SAARC - Introduction | Sakshi Education

Sakshi Education

1. Seven Sisters of South Asia:
The member countries of the South Asian Association for Regional Cooperation (SAARC) are called the Seven Sisters of South Asia because of their geographical proximity and relations based on culture, ethnicity and economics.

2. Formation:

SAARC came into existence in December 1985, at Dhaka, Bangladesh.

3. 8 Members:

India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan, Maldives and Afghanistan.

4. Secretariat: Kathmandu

5. Current Chairman: Sri Lanka

6. Main Objectives laid down by the SAARC Charter:

To improve quality of life and promote welfare of the peoples of South Asia.

To accelerate economic growth, social and cultural development in the region.
To promote self-reliance among the countries of South Asian Region.
To generate mutual trust and understanding of each others problems.
To strengthen cooperation with other developing countries.
To cooperate on matters of common interest in international fora.
To strengthen cooperation with regional and global organisations.

7. Population and Economic Potential:

1.4 billion people, one-fifth of the World’s population.
Home to one-fifth of the World’s consumers with an average yearly income of $ 450.
The SAARC region with a total market size of one and quarter billion people offers enormous potential for intra-regional trade and cross-border investment.
Intra-SAARC trade is less than 5 per cent.

8. One of the Poorest Regions of the World:

The SAARC region is among the poorest regions of the world. The region has 44 per cent of the World’s poor. According to a World Bank report, more than 500 million people in South Asian region live below poverty line. The South Asian region has more than 50 per cent of the total world population of child workers.

9. Need for Regional Cooperation:
Analysts argue that in today’s world of compulsive global integration of national economies, the SAARC countries continue to drift without showing any pragmatic endeavour in regional cooperation.
Regional economic integration has been successful in many parts of the world including the European Union (EU), regional economic organisations in South-East Asia, Latin America and North America.
The regional economic organisations around the world have been successful in promoting intra-regional trade and external competitiveness. So far, SAARC has not achieved much success in regional cooperation.

10. Need to Focus on Trade Cooperation:

For SAARC to prosper the political animosities and suspicions of motivation should be kept aside and a process of mutual trade cooperation should be started. The SAARC Preferential Trading Agreement (SAPTA) which came into force in 1995 has been replaced by the South Asian Free Trade Area (SAFTA) from January 1, 2006.

11. South Asian Free Trade Agreement (SAFTA):

On July 1, 2006, the South Asian Free Trade Agreement (SAFTA) came into effect for the South Asian Association for Regional Cooperation (SAARC) member countries. SAFTA is aimed at providing free trade in goods among SAARC member countries. It is expected to integrate the entire South Asian market paving the way for an eventual single market in the region.

12. Significance of SAFTA Agreement:

Landmark Agreement in the Evolution of SAARC:
Analysts feel that the SAFTA agreement can be regarded as a landmark in the evolution of SAARC. The agreement represents a movement away from tinkering with tariffs under SAPTA to establishing a Free Trade Area in the region.
Can Make South Asia a Competitive Economic Bloc:
The SAFTA agreement has the potential to attract foreign investments to South Asia leading to a restructuring of the economies and making the region a competitive economic bloc.
Will Double Intra-Regional Trade:
The SAFTA will double intra-regional trade every five years from the current level of $7 billion. The agreement would help in drastically reducing tariff barriers, which are still high in South Asia compared to other regions.
Major Confidence Building Measure:
The SAFTA is seen as a major confidence building measure to ease tensions in the region, particularly between India and Pakistan. The treaty would enable South Asia to emerge as a global player in trade, according to the Indian trade and industry.
Enables Optimal Utilisation of Economic Potential of Member States:
Analysts point out that SAFTA can lead to industrial restructuring and help in evolving the special economic potential of member states for their mutual advantage. Thus, Sri Lanka could emerge as the rubber hub of the region, Bangladesh for energy-intensive industries and Bhutan for forest-based industries.

13. Limitations of SAFTA:

Makes no mention of the customs union or an economic union.
Leaves out trade in services.
Leaves unnegotiated far too many things critical for the success of SAFTA. These include the formulation of rules of origin, the preparation of sensitive or the negative list, the creation of a fund for compensating the LDCs for the loss of revenue from the elimination of customs duties.
Does not subscribe categorically to phasing out the negative list or eliminating non-tariff barriers.

14. Impediments to SAARC’s Growth:

SAARC Summits- Mere Talking Shops:
Analysts point out that the record of SAARC in promoting regional integration has been dismal. The SAARC Summits have become merely talk shops with little effect on the lives of the people of the region.
Indo-Pak Tensions:
One the main reasons for SAARC being a non-starter is the strained relations between India and Pakistan. The effectiveness of this forum to further regional cooperation has come under serious scrutiny because of the disputes existing between India and Pakistan.
Pakistan Holding Back Economic Cooperation:
Pakistan has been more interested in bringing its bilateral dispute with India over Kashmir into the SAARC ambit than in trade liberalisation. Pakistan insists that there can be no economic progress unless political issues are resolved. This is the opposite of what the other regional organisations have successfully adopted- expanding economic cooperation despite political differences. Thus, Pakistan should no longer be allowed to hold back the rest of the region.
Fears of India’s Dominance:
India’s size and strength of its economy only served to compound mistrust. Some members of SAARC fear that the organisation could be used by India to dominate the South Asian market.
Fear of Trade Under Liberalised Conditions:
Analysts point out that all the larger economies in SAARC have survived on a diet of high import tariffs and therefore fear trade under liberalised conditions.
South Asian Economies Share Similarities:
Another reason offered for the slow growth of SAARC is that the South Asian economies share too many similarities to benefit from trading with each other. Although this is true, more open borders may encourage greater diversification and specialisation, according to analysts.