REGIONAL COOPERATION AND DEVELOPMENT IN 21 ST CENTURY: A CASE STUDY OF SAARC

Transcription

1 2 2 REGIONAL COOPERATION AND DEVELOPMENT IN 21 ST CENTURY: A CASE STUDY OF SAARC CHANDAN KUMAR (Ph.D. Scholar) Department of Political Science, Faculty of Social Sciences, University of Delhi, Delhi Id- ckumar.du@gmail.com Abstract:- The Partnership for South Asia presents itself as an umbrella initiative acting as a channel for using more efficiently the various efforts of the subregional initiatives currently in place on the Asian continent for development. Member organisations such as SAARC is in charge of different tasks in the framework of the partnership, allowing therefore for a better use of the hardly resources provided by givers. Strengthening regional cooperation by creating functional links between the different sub-regional organisations is a promising step towards more co-ordinate and coherent actions in favour of development. Today, South Asia Cooperation are defined as a series of actions taking place between political or economic entities, proposing to increase mutual benefit for all included actors incorporates such a diverse set of actions as assisting each other in controlling tropical diseases, disaster assistance, drug control, military alliances, nuclear programs and space missions etc. Regional cooperation and integration are necessary parts of solutions for the regional conflicts, global terrorism, the environmental challenges, economic development through increased trade and other social-economic issues. SAARC cooperation and development have been broken-down in domestic politics and sometime international politics. But the business communities, NGOs and governments agencies also need to be handle development objective, build infrastructure, improve education, improve health facility and invest in people, so that business, NGOs and governments as a whole can get practical solutions. scholarsimpact@yahoo.com Vol-I, Issue-3 {5}

2 Keywords:- -Regional Cooperation, Economic Development, South Asia and Business Communities INTRODUCTION:- In 21 st century,regional cooperation is necessity for every nationstateespecially for the developing nation-states.regional organisation has been created by self-governing nations within their geo-political regions. The term Regional Cooperation means, the association of nations tocoveringsocioeconomic concerns for work greater welfares and development of the people in the region.regional Cooperation and integration agreement is one of the most significant building blocks for socio-economic growth of the region. One of the most prominent development in the world trading system since the mid-1990s is a surge in the regional trade agreement (RTAs). i Most of develop and developing countries in the world are members of a regional Cooperation and integration agreements and several belong to more than one. ii Examples of functioning independent regional organisations in the world region and these are European Union (EU) in Europe, North American Free Trade Association (NAFTA) in North America, Association of South East Asian Nations (ASEAN) in Asia, South Asia Association for Regional Cooperation (SAARC) in Asia, Arab League (AL) in the Middle East, the African union (AU) in Africa and Economic Community of West African States (ECOWAS) in Africa etc. The Partnership for South Asia presents itself as an umbrella initiative acting as a channel for using more efficiently the various efforts of the sub-regional initiatives currently in place on the Asian continent for development. Member organisations such as SAARC is in charge of different tasks in the framework of the partnership, allowing therefore for a better use of the hardly resources provided by givers. Strengthening regional cooperation by creating functional links between the different sub-regional organisations is a promising step towards more co-ordinate and coherent actions in favour of development. Today, South Asia Cooperation are defined as a series of actions taking place between political or economic entities, proposing to increase mutual benefit for all included actors incorporates such a diverse set of actions as assisting each other in controlling tropical diseases, disaster assistance, drug control, military alliances, nuclear programs and space missions etc. NEW REGIONALISM:- Regional Cooperation settled numerous substances and there have been several continuous waves of regionalism during the last century. After the scholarsimpact@yahoo.com Vol-I, Issue-3 {6}

3 Second World War, a first wave of regionalisation motivated on trade and payments liberalisation between neighbouring countries in order to intercountry transactions. The current wave of regionalism is different, as it is increasingly no longer about trade only, but presents itself as a multidimensional form of integration which includes social, economic, political and cultural aspects and therefore goes far beyond the goal of creating region-based free trade regimes or security alliances. This second wave of regionalism called a New Regionalism, and the E.U. is the best example of this form of regionalism. It has developed a model of deep economic cooperation and integration. Today we have a complex multilevel governance system with a deep cooperation between states, with firm devolution of power within states and a strong international legal framework. This has created a political model that challenges assumptions about governance all over the world. Of course, European integration cannot be seen as the model for the rest of the world. However, the underlying idea of multi-dimensional regional integration that implies cooperation along a number of different dimensions such as culture, politics, security, economics and diplomacy deserves to be taken serious in all political and economic efforts to achieve stability and successfulness in a given region. SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC):- More than one third of world trade takes place between such agreements. Initially the World Trade Organisation encouraged the growth of RTAs because it believed that regional integration initiatives could complement the multilateral trade regime iii. The South Asian nations have formed South Asian Association for Regional Cooperation (SAARC) in 1985 comprising seven countries of South Asia, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka iv. Subsequently, Afghanistan joined as a full member of SAARC on April 3, 2007 at the Association s fourteenth Summit (See Map No.-1). scholarsimpact@yahoo.com Vol-I, Issue-3 {7}

4 Map No.-1 SAARC Member Countries v Source- Before founding SAARC, the idea of regional cooperation in South Asia was first introduced in May The Foreign Secretaries of the seven countries gathered for the first time in Colombo in April This was followed a few months later, by the meeting of the committee of the whole, which identified five broad areas of regional cooperation. The Foreign Ministers, at their first meeting in New Delhi in August 1983, formally set up the Integrated Programme of Action (IPA) in nine agreed areas through adoption of the declaration on South Asian Regional Cooperation (SARC). At the first summit held in Dhaka on 7-8 December 1985, the Charter was adopted establishing the organisation of South Asian Association for Regional Cooperation (SAARC). vi The SAARC Secretariat and Member States celebrate 8 December as the SAARC Charter Day. The South Asian nations historically had strong trade and cultural ties between themselves for centuries, many of which were until 1947, part of British India. Much before the most successful regional bloc of the European Common Market was established in 1958, the three largest South Asian countries of India, Pakistan and Bangladesh had a common market with integrated monetary and communication system until These ties were disrupted and significant scholarsimpact@yahoo.com Vol-I, Issue-3 {8}

5 political differences emerged during the second half of the twentieth century. Therefore, despite the common heritage shared by these nations, South Asia emerged as the least integrated region in the world. vii Most of the SAARC countries have been depending on the production and export of a few commodities for the elaboration of their economies. Major share of their international trade is also based on the export of these primary products and the import of raw materials and other capital goods required for the export sector. viii After independence, South Asian countries prefer import substitution policies at a time when the World Economy was growing rapidly. One reason for import was export temperament for primary and manufacturing products. The dominant economic thinking in this region at that time was the world markets were structurally geared to developed countries interests and that the cooperation with these countries would continue boredoms. To overtake developed countries and it was argued that developing countries must pursue import substitution. Their imagination and talents gave them confidence that they would generate industrialisation based on their domestic market. ECONOMY OF SAARC:- Since the 1980s, South Asian countries have indicated greater emphasis on trade liberalisation program. They have started to open up their economies to promote competitive efficiency in production and to achieve neutralisation in the incentive structure between production for export and import substitutes. As well lower tariff, one of the major areas of trade reform has been the acceptance of managed floating exchange rate system. With liberalisation in the 1990s, India, Pakistan and Sri Lanka have adopted managed floating exchange rate policy. The Indian rupee has also been made convertible on the trade account since the government of India initiated reforms in The SAARC countries have recognised the inter relation between the trade policy regime and the exchange rate system. ix The Move on of cooperative efforts among the South Asian nations, on the other hand, has been rather slow due to geo-political disputes. Trade liberalisation entered the mandate of SAARC in 1993 when the member countries decide to liberalise under successive rounds of preferential tariff concessions with the ultimate objective of achieving a Free Trade Area (FTA). The launching of South Asian Preferential Trade Arrangement (SAPTA) in 1995 was the first major political breakthrough for the SAARC since it was the first regional agreement on economic cooperation x. The Agreement on SAARC Preferential Trading Arrangement (SAPTA) was signed on 11 April 1993 and applicable on 7 December 1995, with the desire of the Member States of SAARC (India, scholarsimpact@yahoo.com Vol-I, Issue-3 {9}

6 Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions xi. The objective of which is to move stepby- step for a free trade area by An effective and more beneficial communication network, among SAARC partners, which can give information in terms of export potentials, import needs, domestic economic policies, tariff and non-tariff barriers, infrastructural facilities, demand and supply situation and investment opportunities, will help for a better socio-economic cooperation and regional development. SAARC economies are rural in nature. Agriculture plays a vital role in SAARC region. The contribution of agriculture to GDP is the highest. However, over the last few decades, it can also be observed that there is a fall inthe relative importance of agricultural contribution to GDP in SAARC members. It is accepted that economic development means an expansion of the secondary sector of the economy. SAARC partners have adopted various strategies for the expansion of their industrial sectors, or the diversification of their economies, from production of primary products, to that of manufactured goods. As far as Bangladesh, Bhutan and India are concerned, industrial sector and services sector have gained at the loss of agriculture. But, in the case of Nepal and Pakistan, role of industry has improved at the cost of agriculture and services sectors. The prominent trading and commerce activities in Sri Lanka have made the service sector vital than the agricultural and industrial sectors of its economy. Table No. -1 Economic development trends in South Asia xii GDP (millions $) Real GDP growth (%) GDP per capita Afghanista n Bangladesh Bhutan India Maldives Nepal % chang e 2005/ scholarsimpact@yahoo.com Vol-I, Issue-3 {10}

7 Pakistan Sri Lanka South Asia Source: World Economic Situation and Prospects 2007; excerpted from During the period , South Asia was able to achieve high macroeconomic growth with the regional average GDP growth accelerating from 4.2% in 2000 to an estimated 8.2% in 2006, outstripping the average growth rate for developing countries of 6.5%. Bhutan, India and Maldives are expected to reach especially high GDP growth rates in 2006, projected as high as 19% for Maldives, and exceeding 6 % in all countries but one per capita income stands at US$ 2300 in the Maldives, and US$1000 in Sri Lanka, roughly doubling their respective 1990 levels (see Table No.1). Conversely, Nepal continues to have the lowest per capita income in Asia and one of the lowest globally. SAARC countries are low-income developing economies. The relevant economic question of the hour for these nations is whether agricultural development or industrial development is the appropriate strategy for accelerating their economic development. SAARC nations lean or tend to more towards industrial development than agricultural development, because of the belief that rich countries are believed to be rich because they are industrialised and poor countries are believed to be poor because they are primary producing. Therefore, SAARC nations are sharp in expanding and developing the industrial sectors of their economies. OVERVIEW OF SAARC TRADE:- The acceleration of economic growth is a Charter objective of SAARC but there are several problems facing the countries in the SAARC region that embarrasses the economic and trade development in the region. Perhaps the root of all these changed problems is over population. Total population of SAARC region as on 2004 was recorded to be morethan 1.4 billion, which constitutes 23.2% of the total population of the world. The SAARC countries statistically form 50% of the world s poor, with a similarly large number of people earning less than the UN classification of one US dollar per day. Clearly, the population levels of these countries exceed the resources present. With the world s largest population, total GDP volume of SAARC region was determined to be approximately US $ billion in scholarsimpact@yahoo.com Vol-I, Issue-3 {11}

8 Table No. -2 SAARC Trade xiii Indicators Total Population (Million), GDP (US $ bn), Average GDP per capita (US$) $988 Total Imports (US$ bn) % Share in World Import 1.73% Total Exports (US$ bn) % Share in World Exports 1.18% Total Trade (US $ bn) Total Share in World Trade 1.46% Sourcewww.saarc-sec.org Although the SAARC region constitutes about one fourth of the total population of the world but its share in total world trade is less than 1.5%. Total volume of exports of the whole region in 2006 was registered only about US $ 123 billion. India and Pakistan are two major economies in the region that constitute 77% and 11% respectively in the total exports of the region. FINDINGS AND CONCLUSIONS:- SAARC has a unique mix of national interests, religions (Hinduism, Islam and Buddhism), and ideologies. Even the eight-member association has been reaching to the cause of regional cooperation and development in hope of socioeconomic developments.however, today SAARC facing many challenges and struggling own commitments. SAARC wish to reach the level of other successful regional organisations.like ASEAN and EU.The objectives, as stated in its charter include, promoting and improving quality of life of people in South Asia, accelerating economic growth, social progress and cultural development, promoting and strengthening collective self-reliance, and building mutual trust, understanding and appreciation of one another s problems.the region suffers from massive balance of payments burden, mass unemployment, high population growth rate, large concentration of poverty, low rate of economic growth, constant food shortage, failing terms of trade, largely illiterate, considerable malnourished, and also the least gender sensitive region of the globe. Some issues are: - scholarsimpact@yahoo.com Vol-I, Issue-3 {12}

9 1. Most of the pre-conditions needed to enhance the probability of a successful free trade agreement were not present in South Asia. These included high pre arrangement tariffs, high level of trade before any arrangement, the existence of complementary rather than competitive trade, and differences in economic structure based on competitiveness. 2. The characteristic feature of South Asian economic interaction does not exhibit an encouraging image: - (i) Restrictive trade policies,(ii) Lack of information, (iii) Resource constraint and thus dependence on external aid, which in turn, is tied to imports from aid donors,(iv) Non-availability of exportable surpluses of desired specification. (v) High costs of production, (vi) Inadequate transit facilities and transport network, (vii) Imbalance in trade, (viii) Lack of standardisation of documentation and complexity of procedures. 3. The continuing conflict between India and Pakistan has also led to ever-increasing investments in arms and ammunitions to counter each other s military capability. Both statescontinue to invest huge amounts of their financial resources in buying weapons from the USA, China, Russia, Sweden and France. 4. The region is potential for growth cannot be denied butthe rate of poverty stilldeep pressure, particularly in the rural area. There is much urban poverty, too, but relatively the concentration of poverty in the rural area, because that is where most people live, and relatively because the rates of poverty are higher in rural areas than in urban area. 5. South Asia is extraordinarily vulnerable to environmental risk, and water risk right at the top. In fact, the water challenge in South Asia is so significant that nobody can yet find an answer. It is not only a grave problem, but also highly complex and multifaceted. Many parts of South Asia are inherently waterstressed regions. Many parts of South Asia depend on rain-fed agriculture, which is highly vulnerable, and life may become more vulnerable with global climate change. 6. Intra-regional trade among the SAARC countries as a percentage of global trade has been only 5 %. Restrictive trade policies of the SAARC countries, dominance of foreign capital, competitive behaviour of economies, communication gap and lack of monetary cooperation etc. are the primary reasons for such a low volume of trade among the SAARC countries. RECOMMENDATIONS:- Today terrorism affected many countries of thesouth Asia region. South Asia is unbelievable population densities in the world. The fertility rates of women remain very high still vast numbers of extreme poor and high under-nutrition scholarsimpact@yahoo.com Vol-I, Issue-3 {13}

10 rates remain a problem throughout the region. Children do not get proper nutrition during the early years of life about one-fourth of the region. South Asia is unusually in danger to environmental risk and water risk at the top. 1. Regional cooperation and integration are necessary parts of solutions for the regional conflicts, global terrorism, the environmental challenges, economic development through increased trade and other social-economic issues. SAARC cooperation and development have been broken-downin domestic politics and sometime international politics. But the business communities, NGOsand governments agencies also need to be handle development objective,build infrastructure, improve education, improve health facility and invest in people, so that business, NGOs andgovernments as a whole can get practical solutions. 2. In ruralsouth Asia, millions of extremely poor people s lives and if roads,power, schools and clinics are available life can be transformed. Not only the agricultural productivity will rise sharply, but non-agricultural manufacturing and services can develop sharply in rural areas as well. 3. Most of South Asia counties are the systemic under-investment in rural areas for decades. This has occurred in health care to some extent in schooling, though that is improving in other basic services. The situation has improved gradually over the last decade. When I look at the situation in rural India, the underinvestment, for example, in health care remains remarkable. India and the rest of South Asia still spend less than 2 % of GNP on public health. Sometimes it is just 1 % of GNP. This is a completely inadequate. It contributes to continued high male nutrition, high child mortality rates, and high fertility rates. 4. Increasing the investments in rural areas ensure connectivity of all rural villages with roads, power, telecommunications, and the Internet as well as a network of public health facilities, proper public schools of primary education and secondary education.but voices are being raised, and it is vital that the politicians respond. We know businesses can make money in rural areas as well. But that depends on a basic structure of public investment to build out the infrastructure and other service and amenities. 5. Many parts of the world have shown that business leadership can play a crucial role as well as well political leadership for socio-economic development, democratisationand peace. The right way to solve problemsis to get down to business, to create employment, and to improve the economic prospects of people. The business community and government come together to short out South Asia problem. scholarsimpact@yahoo.com Vol-I, Issue-3 {14}

11 Regional cooperation can help in optimum utilisation of capacities and resources available in the member states, decrease of dependence on external world, opening up opportunities of industrialisation for smaller countries, and strengthening of negotiating capabilities of rest of the world. Therefore, SAARC members should agree to follow economic policy with more realistic attitude and with strong political will to push up social-economic development and peace of the region. REFERENCES:- 1 Pal, P., 2008, Regional Trade Agreements and Improved Market Access in Developed Countries: The Evidence. Economic & Political Weekly, November, 29: Anonymous, 2000, Trade Blocs, World Bank Policy Research Report, Washington DC. 1 Pal, P., 2008, Regional Trade Agreements and Improved Market Access in Developed Countries: The Evidence. Economic & Political Weekly, November, 29: Prasad R. and Das A., 2007, SAARC and Poverty Reduction in India. Third Concept, June, 2007: Prasad R. and Das A. 2007, SAARC and Poverty Reduction in India. Third Concept, June, Sawhney A. and Kumar R., 2007, Why SAFTA? Paper submitted to Commonwealth Secretariat, London. 1 Manjula, B. V., 2005, An Economic Analysis of Agricultural Trade and Competitiveness of Major Commodities in SAARC Region. M. Sc. (Agri.) Thesis, Univ. Agric. Sci., Bangalore (India). 1 Manjula, B. V., 2005, An Economic Analysis of Agricultural Trade and Competitiveness of Major Commodities in SAARC Region. M. Sc. (Agri.) Thesis, Univ. Agric. Sci., Bangalore (India). 1 Sawhney A. and Kumar R., 2007, Why SAFTA? Paper submitted to Commonwealth Secretariat, London. 1 Exim Bank Report, Source: World Economic Situation and Prospects 2007; excerpted from scholarsimpact@yahoo.com Vol-I, Issue-3 {15}

12 Bibliography:- Books, Articles and Reports Ambrose, B. (2006). Trade among the SAARC Countries: Problems and prospects. Third Concept. September Anonymous, (2008). Research brief SAARC: An emerging Trade bloc. Exim Bank Report Brief No. 38. Export Import Bank of India. Mumbai. Asher, M.G. ( 2007). India s Rising Role in Asia. Journal of International Economics, vol. 55, no.1, pp Balassa, B. and Stoutjesdijk, A. (1975). Economic Integration among Developing Countries, Journal of common market studies 14 (1), pp Banik, N. and Gilbert, J. (2008). Regional Integration and Trade Costs in South Asia. Working Paper No. 127, ADB Institute, Tokyo , Japan. Gupta, BhabaniSen (1993). SAARC : Asian Prospect and Problems of Intraregional Co-operation. South Asia Publishers. New Delhi. Dhanda S. and Punia R., 2007, SAFTA: Problems and Prospects. Third Concept, April 2007: Dijck, P. van. (1992). Preferential Trade among Developing Countries. New Delhi: Sage Publications. Dijk, M.P. van. (1996). The Results of the Uruguay Round and the Agenda for the World Trade Organization. in M.P.V. Dijk and S. Sideri (eds) Multilateralism Versus Regionalism: Trade Issues After the Uruguay Round. London: Frank Cass, pp Harilal, K. N. and Joseph, K. J. (1999). India - Sri Lanka Free Trade Accord, Economic and Political Weekly, 34 (13) : Jeromi, P. D. and Ramanathan, A. (1993). World market and India: An analysis of growth and instability, Int. J. Agric. Econ., 48 (1): Kolhe, A. (2008). A Spark in SAARC: One India One People, October 2008, Maizels, Alfred (1963). Growth and Trade, Cambridge University. Manjula, B. V. (2005) An Economic Analysis of Agricultural Trade and Competitiveness of Major Commodities in SAARC Region, M. Sc. (Agri.) Thesis, Univ. Agric. Sci., Bangalore (India). Mukherji, I. N. (2000). Charting a Free Trade Area in South Asia: Instrument and Modalitis. Kathmandu :SANEI. Mukherji, (1999). Towards SAARC Preferential Trading Arrangements in Services, The Indian Econ. J., 47 (3): scholarsimpact@yahoo.com Vol-I, Issue-3 {16}

13 Newfarmer, R. S. andpierola, M. D. (2007). South Asia Free-Trade Area Promises and Pitfalls of Preferential Trade Arrangements, In The Challenges and Potential of Pakistan India Trade. Ed. Naqvi Z. F., Schuler P. and Richter K., World Bank Report, Washington DC Pal, P. (2008). Regional Trade Agreements and Improved Market Access in Developed Countries: The Evidence, Economic & Political Weekly, November 2008, 29: Prasad, R. and Das, A. (2007). SAARC and Poverty Reduction in India. Third Concept, June 2007, Rathod, V. and Rathod, P. B. (2004). SAFTA Agreement: An Overview, Third Concept. August: Samaratunga, P. Karunagoda K. and Thibbotuwawa, M. (2006). Regional Agricultural Trade Liberalization efforts in South Asia: Retrospect and Projects, Artnet Policy Brief. No.10, U N. Sawhney, A. and Kumar, R. (2007). Why SAFTA? Paper submitted to Commonwealth Secretariat, London. Sheereen, Z. (2005). Regionalism and Economic Opportunities for India SAARC or ASEAN, Third Concept, April : Singla, C. L. (2007). Indo-Pak Trade and SAARC, Third Concept, July 2007, Taneja, N. (2001). Informal Trade in SAARC Region, Economical & Political Weekly, 36 (11), Viner, Jacob. (1950). The Customs Union Issues, Carnegie Endowment for International Peace, New York. Weerakoon, D. and Wijayasiri, (2001). Regional Economic Cooperation in South Asia: A Sri Lankan Perspective, Research Studies: International Economic, Series No.6., Institute of Policy Studies, Colombo. Wilson, J. S. and Otsuki, T. (2007). Regional Integration in South Asia: What Role for Trade Facilitation?, Policy Research Working Paper No. 4423, The World Bank, Washington DC. Yang, Y. and Gupta, S. (2005). Regional Trade Arrangements in Africa: Past Performance and the Way Forward, IMF Working Paper, WP/05/36, Washington, DC: IMF. scholarsimpact@yahoo.com Vol-I, Issue-3 {17}