Future of South Asia: A New Generational Perspective

Organised by Institute of Foreign Affairs (IFA)

7 November 2003

A ONE day seminar was organized by the Institute of Foreign Affairs on November 7, 2003 with cooperation fro Friedrich Ebert Foundation of Germany to discuss the younger generation's contributions to regional cooperation in South Asia. Diplomats, both serving and retired, regional ambassadors, Foreign Ministry officials, academics and renowned journalists were among the participants who gathered at Kathmandu's Yak and Yeti hotel for the seminar. Four presentations were to be made in the two sessions by young professionals on different aspects of the prospects of regional cooperation in South Asia.

After Dr. Bekh Bahadur Thapa, the Nepalese Foreign Affairs Special Ambassador, inaugurated the function by lighting a traditional lamp, the SAARC Secretary General, Q.A.M.A Rahim, made his address. He reminisced about how the idea of regional cooperation was mooted in South Asia in 1980 and how the South Asian Association for Regional Cooperation came into being. He hoped that the young professionals would steer the future of South Asia well.

In the address he also mentioned three ongoing developments in the regional organization that would have far reaching implications. He said that the regional leaders had met last May and agreed to ultimately take SAARC towards an economic union, where they committed themselves to quickly move from SAPTA (South Asian Preferential Trading Agreement) to SAFTA (South Asian Free Trade Area). "In January 2004, the draft of the free trade agreement will be presented," he said.

The SAARC Secretary General pointed to the criticality of dismantling trade barriers and the need to increase intra-regional trade which is unimpressive at the moment. "Trade facilitation measures need to be taken up in customs procedures, movement of goods with the least cost and time, standards and measurement, quality control and a settlement body. Relevant bodies have been set up for these components to facilitate trade," he said.

The second development Secretary General Rahim talked about was regional efforts towards poverty alleviation. "A poverty profile is being prepared to give a clear picture of poverty in the region. Given that 500 million people live below the poverty line in South Asia strong measures are needed to resolve the problem," he said and emphasized, "Economic development cannot be sustained without resolving social issues. The Colombo meet gave the mandate to prepare a social charter for the region. An intergovernmental group met earlier this month to draft the charter."

Thirdly, the SAARC Secretary General stressed the significance of people to people contact and said that the young generation can contribute here. "The measures taken by SAARC: visa fee reduction, recognition of professional bodies and business communities are areas that need to be looked at. Several measures for facilitation of movement of people are being proposed," he said.

He also touched upon the animosities existing in the region in a diplomatic manner saying, "SAARC can also contribute through confidence building measures. A strong civil society can help the region in this. The past may be bleak, but the future need not be so," he concluded.

In his key note address that followed, the Nepalese foreign affairs Special Ambassador Bekh Bahadur Thapa said that SAARC as a region has yet to make a mark and that it needs to be more cohesive to find greater respect in the world in comparison with other regional organisations.

"Bilateral relations are good between some regional members while not so much between others. In the mid-eighties things were better in terms of our collective international standing as the regional organisation was taken far more seriously than now."

He briefly touched upon how the downturn took place, "Then suddenly things took a different turn. Gaps between regional meetings started to appear, and more ritual than substance became the norm." He emphasized the point saying, "One European colleague once said to me once, South Asians see the light at the end of the tunnel, but they refuse to traverse the distance to the light."

Regarding trade, "the need for speed has been recognised, but 'liberalisation in the tongue and control at heart' has not helped. How do we move ahead on trade so that others see us as an opportunity. Clearly, we are very very far behind on economic issues. Wherever we travel in the region we see some form of frustration or the other. I see the urgent need to promote socioeconomic issues in South Asia."

He was hopeful of the approaching SAARC Summit to be held in Pakistan. "Now, a few weeks before the summit is going to be held, we see that everyone is positive about holding the summit. And, Pakistan is doing its best to hold a successful meeting. The various sectors need to work hard to contribute towards the regional cooperation exercise. This is where seminars like this come in. We at the Foreign Ministry will take the ideas seriously, whether it is on using natural resources, the environment, poverty or trade," he promised.
"We know that all our leaders are serious and committed," he said.

In his welcome address, earlier, Narayan Das Shrestha, the IFA director, highlighted the objective of the seminar. "The seminar will discuss the new generation's perspective on regional cooperation in South Asia. The region is mired in abject poverty with many of the people living below the poverty line. Poverty is a common feature among the countries in South Asia. Bad governance and political instability have been hindering the socio-economic development of these countries," he said.

"SAARC has yet to go a long way to contribute positively. The region is endowed with vast natural resources and human resources and a vast potential market," he said, meaning that only cooperation could bring a positive outcome..

THE working sessions followed the inaugural. Two papers were presented in each session. The first session saw the presentations made by Ratnakar Adhikari on "Using WTO as a Tool of Governance Reform in South Asia with special Reference to Nepal" and by Nischal Nath Pandey on "Security in South Asia". The session was chaired by Kedar Bhakta Shrestha. Prof. Guna Nidhi Sharma was the designated commentator for the first presentation while M.R. Josse commented on Pandey's paper. The floor was opened for discussion after the presentations and the comments. Below are the excerpts of the floor discussions on the two presentations.

SESSION I

PRESENTATION I
WTO as a tool to Reform Governance in South Asia

Chair: Kedar Bhakta Shrestha
Presentation: Ratnakar Adhikari
Comments: Guna Nidhi Sharma

FLOOR

Soorya Lal Amatya: You talk of governance reform on the trade aspect. But you have not talked about the role of the private sector which plays a crucial role in meeting WTO requirements. Support from outside would not be very fruitful at the present. WTO has a tradition of grouping decisions based on similar characteristics but there are also exceptions to this rule.

Coming together of developing countries as a group can achieve a lot for these countries. Therefore developing countries need to unite so that developed countries do not dictate their terms in the global trade regime.

Damodar Gautam: Nepal is import dependent and aid dependent. Forty per cent of its budget is financed by foreign aid. Our trade deficit amounts to about 60 per cent of total trade. Value added in garments or carpets is low. It is also a low-skilled country. Nepal has to overcome all these problems if it wants to join the global economy. WTO opens up new horizons, so we need to be able to overcome these challenges.

The author should have also explained how WTO would open up the multiple of losers and how their problems could be addressed.

Rajan Bhattarai: The question is whether developing countries are well equipped to meet WTO obligations and challenges arising therefrom. The author says that Nepal does not have the means to meet the challenges. Apart from that, no developing country has prospered by fully liberalizing, not even the success stories of Southeast Asia.

Is it the right time to join the WTO, a time when we cannot even implement simple laws? Can we diversify our exports?

Anuj Mishra: You say that external forces could induce change, and Nepal is aid dependent. Donors have become significant contributors to change. Will they also own up the outcome? Except for directly funding political parties, donors have been moving reforms in every sector. Argentina is a prime example of liberalization gone wrong. So is the Philippines, where it is reduced to marketing its labourers. Malaysia on the other hand is protective of its own industry in spite of the liberalisation moves it has made.

I am not against WTO membership for countries like ours. But we need to focus more on protectionism first. This is a contradiction that we face and which has not been highlighted much.

Keshav Raj Jha: You spoke about the role of external forces in controlling corruption in Nepal. You have blamed the government for half-heartedly pursuing the implementation of anti-corruption measures. How do we implement them fully-with the help of external forces again?

Bangladesh Ambassador Kabir: You have given a lot of attention to institutions. Western institutions may not be as useful for countries in South Asia as you have said they will be. What is the type of institution you are contemplating? How optimistic are you about implementation of WTO requirements in South Asia?

You have mentioned Bangladesh in many instances. Our civil servants usually move from one ministry to another ministry, except in cases like foreign ministry where there is a corporate culture.

Prakash Mahat: You have mentioned the erratic moves by CIAA (Commission for Investigation of Abuse of Authority). It has been taking haphazard actions on corruption cases. This is because democracy is not there at the moment. As far as governance reform is concerned, the paper should not talk about bypassing democracy, because such governance would not be transparent.

We need to join the WTO because we may lose more if we do not. The WTO needs to be ratified by the parliament and I hope that we have a parliament as soon as possible.

Durga: If the paper could come out with good practices and bad practices in South Asia. This would be a good reference for Nepal-- a new entrant to WTO-- to understand what it is up against and what to follow. Generational change should not be related to age alone. Being in the WTO from without the WTO requires sea change and transformations. We need elderly people with experience to lead us with their wisdom.

Adhikari's reply: Displacements after WTO that Professor Guna Nidhi Sharma mentions have been mentioned in the paper already.
I have found that membership is slightly better than remaining a non-member. We need safeguards to prevent domestic industries. And, protection can only done in a transparent manner.

The paper does talk about the required human resources after WTO. I am in favour of temporary movement of people from developing to developed countries as it is welfare enhancing.

If technical assistance is supply driven, we don't want it. But if it is something that we need, then it is acceptable. There have been examples like Australia asking us to follow their TRIPS model and they would even provide the necessary assistance for that, but Nepal said, "No".

In Cancun, developing countries stood up together. But there is a lot of pressure against that. At Cancun, the Singapore issues and agriculture were the main agenda. The draft proposal that came out from EU at Cancun almost agreed to the developing countries demand on Singapore issues and agriculture. Since developing countries did not agree, the proposal was dropped. They should have accepted it. Because they did not, they are back to square one and the multilateral trading system is in the doldrums.

Regarding external pressure, countries have to abide by WTO conditions. We have also been pressured by domestic cartels during hard times. To break such grips on the market by cartels, we need the WTO rules.

Chairperson's remarks: WTO has been the most talked about and least understood subject for the last five years. The multifibre agreement will be phased out by 2004. What will happen to our garments after that? In EU we tried to get some preferential treatment for our garments, but we need to add more value to the product for us to truly benefit.

In order to be competitive, we need to streamline our administration. Efficiency counts very much, as suppliers need to meet deadlines on the dot or face losses worth millions.

Developed countries have experts for each item they import or export. Can we have similar number of experts and compete with them? Drugs will be very costly after WTO membership. What is our strategy? We need to ponder over this.

PRESENTATION II
Security in South Asia

Chair: Kedar Bhakta Shrestha
Presentation: Nischal Nath Panday
Comments: MR Josse

FLOOR

Guna Nidhi Sharma: Is the economic dimension of security any less important? You have not given enough attention on that. You should have discussed also about insecurity caused by national treatment to foreigners and their presence in natural resource exploitation?

Sooryalal Amatya: If you consider south of Himalayas as South Asia, we also have a considerable chunk of land north of the Himalayas. Even ASEAN does not exclude China, why should South Asia? Also, India has a project to interlink rivers that originate in China. These should be factored in.

While talking of regional security, you should also consider India supporting the US in the global context and the US supporting India in the regional context.

You have not mentioned that the Boao forum has been perceived by the US ss a gathering against it.

Rajan Bhattarai: China needs to be included in a South Asian discussion. The US presence in South Asia also needs to be discussed. Regional security should also be considering regional alignments with the US or the Soviet Union. Also, the paper does not address the nuclearization issue, something that has challenged the CTVT regime.

Anuj Mishra: India forms a major chunk of South Asia which looks at other countries as frontier states. But India has to start behaving like a leader and not expect reciprocity from its smaller neighbours. Other countries too should realize that India cannot be discounted.
China should be factored in, but our focus should be South Asian integration first. India is needed in resolving Bhutanese refugees and Maoist issues in Nepal.

In terms of collective South Asian security, to be liked by somebody, you have to like somebody.

Hira Bahadur Thapa: Had there been no nuclear explosions earlier, would there have been a different outcome in the Kargil confrontation? Did the belligerent parties pull back from the brink of war bcause of nuclearization?

Do you think that the US role can be disregarded? Consider that South Asian countries have been welcoming the growing US interest in the region.

Mohan Lohani: IFA had published a book on Soth Asian security earlier. I came back from participating at the Boao Forum for Asia (BFA). I was disappointed at the Forum where many participants kept referring to ASEAN and no mention of SAARC, even though former Indian prime minister IK Gujral was there.

ASEAN has a forum called ARF (ASEAN Regional Forum), where China, Russia and the US are observers. All security issues are discussed there. SAARC could also have a similar forum.

Security is multidimensional and the most important dimension is the human security dimension.

General Krishna Naryayan Singh Thapa: When we talk of security, we start from national security. When a neighbour is threatened by insecurity, you are also affected. Security today is not only military but has taken other dimensions as well. In Nepal, economic, social and other factors have contributed to the security situation that we have.

Regarding foreign support, strategic considerations of a country need to be factored in while making alliances. Our security calculations went wrong when a political party gave the government enough time and warning to deal with the problems that the country faced. Since it was ignored, today, we are in a security situation. Had the problem been acknowledged then, things would have been different? Had there been national political will, we wouldn't have been where we are today.

Keshav Jha: China has ben known to be interested in SAARC.

Vajpayee's visit to China has changed things. Pakistan's seeking nuclear cooperation, and not getting, from China is another aspect.
Also, you should be talking about preventing conflicts while collectively working on poverty alleviation.

When P. Chidambaram visited Nepal, his outbursts were not liked by the Indian embassy. He had said that for the sake of security and prosperity of the region, countries need to look up to India, not the US, or WB or IMF. He spoke about non-reciprocity between the 'giant' and the 'mouse'.

Nischal Nath Pandey's reply: The basic premise of my presentation is that the younger generation has new and innovative ideas. China is benefitting from a younger generation's output.

Mahathir said that confidence is the key to success. The octogenerians of South Asia should have confidence in the new generation.
The lines at visa sections are there because they are not allowed by the older generations to contribute in their country.

On China, we should also ask the Chinese whether they want to join SAARC. One argument says that China's participation will give a boost to the economic activities here. But others say that the conflict between India and Pakistan would extend to India and China as well.

About South Asian geography, some say Burma and Afghanistan should be part of the region. But we need to ask them about their opinion.

A cross-border nexus of Maoists exists and also the same is true with other South Asian groups.
There is no region why we should shy away from collective South Asian security.
Americans had actively worked to fight Maoism in Nepal in the sixties, and there should be no reason why we should stop them now.

Chairperson's remarks: On the concept of South Asia, we mean SAARC region, but that is a loosely used term. In Tokyo, they see us as part of west Asia. Now, countries have started to have a SAARC desk at their foreign ministries.

Afghanistan had shown its interest to join SAARC, but was refused membership because of its internal situation. Burma is not interested and China has yet to show its interest.

THE last session of the day was conducted in a different manner than the first one. The two presentations of the session were first allowed to be made, with the commentators following close on their heels, and the floor opened for discussion of both the papers at once. The excerpts of the floor discussion below therefore combine comments and queries aimed at both the papers. Also, the last presenter, Paras Ghimire was not at hand to present his paper. It was read out by Shree Prakash Subedi. This also meant that Ghimire was not available to reply to the queries on his paper.

SESSION II

PRESENTATION III
Streamlining Economic Cooperation in South Asia

Chair: Mohan Lohani
Presentation: Rajendra Khetan
Comment: Madhukar Rana

PRESENTATION IV
Ways to Re-invigorate SAARC

Chair: Mohan Lohani
Comments: Biswa Pradhan

FLOOR

Keshav Raj Jha: On Khetan's paper, he has not talked about delinking politics from economic cooperation. This is the main reason why there is only talk and no progress.

As far as China's involvement is concerned, a powerful defence ministry official was unaware and stunned to hear from me that there was talk about that country's participation in SAARC. We should attach more importance to economic issues rather than on political issues which are hard to resolve. China and India have started coming together and other countries have to be careful about China as that country would be guided by its economics if it does join in.

We should be learning more from ASEAN. Indonesia was a dominating influence, but slowly that country also came to terms because there were economic gains to reap.

MR Josse: I had interviewed Zia Hul Haq and Zi Ur Rahman in the past. Many countries of South Asia were threatened by Soviet invasion of Afghanistan. And I had asked to Ziur Rahman whether SAARC was initiated due to the Soviet threat. But it appears that it was rather the Indian threat that had brought the countries together and that is also why India was reluctant at first.

Anuj Mishra: We live in a region dominated by India and cannot compete with it. In the eighties, we had our own toothpaste brand. After liberalization, the brand was driven out by Indian multinationals of British origin. There should be complementarity in trade, if we import tooth-pastes we should substitute that with some other exports.

In a hostile relations between India and Pakistan, there cannot be collective security.

Two fast developing markets (China and India) in our neighbourhood could be a good thing, but it is hard to have China join in. May be Nepal itself try and join in the China-India partnership.

Soorya Lal Amatya: Ghimire's paper needs to be edited, particularly where numbers are not qualified properly. On Khetan's paper, when you talk of waterways and railways, you forgot to mention the delays brought about by India on the dry port agreement.
SAARC framework needs changing to accommodate bilateral dialogues as well. EU had done so. They let the economic cooperation supersede the bilateral animosities and they have progressed.

We should also think about having countries like Japan given the observer status so that they help the regional grouping financially.

Guna Nidhi Sharma: SAARC had no economic agenda prior to 1995. Both the SAPTA and SAFTA came only after the WTO's establishment.

There appears to be no convergence in SAARC cooperation. The prevalent divergence is buttressed by India's profit motive.
Nepalese investors are rare in India. When we talk of investment, we are talking about Indian investment in Nepal and not vice versa. India is also skeptical of third country investment in Nepal.

India has been imposing non-tariff barriers and duties like, anti-dumping, quarantine requirements etc. Why should India be threatened by Nepal's size? Even the 1950 treaty holds that both the countries impose only basic duties. When we imposed addditional duties in 1989, India imposed a blockade. SAARC appears to be meant for the benefit of India. And, friendship cannot be unilateral.

There is comparative advantage in cultural and natural products and resources in Nepal but no competitive advantage. We are highly inefficient producers. If there is complementarity in the production structure, the non-competitive producer loses out.

Rajan Bhattarai: Whenever there is some political turmoil or instability in Nepal, India has always come in with grave and dubious treaties. Whether it is the 1950 treaty or any other, this has held true. At the moment also, there is a security crisis, and the Indians have hurried to negotiate water and power deals with Nepal when the country is concentrating on internal security issues.

Kashmir has become a stumbling block to regional cooperation, but that should not be the precondition to regional cooperation. We should move ahead in spite of that. India and China have decided to cooperate with each other in spite of their border areas yet to be demarcated.

I propose a department at the university where young people can study these foreign relations issues. Even IFA can bring together seasoned and retired diplomats and organise discussions for others to benefit.

Rajendra Khetan's reply: I would like economic agenda to be separated from politics and it is also possible to take both politics and economic cooperation in a parallel manner.

Nepalese noodles have acquired a SAARC multinational status. Others should follow. The dry port is a different story, a law was necessary on the Nepalese side to allow Indian trains to come into Nepal. And without the law, an agreement was impossible. In other words, we should not always be blaming others. We need to keep our house in order first.

I agree that SAARC has a rigid framework, and without changing the attitude it would be difficult to exploit the vast resources we have, whether it is religious, natural or economic.

People involved in regional cooperation should be more serious in their work. An important dialogue is going on here but we do not see any related people, regarding SAPTA, SAFTA, participating in these discussions.

The 1996 treaty was designed by the businessmen and we were not been able to exploit the benefits available to Nepal. We should have been doing more than exporting non-value added goods. Value-added of at least 30 per cent could help Nepalese economy. Mere buying of goods in dollars and selling them for IC does not help the economy. The 2002 renewal was not as good as we had to face MFN. Another renewal is coming up and we are doomed if we do not become competitive in terms of MFN.

We can also act as the transit for Sino-Indian trade and benefit from the flow of goods between the two countries. Nepal cannot stand competitive in manufacturing. But in services, we can do wonders. We can open health and education centres that Indians can come and use.

I agree that an academic centre for cooperation be set up so that people can study SAARC cooperation.

Chairperson's remarks: Most of the speakers had something to say about India's role in the region. This proves that this important country needs to do a lot more to assuage and allay the fear of others in the region. India's centrality in the region is vital to reinvigorating the SAARC process.

SAARC entered the second cycle of cooperation only after 1990, into economic cooperation. Only after 1995, did the SAPTA process start.

Except Bhutan, all others are WTO members and if we can coordinate our stand in WTO negotiations we will have something to gain from the global trade regime. We also need to reinvigorate the 'growth quadrangle'.

Although SAARC has not made much headway in the last 18 years, the process is still on and there is no alternate to cooperation.

AFTER the floor discussion of the second session, Narayan Das Shrestha gave the vote of thanks concluding the seminar.