How realistic South Asian leaders could be

South Asian leaders in Colombo are going to make another "historic" declaration at the 15th South Asian Association for Regional Cooperation (SAARC) Summit scheduled for 2-3 August. This year the Summit will be held amid two political uncertainties in the region: formation of a new government in Nepal and a week after Indian prime minister won the no-trust vote over the Indo-US civilian nuclear deal. For two days leaders will try to hold off bilateral differences and focus on removing trade policy barriers in favor of intra-regional trade.

With the transition from SAARC Preferential Trading Agreement (SAPTA) to South Asian Free Trade Area (SAFTA), the first step toward regional economic integration is complete. By 2012 the member-states, other than the four Least Developed Countries -- Bangladesh, Bhutan, the Maldives and Nepal -- will reduce their duty to zero percent. These LDCs have until 2015 to fulfill this commitment.

India has a crucial role in realizing the SAARC ideals as it shares borders with all member-countries. A cordial bilateral relationship, especially between India and Pakistan, should build up trust toward regional cooperation. The current Indo-Pak trade under the Most Favored Nation status remains at below $2 billion, but experts talk of a $12 billion potential.

However, the ongoing hostility has thwarted prospects of any regional integration including cancellation of several summits.

India's considerable business interest in the region remains unexplored due to fragile political landscape in the sub-continent. Investors like the Tata Group are keen on setting up steel, fertilizer and power plants in Bangladesh that aims to bolster the economy of India's Northeastern states benefiting 40 million people. Such capital investments and enhanced commercial activities can bring down trade imbalance of $100 million exports and $2 billion imports.

Despite volatile political climate, Nepal opened up its market by recently awarding a 300 megawatt hydro-electric contract to GMR Energy, an Indian infrastructure company. However, the soon-to-be-formed government must create conducive environment for foreign investors. Two multinational subsidiaries, Unilever and Colgate-Palmolive, closed their operation due to insecurity. Since SAFTA also does not accommodate Indo-US ventures, and is thus ineligible for duty-free access, the Summit has a serious business to do.

The Summit should work toward goodwill measures in the interest of the region by increasing people-to-people contact as promised in recent declarations. Increasing physical connectivity, liberalizing visas for education, media and medical purposes are as important as duty-free access to goods. More specific cooperation can be reached in the sub-regional "growth quadrangle" comprising Bangladesh, Bhutan, India and Nepal for power and water sharing.

Another contentious issue is cross-border terrorism. While India does not want any categorization of terrorism, Pakistan maintains some acts are "freedom struggles." Since both the countries have rejected the role of the United Nations in dealing with the Kashmir issue, the call for a Comprehensive Convention on International Terrorism among member- nations remains significant. India now seems to favor the UN Security Council Resolution 1373 (2001) to deal with terrorism.

Although the difference in approach over terrorism exists between the two arch-rivals, other bilateral issues in the region should not build further acrimony. Only recently India provided a soft-loan of $1 billion to Sri Lanka to upgrade its defense capabilities, and the two nations may ink a Comprehensive Economic Partnership Agreement (CEPA) on the margins of the Summit. India is further planning a multilateral cooperation to set up gas pipeline through Turkmenistan, Afghanistan, and Pakistan. Therefore, a regional consensus to contain terrorism and violence is as much important for big countries as it is in the economic and social interest of the smaller nations.

In addition to goodwill achievements, such as setting up of the South Asian University and agreement on SAARC model village, the Summit has to work toward a functioning South Asian Customs Union and operationalization of the SAARC Development Fund. The Intergovernmental Agreement on establishing the SAARC Food Bank is a credible move in dealing with the food security. UN Secretary-General Ban Ki-moon has also put this agenda at the forefront, besides climate and fuel crises.

SAARC observer-countries have shown immense interests in the development of the region. The Chinese proposal for a China-South Asia Business Forum and SAARC-Japan Special Fund could actually complement the intra-regional development vision. The Summit should be able to accommodate trans-SAARC issues beyond rhetoric.

To achieve all these, an effort in "building of trust and understanding" among member-states has been long due for the realization of a South Asian economic union.

Originally published on The Kathmandu Post.