Dr. Salman Shah

Developing and articulating a South Asian vision involving at least a fifth of humanity is indeed an awesome task. I shall try to fulfil this responsibility to the best of my abilities. A South Asian vision should encompass the aspirations and hopes of all the member countries of SAARC. I will be focusing on this topic primarily from the perspective of Pakistan and India. It is, after all, the state of India-Pakistan relations that has kept SAARC from fulfilling its role of promoting development and prosperity in South Asia.

Ever since Mr. Vajpayee extended a hand of friendship to Pakistan in his recent speech in Srinagar and Mr. Jamali’s prompt phone call to reciprocate the feelings, the India-Pakistan relationship has started moving towards some semblance of normalcy and balance. Mr. Yashwant Sinha has spoken of a South Asian Union, perhaps on the pattern of the European Union and Mr. L.K. Advani reportedly keeps suggesting an Indo-Pak Confederation. This change reflects a realisation in India and Pakistan that the dynamic part of the world has moved on from conflict and turmoil to a more peaceful environment and, as a result, its citizens have moved from abject poverty into an era of unprecedented growth and prosperity. India and Pakistan, on the other hand, have been left behind due to the acrimony and bitterness of the last fifty-five years over the unresolved Kashmir dispute, four hot wars, an unending cold war, display of unmitigated hostility and active foreign policies of the two countries designed to undermine each other.

That the post-independence period has been a major economic disaster for the people of South Asia is an understatement. East Asian economic miracle and the explosive economic growth of China are not hidden from anybody. Starting from an economic and human development base that was perhaps better for South Asia than East Asia or China, we in South Asia have been pathetically left behind in every category of economic and human development. Based on current trends around a billion citizens of South Asia will still be living on less than the equivalent of two dollars a day by 2015, compared to only 300 million such citizens in East Asia and Pacific region. Gross national income per capita in South Asia is around $440 (even lower than sub Saharan Africa) as compared to $1010 for East Asia. Per capita GDP is increasing at 2.4 percent in South Asia whereas it is 5.6 percent in East Asia. By 2015 South Asia’s population will exceed 1.67 billion with each citizen demanding a higher standard of living, decent schooling, housing and jobs. There is no doubt that in this era of internet and the information revolution, governments will have to lose office or provide an environment under which South Asia can develop and prosper.

Clearly our forefathers wanted a better future for us. We were supposed to rapidly develop after the yoke of colonialism was overthrown. Independence was supposed to rid South Asia of hunger, poverty, disease and ignorance. This did not happen. Why did South Asia fail to provide a conducive environment for development as compared to East Asia? Is it possible to put in place a new environment for the future? These are the questions we have to deal with and find answers that can help us move forward.

It is interesting to observe that the British had proposed two alternative proposals for independence. Proposal A was a bid to keep some post-independence unity whereby two federations of Hindu majority and Muslim majority regions would be formed under a minimal Union Government that controlled defence, foreign affairs, communications and minority rights. Proposal B was the proposal that eventually got implemented and led to independent India and Pakistan. Proposal A, based on a three-tier-structure of government, (Union, Federation, Provincial) was the preferred option of the British as they wanted to preserve to the extent possible the economic, defence and administrative unity of India. This proposal was accepted in a slightly watered down version by the Quaid-e-Azam and the Muslim League showing that the founding fathers of Pakistan were not averse to strong economic, defence and political links between the two sovereign countries. The Indian Congress however rejected the proposal as it thought that the proposal did not go far enough in empowering the union government.

Proposal A can be thought of as being somewhere between a European Union type arrangement and a confederation. It can, therefore, be argued that from the very beginning Pakistan’s leadership had envisioned strong economic, defence and political links between the two countries. I believe a South Asian Economic Union, on the pattern of EU would have emerged had the relationship between the two countries not been bedeviled by the Kashmir dispute. Mahatma Gandhi, in a different context, had said that the two communities would come together almost immediately after the British power comes to a final end in India. This demonstrates that forefathers of both India and Pakistan desired close fraternal ties between the people of the sub-continent.

Keeping this strand of reasoning in mind, it is highly plausible that South Asian cooperation can become a norm for the future, provided an environment for peace and security can be created between India and Pakistan. A South Asian vision based on peace, security and economic integration driven by facilitating structures on the lines of the European Union can be contemplated. With the visit of Mr. Vajpayee to Lahore and his visit to the Pakistan Monument, where the Lahore resolution was passed, India gave a strong signal of its acceptance of the reality of Pakistan and the two-nation theory. The long-standing Kashmir dispute is not as intractable as it is made out to be. Solutions acceptable to India, Pakistan and the Kashmiri people can be worked out and moves towards a South Asian Economic Union on the pattern of European Union can be made.

The current process of one step forward and two steps backward will not work. We have to focus on what the ultimate long-term goal is and once the goal is identified we can determine the sequence of steps needed to achieve it. The process can start with opening up of communication and travel followed by trade and economic cooperation leading to an economic union. This can be supplemented at a later stage with a coordinated defence, mutual reduction of forces and perhaps even a coordinated common foreign policy. South Asia could become a powerful force for stability and economic development in the region and the world at large.

The stakes are indeed enormous for the citizens of South Asia. The peace dividend would run into billions of dollars, forever changing the lives of the citizens of South Asia. We are missing out on huge wallops of investment, trade and development activities due to the hostile South Asian political environment. The goal of more than doubling the South Asian region’s per capita income and closing the gap with the East Asian Pacific region within the next ten years can be set and easily achieved in a conducive environment. This would require that the leadership of South Asia accept the challenge of propelling South Asia into the 21st century as economically the fastest growing region of the world. This would require sagacious leadership willing to compromise on long held positions for the sake of enriching the lives of the people.

We have to create momentum towards achieving this goal. The first step is an unambiguous joint statement of intent by India and Pakistan reflecting their joint vision of converting SAARC into a South Asian Economic Union (on the lines of the European Union) within a time frame of say ten to fifteen years. The statement should spell out the framework for talks designed to achieve the objective. A separate statement should also commit to an honest endeavour to find a solution to the Kashmir dispute acceptable to the people of Pakistan, India and Kashmir within the same time frame. As part of the understanding, all warring parties would declare an immediate ceasefire in Kashmir and talks for developing a peaceful framework for resolving the dispute would be initiated. The joint statements of intent on economic cooperation and political disputes can be issued within the next six month. Perhaps it can be the Islamabad declaration on the visit of Mr. Vajpayee in early January next year. This would need intense diplomatic activity between the two countries.

If the world gets convinced of our commitment, the joint statements would be worth billions of dollars of immediate direct foreign investment in South Asia. As soon as the capital markets realise that we are serious, investment climate ratings in India and Pakistan would suddenly make a quantum jump. Our political ratings would certainly exceed the East Asian regional ratings and South Asia would probably rank shoulder to shoulder with East Asia for the investors’ dollars. Closing the risk perception gap could lead to a distinct possibility of annual foreign direct investments in South Asia in the range of sixty to seventy billion dollars.

Following the announcement of intent, development of tourism, sports and cultural links should be the number one priority. This is an area unencumbered by vested interests and can give instant returns. If people of South Asia are allowed visa-free and unhindered travel for short visits within the South Asian region and even if just two percent of the population starts to travel annually among South Asian countries, we are talking about twenty five million people contributing to cross border tourism. Cities like Lahore, Delhi, Agra, Jaipur, Lucknow, Madras, Bombay, Karachi and others would have a deluge of tourists and will run out of hotel accommodation. If each visitor spends 1000 dollars, we are talking about twenty five billion dollars per annum of new economic activity in the region that would unleash a construction boom in selected cities and regions of South Asia. New hotels, shopping malls, recreational facilities, transport facilities would be needed, leading to accelerated economic activity. Imagine a cricket match between India and Pakistan in Lahore or Delhi with open borders. Even a match between Lahore District and Delhi Gymkhana cricket teams would be a blockbuster. I feel that if we loosen up now, within two years regional tourism would be a huge industry creating millions of new jobs.

Following tourism, boosting of regional trade in South Asia holds great promise. As a region we have fallen way behind East Asia in our trading activities. The East Asia region as a whole has a trade to GDP ratio of 70 percent compared to South Asia where the ratio is only 30 percent. Regional trade amongst ASEAN countries is around 82 billion dollars (1999) almost ten percent of GDP compared to regional trade (excluding smuggling) in SAARC of 2.7 billion dollars only (0.4 percent of GDP). If SAARC were to hit the ASEAN ratio of 10 percent of GDP it would translate into a trade volume of around 58 billion dollars. This kind of trading activity could tremendously boost economic activity in the region. While some of this activity will replace imports from third countries a major chunk would be based on new production within the region and phase out of inefficient producers. It will introduce corporate efficiencies, cost reductions in manufacturing, price breaks for consumers and a greater ability to market globally. Full economic integration on the lines of the European Union would take a minimum of ten years but if its is done judiciously ensuring a win-win situation for all member countries the payoffs can be enormous. The SAPTA and SAFTA framework is in place but needs to be rejuvenated and pushed towards the road of economic integration.

A major benefit of a South Asian Economic Union based on settlement of long-standing disputes and mutual economic cooperation would be an environment in which major reductions in defence spending can be made and transferred to development activities. In Pakistan alone a 30 percent reduction in defence budget could free up close to a billion dollars a year for human development activities involving health, education and training. The impact of such redistribution of resources will greatly boost the region’s ability to compete in the world markets. Scientists and engineers engaged in R&D per million population in South Asia number 137 (probably mostly in India) compared to 492 in East Asia. Patent applications by residents were 21,43 in South Asia (1998) compared to 65,506 in East Asia. Primary teacher to pupil ratio in South Asia is 59 as against 25 in East Asia (1997). These statistics indicate that we as a region are not investing in our people and we must reverse this trend if South Asia has to be the region of the future. We can quote numerous other statistics but we don’t need to. We all know that we have been left far behind, not by nature but by ourselves, by wasting the opportunities that have come our way.

We have squandered the last fifty-five post-independence years. The next fifty-five years can be a repeat of the past unless the people of South Asia force the leadership to change course. The five-step approach I have outlined above,
1) Announcement of intent,
2) Tourism and travel,
3) Trade and economic integration,
4) Resolution of disputes and mutual reduction of forces and
5) Full South Asian Economic Union will transform the lives of our people.

The leadership must give the people a clear roadmap for the next ten years with an irrevocable commitment that problems and issues between India and Pakistan will be solved peacefully in the best tradition of humanity and civilised behaviour. A roadmap that can help South Asia achieve what other disadvantaged regions have already achieved; an environment in which each South Asian child can realise its highest potential and an era for our region full of liberty, peace, security and economic prosperity free from poverty, disease, war and turmoil. It is within our capacity to develop such a roadmap and implement it. The sooner we do it, the better it will be for all of us. The alternate is a vision that twenty years in the future we are still sitting pointing nuclear missiles at our hapless and poverty-ridden citizens.

(Dr. Salman Shah is a leading economist of Pakistan).