SAARC (South Asian Association for Regional Cooperation) has been urged to allow a bigger role for the private sector.
“Business investment decisions will be made by businesses and entrepreneurs, not by government or by bureaucrats,” said the Minister of Enterprise Development and Investment Promotion, Sarath Amunugama.

He was addressing a gathering of academics and civil groups at a pre-SAARC conference in Colombo recently, organised by the Institute of Policy Studies of Sri Lanka(IPS) and the South Asian Centre of Policy Studies (SACEPS) of Nepal.

The pre-SAARC conference was organised to provide policy feedback for the 15th SAARC Summit that will be held in Colombo from July 28 to August 3.

Out of touch

Already analysts are calling SAARC ineffective and unrealistic.

For starters, although South Asia is on a growth trajectory led by the private sector, SAARC still does not have an official mechanism to incorporate business and trade inputs into regional trade talks.

Speaking at the pre-SAARC conference, Dr Amunugama said SAARC is out of touch with the region’s economic realities and economic trends.

“Today the private sector in the region has gone beyond regional trade, they are looking at investing in Africa and penetrating western markets,” he said.

“Businesses don’t want to mess about with regional integration when they can go straight for the jugular, they want to go global,” said the minister.

Academics pointed to the ‘conspicuous’ absence of the private sector even in SAARC trade negotiations.

“There are so many committees in the SAFTA (South Asia Free Trade Agreement) process, but what is conspicuous, is the absence of the private sector. We don’t recognise the role of the private sector, but trade is driven by the private sectors in all our countries,” said Dr Mahendra Lama, Vice Chancellor of the Sikkim University.

Although a SAARC Chamber of Commerce and Industry is already operational it has limited scope.

“Trade chambers from SAARC countries are represented in the SAARC Chamber of Commerce and Industry, and there are informal discussions with the private sector. But there is no formal mechanism to incorporate private sector feedback,” said a former Secretary General of SAARC, Nihal Rodrigo.

Slow SAFTA

Meanwhile analysts say the SAFTA, the official attempt to increase trade in the region, has not been able to deliver the goods
“A substantial proportion of trade within SAARC is not free trade, despite the SAFTA,” said Deshal De Mel , a Research Officer at IPS.

In fact, over half the items traded among SAFTA countries are still in negative lists and do not get duty concessions, let alone duty free access into each others countries.
“Around 53% of total intra regional imports among SAFTA countries are subjected to negative lists,” said Mr de Mel. The SAFTA is also noted for its slow beginnings and slower implementation.

“The implementation of the SAFTA began in 2006, this is six years after the recommended year. The second stage is a customs union by 2015 and an economic union by 2020. But the SAFTA itself will only be fully implemented by 2016,” said Janaka Wijayasiri, Research Economist, IPS.

There is also no mechanism to reduce non tariff barriers faced by businesses trying to use the SAFTA.

Analysts point out that by now, SAARC countries need to start opening up services and investments to each other, as services are already gaining in share of GDP among South Asian countries and cross border investments are increasing.

Getting to it

Some factors blocking regional trade are being addressed. SAARC ministers are discussing developing capital markets in the region and an agreement on investments is being drafted. Last month SAARC Commerce Ministers called for an ‘urgent review’ of the negative lists under the SAFTA. A SAARC Development Fund is also on the agenda. Major obstacles to regional integration, such as security concerns are also being discussed. “Some of South Asia’s bilateral and perceived security concerns have impeded closer economic integration, even the basic forms of connectivity of transportation links. These bilateral issues are now being addressed in composite and issue specific dialogues, which would facilitate faster, smoother movement of goods across borders,” said Mr Rodrigo. However, at this point, the critics are not satisfied by draft agreements and discussions and are calling on SAARC for less talk and more action.