The Political-Economy of the South Asian Economic Union

{the most hated nation in Nepal today is India. }

Who says so?

it is very important for india to pursue safta and a saeu. the reasons are not economical but political. currently and increasingly in future, india hosts a large number of bengali and nepali workers, but have poor leverage in politics of these countries. a more formal trade agreement will translate into better political leverage. in this, indian govt will have to be far more aggressive than they have been so far e.g. in Nepal. the govt has been only suppporting some power islands in Nepal, which have evidently poor political stature. India needs to strongly push for extensive JVs and infra projects in Nepal, and hopefully in Bangla Desh..i.e. not repeat mistakes of Nepal. these are extremely volatile regions with large populations which will continue to provide agar-agar for breeding maoist and jihadi viruses. so, at least for these regions a trade-agreement and aggressive trade policy is warranted. for this to happen, indian state of bengal will have to first make transition to a bussiness favourable climate. bengal borders both nepal and BD. currently this state is involved in corrupt politics and are preying on poor bangladeshi immigrants.

pakistan is a more stable place, and a bi-lateral trade deal is perhpas sufficient, aggresive JVs or infrastructure partnerships can take purely opportunistic path, no govt policy is needed.

sri lanka is quasi stable, and is not exporting its instabilites. the trade and political relations, JVs are good therefore status quo is sufficient.

To all Chowkies:

Haiy tau yeh rasm-e-zamanah, lekan phir bhi
Ho mubarak tumhain yeh saal nya, meray rafiq

Happy New Year

Mohammad Gill

20/HP
[.....Most of the posts are irrelevant and the chowk admin should filter them out...]

I am sure somebody died and made Mr. HP the king.....Yep, the King has spoken - most posts are junk - so blank them all out, except the ones posted by His Excellency....

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[... article is about SEAU in 2020 not today, not tomorrow or even in the next five years. ...]

The article is asking for one potential member of the future Union to make unilateral ``sacrifices`` and make sure the other members ``donot feel bad about being led``...... so whether the SAEU is formed today or 20 years down the line - it don`t really matter - it would be a non-starter......

urstruly
[.... it is Hindu mentality formed by their religion that do not let them co-exist peacefully with any one...]

May be..... but then this problem of ``co-existence`` is even more acute in muslim communities/countries around the world.....Iraq-iran, paki-afgan, iran-paki, turkey-kurds, saudis-turkey - the list is long[salim amdea compilation sometime back].....

Who are you going to blame that on? hinuds, jews, americans?....

There are three countries in SAARC or SAFTA that could form a true economic confederation surpassing US-Canada`s NAFTA or that of EU; these three countries are India, Bangladesh, and Nepal.

Lets take India and Bangladesh first. The relationship between these two countries is one of unique ones in the world. Bangladesh won its freedom because of India. Indians saved them from an on-going genocide, which by Indias` own account had cost Bagladeshis over 30 million lives. India also gave refuge to 100s of millions of Bengalis who fled their country during their war of independence. Bangladeshis established their own rule with the help of Indians. But today the most hated nation on the globe is India.

Similarly, there is Nepal, a landlocked country, wholly dependent on India for its trade and economy. It is the only Hindu sttate in the world, so ideologically there is no difference. Culture, religion, heritage and even languages are shared. But despite a communist insurgency, which is supposedly supported by China, the most hated nation in Nepal today is India.

Probably, it is Hindu mentality formed by their religion that do not let them co-exist peacefully with any one. The above mentioned two examples is the empirical evidence of that.

It is painfully clear that most of the comments on the article are from people who have not even read the article. Most of the posts are irrelevant and the chowk admin should filter them out. Chowk editors should realize that if they put articles of some academic value on the site for discussion then it is also important that only the posts that discuss the article and thoughts in the article be allowed for display.

The writer of the Article has done lots of research and put in some hard work in writing and presenting his ideas together and the chowk staff should at least respect article contributors and honor them for offering their articles for publishing at chowk by monitoring the interactions for relevancy and the substance. This article is not about politics. It is about some policy issues that were part of the SAARC declaration and all SAARC members have signed on it. The writer has made a serious effort to discuss some aspects of the SAARC declaration and the article deserves a serious look by all readers.

Ensuring respect for female authors is not enough. It is the beginning. ALL authors should be ensured the same courtesy.

I would have preferred to use feedback but posters on this site must also show some commitment to the site. If they lack the commitment then their posts should not be displayed at all. It is better to have 10 comments on an article then 1000 of no value at all.
Sorry for the digression…

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“calls for the creation of a South Asian Customs Union (SACU) by 2015, and a South Asian Economic Union (SAEU) by 2020.”

It is clear from the article that the article is about SEAU in 2020 not today, not tomorrow or even in the next five years. The article is talking about something that is still almost 15 years out in future.

However, I think Athar made an error in relying on an obscure economist C. Westerate’s position in 1948. 1948 was some sixty odd years ago and the economic realities have changed considerable since then. The means of trade and distribution of labor and capital have gone thru some astronomical changes in the last 60 years and some ideas discussed by Westerate may not be relevant today.

In terms of creating the EU, some of Westerate’s ideas were relevant but with the current pace of activity in the international trade, creating layers, and relinquishing sovereignty are obsolete thoughts. Following France and Germany is not a good analogy either as France, Germany scarifies came when they were in an economic position to do that and none of the SAARC countries have anything to scarify anyway.

The first and foremost factor that worked in favor of the EU was the similarity of culture in pretty much all Western Europe. The culture just does not mean the language or the dress code but the meeting of minds, the uniformity of goals and work ethics form a common culture. It was relatively easy for the Western European countries to work on Economic unity on a faster pace, still, they first relied on opening the borders for travel and assimilation of ideas thru a free movement of people to increase dependency on each other, then followed that up with economic integration that is not by any means complete and still a work in progress.

We must also bear in mind that most of the EU countries were almost economic equals before they were able to go full steam in to the EU idea.

Looking at the SAARC countries, it is clear that all countries are in a horrible economic shape. All of them have recently adopted free and private economy and they are still going thru some painful changes in their economic structures. All of them suffer from serious internal political, ethnic, and communal discords and it is obvious that the leadership in all countries is not mature and visionary enough to fully implement a seamless economic transformation in their respective countries.

Economic changes cause political changes and political changes bring turmoil and chaos in societies. Chaos leads to rivalries between the regions and some regions in an effort to catch up make wrong political choices. Some regions are left behind and the hope to recover them diminishes. Leaving regions behind means rise of militancy in those regions and often arm conflicts which eventually begin to hurt the regions that are doing better.
A visionary leaderships in politics, business, and the society can create policies and follow them thru to control the horrors of economic changes.

All members of SAARC lack the visionary leadership and still have to rely on prompting from the World Bank, the IMF and the US state department to move forward with even the smallest of initiatives. In this atmosphere, it is hard to imagine that the current or the future leadership in SAARC countries would be able to implement SAEU initiative even in 2020.

The best course is to allow the economic integration follow its natural course and let people define what would they accept and what can be accomplished without a whole lot of intervention from the moribund leadership.

The first step is gradually reducing the travel restrictions. Let people meet and see for themselves whether the countries in SAARC actually share the culture, work ethics, and goals before forcing them into some economic union that is not able to allay fears between the people and the governments.

It is possible Pakistanis are not willing to make the cultural changes to compete in this world

kham
[.....indians don`t want to trade with pakis ....]

It`s not that Indians don`t ``want`` to trade with pakis - but they are reluctant to make unilateral ``sacrifices`` for that purpose...... SAFTA trade should happen as it does in other cases e.g. Indo-China trade is at 15bn$ within a few years - nobody was asking for ``sacrifices`` for that to happen.....

if ASEAN countries had said that - oh, China is the ``emerging superpower`` - so the chinese should be ``magnanimous`` before we can trade with them - then the ASEAN would have never got off the ground....

=== Interact Filtered ===
view this users filtered interacts

...since indians don`t want to trade with pakis and pakis are staying away from this thread, it is obvious this safta thingy has failed even before it started...author should concentrate on kashmir, hindu bad/muslim good, jihad is our first duty and other such serious topics to get both indians and pakistanis hitting over five hundred interacts and make chowk a succesful web-site... this advice is offered without asking or without charge...fee sabeel-illah...

re:#3 by mohar11
Bangladesh is so stupid that, leave aside giving transit trade facility to India, it has become a new training ground for terrorists (the recent Bangalore episode may be connected with Bangladesh), with the result India is busy fencing off its borders with Bangladesh. Talk of free trade at this point is meaningless.
Sridhar

re:#12 by Layman
Indian diplomacy would have failed if it is unable to convince even Bangladesh that it has nothing to fear and that it can prosper by allowing transit facility. The problem is India`s huge size has become a liability for India. Smaller nations like Bangladesh fall an easy prey to their own machinations and believe they are being exploited by India. Bangladesh`s resistance to TATA`s 2 billion dollar investment does not make any sense. And, there it is!
Pak can gain immensely by allowing free trade with India but again Pak rulers hate India so much that even the label ``made in India`` makes them go mad!
Sridhar

re: this article
An interesting article but i think premature.
Since European Union is being touted as the model to follow, it is a good idea to see how
European Union evolved. Europe was a divided camp in the 30s and 40s and it was only after the trauma of WWII that it seeped into the consciousness of each nation states (at least the ones most traumatized) that in order to prosper, they have to have a healthy rivalry. US helped rebuild Europe through the Marshall plan but Europe evolved its own identity in the last 50 years that sets it apart from the rest.
For more details, one may go to the the history of EU in the above link.
Per that article, EU was formed out of a desire to (rebuild Europe after the disastrous events of World War II, and to prevent Europe from ever again falling victim to the scourge of war. In order to do this, many supported the idea of forming some form of European federation or government. Winston Churchill gave a speech at the University of Zürich on September 19, 1946 calling for a ``United States of Europe``, similar to the United States of America. The immediate result of this speech was the forming of the Council of Europe in 1949.) It grew by a slow process of assimilation (for eg UK was initially not a member) evolving a legal frame work, a common market, currency etc and now a constitution, ratified by most but rejected by nations like UK, Denmark, ,i think also France.
Some benefits of EU include:
1. Free trade of goods and services among member nations
2. Freedom for citizens of its member states to live and work anywhere within the EU with their spouses and children, provided they can support themselves
3. A single currency, the Euro
4. Common system of indirect taxation, the VAT, as well as common customs duties and excises on various products
5. A common external customs tariff, and a common position in international trade negotiations.
Member nations have voting rights to elect parliament, a common criminal law etc etc.

The big questions is: where is South Asia in terms of evolution?
Is India, Pakistan (the biggest nations in SA) ready for economic union? Clearly, there can be little talk on common legal framework, free mobility of persons etc etc given the intense rivalry and hatred that exists between these 2 nations. Is at least an economic union possible?
I think the ball is in Pakistan`s court. India has already given Pak the MFN status, something that Pak has not reciprocated. This is something nation states will be obligated to do anywhere post 2007 once WTO agreement goes into effect. Even in this, Pak is dithering, citing Kashmir problem as a stumbling block!
Pak is clearly not ready at a mental level. India is headed by a PM who is an economist with a vision but even he may run into problems when he tries togive too many one sided concessions to Pak. Author of this article says:
(he onus for doing so clearly lies with India. Without that, SAFTA is likely to be still-born or, at the very least, lead to suboptimal results. The other countries of the SAARC region are justified in looking towards India`s current actions, policies, and postures for signs of things to come.)
It would have been useful if the author had elaborated a little more on what was expected from India.
Sridhar

The author has called upon India to do several things `selflessly` in order to make SAEU a reality. No country is truly selfless, it always acts in its own interest. Can the author show how SAEU is in India`s interest (short term or long term), while calling upon it to do this and that?

In my opinion, India should stop trying to do anything that involves Pakistan - it will only fail. India has little to gain from SAFTA. It already has a free trade agreement with SL, and decent trade with Nepal. Pakistan refuses to grant it reciprocal MFN status and BD is sticking their neck in the sand, refusing to allow India transit rights to the north eastern states or sell gas to us. The bigger markets for India are China (with whom two-way trade is booming), SE Asia, Japan, EU and US. The Indian middle class is already large - 56mn people with income > 10 lakh rupees and another 240 mn (I think) with income > 2 lakh rupees forming a 300 mn middleclass. This number will only grow and will be a large enough market for Indian companies. There is no advantage for us in allowing free movement of people from terror sponsoring nations. The only thing that they can offer India is oil/gas which is currently being negotiated anyways.

Can the author make a case for SAEU from India`s perspective, before urging it to take the leadership role for it, other than appealing to its selflessness or begging for generosity?