Pakistan’s Option: SAARC or ECO?

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Javid Husain[1]

The successful evolution of the European Union into a dynamic association of European states cooperating for common economic, political and security goals from the modest start of the European Coal and Steel Community in 1952 and the phenomenal economic prosperity that Europe has achieved since then has encouraged the growth of regional cooperation organizations in other parts of the world. In Asia, ASEAN, ECO, GCC and SAARC readily come to one’s mind as examples of regional organizations striving to promote cooperation among the member states in economic and other fields. Similar regional cooperation organizations have sprung up in other continents such as MERCOSUR in Latin America, NAFTA in North America and ECOWAS and SADC in Africa.

While regional cooperation per se is desirable, it is a mistake to assume that any regional association of states can evolve on the lines of the EU or can achieve results similar to those of the EU. Nothing could be further from the truth. In fact, the challenges and the potential of regional organizations vary according to their economic circumstances, cultural and historical background, geographical location, intra-regional political relations, world outlook and vision of the future.

It is not surprising, therefore, that the SAARC has failed to make headway as the organization remains mired in political disputes among the member states such as the Kashmir dispute and bogged down by fears of India’s hegemonic designs in the region both in the political and economic fields. The resultant lack of trust does not create a propitious climate for the promotion of regional cooperation. Cultural divergences among the member states, particularly between Pakistan and India, add to the list of negative factors militating against the success of SAARC. Additional obstacles in the way of the success of SAARC arise because of differences among its member states regarding their world outlook and their vision of the future. In fact, it would be correct to say that SAARC was born with genetic defects which simple declarations and pious hopes cannot eliminate. ECO, on the other hand, has a vast potential for regional cooperation leading to economic integration because it meets all the prerequisites for this purpose. For Pakistan, ECO, therefore, has obvious advantages over SAARC.

Rationale for regional economic cooperation:

There are several reasons why countries opt for regional economic cooperation. From the point of view of economic analysis, regional cooperation through free trade among the member states on the basis of comparative advantage leads to increased GDP of all the member states as a result of a more efficient allocation of resources. That is to say, the total size of the cake becomes bigger than the sum total of its parts. Another benefit of regional economic cooperation is realized through economies of large scale production. The larger market created through regional economic cooperation also acts as a magnet for increased inflow of FDI and technology.

From the political point of view, regional cooperation helps in strengthening peace and stability in the region by defusing tensions, discouraging confrontational policies and building up linkages among the member states in various fields.

Finally, the united voice of the member states of a regional organization enhances the influence of the region as a whole in international political and economic forums.

Prerequisites for regional economic cooperation:

The ability of a regional organization to reap fully the economic and political benefits of regional cooperation is determined by the following prerequisites of its success:

  • Community of interests: There must be a feeling of a common destiny and a shared vision of the future (shared goals and aspirations) among the member states.
  • Economic complementarities: The economic benefits of regional cooperation will largely be determined by complementarities among the economies of the member states. The greater the economic complementarities, the more the benefits for the member states of regional economic cooperation.
  • Geographical proximity: Obviously the ability of member states to trade and cooperate with one another will be facilitated if they are located in close proximity geographically.
  • Cultural affinities: This factor again facilitates regional cooperation by promoting a feeling of common identity among the member states. It is a major factor for the success of regional cooperation within the EU as all of its current members trace their cultural roots to Greco-Roman-Christian civilization. It also explains the EU’s reluctance to admit Turkey, a major Muslim country, in its fold.
  • Absence of serious disputes: The presence of serious disputes among the member states like the Kashmir dispute between Pakistan and India can act as a major obstacle in the progress of regional cooperation. The mistrust, tensions and even hostility that such disputes can generate do not provide propitious climate for regional cooperation. Conversely, the absence of such disputes or at least the ability of the member states to assign low priority to them facilitates regional cooperation as in the case of ASEAN.
  • Non-existence of hegemonic designs: As shown by the example of SAARC, the fear of hegemonic designs of a member state (India in the case of SAARC) also blocks progress in regional cooperation. The absence of such apprehensions, on the other hand, promotes regional cooperation as has been the experience of the EU.

Evolutionary path of  regional economic cooperation:

As the process of regional economic cooperation evolves from

programmes of cooperation in various economic fields to the establishment of a free trade area and then to the creation of a customs union leading to an economic union, the economies of the member states are gradually integrated resulting in the establishment of a single market where goods, capital and workers can move freely and in the harmonization of economic and monetary policies. The EU to a large extent has already reached this stage. Further, since economic issues cannot be totally separated from political and security issues as they affect them and are in turn affected by them, progress towards economic integration also generates pressures for the coordination of foreign and security policies of the member states. These factors underline the importance of the community of interests and a shared vision of the future as prerequisites for the long-term success and progress of any scheme of regional economic cooperation.

The projected evolutionary path of regional economic cooperation leads to several important consequences. Firstly, the decision-making powers on issues of common interest are gradually transferred from national capitals to the headquarters of the regional organization as the process of regional integration takes place. Secondly, the more powerful state or states tend to dominate the decision-making process of the regional organization. Even if there are checks and balances to counter this tendency, it is likely that the more powerful state or states, because of their political and economic clout, will ultimately dominate the region and regional policies. This is already happening in the EU where Germany has acquired a pre-eminent position in the economic decision making process because of the weight of its economy. Thirdly, there is an inevitable contradiction between the process of regional integration, whose contours will be defined primarily by the dominant member state(s), and the maintenance of national identities of the smaller states. These likely consequences explain, partly at least, the opposition of several Latin American states to the creation of a Free Trade Area of the Americas (FTAA) advocated by the US.

Potential and limitations of SAARC:

It is in the backdrop of the foregoing that we must examine the potential and limitations of SAARC. Even a cursory glance at the history and the ground realities in South Asia shows that SAARC does not fulfill most of the conditions essential for its successful evolution towards an economic union or even a customs union. The peoples of South Asia belong to two different civilizations, that is, Islam and Hinduism whose outlooks on life and about life are widely divergent. The Muslims and the Hindus are, therefore, culturally far apart. This was the main rationale for the Pakistan movement. The following quotation from Quaid-e-Azam’s reply to Gandhi’s denial of the Muslim nationhood should suffice to establish the cultural divergence between the Islamic Republic of Pakistan and a Hindu-dominated India:

“We maintain and hold that Muslims and Hindus are two major nations by any definition or test of a nation. We are a nation of a hundred million and, what is more, we are a nation with our own distinctive culture and civilization, language and literature, art and architecture, names and nomenclature, sense of values and proportion, legal laws and moral codes, customs and calendar, history and traditions, aptitudes and ambitions. In short, we have our own distinctive outlook on life and of life. By all canons of international law, we are a nation.” (The Struggle for Pakistan, Ishtiaq Husain Qureshi, p.216)

Secondly, there are serious disputes between the member states of SAARC, the most important being the Kashmir dispute between Pakistan and India which has bedeviled relations between the two countries and hindered progress in regional cooperation.

Thirdly, there is little doubt that India entertains hegemonic ambitions in South Asia. Any doubts about India’s quest for hegemony in South Asia should be removed by an examination of India’s past conduct in dealing with its South Asian neighbours especially Pakistan and the following quotation from an article by C. Raja Mohan, a noted Indian security analyst, entitled “India and the Balance of Power” in the Foreign Affairs issue of July-August, 2006:

“India’s grand strategy divides the world into three concentric circles. In the first, which encompasses the immediate neighborhood, India has sought primacy and a veto over actions of outside powers. In the second, which encompasses the so-called extended neighborhood stretching across Asia and the Indian Ocean littoral, India has sought to balance influence of other powers and prevent them from undercutting its interests. In the third, which includes the entire global stage, India has tried to take its place as one of the great powers, a key player in international peace and security.”

Even generally, we must recognize that it is in the nature of an emerging great power like India to seek hegemony as pointed out by John J. Mearsheimer in his widely acclaimed book, The Tragedy of Great Power Politics. After analyzing the anarchic nature of the international system, Mearsheimer concludes, “Thus the claim that states maximize relative power is tantamount to arguing that states are disposed to think offensively toward other states,…..Even when a great power achieves a distinct military advantage over its rivals, it continues looking for chances to gain more power. The pursuit of power stops only when hegemony is achieved.” (p. 34, The Tragedy of Great Power Politics)

Because of cultural divergences rather than affinities, the presence of serious disputes among the member states of SAARC, and India’s hegemonic designs, the South Asian states lack a feeling of common destiny and a shared vision of the future. A pertinent example is the way India and Pakistan look at China. For India, China is a rival for power and influence in Asia. On the other hand, Pakistan views its relationship with China as a vital strategic partnership for safeguarding its security. While the SAARC member states do have the advantage of geographical proximity, their economic complementarities are weaker than those in the ECO region. Little wonder that the intra-regional trade as a percentage of the total trade is higher in the case of the ECO region than in the SAARC region.

The move towards a South Asian Customs Union and more so towards a South Asian Economic Union would unleash economic and political forces which would result in decisions about Pakistan’s economy and ultimately even its foreign policy, as the two cannot be separated, being taken at some regional forum dominated by India because of its sheer size. Thus, regional integration within the framework of the SAARC would negate the very rationale for the creation of Pakistan because the process of regional integration would subsume Pakistan’s national identity in the bigger and dominant Indian identity. India would, thus, have achieved through the process of regional integration what it has failed to achieve through coercive means so far.

This is not to deny that from Pakistan’s point of view SAARC can play a useful role by increasing regional trade on a level playing field and with due safeguards for the health of our economy.  It can encourage regional cooperation in such areas as water management, environment, transportation, communication, cross-border crimes, communicable diseases, etc. Its very existence and the opportunity that it provides to the leaders of the member states to meet one another help in defusing tensions and promoting mutual understanding in South Asia. Thus, SAARC also has a valuable role to play in strengthening peace and stability in South Asia.

These are not minor advantages and must be kept in view in any assessment of the future potential of SAARC. However, because of the various drawbacks and limitations from which it suffers, it is not an organization of choice for Pakistan for establishing a customs union or an economic union. If Pakistan makes the mistake of relying on SAARC for these purposes, it would either be frustrated in the achievement of these objectives or it would gradually lose its separate national identity. Neither of these scenarios would be in our national interest. A more realistic approach, which takes into account both the potential and the weaknesses of SAARC for Pakistan, would be a more advisable course for us.

Comparative advantages of the ECO:

For Pakistan, it is the Economic Cooperation Organization (ECO) which meets all the prerequisites of regional cooperation leading to regional integration. ECO was established in 1985 by Iran, Pakistan and Turkey as the successor organization to the Regional Cooperation for Development (RCD). In 1992, the Organization was expanded to include seven new member states, namely, Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikstan, Turkmenistan and Uzbekistan. The ECO region covers a vast area of eight million square kilometers with the population of over 430 million. It is endowed with huge mineral, oil and gas resources. ECO has a vast potential for the strengthening of regional cooperation as it is based on the solid foundation of economic complementarities, common cultural heritage, geographical proximity and the absence of serious disputes and hegemonic designs among its members. These factors also provide the basis for a community of interests, that is, a common destiny and a shared vision of the future among the member states of ECO. Economic complementarities hold the promise of an enormous expansion of intra-regional trade and cooperation within the framework of ECO.

Just to give a few examples, some of the member states of ECO such as Iran, Kazakhstan, Turkmenistan and Azerbaijan are major oil and/or gas exporters while Pakistan and Turkey need to import oil and gas in large quantities. Pakistan by now has signed agreements with both Iran and Turkmenistan for the import of gas through pipelines. It already imports a substantial quantity of oil from Iran. Pakistan and Turkey are textile exporters whereas Iran and other ECO member states are textile importers. Pakistan is a major rice exporter while Iran imports rice in large quantities. By way of contrast, in all these areas the economies of Pakistan and India are competitive rather than complementary. Thus the possibilities of increased trade and economic cooperation among the ECO member states are immense and far greater than those available within the framework of SAARC.

A paper published by the Pakistan Institute of Development Economics in October, 2011 pointed out that trade in the ECO region, which amounted to $40 billion in 2008-09, could increase by a factor of eight if the free trade agreement among the ECO countries was fully implemented. According to it, Pakistan has the potential to export to other ECO member states a broad range of commodities covering about 30 productive sectors including cotton and textile products, leather products, sports articles, cereals, carpets, staple fibers, apparel and clothing, vegetables, and fish products. (“Strengthening intra-regional trade and investment in the ECO region”, October, 2011 by Musleh ud Din and Ejaz Ghani)

The ECO Vision 2015 adopted by the ECO Council of Ministers in 2005 called for the dismantling of tariff and non-tariff barriers among the member states so as to increase the intra-regional trade to 20 percent of their total trade by 2015, besides other targets for the strengthening of regional cooperation in diverse fields like energy, transport and communications, industry and agriculture. It remains to be seen, however, whether the ECO countries, particularly their leaders and senior officials, will have the wisdom to realize this vast potential.

Pakistan must pay greater attention to ECO than it has done over the past few years to reap fully the economic and commercial benefits of regional cooperation that this organization offers. The ECO member states must redouble their efforts to achieve the targets contained in the ECO Vision 2015. The establishment of a free trade area among the ECO countries must be given the top priority by them. Above all, we must develop together with other ECO member states a regional outlook in dealing with various economic issues rather than limiting ourselves to narrow and, many a time, short-sighted considerations which are not in our self-interest.

Unfortunately, regional cooperation within the framework of ECO has suffered so far due to the sheer ignorance or lack of comprehension of its vast potential on the part of the senior officials and the lack of vision of the leaders of the member states. It is, therefore, necessary to educate our senior officials and policy makers as well as the public about the advantages of regional cooperation within the framework of ECO. The armed conflict in Afghanistan continuing since the days of the Soviet occupation has also acted as a serious obstacle in the furtherance of the objectives of ECO.  Consequently, the restoration of durable peace and stability in Afghanistan is an indispensable condition for the full realization of ECO’s potential. Currently, the strained US-Iran relations also have had a negative effect on ECO. However, this factor should not be allowed by the member states to block progress towards regional cooperation in the ECO region, which is in their long-term interest for the reasons given earlier.

The ECO member states have already laid down an impressive institutional infrastructure including, inter alia, the ECO Trade Agreement (ECOTA) to lower trade barriers among the member states, ECO Transit and Transport Framework Agreement (TTFA) to facilitate ECO-wide transportation, and ECO Trade and Development Bank to support trade and developmental activities within the ECO region. It is now for the leaders of the ECO member states to concert their efforts for the promotion of economic integration within the framework of this promising regional organization.

[1] The author is a former Ambassador of Pakistan.