Unleashing SAARC Potential: Challenges and Prospects

Hemant K Batra, Founder & Chairman of Kaden Boriss Global and Principal Policy Advisor at Goeman Bind HTO

(paper written in 2004)

Concept – Regionalism: Regionalism is described in the Dictionary of Trade Policy Terms, as “actions by governments to liberalize or facilitate trade on a regional basis, sometimes through free-trade areas or customs unions”. In general terms, regional trade agreements (RTAs) may be agreements concluded between countries not necessarily belonging to the same geographical region.

The overriding objective of our Seminar is to identify challenges that need to be met and outline the perspectives in regard to unleashing the potential of SAARC.

The South Asian Association for Regional Cooperation (SAARC) comprises Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. The main goal of the Association is to accelerate the process of economic and social development in member States, through joint action in the agreed areas of cooperation.

The objectives of the SAARC as mentioned in the charter are as follows:

           To promote the welfare of the peoples of South Asia and to improve their quality of live;

           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 realize their full potentials;

           To promote and strengthen collective self-reliance among the countries of South Asia;

           To contribute to mutual trust, understanding and appreciation of one another’s problems;

           To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields;

           To strengthen cooperation with other developing countries;

           To strengthen cooperation among themselves in international forums on matter of common interests; and

           To co-operate with international and regional organizations with similar aims and purposes.

The intraregional investment and trade among the South Asian countries is quite modest, and has remained stagnant over the years. Consequently, the interdependence among these countries is quite limited. Four factors can be mentioned here to explain the limited intraregional trade among the South Asian countries.

First, most of the south Asian countries, being primary producers, tend to export similar items and thus compete with each other.

Second, the South Asian countries, with the exception of Sri Lanka, have a high rate of tariff and non-tariff barriers, which is the most important constraining factor for the expansion of intraregional trade.

Third, lack of adequate transport and information links among the South Asian countries poses serious problems for the expansion of intraregional trade.

Finally, political differences and a lack of willingness to create trade complementarities among the leaders of the South Asian countries contribute to the current low level of intraregional trade.

The above constraining factors notwithstanding, specific trade complementarities can be created in order to foster greater intraregional trade in South Asia. One important study sponsored by the Committee on Studies for Cooperation in Development in South Asia (CSCD) has identified as many as 110 items for intraregional exports and 113 items for intraregional imports in South Asia. (29) Broadly speaking, however, promising prospects for immediate intra-SAARC trade expansion exist in such products as tea and coffee, cotton and textiles, natural rubber, light engineering goods, iron and steel,, medical equipment, pharmaceuticals, and agro-chemicals. (30)

The enormous water resources of the Himalayas offer a great potential for the growth of regional interdependence. Since the Himalayan rivers flow through Bangladesh, Bhutan, India, Nepal and Pakistan, close cooperation is necessary among these countries to harness the Himalayan water resources for flood prevention and management of water flow, development of an inland navigation system, developing ecological watersheds and reforestation programs, and controlling river pollution. It is estimated that the Himalayan rivers flowing through Nepal have a hydropower potential of 83,000 megawatts, while in India, Bangladesh and Pakistan the estimated hydropower potential is about 70,000 megawatts, 1,772 megawatts, and 21,000 megawatts respectively. (31) It is encouraging to note that in Bhutan, another country of enormous hydropower potential, the Chukha hydroelectric project was recently completed with India’s assistance. Besides Bhutan and India, the project has the potential to benefit Bangladesh, Nepal and Pakistan. Similarly, through cooperation between India, Nepal, Pakistan and Bangladesh, it is possible to develop hydropower projects, which will provide a great relief to the energy crisis in this region.

There are other compelling economic reasons to suggest that it is in the interest of the South Asian countries to promote intraregional trade and economic cooperation. Direct trade in such products as steel and aluminium, textile machinery, chemical products, and dry fruits currently being diverted through third countries will benefit both India and Pakistan quite substantially in terms of price, quality, and time. (32) Besides, many goods being imported at high cost form other countries can be made available from India. By importing from India, the SAARC countries will be able to save their hard-earned foreign currencies.

The recent economic reforms in India and Pakistan will doubtless provide these two countries an opportunity to diversify their exports and make manufacturing products more competitive. But the success of their economic liberalization will essentially depend upon their ability to find new markets both in the developed and developing countries. Two developments in the international environment make the prospects of South Asian exports to new market less promising. First, the world economy is currently experiencing weak growth and in the 1990s the major industrialized countries are likely to grow more slowly than in the 1980s. Thus, it will be difficult for the South Asian countries to expand exports rapidly. Second, with the formation of regional economic blocs and growing protectionism in both the developed and developing regions, the South Asian countries may find it difficult to gain access to these markets.

Recent developments in Eastern Europe and the former Soviet Union are also likely to have adverse impacts on South Asian economies. The immediate impact has been on trade. India’s export to these markets has declined from 20 percent in 1990 to 10 percent in 1991. The trend is likely to continue. The longer-term impact is likely to be on the official development assistance (ODA) to South Asia. As some major studies have indicated, the former Soviet Union and Eastern Europe are likely to receive a major share of ODA from the donor countries in the 1990s. (33) Additional demands for ODA will come from the poorer republics of the former Soviet Union in the near future. Given the slower economic growth in the industrialized countries (compared to past performance) and tighter supplies of such funds from the traditional donors, these additional demands will certainly contribute to a reduction of ODA to South Asia in the 1990s. Besides, the expectation of the South Asian countries for an increase in foreign direct investment may not materialize until they are able to create a stable political climate in the region.

Thus, both the international climate and domestic needs are conducive for expanding regional cooperation in South Asia. It is often argued that if the South Asian countries are able to increase their intraregional trade from the current level of 3 percent to 6 or 7 percent over a decade, set up some regional joint ventures, and share the available technology in the region, there will be considerable improvement in the region’s interdependence and economy. Gradually, the policy makers of the South Asian countries seem to realize this. The ratification of SAPTA by all SAARC members is a beginning in the direction of promoting intraregional interdependence.

After the SAARC countries came together on January 6th, 2004 to sign a new arrangement called the South Asian Free Trade Area (SAFTA), economic co-operation in this region received a fresh impetus. South Asia, as a region, lags behind other regions for a number of reasons. South Asia’s trade performance, for instance, over the period 1980 to 2002, has barely doubled from under $50 billion to around $100 billion in these 20 years. East Asia, a region of comparable size in population and GDP in 1981, saw its exports grow from $100 billion to nearly $ 1 trillion in the same two plus decade. In fact, all developing countries expanded their exports rapidly during this period, so that by 2002 all developing countries were producing about $3.5 trillion in exports.

           There was a renewal of the commitment to the objectives and principles of SAARC and pledge to reinvigorate cooperation to realize peace, amity, progress and prosperity of all peoples of South Asia.

           There is the affirmation of determination to create an inclusive, just and equitable partnership for peace, development and prosperity. Satisfactory progress has been made in SAPTA, (South Asian Preferential Trading Arrangement. The signing of the Framework Agreement on SAFTA (South Asian Free Trade Area) is a major milestone. It is important to maintain this momentum and move towards further broadening of economic cooperation and to ensure equitable distribution of benefits of trade and cater to the special needs of the small and LDC member states by providing them special and differential treatment.

           Development of tourism within South Asia could bring economic, social and cultural dividends. There is a need for increasing cooperation to jointly promote tourism within South Asia as well as to promote South Asia as a tourism destination inter alia by improved air links. To achieve this and to commemorate the 20th year of the establishments of SAARC, the year 2005 is designated as “South Asia Tourism Year”, for the success of which, each member would individually and jointly organize special events.

           SAARC members have to continue to safeguard their collective interests in multilateral forums by discussing, coordinating and exchanging information with a view to adopting common positions, where appropriate, on various issues.

           We recognize poverty alleviation as the greatest challenge facing the peoples of South Asia and declare poverty alleviation as the overarching goal of all SAARC activities. It is imperative to relate regional cooperation to the actual needs of the people.

           Provision of basic needs, promotion of literacy, and better health care are a regional priority. It is important to undertake effective and sustained poverty reduction programmes through pro-poor growth strategies and other policy interventions with specific sectoral targets.

           The reconstituted ISACPA, (Independent South Asian Commission for Poverty Alleviation) has done commendable work. An effective strategy should be devised to implement suggestions made in its report “Our future our responsibility”. In this context, ISACPA continues its advocacy role. It prepares and submit to the next SAARC summit a comprehensive and realistic blueprint setting out SAARC development goals for the next five years in the areas of poverty alleviation, education, health and environment, giving due regard, among others, to the suggestions made in the ISACPA report.

           SAARC continues to collaborate with international organizations and UN agencies in the field of poverty alleviation. Arrangements for SAARC food security reserves are made more effective. It was also recommended that the establishment of a regional food bank for which a concept paper should be prepared.

           Investment in human resources is critical for future development of South Asia. It is therefore essential to establish a network of centers of higher learning, training and skill development institutes (SDIs) across South Asia. In this context, the role of the SAARC Human Resource Development Center (SHRDC) is important.

The coverage and depth of preferential treatment varies from one RTA, (Regional Trade Agreements) to another. Modern RTAs are not exclusively those linking the most developed economies; tend to go far beyond tariff-cutting exercises. They provide for increasingly complex regulations governing intra-trade (e.g. with respect to standards, safeguard provisions, customs administration, etc.) and they often also provide for a preferential regulatory framework for mutual services trade. The most sophisticated RTAs go beyond traditional trade policy mechanisms, to include regional rules on investment, competition, environment and labour.

RTAs can complement the multilateral trading system, help to build and strengthen it. But by their very nature RTAs are discriminatory: they are a departure from the MFN (Most-Favoured Nation) principle, a cornerstone of the multilateral trading system. Their effects on global trade liberalization and economic growth are not clearly given that the regional economic impact of RTAs is ex ante inherently ambiguous. Though RTAs are designed to the advantage of signatory countries, expected benefits may be undercut if distortions in resource allocation, as well as trade and investment diversion, potentially present in any RTA process, are not minimized, if not eliminated altogether. An RTAs net economic impact will certainly depend on its own architecture and the choice of its major internal parameters (in particular, the depth of trade liberalization and sectoral coverage). Concurrent MFN trade liberalization by RTA parties, either unilaterally or in the context of multilateral trade negotiations, can play an important role in defusing potential distortions, both at the regional and at the global level.

The increase in RTAs, coupled with the preference shown for concluding bilateral free-trade agreements, has produced the phenomenon of overlapping membership. Because each RTA will tend to develop its own mini-trade regime, the coexistence in a single country of differing trade rules applying to different RTA partners has become a frequent feature. This can hamper trade flows merely by the costs involved for traders in meeting multiple sets of trade rules.

The proliferation of RTAs, especially as their scope broadens to include policy areas not regulated multilaterally, increases the risks of inconsistencies in the rules and procedures among RTAs themselves, and between RTAs and the multilateral framework. This is likely to give rise to regulatory confusion, distortion of regional markets, and severe implementation problems, especially where there are overlapping RTAs.

Traditionally, high border barriers have limited trade in South Asia. The region as a whole has been less welcoming of foreign direct investment, which has been a powerful integrating force in other regions. This apart, attempts in the mid-1990s to establish an effective regional agreement was less successful than similar efforts in other regions in generating intra-regional trade. In 1980, intra-regional trade as a share to total trade within South Asia was less than 2%. Two decades later by 2002, the ration remained the same – there had been virtually no change in South Asian intra-regional trade as a share of total trade.

In order that free trade has a direct impact on spurring growth within the region, certain pre-conditions need to be satisfied:-

First, trade should really be free and not deviate from the objectives enshrined in the agreement. Very often, large segments of economies are exempt from tariff reductions due to various interest groups within these economies.

Second, successful agreements are preceded or accompanied by unilateral efforts among members to reduce external protection, driving export expansion all around.

Third, dissimilar economies have greater chances of success due to the opportunities to exploit larger markets, different relative wage rates, capital availability and differing technologies that give rise to differing factor proportions in production. The success of the various phases of European Union enlargement is a good example of this point.

Fourth, regional integration must bring with it enhanced competition, lower domestic prices and new technologies in order to be most successful when partners streamline borders transactions through active trade facilitation policies. Again, the EU experience is a valuable learning process for SAARC countries in this regard, not only for the achievements but also for the challenges faced by the EU member states to facilitate and harmonize their various laws and regulations.

The EU is the largest trading partner of all the SAARC countries except one (Nepal) in which it is the second largest and a large export market for SAARC member states. On average in the last few years, the EU has accounted for 20-25% of SAARC exports and imports. Merchandise trade exports from the EU increased from Euro 17 billion in 2001 to Euro 18.5 billion in 2003, which accounted for 2.2% of total EU exports. At the same time, imports from SAARC members into the EU increased from Euro 21.5 billion in 2001 to Euro 22.2 billion in 2003, representing 2.5% of total EU imports.

One of the most important trade policy instruments has been the EU’s Generalized System of Preferences (GSP), which has helped the SAARC countries to export their products to EU. From the preferential imports under this regime in 2002, half were duty free and half at a reduced duty.

India, for instance, has been the second largest beneficiary of the EU GSP Scheme. Bangladesh has been the first representative of the beneficiaries of the Everything But Arms Initiative (EBA) – the EU’s unilateral preferential regime. This apart, countries like Pakistan, Nepal, Bhutan, Maldives and Sri Lanka have been able to access the EU market considerably.

Where a product has been manufactured in or with inputs from two or more countries belonging to a group enjoying regional cumulation, inputs from other countries of the same group are treated as if they originate in the exporting beneficiary country. SAARC countries have benefited considerably from the regional cumulation policy especially in their export competitive sectors like textiles and clothing.

It is vital, however, that all SAARC nations cooperate at the national level and set realistic goals with regard to the implementation and other regional initiatives. SAARC members should be urged to reach the goal of eliminating tariffs by January 1, 2006. If these initiatives are carried out and the framework consisting of goals is achieved, there will be a significant increase in the potential for economic growth in the SAARC member states and the goal of attaining double digit growth in the South Asian economies will become feasible.

It should be underlined that one particular factor that South Asian nations urgently need to realize is the favorable impact of foreign direct investment. South Asia, unfortunately, has not received FDI at even close to those received by other regions. South Asia, which accounts for about 11% of the GDP of the developing world, receives only 3% of FDI and this percentage has remained relatively stable since the mid-1980s. Companies from Brazil, Argentina, Taiwan, Singapore and Malaysia and now even India have become global players in some industries and there is no reason why other South Asian companies cannot emulate these examples. There is much to be done towards this end. SAFTA is expected to come into force on January 1, 2006 and is to be fully implemented by the end of 2015. The agreement covers comprehensive measures of economic integration:

           Tariff reductions,

           Rules of origin,


           Institutional structures and

           Dispute settlement.

This apart, trade facilitation measures, such as harmonization of standards and mutual recognition of tests, harmonization of customs procedures and transport infrastructure co-operation are important elements. South Ssian exports face a challenging external environment. World growth and demand have weakened, commodity prices are expected to decline further, and the phasing out of the textile quote system in 2005 will leave many of these countries’ exports more vulnerable to competition from other developing countries. Export growth in the region has slowed; yet reviving export growth will be crucial to boosting the region’s sagging GDP growth rates, which have fallen from about 7 percent in 1996, to 5 percent in 1997-1998, and are widely expected to fall further in recent years.

Preferential trade agreements are expected to have rather modest an economic impact, with some benefits for consumers and some increased competition or domestic produces. Politically, preferential trade can help sustain the improved political relations the region’s leaders all say they want. The following discussion focuses on the four largest South Asian economies: India, Pakistan, Sri Lanka, and Bangladesh.


A preferential trading agreement that sought to reduce tariff and non-tariff barriers on a product-by-product basis would undoubtedly benefit consumers in the region who would gain from a cheaper and wider variety of imports. In Bangladesh and Sri Lanka consumers could gain from cheaper consumer goods. Protected domestic industries and sectors would have to restructure in the face of greater competition. In Sri Lanka, tariff concessions granted under SAPTA will hurt domestic textile manufacturers, but benefit garment manufacturers who would gain from cheaper imported inputs. In all the countries, trade liberalization will face mounting political opposition.

The SAARC member trade imbalances with India would probably increase. Although under preferential trading agreement India’s neighbours would have greater access to the large Indian market, it is likely that the flow of trade will remain unbalanced. India exports a broad range of commodities to Bangladesh and Sri Lanka, including transport equipment, cotton yarn and fabrics, pharmaceuticals, machinery, iron and steel products and food commodities, but its imports from these countries are limited. India is the leading source of imported goods for both Bangladesh and Sri Lanka and both run significant trade deficits with India. In the first three quarters of 1998, India’s trade surplus with Bangladesh stood at U.S. $488 million, with exports of U.S$ 537 million and imports of U.S$49 million.

High tariff nations, such as India and Pakistan, would lose import tariff revenues from any tariff reductions. Unofficial trade between India and her neighbours (particularly Bangladesh and Pakistan) could, however, be converted to official trade resulting in significant revenues for the governments concerned. Trade liberalization that converted all smuggled goods into legally imported goods at a given import duty could yield significant customs revenues for Bangladesh.

Because India continues to be the major regional trading partner for all the SAARC members, a useful step toward greater regional integration would be for India to grant tariff concessions on a non-reciprocal basis. The philosophy behind Indian trade policy in the region has been evolving: in December 1998, India agreed to withdraw all non-tariff barriers from Bangladesh’s exports. Tariff concessions alone will, however, not lead to greater trade integration – non-tariff barriers, foreign exchange restriction, policy discrepancies, and physical infrastructure constraints also need to be removed. A welcome step is the recently concluded agreement in December 1998 between Bangladesh and India to open four new land routes between the two countries in 1999 in an effort to facilitate bilateral trade.

Besides the issue of trade linkages, these are several possibilities for enhanced economic co-operation in the region, most notably in the energy sector. There is also potential for Bangladesh to export part of its natural gas reserves to India, a subject that has generated considerable political controversy within Bangladesh.

Given the low level of mutual trust, spill over effects of the ethnic and religious conflicts, (34) and the magnitude of bilateral disputes in South Asia, it is unrealistic to believe that any substantial growth of regional cooperation is possible without easing political tensions. To the extent that political tensions remain unresolved, SAARC is likely to experience only a “stop-and-go” pattern of growth (35) in which limited pragmatic cooperation on specific techno-economic issues is possible over a period of time. In the post-1990 period, there appears to be some realization among the South Asian leaders that the future of SAARC, like any other regional grouping, lies in concentrating on economic cooperation in specific areas. The SAARC leaders’ renewed emphasis on increasing intraregional trade at three consecutive SAARC summit meetings (Colombo, 1991; Dhaka, 1993; and New Delhi, 1995), the ratification of SAPTA, and the discussion to create SAFTA in future are evidence of their growing willingness to enhance regional economic cooperation in South Asia. But how soon and to what extent they are going to achieve success remains unclear. Any realistic assessment of the prospects for the growth of economic cooperation and interdependence in South Asia must have to address several of the following issues. The first issue pertains to the role of the state in promoting regional cooperation in South Asia. Given limited political contacts and mutual security concerns arising out of a typical security complex (36) in South Asia, a state-directed approach to economic cooperation is better suited to this region. The recent arguments about the limited role of the state in promoting regional cooperation activities in the context of the emerging “post-Westphalia,” “post-sovereign,” and “neo-medieval” international system appear to be irrelevant in the case of South Asia.(37) The South Asian states may be weak and imperfect, but certainly not irrelevant in initiating or guiding regional cooperation policies and promoting economic interdependence in the region.(38) Given the limited development of transnational market forces in South Asia, any prospect of the growth of regional economic cooperation driven exclusively by the market forces appears bleak. Besides, if regional economic cooperation is left to market forces alone, it would take decades. Therefore, conscious efforts at the political level and demonstration of political will by the South Asian leaders are absolutely necessary for the growth of regional economic cooperation in South Asia.

The second issue concerns the development of a pragmatic economic interdependence in South Asia. Three points merit attention here. (1) Given the extensive heterogeneity in levels of economic development of South Asian countries how can they proceed to achieve economic interdependence? Clearly, the approach should be gradual and based on the economic capability of each state. In this context, the recent approach of operationalizing SAPTA appears promising. India, being the largest economy in the region, has agreed to offer tariff reduction on the import of 106 items from the South Asian region. Pakistan has offered tariff reduction on 35 items, Sri Lanka on 31 items, the Maldives 17, Nepal 14, Bangladesh 12, and Bhutan 7.(39) The list of items is expected to be expanded in due course as the market space in each country increases and political confidence grows among the South Asian countries. (2) Regional cooperation should not replace, but only complement the existing bilateral trade and economic transactions between the South Asian countries. (3) The growing interest in operationalizing SAPTA as a prelude to the creation of a South Asian Free Trade Area (SAFTA) should not obscure the importance of the extra-regional and global economic cooperation that most of the South Asian countries are currently engaged in. For instance, it would be detrimental to the economic interest of India, Pakistan, and Sri Lanka if they do not seek access to the markets in Central Asia, Southeast Asia, the Gulf region, and the OECD countries. The key to the development of a pragmatic strategy to increase economic interdependence among the South Asian countries is to promote intraregional trade by lowering tariffs without delinking from extra regional and global economic relations.

Third, setting grandiose goals for intraregional trade is likely to be counterproductive. Instead, over the next ten to fifteen years, SAARC countries should pursue modest trade objectives and seek joint development projects of modest scale. In this context, the SAARC countries should negotiate with the United Nations Development Program (UNDP) and Asian Development Bank (ADB) for the development of joint projects. Some innovative approaches such as the ADB’s vision of growth triangles merit serious attention. Development of joint projects with the assistance of ADB in smaller units can create new opportunities and help establish linkages with other regions. For instance, promising economic opportunities exist, and with respective governments’ support extensive economic cooperation is possible in parts of Bangladesh, Northeast India, Myanmar, and Thailand, or South India, Sri Lanka, the Andaman and Nicobar Islands, and Northwest Indonesia.

Fourth, conservation of the natural resource base should constitute an integral part of any economic development strategy. For decades, the South Asian countries have suffered from the degradation of the natural resource base and environmental pollution because of their overuse and often misuse of the natural resources. Efficient use of the natural resource base and environmental conservation should be given utmost priority by the South Asian countries to meet their growing needs of energy and to alleviate the health risks to their population. Given the integrated environment of South Asia it is essential for the SAARC countries to collectively think of strategies for environmental conservation. This will require policy coordination at the governmental as well as grassroots levels. Passage of environmental legislation and its strict enforcement, dissemination of a wide range of environmental education, and involvement of women in environmental protection programs can go a long way toward the conservation of the environment in South Asia.

Finally, it is necessary to establish a South Asian Development Fund (SDF) in order to provide financial support to regional projects. The fund should not replicate the role of existing multilateral institutions such as the ADB and the World Bank in South Asia. Besides undertaking large regional infrastructure and environmental programs, which the purely project-oriented development banks cannot undertake, the SDF can focus on poverty-alleviation programs, provide lending to a comprehensive human resources development program, finance joint ventures, support intraregional and extra regional trade by arranging finance for export credit and commodity stabilization, and support the existing regional institutions. Resources for the SDF can come from contributions of SAARC countries as well as from external sources. Japan has already shown interest in contributing 20 percent of Japanese ODA to a common SAARC Fund.(40) The SAARC countries can also persuade the United States, Germany, OPEC countries, the Nordic group, and other donor countries to contribute some percentage of their ODA to the SDF. Needless to say, a successful SDF will be able to provide the much-needed economic support to regional projects and thereby strengthen interdependence among the South Asian countries.

It is therefore important for the SAARC countries to begin the discussions with a clear objective of increasing cross border trade and new import competition in national markets. At the same time, these countries must also keep an eye on history to endure that domestic defensive interests at the outset do not hold regional integration to hostage, as has been the case with similar efforts in the past and in other regions as well.

Pakistan Prime Minister Shaukat Aziz began his visit to India on 24th November’04, on a reassuring note, endorsing forward movement in the composite dialogue process between the two countries and agreed to work for increased bilateral cooperation in diversified areas.

In the first official engagement with external affairs minister K Natwar Singh, the Pakistani side did not let the recent fulminations by President Pervez Musharraf to cast any shadows on the wobbly peace process. If the trends of the first day of Pakistani PM’s visit were to be assessed, clearly the policy establishment was of the view that it was “positive, friendly and forward-looking”.

On the issue of the bilateral relation, both sides felt that the composite dialogue should move forward”. Mr. Aziz’s visit comes in the backdrop of India’s decision to reduce troops in J&K.

At the meeting on 25th Nov’04, with his Indian counterpart, Mr.Aziz extended a formal invitation to Prime Minister Manmohan Singh to attend the SAARC Summit Meet in Dhaka in January 2005. Pakistan Prime Minister Shaukat Aziz said it is vital to move from strictly the tactical level to the strategic level, and that’s how we can look at solutions, which will find a sustainable end result.

Let me sum up by saying that it is an important milestone in bringing about economic integration among the SAARC countries. My vision of South Asian Association for Regional Co-operation is of harmony and prosperity, with all its states at peace with each other, within secure borders, and with problems of the past is exchanged for the promises of the future. South Asia is a development with miracle waiting to happen. We must therefore create an environment in which its full potential can be realized in a climate of mutual understanding and co-operation.