The following summaries give an overview of the initial research conducted by SAPANA's 14 Research Groups.

Trade and Tariffs in South Asia
Group Member: S. K. Mohanty

The expansion of the South Asian economy is continuing persistently on the high growth trajectory for the last few years. Most of the regional countries have maintained their growth profile between 5.5 to 8 per cent during the period 2004-05. The continuation of region's high growth performance is due to robustness of the macroeconomic and external sector performances. It seems that macroeconomic fundamentals of the region are strong, which can be assessed from the region's high growth rate, low inflationary pressure, high investment rate, etc. This is a positive development for the success of regional cooperation in South Asia. The dynamic performance of the external sector has been the most important factor for the sustenance of high growth in the region. The expansion of exports was sturdy, but imports expanded more swiftly than exports during the early 2000s. Foreign exchange reserve position was strong for large economies, and India's Forex reserve alone exceeded US$ 140 billion in early 2006. Exports of the region were mostly spurred by a surge in manufacturing exports, and the region is rapidly integrating itself with the global economy.

The intra-regional trade has made steady progress during the last decade, reaching almost 5 per cent of region's total trade with the world during the period 2000-04 as compared to 3.6 per cent during the period 1990-94. Though significant progress has been made in ameliorating the level of intra-regional trade, it is at the cost of high degree of volatility. Instability in the intra-regional trade has not only affected regional exports but also their balance of trade. Towards the latter part of the 1990s, the region's trade situation became sour on account of the 'Asian Crisis'. Since the inception of SAARC, there was a considerable degree of divergence between intra-regional import and intra-regional export, and the gap between them narrowed down gradually over a period of time. The gap between the two almost disappeared in the late 1990s, but reappeared again in the new millennium with lesser intensity.

Trade imbalance is one of the most widely discussed issues in the region where India is often dragged into the controversy as it maintains favourable trade balance with South Asia. Traditionally, a number of small regional countries used India's large competitive production base to meet their short term requirements for 'basic and essential' imports. In the past, there were instances of cessation of essential supplies from India on technical reasons which caused turmoil in those importing countries. Supply constraints in these importing economies have been the underlying factor for not accessing the large Indian market, despite having large export potentials. India provides MFN status to all the WTO Member countries, and does not discriminate against any South Asian country in accessing its large market. There is a need to devise radical strategies to arrest supply inadequacies in some of the regional countries to access market in large countries. The tariff regimes of the region show that the level of tariffs is not similar across countries; and protection of sectors differs significantly among them during the last decade. The region has large resource endowments, and each South Asian country has a distinct advantage in having access to some of these resources. This is the reason for not having a uniform level of sectoral protection across countries.

The regional countries have as many as 30 tariff bands, ranging from zero to 250 percent in 2004. Though each country maintains a large number of tariff bands, most of their tariff lines are concentrated in a few tariff bands. Some of the countries maintain very high tariffs to protect their sensitive sectors. While the average level of tariff is low in Sri Lanka and Nepal, it is high in India and Bhutan. Invariably, the region maintains high protection against certain sectors such as plastics, textiles, footwear, plaster and cement, vehicles, etc; and low protection against minerals, chemicals, leather, wood pulp, base metal, etc. The liberalisation of trade under South Asian Preferential Trade Area (SAPTA) has benefited regional countries as evident from the experience of India. India's imports, under first three Rounds of SAPTA, registered a six-fold increase between 1994/95 and 2000/01.

The coverage of imports has been comprehensive, linking almost all the broad sectors of trade except for sectors like gems and jewellery, vehicles, arms and ammunitions, etc. The LDCs have gained more market access in India than non-Least Developed Countries (LDCs) of the region under SAPTA. The list of trade concessions under SAPTA covered both agricultural and manufacturing sectors; and trade in agricultural products constituted almost one-third of the total trade. India's exports to the region have been restricted to a few sectors. India has benefited very little from the concession under SAPTA, and substantial market access is realised through the non-concessional route. However the SAPTA process was slow, and could have taken a few decades to reach full trade liberalisation in the region, considering the progress made under different rounds of SAPTA in the past. South Asian Free Trade Area (SAFTA) is likely to accommodate most of the shortcomings of the SAPTA Agreement. Implementation of SAFTA is a positive step towards aggressive trade liberalisation in the region. Taking into account the global trend in the post-WTO period, particularly the manner in which regionalism has taken an edge over the multilateralism, long term trade policy of the regional countries would be guided by the potential gains from regionalism. The South Asian region is likely to benefit the maximum from the SAFTA process as evidenced from the CGE results. It is alleged that large countries are likely to benefit more from the SAFTA process, and therefore, there is lukewarm response from other regional partners for the effective implementation of SAFTA. If SAFTA does not take off appropriately, regional countries may engage themselves in forming other RTAs to enhance their domestic welfare.

Custom Laws and Issues: Standardisation and Harmonisation
There have been some welcome moves in the last decade or so regarding the trade regime in South Asia. However, the degree of openness of the SAARC region to external trade and economic relationships is still relatively low. A strategic error in the past was each country's attempt at being self-sufficient without comprehending the role of international trade in development. This prevented them from accessing larger markets for their products or from using quality inputs. The region has opened up to trade and to foreign investment. Custom duties have been reduced, quantitative restrictions on imports have gone and foreign investment can now come in more freely in most sectors. We still have a long way to go, but have certainly embarked on the road to globalisation. And in this context it becomes important to look at laws and procedures related to customs and trade that differ considerably. Apart from production and quality issues which have had an impact on limiting trade in South Asia, it is the free movement of goods and capital between countries, and harmonious laws and procedures related to customs that are required to increase trading opportunities. The point that needs to be forcefully made here is that integration is more than the trade and investment on which we tend to concentrate. At one level, the forces of world integration are much stronger and more varied than the simple economic variables on which we focus. At another level, and more importantly, the forces of globalisation make economic isolation irrelevant, or contrived.

The South Asian region can have a strong global presence by integrating its economy within itself and with the rest of the world. Interdependence and common standards among economies adds to the strength of each one of them. The collective strength is often more than the sum of each of their military might. China's importance in today's world is because it is seen as a business destination by the rest of the world. It has a huge domestic market and cheap labour where foreigners rush to do business. The South Asian region can be in a similar situation only if it can make the world perceive it the same way they perceive China. South Asian countries incur high transaction costs in trading. Adopting appropriate trade measures would reduce costs for intra-SAARC trade and for trade with the rest of the world. The South Asian Free Trade Agreement (SAFTA) signed in Islamabad in January 2004 has made provisions for trade facilitation under Article 8. If implemented, these measures will enhance the pace of economic integration in South Asia. Customs warehousing is an integral part of Customs Act of any country. Customs warehouses are such places where dutiable goods are stored without the payment of duty. To facilitate trade it is important to have a well defined customs co-operations arrangement. Agreement on regional customs co-operation can address the problems in customs procedures including warehousing. It would also help the process towards uniform customs procedures and harmonize the laws relating to warehouses of the member countries.
An umbrella organisation needs to work as the expert group of customs matters including customs warehouses and supply technical assistance to the members. Excessive documentation has come about as a result of various complicated and intricate mechanisms set up by various countries in their attempt towards selective trade encouragement and protectionism in a larger context. There is a clear case for harmonisation and simplification. While all South Asian countries strive towards lowering transaction costs, it is important to reconcile provisions under SAFTA with the ongoing negotiations on trade facilitation in the WTO.

A beginning can be made through adoption of measures such as harmonisation of standards, mutual recognition agreements, harmonisation of customs procedures and customs classification and simplification of procedures. At the same time the South Asian countries could collectively work towards a common agenda in the ongoing negotiations in the interest of developing and least developed countries. The vast potential in a large region like South Asia will only be tapped to its fullest when there is quick movement towards simplification and harmonisation. It doesn't take long at all for negotiating teams to sit together and work out a mechanism that is uniform, especially since the European experiment and its lessons are well known. In this particular area, with benefits for all concerned, the old bogey of vested interests and entrenched lobbies also does not hold water. There is really no reason for us not to have a common set of principles and laws governing customs procedures across South Asia immediately. All governments swear by the reform agenda and therefore none can argue against the need to simplify rules, and in quick time.

Poverty Alleviation and the SAARC Social Charter
South Asia is home to the largest number of the poor in the world. Recent progress in poverty reduction has been impressive in some countries, or regions within countries. At the same time, other parts of South Asia remain stagnant or are facing reversals in poverty, rather than progress. Like a lot of other developing countries, some South Asian countries have also implemented a variety of poverty alleviation programs. It has often been argued that growth by itself is not sufficient to significantly reduce poverty, and that separate interventions are needed to include the poor in the growth process. The declaration signed at the 12th Summit in Islamabad in January 2004 stated that poverty alleviation was overarching goal of all SAARC activities and provision of basic needs, promotion of literacy, and better health care were all regional priorities. All the countries agreed that it was important to undertake effective and sustained poverty reduction programmes through pro-poor growth strategies and other policy interventions with specific sectoral targets.

However, poverty alleviation programs are only an interim solution to the problem. In the long run, the poor have to participate in the growth process in order to benefit from it. Since the 1980s India has been going through a process of economic reform. Poverty has also fallen significantly in the last two-and-a-half decades. Finally, the poor are poor because they do not have assets or access to assets. Improving access of the poor to physical and human capital is the other area that needs attention. The labour force in the non-farm sector commands higher wages than that in agriculture. However, work in the non-farm sector requires skills and human capital that the poor do not have. Therefore, education in terms of learning and not enrolment becomes vital to any long run strategy to get rid of poverty. Even today a majority of the people in Indian and Pakistan rely on agriculture for livelihood and the majority of the poor live in rural areas. Reforms, therefore, need to address the issue of productivity in agriculture.

The key to faster rural development is the emergence of a strong non-farm sector. This can be achieved by focusing on the inter-linkages between the farm and non-farm sectors in the form of agro-processing, provision of agricultural inputs and supply of basic consumer goods and services. Excessive land fragmentation and sub-division of landholdings from generation to generation are causing a persistent decline in size of farm and therefore in agricultural productivity. There is a great need to provide technology and information to smooth out the variability in production by small farms and to give them access to technology and markets to enable them to diversify their incomes. Throughout the Asian region, the phenomenon of 'jobless growth', has been witnessed; especially in manufacturing. Given that the large-scale manufacturing sector is expected to act as the leading sector, there is a danger that we might witness the same phenomenon in other countries, unless industrial growth is concentrated on the production and export of labour-intensive manufactures (as happened in East Asia during the 1970s and 1980s). The gamut of public policies will have to be focused on promoting sectors characterised by relatively high labour intensity. Poverty reduction strategy will have to move beyond current levels of investments in human capital and improve public sector service delivery. Although poverty reduction strategies followed in most South Asian countries provide a strong and credible move for increasing pro-poor expenditures and some progress has been made in increasing social sector expenditures but the governments have to increase the effectiveness of these expenditures. This particularly involves building institutional capacity and improving governance at the local levels and tracking public expenditures. One major factor holding back the development is the lack of access to, and the poor quality of, education. Improved public service delivery is particularly needed in the rural areas, not only to achieve universal primary school enrolment, but also to ensure an effective delivery of basic health care.

It is widely recognised that poverty reduction requires a combination of sustained economic growth and selected interventions designed to improve the position of the poor. One of the pillars of the poverty reduction policies in most countries has been social protection programs which are either designed to protect the poor from shocks or promote their long term move out of poverty. Such measures include cash transfers, reaching the poor with credit, food, employment, access to health and other social facilities which specifically target the poor. For the strategy to work, the government has to ensure that the poor are accurately identified, programs are properly designed and implemented so that benefits do not leak to the non-poor. Economic growth must not only be accelerated but restructured in such a way that its capacity to alleviate poverty is enhanced for given growth rates of GDP. In this context of achieving pro-poor growth, three sets of measures can be undertaken at the country as well as the regional levels:

i) Joint venture projects need to be undertaken to rapidly accelerate the growth of those sub-sectors in agriculture and industry, respectively, which have relatively higher employment elasticities and which can increase the productivity and hence put more income into the hands of the poor;

ii) Regional network of support institutions in the private sector can be facilitated for enabling small scale industries located in regional growth nodes, with specialised facilities such as heat treatment, forging, quality control systems and provision of skill training, credit and marketing facilities in both the country specific and regional economies;

iii) A SAARC fund for vocational training may be established. The purpose of this fund would be to help establish a network of high quality vocational training institutes for the poor. Improved training in market demanded skills would enable a shift of the labour force from low skill sector to higher skill sectors and thereby increase the productivity and income earning capability of the poor. A SAARC educational foundation and a health foundation should be created on the basis of contributions by individual SAARC member countries and more substantially by multilateral donor agencies.

Regional Economic Cooperation: Investments and Joint Projects
The issue of regional cooperation for investment is important both for foreign direct investment, which is directly related to the growth dimension of the region, and for joint investment at the level of states and international financial institutions, which is associated with the improvement of infrastructure facilitating closer linkages among the countries for combating poverty. The structural weaknesses of South Asian economies, the inefficiencies of their markets, their skill shortages and weak technological capabilities, are all characteristics which depress the prospect of investment in the region. These factors also make it less worthwhile for potential investors to incur the costs of a serious examination of local investment opportunities, thus leading to informational inefficiencies. The financing requirements of economic growth in these countries are, therefore, unlikely to be fulfilled by private capital inflows. Until these constraints on possible investment are addressed, they are likely to continue to rely heavily on receipt of foreign aid. While SAFTA focused on the issues of trade in goods, it did not ignore completely the issues of investment. Some elements of cooperation, although very elementary, in the area of investment have been reflected in the SAFTA agreement.

The share of South Asia in global Foreign Direct Investment (FDI) was 0.49 per cent in 2001, which improved to 1.08 per cent in 2004. India was the major recipient of FDI in South Asia. Realising the versatile benefits of FDI, countries in South Asia actively encourage and seek FDI. A range of measures have been implemented to enhance their attractiveness to potential foreign investors. In the recent past it has been observed that two important policy related factors attract foreign investment largely. The first is the expansion of the size of the domestic and regional market that can be serviced, as economic growth accelerates and barriers to regional trade fall (or are expected to fall). The second is privatisation of state owned economic enterprises, particularly public utilities currently enjoying significant domination in domestic markets. Intra-SAARC investment in 2004 was less than 1.0 percent of the total inflow of foreign direct investment to South Asia. Although the current flow of investment is very low among the SAARC countries, a boosted trade relationship through successful implementation of SAFTA may create an environment where cross-border investment would be geared up. Sectors where intra-SAARC investment can play a crucial role, have been identified by the chambers of SAARC countries are: energy, steel, fertiliser, telecommunications, information technology, textiles, ceramics, leather, jute, construction etc. A policy framework is required for the SAARC nations, which will make intra-SAARC investment more preferable than elsewhere by the member states. Based on identification of problems on the ways towards enhanced intra-regional investment, the policy framework will guide the member countries towards selection of South Asian destinations as most attractive one as regards foreign investment. The policy framework will also focus on identification of large inter-governmental investment projects which would create more opportunities for trade and growth.

Some steps may need to be taken to promote FDI into South Asia and also to encourage intra SAARC investment. Synchronization of economic reforms programme of the member countries is essential to ensure policy predictability and consistency of their investment policies. Such synchronisation includes tax regime, foreign exchange policy, capital account convertibility, customs procedure, synchronisation of macroeconomic variables for preventing contagion effect in case of economic and financial crisis etc. Although the investment regime in South Asia is relatively open, particularly with the accelerated reforms in India, the regimes are not harmonised. The harmonisation of investment policy practices and incentives will facilitate stop 'race to bottom' in competing on incentives. Under the harmonisation process regional investment and protection agreements as well as avoidance of double taxation agreements should be expeditiously pursued.

Under the SAARC secretariat a centre for gathering information, analytical work and monitoring of investment activities and potential can be set up which will monitor and evaluate the present status of FDI and its impact on the region's economy and socio-political development. This centre can coordinate with regional think tanks and research centres so that countries can pool experience across member countries and its comparison with other regions to reach a consensus on the best policy practices. A programme for enhancing effectiveness of FDI institutions such as Investment Promotion Boards with coordination between regional and international institutions is required. A set of legally binding codes of conduct should be adopted for regional joint ventures to ensure rights of host country/investors as well as to establish standard of accepted practice to generate confidence in regional cooperation in investment including dispute settlement mechanism. Although it is an indirect measure related to investment, customs reform is of particular importance to investment in export-oriented activities.

South Asian Energy Issues
The concept of energy security amongst the South Asian countries has been deliberated upon from two crucial perspectives, i.e. the sustainable development point of view and from the security-militaristic angle. Energy impinges upon all the three primary dimensions of sustainable development viz., economic, environmental and social. On the other hand, from the security-militaristic plane, energy insecurity could bring large-scale instability among these countries in any given nation-state, thereby threatening its sovereignty and integrity. Imported energy dependence is increasingly becoming critical in South Asia. These countries continue to be characterised by low per capita consumption of energy, poor quality of energy infrastructure, skewed distribution and inaccessible and costly energy availability. They have remained largely energy importers and increasingly face a serious energy shortfall. This situation is likely to be exacerbated further both because of ongoing economic liberalisation-led energy intensive activities and due to a rise in income level-led steady switching over of the rural and urban families from traditional bio-fuels to more efficient and convenient modern fuels.

Energy security is, therefore, emerging to be one of the most critical issues in South Asia region. In the region, power generation and its supply has remained a state monopoly although this is now changing and for the last decade or so most of these countries have undertaken serious reforms in the energy sector. These reforms focus on diversifying traditional energy supply sources, promoting additional foreign and domestic investment for energy infrastructure development, improving energy efficiencies, reforming and privatising the energy sector, and promoting and expanding regional energy trade and investment. There are distinct advantages for South Asian countries to cooperate in the energy sector. These countries together possess vast stores of energy mostly in the form of water resources, oil, forest, coal and gas. Economic gains based on regional cooperation in the energy sector have become a firmly established practice across regional groupings. Given the historical context, topographic and demographic features, natural resource endowments and socio-cultural ethos, South Asia could be the most natural unit of cooperation and integration. Creation of a South Asian energy market and cooperative development of the available diverse energy sources in the region can help increase the level of energy security in the region. This would contribute to achieving a sustained higher economic growth and improved political stability. The interconnection of power systems of contiguously located countries and their coordinated operation provide immense technical and economic benefits also. Besides electricity, the four areas which can be identified for cooperation in the oil and gas sector in South Asia region are i) trans-boundary natural gas trade, ii) trade in refined petroleum products, iii) cooperation in oil and gas exploration and iv) cooperation in NGV developments.

Water Issues in South Asia
For the most part, South Asia is facing a deficit of useable water for its existing and future needs, a deterioration of water resources, management inefficiencies, development concerns and inadequate water legislation. Infrastructure development is considered inevitable in the region for hydro-power generation and to meet water demands. While facing problems in the selection of technical solutions, water sharing within and across the countries and water productivity, all countries are experimenting with management changes to various degrees. In India it is believed that through a combination of two approaches, namely, on the demand side, where the practice of the utmost economy and efficiency in water-use and of resource-conservation, and on the supply side, where efforts to augment the availability of 'usable' water through extensive recourse to local water-harvesting and watershed development are necessary to avert a crisis, the situation will undoubtedly be difficult and will call for careful management. The economic and water sector reforms in India are generally accepted in the nature of public-private partnerships. The paucity of financial resources is pushing the governments, central and state, to think in terms of inviting private sector participation in dam-and-reservoir projects, which would earlier have been exclusively in the domain of the state. Turning from projects to services, the idea of privatising utilities has been in the air for some time, and now it seems to be getting extended to water supply in some states. Anti-dam lobbies have been arguing that the economic, environmental, social and human consequences of projects cannot be fully compensated, while the small-scale, local, people-cantered alternatives are available. A similar logic is mentioned in the context of trans-boundary disputes.

In Nepal's case, it is believed that water is to Nepal what oil has been to the Gulf countries, namely, the source of revenues and wealth; and that those revenues will come principally from the export of hydro-electric power to the neighbouring countries. Nepal's New Water Resources Strategy and National Water Plan for 2002-27 suggests physical developments, joint trans-boundary projects for hydropower and management reforms in the sanitation and irrigation sectors. The scope for joint reservoir and electricity generation projects by Nepal and India is high, however, as India is the main user of this electricity, there is conflict of interest on location, ownership, price, etc.

Bangladesh has adopted major reforms through its five year (2005-9) Rural Water Supply Project. However, the delivery mechanism is highly centralised as the ministry delegates responsibilities to the local public departments and NGOs. This supply- driven approach is not able to respond to peoples' needs, problems in reporting are mentioned while the expected results are not achieved. Unlike in India where the local government unit actually manages the water projects, the local government in Bangladesh facilitates and regulates the 'private sponsors'. Bangladesh has been closely working with the international donors during the last twenty years and has come up with national policy documents, between 1992-99. Bangladesh faces water control and quality problems, groundwater pollution, floods resulting from high river flows and inadequate drainage, and increasing demand for winter irrigation. The national water policy of Bangladesh states that, 'water will be considered an economic resource and priced to convey its scarcity value to all users and provide motivation for its conservation'. The trans-boundary conflict with India originates from the fact that, Bangladesh has 57 common/ border rivers, out of which 54 rivers are with India. The ever-increasing upstream withdrawals from these rivers within the Indian territory have deprived Bangladesh from its traditional uses of the river flows, especially in the dry seasons and thereby disrupting the livelihoods of the people depending on these rivers as well as causing serious environmental degradation to one-third of Bangladesh.

Pakistan is already utilising more than 75 percent of its rivers inflow of 178 billion cubic meters, more than 100 percent groundwater and major part of the rainfall falling in the plains. Different sectors and areas face qualitative and quantitative water shortages in terms of water access, allocation and actual availability. On the supply management side, Pakistan is faced with regional disagreements and technical inabilities for surface water development, water productivity and conservation of water quality, groundwater aquifer and natural aquatic systems. One of the more urgent needs is to devise a policy which addresses water-sharing agreements in South Asia where bilateral and multilateral issues can be addressed. Since much of the water in South Asia emanates from a single region, the need for a supra South Asian water agency must be expedited. In addition, water distribution and water management issues locally, need to be devised and information from the region can be shared where Best Practices become standard operating procedures.

Nuclear Stabilisation and Regional Security Arrangements
There is a view amongst some experts that the normalisation process between India and Pakistan gives space to engage each other in nuclear risk reduction and take other necessary arms control measures to reduce the risk associated with the possession of nuclear weapons. At the same time it is argued that the ultimate safeguard against a nuclear conflict is the complete dismantling of their respective capabilities. For some, the only guarantee against the use of nuclear weapons is total disarmament, where it is suggested that 'there is one way, however, in which India and Pakistan can genuinely contribute to the worthy cause of global nuclear restraint, arms reduction, nuclear disarmament, and peace. If they were to defuse their mutual nuclear rivalry, reach comprehensive agreements on nuclear restraint, and agree to work for a nuclear weapons-free zone in South Asia, they could have a salutary impact upon the world. (Brazil and Argentina offer a useful model of diffusion of rivalry through a forswearing of the nuclear option, which they both pursued till the 1980s.)'. This view is not convinced by the argument that keeping even small nuclear forces would reduce the dangers of accident or unauthorised use of nuclear weapons. The 'bread versus guns' argument holds special relevance for these poor and highly iniquitous societies. Those who argue against nuclear weapons believe that nuclear weapons have not brought security to India and Pakistan and have, in fact, introduced an element of severe insecurity and the clear and present danger of a witting or unwitting nuclear exchange.

Others take a realist position on the possession by the two sides of nuclear capability and believe that the two sides are not about to either cap their capabilities or roll them back. Hence, measures are proposed that can actually be debated given the fact that we have to live with the nuclear weapons. To this end, some argue that 'the concept of stability within the military context implies maintaining a situation where no development disrupts the existing equilibrium in a way that active conflict erupts. In the nuclear context, stability points to the concept of 'nuclear deterrence', or the ability to deter an adversary from taking an offensive for fear of punishment'. This view holds that the key to strategic stability is crises prevention, not crisis management. To begin with, Pakistan and India need an overarching crises prevention mechanism, which is able to deliver in crises. Nuclear risk reduction measures could include setting up direct signalling channels, concluding a non-deployment agreement and an agreement not to attempt pre-emption, establishing nuclear risk reduction centres, and strengthening command and control structures so that they remain intact under crisis situations. Some Pakistani analysts hold that India looks at its capability not just in terms of Pakistan but also China which adds another factor to the equation which is external to Pakistan but which forces Pakistan into augmenting its nuclear arsenal. Along with this, Pakistan has tried to engage India in conventional force reductions but India has not agreed to that because it has a conventional edge over Pakistan which it wants to retain. India is not about to negotiate any measure with Pakistan which could diminish its capability vis-à-vis Islamabad. What it seeks instead is a growing asymmetry. This locks Pakistan into a dynamic that is very different from what those who demand disarmament.

However, because the two sides are also normalising, the atmospherics between them are improving and that by itself helps in reducing risk. It is argued that, having tested their nuclear-weapon potential, the two sides would seek not only to maintain their nuclear arsenals but, given a host of inter- and intra-regional factors that are likely to impinge on their security, may move towards acquiring a more sophisticated capability; the increasing asymmetry between the conventional capabilities of India and Pakistan in favour of the former could lead to nuclear instability in the event of an armed conflict -- resultantly, measures to reduce the risk of a nuclear conflict must also address the conventional imbalance; this situation cannot be addressed merely by calls to disarm -- it needs an approach that combines the political-strategic reality on the ground with achievable targets; the ongoing dialogue process may provide the only framework in and through which this issue can be addressed, though it must be clear that there are limits to what can be done.

South Asian Conflict Resolution Mechanism
In South Asia perhaps the most intractable interstate conflict, that is, between India and Pakistan lends itself to various characterisations cast in strategic-military terms, a territorial/border dispute or an ideological conflict rooted in their mutually exclusive legitimising ideologies of being a secular and an Islamic state, respectively. The central lynchpin of evolving an alternative set of conflict resolution mechanisms better suited to the South Asian realities must be to make an 'inclusive' process by reaching out to all the stakeholders and transforming the method of evolving conflict resolution strategies by turning it into a bottom-up rather than a top-down process.

The conflict resolution mechanism in the South Asian context must allow, as well as create, an alternate set of forums and political spaces where the local stakeholders can themselves think afresh about ways of resolving their conflicts rather than merely reacting to those proposed by the state or the 'powers that be' bureaucracies, national political leadership or military regimes at the top of the state power. A meaningful conflict resolution strategy, in a nutshell, must address itself to recasting the fundamental political equations of power sharing, which in turn need to rework the associated basis of the nation-state in South Asia. The mechanism of conflict resolution is interlinked to a variety of issues whose immediate and long-term implications should be weighed. Yet, accepting the primacy of politics, it is suggested that most conflicts are more or less related to the crisis of governance.

Mechanisms for conflict resolution cannot be uniform in South Asia due to the enormity of diversities in countries of the region. Conflicts are also of varying nature and origin, yet all conflicts are broadly related to social, economic and political disparities that continue the domination of privileged sections of society or of certain class and ethnic origin.

Amongst many suggestions to address these issues, some of the following are recommended. The existence and meaningful role of conflict resolution centres and institutes can help in creating conditions for proper awareness among people about the origins, escalation and transformation of various conflicts. There is a need for political will of parties involved in any conflict to resolve the conflict by applying the techniques of mediation, conciliation and arbitration. The availability of resources to sustain the process of conflict management and resolution also matter for establishing a conflict resolution mechanism. The meaningful role of the media, both print and electronic, also helps in the resolution process of various conflicts. Stakes of the parties involved in a conflict to sustain the process of negotiations through track-I, track-II and track-III channels also help strengthen the framework of a conflict resolution mechanism. It is important to identify and involve stakeholders in the process of conflict resolution and through participatory approaches involve all sections of society, both at the national level and across the region as a whole.

South Asian Political Integration and a South Asian Parliament
South Asian states have emerged out of a contiguous landmass, shared civilisational evolution and cultural moorings, and single socio-economic space through political boundaries and sovereignties that cut across ethnic affinities. The colonial domination made significant contribution to these political divisions that existed in an essentially diverse mutliculteral, multi-ethnic and multi-religious sub continent that never wa s anation or a nation state and the demand for more of such divisions by the native South Asian themselves never seems to be ending. These political boundaries have constantly been reinforced in the post colonial period through divergent, often conflicting, state and nation building strategies by the South Asian States, rise of ethnic movements and sectarian forces within these states and the sustenance of autocratic political orders and rulers. In most of the cases, the divergences and incompatibilities have been between India and one or more of its neighbours because the other states have either been carved out of India or feel threatened by a much bigger neighbour. During the Cold War and even at present, extra-regional powers have been exploiting these intra-regional divisions in pursuance of their respective strategic interests. This in turn has further reinforced and consolidated political division. In the background of South Asian regional political dynamics, any proposal of political integration is a regional anathema; an affront to sovereign sensitivities and political identities.

Similarly, the reference to 'Special Relations' between India and Nepal is widely abhorred in Nepal. The lesion of this experience is clear: any move towards political integration in South Asia must not be initiated by India. The SAARC process was not initiated by India. In fact India was, and in some respects remains, a reluctant participant in this process. SAARC as initially conceived, perhaps aimed at reintegrating the socio-cultural and economic space in the region. That is why it has made slow progress, though it did not intend to erode political identities. Political priorities and vested interests have often dictated the socio-economic agenda in South Asian cooperation. There have, however been significant changes in South Asia, related to the international context, regional environment and national priorities. The international context has become more conducive to regional integration in South Asia. The reasons for this are numerous; the rise of the single super power world, growing nuclear concerns of the world following nuclearization of India and Pakistan in 1998, imperatives of global war on terrorism and the lucrative interests of the international corporate groups for taking advantage of the South Asian economic growth. There has been a greater momentum to regional integration moves all over the world, casting its benign shadow on the South Asian region.

At the regional level, the SAARC process, though slow has made its impact as there is a greater regional consciousness. South Asian countries are now learning to build regional institutions and sustain them in pursuance of their interests. There is also the question of terrorism which all the South Asian countries must fight together. Within each South Asian country, people at large are witnessing an explosion in their aspirations. They have been demanding their rights and asking their states to deliver good governance and development at a faster pace. In this respect, they find intra-regional conflicts to be hurdles in the way of achieving their aspirations for a better life. They are, therefore, pushing their respective states to evolve new initiatives and approaches that promote cooperation rather than conflict. The upsurge of popular expectations for cooperation between India and Pakistan is acknowledged by both the governments who have been compelled to carry on with the people-related confidence building measures. There is also a creeping realisation in among the people and the rulers in South Asia about India's steady growth. This realisation is projecting India as an opportunity rather than an adversary. These recent changes are surely giving a push to integrative tendencies in South Asia. Under these tendencies political barriers are softening. To nurse these tendencies, the best method would be to build regional institutions and co-ordinate regional interests, professional, business and political. The idea of a South Asian parliament, with only deliberative, not legislative functions has emerged. More of such institutions in other walks of life are coming up, like the SAARC Chamber of Commerce and Industry. This is the safest route to any integrative process. Any neglect of institution building will not be in the long term interests of the region. And any hastening of the integration through institutions may break the fragile political consensus in favour of regional cooperation. We need to move forward, but slowly and cautiously.
Rewriting South Asian History and Social Science
The term 'South Asia' carries a self-evident meaning in many contexts. Its most obvious salience is in the sphere of geo-politics and strategic or security studies. Perhaps its earliest avatar was in the context of the post-World War II 'area studies' initiatives emanating from the academic and strategic interests of the United States in the Cold War period. It has long been a familiar term denoting an 'area specialisation' in many disciplines in the Western academy, notably anthropology and political science. However, none of these meanings requires South Asians to talk to each other. In the academic and intellectual arena, this means that, with the partial exception of fields like strategic studies or international relations, South Asian scholars do not address each other's work, nor do they share a common intellectual space. A Sri Lankan anthropologist and a Pakistani or Bangladeshi or Indian anthropologist have absolutely nothing in common as South Asians. If they meet at all, it is almost invariably in Western institutions or under their aegis. There is hardly anything in South Asia that brings them together no common journals, debates, or events; all such things happen elsewhere. There is plenty of social science happening in South Asia, but very little of it addresses the region as such. Isn't such a perspective, which is at best provincial and at worst chauvinist, completely out of place in a globalised world? Coming to the issues of history writing and history textbooks, there are some common concerns that run through the five papers, three of which are from India and one each from Pakistan and Bangladesh. In their different ways, all the experts recognise the paradox while most students tend to regard history as a 'useless subject', it is the content of history textbooks which has seen some of the fiercest contestations in recent years.

The papers have explored the role of the State in history writing, especially in the context of its concern for nation-building. In India, the first generation of free India's historians was concerned with 'not simply the rejection and repudiation of the colonial interpretations but the legitimisation of a secular polity and society'. Others feels that even though history writing and research has come a long way since the early decades after Independence, an emphasis on secular traditions and a keen alertness against communal biases and prejudices is still very much in order. If the State and independent historians share this concern, then it is not to be seen as something unfortunate. Of course, this does not mean that the more recent perspectives of the hitherto marginalised groups should not be incorporated in school history textbooks. In Pakistan, the objective of teaching history, especially since the Bhutto era, has been to develop an abiding love for Pakistan and for Islamic culture. The 'Other' is India, the enemy 'which is sitting at the fountainhead of our river system' with its Hindus, who are portrayed as backward and superstitious. There is also a glorifying of militarism with chapters in Social Science textbooks emphasising the importance of the armed forces in the defence of Pakistan against the enemy. In Bangladesh, a need is felt to overcome the majoritarianism which has come to define the core of 'national history' and has in turn alienated the minorities, both religious and linguist'. This brings us to the issue of silences and erasures in history. Textbooks on History and Pakistan Studies rarely mention the cultures of the Indus Valley and completely bypass the entire Buddhist and 'Hindu' periods of history. They suddenly jump to the advent of Mohammad bin Qasim and treat it as the beginning of history for all practical purposes. In India there was an attempt in 2001 to delete certain portions from the existing NCERT history textbooks on the grounds that they were hurtful to certain religious communities. When we attempt a common history of South Asia, the question of perspective can become a major one. Will our positioning in different South Asian countries, some of which are not well disposed towards each other, affect the emergence of a common perspective? To take one example: while the people of Pakistan take pride in their country and would naturally view the creation of Pakistan as the culmination of a long and legitimate struggle; for Indians it is very difficult to understand, leave alone share, that perspective. From the Indian point of view, the creation of Pakistan was an unfortunate event and continues to remain so. A similar problem would pose itself in Pakistan vis-à-vis the creation of Bangladesh. Can this problem be solved by avoiding anything which smacks of narrow 'national pride'? Most of the writers here show a concern about history becoming a tool in the hands of those who want to spread communal hatred or chauvinism of one kind or the other. How is this to be countered? There is the importance of the need for the professional historian to 'live up to the ideals of intellectual honesty and not be controlled or manipulated by various agencies.' Others feels strongly that a joint secular minded commission, consisting of representatives from all the south Asian countries, should be set up to review and revise the existing history and social sciences textbooks. Any material promoting communalism, obscurantism, casteism and regional and linguistic chauvinism and that is prejudicial to basic human values and rights, should be eliminated from the textbooks.

The papers of this panel have revealed that each of the South Asian countries can have a very different way of viewing the past but there is a common concern about the misrepresentations and distortions. Besides this, the plight of history as a discipline points to some of the larger problems in education. Almost everywhere there is a growing marginalisation of history and the social sciences. Specifically in the context of India, there is clear pressure to develop those disciplines which are 'market oriented' and in certain parts of the country, the teaching of history and the social sciences has even been discontinued. And yet ill-informed historical statements and generalisations are constantly being made and justified. Historians must undertake exercises in popularising history in a meaningful fashion in order to counter this unfortunate tendency. One can end this summary by saying that the knowledge of history can give rise to statesmanship, and lend our daily thoughts a breadth and scope unattainable by those whose view is limited to the present.