Regional integration for sustained ‘national’ growth
By Shahid Javed Burki
Tuesday, 01 June, 2009
GLOBALISATION, the process that allowed relatively free movement of capital, trade and information across national frontiers was meant to create a new economic reality.
As the name given to these processes suggests, countries around the globe were expected to come together and begin to work as the constituents of one economic order.
As Thomas Friedman wrote in his bestselling book published in 2002, globalisation had produced a “flat world” in which capitalism had triumphed. After a struggle that lasted for several decades, capitalism won against socialism and communism as the most efficient and effective way for managing economic affairs.
That “globalisation” would reshape the world economy happened but only to a limited extent.This was for at least three reasons.
One, the world’s smaller nations found that they needed economic mass to deal with the countries that had a larger weight in the global economic system.
Two, capitalism may have triumphed but had a number of flaws of its own.These included not enough concern for the less advantaged countries in the world and for the world’ poor.
Three, multilateral institutions were needed to regulate global transactions that went beyond the flow of goods and commodities. This was particularly the case for financial transactions where national regulatory systems did not serve the purpose. Their absence led to the deep crisis of 2007-2010.
The first development that went counter to globalisation was the organisation of hundreds of arrangements involving a limited number of states. Some countries came together because of geographic proximity; some because they shared common history; and some because of shared culture and religion. Geography was the most common reason for the organisation of economic and trading arrangements. By the end of the 20th century, the global economy had acquired another layer by dividing itself into a number of economic trading blocs.
South Asia followed the trend. In 1986, seven countries of the region agreed to form the South Asian Association for Regional Cooperation, the Saarc. This was done at the urging of the then president of Bangladesh, General Zia ur Rahman. His government did a lot of preparatory work before the countries of the region could be persuaded to subscribe to the Saarc idea.
In 1980, the president wrote a letter to all the heads of state indicating why he believed that it was important for South Asia to have a formal arrangement for addressing common issues. He followed up his letter with visits to all the capitals. The countries of the region agreed but reluctantly. It took them six years to endorse the idea when they met in Dhaka in 1986 for the first Saarc.
President Zia ur Rahman wanted the Saarc to launch the process that would ultimately lead to the creation of a free trade area in South Asia. It took 18 years before this process could begin. It was at the Saarc summit in Islamabad held n January 2004 that it was agreed to begin work on the launching of the South Asia Free Trade Area, the Safta.
The Islamabad declaration was nothing more than the beginning of a process for the eventual creation of a free trade area. The first step towards this end was the ratification of the treaty by the member states. That took more time than originally envisaged. It was only on January 1, 2006 that the process towards creating a free trade area in South Asia was begun with the formal launch of the agreement.
I carried out a study for the US AID on the Safta in 2005-06. Washington’s interest in the matter was related to its desire to bring peace to South Asia that had been long torn by strife. As I will discuss a little later I had been active in a similar way in encouraging the South East Asian countries to create an institutional framework within which they could resolve their differences.
The main purpose of the study was to un derscore the benefits the smaller countries of South Asia could draw from the arrangement and why such an arrangement was beneficial for India, by far the largest economy in the area, as well.
The preparation of the study took me to five South Asian capitals – Colombo, Dhaka, New Delhi, Islamabad and Khatmandu. I also met with a number of senior leaders in the capitals I visited, including President Pervez Musharraf and Prime Ministers Manmohan Singh and Shaukat Aziz. The only places where I found some enthusiasm for the Saarc and Safta were Dhaka and Khatmandu; the former because these organisations were, after all, the result of a Bangladeshi initiative and the latter because it housed the Saarc secretariat.
What are the reasons why the Saarc and Safta as two ideas for regional cooperation have not worked? Are there lessons that the countries in the SAARC could draw from the experiences of other parts of the world, in particular from South East Asia?
Some answers to these questions can be found in the gradual and pragmatic development of the Association of South East Asian Nations, the ASEAN. This is now an organisation that includes ten countries; the original five – Indonesia, Malaysia, the Philippines, Singapore, and Thailand – and later, after the end of the war in Vietnam, three countries of Indochina – Cambodia, Laos, and Vietnam as well as Brunei. Myanmar was recently admitted mostly for geographical reasons.
Historians don’t agree as to the original motivation for the five founding members to associate themselves in a supra-national organisation. According to some, it was Bangkok that wished to form a broad coalition of nations in its neighbourhood in order to balance the American influence on the country. Thailand was an important part of the US effort to contain the spread of communism in the Asia.
According to some other, it was in fact the United States that was behind the move. It wanted the non-Communist countries of the region to work together to work out their differences and to present a slid front to block the advance of Communism. After all, the then Chinese president had, in 1965, urged the people of Asia to rise against their rulers and to bring the masses to power. There may not be a consensus among scholars as toe the motivation of the leaders that created the original ASEAN but there is agreement as to what it made it possible for the organisation to develop.
It was the attitude of Indonesia, the largest country in the association in terms of the size of the population as well as the size of the economy that made the organisation to become a an effective regional enterprise. While it was prepared to be treated as an equal, the smaller countries were, at the same time, prepared to treat Indonesia as the first among equals. There is lesson in this for India. While it is a more dominant economy in South Asia compared to Indonesia in South East Asia, it has to lower its profile in order to provide comfort to the region’s smaller countries. At the same time, the region’s smaller nations and economies have to treat India as by far the most prominent player.
The other important lesson to be drawn from the ASEAN experience is the pragmatic response of several generations of leaders that have guided its evolution over time.
The original agreement has spawned a number of other institutions and forums in response to the changes in the external economic and political environment in which the region has been operating. What was the political dynamics that motivated the member countries not only to remain involved but to engineer practical changes for making it more effective?
While the original motivation may have been political in terms of creating the conditions that would prevent the spread of Communism, that threat has disappeared. Now the member countries find that an association that transcends national interests and makes it easier to deal with the growing competition between two global powers, America and China.