Activating South Asian regional cooperation

After the colonial era, most countries in the South Asian region became independent and sovereign states. In order to remain aligned to their  collective legacy, the nation states strived to form small groups aimed at establishing regional cooperation to enhance economic growth, cultural harmonisation and cross-border security. Prior to 1950s and 1960s the South Asian region was almost a single entity starting from the Philippines to Pakistan.
 After the Second World War these countries gradually became independent but they tried to form regional unions or associations, virtually to form a commonwealth or union out of diversities. Jawaharlal Nehru (14 November 1889 - 27 May 1964) convened the Asian Relations Conference even before the independence of India in 1947. Asian Relations Conference of 1947 was followed by a conference in 1949 in Indonesia and another one in Bandung in 1955. This became the pillar for the establishment of the Non-Aligned Movement (NAM) in 1961. In the late 1970s, under the initiative of Bangladesh seven South Asian nations, Bangladesh, Bhutan, India, Maldives, Nepal,  Pakistan and Sri Lanka formed the South Asian Association of Regional Cooperation ( SAARC). Again under the umbrella of SAARC so many component associations have been formed like South Asia Federation of Exchanges (SAFE), South Asian Federation of Accountants (SAFA), South Asian Federation of Endocrine Society ( SAFES) and so on.
In this perspective, a very recent shift in Indian policy towards its neighbours could be observed in some of the collaboration projects that were discussed in the region to reduce energy shortage through gas pipelines. (Saurabh Kumar and Aparna Sharma, Discussion Paper, CUTS International 2015)
 Implementation of these can bring important results in elimination of mistrust, and gains in the fields of energy and economic progress. For example, India and Bangladesh have different energy endowments and their neighbours Myanmar, Bhutan and Nepal are in a position to fulfil India and Bangladesh's energy requirements. India needs to import hydrocarbon from Myanmar, but the adverse geographical position between the two states is a barrier. However, Bangladesh can bridge this gap because of its geographic location. Similarly, India is also in a position to mitigate Bangladesh's chronic dearth of power to some degree by allowing the country to import hydro power from Bhutan and Nepal as they have vast hydro energy potential.  These arrangements could also assist the landlocked Himalayan states to develop their economic structures by selling hydro power to their neighbours.
Another example, in contrast, is Iran-Pakistan-India gas pipeline project which was conceived in 1989. A lot discussion on technical and economic issues had been done on it but in 2006, under US pressure, India came out of the project as the US was against Iran's nuclear projects and India's increasingly close relationship with Iran. The project was a win-win situation for both India and Pakistan as India could have fulfilled its energy needs while Pakistan could have also got energy from Iran and transit fees from India. In 2005, Myanmar-Bangladesh-India gas pipeline project was signed but no progress could be made as Bangladesh tried to take account of bilateral issues with India in the discussion. So, the hydro power web between India-Nepal and Bhutan can provide gains to all these three states. India, Sri Lanka and Nepal have started to move forward in energy cooperation. Sri Lanka and India's joint venture in electricity and India-Nepal joint venture on gas pipeline are the examples that could be cited in this regard.
A pre-eminent method to enhance regional cooperation in the region could be the creation of a regional fund or regional bank to finance projects, crisis prevention and to provide finance to the private sector. South Asia could take lessons from the experience of the ASEAN in trying to attract intra -regional investments. Even, mobilising foreign exchange reserves for development projects and crisis prevention could play an important role. Secondly, initiating regional bodies could be an effective instrument to boost regional economic cooperation in South Asia.
Good examples of regional bodies in other regions of the world are European Commission (EC) and European Central Bank (ECB) in EU, Chiang Mai Initiative Multilateralisation (CMIM) in East Asian and ASEAN+3 Macro-economic Research Office (AMRO) and recently in the offing BCIM-EC. A possible solution to increase financial cooperation can be the building and implementing of mechanisms like Asian Clearing Union (ACU). However, the idea did not provide enough incentives because of limited coverage of products and limited scope of agreements. The Kunming Initiative, which is currently known as "BCIM (Bangladesh-China-India-Myanmar) Economic Connectivity Forum for Regional Cooperation" began its journey in August 1999 in Kunming, capital of China's south-western province of Yunnan. After 14 years of intense dialogue and cooperation, today BCIM Forum has become an important sub-regional cooperation mechanism in the region, aimed at greater integration of trade and investment among the four countries. Subsequently, to facilitate and consolidate the process of regional economic cooperation and create cross-border trade and investment opportunities both at public and private sector level, an organisation named China Kunming International Logistics & Finance Association (ILFA) has been set up in Kunming with the support of the Chinese government.
The BCIM Forum reached the consensus on establishing non-governmental financing mechanism for China-South Asia International Finance Opening and Cooperation. The Forum will also research on promoting the international finance opening and co-operation, creating and marketing innovative financial products suitable for the objectives. Decisions of all meetings of the Forum shall be submitted to quarterly meetings of BCIM governmental working groups. The forum will work together on promoting BICM Economic Corridor building, China-Bangladesh Economic Corridor building and China-South Asia International Finance Opening and Co-operation.
A major obstacle to cooperation is the economic and infrastructural asymmetries, although there is much scope for intra-industry specialisation among member states of the region. Cooperation could be more successful if there is much scope for market driven integration. In South Asian region transaction costs are high due to mainly to high transportation cost, weak infrastructure and fragile financial services. The lack of scope for direct investment has been another obstacle in the market driven cooperation. Non-tariff barriers, excessive documentations, burdensome customs procedures, inefficient port operations add significantly to the transaction costs of intra-regional trade. South Asian economies, under the current scenario, have to play a greater and firm role in the regional cooperation process.
In this context, the South Asia Sub-regional Economic Cooperation programme (SASEC) that commenced in 1996 between Bhutan, Bangladesh, India and Nepal under the banner of Asian Development Bank ( ADB) could be extended to other areas of cooperation and countries of the region. Furthermore, governments need to initiate a plan and negotiate with their counterparts on the one hand, and with domestic stakeholders on the other. To prevent the conflicts in South Asia it is necessary to give a big push to the process of regional cooperation both within and beyond the agenda of the SAARC. Civil societies can act as catalysts in the initiation of regional cooperation initiatives as they generally have a significant voice in the policy-making processes of their respective states and are also recognised across borders for their intellectual pursuits. Civil societies could, therefore, influence the regional cooperation process by providing a vision, interpreting and explaining it to different stakeholders, especially multilateral parties in their respective nations. They can inform, educate and advocate the agenda of different groups, to achieve a consensus on several regional issues having economic importance. (The basic facts and ideas emanated from the Discussion Paper researched and written for CUTS Centre for International Trade, Economics & Environment (CUTS CITEE) by Saurabh Kumar and Aparna Sharma, 2015)
Dr Muhammad Abdul Mazid is Chairman, Chittagong Stock Exchange and Senior Vice Chairman of the South Asian Federation of Exchanges (SAFE). [email protected]