MEMBERS' REFERENCE SERVICE LARRDIS LOK SABHA SECRETARIAT, NEW DELHI REFERENCE NOTE. No.30/RN/Ref./July/2017

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1 MEMBERS' REFERENCE SERVICE LARRDIS LOK SABHA SECRETARIAT, NEW DELHI REFERENCE NOTE No.30/RN/Ref./July/2017 For the use of Members of Parliament NOT FOR PUBLICATION 1 "SAARC": ITS IMPACT AND FUTURE Prepared by Smt. Neelam Sethi, Additional Director and Shri Abhishek Thakur, SLA of Lok Sabha Secretariat under the supervision of Shri Atul Kaushik, Additional Secretary, Smt. Kalpana Sharma, Joint Secretary and Shri C.N. Sathyanathan, Director.- The Reference Note is for personal use of the Members in the discharge of their Parliamentary duties, and is not for publication. This Service is not to be quoted as the source of information as it is based on the sources indicated at the end/in the text.

2 "SAARC" : ITS IMPACT AND FUTURE Introduction The South Asian Association for Regional Co-operation (SAARC) was founded in 1985 as an expression of the region's collective decision to evolve a regional cooperative framework. Its seven founding members are Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka. Afghanistan joined the organization in Australia, China, European Union, Iran, Japan, Mauritius, Myanmar, Republic of Korea and United States of America have joined SAARC as Observers. The first SAARC summit was held in Dhaka, Bangladesh in 1985 and the 18th Summit was held in Kathmandu, Nepal in The 19th Summit to be held in Islamabad, Pakistan in November, 2016 was cancelled. SAARC Geographic Facts SAARC region is a landmass of 3.3 per cent of the world. SAARC countries has one-fifth of the world population. Two land-locked countries of this region are- Bhutan & Nepal. Two island countries of SAARC region are-sri Lanka & Maldives. India, Pakistan & Bangladesh touches Indian ocean in South and south-west. Majority of the people in SAARC countries depend on agriculture.

3 Objectives of SAARC 1 The objectives as mentioned in the SAARC Charter are: Promote the welfare of the peoples of South Asia and improve their quality of life; Accelerate economic growth, social progress and cultural development in the region by providing all individuals the opportunity to live in dignity and to realize their full potentials; Promote and strengthen collective self-reliance among the countries of South Asia; Contribute to mutual trust, understanding and appreciation of one another's problems; Promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; Strengthen cooperation with other developing countries and also among themselves in international forums on matters of common interests; and Cooperate with international and regional organizations with similar aims and purposes. Principles of SAARC 2 Cooperation within the framework of the Association is based on respect for the principles of sovereign equality, territorial integrity, political independence, non-interference in the internal affairs of other states and mutual benefit. Such cooperation is to complement and not to substitute bilateral or multilateral cooperation Ibid

4 Such cooperation should be consistent with bilateral and multilateral obligations of the member states. Decisions at all levels in SAARC are taken on the basis of unanimity. Bilateral and contentious issues are excluded from its deliberations. The areas of cooperation among the SAARC countries include: Agriculture and Rural Development, Biotechnology, Education and Culture, Economic and Trade, Energy, Environment, Finance and Funding Mechanism, Information, Communication and Media, People-to-people contacts, Poverty Alleviation, Science and Technology, Security aspects, Social Development and Tourism. These areas are being looked after by a number of Technical Committees, comprising representatives of Member States who are responsible for the implementation, coordination and monitoring of the programmes in their respective areas of cooperation. Achievements of SAARC 3 Over the last 30 years, despite extremely difficult political circumstances, SAARC has managed to create situations, institutions and forums where Heads of State have met for talks. It provides a platform to work together for the people of South Asia to work together in a spirit of friendship, trust and understanding. 5 SAARC has tackled important topics for the region such as a social charter, development agreements and even the sensitive subject of fighting terrorism q Ibid

5 The food and development banks, Agreement on Transportation, Energy are important steps in the right direction. Exchanges in the areas of civil society and science have become one of the pillars of South Asian integration efforts. After a decade of establishment of SAARC, a regional economic cooperation agreement called South Asian Preferential Trade Agreement (SAPTA) came into existence in 1995 that led to higher level of intra regional trade liberalization and economic cooperation among the member countries. SAPTA sought to ensure preferential treatment through reduction of import tariffs on eligible items while ensuring special and the most favorable treatment to the least developed countries in the region. South Asian Free Trade Agreement (SAFTA) was envisaged primarily as the first step towards the transition to a Customs Union, Common Market and Economic Union. The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan. The Agreement entered into force on 1 January 2006, and the Trade Liberalisation Programme commenced from 1 July Under this agreement, SAARC members were to bring their duties down to 20 per cent by Following the Agreement coming into force the SAFTA Ministerial Council (SMC) has been established comprising the Commerce Ministers of the Member States. In 2012 the SAARC exports increased substantially to US$354.6 billion from US$206.7 billion in Imports too increased from US$330 billion to US$602 billion over the same period. But the intra-saarc trade amounts to just a little over 1% of SAARC's GDP. In contrast, in ASEAN (which is actually smaller than SAARC in terms of size of economy) the intra-bloc trade stands at 10% of its GDP.

6 The SAARC Visa Exemption Scheme was launched in The leaders at the Fourth Summit (Islamabad, December 1988), while realising the importance of having people to people contacts, among the peoples of SAARC countries, decided that certain categories of dignitaries should be entitled to a Special Travel document, which would exempt them from visas within the region. As directed by the Summit, the Council of Ministers regularly kept under review the list of entitled categories. Currently the list included 24 categories of entitled persons, which include Dignitaries, Judges of higher courts, Parliamentarians, Senior Officials, Businessmen, Journalists, Sportsmen etc. The Visa Stickers are issued by the respective Member States to the entitled categories of that particular country. The validity of the Visa Sticker is generally for one year. The implementation is reviewed regularly by the Immigration Authorities of SAARC Member States. The SAARC Framework Agreement on Energy Cooperation (Electricity) was signed at the 18th SAARC Summit in Kathmandu. This Agreement enables cross-border trade of electricity on voluntary basis subject to the laws, rules and regulations of the respective members. It, inter alia, enables Member states to negotiate the terms, conditions, payment security mechanism and tenure of electricity trade. The Agreement was ratified on 30 July 2015 by India. Other Member States are in the process of ratifying it. Implementation of the agreement should contribute to mitigating electricity shortages, including in our North East. The SAARC Agreement on Rapid response to Natural Disasters was signed during the 17th SAARC Summit in November 2011 with the aim of institutionalizing the regional cooperation on disaster response among SAARC countries. India has also organized a number of workshops/seminar/

7 training programmes on disaster management for the SAARC member states. India very rapidly rendered assistance and expertise to Nepal last year during the severe earth quakes there. On initiative of India, a Concept Paper for SAU was submitted to the SAARC Governments to elicit their views. The idea of a South Asian University found favour in all SAARC Member States and an interministerial Agreement for Establishment of South Asian University was signed on 04 April 2007, during the 14th SAARC Summit in New Delhi. SAARC Secretariat approved the concept of establishing SAU in the 16th SAARC Summit held in Thimpu in Accordingly, the South Asian University opened its door to students in August The university is likely to shift soon to its permanent campus in Delhi. Issues and concerns 4 In its 30 years of existence, SAARC failed to hold 11 annual summits for political reasons, both at the bilateral and internal levels. The Kathmandu Summit in 2014 was held after a gap of three years. SAFTA accounts for only around 10% of the total regional trade even after 30 years of the establishment of SAARC and despite the existence of logistical advantages. The cumulative figure of intra-saarc trade flows under SAFTA was around US$ 3 billion during India s trade with South Asia accounts for about 5 % of its global trade. This is in contrast to the Intra-regional trade of roughly 65 per cent of European Union's total trade; 51 per cent in the North American Free Trade Agreement (NAFTA) area; and 26 per cent in the Association of South East Asian Nations (ASEAN) and 16 per cent in the Latin American trade bloc, Mercosur. Same 4 The Hindu

8 was the case with FDI. Though the FDI received by SAARC countries have significantly improved over a period of three decades, more than 84% of FDI was received only by India in 2012 compared to Nepal s about 0.16%. South Asian countries will need to address not only economic factors such as trade facilitation and infrastructure development, but also some non economic factors like creating political will and building confidence so that the road map of converting SAPTA into SAFTA and further into South Asian Customs Union and finally into South Asian Economic Union by the year 2020 could hopefully be achieved. While different regions of the world have progressed even to monetary union, SAARC has failed to even come up with a free trade agreement. Even in the Kathmandu Summit 2014, there were three connectivity agreements on road, rail and energy, to be endorsed by the eight SAARC leaders. Only one of these - on energy - has been signed. Recent Developments On 17 January 2017, speaking in an interactive session titled Harnessing Regional Cooperation in South Asia at the Congress Centre, at Davos on the sidelines of the World Economic Forum (WEF) Annual Meeting 2017, Bangladesh Prime Minister Sheikh Hasina said, The effectiveness of SAARC is still there and I think, there s a lot to work on it...saarc is very much alive. However, referring to the postponement of the last SAARC Summit in Pakistan, Sheikh Hasina said, What did happen that one SAARC Summit was postponed. There s no reason for apprehension...the next SAARC Summit could take place in near future. On the sidelines of the two-day Asia-Pacific Business Forum in Dhaka, Commerce minister of Nepal Mr Romi Gauchan Thakali expressed the view that despite a lot of tension over the future of the South Asian Association for Regional

9 cooperation (SAARC), the relevance of the regional grouping still exists and it will continue to do so. He further said that SAARC is an established institution and Nepal firmly believes in the relevance of SAARC. Expressing satisfaction over the SAARC moving forward during the last three decades, despite lot of impediments and tensions he said it is the time to work more to advance the regional cooperation arrangement. On 28 January 2017 talking to Arjun Bahadur Thapa, the outgoing Secretary General SAARC, Adviser to Pakistani Prime Minister on Foreign Affairs Sartaj Aziz said that Pakistan remains committed to hosting the 19th SAARC Summit at the earliest so that the objectives of regional cooperation under the SAARC umbrella can be pursued more vigorously. The Pakistan Foreign Minister also reaffirmed Pakistan's commitment to regional cooperation under the framework of SAARC for promoting the welfare of the people of South Asia, improving their quality of life, economic progress, social uplift and cultural cooperation. In another development, on 5 May, India launched the first South Asia Satellite, built by Indian Space Research Organization and funded entirely by India. The South Asia Satellite, which was proposed by Prime Minister Shri Narendra Modi, will help partner countries in effective communication, better governance, better banking and education in remote areas, more predictable weather forecasting and efficient resource mapping, linking people with top-end medical services through telemedicine and quick response to natural disasters. The SAARC process, which hit a snag following the postponement of the 19th Summit scheduled in Islamabad saw revival as all eight member states participated in a two-day meeting of SAARC Programming Committee held in Kathmandu, capital of Nepal on 1 and 2 February The Programming Committee is the lowest level mechanism in SAARC after the SAARC Standing

10 Committee, which is held at the foreign secretary level, and SAARC Council of Ministers held at foreign minister level. The Programming Committee had discussed various administrative and financial issues related to SAARC Secretariat and its bodies. It also had discussed issues related to budget of the SAARC Secretariat and five regional centres of SAARC, among others. Recently, speaking on the sidelines of a Shangani Cooperation Organisation (SCO) event in Beijing, Mumtaz Zahra Baloch, the Deputy Head of the Pakistani mission, said it is important for both countries to strengthen the South Asian Association for Regional Cooperation (Saarc). We really hope that Saarc, which is our regional organisation to move beyond the differences that India would be able to come to Pakistan for the summit because in the end we are neighbours, Baloch said. It s still not clear whether the summit will be held at the end of this year either, given India s position on Pakistan s involvement in cross-border terror. Baloch, however, indicated that Islamabad is working to holding the summit. It is important that the forum of SAARC should be utilized to achieve its role as envisaged in the objectives to work for peace and stability in the region and better relations and harmony among the member nations to the benefit of the people of the region. The challenge before the SAARC is now to overcome the regional tension and foster greater cooperation between the nations in the region. SAARC should be seen as belonging more to the peoples of the region than to governments, as indeed is the case. **********