Look East for economic integration

AT the SAARC Summit in Kathmandu in 2003, the heads of government proclaimed: “To give effect to the shared aspirations for more prosperous South Asia, the (SAARC) leaders agreed on the vision of a phased and planned process, eventually leading to a South Asian Economic Union”.

Look East for economic integration

The 2014 SAARC Summit discussed increasing synergy in diverse areas.

G Parthasarathy

AT the SAARC Summit in Kathmandu in 2003, the heads of government proclaimed: “To give effect to the shared aspirations for more prosperous South Asia, the (SAARC) leaders agreed on the vision of a phased and planned process, eventually leading to a South Asian Economic Union”. India’s regional economic integration has been far slower in South Asia, than what has transpired in its relations with ASEAN, with whom India has concluded Free Trade Agreements (FTA), in both goods and services.

Moreover, India has also concluded Comprehensive Economic Cooperation Agreements, going well beyond FTA, with Japan and South Korea. Despite the conclusion of a SAARC Free Trade Agreement, Pakistan has placed crippling trade restrictions on Indian exports and made a farce of pious declarations to establish an Economic Union in South Asia. There is no realistic reason to believe this will change in the foreseeable future. 

Pakistan’s determination to torpedo South Asian Regional Cooperation was starkly manifested in its opposition to India’s proposal for launching a satellite for exclusive use by SAARC members. Mercifully, the enthusiasm shown by other members forced Pakistan to eventually fall in line. Apart from trade, there are two other crucial features that accelerate regional cooperation — connectivity and energy cooperation — including through the interlinking of electricity grids. The 2014 SAARC Summit in Kathmandu spoke of increasing regional cooperation in areas ranging from connectivity and energy, to terrorism and telecommunications. Quite obviously, Pakistan has no intention to expand cooperation in any of these areas. It blocks road connectivity between India and Afghanistan, and despite facing severe power shortages, it has rejected offers from India to supply electricity. It sends the likes of Ajmal Kasab for terrorism in India and provides haven to terrorists like Dawood Ibrahim and Zakiur Rehman Lakhvi. 

New Delhi has now moved ahead on measures that will promote regional cooperation, bypassing Pakistan. Connectivity with Afghanistan is now being sought through the Iranian port of Chabahar. At a recent ministerial meeting in Bhutan, the Transport Ministers of India, Nepal, Bhutan and Bangladesh concluded a significant Motor Vehicle Agreement, laying the framework for seamless movement of passenger, personal and cargo vehicular traffic. Nitin Gadkari said the agreement would “allow motor vehicles of all categories in our countries to move freely in our region”. 

India and its eastern neighbours are envisaging a massive project, including 30 priority transport connectivity corridors, requiring an investment of around $8 billion. Initial estimates suggest that such corridors could potentially increase sub-regional trade by 60 per cent. Asian Development Bank (ADB) has expressed its interest in funding such projects. It remains to be seen if Asian Infrastructure Bank will adopt a similarly positive approach. Crucially, as relations with Bangladesh improve, the prospects for land and maritime connectivity with our Northeast states through Bangladesh appear increasingly bright. 

The prospects for energy cooperation with our eastern neighbours are immense. The visits of the Prime Minister and the External Affairs Minister to Nepal over the past year have helped create an environment for tapping into Nepal’s vast hydroelectric potential of 83,000 MW. Barely 600 MW of this potential is now being utilised. While Independent Indian Power Producers (from the private sector) are in the process of negotiating agreements for generating around 11,000 MW, delays could arise because of political uncertainties in Nepal. Similar considerations could cause delays in major inter-governmental projects like the 5,600 MW Pancheshwar Multipurpose Project. Grid connectivity between India and Nepal is also set to expand. At the same time, hydroelectric projects in Bhutan are being expeditiously completed, with a target of 30,000 MW by 2030. 

The prospects for developing an eastern electricity grid linking India, Nepal, Bhutan and Bangladesh now appear bright, as grid connections have also been established between Bangladesh and both Tripura and West Bengal. India would be supplying Bangladesh 1,100 MW of power from West Bengal and Tripura by the year-end. Moreover, implementation has already begun on a 1,320 MW thermal power station in Bangladesh, with an estimated cost of $1.2 billion. The project is being executed by a joint venture of India’s public sector National Thermal Power Corporation and the Bangladesh Power Development Board. 

Arunachal Pradesh has a huge hydroelectric potential. The state government is seeking to conclude agreements for some 42 hydroelectric projects with an estimated capacity of 27,000 MW. Construction on the Upper Salang Hydroelectric Project, with an estimated capacity of 12,000 MW, has commenced. Hopefully, environmental challenges to these projects will be addressed fast.

India is planning to take forward its proposals for land connectivity, agreed to in Bhutan, by fashioning a similar agreement with Myanmar and Thailand by December 2015. A proposal to provide road connectivity to Sri Lanka, through a bridge and an underwater tunnel, is under consideration. This would complete an ambitious programme for a Trans-Asian Road and Transport Network across the Bay of Bengal. Project financing from the ADB, which will be competing with Asia Infrastructure Development Bank, could be considered. 

New bus services were made operational during the visits of Prime Minister Narendra Modi to Nepal and Bangladesh. There are also proposals under consideration for an India-Sri Lanka High Voltage DC Grid, linking either Madurai or Tuticorin in Tamil Nadu with Anuradhapura or Puttalam in Sri Lanka. We could then see a power grid linking India, Nepal, Bhutan, Bangladesh, Sri Lanka, Myanmar and Thailand — all members of BIMSTEC. This would be akin to the North American Electricity Grid, linking the US, Canada and Mexico.

And so, New Delhi should recognise that the only realistic route to economic integration in its neighbourhood lies primarily eastwards, along the shores of the Bay of Bengal. Separate structures other than SAARC, need to be fashioned for cooperation across the Arabian Sea, with island-states like the Maldives, Seychelles and Mauritius. We can pay lip service to SAARC, but have to realistically recognise that it is not the forum for any meaningful cooperation. New regional architecture has to be crafted to meet the challenges posed by China’s land and maritime silk routes.

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