Safta & the Dhaka summit

I AM writing this article in New Delhi. The purpose of the column is to bring to the attention of the officials preparing for the Dhaka summit of the South Asian Association of Regional Cooperation (Saarc) some of the apparent shortcomings in both the original design of Safta and the preparation for its launch. I should provide a bit of background to my involvement in this work in order to place this article in context.

At the 12th summit meeting of the Saarc leaders, held in Islamabad, in January 2004, the decision was taken to launch Safta by January 1, 2006. In the summer of 2004, the US government decided to fund a project to study the impact of Safta on the South Asian region. The US interest in the subject was more political than economic; there was a strong feeling in Washington that regional integration in South Asia, focused initially on trade, could help to bring peace to this long troubled region. The assumption was that if the nations of Europe could overcome centuries of suspicion among them by focusing on economic integration, similar results could be obtained in South Asia.

I was asked to lead a team of researchers drawn from the region to study the impact of Safta on the member countries and to recommend the changes that needed to be made in the agreed framework in order to make the forthcoming arrangement economically productive.

In the winter of 2004-05, I undertook a trip to most South Asian capitals to meet with senior political leaders, bureaucrats engaged in negotiating various aspects of Safta, members of the business community, and the academia. I found considerable enthusiasm among senior politicians but serious reservations among the bureaucrats about the possibility of launching an effective free trade arrangement in the region.

On the basis of this visit I wrote a long background paper on regional free trade arrangements in other parts of the world and drew some lessons from these experiences that could help the Safta planners. My team and I spent most of 2005 writing country reports analyzing the impact of Safta and published them in the form of a conference volume. Our work was discussed at a two day workshop held in Delhi, attended by 40 experts from the region.

This was a timely gathering for trade and development experts since the 13th Saarc summit was now scheduled to be held in Dhaka, Bangladesh, in the middle of November. The meeting had been postponed twice, once because of the tsunami in December 2004 and the other time because of India’s reluctance to have the King of Nepal sit at the table with other heads of government from South Asia. The king had installed himself as the country’s chief executive by suspending the constitution and dismissing the prime minister and his cabinet. The Indians were unhappy at this development. They hope that one important objective for SAARC would be to encourage the move towards democracy in all members of the organization.

There was fear that the October 8 earthquake in Pakistan that took such a heavy human toll could result in yet another postponement. We were relieved to learn that Islamabad insisted that the summit should be held as planned in November.

There was consensus among the workshop participants that Safta, even in its present form, would bring about some benefit to the member countries. There would be no losers among the countries; all countries participating in the arrangement will benefit. There was also agreement that Safta, as currently designed, needed some improvements. A successful Safta that would lead to substantial increases in intra-regional trade and further market integration among member states is important politically and economically for the South Asian region.

However, the current course of the negotiating process appears to be moving towards meeting the lowest common requirements whereas a much more ambitious result is within reach. There should be no doubt that without additional efforts to greatly strengthen the agreement, Safta may not realize its full potential. This had happened before when with considerable fanfare the Saarc nations had launched the South Asia Preferential Trade Area initiative. Nothing of significance was achieved by several rounds of Sapta.

A committee of experts drawn from the bureaucracies of the seven countries was set up by the Saarc summit at Islamabad to prepare for the inauguration of the free area. Experts were required to submit proposals on subjects such as “sensitive lists”, “rules of origin”, compensating less developed countries in the region for the revenue losses they could suffer as a result of the planned reduction of tariffs, and to plan for the provision of technical assistance for adjustment to free trade for this group of countries.

From the preparatory work undertaken it appeared that far too many products produced by the countries could be excluded from the free trade regime, and also that reductions in tariff rates were too limited and would become effective at a slow pace, and the application of restrictive rules of origin could be very difficult to meet in many cases.

If these rules and principles were to be accepted by the Dhaka summit, the free trade area that would result would not meet expectations. Such a Safta would do little to expand intra-regional trade which, in spite of significant increases in the last three to four years, still amounts to about six per cent of the total.

To fully achieve the anticipated benefits of Safta, it will be necessary to make much greater efforts to reduce all barriers to trade, not just tariffs. When the design of an agreement is undertaken to protect domestic industries, governments can play many games. For instance, all kinds of additional duties and charges can be added to low rates of tariffs.

Some governments use ad valorem tariffs in conjunction with specific duties. For instance, a low level of tariff can be combined with a rate levied per metre of fabric with the stipulation that the higher rate will prevail. This can result in very high levels of duties. One way of handling this problem is for the governments to agree at Dhaka that there will an explicit commitment to ensure that Safta is compatible with the WTO.

Greater efforts will be required to adequately address the issue of non-tariff barriers. These can take many forms. The importing government can insist that the products entering its territory must meet certain standards. The certificate that this has happened can only be issued by an agency located at a long distance from the port of entry. The net result is that the cost to exporter for compliance increases significantly.

Another popular non-tariff barrier often used in South Asia is to restrict transit rights to some routes which may be less convenient and more expensive for the exporter. The Safta agreement has left the removal of these kinds of barriers to the governments on the basis of what trade economists call “good behaviour”. That kind of behaviour seldom results if the intention is to protect domestic producers.

Another problem the region faces is that all nations are engaged in or are pursuing bilateral or regional trade agreements in addition to Safta. While I was in India, Prime Minister Manmohan Singh announced that his country would try and conclude free trade arrangements with all the countries that are its neighbours, with Asean and with the countries in the Gulf. New Delhi hopes that these will be concluded by the end of 2006.

This approach is designed to enhance India’s engagement with the global community even if the WTO talks do not result in increasing the country’s market access. In implementing Prime Minister Manmohan Singh’s trade diplomacy, several import concessions would be given to neighbouring countries like Pakistan, Bangladesh and Myanmar while India will back the entry of Afghanistan into Saarc as a full member.

After Afghanistan joins Saarc, it could be inducted into Safta. Afghanistan is increasingly assuming a greater economic and political role in South Asia. Making it an integral part of South Asia would be an important step in building a stronger regional foundation.

While these initiatives may serve a diplomatic purpose they create problems for trade. Economist Jagdish Bhagwati has called this the “spaghetti bowl” approach which makes it difficult to untangle trade relations among nations. Our meeting in Delhi took cognizance of this development and pointed out to the Saarc countries that for their organization to continue to be the foundation for regional growth and development, it is important for Safta to be the predominant trade agreement. This can only be achieved if a more ambitious Safta is concluded quickly.

One of the most important items not included in the current design of Safta pertains to cross-border investment. Most countries of the region have low levels of savings and hence low rates of investment compared, say, to the countries of East Asia. These could be augmented by foreign flows. However, why relatively lower amounts of foreign investment were flowing into the region was the result in part of its poor integration.

The amount of money coming from abroad would increase significantly if the countries in the region could work well together, overcome mutual suspicions and create a large market that did not have internal borders. Even India which receives about 80 per cent of the foreign capital flows into the region would see an increase in the amount of money being invested if foreign investors believed that it could become the industrial and service sector hub of the region.

For that to happen, the Indians themselves will have to take the lead and become the first wave of investors in the region. This is what happened initially in East Asia when overseas Chinese operating out of countries such as Singapore, Taiwan, Hong Kong, even Indonesia, Malaysia, Thailand and the Philippines began to take interest in the country of their origin. Once they opened the way to China, other non-ethnic investors followed. China, consequently, is the favoured destination of all investors who have decided to look at the country as one of the world economies with an enormous future.

The process of developing Safta has been hindered to some extent by the limited analytic capacity of the Saarc secretariat located in Kathmandu, Nepal. Increased technical capacity, especially to monitor and address the complex and changing impediments to efficient trade facilitation, will be essential for the effective implementation of Safta.

These are some of the ways in which South Asian leaders can work to increase the impact of Safta on their region and create a more integrated regional economy that can play an effective role in the global economic system. They could turn the summit in Dhaka into a real turning point for the region.

Saving the survivors

AN immense amount of goodwill has surfaced for the victims of the earthquake in northern Pakistan. An entire nation has rallied. But there is a fatal flaw in the ongoing relief operations.

No matter how much effort has gone in already, no matter how much more is being put in, not enough is being done to provide heat and shelter to everybody before winter sets in. As the UN has predicted, thousands more can die. State policy must be changed immediately to save lives.

More than two weeks into the relief operations, a great deal of progress has been made. Roads have re-opened. Supplies have reached hundreds of thousands of people. But the two weeks have also brought us that much closer to a looming disaster. Despite the courageous efforts of individuals, NGOs, the army, government officials and the international community, the provision of adequate shelter, food and heat to the entire population throughout the winter does not appear possible.

The UN’s emergency relief coordinator, John Egeland, after a visit to the region, spoke bluntly. “Tens of thousands of people’s lives are at stake and they could die if we do not get to them in time”, he said. As though this were not warning enough, UN Secretary-General Kofi Annan stated that thousands would die from exposure and demanded “immediate and exceptional escalation of the global relief efforts”.

Winter is upon us. It is no longer around the corner or even fast approaching. Hundreds of thousands will not get shelter. Even those with makeshift shelter have no heat. The inevitable result of exposure to the cold will be a reduction in the body’s immunity leading to tuberculosis, tetanus, pneumonia etc. Inadequate food, water and sanitation arrangements will cause serious diseases like cholera. It is imperative that the maximum number of people are pulled out of these treacherous conditions as swiftly as possible.

Although the government has asked the displaced people to come down from the mountains, they must be provided with the means to do so. Hundreds of trucks going up every day with relief goods are returning empty. There is no reason why 40 or 50 persons do not return in every truck. Nor indeed is there any reason not to supplement the trucks and make an orderly evacuation of several hundred thousand people from Kashmir and the NWFP. It can be done; and done fairly swiftly.

The most vulnerable can be evacuated first. Even those comfortable in good tents in big towns like Muzaffarabad can be evacuated, so that their vacated tents become available for others who have no shelter. Evacuation of the maximum number over the next few weeks is by far the most effective way of saving lives, given the shortage of tents, blankets and heating. It is much easier and cheaper to bring people down to the plains in a returning truck and house and feed them here; than it is to build a shelter (even a tent) and take all the essentials of life up to the mountains throughout the winter.

What would such an evacuation entail? The relocation of as many people as can come down — two hundred thousand, half a million, a million? We have just elected a new lot of union councils and nazims. With over 100 districts in Pakistan it should be simple enough to disperse the homeless throughout the country, particularly in the NWFP and Punjab. That would put only a few thousand persons in each district, an easily manageable number. MPAs, nazims, local bodies, administrators, schools, hospitals etc would all be directly involved at the grass roots level.

The entire community would be able to participate in relief work on a daily basis in cash, in kind and as volunteers. There are enough buildings to accommodate the relatively small numbers in every district and more than enough resources are available to cover all their needs.

Town halls, school buildings, mosques and rest houses are available by the thousands. Punjab, with its 60,000 schools and 550,000 employees in the education department alone (as compared to only 500,000 in the Pakistan army) should have no difficulty in accommodating a large number of people. This year, the Haj complex need not be used for preparing Hajis for the pilgrimage. It is a huge complex which can itself house tens of thousands. Hajis go to the Haj complex for purely bureaucratic requirements, not as part of the Haj rituals. It is an ideal shelter, within a few hours drive of the devastated areas. And it is empty most of the year.

In fact some religious scholars have suggested that a contribution can be made by those who decide to forgo Haj this year and, instead, donate the money saved to care for their displaced countrymen.

We looked after three million Afghan refugees for 15 years. But unlike Afghan refugees, escaping a war which lasted a decade, this would be a very temporary arrangement, for a few hundred thousands for only about four months, to escape the killing winter. Come spring, and most would immediately return to their homes. In any event, unlike the Afghans who are foreigners the Kashmiris have a right to live and work anywhere in Pakistan like other Pakistanis.

The needs of the earthquake victims must also be taken into consideration. They want to see their families escape the winter of death and destruction. They are pleading for relief relocating to the plains. There are many examples. The guard of a local security company visited his demolished house in Bagh and returned with 40 family members. They have all been accommodated in a converted chicken farm. They are happier and safer than they were in Kashmir and the owner of the company is very happy to look after them.

A driver of another local firm came back from his village with a truck load of his family. His firm’s owners did not bat an eyelid and agreed to put them up and feed all 50 of them throughout the winter. Tens of thousands of Pakistanis are willing to provide this kind of support, which they can see is tangible and effective, as opposed to donations which may or may not be used effectively. As it is, hundreds of the more affluent have already moved their families to the plains.

The evacuation of a few hundred thousand people out of two and a half million homeless will significantly reduce the number of people exposed to death and disease. It would also reduce by an equivalent number those who have to be supplied the essentials of life throughout the winter in the mountains. Hundreds of thousand will be that much safer. Thousands of lives will be saved. The vast majority of displaced persons will of course remain behind. But by evacuating the maximum number, the casualty figure will drop. The government should now shift its focus a bit and, while continuing to provide all support possible to the affected areas, evacuate as many people as possible to the plains. And soon.

It’s pay-back time

OLD sins, Agatha Christie once wrote, have long shadows. And the sins of omission of every Pakistan government since our own independence in 1947 and the facsimile independence we have allowed Azad Kashmir since then are returning to haunt us.

Azad Kashmir is as much a misnomer as it has been a political fiction, for it has never been free of Pakistan, nor more than its amputated other half — the state of Jammu & Kashmir — has been a voluntary part of India. The seat of government of our Kashmir was never Muzaffarabad, that nominal capital once perched in the lower mountain ranges of the Himalayas and since flattened by the earthquake of October 8.

Nor was it the sumptuous building that lay hidden from public criticism in the recesses of Islamabad, next to the federal ministers’ residential enclave, and one that houses the nominal head of the Azad Kashmir government, a cardboard monarch allowed to reign but never permitted to rule.

All its policies — whether administrative, socio-economic, political and especially its foreign policy — were controlled from the president/prime minister’s office in Islamabad, working in tandem with GHQ/ISI. It is therefore not surprising that the responsibility for the relief effort following the disastrous earthquake should have devolved on the shoulders of the Pakistan government, rather than on its stringed puppet.

The legal fiction of Azad Kashmir has had its uses. Over the years, every Pakistan government has periodically rubbed the issue of Kashmir into the open, running wound of its relations with India. It has paraded Kashmir in international forums such as the Commonwealth, when our voice mattered, and in the United Nations, where the sound of our whining voice no longer does.

Today, Pakistan has had its wishes granted by a cruel Nature. It has not only complete authority over Azad Kashmir but also the unequivocal responsibility for it. It is now being called upon to demonstrate its commitment to the hapless Kashmiris, to put its purse where its mouth has been. A buck may be solicited from foreign donors; the buck can no longer be passed.

In a way, the appeal by the Pakistan government to the international community for help has been both natural and instinctive. It has evoked as previous tragedies have done — the East Pakistan cyclone in 1970, for example — within more affluent developed countries a sharper sense of awareness to the predicament of those less fortunate than themselves, and instinctive, because it reflects yet again Pakistan’s continued dependence on foreign support and intervention on anything pertaining to Kashmir.

Gradually, over the past three weeks, the channels of supply through which such relief goods can pass have been widening. Tentacles of contact are being established with remoter silent villages, and inexorably the fuller dimensions of the disaster are becoming painfully apparent. Kashmir is an uncovered graveyard.

The succour provided by international relief agencies, matched if not outstripped by the contribution of local NGOs and the general public, has been like a tsunami of goodwill. It has poured into the affected areas with a similar force, and has left in its wake the debris of mismatched largesse. Clothes and neckties that no one wants, medicines that the injured need but cannot use, and bottles of precious water that are being used to wash the grime off diesel delivery trucks.

Some people feel that the government did not act in time; others that it did not act at all. It has simply reacted, after the event. In either case, its performance cannot be a good advertisement of its competence. It has exposed the lack of preparedness on the part of the government to anticipate any crisis — whether it is an earthquake, a flood, or a premeditated war, or a sudden nuclear attack.

There is no one left alive to rescue in the rubble of Kashmir. Those who survived will now have the heart-wrenching task of rebuilding their homes on foundations that include their dead. Realists estimate that it will take as long to reconstruct and to rehabilitate Azad Kashmir as it did to create it.

Already, the October earthquake has disappeared off the international TV screens. It has been replaced by Hurricane Wilma and the threat posed by Asian bird flu. The predictable phase of donor fatigue is beginning to become apparent. It will be followed by donor ennui. The only donor who cannot afford the luxury of detachment is the Pakistan government. It is no longer relevant whether the Indian government did or did not come to the aid of its own Kashmiris. It does not matter whether there is a plebiscite in Kashmir or not. A plague on both your houses has been replaced by an earthquake beneath both of them.

If past experience is a precedent, there will be an increasing withdrawal within Islamabad from its dependence on public support. What is welcome today will be ignored tomorrow, and thwarted the day after. Kashmir will stop being pampered as an adopted child and will become instead a step-child, a gratuitous imposition.

One way the government can maintain the dialogue it will need with the public during the endless period ahead of reconstruction and rehabilitation of Azad Kashmir and the affected districts in the Frontier province is to disclose honestly and periodically the application of the funds it has received for the earthquake.

One is not asking for an account of every blanket or for every tent or for every carton of mineral water. What can be done is a reasoned disclosure of the sources of funds and their application. Governments tend to be coy in such matters. For instance, the government has received Rs 110 billion as its share of the proceeds from privatization of units since the public sector meena bazaar began in 1991. It has yet to disclose how much of that was applied towards its stated purpose — debt relief and poverty alleviation.

The last time there was a bonanza on this scale was during the Afghanistan crisis when unaccounted billions made Croesuses out of many a general who had not been able to master bookkeeping. This is neither the time nor Kashmir the place to repeat that self-indulgent laxity. There has to be a proper accounting and accountability.

The donors expect it.

The injured and the homeless deserve it.

And the dead — had they the voice — would have demanded it.

To revive a presidency

POLITICAL commentary is addicted to bold trends: Leaders must be either up or down; sideways isn’t tolerated. So it’s easy to forget that, along with the implosion of the Harriet Miers candidacy for the Supreme Court, last week featured the nomination of a highly qualified candidate to head the Federal Reserve; or that, along with the indictment of I. Lewis “Scooter” Libby, Vice-President Cheney’s chief of staff, last week brought a big step toward ending the investigation that has put a cloud over the White House for so long.

Presidents have a way of bouncing back from low points, and it is too early to assume that President Bush is a lame duck.

But unquestionably Mr Bush is in trouble, and if he is to recover, he needs to acknowledge the root causes of his misfortunes. There may be less to learn from the indictment of Mr. Libby, whose alleged perjury appears to be the result of his own miscalculations, than from some other recent stumbles. Ms Miers’s failed Supreme Court candidacy, for one, is emblematic of a broader and persistent Bush failing: a lack of intellectual seriousness, which goes hand in hand with his excessive trust in loyalists.

Mr Bush does not have the appetite to cross-examine subordinates in detail and judge them on the quality of their advice, so he tends to appoint those with whom he feels comfortable. This has led to bad appointments — and not only Ms. Miers and that hapless horseman who presided over federal disasters and also became one.

There’s Alberto Gonzales, the attorney general who is unable to state US policy on cruel and inhuman treatment of prisoners; one Treasury secretary who committed gaffe after gaffe and a second who is lackluster; unqualified contributors in many of the most important diplomatic posts; and more. A president who grappled seriously with the issues would surely demand better.

—The Washington Post