There was consensus among the participants that it was not resource shortfall that constrained the evolution of SAARC as a meaningful
economic entity but the regional leadership‘s lack of political will to move
forward by resolving their political disputes. During the deliberations, approaches were cited that other regions adopted to achieve mutual economic cooperation despite the existence of disputes such as increased trade between China and Japan, China and Philippines and China and India. The second model fitted the case of SAARC where inter-state conflicts have taken the centre stage and trade and economic activity has been held hostage to their resolution. It was suggested that SAARC countries could also pursue mutual trade and investment-based economic cooperation without waiting for the resolution of inter-state disputes.
With adequate institutional arrangements in place, SAARC should have been a facilitator and enabler in speeding up regional economic cooperation but the volume of trade between member states is far below the desired level and the true potential of the region. The eight SAARC countries account for around a quarter of humanity, with a population of nearly 1.7 billion. However, SAARC only has a combined share of three per cent of world GDP, roughly two per cent of world exports and imports
and around 1.7 per cent of world‘s inward FDI flow. It is dominated by
India with 75 per cent of the population of the region, 63 per cent of land area and 81 per cent of the combined SAARC GDP. One of the impediments in regional cooperation is the variance in the degree of economic development of member states which leads to economic inequalities and even the developed member states do not have the capacity to restructure the economies of less developed partners. That is why, instead of benefitting from SAFTA, preference is given by member states to bilateral free trade agreements. Such a trend needs to be discouraged. South Asian economies still choose to trade with extra-regional economic partners like the US and EU. Pakistan and India need to set the tone right and lead the way by correcting their respective trading priorities and preferring to trade with each other and within the region.
Within the region, resolving financial problems pertaining to intra-regional trade and investments should not be left to the central banks of a single country. To do that all member countries should co-opt their central banks to evolve compatible structures and regulatory mechanism.
SAARC member states need to keep in view that economic dynamism through mutual economic reliance creates its own peace dynamics and generates growth. There is a need for carefully thought-out processes of negotiations and a comprehensive package of agreements followed by a sound monitoring & management mechanism that is practical, and efficient, capable of comprehensively addressing political disputes and existing impediments to economic cooperation.
Micro economic fundamentals of the region reveal that these regional countries need to integrate production-investment- value-chain to boost overall growth. For this both government and private sectors need to be involved in setting the investment agenda for regional investment framework.
SAFTA came into force on January 1, 2006.There are various elements and components which are supposed to be fully implemented by December 31, 2015. Therefore, it is important that all SAFTA agreements are implemented within the stipulated time. To implement SAFTA, every country should shorten its negative list as soon as possible and as far as feasible, especially regarding those products which are more economical to trade within South Asia. There is no mechanism in SAFTA for progressively reducing the negative lists. Such mechanism is needed.
Despite numerous incentives, FDI is quite low in South Asia due to less than expected economic returns, infrastructural deficiencies, law and order situation, political instability etc. Therefore, SAARC governments should attach high priority to addressing the impediments.
At present, all types of trade negotiations are taking place at the government level, both in the case of WTO and SAFTA. Business communities, the actual actors, have, by and large, been left out. To be able to identify the problems more clearly and to solve them efficiently, business communities and private sector representatives should be included in all trade negotiations to materialize the true spirit and benefits of SAFTA.
Economic cooperation was the main driver behind European integration and it took sixty years for the EU to evolve into its present form, it would be difficult to have an Asian Union on the pattern of the European Union. It would be more feasible to strengthen SAARC by focusing on regional commonalities and economic cooperation.
Afghanistan is a natural land-bridge and the new Silk Route initiative would help to integrate the regional economies with Afghanistan, helping it to stabilize its economy in the post 2014 situation.
Liberalization of trade amongst SAARC countries would help in reducing smuggling and other forms of informal trade. Hence, gradual formalization of informal trade would benefit the mainstream national economies of SAARC states.
SAARC must jointly establish a competitive research Hub to evaluate the relative competitiveness of SAARC countries and facilitate a free trade environment.
Member states must develop complementarities in their economies so that they can move forward in a relatively smooth manner.
SAARC should establish a joint investment company to facilitate cross border investments and this could ultimately lead to the establishment of a SAARC Bank to facilitate trade and investment.
Energy
There are pockets of energy surplus and energy scarce areas within SAARC. Trade in energy sector can open new and exciting prospects of economic cooperation that can benefit the entire region. However, it would require extensive grid and transmission infrastructure upgradation.
Energy trade would also give rise to interesting patterns of interdependence and yield positive dividends in the form of sustainable and robust CBMs.
The SAARC Energy working Group should be more proactive to create infrastructure and regulatory mechanisms in SAARC.
The creation of SAARC ―Power Pool‖ will enable the region
to utilize their collective resources of electricity/energy in an optimal way by balancing the demand and supply through various sources of electricity generation.
To enhance inter‐state trade in energy the practical hurdles need to be removed to encourage investment in the required infrastructure and upgradation of transmission grid systems.
A dispute resolution mechanism should also be in place before cross‐border energy transmission plan is developed.
Energy pipelines would be a major CBM to create goodwill and mutual trust among member states.