South Asian Association for Regional Cooperation (SAARC)

Presented by:
Samara Sabnam Poroma (05.01.02.001) Abdul Halim (05.01.02.005) Q.M.S.H Thakur (05.01.02.020)

Contents
Introduction History Overview of SAARC countries economics Major Agreement Ineffectiveness Political Issues

Contents
Free Trade Agreement Dhaka 2005 Summit Comparison with other Regional blocs Conclusion References

Introduction
The South Asian Association for Regional Cooperation (SAARC) is an economic and political organization of eight countries in Southern Asia. In terms of population, its sphere of influence is the largest of any regional organization: almost 1.5 billion people, the combined population of its member states. It was established on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan. In April 2007, at the Association's 14th summit, Afghanistan became its eighth member.

History of SAARC
In the late 1970s, Bangladeshi president Ziaur Rahman proposed the creation of a trade bloc consisting of South Asian countries. The Bangladeshi proposal was accepted by India, Pakistan and Sri Lanka during a meeting held in Colombo in 1981. In August 1983, the leaders adopted the Declaration on South Asian Regional Cooperation during a summit which was held in New Delhi. The seven South Asian countries, which also included Nepal, Maldives and Bhutan, agreed on five areas of cooperation: Agriculture and Rural Development Telecommunications, Science, Technology and Meteorology Health and Population Activities Transport Human Resource Development Afghanistan was added to the regional grouping at the behest of India on November 13, 2005, and became a member on April 3, 2007.With the addition of Afghanistan, the total number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status. The European Union has also indicated interest in being given observer status, and made a formal request for the same to the SAARC Council of Ministers meeting in July 2006.On August 2, 2006 the foreign ministers of the SAARC countries agreed in principle to grant observer status to the US, South Korea and the European Union. On 4 March 2007, Iran requested observer status.

Members of SAARC

Peoples Republic of Bangladesh

Although one of the world's poorest and most densely populated countries, Bangladesh has made major strides to meet the food needs of its increasing population, through increased domestic production augmented by imports. The land is devoted mainly to rice and jute cultivation, although wheat production has increased in recent years; the country is largely self-sufficient in rice production. Nonetheless, an estimated 10% to 15% of the population faces serious nutritional risk. Bangladesh's predominantly agricultural economy depends heavily on an erratic monsoonal cycle, with periodic flooding and drought. Although improving, infrastructure to support transportation, communications, and power supply is poorly developed. Bangladesh is limited in its reserves of coal and oil, and its industrial base is weak. The country's main endowment include its vast human resource base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas.

Year 1980 1985 1990 1995 2000 2005

Gross Domestic Product 250,300 597,318 1,054,234 1,594,210 2,453,160 3,913,334

US Dollar Exchange
16.10 Taka 31.00 Taka 35.79 Taka 40.27 Taka 52.14 Taka 63.92 Taka

Inflation Index (2000=100)

20 36 58 78 100 126

Bangladesh has made significant strides in her economic sector since her independence in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the area of foreign trade in South Asian region. Despite major impediments to growth like the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, inadequate power supplies, and slow implementation of economic reforms, Bangladesh has made some headway improving the climate for foreign investors and liberalizing the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration, better countrywide distribution of cooking gas, and the construction of natural gas pipelines and power stations. Progress on other economic reforms has been halting because of opposition from the bureaucracy, public sector unions, and other vested interest groups. The especially severe floods of 1998 increased the country's reliance on large-scale international aid. So far the East Asian financial crisis has not had major impact on the economy. World Bank predicted economic growth of 6.5% for current year. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for selfreliance. There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate. Export was $10.5 billion in fiscal year 2005 exceeding the target export of $10.4 billion. Target export for current year is $11.5 billion. An estimated GDP growth of 6.7% was predicted for FY 2006.

Republic of India

The economy of India, measured in USD exchange-rate terms, is the twelfth largest in the world, with a GDP of US $1 trillion (2008). It had a GDP growth rate of 9.0% for the fiscal year 20072008. However, India's huge population has a per capita income of $4,542 at PPP and $1,089 in nominal terms (revised 2007 estimate). The World Bank classifies India as a low-income economy.

World Rank

Company

Logo

Industry

Revenue (billion $)

Profits (billion $)

Assets (billion $)

Market Value (billion $)

193

Reliance Industries

Oil & Gas Operations

26.07

2.79

30.67

89.29

198

Oil and Natural Gas Corporation

Oil & Gas Operations

18.90

4.11

33.79

54.11

219

State Bank of India

Banking

15.77

1.47

188.56

33.29

303

Indian Oil Corporation ICICI Bank NTPC

Oil & Gas Operations Banking Utilities

42.68

1.82

25.39

16.36

374 411

9.84 7.84

0.64 1.60

91.07 20.34

29.85 41.57

647

Steel Authority of India Limited

Materials

7.88

1.45

8.05

26.37

738

Tata Steel

Materials Telecommunication s Services

5.83

0.97

11.48

14.63

826

Bharti Airtel

4.26

0.94

6.61

39.16

846

Reliance Communications

Telecommunication s Services

3.13

0.65

13.08

29.63

Islamic Republic of Pakistan

Pakistan is a nation with a diverse economy that includes textiles, chemicals, food processing, agriculture and other industries. It is the 25th largest economy in the world. The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. GDP growth, spurred by gains in the industrial and service sectors, remained in the 68% range in 2004-06. In 2005, the World Bank named Pakistan the top reformer in its region and in the top 10 reformers globally. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit - driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term.

Republic of Maldives

In ancient times the Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive Fish), ambergris (Maavaharu) and Coco de mer (Tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad. Nowadays, the mixed economy of the Maldives is based on the principal activities of tourism, fishing and shipping.

Tourism is the largest industry in the Maldives, accounting for 20% of GDP and more than 60% of the Maldives' foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourismrelated taxes. Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Agriculture and manufacturing play a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported. Industry in the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for about 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.

Year

Gross Domestic Product

US Dollar Exchange

1980
1985 1990 1995 2000 2005

440
885 2,054 4,696 7,348 10,458

7.58 Rufiyaa
7.08 Rufiyaa 9.55 Rufiyaa 11.76 Rufiyaa 11.77 Rufiyaa 12.80 Rufiyaa

Democratic Socialist Republic of Sri Lanka

With an economy of $27.4 billion ($95.5 billion PPP estimate , and a per capita GDP of about $4,700 (PPP), Sri Lanka has mostly enjoyed strong growth rates in recent years. The main economic sectors of the country are tourism, tea export, apparel, textile, rice production and other agricultural products. In addition to these economic sectors overseas employment contributes highly in foreign exchange, most of them from middle-east. After getting political independence from British colonialism in February 1948, the economy of the country has been affected by Tsunami and couple of insurrections such as 1971, 198789 and ongoing civil war. The parties which ruled the country after 1948 does not implement any national plan or policy on economy, then time to time it was effected with left and right wing economic practices. The government during 1970-77 period applied pro-left economic policies and practices then after 1977 to 1994 UNP rule and 1994-2004 SLFP rule applied proright policies. After 2004 the UPFA government is highly concentrating on mass production of domestic consumption such as rice, grain and other agricultural products.

Year

Gross Domestic Product

US Dollar Exchange

1980

66,167

16.53 Sri Lankan Rupees

1985

162,375

27.20 Sri Lankan Rupees

1990

321,784

40.06 Sri Lankan Rupees

1995

667,772

51.25 Sri Lankan Rupees

2000

1,257,637

77.00 Sri Lankan Rupees

2005

2,363,669

100.52 Sri Lankan Rupees

People's Republic of Nepal

An isolated, agrarian society until the mid-20th century, Nepal entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s and is committed to a program of economic liberalization.

Year
1960 1965 1970 1975 1980 1985 1990 1995 2000

Gross Domestic Product

3,870 5,602 8,768 16,571 23,350 46,586 103,415 219,174 379,488

Islamic Republic of Afghanistan

The economy of Afghanistan has improved significantly since 2002 due to the infusion of multi-billion US dollars in international assistance and investments, as well as remittances from expats. It is also due to dramatic improvements in agricultural production and the end of a four-year drought in most of the country. However, Afghanistan still remains poor for now and highly dependent on foreign aid. About half the population suffer from shortages of housing, clean drinking water, electricity and employment. The Afghan government and international donors have remained committed to improving access to these basic necessities by prioritizing infrastructure development, education, housing development, jobs programs, medical care, and economic reform over the recent years. The replacement of the opium trade - which probably makes up about one-third of the country's GDP - is one of several potential spoilers for the economy over the long term

GDP: purchasing power parity - $31.9 billion (2006 est.) GDP - real growth rate: 14% (2005 est.) GDP - per capita: purchasing power parity - $1,490 (2007 est.) GDP - composition by sector: agriculture: 38% industry: 24% services: 38% (2005 est.) Population below poverty line: 53% (2003) Household income or consumption by percentage share: lowest 10%: NA% highest 10%: NA% Inflation rate (consumer prices): 16.3% (2005)

Kingdom of Bhutan
Though Bhutan's economy is one of the world's smallest, it has grown rapidly in recent years, by 8% in 2005 and 14% in 2006. This was mainly due to the commissioning of the gigantic Tala Hydroelectricity project. As of March 2006, Bhutan's per capita income was US$1,321. Bhutan's economy is based on agriculture, forestry, tourism and the sale of hydroelectric power to India. The industrial sector is in a nascent stage, and though most production is cottage-industry type larger industries are being encouraged and some industries such as cement, steel, ferro alloy, etc have been set up. Most development projects, such as road construction, rely on Indian contract labor. Incomes of over Nu 100,000 per annum are taxed, but very few wage and salary earners qualify. Bhutan's inflation rate was estimated at about 3% in 2003. Bhutan has a Gross Domestic Product of around USD 2.913 billion (adjusted to Purchasing Power Parity), making it the 162nd largest economy in the world.

In a survey in 2005, 45% of Bhutanese reported being very happy, 52% reported being happy and only 3% reported not being happy. Compare that, for example, with the USA, where only 30% report being very happy, 58% being pretty happy and 12% were not too happy (based on data from the General Social Survey). Based on this data, the Happy Planet Index estimates that the average level of life satisfaction in Bhutan is within the top 10% of nations worldwide and certainly higher than other nations with similar levels of GDP per capita.

Major Agreements of SAARC SAPTA

The basic principles underlying SAPTA are: overall reciprocity and mutuality of advantages so as to benefit equitably all Contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems; negotiation of tariff reform step by step, improved and extended in successive stages through periodic reviews; recognition of the special needs of the Least Developed Contracting States and agreement on concrete preferential measures in their favors; Inclusion of all products, manufactures and commodities in their raw, semiprocessed and processed forms.

SAFTA
The Agreement on the South Asian Free Trade Area is an agreement reached at the 12th South Asian Association for Regional Cooperation (SAARC) summit at Islamabad, capital of Pakistan on 6 January 2004. It creates a framework for the creation of a free trade zone covering 1.4 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives. The seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of practically all products in the region by end 2016. The SAARC Preferential Trading Arrangement (SAPTA), with concessional duty on sub-continent trade, went into force on 7 December 1995. The new agreement i.e. SAFTA, came into being on 1 January 2006 and will be operational following the ratification of the agreement by the seven governments. SAFTA requires the developing countries in South Asia, which is, India, Pakistan and Sri Lanka, to bring their duties down to 20 percent in the first phase of the two year period ending in 2007. In the final five year phase ending 2012, the 20 percent duty will be reduced to zero in a series of annual cuts. The least developed nations in South Asia consisting of Nepal, Bhutan, Bangladesh and Maldives have an additional three years to reduce tariffs to zero. Pakistan has signed but not ratified the treaty, though there is hope in India that it will sometime in 2008

Ineffectiveness
SAARC's inability to play a crucial role in integrating South Asia is often credited to the political and military rivalry between India and Pakistan. It is due to these economic, political, and territorial disputes that South Asian nations have not been able to harness the benefits of a unified economy. Over the years, SAARC's role in South Asia has been greatly diminished and is now used as a mere platform for annual talks and meetings between its members.

Political Issues
SAARC has intentionally laid more stress on "core issues" mentioned above rather

than more decisive political issues like the Kashmir dispute and the Sri Lankan civil
war. However, political dialogue is often conducted on the margins of SAARC meetings. SAARC has also refrained itself from interfering in the internal matters of its member states. During the 12th and 13th SAARC summits, extreme emphasis was laid upon greater cooperation between the SAARC members to fight terrorism.

Free Trade Agreement

Over the years, the SAARC members have expressed their unwillingness on signing a

free trade agreement. Though India has several trade pacts with Maldives, Nepal,
Bhutan and Sri Lanka, similar trade agreements with Pakistan and Bangladesh have been stalled due to political and economic concerns on both sides. India has been constructing a barrier across its borders with Bangladesh and Pakistan. In 1993, SAARC countries signed an agreement to gradually lower tariffs within the region, in Dhaka. Eleven years later, at the 12th SAARC Summit at Islamabad, SAARC countries devised the South Asia Free Trade Agreement which created a framework for the establishment of a free trade area covering 1.4 billion people. This agreement went into force on January 1, 2006. Under this agreement, SAARC members will bring their duties down to 20 per cent by 2007.

Dhaka 2005 Summit

The summit accorded observer status to People's Republic of China, Japan, South Korea and United States of America. The nations also agreed to organize development funds under a single financial institution with a permanent secretariat that would cover all SAARC programs ranging from social, to infrastructure, to economic ones.

Comparison with Regional Bloc

Most active regional blocs (as of 2004, except as noted) Area GDP ($US)

Regional

bloc1

km 29,797,500 4,497,493 422,614 462,344 2,285,844 298,148 4,324,782

sq mi 11,504,879 1,736,000 163,172 178,512 882,569 115,116 1,669,808

Population 897,548,804 566,500,000 37,816,598 14,565,083 35,869,438 28,929,682 497,000,000

in millions (PPP) 1,515,000 3,115,480 159,536 64,219 536,223 222,041 14,953,000

in millions (nominal) 1,131,850 1,173,000 84,792 24,020 717,800 122,001 16,574,000

per capita (PPP) 1,896 5,541 4,219 4,409 14,949 7,675 28,213

AU ASEAN (2007 est.) CACM CARICOM CCASG / GCC CEFTA EU (2007 est.)

per capita (nominal) 1,261 2,041 2,242 1,649 20,011 4,217 33,482

Member states1 53 10 5 (14+1)3 6 (7+1)3 27

EurAsEC EFTA (2007 est.) GAFTA GUAM NAFTA (2007 est.) PARTA SAARC Unasur / Unasul
UN and countries for reference2

20,789,100
529,600 9,421,946 810,506

8,026,720
204,480 3,637,834 312,938

208,067,618
12,660,623 280,727,416 63,764,600

1,689,137
567,500 1,341,298 456,173

1,125,528
743,300 N/A 106,469

8,118
44,828 4,778 7,154

5,409
60,000 N/A 1,670

6
4 (16+1)3 4

21,783,850
528,151 5,136,740 17,339,153 Area km

8,410,792
203,920 1,983,306 6,694,684

445,000,000
7,810,905 1,467,255,669 370,158,470

15,857,000
23,074 4,074,031 2,868,430

15,723,000
N/A N/A N/A GDP ($US)

35,491
2,954 2,777 7,749

35,564
N/A N/A N/A

3
(12+2)3 8 12

sq mi 51,420,318 3,287,612 3,855,103 1,269,346 145,898 3,705,407 6,592,772 3,794,083

Population

in millions (PPP) 55,167,630 1,804,000 1,274,000 4,726,000 4,346,000 7,043,000 2,076,000 13,543,000

in millions (nominal) 48,245,198 1,067,706 1,406,000 1,089,000 4,346,000 3,420,000 1,286,000 13,794,700

per capita (PPP) 8,604 10,073 38,200 4,182 33,800 5,300 14,600 43,500

per capita (nominal) 7,524 6,842 42,738 1,004 38,341 2,800 9,056 45,594

Units4

UN 133,178,011 Brazil (2007 8,514,877 est.) Canada (2007 9,984,670 est.) India (2007 3,287,590 est.) Japan (2007 377,873 est.) PR China5 9,596,960 (2007 est.) Russia (2007 17,075,200 est.) USA (2007 9,826,630 est.)

6,411,682,270 183,888,841 33,000,000 1,120,000,000 127,433,494 1,321,851,888 142,500,000 302,000,000

192 27 13 35 47 33 83 50

Conclusion
Intra-South Asian Association for Regional Cooperation (SAARC) trade appears to be very small compared to other existing regional blocks. This might be because of normal outcome or because of unexplored trade opportunity. If the latter is the case, then increased trade within this region might be welfare improving. This study attempts to make a formal analysis of these issues whether intra-SAARC is lower or higher than what is predicted by an economic model. This gives an idea about the structure of comparative advantage in the SAARC countries that helps to explain why intra-SAARC trade is low. Appropriate policies need to be formulated for more regional integration. Liberalization of trade in SAARC countries offers significant gains for all the economies in the region. Efforts should be made to liberalize border trade and strengthen bilateral trade relations through the removal of tariff and nontariff barriers in the general framework of South Asian Preferential Trading Arrangements. Meanwhile, the SAARC region will benefit more if countries in the region set aside their rivalry to focus on exploring increasing trade between each other for overall benefit of its people.

References
indiatimes.com Promothomalo.com South Asia: Afghanistan Joins World's Largest Regional Grouping news.bbc.co.uk hindustantimes.com english.people.com.cn thehimalayantimes.com tehrantimes.com Afghan and further Chinese membership prospects China's membership prospects chennaionline.com telegraphnepal.com irna.ir Iran's membership prospects upi.com Thedailystar.com www.wikipedia.org/wiki/South_Asian_Association_for_Regional_Cooperation#References

Thank You