Let economists lead the way

It’s time to invest in free trade and cross-border movement of capital and people

Written by Khaled Ahmed | Published:December 27, 2014 12:00 am
(Illustration: C R Sasikumar) (Illustration: C R Sasikumar)

We all know the South Asian Association for Regional Cooperation (Saarc) died long ago, and if you visit its official website today, the stench is quite overpowering. Pakistan said cooperation is no use if disputes stay unresolved. India remained uninterested because it was inward-looking as a state and was OK with the not-OK status quo. Was Saarc  born before time? Was it too futuristic, because South Asia was too decrepit to wake up to the reality of economic regionalism?

In the last week of November, the 18th Saarc summit ended with another whimper. We know the numbers: 1.6 billion South Asians live below the poverty line, the region produces 3 per cent of global output and 2 per cent of world exports, intra-regional trade is only 5 per cent of total trade “compared to 66 per cent in the EU, 53 per cent in Nafta, 32 per cent in the Pan Pacific region and 25 per cent in Asean”.

There was a lot of handshaking among leaders. Nawaz Sharif was first seen not keen to shake with Narendra Modi, but when the two actually shook and lingered over it, a retired Pakistani air force officer fond of “analysing” on TV blew a fuse and reprimanded Sharif for letting Modi score at Pakistan’s expense. The take in Pakistan is the army doesn’t want Sharif to get too cosy with India while Modi is making life miserable for Pakistan on the LoC and is determined to deprive Kashmiris of their rights.

I know most Pakistanis think nothing of Saarc. The diplomats are on record saying awful things about it in the media because India can frontload trade and connectivity through it to make the region forget about Indo-Pak disputes. Pakistani doves who advocate trade and connectivity “without giving up on Kashmir” are shunned, if not threatened. I think Pakistan approaches Saarc the wrong way. Is there an Indian who is critical of India the same way?

One commentator I respect a lot is M.K. Bhadrakumar, whose opinion I follow. He has the following critique of how Modi has handled the latest summit: one, Modi didn’t make any big unilateral concession on connectivity; two, he shied away from any move of “increased market access or transit regimes” so that the neighbours can trade through India; three, Modi didn’t rescue India from the label of “control freak”; four, he didn’t allow China to join Saarc as the region’s big trading partner; and five, he didn’t lead the region in making Saarc meaningful.

Saarc is important and India, being the big state, will have to lead it to realise the economic benefit it deserves because of its size. If Pakistan is an impediment because of Kashmir, the process of trade and connectivity will make Kashmir irrelevant with the passage of time. Pakistan has a national consensus on free trade with India, with only certain farming and manufacturing lobbies fearing competition in opposition. All that can be taken care of within the free trade arrangement agreed between India and Pakistan. As for the “deep state” roadblocks in Pakistan, they will go as economic challenges become more emphatic, as they just did, triggering the anti-Taliban military operation in the tribal areas.

I am quoting here an optimistic report by Ali K. Chishti in the Friday Times (December 28) titled “The Raheel Doctrine”: “During the tenure of former army chief, General Ashfaq Parvez Kayani, as the IG Training and Evaluation, General Raheel Sharif ‘vociferously recommended moving away from the traditional rivalry with India and to deal with internal threats within Pakistan first,’ says security expert Maj-Gen (retired) Muhammad Ali. A change in policy is apparent since he — General Sharif — took over as the military chief.” (Chishti has been thrashed once for his writings by what looked like the police.)

It is within Saarc that India will attain its rightful vision of becoming the big power it is expected to be by the world. Prime Minister Modi is the man to do it because he is least tainted with protectionist ideology. He can sign a deal with Bangladesh over the Teesta waters; he can restart the peace talks with Pakistan and switch off the LoC crossfire, knowing Pakistan is threatened on its western border. Prime Minister Sharif is game and doesn’t really care what the hawks say.

If Modi’s “look east” programme is aimed at reviving a “trading bloc” comprising India’s Northeast, Bangladesh and Myanmar, India’s northwest too awaits his attention. On both sides, China is entering the region with trade, investment and infrastructure development. Pakistan and Afghanistan deserve the advantage of being “median” states and need investment in their infrastructure and segments of the economy where Indian investors may reap higher profits because of low-cost manpower, as in computer software development.

Energy is the big topic of discussion in the region. A gas pipeline is supposed to start from Turkmenistan, cross Afghanistan and Pakistan, and reach India in what may be the most symbolic development in the Saarc region. India has to look west to reach its economic potential and “soften up” an already willing Pakistan with helpful gestures. The paradox is that Pakistan has become “willing” after being internally troubled; and it became internally troubled during the phase of being “unwilling”. Prime Minister Sharif and General Sharif are both more realistic and, therefore, more flexible about India than leaders in the past. Realpolitik works if economics is prioritised and trade frontloaded.

India needs Saarc more than the other regional states. I believe pretending that it does not could be a policy to disarm the neighbourly fear about Indian “hegemony”. Yet, the regional states have signed a charter that can be fulfilled only if India is the big economic powerhouse, sustaining its neighbouring economies and using connectivity with them to top-up its energy reserves. The entire world believes this and whoever, clinging to nationalism, badmouths Saarc as a dead organisation, isolates himself.

Asean may be showcased today to make us feel bad, but there is trouble in the South China Sea that may yet divide the member states. India has reached out to Iran in the west, but sanctions against Tehran block further advance. China is entering a willing Pakistan after becoming an associate member of Saarc. The rest of the world, led by America, favours India expanding its market westward, which may ultimately mean linking up with China through Pakistan after getting into Afghanistan and Central Asia. Pakistan benefits by being tamed as a warrior state, as its population gets busy living off the new infrastructure of roads.

How can we “normalise” a troubled South Asia except through trade and connectivity? If the nation-state cannot live without going to war, what indirect means can we use to wean it from nationalism — the textbook mythology that creates external enemies to achieve internal cohesion? You can’t forswear this mythology, but you can lean on regional economic cooperation to draw its sting. Only the “indirection” of trade and connectivity can detox the nation-state. So far, nationalism and isolationism have given us gradual impoverishment and budgets that can hardly protect our populations from deprivation. The new leaders are not generals and civilian demagogues but economists found prescribing the unpleasant new recipes of free trade and cross-border movement of capital and people.

The writer is consulting editor, ‘Newsweek Pakistan’

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    BHAGWAT GOEL
    Dec 27, 2014 at 2:05 pm
    EASIER SAID THAN DONE. SAARC TO BE MEANINGFULL TIME TO END MEMBERSHIP OF STAN LEAVING AN OBSERVER STATUS. STAN IS THE BIGGEST IMPEDEMENT IN THE FLOWERING OF SAARC TO ITS FULL POTENTIAL.
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      TrueFace
      Dec 29, 2014 at 6:20 am
      Its good to hear that stan has opportunities on economic front and new leaders are wishful for trade relations with India, but will this treaty be strong enough to sustain the threat of terrorism? Wont the easier connectivity between the two states would also increase infiltration? The experience has taught us that every time we tried to liberal our relationship with stan, we were rewarded with some form of cease border violations. Any gesture of friendship by Mr. Sharif was discouraged in stani Army. However if the new General deviates in opinion from other on Kashmir issues, then it might very well be the harbinger of new phase . This,if possible, would be beneficial for both stake holders which could give a new direction to SAARC
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        GS
        Dec 27, 2014 at 4:54 pm
        Mr Ahmed is a brilliant commentator who seems to have the ability to look at facts in a dispionate manner. Wish more people would listen to people like him. Bravo!!
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          Lulu Leena
          Dec 27, 2014 at 1:05 pm
          I think the main reason of Indias reluctance to open trade links and connectivity is the fear that under the trade unbrella all sorts of other terrorist activities will take place, this is also true with the pipe lines if one fine day stan decide to stop the gas and oil supplies what then.stan State cannot gurantee India anything, it doesnot have absoloute control over the state.stan should first secure itself and then talk to India without a shadow of terrorism I am sure India will go two steps forward then.
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            Rajesh
            Dec 27, 2014 at 3:58 am
            it is true that good economics can make borders irrelevant. It can create an atmosphere of growth if it is followed by removing non-trade barriers including free movement of capital, followed with free movement of labour. Question is whether the 2 big brothers are willing to take the first steps? if not, there is nothing wrong to start bilateral arrangements by the 2 big brothers striking deals independently with the other smaller countries.
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              rkannan
              Dec 27, 2014 at 6:45 pm
              India accorded stan MFN status in 1996 without any reciprocation to date despite international agreements to do so by stan. Both IPI & TAPI pipelines make little sense as India can build an under water pipeline from Iran. It is only American insistence that prevents this but with Modi as PM, India may move forward on this aspect as well. stan has reacted to Peshawar by hanging some persons and by military action on its western borders but it continues to protect terrorists like Sa, Lakhvi, Dawood etc. Under the cirstances, it is unrealistic to expect further concessions from India.
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                Don Mattrick
                Dec 27, 2014 at 9:42 am
                This is a very conciseanalysis. The former Israeli foreign minister Mr. Abba Eban remarked "Palestiniansnever missed an opportunity to miss an opportunity." Granted that the situation in the South Asianregion is not the same, but if you replace the word Palestine with stan,you get the picture, right?
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                  SP
                  Dec 27, 2014 at 5:41 pm
                  It is not just about Kashmir, there are other issues related to terror, starting from Kandahar Hijack, Parliament attack to 26/11 and support to terror attacks in India and so on. Handing over Dawood Ibrahim and 26/11 attackers will help. There is no possibility of fair trial in stan. Most recently India's gesture to mourn death of children in Peshwar was reciprocated by bail to 26/11 suspect the same way La bus journey was reciprocated by Kargil, then by Parlliament attacks and so on. Both India and Paikstan do not learn. Unless India changes its approach, stan will continue to play the same game.
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