SAARC & SAFTA

SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC)


Basics and Backgrounds

  • It was established on 8 December 1985.
  • Its member countries are—Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan (2005)
  • The Headquarters and Secretariatof the Association are at Kathmandu, Nepal.
  • SAARC comprises 3% of the world’s area, 21% of the world’s population and 3.8% (2018) of the global economy

Member states

  • SAARC comprises of eight member States namely, Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. Afghanistan joined SAARC in 2007.
  • There are currently nine Observers to SAARC, namely: Australia, China, the European Union, Iran, Japan, the Republic of Korea, Mauritius, Myanmar and the United States of America.

Future Member

  • Myanmar has expressed interest in upgrading its status from an observer to a full member of the SAARC.
  • Chinahas requested joining SAARC.
  • Russiahas applied for observer status membership of SAARC.
  • Turkeyapplied for observer status membership of SAARC in 2012.
  • South Africahas participated in meetings.

Principles

  • Respect for the principles of sovereign equality, territorial integrity, political independence, non-interferencein the internal affairs of other States and mutual benefit.
  • Such cooperation shall not be a substitute for bilateral and multilateral cooperation but shall complement them.
  • Such cooperation shall not be inconsistent with bilateral and multilateral obligations.

Objective

  • To promote the welfareof the people of South Asia and to improve their quality of life.
  • To accelerate economic growth,social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potentials.
  • To promote and strengthen collective self-relianceamong the countries of South Asia.
  • To contribute to mutual trust,understanding and appreciation of one another’s problems..
  • To promote active collaborationand mutual assistance in the economic, social, cultural, technical and scientific fields.
  • To strengthen cooperation with other developing countries.
  • To strengthen cooperation among themselves in international forumson matters of common interests; and
  • To cooperate with international and regional organizations with similar aims and purposes.

Areas of Cooperation

  • Human Resource Development and Tourism
  • Agriculture and Rural Development
  • Environment, Natural Disasters and Biotechnology
  • Economic, Trade and Finance
  • Social Affairs
  • Information and Poverty Alleviation
  • Energy, Transport, Science and Technology
  • Education, Security and Culture and Others

 

Principal Organs

  • Meeting of Heads of State or Government
  • Standing Committee of Foreign Secretaries
  • Secretariat

 

  1. Meeting of Heads of State or Government
    • Meetings are held at the Summit level, usually on an annual basis.

 

  1. Standing Committee of Foreign Secretaries
    • The Committee provides overall monitoring and coordination, determines priorities, mobilizes resources, and approves projects and financing.

 

  1. Secretariat
    • The SAARC Secretariat was established in Kathmandu on 16 January 1987. Its role is to coordinate and monitor the implementation of SAARC activities, service the meetings of the association and serve as a channel of communication between SAARC and other international organizations.
    • The Secretariat comprises the secretary-general, seven directors, and the general services staff. The secretary-general is appointed by the Council of Ministers on the principle of rotation, for a non-renewable tenure of three years.

SAARC Specialized Bodies

SAARC has established new institutions such as SAARC Arbitration Council (SARCO), South Asian University (SAU), SAARC Development Fund (SDF) Secretariat and SAARC Regional Standards Organization (SARSO) which have mandates and structures different from the Regional Centers.

  1. SAARC DEVELOPMENT FUND
    • The 13th SAARC Summit (Dhaka, 12-13 November 2005) decided to establish SAARC Development Fund (SDF) as a comprehensive funding mechanism with the provision of three Windows (Social, Economic and Infrastructure).
    • SDF Secretariat was formally commissioned in April 2010 in Thimphu during the Sixteenth SAARC Summit with the primary objective of funding project-based collaboration. Since then, SDF has been funding projects approved by the SDF Board under its Social Window.
    • SDF is governed by a Board consisting of representatives from the Ministry of Finance of the Member States. The Governing Council of SDF (Finance Ministers of MSs) oversees the functioning of the Board.
    • MS have also been emphasizing on opening up of the two remaining windows of SDF, i.e. Economic and Infrastructure Windows.

 

  1. SOUTH ASIAN UNIVERSITY
    • The Agreement for the Establishment of South Asian University was signed by the Ministers of Foreign/External Affairs of the MSs of SAARC during the Fourteenth SAARC Summit (New Delhi, 4 April 2007).
    • As per Article 7 of the Agreement of the SAU, it is necessary for the MS to recognize the Degrees and Certificates awarded by the SAU at par with the respective Degrees and Certificates awarded by the National Universities / Institutions.

 

  1. SOUTH ASIAN REGIONAL STANDARDS ORGANIZATION
    • The fifteenth SAARC Summit paved the way for establishing SARSO in order to harmonize standards and promote cooperation in the fields of metrology, accreditation and conformity assessment for enhancing the capacity of the respective national institutions in carrying out their technical tasks.
    • The agreement on SARSO came into effect on 25th August 2011.

 

  1. SAARC ARBITRATION COUNCIL
    • The agreement on SARCO was signed during the Thirteenth Summit and came into effect on 2 July 2007.
    • SARCO was established with a view to resolve cost-effective settlement of disputes via arbitration within the region.

SAARC Disaster Management Centre

  • South Asian Association of Regional Cooperation (SAARC) Disaster Management Centre (SDMC-IU) has been set up at Gujarat Institute of Disaster Management (GIDM) Campus, Gandhinagar, Gujarat, India.
  • Eight Member States, i.e., Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka are expected to be served by the SDMC (IU).
  • It is entrusted with the responsibility of serving Member States by providing policy advice, technical support on system development, capacity building services and training for holistic management of disaster risk in the SAARC region.
  • The centre also facilitates exchange of information and expertise for effective and efficient management of disaster risk.

South Asian Free Trade Agreement (SAFTA)

  • Motivated by the commitment to strengthen intra-SAARC economic cooperation to maximise the realisation of the region’s potential for trade and development for the benefit of their people, in a spirit of mutual accommodation, with full respect for the principles of sovereign equality, independence and territorial integrity of all States.
  • The Contracting States hereby establish the South Asian Free Trade Area (SAFTA) in 2004 during the 12th SAARC Summit held in Islamabad (Pakistan) to promote and enhance mutual trade and economic cooperation among the Contracting States, through exchanging concessions in accordance with this Agreement.

Objective of SAFTA

The Objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia:

  • eliminating barriers to trade in, and facilitating the cross-border movement of goods between the territories of the Contracting States.
  • Promoting conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development.
  • Creating effective mechanism for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes.
  • Establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this Agreement.

Principles of SAFTA

  • SAFTA will be governed by the provisions of this Agreement and also by the rules, regulations, decisions, understandings and protocols to be agreed upon within its framework by the Contracting States.
  • The Contracting States affirm their existing rights and obligations with respect to each other under Marrakesh Agreement establishing the World Trade Organization and other Treaties/Agreements to which such Contracting States are signatories.
  • SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit equitably all Contracting States, taking into account their respective levels of economic and industrial development, the pattern of their external trade and tariff policies and systems.
  • SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures.
  • SAFTA shall entail adoption of trade facilitation and other measures, and the progressive harmonization of legislations by the Contracting States in the relevant areas.
  • The special needs of the Least Developed Contracting States shall be clearly recognized by adopting concrete preferential measures in their favour on a non-reciprocal basis.

SAARC Development Fund

  • It was established by heads of all eight SAARC member states during 16th SAARC summit at Thimphu, Bhutan in 2010.
  • Its Secretariat is located at Thimphu, capital of Bhutan. Its Governing Council comprises finance ministers of these eight countries.
  • It was created as umbrella financial mechanism for all SAARC developmental projects and programmes.
  • It funds projects in South Asia region via three windows viz. Social Window, Economic Window and Infrastructure Window.
  • The SDF has a total corpus of $1.5 billion with the total capital base currently at $497 million.

SAARC and its Importance

  • SAARC comprises 3% of the world’s area, 21% of the world’s populationand 8% (US$2.9 trillion) of the global economy.
  • Creating synergies:It is the world’s most densely populated region and one of the most fertile areas. SAARC countries have common tradition, dress, food and culture and political aspects thereby synergizing their actions.
  • Common solutions:All the SAARC countries have common problems and issues like poverty, illiteracy, malnutrition, natural disasters, internal conflicts, industrial and technological backwardness, low GDP and poor socio-economic condition and uplift their living standards thereby creating common areas of development and progress having common solutions.

SAARC Achievements

  • Free Trade Area (FTA):SAARC is comparatively a new organization in the global arena. The member countries have established a Free Trade Area (FTA) which will increase their internal trade and lessen the trade gap of some states considerably.
  • SAPTA: South Asia Preferential Trading Agreementfor promoting trade amongst the member countries came into effect in 1995.
  • SAFTA: A Free Trade Agreementconfined to goods, but excluding all services like information technology. Agreement was signed to reduce customs duties of all traded goods to zero by the year 2016.
  • SAARC Agreement on Trade in Services (SATIS):SATIS is following the GATS-plus ‘positive list’ approach for trade in services liberalization.
  • SAARC University:Establish a SAARC university in India, a food bank and also an energy reserve in Pakistan.

Recent Developments

  • South Asia Satellite
    • Pakistan has decided to opt-out of the satellite project. So it cannot be called a SAARC satellite. It will be a South Asia satellite.
  • Framework agreement in power sector Electricity trading through grid connectivity.
  • India Business Card for SAARC trade – “India Business Card” to be given to businessmen of high repute in SAARC countries.

BBIN MVA

  • Bangladesh, Bhutan, India and Nepal (BBIN) had signed a framework MVA in June 2015to enable movement of passenger and cargo vehicles across borders among the four countries.
  • Bhutan has not yet ratified the pact for its entry to come into force. However, Bhutan had given its consent for the BBIN MVA to enter into force amongst the other 3 countries i.e. Bangladesh, India and Nepal, who have already ratified it.

About the Project

  • The BBIN project was conceived when SAARC at its 18th Summit in Kathmandu failed to sign a SAARC Motor Vehicles Agreement -chiefly because of Pakistan.
  • The sub-regional Motor Vehicle Agreement (MVA) seeks regulation of passenger, personnel and cargo vehicular traffic between the four BBIN countries.
  • Originally, the project mentioned 30 identified priority transport connectivity projects with an estimated cost of over US $8 billion that will rehabilitate and upgrade remaining sections of trade and transport corridors in the BBIN countries.
  • India, Nepal and Bangladesh have ratified the Agreement while Bhutan failed to get its Parliament’s nod to ratify the same. It has some reservations about its environmental impact owing to increased traffic of heavy-duty vehicles.
  • Under South Asia Sub-regional Economic Cooperation (SASEC) programme, Asian Development Bank (ADB) has been providing technical, advisory, and financial support to this initiative.
  • On November 1, 2015, a cargo vehicle made the first successful trial run from Kolkata to Agartala via Bangladesh that reduced the distance by over a thousand kilometers.
  • In recent meet, the delegations discussed a draft enabling MOU (memorandum of understanding) among Bangladesh, India and Nepal for implementing the BBIN MVA, without obligation to Bhutan. Bhutan participated in observer capacity.

Significance of SAARC for India

  • Neighborhood first:Primacy to the country’s immediate neighbours.
  • Geostrategic significance:Can counter China (OBOR initiative) through engaging our neighbours in development process and economic cooperation.
  • Regional stability:These regional organisations can help in creation of mutual trust  (India & Pakistan) and ensure that regional interest over ride bilateral disputes
  • Global leadership role:It offers India a platform to showcase its leadership in the region by taking up extra responsibilities.
  • Game changer for India’s Act East Policy:Linking of South Asian economies with South East Asian region will bring further economic integration and prosperity to India particularly in its under-developed Eastern region
  • Potential for India’s export:With closer economic integration of economies in the region, India’s domestic companies will get access to much bigger market thus boosting their revenues

Impact of COVID-19 on SAARC

  • Major concern is of an escalation in the virus’s spread in the subcontinent.
  • With close to 300 positive cases, South Asia has seen a much lower incidence globally, but given its much higher population density,it is clear that any outbreak will lead to far more casualties.
  • Afghanistan and Pakistanhave specific challenges as they share long borders with Iran, which has emerged, after China and Italy, as a major hub of the virus.
  • Bhutan, the Maldives, Nepal and Sri Lanka worry about the impact on tourism, which is a mainstay of their economies.
  • Other concerns are about under-reporting,as fewer people are being tested in much of South Asia
  • Inadequate public health service infrastructureto cope with rising cases, as all SAARC members are developing nations with sub-standard public health infrastructure.

Video Conference of SAARC Leaders on COVID-19

  • The South Asian Association for Regional Cooperation (SAARC) should create a fund to fight the threat of COVID-19, Prime Minister Narendra Modi announced on 15th March 2020 – Addressing the first ever video conference among the heads of governments of the SAARC member countries.
  • Foreign Secretary of India Harsh Vardhan Shringla and his counterparts from other member countries of SAARC should meet and decide the plan ahead for the creation of the SAARC COVID-19 Emergency Fund.
  • Proposal from the South Asian leaders came days after the World Health Organisation (WHO) floated the COVID-19 Solidarity Response Fund with the help of corporate bodies, foundations and the UN Foundation.
  • The conference is considered as a step towards the revival of SAARCas the SAARC Summit has not taken place since 2014 because of India-Pakistan tensions.

India’s Proposal in the Conference

  1. COVID-19 Emergency Fund
    • India has proposed to create a COVID-19 Emergency Fundwhich could be based on a voluntary contribution from all SAARC members.
    • Further, $10 million has been extended by Indiaas a contribution to the fund.
    • The fund can be used to meet the cost of immediate actions by any member and will be coordinated through foreign secretaries and embassies of the member countries.
    • The World Health Organisation (WHO)has also constituted the COVID-19 Solidarity Response Fund with the help of corporate bodies, foundations and the UN Foundation.
  1. Other Proposals by India
    • India has also proposed a rapid response team of doctors and specialists, along with testing kits and other equipment for all the member countries.
    • India has set up an Integrated Disease Surveillance Portalto better trace possible virus carriers and the people they contacted. India has offered to share it with member countries.

Other Issues Discussed

  1. Economic Issues and Measure
    • The conference also discussed longer-term economic consequences of COVID-19.
    • The member countries have also proposed to insulate internal trade of South Asia and local value chainsfrom its impact.
  1. Measures by SAARC to Manage Health Pandemics
    • It has been decided to frame and enforce the common SAARC pandemic protocols.
    • The members have also decided to establish a working group of national authorities for health information, data exchange and coordination in real-time.
    • It has also proposed a SAARC health ministers’ conferenceand the development of regional mechanisms to share disease surveillance data in real-time.
  1. Country-Specific Issues
    • Afghanistanhas highlighted the vulnerability as it shares a long and open border with Iran, one of the worst affected countries in the world.
    • The Maldiveshas cited the economic downturn owing to the drop in tourists inflow from Italy, China and Europe – the main source of tourists for the country and sought a South Asian response to the crisis.
    • The tourism-dependent countries like Bhutan, Sri Lankahas also sighted issues related to the economic slowdown.

Challenges of SAARC

  • Broad area of cooperationleads to diversion of energy and resources.
  • Low Intra-regional trade: South Asia is the world’s least integrated region; less than 5% of the trade of SAARC countries is within.
  • Inadequate Political Will:India’s inclination towards Big powers which leads to neglecting its relationship with its neighbours
  • Bilateral tensions, especially between India and Pakistan, spilling over into SAARC meetings.
  • Perception of India being a Big Brothervis-à-vis its neighbours whereby India enforces its own agenda on small neighbouring countries through these groupings
  • Slow implementation of the projects announced by India – declines India’s credibility to deliver on its promises thus pushing Nations to seek help from China or West.
  • Rising China in the region with its overarching Belt & Road initiative (Cheque book Diplomacy of China).
  • South Asia Free Trade Agreement (SAFTA) that came into force in 2006 is often highlighted as a prominent outcome of SAARC, but given the presence of sensitive lists, it is yet to be implemented in spirit. Almost 35 percent of the value of intraregional trade in South Asia is subject to sensitive list tariffs. There is no provision in SAFTA to phase out this list.
  • SAARC does not have any arrangement for resolving disputes or mediating conflicts.
  • Pakistan’s non-cooperation has stalled some major initiatives under SAARC. For example: SAARC– Motor Vehicles Agreement (MVA) and SAARC satellite project.

Why SAARC has been dormant in the recent past?

  • Lack of trust among the member countries: In the many failures of SAARC, lack of trust among the member countries has been the most significant factor between India and Pakistan. In recent times, Pakistan’s non-cooperation has stalled some major initiatives under SAARC. For example, despite India’s keen interest in cooperating and strengthening intra-regional connectivity by backing the SAARC–MVA during the 18th summit of SAARC, the agreement was stalled following Pakistan’s reluctance.
  • Security cooperation: SAARC has also faced obstacles in the area of security cooperation. A major hindrance in this regard has been the lack of consensus on threat perceptions, since member countries disagree on the idea of threats. For instance, while cross-border terrorism emanating from Pakistan is a major concern for India, Pakistan has failed to address these concerns.
  • Big Brother attitude of India: The asymmetry between India and other member countries in terms of geography, economy, military strength and influence in the global arena make the smaller countries apprehensive. They perceive India as “Big Brother” and fear that it might use the SAARC to pursue hegemony in the region. The smaller neighbouring countries, therefore, have been reluctant to implement various agreements under SAARC.
  • Resources: SAARC faces a shortage of resources, and countries have been reluctant to increase their contributions.
  • Lack of Connectivity: The lack of connectivity among member states is another weakness of the SAARC. This ties in with the lack of a proper infrastructure of member states. This infrastructure deficit in turn leads to reduced connectivity among the SAARC nations. South Asia needs to invest up to $2.5 trillion to bridge its infrastructure gap over the next ten years, says a 2014 World Bank report. Women, the poor, and marginalized social groups are particularly affected by the region’s infrastructure gap.
  • Agreements and Conventions: Almost all the agreements and conventions, adopted and signed by SAARC members, are concentrating on promotion of economic and social interactions and relations. There is hardly any significant development, under the banner of SAARC, to promote mutual trust and resolve mutual disputes. Dispute resolving has been, unfortunately, left out of the scope of SAARC. Even “SAARC Regional Convention on Suppression of Terrorism” was nothing but ratification and implementation of the UN resolutions and conventions

Way Forward

  • In a region increasingly targeted by Chinese investment and loans, SAARC could be a common platform to demand more sustainable alternatives for development, or to oppose trade tariffs together, or to demand better terms for South Asian labour around the world.
  • SAARC, as an organisation, reflects the South Asian identity of the countries, historically and contemporarily. This is a naturally made geographical identity. Equally, there is a cultural, linguistic, religious and culinary affinity that defines South Asia.
  • The potential of organisation to maintain peace and stability in the region should be explored by all the member countries.
  • SAARC should be allowed to progress naturally and the people of South Asia, who make up a quarter of the world’s population should be offered more people-to-people contact.
  • All of India’s neighbours implicitly recognize that India is South Asia’s natural leader. However, India cannot take leadership for granted; it has to earn it.
  • South Asia may be politically divided but it faces common security challenges. Nation-building is still a work in progress in southern Asia, and state sovereignties are still new and fiercely defended.
  • Regional connectivity in South Asia should be a strategic priority for India.