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SAARC Nations: An Overview

There is wide geographical imbalance among SAARC nations. India stands first in the rank on the basis of geographical area with 3,166,829 square kilometres, followed by Pakistan with 804,000 square kilometres. All the other nations have less than 150,000 square kilo meters.

Population

The high growth rate of population has led to high population density in SAARC region, leading to pressure on natural resources, particularly land. India has the highest population among SAARC nations (870 million in 1992) and Maldives has the least population (0.23 million in 1992), with no comparison to that of India›s.

Bangladesh and Pakistan have population around 120 million in 1992, where as other members (Bhutan, Nepal and Sri Lanka) have a population less than 20 million in 1992. Bangladesh has the highest density of population from 1984 to 1992 and Nepal has the least density of population during the same period.

Only Sri Lanka has an annual average growth rate of population which is less than 1.50 per cent (1.37 per cent), whereas in all the other SAARC nations› case it is above two per cent, Maldives having the highest growth rate of 3.85 per cent. India›s per capita GNP at $350 in 1990 was lower than that of Sri Lanka ($470), largely due to its population size.

However, the annual average growth rate of GNP of Maldives is the highest (12.31 per cent) and India›s is the lowest (3.52 per cent).

Economies

SAARC economies are basically rural in nature. Agriculture plays a vital role in SAARC region. Except for Pakistan and Sri Lanka, where service sector play a major role than agriculture, in all the other countries, the contribution of agriculture to GDP is the highest.

However, over the last few decades, it can also be observed that there is a fall in the relative importance of agricultural contribution to GDP in SAARC members, except fort that of Nepal where agriculture›s role has not changed significantly.

It is accepted that economic development entails an expansion of the secondary sector of the economy. SAARC partners have adopted various strategies for the expansion of their industrial sectors, or the diversification of their economies, from production of primary products, to that of manufactured goods.

As far as Bangladesh, bhutan and India are concerned, industrial sector and services sector have gained at the loss of agriculture. but, in the case of Nepal and Pakistan, role of industry has improved at the cost of agriculture and services sectors.

The prominent trading and commerce activities in Sri Lanka have made the service sector vital than the agricultural and industrial sectors of its economy.

SAARC countries are low-income developing economies. The relevant economic question of the hour for these nations is whether agricultural development or industrial development is the appropriate strategy for accelerating their economic development. SAARC nations lean or tends to lean more towards industrial development than agricultural development, because of the belief that rich countries are believed to be rich because they are industrialised; and poor countries are believed to be poor because they are primary-producing.

Thus, SAARC nations are keen in expanding and developing the industrial sectors of their economies.

Agricultural Productivity

Agriculture continues to be dominant in all the member countries though the secondary and tertiary sectors show a rising trend. Productivity of cultivable land is reflected in the form of yield of crop per unit area. India›s productivity with respect to wheat, vegetables and pulses is higher compared to other SAARC counties.

Productivity of tobacco was highest in Pakistan; paddy was highest in Sri Lanka; in the case of millets Nepal was the highest; and productivity was two times higher in Bhutan compared to other member states.

Political Relations

One point of view with respect to economic co-operation is that unless the political matters are settled first, there is little scope for fostering regional economic co-operation.

Thus, political factors do play a vital role which has a bearing on economic and other matters. Say, for example the cold war like situation between India and Pakistan definitely has a high level of correlation on other matters too.

Similarly, the unsettled issues of Indian origin Tamils in Sri Lanka and issues of Indian origin Tamils in India also has a say in Indo-Sri Lankan co-operation. Further, the ethnic issues in Sri Lanka has worsen Indo-Sri Lankan relations.

Disparity in Foreign Trade

Since inception, SAARC did not witness any dramatic changes in trade and other economic linkages within the region. The total intra-trade of SAARC countries was minimal (around 3 per cent) when SAARC was first established and it still remains small.

Manufactured goods play a major role in both the exports as well as the import structure of member countries of SAARC.

Approximately it is around 60 per cent in the case of exports (except Sri Lanka where food items do have a major role) and above 50 per cent in the case of imports.

Most of the SAARC countries have been dependent on the production and export of a few primary commodities for the expansion of their economies. A major share of their international trade is also based on the export of these primary products, and the import of raw materials and other capital goods, required for the export sector, as well as for other sectors of the economy.

As far as trade statistics is concerned, India›s export and import values are the highest with respect to the world and Asia, among SAARC members. Trade within SAARC : - Major portion of exports of Bangladesh is to Pakistan; India is to Bangladesh; Pakistan is to Bangladesh; and Sri Lanka is to Pakistan.

On the other hand, major portion of imports of Bangladesh is from India; India is from Pakistan; Pakistan is from Bangladesh; and Sri Lanka is from India. It has to be noted that the proportion of trade flows within the SAARC region are small and there exists low growth rate within region.

A noteworthy factor for low inter-regional trade is the competitive nature of the SAARC members in the global market.

For example: India, Bangladesh and Sri Lanka compete with respect to tea; India and Bangladesh compete with respect to jute; India, Pakistan and Sri Lanka compete with respect to ready wear products; etc. Thus, this calls for a unified marketing strategy by SAARC members in order to compete in the global market for mutual benefit.

Prospects for Better Co-operation

Though there exists certain differences among SAARC member states, such as, geographical and population imbalances, they have many factors in common - rural economies, low income, population pressure, unemployment, geographically neighbour states and dependence on external debt, to name a few.

Even though diversification was mooted as a remedy for low level growth of exports, SAARC nations dependence on exports of manufactured goods are back in a situation of low growth. Therefore, benefits of export expansion may have to be evaluated against the present level of protectionist tendencies.

Thus, high nominal tariffs on a variety of non-tariff barriers such as quantitative restrictions, fiscal charges and discriminatory practices and outright ban on imports has to be avoided among SAARC members. Also, SAARC must deal with the world›s major trading blocks as a composite unit in order to maximise the gains of trade for both sides.

An efficient and better communication net work, among SAARC partners, which can give information in terms of export potentials, import needs, domestic economic policies, tariff and non-tariff barriers, infrastructural facilities, demand and supply situation and investment opportunities will help for a better economic co-operation and regional development.

A proper financial and institutional frame work such as, for instance, a bank for the countries of the region or the establishment of capital markets of regional importance will lead to a better financial flow among SAARC economies.

Regional economic co-operation can help in optimum utilisation of capabilities and resources available in the member states, reduction of dependence on external world; opening up avenues of industrialisation for smaller countries; and strengthening of negotiating capabilities vis-a-vis rest of the world.

Thus, SAARC members should agree to follow, and follow an economic policy with more realistic attitude and with strong political will to boost up the economic development and peace of the region.

 

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