SAARC is not prepared for new security threats


An interview with former Finance Minister of Nepal, Prof. Madhukar SJB Rana

By Prof. Madhukar SJB Rana

Madhukar RanaWhat are the achievements of SAARC so far?

SAARC’s most major achievement is that it has managed to survive despite the vicissitude of the India-Pakistan relations and the inability of their leaders to break out of the vicious grip of their national politics.

The second major achievement of SAARC is its institutionalization and establishment of a cost-effective modality for regional cooperation with full participation of all. A total of 10 Regional Centers have been created in addition to the South Asia University. This is no mean achievement.

The third achievement is the adoption of the Social Charter. This is a significant development for its content as well as for the process involved which shows how dynamic and influential civil society of South Asia is as compared to other regional blocs in developing societies.

In its initial objectives, SAARC aimed to create an environment of trust and understanding between member states. How far has it succeeded in this?

The SAARC Charter lays down eight sets of objectives. One of them is “to contribute to mutual trust, understanding and appreciation of one another’s problems.” It is believed that when President Ziaur Rahman floated the idea of regional cooperation among South Asian countries, India and Pakistan were taken by surprise by the very notion. Both wondered where the idea originated from. Considering that the birth of almost all regional groupings is explained by an extraregional threat to their collective security, which does not exist in SAARC’s case, it was natural that the two bigger South Asian powers were taken aback by the Bangladeshi proposal.

Annual summits have been invaluable to get the whole process moving, particularly since the process was largely supported by all the smaller powers of the region.

These summits also have practical benefits to all participants who could use the opportunity for solving pending bilateral issues, mostly stuck in bureaucratic quagmires, through personal contacts between secretaries, joint secretaries and director generals of each country.

The process has also helped “to strengthen cooperation among themselves in international forums on matters of common interest,” which is yet another important SAARC objective. That said, many critics have wondered whether the cost of summits have exceeded the benefits of SAARC. To curtail pomp and fanfare and to make it more business-like, it is now designed to meet biannually.

How can SAARC work around the ongoing disputes between various member nations, particularly India and Pakistan?

This question has eluded our leaders for the 29 years of SAARC’s existence. It’s a Catch-22 situation and the catch lies in the Kashmir question with no signs of resolution. For Pakistan it is the sine qua non of its very rationale as a nation state.

For India it is the sine qua non for its existence as a secular state. Three of the four wars between India and Pakistan have been over Kashmir. SAARC can work around this by allowing the private sector of all member nations to take the lead and come forth with an economic charter. This business to business (B2B) cooperation and collaboration should be done in coordination with the SAARC Secretariat and should be led by an eminent personality like Rattan Tata. He can best lead and mobilize all the 55 plus South Asian billionaires, as identified in the Fortune 500 list, to come forth and unite for the cause of our region and in their own collective interest for their survival and self interest as a highly privileged class in the wake of the unprecedented inequality, inequity and exclusion of regions, classes, castes and ethnic communities ensuing from the new era of globalization.

This is the best way to secure the economic goal of the SAARC Charter “to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potentials.”

The World Order is changing and new security threats are emerging. How is SAARC preparing for this in terms of better cooperation between member states?

SAARC was the first regional organization to sign a Convention on the Suppression of Terrorism. It is a historic breakthrough in international diplomacy considering the fact that the UN is yet to adopt the draft on the Comprehensive Convention on International Terrorism. The UN falters because of its inability to define terrorism and breakaway from an attitude that tends to distinguish between ‘good terrorists’ and ’bad terrorists’.

The SAARC Ministerial Declaration on Terrorism solemnly proclaimed, “We reiterate our commitment to implement measures against organizing, instigating, facilitating, financing, fund raising, encouraging, tolerating and providing training for or otherwise supporting terrorist activities.

We will take appropriate practical measures to ensure that our respective territories are not used for terrorist installations or training camps, or for the preparation or organization of terrorist acts intended to be committed against other States or their citizens.”

However, SAARC meetings on security issues have centered only on peripheral issues such as smuggling of goods and people, counterfeit currency and drug trafficking. While home ministers have begun to meet periodically, which is a move forward, what is missing at the practical level are periodic meetings by the local police authorities.

To put it simply, SAARC is totally unprepared to cope with the security threats emanating from the emerging world order. The newest security threat is cyber security. One reads about cyber hackers and cyber piracy where one is asked to pay ransom for hacked files or face their deletion. Experts are also speaking of the possibility of cyber terrorism where individuals seek to sabotage nuclear installations, satellites, aircrafts, etc.

In the emerging multi polar global order, South Asia will be at the forefront of new security threats.

The ascendency of Maoism amidst landless peasants and tribal communities suffering acute poverty and deprivation is one such threat. The second is the politicization of religion to make electoral gains.

South Asia will be the new vortex of the emergent real politic of the 21st century’s multi polarity. Therefore, security should and must be a central agenda for SAARC leaders, especially if SAARC is to be a powerful regional bloc. It is time the SAARC leaders put aside national security (as commonly understood in militaristic terms to mean to safeguard national interest and values) and be bold enough to hold dialogue on the urgent need for a “comprehensive regional security” as a central thematic agenda of SAARC henceforth.

They should invite regional think tanks, through the auspices of the SAARC Secretary General to come forth with a time bound SAARC Comprehensive Regional Security Charter to be adopted by the SAARC Summit in 2018.

How can SAARC nations develop their economies in a manner that their debt burden is reduced?

It is difficult to generalize debt policy and management at the country level since SAARC countries are different in sizes and levels of development. Bangladesh, India and Pakistan are huge as compared to the other five nations. Four South Asian nations – Afghanistan, Bangladesh, Bhutan and Nepal – are classified as Least Developed Countries (LDCs) with only four – India, Maldives, Pakistan and Sri Lanka – categorized as Developing Countries (DCs). Nepal is seeking to graduate by 2022. India is in the G20 and also in BRICS that puts it in a different league altogether.

The finance ministers of SAARC countries have simply ignored the issue of debt and the scope of regional cooperation to develop local and regional bond markets for their potential benefit to the region. Let us face the fact that financial markets in South Asia are mostly bank dominated with equity markets developing fast only in India and Sri Lanka.

As a result all South Asian finance ministers are at the mercy of the IMF’s conditions which they abhor but do nothing to enhance their fiscal independence. Most finance ministers believe that since SAARC does not allow capital convertibility, the issue of external debt is only marginal. The remittance economy has come to the rescue by servicing foreign debt even if the exports are not as dynamic as one would hope for. Foreign aid and debt forgiveness too have provided a threshold. Except for Afghanistan, the IMF would not be alarmed by the foreign debt to GDP ratio of all other South Asian countries.

Development of local bond markets and regional cooperation in debt management would be a way forward. Regional cooperation in bond markets will permit a broadened choice of instruments with which to manage debt with a deeper bond market. It will make available long term finance for regional infrastructure development and allow the private sector a greater access to capital markets.

The capacity of banking and financial institutions for better risk management will increase with a more sophisticated national capital market. Corporate bond markets will also develop as a result, ensuring good corporate governance. Insurance and pension funds will record a boom providing the much desired social security and safety nets to all households. It will also move the SAARC agenda from trade in goods and services, trade, transport and transit facilitation to issues of investment, capital markets and currency convertibility and foreign exchange risks.

While South Asian finance ministers can be complacent with respect to external debt, the story is radically different when it comes to the domestic debt policy and management. Debt sustainability and fiscal consolidation is a commonplace policy issue in India, Maldives, Pakistan and Sri Lanka. It is being recognized that debt is beginning to impact growth and macroeconomic stability in these counties. Ways and means have to be found to cut back on subsidies, raise taxes and enhance revenue through disinvestment of public enterprises.

India dwarfs the other seven full member countries of SAARC with 74 percent population and 82 percent GDP. How can this be balanced in a way that other nations also benefit?

India needs to get rid of the psychology of domination. In South Asia’s context, regionalism is meaningful only when there is overland trade, transport, transhipment and transit between its nations, which unfortunately has been denied by India till now.

No wonder the intra SAARC trade is stymied at five percent of its total trade since 1985. Let us hope that with PM Modi at the helm, this will change. He can begin with extending all its planned infrastructure projects, for which he seeks trillions of U.S. dollars from China, Japan, Korea and the U.S., to terminate on its borders with all SAARC nations.

For South Asian nations, this will be an unimaginable transformational gain by having to bear a marginal cost only. Further, if India could provide concessions to all by accepting the rupee as repayment, this will boost regional trade, investment and financial integration.

PM Modi has also committed himself to let market forces play their due role in India’s economy. This will strengthen regional cooperation as the private sector will have a lead role. Modi’s promise to empower the Indian states also portends well for unprecedented dynamism in SAARC. It will create huge opportunities for People to People (P2P) and Business to Business (B2B) diplomacy which will turnaround the psyche of security that dominates our traditional policy thinkers.

The doldrums in the SAARC process can be resolved by visualizing the South Asian economy as having four grand sub-regions to West Asia, Central Asia, Indo-China and Australasia. In this manner one can visualize a grand axis comprising the western seaboard linking the Maldives-Bombay-Karachi-Iran- Gulf region; the second grand axis comprising the eastern seaboard linking the SAGQ sub-region to Myanmar-Thailand-Indo-China; the third grand axis comprising the southern seaboard linking the Visakhapatnam-Chennai-Colombo sub-region to Malaysia-Singapore- Indonesia-Australasia; while the fourth sub-region could comprise the grand landmass of the Hindu Kush-Himalayan region stretching from Delhi-Islamabad-Kashmir- Kabul to link up with Central Asia.

Biodiversity is a valuable resource for future long-term wellbeing of the human race. What are the problems in this area in the context of SAARC?

South Asia is one of the richest regions of the world in biodiversity where new species are being discovered and the species once thought to be extinct have been rediscovered. The region is blessed by Mother Nature with many micro climates because of its geomorphology where changes occur rapidly. Take Nepal, which has the world’s highest landscape, Mt Everest in the north, and a landscape below sea level within less than 160 km in the Terai.

Let us hope that SAARC scientists start working on mountain orography and climatology, including the crucial relationship aspects of glaciology, planning for optimal land use and human settlement given the bio diversity, use of micro climate for off season organic farming to access global markets, exploitation and conservation of the Himalayan herbal resources on a commercial scale to generate wealth and welfare for, multi disciplinary research into the jugular veins of our ancient civilization, namely the river systems and how to integrate them through sub-regional basin planning and watershed management and research on the Indian Ocean resources for the benefit of all South Asians.

China is not a member of SAARC but its economic influence in the region is predominant. Does SAARC have a policy regarding China?

SAARC has a policy to welcome observer nations and it currently has eight observer nations. However, a moratorium was declared over admitting further observers in 2007. All SAARC nations, except India, desire more observers. But this policy was presumably drafted at the behest of India to keep alive its hegemony in SAARC.

Russia, South Africa and Turkey have applied for the observer status and it does not make sense to keep them out considering the formation of BRICS and the emergence of Turkey as a regional power.

It is well known that China is keen to revive the northern and southern Silk Roads. In fact, it also wants to add a new element, namely the Maritime Silk Route with its string of pearl bilateral investments in the ports of Bangladesh, Maldives, Myanmar, Pakistan and Sri Lanka.

SAARC does not have any China policy for the time being. But this will not hold water for long especially when the Bangladesh-China-India- Myanmar (BCIM) quadrilateral road connectivity project takes off.

Madhukar S.J.B. Rana is a Nepalese development economist and a former finance minister of the country. He served on various important positions including a member of the Board of Governors, Nepal Rastra Bank, the central bank of Nepal. Currently he is working as a professor of economics at the South Asian Institute of Management in Nepal.

Professor Rana contributes to various national and international publications and his input on economic policy is sought and valued throughout South and Southeast Asia.


South Asia Global, (November, 2014) Karachi, Pakistan


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