An economic initiative

The first-ever three-nation business summit in Dhaka has opened a new chapter in economic cooperation among India, Pakistan and Bangladesh.

TWELVE years after the South Asian Association for Regional Cooperation (SAARC) was formally launched in Dhaka, the Bangladesh capital has witnessed another major initiative for regional cooperation. The first-ever three-nation business summit, held on January 15, opened a new chapter in economic cooperation among India, Pakistan and Bangladesh. Prime Ministers I.K. Gujral of India and Nawaz Sharif of Pakistan participated in the summit, the initiative for which came from their Bangladesh counterpart Sheikh Hasina.

The summit, held immediately after India and Pakistan had concluded the celebrations to mark the 50th anniversary of their Independence, and Bangladesh the 25th anniversary of its freedom from Pakistan, was also significant in that it proved that the historical mistrust among the countries can be overcome with political will. The summit, intended also to accelerate the movement towards a South Asian Free Trade Area, brought together government and industry leaders from the three countries, who were in favour of adopting a pro-cooperation agenda to fight poverty in the region.

Inaugurating the summit, which was originally scheduled to be held on November 23, 1997 but was postponed because of the political crisis in Pakistan, Sheikh Hasina hoped that it would mark the beginning of a "new period of mutual trust and confidence". "Let us be inspired by a vision of a South Asian community," she said, "a community wherein fear and suspicion are replaced by a sense of well-being, a community free of poverty, enabling each of our citizens to lead a life of dignity, free from hunger and illiteracy."

Gujral offered unilateral trade concessions to Bangladesh and reiterated India's desire for normal trade with Pakistan. Aware of the concerns in Bangladesh over the country's massive trade deficit with India, Gujral said that India was prepared to lift trade barriers, or "quantitative restrictions", against agreed imports from Bangladesh. He also said that India was committed to a "fast forward" mode in moving towards a free trade area. He announced India's decision to double the ceiling for overseas Indian investment in order to promote Indian investment in the South Asian region. Gujral concluded his speech by quoting from the Rg Veda: "May you walk in step together; May you speak in one voice; May your minds unite in knowledge."

Nawaz Sharif said that South Asia had to "rid itself of the underlying causes of tension and mistrust and build a secure and peaceful environment conducive to peace, progress and prosperity." He said that his country would host a Regional Economic Summit later in the year to promote economic development further through regional cooperation. Although information about the countries that would be invited to the summit was not available immediately, many people believed that it would complement the Dhaka summit.

The Prime Ministers were unanimous on the need to forget the bitterness of the past and pursue common interests together. They identified the main barriers to growth: lack of proper communication networks, poor infrastructure, and energy shortage. They welcomed the opportunities presented by the globalisation of economies, but expressed concern over the "special difficulties" this posed for developing countries.

During the deliberations, the three leaders put forward specific proposals to improve economic cooperation. Sheikh Hasina suggested the establishment of a three-nation task force, including government and private sector business representatives, and a mid-year meeting of Economic Ministers to follow up on the summit proceedings. She also proposed an Asian Energy Grid that could eventually be extended from Turkmenistan to Singapore. Gujral, for his part, proposed a SAARC study on the possibility of setting up a regional electricity grid. Nawaz Sharif, who called for "transparency in the trading practices of the regional countries", recommended a market study in order to increase trade opportunities.

The three leaders also discussed the possibility of SAARC emulating other regional blocs such as the European Union, the North American Free Trade Agreement and the Association of South-East Asian Nations. Understandably, the summit did not go against the spirit of SAARC, even though its four other member-countries were not involved in the summit. The Dhaka Summit may, however, benefit SAARC if the three major constituents (India, Bangladesh and Pakistan) are able to improve relations among them.

The Prime Ministers emphasised the need to attract foreign capital. "In the emerging international economic environment," said Nawaz Sharif, "our hope of socio-economic progress lies in our ability to attract foreign investment." He added: "We need to focus attention on creating an environment which will inspire the confidence of investors and businessmen." Sheikh Hasina suggested that the three largest economies in the region together chalk out a plan of action to create conditions that are conducive to increased foreign direct investment (FDI). "We must move quickly," said Gujral, "to put in place a regional investment treaty and evolve regional arrangements for avoiding double taxation and settling commercial disputes." This would, he said, significantly enhance the confidence of investors and create a suitable environment for greater investment flow into the region.

Despite the emphasis laid on increased cooperation, the Pakistan Prime Minister's reticence on the issue of trade liberalisation stood out during the summit proceedings. "Pakistan is committed to the idea of a friendly and cooperative South Asia engaged in mutually beneficial economic activities," said Nawaz Sharif. "But the process should," he said, "move in such a manner that the interests of all member-states are safeguarded." He said that the reduction and elimination of tariffs "have to be accompanied by parallel efforts to do away with non-tariff barriers that impede and distort trade." "Our failure to do so," he warned, "will only accentuate the prevalent imbalances" in the region.

Intense deliberations among politicians and top business leaders marked the summit. The meeting drew to a close with the adoption of a 15-point Joint Declaration, which reiterated the commitment of the three countries to strengthening mutual cooperation in the region and to establish a Free Trade Area in South Asia by the year 2001. They agreed on the need to reduce tariffs, quantitative restrictions, non-tariff and para-tariff barriers and other structural impediments in order to achieve this goal. The Declaration reaffirmed the commitment to encourage the private sector.

The Declaration observed that although FDI had been growing rapidly over the last few years, its flow was uneven. It observed that the South Asian region, which had abundant natural resources, a skilled workforce and a combined market of over one billion people, was "an attractive destination" for FDI.

In the final analysis, the Dhaka summit could well contribute to the enhancement of trade and business in South Asia if the proposals that were put forward are followed up enthusiastically.