05 December 2014
References have been made in Kathmandu of moving towards building an ‘economic federation’ in 15 years. It is clear that, thanks to Pakistani negativism, the original vision of an ‘economic union’ has fallen by the wayside
Prime Minister Narendra Modi had a full diplomatic calendar in November, participating in three multilateral summits — the East Asia Summit in Nay Pyi Taw (Myanmar), the G20 Summit in Brisbane and the South Asian Association for Regional Cooperation Summit in Kathmandu. The East Asia Summit is integral to India’s economic and strategic agenda across its eastern shores.
It casts the Indian strategic imprint across the Asia-Pacific Region. Over the past 15 years, India has concluded a free trade agreement with the 10 members of Asean, with bilateral trade targeted to reach $100 billion soon. India has also concluded Comprehensive Economic Cooperation Agreements with two major East Asian economic powers — Japan and South Korea. It has actively engaged Australia, which straddles the Indian and Pacific Oceans. These developments enable India to proactively deal with the assertive role of China in the
Asia-Pacific region. Participation in G20 gives India a role on the high table of global economic decision making. Our three-decade long interaction in Saarc with our South Asian neighbours has little to show, by way of economic cooperation, thanks primarily to the obstructionist policies of Pakistan. A “Group of Eminent Persons” crafted a
long-term vision for Saarc in 1998, which envisaged the establishment of a South Asian Free Trade Area by 2010, a Customs Union by 2015 and an Economic Union by 2020. The visionary, Mr Atal Bihari Vajpayee, even advocated that the culmination of this process should be the establishment of a Saarc Monetary Union. The 2002 Saarc Summit in Kathmandu loftily proclaimed: “To give effect to the shared aspirations for a more prosperous South Asia, the leaders agreed to the vision of a phased and planed process eventually leading to a South Asian Economic Union”.
Where exactly do we stand today? After much foot-dragging, Saarc countries have concluded a Free Trade Agreement confined to goods, but excluding all services like information technology. Even this agreement has been stymied by Pakistan, which has declined to even accord India the World Trade Organisation-mandated ‘Most Favoured Nation’ treatment.
The prospect of a Comprehensive Economic Cooperation Agreement like those India has fashioned in East and Southeast Asia remains bleak and the vision of an Economic Union is a constantly receding mirage. While references have been made in Kathmandu of moving towards building an “economic federation” in 15 years, it is clear that thanks to Pakistani negativism, the original vision of an Economic Union has fallen by the wayside.
Pakistan successfully blocked all efforts to promote road and rail connectivity across South Asia, because it intends to deny India access to the markets of Afghanistan and Central Asia. Pakistan was prevented from making the Kathmandu Summit a disastrous failure. It reluctantly agreed, in the last minute, to promote electrical connectivity. What has been Pakistan’s record even on this score? After broadly agreeing to supply electricity to India in 1999, Mr Nawaz Sharif buckled under Army pressure and torpedoed the proposal he had agreed to earlier. Despite vast tracts of Pakistan facing crippling electricity shortages, the Army has torpedoed several proposals to buy power from India in negotiations ever since Mr Sharif assumed office. There is little reason to have any faith in a “change in heart” by the hard-boiled General Raheel Sharif.
In contrast, the prospects for energy cooperation with our eastern neighbours — Nepal, Bhutan, Bangladesh and Sri Lanka — are gathering momentum. Distribution networks funded by India and the World Bank have been built, or are under construction across the India-Nepal Border. With a River Basin Potential of 83,280MW, Nepal is slowly shedding earlier inhibitions (some justified) about achieving prosperity through energy cooperation, like Bhutan has done. Apart from endeavouring to move ahead on major public sector projects, there has been promising movement forward in hydroelectric projects with Indian companies like GMR and GlaxoSmithKline energy. Hard negotiations are only to be expected.
In Bhutan, 10 hydroelectric projects were agreed upon for implementation in 2009. The two countries are well set to reach a target of 10,000MW by 2020 and 3,00,000MW by 2030. Likewise, in Bangladesh, India has commenced supply of 250MW in 2013 from West Bengal, with discussions under way for 200MW from Tripura. In Sri Lanka, India has extended a $200 million credit for a 500MW power plant in the Tamil dominated Northern Province. Discussions are underway for a high voltage undersea cable linking the two countries.
It is evident that apart from playing spoil spot and embarrassing India, Pakistan will do precious little and even seek to retard energy cooperation across South Asia. While work could continue on seeking to develop a South Asian Energy grid, India would be well advised to seek development of a sub-regional eastern energy grid, bringing together its four eastern neighbours — Nepal, Bhutan, Bangladesh and Sri Lanka — all of whom are members of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.
This grid can be extended across Bimstec to Myanmar and Thailand, given the vast hydroelectric potential of Arunachal Pradesh. Moreover, the rail and road connectivity that India envisages to and through Myanmar should be linked to the development of communications with Bhutan, Nepal and Bangladesh. Combined with the development of Chahbahar Port in Iran guaranteeing access to Afghanistan and Central Asia, these measures will ensure that it is Pakistan and not India that remains economically disconnected from the rest of South Asia.
The Chinese effort to gatecrash into Saarc as a member, was deftly, but firmly thwarted by India. After the visit of President Xi Jinping to the Maldives and Sri Lanka (countries he described as “pearls” in the Indian Ocean) and China’s growing economic and strategic profile in Nepal, Pakistan, Sri Lanka and Afghanistan, with “Silk Routes,” across India’s land and maritime frontiers, there are now greater concerns about Chinese policies of “containment” of India. Asean members are bitter at the manner in which China, which is an Asean Dialogue Partner, used its economic clout in Cambodia in 2012, to divide Asean and prevent issue of the customary joint communiqué, which envisaged reference to widespread concern within Asean about Chinese policies on the South China Sea.
The Kathmandu Summit rightly decided to direct the Saarc Programming Committee to engage “Saarc Observers” like China, the US and others, in “productive, demand driven and objective project-based cooperation, in priority areas as identified by the (Saarc) Member States”. India cannot allow China to become a “Bull in a China Shop” in Saarc, like it did during the Asean Summit in 2012.
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