Abandon ship

"Over the years, SAARC's role in South Asia has been greatly diminished and is now used as a mere platform for annual talks and meetings between its members." This is the collective wisdom of Wikipedia. And if Wikipedia can be faulted, that would be for its suggestion that SAARC was important earlier. With a population of some 1.5 billion, the eight SAARC member countries make up the largest regional grouping in the world – and, together with the African Union, also the poorest.

According to the World Bank, the region is home to 47 percent of the world's poor, living on less than USD 1 a day. True, things have changed a bit since 1990. Growth has gone up almost everywhere in the region, particularly in India. Various indicators have improved – health in Bangladesh, Nepal and Sri Lanka, and education in India. But Southasia can do much better, and could try to emulate the China of the last 20 years and the East Asia of the two decades prior to that. More to the point, what role can SAARC play in this transformation? Perhaps much less than what many have suggested.

To say it as it is, the Agreement on the South Asian Free Trade Area (SAFTA) is not worth the paper on which it is written, for at least five reasons. First, it is only concerned with liberalising trade in manufactured goods, and will be undermined by the outcome of ongoing multilateral trade negotiations, unilateral trade liberalisation and sub-regional trade agreements. Second, SAFTA will be circumvented by 'sensitive' (also known as negative) lists, Rules of Origin requirements and non-tariff barriers. Third, an agreement such as SAFTA only makes sense if it includes agriculture, crossborder movements of labour and capital, free movement of services, cooperation in transport and so on.

Fourth, without China, Iran and Burma joining SAARC, such agendas cannot be pushed through SAFTA, the probability of which is remote. Hence, fifth, sub-regional cooperation will be pursued by India with Afghanistan, Bhutan, Nepal and Sri Lanka (the Maldives is in a slightly different situation). Meanwhile, the India-Bangladesh and India-Pakistan relationships remain stuck, but there is no reason to presume that these have a higher probability of being negotiated through SAARC than bilaterally.

Internal-to-regional
How does one even define Southasia? How do we deal with Afghanistan, Iran and Burma? It seems that a sensible way to define the region would be by recognising that the most important language spoken is not Hindi/Urdu or Bengali or Tamil but English, at least if one restricts oneself to urban areas. One can also define Southasia by invoking its colonial legacy. This includes not just language, but also a common legal tradition. Bhutan, the Maldives, Nepal, Sikkim and Sri Lanka are, by extrapolation, part of this tradition, though all of them were not part of the British Raj. In which case, one could even bring in Singapore. The distinguishing feature of this tradition, besides law and order, had been the free movements across today's borders, and an integrated transport infrastructure.

Indeed, with the example of the Silk Road, this predates the colonial legacy. How can Southasia become less poor? This has been the stuff of development economics for decades. At differing levels of economic development, countries use differing parameters to shape their comparative advantage. Given where Southasia is today, the driving economic force has to be natural resources, mainly land and labour. In particular, the entire region stands to reap a demographic dividend, since the rest of the world's populations are currently aging, while Southasia has a young population.

To tap this opportunity, and to ensure that the demographic dividend does not become a demographic deficit (or worse), better health and education indicators are required. So too are reforms necessary in the agricultural sector, coupled with improved infrastructure such as roads, electricity, and drinking and irrigation water. This is fundamentally the domain of domestic economic reforms, and has little to do with inter-country trade agreements. However, India's economic growth engine is indeed chugging along, even as it faces a cyclical downswing in the next few years. The important question, then, is how the rest of Southasia can ride on this growth engine. India is a large and heterogeneous country. As such, economic or political integration with all of India is meaningless.

South India will develop closer links with Sri Lanka and the Maldives, something that is already happening. North India will develop linkages with Afghanistan and Pakistan. Eastern India, meanwhile, will be part of a unit which include Bangladesh, Bhutan, Burma and Nepal. Again, while most reforms are internal to a country, physical infrastructure (transport and energy) has crossborder dimensions. Many of these links were severed pre- and post-Independence. These need to be restored. For all of this to happen and for an integrated and efficient Southasian economy to drive the region out of poverty, we first need to junk SAARC. The organisation concentrates power in the capitals, and stifles innovative thinking by locking everyone into a 'regionwide' format. In the Southasia of the future, Bhutan and Nepal must be able to negotiate agreements with Bihar and Uttar Pradesh, and Bangladesh with Assam and West Bengal.

It was the British who made administration unnecessarily centralised, and now we need to encourage decentralisation and devolution. Perhaps then something will move in Southasia, while abandoning SAARC in the process.

~ Bibek Debroy is a research professor with the Centre for Policy Research in Delhi.