Regionalism in South Asia

The dramatic surge in regional integration schemes over the past two decadeshas been one of the most important developments in world politics. Virtually allcountries are now members of at least one regional grouping. South Asia is noexception to this trend. In December 1985, seven South Asian countries cametogether to establish South Asian Association for Regional Cooperation(SAARC) to address issues of peace and development in the region. This bookexamines regionalism in South Asia, exploring the linkages between institu-tional structures, government capabilities, and domestic actors’ preferences toexplain the dynamics of regional cooperation. It considers the formation andevolution of SAARC, explaining why its growth in terms of institutional devel-opments and program implementation has remained modest and slow over thepast two decades. It also addresses the impact of important issues such as theacquisition of nuclear capabilities by India and Pakistan, the unending conflictsin Kashmir, the war against global terror in Afghanistan, and India’s growingeconomy. Drawing on a wealth of empirical research, including elite interviewsand trade transaction data, this book sheds new light on the main cooperationissues in South Asia today and provides important information on the trends andprospects for regional cooperation in future years.

Kishore C. Dash is Associate Professor of Global Studies at ThunderbirdSchool of Global Management. His research interests are in the areas of inter-national political economy, Asian studies, and political economy of contempor-ary South Asia. He has published in international journals, and he is the coeditorof International Political Economy: State–Market Relations in a ChangingGlobal Order.

Routledge contemporary South Asia series

1 PakistanSocial and cultural transformations in a Muslim nationMohammad A. Qadeer

2 Labor, Democratization and Development in India and PakistanWorkers and unionsChristopher Candland

3 China–India RelationsContemporary dynamicsAmardeep Athwal

4 Madrasas in South AsiaTeaching terror?Jamal Malik

5 Labor, Globalization and the StateWorkers, women and migrants confront neoliberalismEdited by Debdas Banerjee and Michael Goldfield

6 Indian Literature and Popular CinemaRecasting classicsEdited by Heidi R.M. Pauwels

7 Islamist Militancy in BangladeshA complex webAli Riaz

8 Regionalism in South AsiaNegotiating cooperation, institutional structuresKishore C. Dash

Regionalism in South AsiaNegotiating cooperation, institutionalstructures

Kishore C. Dash

First published 2008by Routledge2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Simultaneously published in the USA and Canadaby Routledge270 Madison Ave, New York, NY 10016

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2008 Kishore C. Dash

All rights reserved. No part of this book may be reprinted or reproduced orutilised in any form or by any electronic, mechanical, or other means, nowknown or hereafter invented, including photocopying and recording, or inany information storage or retrieval system, without permission in writingfrom the publishers.

British Library Cataloguing in Publication DataA catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication DataDash, Kishore C., 1956–

Regionalism in South Asia: negotiating cooperation, institutionalstructures/Kishore C. Dash.p. cm. – (Routledge contemporary South Asia series; 8)Includes bibliographical references and index.

1. South Asian Association for Regional Cooperation. 2.Regionalism–South Asia. 3. South Asian cooperation. I. Title.

DS335.D37 2008341.24�7-dc22

2007036117

ISBN10: 0-415-43117-4 (hbk)ISBN10: 0-203-93036-3 (ebk)

ISBN13: 978-0-415-43117-0 (hbk)ISBN13: 978-0-203-93036-6 (ebk)

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To My Parents

Contents

List of figures viiiList of tables ixAcknowledgments xMap xii

1 Introduction 1

2 Explaining regional cooperation in South Asia 20

3 Regional dynamics 45

4 Origin and evolution of SAARC 79

5 The challenge of regionalism in South Asia 110

6 Domestic politics and regional economic cooperation in South Asia 142

7 Domestic preferences for regional cooperation:cross-national comparisons 170

8 Conclusion 187

Notes 217Bibliography 226Index 241

Figures

2.1 Government strength, domestic support, and regionalcooperation policy initiatives 31

4.1 Organizational structure of SAARC 926.1 Regional leadership, potential market gains, and regional

integration outcomes 1466.2 Nature of political coalitions, potential market gains, and

preferences for free trade arrangements 1667.1 Relative benefits and contributions of South Asian countries 1777.2 Positive issues of SAARC 1797.3 Issues with negative effects on SAARC’s growth 180

Tables

2.1 Characteristics of foreign, domestic, and community issues 223.1 Key indicators of SAARC member countries 473.2 Socioeconomic profile of SAARC member countries 504.1 Contribution of SAARC countries to annual budget

expenditures of the secretariat 955.1 Dominant power in selected regional groupings 1125.2 Hegemony and regional cooperation dynamics in South Asia 1135.3 The balancing act – India and Pakistan 1155.4 Comparative government strength in South Asia, 1990–99 1285.5 Ruling party’s strength in South Asia, 1990–2005 1296.1 Regional complementarities 1486.2 South Asian market sizes 1506.3 Share of foreign trade in GDP (percentage) 1526.4 Intra-SAARC trade in relation to world trade 1526.5 South Asian trade dependence indices (in percentages),

1980–2006 1536.6 Sensitive lists of SAFTA members 1637.1 Affective and utilitarian support questions 1737.2 Interviewees according to occupational categories 1747.3 Comparison of measures of affective support 1757.4 National image of SAARC countries 1767.5 Attitudes toward expansion of regional cooperation in

South Asia 182

Acknowledgments

One of the most rewarding aspects of working on this project is that it hasbrought me into contact with many extraordinarily generous people. I haveincurred many debts of gratitude in the preparation of this work. I cannot hopeto include all to whom I owe such debts, but the following are among those whocan not be ignored.

My deepest debt of gratitude goes to Prof. Michael Haas, my mentor andmy dissertation advisor at the University of Hawaii at Manoa, for his constantsupport, encouragement, and detailed critical comments on drafts of my chap-ters which not only sharpened my thinking but also enhanced my understand-ing of regional cooperation dynamics. I am also deeply grateful to my twoother mentors Dr Charles Morrison, president of the East–West Center at Hon-olulu, and Prof. Majid Tehranian, director of Toda Institute for Peace, for theirintellectual support. Other scholars that I owe great gratitude for their criticalinsights and comments are Carolyn Stephenson, Richard Chadwick, SeijiNaya, William James, Harry J. Friedman, Tsuneo Akaha, Muthiah Alagappa,Yaacov Vertzberger, Richard Baker, Mark Valencia, Ali Riaz, and LarrySmith.

In South Asia, I owe deep gratitude to the numerous embassies, academicinstitutions, think tanks, government officials, political leaders, industry associ-ations, Parliament staff members, and staff members of the SAARC Secretariat,who provided forums and very helpful intellectual exchange during my travel tothe region. Although it is not possible to list them all, which will take severalpages, I do, however, want to list some of them, which provided too many ser-vices to be detailed here. Without their tremendous personal and institutionalsupport, the project could not have been carried through to completion. They arethe SAARC Secretariat (Kathmandu), SAARC Documentation Center (NewDelhi), Marga Institute (Colombo), Bandaranaike Center for InternationalStudies (Colombo), Bangladesh Institute of International and Strategic Studies(BIISS), Center for Policy Research (New Delhi), Center for Studies of Devel-oping Society (Delhi), Institute of International Strategic Studies (Islamabad),Indian Council of Social Science Research (New Delhi), Indian Council forResearch on International Economic Relations (New Delhi), Institute forDefense Studies and Analysis (New Delhi), Teen Murty Library, Central Library

of Delhi University, Sapru House, and Jawaharlal Nehru University Library atNew Delhi.

To the following individuals, I give my deep thanks for their tremendous per-sonal and professional help: Ibrahim Hussain Zaki, SAARC Secretariat staffmembers, Bimal Prasad, Lok Raj Baral, B.B. Thapa, Mana Ranjan Josse, PuruRisal, Barun Gurung, S. Sultana, A.K.H. Morshed, Rehman Sobhan, Muham-mad Shamsul Huq, Emajuddin Ahamed, Imtiaz Ahmed, Mohammad HumayunKabir, Ataus Samad, Md Abdur Razzaque, Subrata S. Dhar, Kajal Dhar, GitiaraNasreen, V. Kanesalingam, Godfrey Gunatilleke, Ray Forbes, Gamini Weer-akoon, Manik De Silva, Victor Gunawardena, Ponna Wignaraja, Siri Ranas-inghe, Jayadeva Uyangoda, Ven. Dodampahala Chandra Siri, Ven. T. MithabaniThera of Gothama Thapowanaya, S.D. Muni, I.N. Mukherjee, MuchukundDubey, Manoranjan Mohanty, Subrata Mukherjee, Neera Chandhoke, RajniKothari, Vijay Pillai, Uday Kumar, Ali Baquer, Charan Wadhva, Partha S.Ghosh, S.P. Gupta, Jasjit Singh, GVC Naidu, Rupa Narayan Das, Nasir Ahmed,K. K. Panda, and Lynette Wageman.

I would like to thank Thunderbird Research Center for a generous researchgrant to complete this project. I would like to thank my colleagues at the Inter-national Studies Department of Thunderbird for engaging me in many intellectu-ally stimulating discussions. At Thunderbird, I owe a special gratitude toGeorgia Lessard for her outstanding research and editorial help.

I am very grateful to Dorothea Schaefter and Tom Bates at Routledge (AsianStudies), who provided me with timely reviews and constantly encouraged me tocomplete this work. Without their help, this work could not have been com-pleted.

Above all, I am indebted to those 780 respondents who consented to be inter-viewed and shared their thoughts, perception, and vision with me. This booksimply could not have been written without them, their insights, and their viewsof South Asian regionalism. In acknowledging my indebtedness to these manyindividuals and institutions, I would like to stress that the ultimate responsibilityfor any conclusions or errors in this work remains mine alone.

Throughout this project, I have been blessed with the love and support of myfamily. To Arun and Tara: thanks for being there when I needed you most. Yourzest for life is a constant source of inspiration for me. Most of all, I would like tothank my wife, Sagarika. She has been of tremendous help in virtually everyway possible. Despite her extremely demanding teaching schedule, she was ableto find time to offer me crucial advice in difficult times of my research. Her infi-nite reserve of good-natured patience and understanding and intellectually stim-ulating comments on some aspects of this research have been a repeated sourceof inspiration during the research and writing of this book.

Kishore C. Dash

Acknowledgments xi

PAKISTAN

CHINA

AFGHANISTAN

TAJIKI STANTURKM. UZB.

BANGLADESH

SIKKIMPRADESH

ASSAM

TRIPURADhaka

Bhopal

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New Delhi

Islamabad

Kabul Chinese

control

Indian claimLine of

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GUJARATMADHYA PRADESH

RAJASTHAN

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BIHAR

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DELHI

HARYANA

South Asia

NEPALBHUTAN

MANIPUR

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ARUNACHAL

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Delhi

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UTTAR-

KASHMIR

HIMACHAL

PUNJAB

PRADESH

BURMA

MIZORAM

ANDAMAN ANDNICOBAR ISLANDS

INDONESIA

LANKA

Rangoon

LAKSHADWEEP

KERALA

TAMIL NADLPONDICHERRY

Chennai (Madras)

Hyderabad

Shvassa

Raipur

Bhubaneshwar

(Catcutta)

Mumbai

Bangalore

Panaji

Colombo

Trivandrum

Kavaratti

Cuddalore

Port BlairPONDICHERRY

KARNAT AKA

MAHARASHTRA

GOA

ANDHARPRADESH Bay

ofBengal

Indian Ocean

ORISSA

JAMMU AND

DADRD ANDDAMAN AND DIU

PONDICHERRY

CHHATTISGARAH

WEST

SRI

Daman

Aizaw

Kolkata

(Bombay)

ArabianSea

NAGAR HAVELI

BENGALAizaw

Diu

MALDIVES Male

PAKISTAN

CHINA

AFGHANISTAN

TAJIKI STANTURKM. UZB.

BANGLADESH

SIKKIMPRADESH

ASSAM

TRIPURADhaka

Bhopal

Jaipur

Gandhinager

Patna

Lucknow

Dehra DunChandigarh

New Delhi

Islamabad

Kabul Chinese

control

Indian claimLine of

Imphal

Agartala

KohimaDispur

Shillong

ThimphuItanagar

GangtokKathmandu

Ranchi

GUJARATMADHYA PRADESH

RAJASTHAN

ANCHAL

PRADESH

BIHAR

UTTAR

JHARKHAND

DELHI

HARYANA

South Asia

NEPALBHUTAN

MANIPUR

NAGALAND

ARUNACHAL

MEGHALAY

Delhi

Simla

Srinagarline ofControl

UTTAR-

KASHMIR

HIMACHAL

PUNJAB

PRADESH

BURMA

MIZORAM

ANDAMAN ANDNICOBAR ISLANDS

INDONESIA

LANKA

Rangoon

LAKSHADWEEP

KERALA

TAMIL NADLPONDICHERRY

Chennai (Madras)

Hyderabad

Shvassa

Raipur

Bhubaneshwar

(Catcutta)

Mumbai

Bangalore

Panaji

Colombo

Trivandrum

Kavaratti

Cuddalore

Port BlairPONDICHERRY

KARNAT AKA

MAHARASHTRA

GOA

ANDHARPRADESH Bay

ofBengal

Indian Ocean

ORISSA

JAMMU AND

DADRD ANDDAMAN AND DIU

PONDICHERRY

CHHATTISGARAH

WEST

SRI

Daman

Aizaw

Kolkata

(Bombay)

ArabianSea

NAGAR HAVELI

BENGALAizaw

Diu

MALDIVES Male

National capitalsOther cities

1 Introduction

Revival of regionalism

The dramatic surge in regional cooperation schemes in the post-1980 period hasbeen one of the most important developments in world politics. Significantly, coun-tries like the United States, Canada, Japan, and China, which showed little interestsin regionalism in the post-World War II period, have embraced regionalism withconsiderable enthusiasm in the post-Cold War era.1 What accounts for this recentspurt in regionalism? At least four developments seem to have come together in thelate 1980s to create a momentum toward regionalism: expansion of Europeanintegration; the demise of Soviet Union; the shift in US strategy; and changing per-spectives on regional trade and foreign investment in the developing world.

Unlike the “locust years” of disillusionment in the 1970s, during whichregional integrative activities declined in Western Europe (Euro-sclerosis) as aresult of the revival of nationalism (Clark 1988: 1424–1425), the late 1980s wit-nessed several new integration initiatives in Europe. The continued expansion ofthe European Union in terms of scope, depth, and geographical area is a signific-ant achievement.2 This success has had a demonstration effect, encouragingemulation of regional integration initiatives in other parts of the world.

A related development during this time was the end of the Cold War and col-lapse of Soviet Union. This led Eastern European and Baltic countries toembrace democracy and capitalism. Western Europe entered into severalregional economic arrangements with these countries to accelerate their trans-ition. Such moves increased the appeal of regionalism as an instrument of eco-nomic development and political transformation.

The decision of the United States to embrace regionalism in the post-ColdWar era, as Bhagwati (1992: 535–555) argues, has been an important drivingforce for the growth and success of “second regionalism.” The changed attitudeof the United States toward regional integration, from active hostility to broadlyenthusiastic support, has both fostered regional integration schemes and reducedthe diplomatic pressure for countries from engaging in the formation of regionalschemes. The shift in the US policy was partly driven by its frustration with theslowness of the multilateral process and partly by its desire to gain increasingaccess to large regional markets.

The formation of the European single market and North American Free TradeAgreement (NAFTA) led to apprehension among the developing countries thatthe major centers of economic powers – notably Western Europe and NorthAmerica – may form trading blocs and pursue protectionist policies.3 Such pol-icies would, many developing countries feared, prevent their effective participa-tion in the global economy and hamper the prospects of their nationaldevelopment (Hveem 1989: 269). In such a situation, their aspirations for eco-nomic development would perhaps be best realized through some kind ofregional cooperative arrangements among themselves (Gilpin 1987: 294). Theregional arrangements, many policymakers of these countries reasoned, wouldprovide them more secure access to regional markets.

Growth of regional cooperation among the developing countries appears tohave been guided by what Ernst Haas (1990: 65) called an “ideology of prag-matic antidependency” which seeks to promote regional interdependence amongthe developing countries without delinking them from the global system.4

Through increasing intraregional trade, the Third World countries aspire toachieve “structural empowerment” (Mortimer 1980) and, thus, hope to reducetheir degree of dependence on the North and at the same time increase theircollective bargaining in the global economy (Hettne 1992: 198).

A logical prerequisite for the success of pragmatic antidependency was thatcountries in the developing regions had to implement trade liberalization pol-icies. To do so, they had to abandon their inward-looking domestic-orientedimport-substitution model, which had dominated thinking in the 1960s and1970s, and, instead, embrace an outward-oriented market liberalization model.The examples set by the phenomenal success of the East Asian “tigers” and thecollapse of the Soviet system validated the market liberalization model of devel-opment. The pro-market philosophical shift in the 1980s became the basis for agrowing number of free trade agreements (FTAs) among developing countriesand between developed and developing countries (Frankel 1997: 10).

One of the important goals of economic liberalization and trade liberalizationpolicies in many developing countries is to attract more foreign investment andtechnology. The success of these policies requires regional stability, whichwould make the region more attractive for foreign investors by reducing geopo-litical risks. Policymakers in many developing countries believe that regionalcooperative arrangements can help achieve such goals. Through regional coop-eration, the developing countries also desire to help neighboring countries stabi-lize and prosper for altruistic reasons and to avoid spillovers of unrest andpopulation (Schiff and Winters 2003: 9). Thus, in the post-Cold War era,forming regional cooperation schemes and FTAs have become a pragmatic goalfor many developing countries.

Finally, from a policy coordination point of view, regionalism appears morepractical and feasible than global cooperation. Balancing divergent interests anda coordination of policies is easier among relatively few partners than among alarge number of member states at a global level as represented by GATT/WTO.Developing countries are also convinced that regional cooperation can build

2 Introduction

upon existing cultural, economic, or even security ties between neighbors. Aglobal option does not present this dynamic.

Regionalism in South Asia

South Asia is no exception to such worldwide trends. After more than eightyears of negotiations, seven South Asian countries – Bangladesh, Bhutan, India,Maldives, Nepal, Pakistan, and Sri Lanka – came together in December 1985 toform the South Asian Association for Regional Cooperation (SAARC). Theformation of this regional association represented a major diplomatic initiativeby the South Asian leaders to address the issues of peace and development in theregion. But since its origin, SAARC has experienced only limited growth interms of institutional developments and program implementation. This has ledsome observers to argue that the organization is likely to experience what ErnstHaas describes as “turbulent nongrowth” in coming decades (1990: 109–125).According to Haas:

Turbulence in an organization’s life refers to a phase where participatingactors are utterly confused about the goal and purpose of the organization,pursue many objectives simultaneously as they are unsure of the trade-offsamong them, and demonstrate ambiguity and lack of commitment in anynegotiation.

(1990: 111)

“Nongrowth is characterized by stable or shrinking budgets, the failure toacquire new tasks, low morale, and failure to recruit needed personnel” (Haas1990: 109). When non-growth occurs in a setting of turbulence, the organizationexperiences “turbulent nongrowth,” which over a period of time leads to eitherthe demise or the reevaluation (replacement) of the organization.

Some other observers, however, argue that SAARC may not be a panacea tothe region’s problems, but its existence has certainly provided an opportunity forthe policymakers and other techno-economic experts of South Asia to meetregularly and hold informal discussions on important bilateral and regionalissues at the highest level. These informal discussions among the leaders have,at least, opened doors for improved relations among the South Asian countries.What lies ahead for SAARC? What are the prospects of deeper regional cooper-ation in South Asia? Given decades of mutual hostility and distrust, will SouthAsian leaders be able to pursue deeper regional cooperation that involves takingconcrete initiatives to strengthen the existing regional arrangements and buildingnew regional institutions to achieve mutual benefit?5

This book analyzes the prospects of deeper regional cooperation in SouthAsia by linking the process and outcome of regional cooperation with domesticpolitics. Understanding the prospects of growth of regional cooperation, I argue,requires an examination of the domestic system, different domestic sources ofmotivations of the policymakers, and various kinds of domestic institutional

Introduction 3

constraints and opportunities that policymakers usually face while pursuingregional cooperation policies. Such an examination will address two fundamen-tal questions about regional cooperation. First, why do governments form or joinregional arrangements? Second, once a regional cooperation scheme has beenlaunched, what forces drive the process further and determine the chance of sus-tained growth? Focusing on the interrelationship between domestic politics andregional cooperation policies, this book argues that the interaction of thedomestic actors’ (both political and societal actors) preferences within thecontext of their domestic institutional structures determines when expansion ofregional cooperation is possible and what its terms will be. This book seeks tolink the nature of the institutional structures, government capabilities, anddomestic actors’ preferences to explain the dynamics of regional cooperation inSouth Asia.

While there is no dearth of books and articles on country specific studies inSouth Asia, and studies related to India–Pakistan rivalry, very few systematicstudies are available on South Asian regional cooperation. Besides, the existingstudies on regional cooperation in South Asia have focused mostly on historicalanalyses and interpretation, structural economic, and security analyses. Studiesrelated to different domestic sources of motivations of the policymakers – forexample the nature of domestic institutions, various kinds of domestic institu-tional constraints and opportunities, domestic actors’ support or opposition toregional cooperation policies – have received inadequate attention. It is neces-sary to understand the dynamics of domestic politics and domestic actors’ pref-erences in order to explain why or why not South Asian countries seek to deepenregional cooperation.

This introductory chapter is organized as follows. First, I provide a review ofthe major schools of integration theory and suggest why these theories offer onlypartial explanations of the regional cooperation process. Second, I identifyseveral important implications of Euro-centric focus of the integration literaturefor understanding regional cooperation efforts in Third World regions. Third, Iprovide a brief preview of the analytical arguments of this study and introducethe organization of this book.

Theoretical approaches to regional integration: a review

Transactionalism

One of the early theories of regional integration, transactionalism (or communi-cations theory), was developed by Karl Deutsch, the Czech-born German polit-ical scientist. Deriving his paradigm from cybernetics and information theory,Deutsch developed a communications approach to address the issue of commun-ity building in the international arena. His most substantive contribution tointegration theory is found in his pioneering work Political Community and theNorth Atlantic Area (1957). In this book, he defined integration as “the attain-ment, within a territory, of a sense of community and of institutions and prac-

4 Introduction

tices strong enough and widespread enough to assure, for a long time, depend-able expectations of peaceful change among its population” (Deutsch et al.1957: 5). By “peaceful change,” Deutsch refers to “the resolution of social prob-lems, normally by institutionalized procedures, without resort to large-scalephysical force” (1957: 5).

The central objective of Deutsch’s theory was to develop a political commun-ity to avert war and thus enhance the prospect of peace and prosperity amongnation-states. In contrast with Durkheim’s pessimistic construction of worldsociety,6 Deutsch believed that people can learn to give up their narrowparochial orientations and form organizations to promote peace (1978: 285).Deutsch’s effort, as Arend Lijphart (1981: 236) perceptively remarks, revivedsignificantly the Grotian paradigm of world society, which challenged the tradi-tional paradigm of international relations. Traditional international relationstheory revolved around the notions of state sovereignty and its logical corollary,international anarchy. Such notions reflected the Hobbesian paradigm, whichunderlined the fact that nation-states live in an international state of nature withno guarantee of security. Thus, they are forced to survive in a condition ofmutual competition and conflict. Challenging this axiomatic view of the rela-tionship between anarchy and war, Hugo Grotius and his followers claimed thatthe world consists of a society of states with a common framework of moral andlegal norms and that “the normative consensus of international society is suffi-ciently strong and pervasive to render the image of the state of nature, at least inthe Hobbesian sense of international anarchy, inapplicable” (Bull 1966: 51).Deutsch’s analysis of political communities seems to be in line with thisparadigm.

According to Deutsch, political communities can be of two types: pluralisticsecurity communities and amalgamated security communities. An amalgamatedsecurity community exists whenever there is “formal merger of two previouslyindependent units into a single larger unit with some kind of common govern-ment after amalgamation . . . with one supreme decision-making center” (1957:6). Deutsch cites the United States as an example. Alternatively, a pluralisticsecurity community exists when nation-states retaining the legal independenceof separate governments and maintaining their separate national identitiespursue common goals and harmonize their policies to achieve joint economicrewards. Of these two communities, Deutsch observes, the pluralistic securitycommunity is easier to attain and maintain. He further suggests that for the cre-ation of both kinds of communities, changes in the political attitudes and behav-ior of individuals, in other words, development of a “we feeling,” are absolutelynecessary. According to him, through transactions such as trade, migration,tourism, cultural and educational exchanges, and the use of physical communi-cation facilities, a social fabric is built not only among elites but also the masses,instilling in them a sense of community or a “we feeling” (1957: 29).

To Deutsch, the success of integration is linked to the development of a“sense of community” among nation-states. To measure this “sense of commun-ity,” he and his associates quantified transaction flows – such as mail flows,

Introduction 5

electronic communication, student travel, tourism, and relative levels of intrare-gional trade – among nation-states. On the basis of aggregated data on socialcommunications and public and elite opinion, Deutsch and his colleagues (1967)concluded that the process of European integration, at least in the sense of thegrowth of supranational state or sense of community, had come to a halt. Theyobserved that integration in Europe was at its peak in 1954; integration reacheda plateau from 1957 to 1958 and from then on integrative trends declined (218).

Deutsch’s conclusion, however, was challenged by Inglehart and many otherscholars. Using identical data, Inglehart (1968) found out that regional integra-tion in Europe, rather than declining, was progressing toward a fuller integrationduring the same time period studied by Deutsch and his associates (122).Sharing Inglehart’s view, Lindberg (1970) commented that Western Europe,during the five-year period after the formation of European Economic Commun-ity (EEC) in 1958, experienced substantial progress toward integration (24). CarlJ. Friedrich (1969), using other indicators, concluded that Western Europe hadbecome more integrated since 1957, the year of the signing of the Rome Treaty,creating the Common Market. He criticized Deutsch and his associates both fortheir choice of indicators and for their use of statistical data in supporting theirconclusion (196–215).

Ernst Haas (1958) found Deutsch’s paradigm inappropriate to account for theemergence of the European Coal and Steel Community (ECSC). Haas arguedthat if one had to consider Deutsch’s transactionalist criteria to gauge the levelof regional integration in Europe, then ECSC would not have come into exist-ence, because the six countries were not enjoying a high level of transactionsamong themselves. Haas also did not find Deutsch’s three qualitative indicators– mutual predictability, mutual responsiveness, and value compatibility – usefulin case of ECSC. Instead, Haas argued that political leaders and their expecta-tion of mutual economic gains played crucial roles in the emergence of theECSC.

These criticisms led Deutsch to reevaluate his conclusions about Europeanintegration from 1954 to 1967. In a subsequent study with Richard Chadwick(1973), Deutsch reported statistical errors for measuring relative trade concen-tration [relative acceptance (RA) indices], which led to his earlier conclusionthat European integration has reached a plateau in the mid-1950s. Instead, thestudy of Chadwick and Deutsch (1973: 84–109) suggested that steady growth inthe EEC had occurred since 1954–67.

Despite these revisions, many critics remained unconvinced about the applic-ability of Deutsch’s transactionalist framework in the 1970s and 1980s. Themajor weakness of this approach was that Deutsch’s emphasis on quantitativemeasures of transaction flows led him to ignore other critical international anddomestic political and economic factors in the decision-making process. Hisanalysis neglected the role of international organizations, structural dynamics ofstate power, and the self-interested national decision-makers. By focusing onquantitative transaction flow indicators to measure structural integration inEurope, his study paid inadequate attention to various international and domestic

6 Introduction

constraints and opportunities that policymakers face in pursuing integration pol-icies. This was a major deficiency of Deutsch’s transactionalist approach, whichwas criticized by scholars of neo-functionalism and intergovernmentalism.

Functionalism

Functionalism, as developed by Hungarian political economist David Mitrany(1966), rests upon two central assumptions. First, political divisions are a sourceof conflict among nations. Nation-states can transcend these divisions graduallyby seeking out areas of mutual interests and establishing a “working” web ofinternational institutions, managed by technical elites. Second, in today’s inter-dependent world, no nation-state can individually solve all its economic andsocial problems. Hence, there is a need to identify common international eco-nomic and social problems and to create regional and global organizations todeal with them.

However, Mitrany did not favor an organization like the League of Nations,which failed, according to him, because of its all-encompassing nature andoveremphasis on military issues. Instead, he argued for monofunctional orfunctionally specific organizations because they can address a single inter-national problem and strive for its ultimate solution. Technical experts, ratherthan political actors, Mitrany believed, will play a vital role in these functionalorganizations. Once people are able to perceive increased benefits and thegreater ability and efficiency of these organizations, demands will be raised forthe solution of other problems with other functionally specific organizations.This process, known later as “spillover”7 or what Mitrany calls “the doctrine oframification,” will result in “ever-widening circles” of social and economicintegration. As the role and number of these functionally specific organizationsgrow, the state system will collapse, resulting in the transfer of “slices of sover-eignty” from nation-states to regional organizations. Thus, functionalism sug-gests that promotion of cooperation in the “low politics” (technical, social, andeconomic) will bring about greater political cooperation among the nation-states in the long run and may result in the emergence of supranational institu-tions. Mitrany hoped that the technical experts would create a new worldculture dominated by “technical rationality” that would replace the narcissisticnation-state system.

The major weakness of Functionalism is its deterministic solution that func-tional cooperation in “low politics” area would gradually lead to cooperation in“high politics.” Summing up these deficiencies of functionalism, Dougherty andPfaltzgraff (1990) comment:

It is difficult, if not impossible, to separate the economic and social tasksfrom the political; that governments have shown themselves unwilling tohand over to international authority tasks that encroach upon the political;that certain economic and social tasks do not ramify or spill-over intothe political sector; and that the road to political integration lies through

Introduction 7

political “acts of will,” rather than functional integration in economic andsocial sectors.

(458)

In light of the Western European experience since World War II, there islittle evidence to suggest that technology or economic growth per se had pro-duced integration through functional cooperation. Political influences andpressures from various interest groups, political parties and regimes have mat-tered greatly in the integrative process of Western Europe. In short, therehas been little or nothing that is “non-political” in the integrationexperience of Western Europe since World War II (Pentland 1973: 98). Thus,the relative neglect of political factors undermines the explanatory value offunctionalism.

Neo-functionalism

The concepts and assumptions of functionalism were refined and then embed-ded into an analytical framework to study the logic of regional integration byneo-functionalism. Ernst Haas, the chief exponent of neo-functionalism, in hispioneering work The Uniting of Europe, provides the original framework ofneo-functionalism. Later, this framework was expanded to include contribu-tions from several other scholars, Leon Lindberg (1963) and Joseph Nye(1968), to name a few. The central objective of neo-functionalism was toexplain how and why nation-states cease to be wholly sovereign, how and whythey “voluntarily mingle, merge, and mix with their neighbors so as to losethe factual attributes of sovereignty while acquiring new techniques for resolv-ing conflicts between themselves” (Haas 1970: 610). More specifically, neo-functionalism defines integration as “the process whereby political actorsin several distinct national settings are persuaded to shift their loyalties,expectations, and political activities towards a new and larger center, whoseinstitutions possess or demand jurisdiction over the pre-existing states” (Haas1958: 12).

Neo-functionalism postulates that the key actors in the integration process arenational and regional elites, political parties, pressure groups, and supranationalinstitutions. It is the expectation of gain or loss of these groups that becomes thedriving force for the regional integration process. As actors realize that theirinterests are best served by a commitment to a larger organization, learning con-tributes to integration. Besides, actors who experience gains from supranationalinstitutions in one sector will tend to favor integration in other sector. Thus,there is an “expansive logic” of sector integration that contributes to “spill over”from one sector to another (Haas 1964: 48).

Sectoral integration, neo-functionalists argue, makes two types of spilloverspossible: functional and political. Functional spillover, as Walter Mattli (1999:25) argues, is based on the assumption that the different sectors of a modernindustrial economy are highly interdependent and that any

8 Introduction

integrative action in one sector creates a situation in which the original goalcan be assured only by taking further actions in related sectors, which inturn creates a further condition and a need for more action, and so forth.

Stephen George (1985: 21) provides an illustration of this functional spillover inthe context of European integration. He argues that the removal of tariff barrierswill not in itself create a common market. The fixing of exchange rates is alsorequired in order to achieve that end. But the surrender of control over nationalexchange rates demands the establishment of some sort of monetary union,which, in turn, will not be workable without the adoption of central macroeco-nomic policy coordination and which itself requires the development of acommon regional policy, and so forth. Thus, sector integration, as Haas argues,“begets its own impetus toward extension to the entire economy even in theabsence of specific group demands” (1958: 297).

Political spillover describes the process of adaptive behavior of nationalinterest groups and political parties at the supranational level in response to sec-toral integration. According to neo-functional framework, sectoral integrationleads to a gradual shifting of expectations and the changing of values of nationalelites and interest groups, resulting in more favorable response to integrativeefforts. Like functionalism, neo-functionalism also posits that functional cooper-ation must begin on the relatively low politics areas, that is economic, technical,and social areas. But unlike functionalism, neo-functionalism argues that eco-nomic, social, and political problems are ultimately inseparable and accepts thelinkage between economics and politics in the integration process. As Haasdescribes, “The supranational style stresses the indirect penetration of the polit-ical by way of the economic because the purely economic decisions alwaysacquire political significance in the minds of the participants” (1968: 152).

With the advent of the first major crisis of the European Community in 1965,when President de Gaulle refused to accept further expansion of Europeanintegration, neo-functionalism seemed to have lost much of its appeal as an ana-lytical framework for explaining regional integration. Critics pointed to thefailure of neo-functionalists to recognize the importance of nationalism, theautonomy of the political sector, and the interaction between the internationalenvironment and the regional environment (Hoffmann 1966: 862–915). In lightof these criticisms, several neo-functional scholars suggested reformulation ofthis theory to include factors that neo-functionalism neglected until this point.Concepts such as spillback (Lindberg and Scheingold 1970: 137) andspillaround (Schmitter 1970: 840) were introduced to note the halt in the integra-tion process as a result of participating actors’ wavering of commitment.Explaining spillback, Schmitter argued that in the regional integration process“spillback” may occur, “whereby in response to tensions actors consequentlywithdraw from their original objective, downgrading their commitment tomutual cooperation” (1970: 840). Spillaround refers to an increase in the scopeof functions performed by an integrative organization but not a correspondinggrowth in authority (Schmitter 1970: 846). For Haas, the role of external actors

Introduction 9

and events in the integration process was considered peripheral. Exploring thisvariable in some detail, Joseph Nye came to the conclusion that both externalactors and events should be included as a “process mechanism” in the evolutionof any integrative scheme, with particular emphasis on the role of external actors(1971: 64).

Roger Hansen criticized the neo-functionalists for their failure to relate theprocess of regional integration to factors in the surrounding international system.The neo-functionalists, according to Hansen (1969), tend to deny rather thaninvestigate the discontinuity between “high” (national interest) politics and“low” (welfare) politics, a distinction developed by Hoffmann (1966). The neo-functionalists also failed to recognize, Hansen argued, that sizable economicgains would result from a common market coordinated by sovereign statesrather than managed by ceaselessly expanding supranational authorities(1969: 270).

These criticisms forced neo-functionalists to take a closer look at their analyt-ical framework. Many accepted their analytical inadequacy and argued for a newframework to explain the process of integration. In the contemporary world,Haas (1975) found that more emphasis was laid on national self-interest thanapproaching issues on the basis of a joint incrementalist strategy. Europeanintegration in the 1970s can therefore be more fruitfully studied, Haas sug-gested, through a concept of global interdependence. He identified global inter-dependence as “fragmented issue linkage” (1975: 25). “Issue linkage” occurs,Haas pointed out, “when older objectives are questioned, when there is a clamorfor satisfaction of new objectives, and when the rationality accepted as adequatein the past ceases to be a guide to future action” (1975: 26). Thus, regionalintegration, according to Haas, “has become a fragmented, disjointed process,heavily dependent upon motives of actors and their ability to link the solution ofone problem with the solution of prior problems” (Duffy and Feld 1980: 499).

Despite these reformulations, many critics remained unconvinced about theapplicability of neo-functional framework in the 1970s and early 1980s.However, with the revival of European integration in the mid-1980s, neo-functionalism regained popularity in the international relations literature as aframework for explaining the process of integration. In particular, the focus ofneo-functionalism on subnational actors and the role of supranational institu-tions as catalysts for integration have proven to be relevant for explainingregional integration in Europe. Nevertheless, neo-functionalism suffers fromseveral shortcomings.

First, the argument of neo-functionalism that technocratic problem solving isthe main basis of motivation for national decision-makers in pursuing regionalintegration remains inadequate. This neo-functionalist view is based on a lack ofunderstanding of the preferences of governments and how these preferences areshaped in a particular society and political system. Rewarding and protectingdomestic constituency upon which decision-makers are dependent for politicalsupport and survival are also important considerations for national decision-makers. In addition, policymakers’ decision to cooperate or not is shaped by the

10 Introduction

structure of the society and government. In sum, neo-functionalism fails to ade-quately explore the range of motives, constraints, and opportunities that policy-makers face in pursuing regional integration policies.

Second, the overemphasis of neo-functionalism that supranational institutionshave the capability to initiate integrative activities neglects the role of nation-states as the dominant decision-making institutions (Keohane and Hoffmann1991). In fact, as the evidence of European integration process and elsewheresuggest, nation-states continue to play significant roles in expanding (or lack ofexpanding) regional integration activities. More precisely, the nature of develop-ment of regional integration is affected by participating members’ system capac-ity, system support (domestic opinion), demand (for integration), and leadershippreferences rather than the exclusive roles of regional actors and supranationalinstitutions as emphasized by neo-functionalism.8

Intergovernmentalism

Another popular school of integration theory is intergovernmentalism, which hasbased its analysis on the central assumptions of structural realism. According tothe structural realist paradigm, the unitary states are the central actors in an anar-chic international system, seeking to maximize their national interests (Waltz1979; Grieco 1990). Following this, intergovernmentalism reinforces the statesas primary actors in the regional cooperation process. These sovereign statesseek to pursue regional integration only when their national interests are com-patible with the regional integration goals. Thus, as intergovernmentalismargues, regional integration process involves a series of bargains between theheads of governments of the states in a region. Nation-states’ search for balanceof their national interests with regional integration goals is not easy and oftenslows down the pace of regional integration. Further, in this interstate bargain-ing, the heads of governments are often reluctant to sacrifice their national sov-ereignty to attain common goals. Thus, intergovernmentalism is much morecautious about the growth prospects of regional integration than is neo-functionalism and seems to account for the uneven and slow pace of Europeanintegration in the 1960s and 1970s (Huelshoff 1994: 259).

The emphasis of intergovernmentalism on the centrality of unitary states assole actors in international relations was criticized by the interdependenceschool (Keohane and Nye 1977). Pointing to the need to disaggregate states,interdependence school focused on the interaction among the domestic actorsand fragmented state. This theme was later picked up and expanded by neo-liberal institutionalism, which has replaced interdependence school in recentyears. Neo-liberal institutionalists were particularly critical of intergovernmen-talism’s emphasis upon the centrality of the unified state, system-derived inter-ests, and relative gains motivations, which lead to little regional integration(Milner 1992). By emphasizing the role of the unified state, intergovernmental-ism is unable to systematically analyze the domestic sources of the motivationsof states in regional integration and thus offers only a partial explanation of the

Introduction 11

integration process (Huelshoff 1994: 260). Neo-liberal institutionalists, instead,focus on the existence of fragmented states, multiple actors, and multiple defini-tions of national interests to overcome this limitation of intergovernmentalism.

Faced with such criticisms, intergovernmentalists have sought to expand theirtheoretical approach. Building on the original postulates of intergovernmental-ism, Andrew Moravcsik has developed a new version of this theory called“liberal intergovernmentalism” (1991: 19–56). The theory posits a two-stageapproach to explain the integration process of the European Community in thelate 1980s. Walter Mattli has summarized these two stages as follows:

In the first stage, national preferences are primarily determined by the con-straints and opportunities imposed by economic interdependence. In thesecond stage, the outcomes of interstate bargains are determined by the rela-tive bargaining power of governments and the functional incentives forinstitutionalization created by high transaction costs and the desire tocontrol domestic agendas.

(1999: 30)

This expanded approach is undoubtedly an improvement over the original versionof intergovernmentalism. But the focus of liberal intergovernmentalism on theinteraction between domestic preferences, government bargaining, and supra-national institutions in the regional integration process shows a strong influence ofneo-functionalism. Critics point out that this new theory offers nothing new but thecentral arguments of neo-functionalism and thus suffers from the same kind of criti-cisms that are leveled against neo-functionalism (Caporaso 1998: 336).

In light of the above argument, it would be problematic to apply the liberalintergovernmental approach to fully explain regional integration in Europe andelsewhere. Like neo-functionalism, liberal intergovernmentalism points out theimportant roles of governmental actors, groups, and supranational institutions inthe regional integration process. But, it fails to explore adequately domesticsources of motivations of policymakers.

Dynamics of Third World regionalism: limitations of eurocentricexplanations

The Eurocentric approaches of neo-functionalism and intergovernmentalism –and its later reformulation in the form of liberal intergovernmentalism – areinadequate to explain regional cooperative efforts among developing countries.In fact, regional cooperative arrangements in Third World regions were down-played by Eurocentric scholars. Haas and Schmitter (1964) predicted that integ-rative efforts in the Third World countries would be less likely to succeedbecause of the absence of four “background conditions” – relative equality insize and power; substantial rates of transaction among them; existence of a plu-ralistic sociopolitical structure; and high degree of complementarity of thevalues existing within the proposed union (268–269).

12 Introduction

Amitai Etzioni (1965) cited three reasons for the failure of regional unifica-tion efforts among developing countries. The first reason is a “restrictedhorizon” of the illiterate publics. Second, the developing countries “lack citizenswith the organizational and political skills to handle regional unification.” Third,these countries are so preoccupied with their own domestic problems that theyhave very little time left to think of regional unification (319–321). RogerHansen (1969: 258) came out with additional explanations for the lack ofsuccess in the integrative efforts of the Third World countries. The superpowers’interference in the economic and political systems of these countries is a majorimpediment in their integrative efforts. Moreover, integrative efforts, Hansenargued, would be impossible so long as developing countries were still engagedin the nation-building process.

Following Karl Deutsch and his associates’ observation that all integrativeefforts have built-in expectations of gains and rewards, Lynn Mytelka arguedthat Third World integrative systems will fail unless there is a solution to theproblem of unequal gains (1973: 236–250). Characterizing the Third Worldcountries’ dependence on the industrialized nations for capital, markets, andtechnology as asymmetrical interdependence, John Ravenhill (1979) argued thatthe Third World countries’ vulnerability to external economic influence mayimpede their regional cooperation efforts (231).

These arguments explain why many regional arrangements in Africa, LatinAmerica, and Central America did not achieve the desired success during the1970s and 1980s. A central argument in this literature is that regional coopera-tion efforts in the Third World are unlikely to succeed because members ofregional arrangements in the Third World have very little to offer one another(Haas 1990: 247). According to this literature, remedies for Third World prob-lems can be provided only by the wealthy North and not by “regional partners inpoverty.” This argument seems to have ignored the fact that most Third Worldcountries have pursued development strategies based on aid and trade with thedeveloped world for more than four decades. Yet, very few of these countrieshave actually been significantly successful in alleviating poverty. The exportperformance of many Third World countries have been sluggish in the face ofthe protectionist policies of their main trading partners in the developed world.The stalemate in the North–South dialogue, the worsening terms of trade in theglobal markets, the growing dependence on external assistance, and mountingdebt have turned the vision of the New International Economic Order (NIEO)into an illusion. With the end of the Cold War and end of the European schism,most Third World countries are faced with the ever-increasing prospect of beingmarginalized in the international economy. Today, regional cooperation is nolonger just an option but a necessity for policymakers in most of the ThirdWorld countries. As a result of global changes, it is likely that more and moreThird World countries will engage in regional arrangements for trade andtechnology transactions. However, given the resource crunch of the Third Worldcountries, these regional arrangements are likely to be more outward lookingand likely to have more external linkages than in the past.

Introduction 13

Regional cooperative efforts have increased in the Third World regionsduring the 1980s, and thereafter. The Association of South East Asian Nations(ASEAN) came into existence in 1967 and, after almost a decade of “non-action,” has become a successful regional organization in Asia and thus a modelof regional cooperation for developing countries. The members of ASEANagreed to create an ASEAN Free Trade Area (AFTA) in 1992. ASEAN has alsoenlarged by admitting new members since 1980s – Brunei (1984), Vietnam(1995), and Laos, Cambodia, and Burma (1997). Inaugurated in 1971, the SouthPacific Forum (SPF) has grown in strength since early 1980s as a regionalorganization in the Southwest Pacific-Oceania region (Haas 1989b; Palmer1991). In Middle East, the Gulf Cooperation Council (GCC), which was formedin 1981, has been growing in stature since its inception (Nakhleh 1986). Withthe inclusion of Bolivia as a new member, the Latin American Free TradeAssociation (LAFTA) formed in 1960 was supplanted by the Latin AmericanIntegration Association (LAIA) in 1980. In Latin America, several otherregional cooperation schemes have emerged in the early 1990s. The mostnotable of these regional arrangements was the Mercado Comun del Sur (MER-COSUR) in 1991 comprising Argentina, Brazil, Paraguay, and Uruguay. TheAndean Pact and the Central American Common Market (CACM) were resur-rected in 1991 and 1993, respectively. In 1995, the Group of Three (G-3) –Colombia, Mexico, and Venezuela – FTA was established. A recent organi-zation to join the list of cooperative efforts in the Third World countries is theSAARC which came into existence in 1985. What is remarkable about theseregional organizations is that they have emerged in regions which, unlikeEurope, have little prior experience of regional integration.

How can one explain the emergence of such regional cooperation schemes inthe developing world when the integration theorists predicted failure? Theintegration theorists’ attempts to explain and predict regional integration effortsin Asia and elsewhere were clearly inadequate. One of the critical reasons forthis is that Eurocentric theorists overemphasized integration, ignoring othermore realistic regional cooperation approaches. As Norman Palmer comments,“By concentrating too heavily on integration, which was interpreted in many dif-ferent ways, they gave inadequate attention to the conceptualization and encour-agement of other forms of regional cooperation of less intensive but morerealizable nature” (1991: 11). Michael Haas (1992b: 235) observes that thecentral weakness of the integration theorists is their emphasis on the creation ofa supranational authority, which presupposes “a slicing of sovereignty” of thenation-states.9 The Third World countries, still extremely emotional and sensi-tive about sovereignty, seem to resent any idea of surrender of their sovereignty(Krasner 1985: 73–75). Thus, while regional cooperation for mutual gains isconsidered as a pragmatic policy and is appealing for Third World leaders,regional integration which involves setting up a supranational authority by sur-rendering their sovereignty (or going completely “beyond the nation-state”)seems undesirable for most of these leaders.

Capturing this tension between regional integration and regional cooperation,

14 Introduction

Michael Haas (1992b) has advanced a Communitarian perspective to explain theprocess of regional cooperation in Third World regions. He has developed thisperspective after comparing some 75 regional institutions in Asia and the Pacificsince the 1950s. According to this perspective:

modest technical cooperation pursued for joint economic gain, leads to thedevelopment of communitarian culture of interaction, which spills over intothe building of a political community that is so firmly rooted in culturalaffinity that economic collaboration proceeds and spillback becomesimpossible.

(Haas 1992b: 294)

Central to the communitarian perspective is what Michael Haas (1989a) callsthe Asian Way to cooperation. The Asian Way advances three main arguments:regional cooperation should proceed from less controversial issues (becauseconsensus can be easily achieved on those issues) to more complex political andeconomic issues; political actors should take an incremental approach ratherthan embracing any blueprintish grand designs; and there should be a stress oncooperation rather than integration (Haas 1992a: 240). Although mainly derivedfrom his observations on regional institutions in Asia, Michael Haas’ conceptu-alization contains various practical principles that can be adopted to explainregional cooperation activities in most Third World regions, including SouthAsia. In particular, his emphasis on regional cooperation rather than regionalintegration and consensus building, which is necessary because of the interplayof domestic and regional political and economic dynamics, has importantimplications for this study.

The central empirical issue in this study is to explain the growth of regionalcooperation in South Asia. Thus, the first task is to define what is regional coop-eration? Defining regional cooperation is important for two reasons. First, itallows one to distinguish policy coordination among nation-states (an attributeof cooperation) from devolution of decision-making power to a supranationalauthority, which is an essential attribute of regional integration. Second, itallows to shift the focus of analysis from predominantly economic areas (asfound in regional integration) to other areas of cooperation among regional part-ners such as security, social welfare, environment, and technology. The liter-ature on international cooperation (Keohane 1984) and international regimes(Krasner 1983) provides useful insights on the meaning of cooperation and basisof cooperation among nation-states. Based on these insights, regional coopera-tion in this study is defined as a process of policy coordination through which agroup of states in a region agree to establish a common set of rules and proce-dures to guide state actors’ policy choice in economic and/or non-economicareas. It is obvious from this definition that regional cooperation entails a set ofreciprocal commitments and obligations on the part of participating members toabide by some common rules of conduct (Rodrik 1995: 176). In a sense, asAndrew Moravcsik suggests, regional cooperation can be considered as an

Introduction 15

intergovernmental regime to manage state actors’ expectations in the economicand/or non-economic areas (1993: 474). The management of expectations meansthat participants in the regional arrangement agree to play by the same rules.This study argues that participating actors’ willingness to play by common rulesof conduct and enter into reciprocal commitments and obligations is determined,to a large extent, by domestic politics.

Domestic politics and regional cooperation

The central argument of this study is that the growth of regional cooperationactivities is affected by the domestic politics. Growth of regional cooperation isprimarily measured by the extent to which regional groupings manage to matchtheir stated cooperation goals with subsequent achievements. Intergovernmentalnegotiations to realize regional cooperation goals often fail because of domesticpolitics. Also, political leaders often fail to implement regional cooperativeagreements because of domestic politics. Thus, domestic considerations play acritical role in shaping the possibility and nature of regional cooperative agree-ments. In explaining the growth of regional cooperation, an examination ofdomestic constraints and opportunities becomes essential at least for threereasons. First, domestic politics facilitates our understanding about variousactor’s preferences, how national interests are constructed, and how states calcu-late their gains (absolute or relative gains) from any cooperative arrangements.For example, if the dominant domestic actors share a strong perception ofinequity, that is, their country sacrifices more and benefits less, regarding anarms control treaty, or a preferential trade arrangement, decision-makers willfind it difficult to pursue cooperative policies toward such agreements. Second,domestic factors explain the kinds of strategies decision-makers usually employto realize their goals. Of course, a state’s structural position is important, but atthe same time, the nature of its political system, the role of bureaucracy and mil-itary, the influence of special interests, and public opinion may ultimately deter-mine which strategies the decision-makers can realistically pursue at theinternational and regional levels. Third, the policymakers can always negotiateinternational and regional agreements, but the implementation of these agree-ments require domestic support. Hostile or negative domestic reactions for anyagreement may eventually lead the decision-makers to abandon or postponeregional cooperation policies.

Thus, this study posits the need to focus on domestic politics in order toexplain the growth of regional cooperation in South Asia. Many scholars havenoted the need for studies that emphasize a linkage between domestic politicsand foreign policy to explain regional cooperation process, but few have beenoffered in the literature. Again, these few studies are confined to explaining theEuropean integration process only. No such study has been attempted in explain-ing regional cooperation process in other regions. In this study, I have sought toexplain the importance of domestic politics for the growth of regional coopera-tion in South Asia by combining three interrelated perspectives. First, building

16 Introduction

on the concept of issue areas, I argue that regional cooperation policies do notfall strictly into the category of either domestic or foreign policy issue areas.Rather, these policies are in the realm of community policies, possessing somecharacteristics of both domestic and foreign policy issue areas. An importantimplication of this argument is that domestic groups’ involvement in regionalcooperation issues can be high and support of various domestic groups is neces-sary for the decision-makers to pursue regional cooperation policies. Second,employing Robert Putnam’s framework, I argue that regional cooperation is atwo-level process in which domestic support and regional bargains and negotia-tions must overlap if cooperation is to proceed. Third, drawing on the literatureof institutional analysis, I argue that the interaction of the domestic actors’ (bothpolitical and societal actors) preferences within the context of their domesticinstitutional structures determines when expansion of regional cooperation ispossible and what its terms will be.

The plan of this book

This book is organized in the following way. Chapter 2 examines three inter-related perspectives in the areas of international relations and comparative poli-tics – i.e. issue areas, two-level game, and institutional analysis – to frame thecentral argument of this study. Building on these three theoretical insights, thischapter argues that to explain the nature, process, and outcome of regional coop-eration in South Asia, it is necessary to understand domestic institutional struc-tures, government capacity, domestic support, and preferences of political andsocietal actors toward regional cooperation.

Chapter 3 explores the nature of interstate relationships among five major ori-ginal SAARC member countries: India, Pakistan, Bangladesh, Nepal, and SriLanka. It first identifies major characteristics of each state that affect their pol-icies toward the neighboring countries and countries outside of the region. It,then, examines the influence of history, which plays a significant role in definingthe South Asian countries’ regional diplomacies. In addition to history, it exam-ines other features of the structure of the South Asian regional system – reli-gious affiliations, ethnic relations, state capabilities, Indo-centric geography, andleaders’ contrasting conception of their state’s relative roles – that affect theirrelationships. The Indo-Pakistan rivalry and the implications of securitydilemma for the entire region are examined. This chapter also examines how thesmaller states are affected by their relations with their larger neighbors and howthese relations create opportunities and challenges for their leaders. Finally, thischapter explores the relations between South Asian states and extraregionalpowers and the implications of these relations for the South Asian region.

Regional cooperation is not a new development in South Asia. In the post-independence period, regional cooperation issues were discussed in at least threeconferences: the Asian Relations Conference in New Delhi in 1947, the BaguioConference in the Philippines in 1950, and the Colombo Powers Conferences in1954. After examining these earlier initiatives for regional cooperation by South

Introduction 17

Asian leaders, Chapter 4 explores the important domestic and external factors thatled Bangladesh to take some concrete initiatives for regional cooperation in SouthAsia in the late 1970s. Examining the dynamics of domestic politics and the inter-relationship between domestic and regional politics, this chapter explains whysmaller states in South Asia (Bangladesh, Nepal, and Sri Lanka) took the initi-atives for regional cooperation and why India and Pakistan were initially reluctantto join the regional grouping. It examines the domestic and external factors thatled to changes in India’s and Pakistan’s decision in favor of joining the regionalassociation? This chapter then provides an overview and evaluation of SAARC’srecord in terms of institutional developments and program implementation. Someof the major security-related and trade-related agreements, i.e. SAARC conventionon suppression of terrorism, and SAARC Preferential Trading Arrangements(SAPTA) are examined in detail to explain if SAARC has been able to increasethe capacity and extend the scope of its institutions.

Chapter 5 assesses the prospects of deeper regional cooperation in South Asiaby examining some of the major challenges of the region. This chapter identifiesseveral “facilitating conditions” in the literature to explain the growth ofregional cooperation activities. First, regional groupings operating with the pres-ence of a benevolent hegemonic power are more likely to experience anenhanced sense of regionalism accompanied by the creation of regionalist insti-tutions than are groups without a benevolent hegemonic power. Second, regionalgroups with strong governments are more likely to pursue cooperative effortsthan regions with weak governments. Third, ruling coalitions committed to eco-nomic liberalization policies are likely to seek deeper regional cooperation.Given these conditions, this chapter explores several key questions. First, howhas India’s hegemonic status affected the process of regional cooperation inSouth Asia? This chapter has drawn four major arguments from the literature –balance of power, regionalist entrapment, bandwagoning, and declining hege-mony – that explain how hegemonic power can provide powerful stimulus forthe growth of regional institutions. These are then examined in the context ofSouth Asian regional dynamics, and their implications for deep regional cooper-ation in South Asia are discussed. Second, how has the strength of South Asiangovernments and their interactive dynamics with civil society affected theprocess of regional cooperation? This chapter then examines India’s and Pak-istan’s nuclear policies and their special implications for regional cooperation inSouth Asia. Finally, this chapter considers how ethnic relations transcend fron-tiers and affect South Asian state’s interrelationships. The implications of ethnicdynamics for national cohesion and accommodative diplomacy among SouthAsian countries are examined here. This discussion lays the groundwork forassessing the future prospects of regional cooperation in South Asia.

A key facilitating condition for the growth of regional cooperation is theexistence of significant market potential for economic gains from marketexchange within a region. Given this condition, Chapter 6 profiles the marketsize and structure of economy of South Asian countries. It then examines thelevels of intraregional imports and exports among South Asian countries to

18 Introduction

determine the extent of their economic interdependence. It explains severalreasons for South Asia’s limited intraregional trade with a focus on domesticpolicies toward regional trade. This chapter then examines the question: will thelatest economic liberalization polices launched by South Asian countries andtheir new economic interests drive these countries toward deeper economiccooperation? By signing South Asian Free Trade Area (SAFTA) agreement inIslamabad in January 2004, South Asian leaders have taken an important step tointensify their intraregional trade cooperation. What are the prospects ofSAFTA? This chapter examines the nature of political coalitions, preferences,and initiatives of two key actors – policymakers and business groups – toprovide a realistic assessment of the prospects of SAFTA.

Using primary data derived from extensive open-ended interviews with 780elites from five South Asian countries (India, Pakistan, Bangladesh, Nepal, andSri Lanka) over a period of three years, Chapter 7 provides an assessment ofdomestic preferences for deeper regional cooperation in South Asia. The respon-dents were drawn from the following occupational categories: political leaders,civil servants, retired military personnel, university professors and researchfellows, journalists, business groups, trade union leaders, religious leaders, andother professional groups. This chapter presents our findings on the followingissues/questions, which have important bearing on the future growth of SAARC.

1 To what extent do South Asians believe that their country’s national interestwill be promoted through regional cooperation?

2 Do South Asians perceive inequity in any SAARC arrangement, that is, dothey feel that their country will contribute more and benefit least, or viceversa, from SAARC arrangements?

3 What are the evaluations of South Asians about their country’s concretegain or loss from SAARC membership?

4 What kind of national images do South Asians have about their neighboringcountries in terms of the following attributes: political stability, authorit-arian, economically dependent, external orientation, aggressively militaris-tic?

5 What do South Asians think about India and Pakistan becoming nuclearpowers?

6 Do South Asians ever think of themselves not only as a citizen of theircountry, but also as a citizen of South Asia?

7 Are South Asians willing to undergo economic sacrifice for the sake ofother SAARC members?

8 In general, are South Asians for or against efforts being made to expandregional cooperation in South Asia?

The concluding chapter discusses the main findings of this book and consid-ers the implications of these findings for regional cooperation in South Asia.This chapter also discusses some important lessons for the future growth ofregionalism in South Asia.

Introduction 19

2 Explaining regional cooperationin South Asia

In Chapter 1, I argued that Euro-centric approaches of the integration theoristsare inadequate to explain regional cooperative efforts among developing coun-tries. One reason for this is that Euro-centric theorists overemphasized integra-tion and the creation of supranational institutions with authority to override theparticipating members’ decision-making institutions. By focusing too heavily onintegration, they gave inadequate attention to other more realistic forms ofregional cooperation efforts. For example, regional cooperative agreementsamong developing countries can exist on a specific issue area such as trade,monetary exchange, security, social welfare, science and technology, and meteo-rology without any “spillover effect” as integration theorists would argue. Poli-cymakers in developing countries are more comfortable in coordinating theirpolicies on specific issue areas with each other rather than pursuing any kind ofintegration, which presupposes surrender of sovereign policy-making power to asupranational institution. Sometimes, policymakers’ concerns on different issueareas are intertwined intermittently. In such a context, they may pursue coopera-tion on several issues simultaneously. However, the choice of issue areas forcooperation and the nature and terms of regional cooperation depend much onthe participating member countries’ domestic politics and leadership prefer-ences.

Thus, I argue in this study that to explain the nature, process, and outcome ofregional cooperation in South Asia, it is necessary to understand domestic insti-tutional structures, government capacity, domestic support, and preferences ofpolitical and societal actors toward regional cooperation. This chapter examinesthree interrelated perspectives in the areas of international relations and compar-ative politics – i.e. issue areas, two-level game, and institutional analysis – toframe the central argument of this study.

Regional cooperation as a community policy issue area

If we accept the traditional distinction between domestic and foreign policies,regional cooperation policies can be technically described as the representativeof the latter. But such simple characterization seems to be inadequate becausethe member states’ regional cooperation policies, in many ways, resemble the

patterns of domestic policy-making process. In light of this, Charles Pentlandhas suggested a useful third category of policy – community policy – to describethe policies of cooperating states toward each other (1973: 220). Pentland’s dis-cussion of the concept of community policy is based on Rosenau’s analysis offoreign and domestic policies as issue areas (1967: 15–43).1 According toRosenau (1967), domestic and foreign policy issue areas exhibit three importantdifferences, that is motivational differences, role differences, and interaction dif-ferences. An analysis of these three differences appears to provide some scope toestablish the existence of a third issue area, namely that of community policyissue area. The extent and nature of differences between foreign, domestic, andcommunity policy issue areas are summarized in Table 2.1.

The first difference that Rosenau describes between the foreign and domesticpolicy issue areas is related to the type and degree of motivation found in each.For citizens, Rosenau argues, foreign policy matters, being largely beyond theirimmediate concern, interest, and control, are likely to generate motivation “thatis less complex and ambivalent, and therefore more clear-cut and intense, than isthe domestic area” (1967: 24). While the intensity of people’s motivation towardexternal environment is high, their motivational extensity toward external devel-opments is generally narrow. This is because the citizens often fail to connectexternal developments with their daily needs and wants. However, the case isdifferent for the political elites. Since the political elites are aware of the exten-sive nature of foreign policy issues as well as the interdependence of foreign anddomestic politics, their motivational extensity is much greater and motivationalintensity much less in foreign policy matters than ordinary citizens. Thus, unlikethe domestic issue areas, the foreign policy issue areas are marked by a “motiva-tional gap” between citizens and policymakers. One important implication ofthis motivational gap is the apparent freedom of officials in foreign policymatters, unlike the domestic areas where public involvement is generally highand is, thus, a constraint on official action.

In the case of community policy, citizen motivation is the same as in the caseof domestic issues. But unlike pure foreign policy issues, the public motivationsin community policies are somewhat “less stark, simple and intense” (Pentland1973: 221). Besides, a motivational gap exists not only between the citizens andthe policymakers, but also among political elites. Some members of the politicalelites tend to treat community policy issues as domestic, others try to makediplomatic gains from the interdependence of participating states’ economic andpolitical systems, while a third group tends to see such issues as opportunities toincrease the level of cooperation among cooperating states.

A second distinction between the foreign and domestic issue areas, accordingto Rosenau, is based on the number of actors involved and types of roles theyplay in each of these issue areas. Domestic issues, Rosenau argues, involve thedistribution of resources and arrangement of relationship at home. Thus, theenactment of these issues usually involve a number of generalized social roles, asrepresented by “the healthy and the sick, the old and the young, the rich and thepoor in the society,” and large categories of occupational roles as represented by

Explaining regional cooperation in South Asia 21

Tab

le 2

.1C

hara

cter

isti

cs o

f fo

reig

n, d

omes

tic,

and

com

mun

ity

issu

es

Mot

ives

Rol

esIn

tera

ctio

n se

quen

ces

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ber

Iden

tity

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onD

egre

e

Cit

izen

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d gr

oups

For

eign

pol

icy

issu

esH

igh

Nar

row

Few

Nat

iona

l lea

ders

Ver

tica

lL

owD

omes

tic

poli

cy is

sues

Low

Wid

eM

any

All

str

ata

Hor

izon

tal

Hig

hC

omm

unit

y po

licy

issu

esH

igh

+ lo

wN

arro

w +

M

any

All

str

ataa

Ver

tica

l +

Low

+

wid

eho

rizo

ntal

high

Pol

icym

aker

s an

d ag

enci

esF

orei

gn p

olic

y is

sues

Low

Wid

eF

ewN

atio

nal

Ver

tica

lL

owD

omes

tic

poli

cy is

sues

Low

Wid

eM

any

Nat

iona

l and

loca

lH

oriz

onta

lH

igh

Com

mun

ity

poli

cy is

sues

Low

Wid

eM

any

Nat

iona

l and

loca

laV

erti

cal +

L

ow +

ho

rizo

ntal

high

Sou

rces

: Jam

es N

. Ros

enau

, Dom

esti

c So

urce

s of

For

eign

Pol

icy

(New

Yor

k: F

ree

Pre

ss, 1

967)

, p. 4

6; C

harl

es P

entl

and,

Int

erna

tion

al T

heor

y an

d E

urop

ean

Inte

gra-

tion

(Lon

don:

Fab

er, 1

973)

, pp.

220

–224

.

Not

ea

Not

alw

ays.

businessmen, workers, farmers, teachers, housewives, doctors, other profession-als, and leaders of interest groups. On the other hand, issues of foreign policy,being concerned with resources and arrangements abroad, do not normallyinvolve the roles of such large classes of people. Basically, the occupational rolesof government leaders, foreign ministers, and senior officials are involved in theformulation of foreign policies (Rosenau 1967: 39–41).

In community policy, although the official actors play a dominant role, actorsplaying traditionally domestic roles, such as interest group leaders and opinionleaders, are often involved. The main reason for this is that a state involved inthe regional cooperation process may have to pursue accommodative policiesand to take actions jointly for which the mobilization of support from differentstrata of the society becomes necessary. Moreover, since community policiesencompass issues of both high politics (security) and low politics (economics,technology, and culture), they require the involvement of foreign policy officialsand non-official actors.

The third distinction that Rosenau draws between the foreign policy anddomestic policy issue areas is related to the patterns of interaction amongvarious actors and various agencies involved in the policy-making process.While the patterns of interaction in foreign policies, according to Rosenau, arelargely hierarchical or “executive,” these patterns are mostly horizontal or“legislative” in the domestic policies. Often, it is necessary to take quick anddecisive action to deal with an external environment. Because of this, in allpolitical systems, foreign policies are made by few officials in the executivebranch of the government. Invariably, the decision-making structure in theforeign policy areas is hierarchical with a vertical flow of information, initi-atives, and guidance coming from the executive branch. The pattern of inter-action in the domestic policy areas, by contrast, is not so hierarchical and ishighly competitive between various actors of the society. As Rosenau hasargued, since every segment of the society has some claim on the resources,decision-making in the domestic issue areas is dispersed rather than concen-trated in a few hands. Accommodation of different views and demands is neces-sary for successful enactment of domestic policies. Thus, unlike foreign policyareas, a horizontal pattern of interaction among various societal actors is foundin case of domestic policy areas.

Community policy differs from the pure models of both the domestic and theforeign policy issue areas. Since community policy deals with distribution andrearrangement of the cooperating state’s internal as well as external resources,both the horizontal and the hierarchical patterns of interaction among variousactors are necessary. Besides, as the states become more deeply engaged in theregional cooperation process, they need to deal with more and more border-crossing issues. A time comes when it becomes impossible for the traditionalforeign policy hierarchy “to coordinate all the policies advocated and pursued bydifferent departments and agencies-all with their different foreign and domesticclientele, different priorities and perceptions, different methods, personnel andcontacts” (Pentland 1973: 224). It is in this kind of environment that a unique

Explaining regional cooperation in South Asia 23

pattern of interaction – neither absolutely hierarchical nor totally horizontal –takes place. According to Pentland (1973), such a pattern of interaction is pos-sible in the context of a community policy.

Based on this discussion, it seems reasonable to argue that a state’s regionalcooperation policy does not exclusively fall in the realm of the traditionaldomestic or foreign policy areas. Rather, it falls in the category of communitypolicy areas, possessing some characteristics of the domestic and foreign policyissue areas.2 It is in this context that the influence of various domestic groups onregional cooperation policies acquires added significance.

Regional cooperation as a two-level game

Robert Putnam’s (1988) conceptualization of the two-level game provides auseful framework to analyze the role of domestic politics in the regional cooper-ation process (Mayer 1992: 793–818; Evans et al. 1993; Iida 1993: 403–426). Innegotiating an international agreement, decision-makers, Putnam argues, aretypically engaged in two simultaneous games, one at the domestic level and theother at the international level. Putnam describes two-level games as follows:

At the national level, domestic groups pursue their interests by pressuringthe government to adopt favorable policies, and politicians seek power byconstructing coalitions among those groups. At the international level,national governments seek to maximize their own ability to satisfy domesticpressures, while minimizing the adverse consequences of foreign develop-ments. Neither of the two games can be ignored by central decision makers.

(1988: 434)

In the ultimate analysis, the outcome of an international agreement depends onwhat other states will accept and whether or not the terms of the agreement areacceptable to the decision-makers’ domestic constituencies. Thus, in inter-national negotiation, prospects of domestic ratification are an important concernfor the decision-makers.

At the domestic level, decision-makers’ strategic moves are largely deter-mined by the nature and size of what Putnam calls a “win-set.” Defining thewin-set as a set of international agreements that will gain majority supportamong domestic constituencies, Putnam develops two main hypotheses:

1 The larger the win-set, the greater the possibility of a successful agreement(regional cooperation in this case); the smaller the win-set, the more likelythat the policymakers will be reluctant to conclude an agreement.

2 Decision-makers with large win-sets are likely to have weaker bargaining posi-tions in international negotiations than decision-makers with small win-sets.

The latter will have larger (stronger) bargaining positions internationally as theycan make domestic pressure a credible alibi to disagree with unfavorable deals.

24 Explaining regional cooperation in South Asia

The size of win-sets is, therefore, important to understanding the outcome ofan international negotiation. What determines the size of the win-sets? Here,Putnam offers three factors. First is the nature of domestic coalitions and theirpreferences for a specific agreement. The pattern of domestic coalitions and theirrole in negotiations are shaped by a combination of the following: the degree ofheterogeneity of the constituents, saliency of the issue for a particular group (towhat extent the issue at hand affects the interests of a particular group), and thecost of “no agreement” for the domestic constituents. Second, the size of win-sets is determined by the nature of domestic institutions. A country’s ratificationprocedure can change the size of the win-sets. Here, Putnam’s discussion intro-duces the weak–strong distinction of states based on the autonomy of the centralgovernment from domestic pressure. For example, in a democratic politicalsystem, strong party disciplines and the strong strength of the government asdetermined by the extent of legislative autonomy of the decision-makers canincrease win-sets. In contrast, weak governments, which do not enjoy legislativeautonomy and are subject to domestic pressures, will have only narrow win-sets.Decision-makers in an authoritarian political system may not have to go througha rigorous legislative ratification process and thus may have large win-sets forinternational agreements.

Third, the size of domestic win-sets is also influenced by what Putnam callssynergy. A hallmark of Putnam’s concept of the two-level game, synergymeans the promotion of mutual benefits through cooperation in the inter-national bargaining game to create coalitions favoring cooperation in negotiat-ing countries (Snyder 1993: 104). In the pursuit of synergy, a critical conceptthat assumes significance in the two-level game is that of positive or negativereverberation, in which concessions or threats from one state affect coalitionpolitics inside another state (Putnam 1988: 454–456). Positive reverberationcan expand the domestic win-set and facilitate international agreements. Negat-ive reverberation, on the other hand, can create a domestic backlash and impedeinternational cooperation. It is quite clear that hard-line policies and coalitionsin one negotiating state can sometimes reinforce hard-line policies and coali-tions in another negotiating state, thus impeding the progress of internationalagreements. Since international cooperative agreements have significantdomestic distributional consequences (Milner 1997: 61–65), positive and negat-ive reverberation play a critical role in terms of generating domestic support ordomestic backlash for any particular international agreement. Putnam also sug-gests that decision-makers can employ several innovative strategies – such astransnational linkages, side payments, and targeting swing voters – to transformthe domestic politics and thus expand their win-sets for any particular inter-national agreement.

The two-level approach strikes a middle-ground between the state-centrictheories and “second-image-reversed perspectives.”3 Unlike the state-centric the-ories, the second-image-reversed approach does not consider the state as aunitary rational actor. Rather, a state is a fragmented unit consisting of differentgroups or units. According to this analysis, states are no longer the actors.

Explaining regional cooperation in South Asia 25

Central decision-makers, legislatures, and domestic groups become the agents.A state’s policy preferences often are expressions of coalitions of interests ofthese units or agents. Focusing on this dynamic of a state’s decision-makingprocess, Putnam argues, “Unlike state-centric theories, the two-level approachrecognizes the inevitability of domestic conflict about what the national interestrequires” (1988: 460). Thus, the definition of national interest and how it is con-structed and pursued become a central focus of analysis in this approach.

Applying Putnam’s framework to the process of regional cooperation, it canbe argued that decision-makers will show more enthusiasm for those regionalagreements which meet the demands of enough domestic groups to guaranteeratification and the leaders’ political survival. In other words, domestic andregional bargains must overlap if cooperation is to proceed. Domestic support,thus, is of crucial importance for policymakers to pursue regional cooperationpolicies. Employing Putnam’s framework, a number of scholars have focused onthe links between the domestic politics and intergovernmental bargaining toexplain the progress of the European integration process in the late 1980s.4

The central attraction of the two-level game framework for regional cooper-ation is that it offers a better conceptual framework in which negotiations areno longer viewed as binary game based on cooperation or defection, but as acontinuum where many tactics and bargaining tools are employed (Jervis1988). The framework allows to explain variations in policy outcomes acrossvarious issues even when the domestic and international factors remain con-stant. By avoiding the binary two-by-two game theoretic model, Putnamprovides useful analytical tools to explain suboptimal cooperation. Unlikethe game theoretic model, Putnam’s framework acknowledges that “coopera-tion below the Pareto frontier” to use Krasner’s term (1991) is possibleand indeed very common because of the domestic game that decision-makershave to engage in simultaneously. Thus, more than the game theoretic models,the two-level game framework can better account for the various cooperativeoutcomes.

Specifically, Putnam’s two-level game approach allows one to examine threeinterrelated domestic level variables that have significant impact on intergovern-mental bargaining at the regional level – institutional structures and policy-making process, the strength of the government, and the policy preferences ofdomestic actors. In the following section, these three variables and their linkagewith intergovernmental bargaining are analyzed to explain the process andoutcome of regional cooperation.

Institutions, preferences, and regionalism

Helen Milner’s conceptualization of the state as a polyarchy provides a usefulframework to analyze the role of domestic actors in the regional cooperationprocess. The term polyarchy was first coined by Robert Dahl to refer to thedegree of democracy present in a country (1984: 75). Milner has used this termto refer to power-sharing arrangements among domestic groups. Challenging the

26 Explaining regional cooperation in South Asia

realist paradigm (Waltz 1979: 88), in which state is considered as a unitary actorand decision-making usually flows along a vertical hierarchy, Milner argues:

States are not unitary actors; that is, they are not strictly hierarchical but arepolyarchic, composed of actors with varying preferences who share powerover decision making. The struggle for political power domestically is crit-ical for them . . .. “International politics and foreign policy become part ofthe domestic struggle for power and the search for internal compromise.”

(1997: 11)

This analysis focuses on the important roles of domestic actors and their pref-erences in a country’s policy-making process. Based on Milner’s analysis, Iargue that understanding the actors and their preferences within a given institu-tional context is essential to explain why a state behaves the way it does. Such afocus provides additional insights to help explain questions on three fundamen-tal issues of regional cooperation:

1 why states differ in their commitment to increase information and trans-parency;

2 why states evaluate gains associated with each outcome differently;3 whether relative gains matter more than absolute gains.

The relevance of domestic politics assumes significance in a country’spolicy-making process once the realist assumption of the state as a unifiedactor is relaxed. The question, then, is: who are the actors involved in thepolicy-making process in a domestic political setting? Usually, there are threesets of actors in domestic politics, who play important roles. The first two setsof actors are political actors – executive and legislature, and the third set ofactors are the societal actors. The executive refers to the executive branch ofgovernment that includes head of a government (president or prime minister ordictator), the bureaucracy, or the various departments and ministries ofgovernment. The legislature refers to the legislative branch of governmentwhere policy issues are discussed, debated, and voted by legislators to becomelaws. A country’s legislature is also important for the ratification of inter-national and regional agreements and treaties negotiated by the policymakers.The third set of actors are societal actors who include interest groups andopinion leaders. The societal actors are assumed to exercise indirect influenceon the policy-making process in terms of supporting or opposing a particularpolicy. Examining the dynamic interaction of preferences between the politicaland societal actors is the key to understanding the policy-making process in acountry.

The interaction of preferences between the political and societal actors takesplace within an institutional context. The relative roles of each actors and theextent of their control over policy-making are determined by a country’s institu-tional structures. It is, thus, useful to examine a country’s institutional structures

Explaining regional cooperation in South Asia 27

and how different policy preferences of actors are aggregated by domestic polit-ical institutions to explain the nature and outcome of national policies.

Domestic political institutions

There is a growing consensus among political analysts that institutions play acritical role in shaping politics. As March and Olson observe: “political institu-tions define the framework within which politics takes place” (1989: 18). RobertPutnam (1993: 7–8) provides further explanation to this observation: “The rulesand standard operating procedures that make up institutions leave their imprinton political outcomes by structuring political behavior . . .. Institutions influenceoutcome because they shape actor’s identities, power, and strategies.” DouglassNorth offers a useful definition of institutions. According to him, “institutionsare the rules of the game in a society or, more formally, the humanely devisedconstraints that shape human interaction” (1990: 3). Agreeing with this broaddefinition, Jack Knight provides an additional dimension to explain the scope ofinstitutions: “First, an institution is set of rules that structure social interactionsin particular ways. Second, for a set of rules to be an institution, knowledge ofthese rules must be shared by the members of the relevant community orsociety” (1992: 2). The common theme of these definitions is that institutionsare considered as socially accepted constraints or rules that shape human interac-tions.

Domestic political institutions determine how much control each of the threedomestic actors – executives, legislatures, and societal – has over policy-makingprocess. In a country’s policy-making process, the relative influence of domesticactors is based on their varying degrees of control over three crucial elements ofpower: the ability to initiate and set the agenda, to amend any proposed policy,and to ratify or veto policy (Milner 1997: 18). The extent of control over thesethree elements of power determines whose preferences are likely to be morereflected in the ultimate policy choice. Constitutions often assign certain powerto each set of domestic actors. However, it is obvious that the constitutional pro-vision of power in a democratic system differs from a non-democratic system.

In a non-democratic system, legislatures are often subservient to the execu-tives. However, although executives have exclusive control over the policy-making process, policies are rarely formulated by a single person. The supportof the bureaucracy, professional military, big business, landed oligarchy, reli-gious leaders, opinion leaders, and/or a political party is usually necessary foreven autocratic leaders to implement their policies and remain in power. Thus, itis reasonable to argue that these groups can often exercise veto power over theexecutive’s policy proposals and may share power with the executives by partic-ipating in the agenda setting functions. Historical evidence suggests that evensuch autocratic leaders as Hitler, Stalin, and Franco depended on the support ofinternal groups to retain their positions and make policy.5

In many democratic countries, the executive is most often given the power toinitiate and formulate policies. Although the legislatures act as a representative

28 Explaining regional cooperation in South Asia

body, they have almost no power to initiate policy proposals. At the same time,the legislatures enjoy the power to ratify or reject the executive’s policy pro-posals. This power of ratification and rejection gives the legislature a veto powerthat executives must have to deal with in making a policy. Another issue fordemocracies is that both executive and legislative actors must be sensitive to thedemands of their constituents and effective to address those demands. Inabilityto address the societal actors’ demands is a recipe for the loss of power for thepolitical actors. It is in this context that domestic societal actors exercise influ-ence over the policy-making process. In nutshell, the executives in a democracyrequire the support of legislative actors and societal actors for the formulation ofpolicies. In non-democracies, the executives may not depend on the legislaturefor their policies. But, they do depend on professional elites and opinion leaders,military, landed elites, labor union leaders, and big business to formulate andimplement policies. In light of this argument, the strength of governmentbecomes a useful variable to explain the nature and outcome of policies, includ-ing regional cooperation policies.

The strength of government

The importance of domestic politics for the growth of regional cooperationacquires added significance when governments involved in the cooperationprocess are “weak.” In the statist literature, there has been too much emphasison the weak–strong conceptualization of states.6 A state is said to be either weakor strong on the basis of the centralization of decision-making authority. Cen-tralized institutions and single-party governments are usually the two mainattributes of strong states. Weak states, on the other hand, are associated withdivision of powers between executive and legislative branch of governments(federalism), judicial independence, coalition governments, and para-publicinstitutions. However, this institution-based categorization of states neglects therole of leadership and, thus, is clearly arbitrary and limited in scope. Not surpris-ingly, many scholars have criticized this institution-based categorization.7 Often,popular leaders are able to overcome the institutional weaknesses and pursuetheir own agendas of national interest. It is, therefore, analytically useful to dis-tinguish between institutions (i.e. constitutional arrangements) and governments(i.e. political leaders who operate within these constitutional arrangements), todetermine the ability of decision-makers to resist domestic demands and pursuetheir views of national interests.8

Thus, I have focused on the variable “government strength” in this studybecause it allows space to distinguish between institutions and the power ofpolitical leaders who constitute government. Centralization of decision-makingauthority, legislative independence, single-party system, and wide popular baseof the political leaders is some of the essential attributes of a strong government.Weak governments, on the other hand, are associated with unpopular heads ofgovernment, divisions within legislature, and/or constitutional order that limitthe power of heads of government.9 Because of their lack of broad public

Explaining regional cooperation in South Asia 29

support and social base, the leaders in weak governments are less able to designand implement policies independently without the support of dominant domesticactors.10 Thus, policymakers in weak governments are likely to remain moreresponsive to domestic opinion in order to pursue specific policies, includingregional cooperation policies. Two important reasons why policymakers in weakgovernments depend on the support of domestic actors are:

1 the latter’s ability to politicize issues, thereby making ratification and imple-mentation of regional agreements more difficult;

2 the leaders’ concern for political survival.

To insure their political survival, weak coalitions are under greater pressureto accommodate the varying demands and interests of their political opponentsthan strong coalitions. Thus, as Etel Solingen shows, weak coalitions oftenpursue more populist, nationalistic policies, and it often becomes difficult forleaders of weak coalitions to downplay regional security threat and to ignorescapegoating (blaming external enemy) as an instrument of their national pol-icies (1997: 68–100). In any intraregional negotiation, it is quite possible thatweak governments will take larger bargaining positions because they must bemore responsive to domestic demands than are leaders in strong government.Strong governments tend to have smaller bargaining positions as leaders are notforced to seek out support from various domestic actors. In this case, theleaders’ own values and beliefs will help determine the bargaining positions.Thus, while leaders in strong governments can take bolder regional cooperationinitiatives, weak governments remain tentative about taking more active regionalcooperative initiatives unless these initiatives have strong domestic support andthus are strategically important for the leaders’ to retain their political power.

Figure 2.1 captures the above arguments in a stylized way. The horizontalaxis describes the strength of governments. The vertical axis describes the natureof domestic support. The cells represent four possible types of outcomes. Ifdomestic support remains weak for regional cooperative activities, policymakersin weak governments lose enthusiasm and are unlikely to pursue further regionalcooperation policy initiatives. In such a situation, as cell A shows, the policy-makers’ regional cooperative initiatives are likely to be ambiguous, sporadic,and fragmented, leading to a stop-and-go pattern of regional cooperation, inwhich implementation of regional policies and development of regional institu-tions remain uncertain.11 Conversely, it is possible for policymakers in weakgovernments to pursue regional cooperation policy initiatives if regionalarrangements receive strong or adequate domestic support and if such arrange-ments are considered strategically important for the government’s legitimacy,leadership, and popularity (see cell D). Weak democratic governments of theUnited States and Canada have often pursued regional integration successfullybecause of the strategic importance of such integration schemes in terms ofenhancing job growth, overall economic growth, and competitiveness. As theexample of NAFTA illustrates, once the strategic importance of a regional

30 Explaining regional cooperation in South Asia

integration scheme is established, it becomes possible for the policymakers inweak governments to generate adequate domestic support for such schemes. Incontrast, as cell B shows, the absence of strong domestic support may not deterpolicymakers in strong governments to engage in regional cooperative arrange-ments. Policymakers in strong governments usually remain reasonably confidentthat a positive outcome of a regional cooperative arrangement can create synergyand turn public opinion in favor of their policy. The ideal context for the successof regional cooperation is when the government is strong and strong domesticsupport is available for regional cooperation policy initiatives (see cell C).

As suggested by the two-level game framework, the strong/weak categoriza-tion of government is useful in understanding the dynamics of domesticdecision-making. By focusing on the relative responsiveness of policymakers todomestic demands, it also sheds light on policymakers’ bargaining positions at aregional level. For example, whether or not the decision-makers are able to takea large or small bargaining position while negotiating a particular regional issuerelating to trade, or security, or social welfare can be explained by the relativestrength of their governments and domestic political environment. The domesticvariables, thus, determine what the decision-makers take to regional bargainingand the extent to which they might be able to accommodate regional interestover their own narrow national interest.

The preferences of political actors

The central argument of this book is that the preferences of both political andsocietal actors hold a key to understanding the dynamics of regional cooperationin South Asia. This argument is based on the assumption that a country’s policy

Explaining regional cooperation in South Asia 31

Domesticsupport

Government strength

Weak Strong

Weak

Strong

A B

D C

Stop-and-go (SAG)Deeper regional

cooperation initiativespossible

If strategically important forthe government, further

regional cooperation policyinitiatives possible

Deeper regionalcooperation successful

Figure 2.1 Government strength, domestic support, and regional cooperation policyinitiatives.

choices are influenced by the preferences of both political and societal actors.The strategic interaction among the actors’ preferences within a given institu-tional context determines a specific policy choice. Thus, to understand the scopeand nature of regional cooperation, it is important to understand the actors’ pref-erences and how they interact in a given institutional context.

Preferences are defined in this study as the specific policy choice that actorsbelieve will maximize their benefits – that is maximizing chances of retainingpolitical office for political actors and maximizing chances of benefits in termsof income, security, or social welfare for societal actors (Milner 1997: 15). Pref-erences, as Milner reminds us, need to be differentiated from interests:

Actors’ interests represent their fundamental goals, which change little . . ..Although all political actors may share the same interest, their policy prefer-ences will vary according to their political situation, for example, their partyaffiliation, constituency, characteristics, and so on. The same is true for eco-nomic actors. Interests are the stable foundation on which actors’ prefer-ences over policy shift as their situation and the policy area vary.

(1997: 15)

What is important to note here is that actors’ policy preferences are situation-specific and constituency-driven. Unlike interests, preferences are dynamic, andthey change as a country’s domestic political and economic conditions change.Since domestic politics influence regional politics and vice versa, it is reasonableto argue that actors’ regional cooperation policy preferences will not remainstatic for ever.

In this context, an important question to explore is: under what conditionswill political actors show preferences for regional cooperation? The answer tothis question requires an understanding of the fundamental goals and motiva-tions of political actors. The primary goal of political actors is to retain theirpolitical office, maintain or increase their power and authority. Thus, politicalactors’ preferences for regional cooperation are determined by the extent towhich regional cooperation policies serve their fundamental goals. If regionalcooperation policies enhance political actors’ prospects of retaining power orremaining in office, then these policies are likely to be enthusiastically pursued.Otherwise, political actors are likely to show little preference for these kinds ofpolicies.

In democratic political systems, the political actors need to participate in theelectoral process to achieve their “office-seeking” or “office-retaining” goals.Thus, electoral considerations motivate their policy choices. In order to maxi-mize their chances of reelection, the political actors need to worry about twoissues: the overall economy and the preferences of their domestic constituents. Ifthe general performance of the economy is good and voters are relativelycontent, it is possible that political actors will not show interest in regional coop-eration. This is because their expected marginal benefit from regional coopera-tion in terms of improved reelection chances or simply in terms of retaining

32 Explaining regional cooperation in South Asia

political power is minimal and thus not worth the cost of regional cooperation.The political cost of regional cooperation is some degree of loss of politicalautonomy in policy choices which many political leaders are unwilling to do aslong as their economies are relatively prosperous. However, if the generalperformance of the economy is not good, voters may choose to support theopposition parties in the hope that the latter can improve the situation. Thevoters’ power to reward or punish the incumbents on the basis of their perform-ance forces political actors in democracies to be concerned not only with thepolicies that benefit domestic interest groups but also with those that serve thegeneral economy.

In non-democratic political systems, political actors do not face the pressureof a regular electoral cycle to stay in power. But, in order to secure their legiti-macy and retain their power for a relatively longer period of time, they also needto be sensitive to the preferences of their domestic constituencies – for examplemilitary, bureaucracy, industrial, and landed elites, religious groups, and thegeneral health of the economy. A continuously declining economy is a recipe forsocial unrest that no political actors like to face. Thus, they would be inclined topursue policies that can improve the overall state of the economy, therebyenhancing their probability of remaining in office. This “power-retaining” moti-vation guides political actors in both democracies and non-democracies toembrace only those specific regional cooperation policies that improve theircountry’s economy and promise to bring economic benefits to their con-stituency, whose support is necessary for them to stay in power for a longerperiod of time.

In addition to “office-retaining motivation,” political actors’ preferences forregional cooperation are also shaped by the following factors. Several studiessupport the argument that the presence of externalities shape political actors’preferences for regional cooperation (Milner 1997: 42–44; Mattli 1999: 46–50).Externalities refer to unintended consequences of one country’s policies on othercountries’ economies. Milner defines externalities as follows: “When through itschoice of policies a foreign country generates costs or benefits for anothercountry that are not included in the foreign country’s calculation of the optimal-ity of the policy, we can speak of externalities” (1997: 43). Externalities can bepositive or negative. While positive externalities are beneficial for a country’seconomic growth, negative externalities are generally considered to be a burden.Several studies have shown that in issue areas like exchange rate policy, indus-trial and trade policy, and monetary policy, the presence of externalities arelikely to generate demand for cooperation among political actors (Cooper 1986;Frankel 1988; Webb 1991).

However, the effects of externalities vary from country to country anddepend on the extent of openness of a country. The more open a country’seconomy is – that is the more a country’s economy is integrated with globaleconomy – the greater the effects of externalities. In a closed economy, theeffects of externalities are difficult to determine because of several policy distor-tions by political actors. If a country is open to global economy in terms of its

Explaining regional cooperation in South Asia 33

trade, investment, and monetary exchange rate, it is reasonable to assume thatany policy change by foreign countries on these areas is likely to impact thehome country’s economies. To deal with these externalities, political actorsoften seek cooperation.

In a regional context, geographical contiguity makes the issue of externalitieseven more important. Countries in a region are affected more by externalitieswhen they share resources – such as rivers, fishing grounds, hydroelectricpower, or transport connection (rail connections). For example, the upstreamindustrial plant which discharges industrial wastes in the river thus reducing thescope for fishing downstream is said to impose an externality on the fishermen.Unilateral exchange rate policies, such as devaluation or appreciation, tariffreductions, and other trade-related polices by one country, can impose external-ity on another country in a region. The resolution of these issues requires coop-eration between the affected countries. A coordinated approach topolicy-making within a framework of regional cooperation becomes a desirablestrategy when countries in a geographically contiguous area seek to alter the pol-icies of their neighboring country to reduce the negative externalities or increasepositive externalities these policies create for them. However, it is worth notingthat countries sometimes are unwilling to cooperate because of national pride,lack of trust, political tension, the inequitable distribution of costs and benefits,and so on. Regional cooperation agreements can help to build trust amongparties by facilitating collaboration and frequent contact between politicalleaders.

Political leaders may also seek to join a regional cooperation scheme toenhance their country’s security. This motivation is based on the belief thatincreasing intraregional trade would reduce the risk of intraregional conflict. Theassociation between trade and security has been supported by several studies onEuropean integration (Milward 1984), the Association of Southeast AsianNations (ASEAN) (Anwar 1994; DeRosa 1995; Acharya 1998), and the CACM(Page 1996). The fundamental argument of these studies is that negotiationsbetween political leaders on trade issues gradually build trust that lead elites toform cross-national coalitions for subsequent collaboration. Collaborations onvarious economic activities eventually make war undesirable and enhanceregional security (Mansfield 1993: 199–217; Gowa 1994). As perceptivelyargued by the founding fathers of the European Community, Robert Schumanand Jean Monnet, economic integration would make war “materially imposs-ible,” because interlocking of steel, coal, and other strategic industries wouldleave countries unable to wage war against each other (Milward 1984).

Many scholars, however, disagree with the above argument. According tothem, regional trade policy can redistribute income and produce outcomes thatworsen intraregional security. In the case of East African Common Market,Kenya enjoyed disproportional income transfers that were created by thecommon external tariff on manufacturers. Tanzania and Uganda consistentlycomplained about this income transfers. They also feared that Nairobi wouldattract increasing concentration of manufacturing industries because of its relat-

34 Explaining regional cooperation in South Asia

ively well-developed infrastructure. Arguments about compensation for theincome transfers led to the collapse of the Common Market, the closing ofborders, and the confiscation of Community assets in 1978 (Robson 1998). Sim-ilarly, in the CACM, the dissatisfaction of Honduras over the distribution ofbenefits is cited as one of the factors for the 1969 military conflict between Hon-duras and El Salvador and the subsequent withdrawal of Honduras from theCACM (Pomfret 1997).

Thus, it seems that regional cooperation is a double-edged sword with respectto intraregional security – sometimes promoting intraregional security andsometimes worsening it. Which of the two consequences is likely to resultdepends upon the economic characteristics of the member countries. If themembers have a similar size of economy and level of economic development,regional cooperation can enhance intraregional security. But, in the case ofuneven economies, redistribution problems can arise and cause conflicts amongthe member countries. Thus, the preferences of political actors for regionalcooperation are often determined by their countries’ economic conditions.

Sometimes, intraregional security may not be the political impetus forregional cooperation. The need to unite to face a common external threat canalso serve as a driving force for regional cooperation. Typically, the regionalhegemon is perceived to be the potential threat by the small countries of theregion. For example, the formation of the Southern African DevelopmentCoordination Conference (SADCC) in 1980 was the result of a collective desireamong the small countries of the region to provide a united front against theapartheid regime in South Africa (Foroutan 1993). The GCC was established in1981 partly in response to the potential threat of regional powers like Iran andIraq (Kechichian 1985). The communist threat from Vietnam was one of thereasons for the creation of ASEAN in 1967. A major motivation of Central andEastern European countries in seeking EU membership in the 1990s is protec-tion against a perceived threat from the Russian Federation.

Thus, security considerations – either intraregional or extraregional – oftenserve as powerful motivations for political actors’ regional cooperation policypreferences (Lake and Morgan 1997). Regional cooperation, of course, has eco-nomic consequences. Sometimes the economic effects will be favorable, offer-ing political leaders positive political payoff – such as enhanced security,political legitimacy, and longer stay in power. Sometimes the economic effectswill be unfavorable, forcing decision-makers to choose non-cooperative policiesor to withdraw from cooperative agreements.

Regional cooperation agreements may allow leaders to “lock in” or bindthemselves to their preferred polices. If there is a conflict of preference betweendomestic groups and political leaders about a particular policy and the politicalleaders believe that domestic preference for a policy is not beneficial to theirpolitical interests, they may choose to “lock in” regional cooperative agreementsto prevent themselves from being forced domestically to adopt such policies.There is a circular logic involved in this strategy. For example, political leadersoften pursue economic reforms to attract more investment to their country. But,

Explaining regional cooperation in South Asia 35

investors will not invest unless they are confident that economic reforms willpersist. If a country has no track record of reform or a history of reversingreform, then investors’ confidence in the persistence of reform may be low. Inthat case, the country may not experience a steady inflow of foreign investment.In the absence of adequate investment, government is likely to face increasingdomestic pressure to reverse the reforms. To escape from this situation, leadersoften need institutions or commitment mechanisms that enable them credibly tolock in to their decisions. Regional cooperation agreements offer such commit-ment mechanisms.

Regional cooperation agreements can serve as a well-designed piece ofcommitment mechanisms in a variety of policy areas – such as economicreforms, trade liberalization, market-based exchange rate as opposed to unilat-eral exchange rate policies, democratic reforms, and security-related policies.Through regional commitments, governments of developing countries canimprove their problem of credibility gap for sustaining economic reforms.Regional cooperation schemes can also increase the credibility of commitmentsvia signaling to the private sectors that “rules of the game are now changing forgood” (Rodrik 1995: 111). Some of the examples where regional cooperationagreements have proved useful as commitment mechanism are Mexico gainingcredibility through NAFTA; Eastern Europe through accession agreements withthe EU; North Africa through association agreements with the EU; and MER-COSUR members’ commitment to democracy and free trade (Rodrik 1995:110). Despite some obvious advantages of lock-in strategies, political leaderschoose these strategies on the basis of a careful evaluation of political costs. Themost important political cost is their loss of unilateral control over a policyinstrument. Thus, in all likelihood, political leaders will choose regional cooper-ative agreements only when political costs are expected to be less than thebenefits.

The preferences of societal actors

Political actors remain the formal initiators of regional cooperation negotiations.As Evans et al. (1993: 403) observe in their comprehensive survey of two-levelgames, “There is little doubt that agenda-setting usually reflects leaders’ prefer-ences. International initiatives in direct response to constituency pressure weresurprisingly rare.” Thus, the terms and nature of regional cooperation agree-ments are largely determined by the preferences of political actors. Nevertheless,societal actors have much indirect influence on regional cooperation agreements,because their preferences often have a significant bearing on political actors’policy preferences. In one of his earlier works, The Nerves of Government(1963), Karl Deutsch provides a systematic analysis of the effect of societalactors’ feedback on the decision-makers. According to Deutsch, governmentpolicies become successful and are reinforced only when they receive a “posit-ive feedback” from the societal actors, that is, when the domestic groups reactfavorably agreeing with the decision that has been made. “Negative feedback,”

36 Explaining regional cooperation in South Asia

i.e. unfavorable domestic reactions to the government policies, has a dampeningeffect on decision-makers. For integration policies to be successful, Deutschargues, policymakers need to have positive feedback from domestic actors.

This argument is consistent with the insights from the “distributional politics”literature and a wide range of research in international political economy.According to this literature, the preferences and political pressures of societalgroups are key determinants of both foreign economic policy and internationalcooperation (Gourevitch 1986; Milner 1988; Rogowski 1989; Frieden 1991).Two reasons explain why political actors’ policy preferences are influenced bysocietal actors’ preferences. First, following the logic of two-level game, anumber of scholars agree that political actors can negotiate regional agreementson their own, but the subsequent ratification or implementation of these agree-ments require domestic groups’ support (Huelshoff 1994). Since political actorsdesire to retain their office or stay in power for long, they anticipate the reac-tions of societal groups on specific cooperation policies and generally avoidthose policies that will bring them into confrontation with dominant domesticgroups. In this sense, political actors tend to choose cooperation policies that aremore or less consistent with the policy preferences of key societal groups.

The second reason for the influence of the societal groups is related to polit-ical actors’ sensitivity to business interests (Lindblom 1977). Business groupsplay an important role in generating employment, income, and tax revenues andeven in providing “bribe money” or “campaign contributions” to politicians.Given these economic benefits, political leaders are particularly careful not topursue those policies which will undermine “business confidence” and adverselyaffect the overall economy. Instead, they anticipate business reactions to theireconomic cooperation policies and pursue those that are agreeable to the domin-ant business community. Sometimes, political actors pursue economic coopera-tion policies under the sustained pressure from business groups. The“relaunching” of European integration in the mid-1980s (Sandholtz and Zysman1989: 95–128) and the creation of NAFTA in the mid-1990s (Haggard 1995: 90)are in great part attributable to the pressure of the business community. Thus,societal groups, including business groups, may not play a direct role in regionalcooperation negotiations process. But, they play a major, often indirect, role inshaping policy-making and influencing regional cooperation.

What shapes the preferences of societal actors? In other words, are societalactors interested in all kinds of regional cooperation policies? To address thisquestion, it is necessary to understand who these societal actors are. The keysocietal actors include business and labor groups, landed elites, retired civil ser-vants and military leaders, religious leaders, professional elites, and opinionleaders – such as communication media leaders and academics. Given this com-position of societal groups, it should be clear that not all societal actors are con-cerned with all kinds of regional cooperation policies. Different issue areas willevoke the attention of different societal actors. For example, regional trade liber-alization policies might evoke the attention of different societal groups thanwould regional security policy coordination or environmental policy

Explaining regional cooperation in South Asia 37

coordination. It follows that if a group is unaffected by the policy change in aparticular issue area, that group is unlikely to become involved in the given issuearea. Thus, the policy preferences of societal groups remain issue specific andare shaped by the relative saliency of a particular issue area for the specificgroups’ self-interests.

The issue-area approach suggests that societal actors’ preferences for regionalcooperation policies are determined by their self-interests. Societal actors, likepolitical actors, seek to maximize their utility. Thus, their support for a particu-lar regional cooperation policy will be determined by their perceived utility (thatis costs and benefits) from such a policy. David Easton’s analysis of publicsupport for political institutions (1965, 1975) provides useful insights into thisutilitarian dimension of societal actors’ preferences for regional cooperation.Easton’s analysis specifies how and under what conditions utilitarian evaluationsof societal actors influence their preferences for regional cooperation.

David Easton’s model posits that public support for political institutions isbased on their affective allegiances to these institutions and their utilitarian evalu-ations of institutional outputs and performance (1975: 444–448). Deep publicaffective allegiances are an important source of legitimacy for the institutions.When affective allegiances are low or non-existent, the level of public support forthe institutions can be determined by utilitarian evaluations (Gabel 1998: 11).

According to Easton, utilitarian support refers to perceived benefits or satis-faction from governing institutions and policies. When these perceived benefitsdecline or cease, the citizens’ support to these institutions will do likewise(1975: 439). Thus, utilitarian support is not permanent or stable, and it changeswith the change in the performance of institutions. Affective support representsan allegiance, attachment, or loyalty to governing institutions and policies thatmay develop as a result of “accumulated positive utilitarian appraisals of gover-nance” (Easton 1975: 445). According to Easton, “it consists of a reservoir offavorable attitudes or good will that helps members to accept or tolerate outputsto which they are opposed or the effects of which they see as damaging to theirwants” (1975: 444). In contrast to utilitarian support, affective support does notswing much in either positive or negative direction over time on the basis ofshort-term institutional performance. Thus, it provides a stable long-termenvironment for governance.

Easton contends that these two dimensions of public support are interlinked.Affective support toward governing institutions derives from positive utilitarianevaluations of these institutions’ performance. If citizens are discontented withthe performance of these institutions over a long enough period of time, it maygradually erode their affective support.

Applied to the regional cooperation context, Easton’s model explains thatboth affective support and utilitarian support are necessary for the growth ofregional institutions. Utilitarian support for regional cooperative arrangementscan grow with the perception of mutual economic and political benefits (forexample increased standard of living or a guarantee of peace). This perception ofmutual rewards and gains will, in turn, enhance peoples’ affective support,

38 Explaining regional cooperation in South Asia

which is related to their shared values, attachment, sympathy, trust, confidence,and loyalty to a regional organization and its institutional arrangements. Thus,Easton’s focus on the interlinked aspect of utilitarian and affective support pro-vides a useful explanatory tool to examine the societal actors’ preferencestoward the growth of regional cooperation.

Several previous studies have applied the Eastonian model to the EU context.Lindberg and Scheingold (1970) found that the strongest basis of support for theEuropean Community was utilitarian. Using the reasoning of game theorists,Lindberg and Scheingold (1970) argued that utilitarian support for Europeanintegration was based on the perception that involved parties were likely to gainmore by cooperation than by an independent or non-cooperative stance. Theirstudy concluded that although weaker in comparison with utilitarian support,levels of affective support were sufficiently high to provide a “permissive con-sensus” in favor of European integration. Because of the existence of permissiveconsensus, “National and (European) Community decision-makers can expect tooperate relatively freely without encountering significant opposition” (Lindbergand Scheingold 1970: 252–260). Later studies have confirmed a pervasive andstable level of affective support for European integration (Shepherd 1975; Slater1983: 74; Smith 1993: 72–76). More recent empirical studies, however, havechallenged these findings. Matthew Gabel (1998), for instance, has found lowaffective support for EU and argues that citizens’ utilitarian appraisal of theimpact of the Union on their individual welfare will remain a crucial determi-nant of their preference toward European integration. While the debate on theaggregate-level domestic support for EU continues, there is a convergence ofopinion among many scholars of European integration that a systematic exami-nation of domestic support along the utilitarian and affective dimension remainsa useful method to explain the scope and speed of integration in Europe.

In this study, I adopt the Eastonian model of public support to examine theaffective and utilitarian preferences of South Asian societal actors toward thegrowth of regional cooperation in South Asia. However, unlike European Union,where Easton’s model has been extensively employed by many scholars to studypublic opinion, I have restricted the scope of this study to the examination ofelite preferences for the growth of regional cooperation in South Asia for pri-marily two reasons discussed in the next section of this chapter.

Preference-based approaches have been employed by many scholars topredict domestic support for and opposition to European integration. I contendthat with some modification, this preference-based approach can explain thescope and speed of regional cooperation in other regions, including South Asia.In the past, scholars of regional integration have focused their analysis either onsocietal actors’ preferences (public opinion literature) or on political actors’preferences (intergovernmentalism; neo-functionalism) to explain the dynamicsof regional integration. This study seeks to move beyond the earlier work bycombining political actors’ preferences with those of societal actors. By sodoing, this study acknowledges the interdependence among political and societalactors in policy-making toward regional cooperation.

Explaining regional cooperation in South Asia 39

Understanding regional cooperation in South Asia

As reviewed above, scholars of regional integration, international relations, andcomparative politics have offered various useful perspectives as to why, when,and how regional cooperation is possible. In what follows, I discuss how thesetheoretical arguments can be applied to the study of regional cooperation inSouth Asia. The central assumption of this study is that regional cooperation is aprocess of action, that is, initiatives by governmental actors, and reaction, that is,support or opposition to those policies by domestic societal actors. Focusing oneither governmental actors or societal actors captures only one aspect of regionalcooperation, leading to an unnecessarily restricted view of the process. On thebasis of this assumption, this book advances the following arguments that willbe elaborated and examined in the following chapters.

First, consistent with Pentland’s (1973) discussion on issue areas, I argue inthis study that South Asian countries’ regional cooperation policy does notexclusively fall in the realm of the traditional domestic or foreign policy areas.Rather, it falls in the category of community policy issue areas, possessing somecharacteristics of both the domestic and the foreign policy issue areas. It is inthis context that the domestic political economy and the preferences of variousdomestic actors (both political and societal) for the formulation and implementa-tion of regional cooperation policies acquire significance and thus must beunderstood in order to explain adequately the process of regional cooperation inSouth Asia.

Second, based on Putnam’s (1988) framework, I argue that regional coopera-tion is a two-level process in which domestic support and regional bargains andnegotiations must overlap if cooperation is to proceed (Putnam 1988). Attemptsto achieve regional cooperative agreements involve bargaining and negotiationsamong governmental actors in various issue areas. But, domestic support isessential for implementation of these negotiated agreements. Policymakersknow this, and hence, when negotiating regionally, they always anticipatedomestic reactions. The larger the domestic win-sets, the greater the possibilityof a successful agreement; the smaller the win-sets, the more likely that the poli-cymakers will be reluctant to conclude an agreement. Thus, policymakers’ antic-ipation and calculation of the size and nature of domestic win-sets largelydetermine their scope of bargains and negotiation on various regional issues.

In case of South Asia, the two-level game framework provides useful insightsfor understanding South Asian countries’ interstate relationships. What kind ofdomestic constraints or opportunities, along with international ones, do theSouth Asian governments face in pursuing policies of cooperation with theirneighbors? How do South Asian governments use external threats at home?How do issues of macroeconomic compatibility or incompatibility weigh on theprocess of regional cooperation among South Asian countries? In case of theexistence of narrow win-sets for a specific regional cooperation agreement, arethere ways of expanding the win-set during the regional cooperation negotiationprocess? The answer to these questions requires an understanding of the South

40 Explaining regional cooperation in South Asia

Asian countries’ domestic political and economic dynamics and their link tointernational and regional factors. Understanding this linkage is essential toexplain the prospects for regional cooperation in South Asia.

Third, external factors, outside pressure for opening domestic markets,private capital flows, and country’s degree of economic openness criticallyaffect leaders’ political calculations about deeper regional cooperation policyinitiatives. But, external factors alone are not enough. Growth of regional coop-eration is also critically dependent on the nature of domestic institutional struc-ture and strength of the government. When the governmental actors enjoylegislative autonomy and are relatively well insulated domestically, they canafford to pursue bold and accommodative regional policies. Conversely, a weakgovernment may force governmental actors to pursue more nationalistic anddomestically oriented policies, with regional cooperation initiatives a primecasualty. It is, therefore, important to understand the nature of domestic institu-tions and the strength of the government, in order to explain why states do or donot deepen regional cooperation initiatives.

In light of this argument, this book examines the institutional structures andthe strength of the governments in South Asia. South Asian countries experiencevarious kinds of political systems – democratic, authoritarian, and quasi-democratic political systems. As discussed in Chapter 5, almost all South Asiangovernments have suffered from considerable weakness in terms of their polit-ical leaders’ narrow political base and lack of legislative autonomy since 1990s.Given the weakness of their governments, political leaders are likely to pursuemore domestic-oriented policies, making regional accommodation a difficultgoal.

Fourth, under what conditions will political actors show preferences forregional cooperation that involves coordinating policies with another country?The answer to this question requires an understanding of the fundamental goalsand motivations of political actors. The primary goal of political actors, as dis-cussed above, is to retain their political office, maintain or increase their powerand authority. Thus, political actors’ preferences for regional cooperation aredetermined by the extent to which regional cooperation policies serve their fun-damental goals. If regional cooperation policies enhance political actors’prospects of retaining power or remaining in office, then these policies are likelyto be enthusiastically pursued. Otherwise, political actors will show little prefer-ence for these kinds of policies. In addition, externalities, intraregional andextraregional security consideration, and lock-in are the main motivations thatshape political actors’ preferences toward regional cooperation.

To what extent do regional cooperation policies serve the power-retainingobjectives of South Asian political actors? What is the overall impact of regionalcooperation policies on the economy of South Asian countries? Given their geo-graphical contiguity and the fact that they share water and land resources, SouthAsian countries have to deal with externalities on a continuous basis. In fact,many experts believe that regional cooperation in South Asia can be useful for anumber of issues facing South Asian countries – such as natural disasters,

Explaining regional cooperation in South Asia 41

destruction of ecosystems, pollution, droughts, irrigation, fishing, transportationbottlenecks, equitable water sharing, hydroelectricity generation, and energyissues. According to many outside observers, regional cooperation is likely tohelp South Asian countries to effectively deal with these issues by increasingtrust between policymakers and by embedding the issues in wider negotiationswhere trade-offs are more feasible and agreements easier to reach. Do SouthAsian policymakers share these beliefs or they find themselves unwilling tocooperate because of national pride, political tensions, lack of trust, and theasymmetric distribution of costs and benefits?

Another issue of critical importance for regional cooperation in South Asia isintraregional and extraregional security considerations among South Asianleaders. One of the main contributions of the realist scholars has been theemphasis on the security dilemma and how it serves to aggravate intraregionalsecurity environment, thereby weakening regional cooperation efforts. Thisstudy explores to what extent security dilemma, particularly between India andPakistan, has been a crucial barrier to effective regional cooperation in SouthAsia. Another underlying assumption in the realist literature that shapes prefer-ences of political actors for regional cooperation is the need for extraregionalsecurity, that is, the need to unite to face a common external threat. The poten-tial threat can come from a regional hegemon or other extraregional power.Given this line of reasoning, this book advances the argument that the potentialfor regional cooperation in South Asia will greatly improve when intraregionaland extraregional sources of insecurity are eliminated in the region.

Another source of motivation for political actors to pursue regional coopera-tion policies is the potential of regional cooperation agreements to help lock inor to create a commitment mechanism for trade liberalization and economicreforms policies. To what extent regional cooperative arrangements have facilit-ated trade liberalization policies in South Asian countries? Has regional cooper-ation proved useful for political actors as a lock-in mechanism for thecontinuation of economic reforms in South Asia? Has regional cooperationfacilitated an increase in intraregional trade among South Asian countries?These questions are addressed in the following chapters with a focus on thedomestic political and economic dynamics of South Asian countries.

Based on the insights from the “distributional politics” literature, this bookargues that while political actors negotiate regional agreements, their prefer-ences for specific regional cooperation policies are influenced by the preferencesof societal actors. The “power-retaining” motivation of political actors forcesthem to anticipate the reactions of societal groups on specific cooperation pol-icies and avoid those policies that will bring them into confrontation withdominant domestic groups. In this sense, political actors tend to choose coopera-tion policies that are more or less consistent with the policy preferences of keysocietal groups.

Following David Easton’s theory of public support, this study argues thatpreferences of key societal actors for specific regional cooperation policies arebased on their utilitarian evaluation of and/or affective allegiances toward

42 Explaining regional cooperation in South Asia

regional cooperation agreements. While utilitarian preferences are determinedby their perception of benefits – economic, security, social welfare, and so on –from a specific regional cooperative arrangement, affective allegiances are basedon their shared values, attachment, sympathy, and trust toward a regional organi-zation. Several empirical studies in the context of EU show that examining thelevel of utilitarian and affective support provides a useful explanation in under-standing the scope and speed of integration.

Based on this understanding, the present study seeks to examine the nature ofdomestic support along the utilitarian and affective dimensions for regionalcooperation policies in South Asia. However, in exploring the nature ofdomestic support toward regional cooperation in South Asia, this study hasfocused on elites. My decision to focus on elites rather than mass publics isbased on two specific assumptions. First, in a region where almost half of thepopulation lacks formal education, knowledge of regional cooperation issues isextremely limited. South Asian mass publics are generally uninformed andunconcerned about regional cooperation. Thus, to explore preferences for avariety of complex regional cooperation policies, it is necessary to target edu-cated and well-informed elites such as business groups, labor union leaders, reli-gious leaders, retired civil servants, and opinion leaders – academics, massmedia. Second, elites in South Asia have greater potential to influence indirectlythe course of government policy. As opinion leaders, these elites have the capa-bility to politicize issues, mobilize masses, and even increase saliency of aparticular issue by means of debates, media writing, and discussion. Hence, theperspectives of these elite groupings are of particular significance for gaugingtrends in policy formulation.12

In the context of examining the nature of elite opinion, it is useful to under-stand the elite structure of South Asian countries. The elite structure of India andSri Lanka can be described as pluralistic. In such a system, political decision-making is more often a case of bargaining among functional elites than one inwhich a single elite imposes its will on others. While governing elites aredirectly responsible for policy through initiation, legislation, and administration,other functional elites – opposition political leaders, business, or labor leaders orthe communication media or religious leaders – may play a less direct role inpolicy-making. Sometimes, they act as interest groups lobbying to secure certaingoals; at other times, they act as veto groups who must be placated before agiven policy can be implemented. In order to understand why a particular policyis adopted in India and Sri Lanka, it is usually necessary to know what pressureswere put on decision-makers by such interest groups. It is in this sense thatunderstanding domestic elites’ preferences becomes useful.

The elite structure of other SAARC member countries – Pakistan,Bangladesh, Nepal, Bhutan, and Maldives – remains tightly integrated to avarying degree, where few functional elites – notably, the military, bureaucrats,industrial, and landed elites and religious leaders – have access to power andwealth. In such a system, a leader may enjoy more autonomy in the policy-making process. Even then, it will be unreasonable to assume that a leader

Explaining regional cooperation in South Asia 43

initiates and implements single-handedly policy measure to keep an entirecountry functioning. A leader must rely upon associates comprising variousfunctional elites who tell him what the major problems are, offer informationand advice, suggest solutions, and assist in carrying out decisions. The numberof these elite groupings surrounding the leader is few. But, typically, these fewelite groupings, as Karl Deutsch et al. (1957) reminds us, have a support base onwhich the leader must depend in order to expand his own support base for legiti-macy and retaining power. Hence, it is useful to examine the perspectives ofthese elite groupings to understand trends in policy formulation.

44 Explaining regional cooperation in South Asia

3 Regional dynamics

Geographically, South Asia is easily demarcated. It is bounded on the north,northwest, and the northeast by the Himalayas and its sub-ranges. The vastexpanse of the Indian Ocean, with the Arabian Sea to its west and the Bay ofBengal to its east, marks off the region from the rest of the world. The regionhas one of the largest alluvial soil systems of the world formed by three greatrivers, the Indus, the Ganges, and the Brahmaputra. The eight countries of thisregion – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,and Sri Lanka – share common rivers, mountain systems, oceans, and ecologicalcycles. Except for narrow water corridors between the subcontinent and SriLanka and Maldives, the whole region is a contiguous land mass without anynatural barriers between the countries. In addition to geographic contiguity, theeight countries in South Asia share a common colonial past, historical ties, reli-gious and cultural traditions, linguistic affinities, and values and social norms.

These commonalities should have provided a solid ground for regional coop-eration among South Asian countries. But, the growth of regionalism – theefforts to build institutions to foster regional cooperation – has been notablyabsent in South Asia in the post-independence period, leading one observer tocomment that South Asia has been “a region without regionalism” (Lyon 1992:126). What explains the lack of growth of regionalism in South Asia? Thischapter seeks to answer this question by exploring the nature of interstate rela-tionships among five original SAARC member countries: India, Pakistan,Bangladesh, Nepal, and Sri Lanka. It first identifies major characteristics ofeach state that affect their policies toward the neighboring countries and coun-tries outside of the region. It, then, examines the influence of history, whichplays a significant role in defining the South Asian countries’ regional diploma-cies. In addition to history, it examines other features of the structure of theSouth Asian regional system – religious affiliations, ethnic relations, state cap-abilities, Indo-centric geography, and leaders’ contrasting conception of theirstate’s relative roles – that affect their relationships. The Indo-Pakistan rivalryand the implications of security dilemma for the entire region are examined.This chapter also examines how the smaller states are affected by their relationswith their larger neighbors and how these relations create opportunities andchallenges for their leaders. Finally, this chapter explores the implications of

the relations between South Asian states and extraregional powers for the SouthAsian region.

South Asian states – differences and shared characteristics

The South Asian region is Indo-centric. India is at the center of the SouthAsian system, sharing frontiers with every country in the region. While all thecountries in South Asia share borders with India, none of them shares borderswith one other except for Pakistan and Afghanistan. India is the world’ssecond most populous country with more than one billion people and isexpected to surpass China’s population in 2025. It occupies over 3,288,000square kilometers, which is four times larger than the next big state in SouthAsia – Pakistan. India is a thriving multiethnic democracy with 29 states andsix union territories. It has more than 16 officially recognized languages and200 other languages and dialects. Constitutionally secular, India is a home toall major religious faiths of the world – Hindus (80.5 percent), Muslims (13.4percent), Christians (more than 2 percent), Sikhs (2 percent), Buddhists (1percent), and Jains (less than 1 percent). In terms of population, size, naturalresources, military power, and industrial capability, India is enormous com-pared to its neighbors (see Table 3.1).

Pakistan is the second most important state of the region in terms of popu-lation, size, military power, and industrial capability. It occupies over 796,000square kilometers with some 150 million people. Although created as a Muslimstate as a result of the partition of the subcontinent in 1947, Pakistan is a multi-ethnic state with at least five regional languages. Unlike India, however, Pak-istan has been ruled by the military in the vice-regal tradition for most of itsexistence. For a brief period in early 1970s and more than a decade in late 1980s(1988–99), Pakistan experienced a “quasi-democracy,” where political leaders,despite their victory in parliamentary elections, remained critically dependent onthe support of the military and bureaucracy for foreign and domestic policies.Since 1999, there has been once again a military rule in Pakistan.

Bangladesh, formerly East Pakistan, became an independent state in 1971 bybreaking away from Pakistan after a prolonged civil war over issues ofrepresentation, economic policies, and language issues. Situated at the mouths ofthe great Brahmaputra and Ganges rivers, Bangladesh occupies about 144,000square kilometers (seven times less than Pakistan’s total size) with a populationof more than 144 million (nearly the same number of people as Pakistan).Unlike India and Pakistan, however, Bangladesh is culturally relatively homo-geneous with nearly everyone speaking Bengali. About 88 percent of its popu-lation are Muslims, 11 percent are Hindus, and 1 percent are Christians andothers. Following its independence in 1971, Bangladesh was governed for fouryears by the charismatic Sheikh Mujibur Rahman. After his assassination by agroup of army officers in 1975, the army generals ruled the country for 15 years.Since 1991, there have been parliamentary elections at regular intervals with twopolitical parties – Awami League and Bangladesh Nationalist Party (BNP) –

46 Regional dynamics

Tab

le 3

.1K

ey in

dica

tors

of

SA

AR

C m

embe

r co

untr

ies

Ban

glad

esh

Bhu

tan

Indi

aM

aldi

ves

Nep

alP

akis

tan

Sri L

anka

1 A

rea

(tho

usan

ds o

f sq

uare

km

)14

447

3,28

80.

3014

179

666

2 P

opul

atio

n (m

illi

ons)

, 200

413

90.

896

1,08

00.

321

2715

219

3 G

NP

per

cap

ita

(US

$), 2

004

440

760

620

2,41

025

060

01,

010

4 G

DP

per

cap

ita

annu

al g

row

th r

ate

(%),

(20

03–0

4)4.

32.

35.

48.

11.

43.

94.

55

Tot

al e

xter

nal d

ebt (

mil

lion

s of

US

$), 2

004

20,3

4424

512

2,72

331

63,

332

32,5

6610

,061

6 T

otal

deb

t ser

vice

as

% o

f ex

port

of

good

s an

d se

rvic

es (

2004

)5.

24.

614

.9a

4.5

5.5

21.2

8.5

7 C

urre

nt a

ccou

nt b

alan

ce (

mil

lion

s of

US

$), 2

004

–279

–20.

36,

853

–10.

519

7–8

08–6

488

Str

uctu

re o

f ou

tput

(%

of

GD

P),

200

4(a

) A

gric

ultu

re21

38.2

b21

16.4

b40

2218

(b)

Indu

stry

2736

.5b

27.0

18.4

b23

25.0

27.0

(Of

whi

ch M

anuf

actu

ring

)(1

6.0)

(11.

6)(1

6)(6

.5)

(9.0

)(1

8.0)

(15.

0)(c

) S

ervi

ces

5225

.4b

5264

.7b

37.0

53.0

55.0

9 F

orei

gn tr

ade

(a)

Impo

rts

of g

oods

and

ser

vice

s (%

of

GD

P),

200

421

60b

2376

b31

1546

(b)

Exp

orts

of

good

s an

d se

rvic

es (

% o

f G

DP

), 2

004

1630

b19

93b

1816

3610

Gro

ss d

omes

tic

savi

ngs

as %

of

GD

P (

2004

)31

37.9

b23

–27

2319

11 A

rmed

for

ces

pers

onne

l (th

ousa

nds)

251

–2,

617

–13

192

123

9

Sou

rces

: Wor

ld B

ank,

Wor

ld D

evel

opm

ent I

ndic

ator

s 20

06.

Not

esa

2002

figu

reb

indi

cate

s da

ta f

or 2

000.

– in

dica

tes

non-

avai

labi

lity

of

data

.

dominating the political landscape. These parliamentary elections have broughtcivilian governments to power in Bangladesh, with the military back in the bar-racks.

Situated at an important Indian Ocean crossroad, Sri Lanka is an island stateand is separated from India by a narrow 20-mile Palk Strait. It has a populationof 20 million people and an area of 65,000 square kilometers. It has a morevaried and cosmopolitan population than Nepal or Bangladesh, with Buddhist(mostly Sinhalese, 70 percent), Hindus (Tamils, 15 percent), Christian (8percent), and Muslim (7 percent). Until independence in 1948, Sri Lanka wasdirectly ruled from London as a Crown Colony. Sri Lanka is the only country inAsia which has had universal adult franchise since 1932. Historically known forits robust electoral democracy, the country’s government has been dominated bya two-party system until the 1970s and multiparty system since then. Since themid-1970s, the country has plunged into one of the world’s most intractablecivil conflicts between Sri Lanka’s Tamils minority in the northern and easternparts of the island and Sinhalese majority in other parts of the country. Given thedomestic compulsions driven by natural sympathy of its Tamil populationmostly from Tamil Nadu, geographical proximity, and the concern for regionalpeace and security, India has been drawn into Sri Lanka’s civil conflicts as amajor player.

Nepal is a landlocked country, occupying 141,000 square kilometers. Nepal’slocation along the 16,000 kilometers of frontier dividing India and China hasmade it strategically important for India. It has a population of about 25 millionout of which 90 percent are Hindus, 5 percent are Buddhists, 3 percent areMuslims, and 2 percent are Christians and others. Nepali is recognized as offi-cial language, but its people speak many other languages and dialects. Until1990, the country was run by an autocratic king under a system of governanceknown as the panchayat. Although touted as a representative system, the pan-chayat system in reality comprises a cluster of like-minded undemocratic politi-cians who were primarily chosen by the king and obeyed the will of the king. In1990, following months of popular unrest and agitation, King Birendra, on thethrone since 1972, finally gave in to popular demands to create a democraticstate with elected representatives rather than king’s chosen upper caste and classelites. But, Nepal’s political leaders were unable to manage complexities ofdemocratic governance. In particular, the leaders were unable to forge effectivepolitical alliances with other parties to form politically stable governments. Con-sequently, Nepal had 14 governments from 1991 to 2001. From 1996 until 2001,Nepal experienced a civil war between Maoist groups and the various govern-mental forces. In 2001, Nepal returned to a monarchical rule under King Gya-nendra when King Birendra’s entire royal family was massacred by his son andCrown Prince Dipendra.1 However, the monarchical rule of King Gyanendrawith a government of unqualified cronies and demoralized army unable to main-tain Nepal’s peace and stability came to an end in 2006 as a result of months ofpopular protest. Since then, parliamentary democracy has been restored, andthere has been a multiparty government in power in Nepal.

48 Regional dynamics

Shared characteristics

Although different in the nature of their political systems and regimes, size,population, economy, and military power, South Asian states also share certaincharacteristics. More than half of the world’s poor live in this region. Per capitaincome, despite some improvements in recent years, still remains very lowamong South Asian countries. As shown in Table 3.2, even after five decades ofindependence, over 28 percent of the total population in India, 32 percent inPakistan, 49 percent in Bangladesh, 30 percent in Nepal, and 25 percent in SriLanka live below the poverty line. More than 52 percent Indians, 74 percentPakistanis, 82 percent Bangladeshis, 68 percent Nepalis, and 41 percent SriLankans survive on less than two dollars per day. In these countries, infant mor-tality rates are among the highest in the world and life expectancy at birth is just63 years on average. Almost 50 percent of children under five suffer from mal-nutrition. In South Asia, the incomes and consumption levels are highly skewed,with the rich enjoying a disproportionate amount of resources. As summarizedin Table 3.2, other social statistics such as literacy rates (except for Sri Lanka),availability of doctors and medicines, drinking water, and other sanitary levelsalso indicate the widespread existence of poverty in South Asia.

All South Asian countries have experienced high rates of population growthduring the past four decades. While the population density at the global level isabout 49 persons per square kilometer, it is 1,069 in Bangladesh, 300 in SriLanka, 363 in India, 186 in Nepal, and 197 in Pakistan (World Bank WorldDevelopment Report 2006). With an annual average growth rate of little lessthan 2 percent, the population in the region is likely to account for almost aquarter of the world’s population by 2010. The rapid increase in populationduring the past decades has led to an adverse dependency ratio in the SouthAsian countries. The ratio of population in the dependent age group (between0–14 and 60 years and above) is 95.4 percent in Bangladesh, 90.1 percent inPakistan, and 82.7 percent in Nepal, in comparison with 64.7 percent globallyand only 11.7 percent in the United States.

While the economies of the East Asian newly industrializing countries(NICs) (Hong Kong, Singapore, South Korea, and Taiwan) grew annually at anaverage of 9.0 percent and the ASEAN-4 (Indonesia, Malaysia, Philippines, andThailand) at 7.0 percent, the South Asian countries achieved a modest annualgrowth rate of 4.6 percent during the past three decades (World Bank WorldDevelopment Report 1991: 39). Both the industrial growth rates and the agricul-tural production of the South Asian countries remained low during the 1980s, incomparison with East Asia and ASEAN countries (World Bank World Develop-ment Report 1991: 38, 41). The slow growth rate in South Asian economy canbe attributed to the import-substitution development strategy of these countriesduring the 1970s and 1980s. The increasing debt-burden of all the countries,which has further contributed to the slow growth of economy, certainly is aserious obstacle to human development in the region.

Dualism and uneven economic development have been the dominant feature

Regional dynamics 49

Tab

le 3

.2S

ocio

-eco

nom

ic p

rofi

le o

f S

AA

RC

mem

ber

coun

trie

s

Ban

glad

esh

Indi

aN

epal

Pak

ista

nSr

i Lan

ka

1980

2004

�19

8020

04

�19

8020

04

�19

8020

04

�

1980

2004

Pop

ulat

ion

dens

ity

(peo

ple

per

squa

re k

m)

656

1,06

923

136

310

218

610

719

722

630

0A

vera

ge a

nnua

l pop

ulat

ion

grow

th r

ate

(%)

2.5

2.1

2.2

1.7

2.1

1.8

2.8

2.1

1.3

1.0

Lif

e ex

pect

ancy

at b

irth

(ye

ars)

, 200

449

6354

6348

6255

6568

74In

fant

mor

tali

ty r

ate

(per

1,0

00 li

ve b

irth

s)12

956

113

6213

359

105

8035

12P

hysi

cian

s pe

r 1,

000

0.12

0.3

0.37

0.6

0.03

0.2

0.29

0.7

0.14

0.5

Pop

ulat

ion

belo

w th

e po

vert

y li

ne (

nati

onal

%)

–49

.8–

28.6

–30

.9–

32.6

–25

Pop

ulat

ion

per

capi

ta in

com

e (l

ess

than

$2

a da

y) (

%)

–82

.8–

52.4

–68

.5–

73.6

–41

.6M

alnu

trit

ion,

in c

hild

ren

unde

r ag

e 5

(%)

48–

4838

30F

emal

e ad

ult l

iter

acy

rate

(%

age

s 15

and

old

er)

1731

2748

735

1435

7989

Mal

e ad

ult l

iter

acy

rate

(%

age

s 15

and

old

er)

4050

5573

3763

4062

9192

Inco

me

Dis

trib

utio

n (s

hare

of

poor

est q

uint

ile

in n

atio

nal

cons

umpt

ion

or in

com

e %

)–

9.0

–8.

9–

6.0

–9.

3–

8.3

Acc

ess

to im

prov

ed w

ater

sou

rce

(% o

f po

pula

tion

), 2

002

–75

–86

–84

–90

–78

Acc

ess

to im

prov

ed s

anit

atio

n fa

cili

ty, 2

002

–48

–30

–27

–54

–91

Def

ores

tati

on (

aver

age

annu

al %

of

tota

l lan

d m

ass)

a–

0.1

––0

.4–

1.6

–1.

7–

1.2

Offi

cial

dev

elop

men

t ass

ista

nce

($ m

illi

ons)

1,28

11,

404

2,19

269

116

342

71,

183

1,42

139

051

9F

orei

gn d

irec

t inv

estm

ent,

net i

nflow

s (%

of

GD

P)

0.05

0.8

0.04

0.8

0.02

0.0

0.27

1.2

1.07

1.2

Hum

an D

evel

opm

ent I

ndex

(H

DI)

– W

orld

Ran

king

b(2

003)

0.36

40.

520

0.43

80.

602

0.33

30.

526

0.38

60.

527

0.64

90.

751

Sou

rces

: Wor

ld B

ank,

Wor

ld D

evel

opm

ent I

ndic

ator

s 20

06; U

ND

P H

uman

Dev

elop

men

t Rep

ort,

2006

.

Not

esa

Neg

ativ

e nu

mbe

rs in

dica

te in

crea

se in

for

est a

rea.

bH

uman

Dev

elop

men

t Ind

ex R

epor

t, 20

05 (

2003

and

198

0 tr

end

data

giv

en).

of South Asian economies. Vast disparities exist between different regions anddifferent strata of population in the same region in South Asia. The metropolisesof South Asian countries have more economic, cultural, and social linkages withthe industrialized world than with their own hinterlands. “Enclaves” of modernindustries and urban living are found in all countries of South Asia.

Regional imbalances are also common features of South Asian countries. Thewestern states of India are more developed than the eastern states of Bihar,Bengal, and Orissa. The per capita incomes in Punjab, Maharashtra, and Gujaratare much higher than in the three eastern states. The northeastern states ofAssam, Manipur, Tripura, Nagaland, and Meghalaya have almost no industries,and their per capita incomes are far below the national average. In Pakistan,Punjab is far more prosperous than Sind, Baluchistan, and North West FrontierProvince. While Karachi and Lahore have been extensively industrialized andcommercialized, the rest of the country suffers from lack of industrialization.The capital cities, Dhaka in Bangladesh and Kathmandu in Nepal, are qualita-tively different from the rest of the country. Such regional imbalances often con-tribute to social and political tensions in South Asian countries.

South Asia has an integrated environment. Three major rivers and their tribu-taries – Ganges, Indus, and Brahmaputra – flow through India, Pakistan,Bangladesh, Nepal, and Bhutan. Majority of South Asian countries share theHimalayan ecosystem, and all of these countries share common ecologicalcycles. The rapid increase in population has put enormous pressure on thisecosystem. In recent years, there has been an increase in natural disasters inSouth Asia, bringing untold miseries to millions of people. The increase in thefrequency of natural disasters in South Asian region are due to the break downof the Himalayan ecosystem caused by extensive deforestation. Unless all thecountries in South Asia make collective efforts to protect the ecosystem,environmental disasters are likely to continue.

In recent decades, there has been an increase in ethnic polarization andsocial conflicts in South Asia. The Tamil militancy and Sinhalese violence inSri Lanka, terrorist activities in Kashmir and northeast regions in India, anti-mohajir violence in Karachi, tensions in Sind and Baluchistan, and, above all,communal violence in India, with some spill over effect in Pakistan, andBangladesh have adversely affected the interstate relationships in South Asia.As discussed in detail in Chapter 5, in all the states of South Asia, there areethnic groups who have close relatives in the neighboring states. This explainshow ethnic conflicts in one country affect ethnic politics of its neighbor. Atleast three factors can be identified that have contributed significantly to theincreasing ethnic violence in South Asia: large-scale unemployment resultingfrom the slow growth of economy and population explosion; uneven develop-ment in each country, which has led some ethnic and linguistic groups tobelieve that they have been marginalized from the process of development anddenied the benefits of economic growth; and gradual erosion of credibility ofthe state and other political and legal institutions. A combination of populistand repressive policies of South Asian ruling elites have alienated some ethnic

Regional dynamics 51

groups and contributed to growing social rifts and violence in South Asiansocieties.

Given the shared characteristics of the South Asian societies and similarproblems facing the governments of these countries, it is reasonable to arguethat some sort of collective efforts would have been mutually beneficial toaddress the nation-building issues in South Asia. But, instead, political leadersof these countries drifted away from each other because of their insecurity andfear of India’s domination. Since independence, the political leaders of SouthAsian countries have actively sought external assistance to offset the power ofIndia. The intense rivalry between the two principal states in South Asia – Indiaand Pakistan – has a profound impact on the nature of interaction among SouthAsian countries. In fact, it is fair to say that the subcontinental rivalry betweenIndia and Pakistan has shaped the most consequential relationship in South Asia.

The influence of history

History has deeply influenced the interrelationship of the South Asian countries.With a five millennia old heritage, South Asian history is complex and open tomany interpretations. For the purpose of this chapter, however, some majorhistorical developments with a direct bearing on the shaping of interstate rela-tions in South Asia are briefly discussed here. From the beginning of the Secondmillennium BC, periodic migrations of tribal communities from Afghanistan andCentral Asia to the fertile plains of the northern part of the Indian subcontinentcontributed significantly to the region’s emerging socioeconomic structure. TheSouth Asian societies grew constantly with the absorption of new kinds of socialorganizations and methods of economic production introduced by the migrants.

Gradually, with the settling down of the agrarian communities across theplains of the Indus and the Ganges, different types of local polities emerged inthe region. The local polities were governed by clans of warrior elites who con-trolled rights over land and appropriated the agricultural surplus. Subsequently,social conflicts and warfare between the local polities led to the formation ofregional states by the middle of the First millennium BC. Either a chieftain or adominant kinship group controlled the power structure of the local polities andthe regional states. Both monarchical and republican systems of administrationwere prevalent during this period. With the passage of time, the monarchicalsystem became dominant form of macro-political organization. At the micro-level, however, different communities and tribal groups continued to exercise asubstantial measure of self-rule through popular assemblies known as sabha andmore select gatherings known as samiti (Bose and Jalal 1998: 15).

By the Third century BC (322 BC), a few years after Alexander the Great’sbrief foray into northwestern India, a subcontinental polity was established forthe first time in South Asia under the Hindu king Chandragupta Maurya. TheMaurya empire achieved a far-flung reach under the reign of ChandraguptaMaurya’s grandson, Ashoka (268–231 BC), who expanded the empire beyondSoutheast Asia. Under Emperor Ashoka’s patronage, Buddhism spread to East

52 Regional dynamics

and Southeast Asia, Central Asia, and Ceylon. During their rule, the Mauryakings developed a centralized bureaucracy and an intricate network of spies andinformants to maintain domination over their far-flung empire. As RomilaThapar (1966: 91) observes, a high degree of central control over revenue wasnecessary to support a vast army or subsidize imperial enterprises.

The nature of Indian statecraft, political and social organization under theMauryan empire are discussed in Kautilya’s Arthashastra, which literally means“science of wealth” but reads like a manual for the kings in the same way asMachiavelli’s Prince. The Arthashastra, written about the same time as Thucy-dides’s The Peloponnesian Wars and Sun Tzu’s Art of War, is no longerregarded as a unitary text by historians of Ancient India. It is, however, an influ-ential, entirely indigenous political text, comparable to the writings of Aristotleand Plato (Schwartzberg 1992: 254–261; Cohen 2001: 10). It offers manyimportant insights on the doctrine and practice of Mauryan kings’ foreignpolicies.

One of the important foreign policy doctrines of Mauryan empire asdescribed in Kautilya’s Arthashastra is based on the mandala, which literallymeans a circle or ring. According to this doctrine, a state is surrounded by acircle or ring of 12 neighbors: some allies, some enemies, and some neutrals. Inthis mandala of existence, a state’s immediate neighbors are likely to be theenemy; beyond that ring are a number of potential allies (who are the enemy’senemy) and so forth. Kautilya describes a range of six types of foreign policyoptions for a ruler based on this circular arrangements of states: agreement withpledges (peace), offensive operations (war), threats to the enemy, indifference(neutrality), subordination within an alliance, and “duplicity,” or the dual policy,that is, forming an alliance with one power while making war against another.An underlying assumption of the mandala doctrine is the justification of militarystrength of a state to achieve balance of power in a regional system. These prin-ciples of statecraft are comparable to the modern-day realists’ architecture of theinternational system based on the military capability of the sovereign states andbalance of power.2

The Mauryan Empire disintegrated soon after the death of Ashoka. Withthe disintegration of this far-flung empire, the Indian subcontinent experiencedestablishment of many autonomous regional kingdoms – the Shaka andKushana kingdoms in western and northern India are among the most notableones – from c.200 BC to c. AD 300. During these five centuries, India enjoyeda good deal of economic prosperity and cultural glory with thriving coastaltrade with Southeast Asian region and long-distance trade with the Romanempire. Historians have noted Indian cultural influence in countries likemodern-day Thailand and Kampuchea during this period (Bose and Jalal 1998:18–19).

The process of empire building was renewed by the Gupta dynasty (represen-ted by well-known emperors like Chandragupta I, Samudragupta, and Chan-dragupta II) from AD 320 to the early decades of the sixth century. The Guptaempire was not as centralized as their Maurya predecessors. Nonetheless, the

Regional dynamics 53

Gupta reign witnessed comparable political security and economic prosperity.Described as the “golden era” of Hinduism, the Gupta period produced some ofthe best-known literary, scientific, and cultural works. This period was represen-ted by one of the greatest literally figures Kalidasa – known for his famous playShankutala and poem Meghaduta (The Cloud Messenger) – and a great mathe-matician and astronomer Aryabhatta – known for his remarkably accurate calcu-lations of the length of the solar year.

From the early sixth century onward, the Gupta empire started crumblingdown under a number of Hun invasions. Although briefly reversed during thereign of Harshavardhana, the founder of another short-lived empire in northernIndia between AD 606 and 647, the trend toward imperial disintegration con-tinued in India until the establishment of the Mughal empire in 1526. During thisperiod, many powerful regional kingdoms emerged in India. The most famousof these kingdoms was the Chola kingdom in southern India from the tenth tothe twelfth century AD. Near the end of the tenth century, Chola king Rajaraja Iconquered Sri Lanka while his son Rajendra I made military forays into thenorth during 1022–23 and Southeast Asia couple of years later. In 1026, hedefeated the forces of the great South East Asian empire Srivijay and establisheddeep economic and cultural exchange between southern India and SoutheastAsia.

In the early eighth century, Muslims came to India’s Sind via the Arabian Seaand later to the Malabar coast in the South. Fresh migrations from West andCentral Asia led to the development of new technologies of warfare, politicalorganization, economic production, and, above all, a new faith, Islam, which hada far-reaching impact on the South Asian region. There are two schools ofthought among historians of medieval India about the impact of Islam on theprocess of political, social, cultural, and economic transformation in the subcon-tinent. While the first school of thought provides a popular narrative of Indianhistory supported by most Hindu nationalists, the second school of thought pro-vides a more dispassionate view of the subcontinent’s medieval history underMughal rule. According to the first school, Islam is a religion of violence andMuslims are generally intolerant of other faiths. This view is supported by theseries of military conquests, lootings, attack on the Brahmin-dominated Hindusocial order, destruction of Hindu temples – most notably, the destructionSomnath temple in the Indian state of Gujrat by Mahmud of Ghazni during aseries of raids between 997 and 1030 – and religious conversions undertaken byearly Muslim invaders and rulers. Writing in the early eleventh century, theCentral Asian scholar Alberuni provided one of the most vivid accounts of theseconquests:

Mahmud of Ghazni utterly ruined the prosperity of the country, and per-formed there wonderful exploits, by which the Hindus became like atoms ofdust scattered in all directions, and like a tale of old in the mouth of thepeople. Their scattered remains cherish, of course, the most inveterate aver-sions towards all Muslims.3

54 Regional dynamics

On the other hand, the second school of thought based on recent research onthe spread of Islam in the subcontinent offers several important insights. First,the historical interpretation of a monolithic Islamic community in India is chal-lenged. Instead, the research focuses on the great variety of Muslims – Turks,Mongols, Persians, Arabs, and Afghans – who came to India motivated less byreligious zeal than by political and economic objectives. Second, the researchquestions any general model of Muslim conversions in the subcontinent andinstead reveals cultural and economic regional specificities to explain conver-sions of Hindus into Muslims (Eaton 2002: 46–56). Finally, the research shiftsthe focus from an Islamic religious identity to an Indo-Islamic historical identity.It brings attention to the issues of Indo-Islamic accommodation at various levelsof society and culture and the eventual emergence of the Indian subcontinent asthe hub of an Indian ocean world with “a distinctive historical identity thatstretched from the Mediterranean to the Indonesian archipelago” (Bose and Jalal1998: 26).

By 1290, nearly all of India came under the domination of Muslim rulers.After two and a half centuries of internecine war among Muslim, Hindu, andSikh rulers, the Mughal empire was established in the early sixteenth century.Most historians agree that the Mughal emperor Aurangzeb’s brutal treatment ofhis subjects and his several attempts to extend his control to South India led to acrisis and weakening of Mughal empire. After his death in 1707, the Mughalempire started to decline. The empire lasted until 1858, when the British finallybrought an end to it.

British domination in India started in the 1750s beginning with the Britishconquest of Bengal led by the East India Company. The company, which was aprivate company chartered by the British Crown, developed a civil and militaryadministration throughout most of the subcontinent well before 1858, whenIndia formally became a colony. The dual pretext of Company rule and Mughalsovereignty came to an end and the British Raj (rule) in India officially com-menced following the sepoy (sipahi in Urdu which means soldier) mutiny of1857.4 Politically, the British raj established a unified administrative structure bysetting up strong bureaucratic and military institutions for effective governancein India. Although the British raj sought no mass conversions or state-sponsoredreligion, its cultural penetration – through the English language and Westerneducation – was as deep and lasting as the Mughals. Economically, from 1858 to1914, Britain is said to have derived maximum strategic and economic benefitsfrom its prize colonial possession – India is often described as the jewel in thecrown of the empire. Summing up Britain’s strategic colonial advantage duringthis period, Bose and Jalal (1998: 97) aptly observes:

India was being fashioned into a colony not only to play a critical role in theinternational system of payments of the capitalist world economy for thesustenance of its hegemonic core, but was also indispensable in the strategicdefense of that hegemony. . . . India’s economy was twisted to fit a classicalcolonial pattern of importing manufactured goods from the metropolis and

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exporting a variety of agricultural raw materials. Britain enjoyed a tradesurplus with India. But it had a growing deficit in its overall internationaltrade which was offset in this period by India’s substantial export surpluswith the rest of the world.

From 1914 onward, however, the British rule had to deal with a variety ofIndian independence struggles led by moderate nationalists, militant nationalists,and radical revolutionaries. The most successfully organized freedom strugglewas led by Mohandas Karamchand Gandhi (popularly referred to as Mahatmaand Bapu or Father of the Nation) that eventually resulted in India’s independ-ence and partition in August of 1947.

There is a rich polemic literature on the partition of the Indian subcontinent.For Indian nationalist historians, Muslims’ demands for a separate Pakistanarose mainly in the post-1919 period when the British tried to divide the twocommunities to rule them. For another group of secular historians, in addition tothe British machination, the failure of the Indian National Congress to accom-modate the Muslim League demands for autonomous provinces also contributedto the demand for a separate homeland for Muslims. For many Pakistani histor-ians, however, the idea of a separate Pakistan was rooted in the British victory in1857 and their subsequent preferential policies toward Hindus. By favoringHindus in education, administration, and economic spheres, the British alienatedMuslims culturally, economically, and politically. The British introduction ofdemocracy and parliamentary elections, according to many Muslim leaders, wasmeant to perpetuate Hindu domination and the minority status of Muslims in aHindu-majority Indian state. The fear of Hindu domination in the political, eco-nomic, and sociocultural spheres was one of the root causes that drove earlyMuslim leadership to demand for a separate status for India’s Muslims.

The idea of a separate Muslim nation can be traced back to the thinking of theleading jurist and educator Sir Saiyid Ahmad Khan (1817–98), who vigorouslyargued for the recognition of Indian Muslims as a separate nation and their equaltreatment with the Hindu nation in the distribution of power and patronage.However, the actual territorial description of a separate Muslim state was firstarticulated in the 1930s by Choudhary Rahamat Ali, a student in Cambridge.Inspired by Saiyid Ahmad Khan’s thinking and later Muhammad Iqbal’sdemand for a separate Muslim nation in the December 1930 session of All-IndiaMuslim League, Rahmat Ali outlined a plan for a federation of several Muslimstates, which he named “Pakistan” – means “land of the pure” – by drawingletters from the provinces with a Muslim majority. According to this scheme,“P” stood for Punjab, “A” for Afghan, “K” for Kashmir, “S” for Sind, and “tan”for Baluchstan. Although dismissed initially, Iqbal and Rahamat Ali’s ideagained momentum subsequently and came to be supplemented by a plethora ofMuslim schemes most of which were predicated on Mulims being a nation andnot a minority. By the late 1930s, All-India Muslim League formally demandedfor an independent nation for Indian Muslims under the leadership of Moham-maed Ali Jinnah, referred to as the Quaid-i-Azam (or great leader) in Pakistan

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today. In a historic address at the annual session of the All-India Muslim Leagueat Lahore in March 1940, Jinnah articulated the logic of an independent Pakistanbased on a two-nation theory:

The Hindus and Muslims belong to two different religious philosophies,social customs and literatures . . . they belong to two different civilizationswhich are based mainly on conflicting ideas and conceptions . . .. It is quiteclear that Hindus and Musalmans derive their inspiration from differentsources of history. They have different epics, their heroes are different, andthey have different episodes. Very often the hero of one is a foe of the other,and their victories and defeats overlap.5

Jinnah’s two-nation theory essentially served as the basis of a political move-ment by All-India Muslim League for an independent Pakistan. The protracteddebate following the Cabinet Mission Plan of 1946 for a three-tiered all-Indiafederation between the liberal leaders of the Indian National Congress led byJawaharlal Nehru and the Muslim League under Jinnah intensified bitterness andfear between the Muslims and Hindus. Competing political leaders of the twocommunities did little to address these fears and instead played on the fears andpsychological anxieties of Muslim minority and Hindu majority to develop loyalpolitical following. The brutalities and savageries of the pre-partition period,which were perpetrated by the frenzied members of both communities, werelargely the result of the fears and anxieties of Muslim minority of Hindu domi-nation and the anxieties of Hindu majority of Islamic intolerance and insensitivi-ties to Hindu social order. Such fears and anxieties, which were partly aided bythe construction of mutually hostile political and historical narratives by theleaders, continue to profoundly influence the post-independence relationshipsbetween India and Pakistan.6 Although historians continue to debate about theimpact of partition on the psyche of the people, the subcontinent has never reallyrecovered from the colossal human tragedy and the nightmarish experience ofhuman resettlement of Hindus, Muslims, and Sikhs during the partition.7

Structure of the regional system: India and Pakistan –unequal rivals

In addition to historical tension, the rivalry between India and Pakistan is also areflection of their structural problems. Separated by a historically arbitraryborder and with no natural frontiers and buffer state between them to check theirrivalry, India and Pakistan have continued their rivalry unchecked in the post-independence period. The relative size of India and Pakistan also contributes totheir rivalry. Since both the states are not nearly equal in size, leaders have notattached any strategic importance to reciprocity in their relationship. Yet, Pak-istan before 1971 was not substantially smaller to accept India’s dominationmore readily. Instead, unlike other smaller states, Pakistan remains India’s prin-cipal rival for influence within South Asia and regularly stakes its claim to play

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a larger or even coequal leadership role in South Asian regional system much tothe disliking of India.

The intense rivalry between India and Pakistan can also be explained, albeitnot entirely, by the useful framework of the security dilemma (Jervis 1988:167–214; Buzan 1983: 106). The security dilemma, which is based on anaction–reaction effect within a region, is a negative consequence of anarchy inthe international system. The security dilemma paradigm suggests that stepstaken by a state to reduce its own anxieties about its neighbor, in turn, con-tributes to an intensification of that neighbor’s sense of insecurity. As HowardWriggins et al. (1992: 11) observe: “Because the margin of safety for one stateis often seen as the margin of danger for its neighbor, these can provoke defen-sive efforts that only reinforce the sense of threat.” Thus, security dilemma isoften considered a prime cause of arms race, in which neighboring states wastelarge sums of money on acquiring mutually threatening weapons that do not ulti-mately provide security. Since their independence, both India and Pakistan haveengaged in a continuously unhealthy arms competition that has ultimately rein-forced their insecurity against each other.

The acute rivalry between India and Pakistan in South Asia has led to whatBarry Buzan describes as security complex, in which the primary security con-cerns of India and Pakistan are so closely linked that their national securityproblems cannot be considered without one another (Buzan and Rizvi 1986: 8).Other smaller states’ securities in South Asia are bound to this security complexfor geographical reason. Buzan has further added amity/enmity axis to explainthe pattern of security relationships among South Asian countries (Buzan andRizvi 1986: 9). According to this view, security relationships and patterns ofalignments among South Asian countries are determined not only by considera-tions of relative strength of the states or the distribution of power, as balance ofpower theory suggests, but also by the legacy of colonial rule and such domesticissues as religious and ethnic conflicts and other ideological perceptions of indi-viduals and leaders.

The rivalry between India and Pakistan is built around this amity/enmity axis.Reasons for interstate hostility between India and Pakistan include historic rival-ries between Hindus and Muslims, past conquests of one group over the other,the bitter memory of partition, territorial disputes in Kashmir, mutually antago-nistic constitutional principles such as India’s secular as opposed to Pakistan’sIslamic foundation of the state, and the memory of three major wars that the twocountries have fought since independence. In addition, structural asymmetryintensifies the security dilemma between the two states. Despite great disparitybetween India and Pakistan in terms of population, size, economy, and militarycapability, Pakistan has constantly refused to accept India’s domination in theregion.

Pakistan has sought to achieve a balance of power in the subcontinent basi-cally through two means. First, it has successfully secured military and eco-nomic assistance of foreign powers including the United States, China, andIslamic countries in the Gulf and the Middle East. While the assistance from

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Islamic countries is mainly economic, the assistance from China and the UnitedStates is both economic and military. Pakistan’s strategic position as a frontlinestate in America’s struggle to contain communism in the 1960s and after SovietUnion invasion in Afghanistan in 1979, and the US fight against terrorism inAfghanistan after 2001, has mainly led to massive US military and economicassistance to the country. Given the Sino-Soviet and Sino-Indian rivalry fromthe late 1950s to the end of the Cold War period, China has also joined theUnited States in continuing its support for Pakistan. The cumulative effect hasbeen the development and modernization of Pakistan’s military that is able tochallenge India.

Although Pakistan has benefited substantially from military and economicassistance from the United States and China, Pakistani policymakers recognizethe vulnerabilities of relying exclusively on foreign powers. Past experience hasshown that the US support to Pakistan is unreliable. The support is only a stra-tegic alliance and can shift with the change of geostrategic situation. AlthoughChina can be counted as a trusted ally, it cannot match the sophistication of theUS defense technology. Moreover, Pakistan also knows well that no matter howmuch the country spends on defense, it will not be able to match India in termsof conventional weapons and military personnel. Thus, acquisition of nuclearbomb remained a critical policy option for Pakistan to achieve a strategic mili-tary parity with India. After the 1971 military defeat, Pakistani policymakerssought to develop nuclear weapons with a sense of urgency to achieve thebalance of power with India. By acquiring nuclear bomb in May 1998, followingIndia’s nuclear test, Pakistan seems to have met its objective of improvingbalance of power with India. As discussed in Chapter 5, the development ofnuclear weapons by both India and Pakistan, however, does not guaranteelasting peace or growth of cooperative activities between these two principalrivals in South Asia.

Kashmir dispute

The territorial disputes over Kashmir remain the most divisive issue in the sub-continent and a major source of bitterness between India and Pakistan. Both thecountries have fought three wars – 1948, 1965, and 1999 – over the Kashmirissue. The roots of the problem in Kashmir can be traced to the partition of thesubcontinent in 1947. The last viceroy Lord Mountbatten passed an edict thatrequired the division of the states of British India on the basis of demographics,i.e. Muslim-majority states and areas would go to Pakistan and Hindu-majoritystates would go to India. The “princely states” which enjoyed nominal independ-ence during the British rule were given the choice to join either India or Pak-istan. Mountbatten made it clear that the decision of these princely states shouldbe based on considerations of geographic location and demographic features.Based on this principle of partition, 500 odd states were integrated without anyproblem. However, in three cases – Junagadh, Jodhpur, and Hyderabad – whererulers decided either to remain independent or to accede to Pakistan in violation

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of the principle of partition, India used force to integrate them with the Indianunion. The loss of both Junagadh and Hyderabad, where the rulers were Muslimbut the population was Hindu, increased Pakistani leaders’ distrust towardIndian leaders’ motive.

The situation in the princely state of Kashmir was exactly the opposite. Thestate had a Hindu ruler, Maharaja Hari Singh, and more than 75 percent ofMuslim population. Threatened by a tribal invasion from Pakistan’s North WestFrontier Province, allegedly supported by Pakistani army, Maharaja Hari Singhsigned an Instrument of Accession to India in October 1947 on the advice ofV.P. Menon, the Government of India’s secretary for the Princely States. Afterthe signing of the Instrument of Accession, Nehru, the then Indian Prime Minis-ter, agreed to airlift Indian troops to stop the onslaught. By the time the firstIndo-Pakistan war ended with a cease-fire resolution by the United Nations inJanuary 1949, some two-thirds of Kashmir was under Indian control and theremaining one-third under Pakistani control. Between 1948 and 1965, there hadbeen several multilateral efforts mainly led by the United Nations to resolve theKashmir issue. But, these efforts had failed because of the intransigence of bothIndian and Pakistani leaders.

For Pakistani leaders, the claim to Kashmir is irredentist, a moral issuebecause it is linked with Pakistan’s identity as the homeland of Muslims ofSouth Asia. Pakistan’s former Prime Minister, Zulfiquar Ali Bhutto, in his TheMyth of Independence (1969) captures this sentiment well:

If a Muslim majority can remain a part of India, then the raison d’etre ofPakistan collapses. These are the reasons why India, to continue her domi-nation of Jammu and Kashmir, defies international opinion and violates herpledges. For the same reason, Pakistan must unremittingly continue herstruggle for the right of self-determination of this subject people. It wouldbe fatal, if in sheer exhaustion or out of intimidation, Pakistan were toabandon the struggle, and a bad compromise would be tantamount to aban-donment; which might, in turn, lead to the collapse of Pakistan.8

Thus, throughout 1950s and 1960s, Pakistani leaders remained unreconciledto the disputed status of Kashmir and pursued multilateral, diplomatic, and mili-tary strategies to wrest Kashmir from India. For Indian leaders, however, con-ceding to Pakistan’s demand over Kashmir would weaken India’s secularstructure and lead to other secessionist demands. Not surprisingly, Indian leadersignored Pakistan’s demands and tightened India’s grip by passing an ordinancein Indian Parliament in 1964 to extend Articles 356 and 357 to Jammu andKashmir. This ordinance enabled the central government at New Delhi to pro-mulgate President’s rule in the state during the crisis, essentially erodingKashmir’s special autonomous status provided under Article 370. Needless tosay, from Pakistan’ perspective, such actions were interpreted as India’s effortsto integrate Kashmir more formally with Indian union and thus a blow to Pak-istan’s irredentist claim on the state.

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After her humiliating defeat in the Sino-Indian border war of 1962, Indiaembarked upon a substantial military modernization program, by securing mili-tary aid from Britain, the Soviet Union, and the United States. As expected,Indian military planners deployed few infantry divisions along the Sino-Indianborder. But, surprisingly for Pakistan, India deployed majority of its infantrydivisions in Kashmir and along the western borders with Pakistan. Such armsbuildup by India generated considerable anxiety among Pakistani decision-making elites. For them, any further military buildup by India in Kashmir andalong the India–Pakistan border would close Pakistan’s “last window ofopportunity” (Rizvi 1986: 108; Ganguly 2001: 31) to seize Kashmir throughmilitary offensive. In addition, the following factors explain Pakistan’s decisionto launch a military attack in Kashmir and on India in 1965.

First, a lack of Indian counterattack against a limited Pakistani military cam-paign in early 1965 along the Rann of Kutch (near the western Indian state ofGujrat) disputed area and India’s ready willingness to accept a third party inter-vention to resolve this issue convinced the Pakistani leadership about India’smilitary weakness and an apparent unwillingness to engage in any major mili-tary conflict with Pakistan. Second, after an eight-day visit to China in March1965, President Ayub Khan and Foreign Minister Zulfiqar Ali Bhutto were con-vinced of China’s military assistance in the wake of a war with India. Third,following India’s military defeat in the Sino-Indian war in 1962 and the sub-sequent death of Indian Prime Minister Jawaharlal Nehru in 1964, India’sdomestic politics were passing through considerable political turbulence. Foroutsiders, India’s domestic politics at this time seemed to be in disarray markedby an intra-party leadership squabble in the Congress party leading to a compro-mise selection of Lal Bahadur Shastri as the next prime minister, the politicaldefeat of Congress party in a number of states, Tamil agitation for anautonomous Dravidian state, and communal riots in most part of the country. Insuch a situation, India’s military resolve to fight against a Pakistani attack wasconsidered weak by Pakistani leaders. Finally, following the theft of a holy relic– claimed to be the sacred hair of the Prophet Muhammed – a widespread andviolent agitation by Kashmir Muslims against India erupted in December 1963.This was construed by Pakistani leaders as a popular support of KashmirMuslims for Pakistan. On the basis of this belief, Pakistani leaders plannedOperation Gibralatar to recover Kashmir in May 1965. According to this plan,specially trained Pakistani troops would infiltrate in small numbers into India-occupied Kashmir area and help spread the armed rebellion against Indianauthorities. In the wake of Indian authority’s measure of suppressing the rebel-lion, Pakistani troops would launch a military attack on Indian forces. Pakistanileaders reasoned that this would be a localized war in Kashmir and that Indiawould not cross the disputed cease-fire line (CFL) in order not to antagonizeworld opinion. At the same time, the limited localized war would bring inter-national attention to the Kashmir dispute leading India to accept a Rann ofKutch type of agreement with international mediation.

These Pakistani assumptions proved wrong. First, contrary to Pakistani

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leaders’ belief, the rebellion in Kashmir was not pro-Pakistan. This became clearwhen Kashmiri Muslims apprehended Pakistani commandos after they crossedthe CFL in Kashmir in August 1965 and handed them over to Indian authorities.Second, again contrary to Pakistani belief, Indian troops actually crossed theIndo-Pakistan international boundary in their counterattack, forcing Pakistanitroops to defend their own territory. A full-fledged war between India and Pak-istan broke out on September 5, 1965, and 15 days later, this war came to a haltwith Soviet Union initiated UN cease-fire resolution on September 20, 1965.

The Soviet diplomacy for brokering peace between the two subcontinentalrivals was based on a strategic calculation to expand Soviet influence in SouthAsia and limit China’s influence in Pakistan. On the invitation of Soviet PrimeMinister Alexei Kosygin, Pakistani President Ayub Khan and Indian PrimeMinister Lal Bahadur Shastri met at Tashkent to resolve their differences onJanuary 4, 1966. The Tashkent meeting did not produce any substantial result sofar as the resolution of the Kashmir issue was concerned. It merely restored thestatus quo ante over Kashmir.

The Indo-Pakistan war in 1965 had at least two critical consequences for Pak-istan. First, as the failure of Pakistan’s Operation Gibralator suggests, the anti-India agitation of Kashmiri Muslims should not be interpreted as a movementfor Kashmir’s merger with Pakistan. Second, and more critically for Pakistan,the 1965 war demonstrated Pakistan’s Kashmir fixation. Pakistan’s preoccupa-tion with Kashmir led its leaders to neglect East Pakistan’s Bengali subnational-ist movement, which gathered considerable momentum during and after the1965 war.

The 1971 Indo-Pakistan war

While the Indo-Pakistani conflicts in 1948 and 1965 were initiated by Pakistan,the 1971 war was a result of India’s strategic initiative. However, the roots ofthe 1971 conflict can be found in the failure of Pakistani domestic politics since1950s. There was widespread resentment among Bengalis of East Pakistanagainst the domination of Punjabis in Pakistan’s politics, military, and economy.The Bengalis of East Pakistan had always resented against the imposition ofUrdu as the national language, inadequate representation of East Pakistanis inmilitary and civil services, and a disproportionate allocation of foreign aid anddomestic revenues to West Pakistan. In Pakistan’s first democratic election inOctober 1970, the Awami League under the leadership of Sheikh MujiburRahman won an absolute parliamentary majority. Emboldened by this victory,the Awami League demanded for the immediate implementation of its six-pointprogram for autonomy. But, the military regime under General Yahya Khanrefused to concede to these demands and instead launched a military invasion ofEast Pakistan to negate the popular mandate. A full-scale civil war erupted inMarch–April 1971 in East Pakistan in protest against this attack. Pakistani armyresorted to large-scale atrocities against East Pakistani population (Bose andJalal 1998: 219).

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The extreme brutality of the Pakistani army caused a massive influx ofBengali refugees into the eastern part of India (state of West Bengal). Thenumber of East Pakistani refugees reached four million by the end of May in1971 with about 60,000 refugees crossing the border per day (Sisson and Rose1990: 152). Describing as humanitarian intervention, India provided massivelogistics and sent its troops across its eastern border to join Mukti Bahini (libera-tion army) to fight against Pakistani army. Finally, in response to Pakistan’s pre-emptive air strikes against Indian air installations on December 3, India declaredthe war on December 5, 1971. On December 16, Dhaka fell and Bangladesh wasborn. India’s motivation to fight this war of 1971 was based on the followingstrategic objectives. The liberation of East Pakistan would undermine Pakistan’stwo-nation theory; weaken Pakistan’s claims to Kashmir; and reduce Pakistan’ssize so that she would not be able to challenge India’s predominance in theregion.

India’s decisive victory in the 1971 war essentially changed the political geo-graphy of the subcontinent. With the emergence of Bangladesh as an independ-ent state, Pakistan experienced a substantial structural reduction in terms oflosing half of its population and territory. Undoubtedly, India emerged as thedominant power in South Asia. Although analysts differ, it can be argued thatthe subsequent withdrawal of the United States from South Asia reflects a tacitrecognition of this reality by the US policymakers. In 1972, India and Pakistanhad signed the Simla Accord, according to which both the countries agreed to:

1 respect the Line of Control (LoC) as determined by the cease-fire agreementon December 17, 1971;

2 resolve their disputes peacefully through bilateral negotiations or any othermutually acceptable means.

The agreement on the new LoC gave India control over the strategically signific-ant areas of Tithwal and Kargil and thus made any future attempt by Pakistan todislodge India from Kashmir extremely difficult (Mansingh 1984: 229). In nut-shell, this agreement essentially froze the Kashmir dispute by making the Lineof Actual Control (LAC) the de facto boundary between Indian and Pakistaniparts of Kashmir (Hagerty 1998: 137). For India, Simla agreement supplantedthe UN resolutions as a point of reference for the resolution of Kashmir dispute.For Pakistan, however, the Simla Agreement became just another means ofresolving the dispute, but it did not replace the UN resolutions. The other agree-ment on the principle of “bilateralism” meant that both Pakistan and India wouldno longer seek the intervention of third parties to resolve a bilateral issue.Instead, they would seek to directly work with one another, making extrare-gional diplomacy irrelevant. Given India’s insistence on bilateral negotiationsand opposition to external intervention on a South Asian regional issue, this pro-vision of the Simla Agreement was a diplomatic triumph for India.

Pakistan’s defeat and the emergence of Bangladesh as an independent state in1971 challenged the basic assumptions of the two-nation theory. No longer,

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religion could be considered as the sole basis of state-building in South Asia.Other ethno-linguistic issues should also constitute as a foundation for state-building. In addition, Indian policymakers argued that the outcome of the 1971war had considerably weakened Pakistan’s claim on Kashmir. Although Pak-istan agreed for a pragmatic solution by soft-pedaling the Kashmir issue andaccepting the LoC as existing on December 17, 1971 (Rizvi 1986: 118), it neverreally relinquished its moral claim on Kashmir. Further, to maintain Pakistan’sIslamic identity and to attract much-needed international support, PresidentBhutto turned to the oil-rich Islamic states of the Middle East by projecting thePakistani state as not only a South Asian state but also a Southwest Asian state(Hagerty 1998: 77).

The Bangladesh debacle intensified a national debate on the Pakistani secur-ity issues inside Pakistan. Given India’s overwhelming conventional militarysecurity, some Pakistani policymakers led by President Bhutto were convincedthat the only way Pakistan could achieve strategic security parity with India wasthrough a nuclear option. As discussed in Chapter 5, India’s 1974 nuclear testfurther increased Pakistan’s resolve to develop nuclear weapons.

After a brief period of relative peace following the Simla Agreement, theIndo-Pakistan relations again ran into a rough patch in the 1980s. With theSoviet invasion of Afghanistan in December 1979, and the subsequent Americaninvolvement to fight against the Soviet occupation, South Asia’s security land-scape changed dramatically. In 1981, the Reagan administration decided toprovide a six-year, $3.2 billion economic and military aid to Pakistan, becauseof the country’s frontline status in the scheme of American defense strategyagainst soviet occupation in Afghanistan. This substantial economic and militaryaid enabled Pakistan’s new military ruler, President Zia-ul-Haq, who oustedPresident Bhutto in a military coup and later hanged him despite unfavorableinternational public opinion, to modernize Pakistani army. It also provided himwith confidence to challenge India by exploiting her domestic weakness.

Four important developments marked Indo-Pakistan relations in the 1980s.First, staking claims over the Siachen glacier, both India and Pakistan deployedtroops in 1984 on the glacier.9 Throughout the 1980s and 1990s, the Siachendispute remained one of the major bones of contention in Indian and Pakistanidiplomacy (Khosa 1999: 195). Second, a major source of political conflictbetween India and Pakistan was each country’s alleged support for ethnic insur-gencies on the other’s territory. In 1981, a Sikh insurgency led by the Akali Dalhad begun in the Indian state of Punjab demanding more autonomy for the stateand recognition of the city of Chandigarh as the capital of Punjab only asopposed to the current status of the city as the capital of both Punjab and theneighboring state of Haryana. The failure of negotiation between the Sikhleaders and Indira Gandhi government led the more extremist Sikh leaders todemand for Khalistan – an independent Sikh state. In June 1984, the Indianarmy launched Operation Bluestar, an assault on the sacred Golden Temple,where militant Sikh leaders had taken refuge. After three-day military siege anddeath of an estimated 1,000 people because of fighting between the army and the

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militants, the crisis came to an end. Subsequently, Prime Minister Indira Gandhiwas assassinated by her two Sikh bodyguards in October 1984 leading to wide-spread riots between Hindus and Sikhs. An estimated 2,700 Sikhs were killed inDelhi’s worst violence since partition (Hagerty 1998: 95). Denying Indiangovernment’s accusation of Pakistan’s support for the Sikh extremist move-ments in Punjab, Pakistani leaders launched a counter-allegation against Indiangovernment’s role of inciting violence between Sindhis and other communitiesin Pakistan in the southern Pakistani province of Sindh.

In the midst of this accusation and counteraccusation, a third significantdevelopment related to nuclear issues took place in 1985. By 1983, both the USintelligence report and the Indian intelligence suggested that Pakistan haddeveloped nuclear weapon capabilities but not the nuclear bomb (Spector 1988:127). There was a widespread speculation in South Asia and Washington thatIndia had finalized a plan for an “Israeli-style” attack on Pakistan’s Kahutanuclear facility to shut down the plant. However, laying the speculation to rest,both India and Pakistan announced an agreement in December 1985 not toattack each other’s nuclear facilities. Fourth, this relative goodwill in Indo-Pakistan relations in 1985 came to an end with a series of India’s largest evermilitary exercises, collectively known as Brasstacks, along its western border inPunjab during 1986–87. Although consistently denied by the Indian policymak-ers, Indian military movements during the Brasstacks crisis were largely an out-growth of New Delhi’s anxiety about the instability in Punjab and its widerimplications for the integrity of the country. In response to India’s military exer-cises, Pakistan moved its armed forces to the border leading to a “war-like” situ-ation. Although the Brasstacks crisis subsequently subsided with an agreementbetween President Zia-ul-Haq and Prime Minister Rajiv Gandhi to pull backtheir troops to their normal positions by 1988, the crisis increased Islamabad’sdetermination to acquire nuclear weapons to achieve strategic military parity andnuclear deterrent vis-à-vis its larger neighbor.

The Indo-Pakistani relations deteriorated further in the 1990s with the adventof three major crises – the 1990 Kashmir crisis; acquisition of nuclear weaponcapability by both India and Pakistan in 1998; and the Kargil war between Indiaand Pakistan in 1999. These three crises, which are discussed in Chapter 5,intensified the Indo-Pakistani rivalry. The rivalry between India and Pakistan isbased on a deep-seated historical, structural, and ideological animosity and isthus unlikely to disappear soon. India’s secular ideology, the presence of thethird largest Muslim population in the world, and the emergence of Bangladeshas an independent state with the help of India constantly challenge the “two-nation theory” and the religious basis of the partition of the subcontinent,making the creation of the Pakistani state and its claim as the homeland forMuslims in South Asia questionable. In contrast, Pakistan’s determination tochallenge India’s hegemony in South Asia and its continuing assertion as thehomeland for South Asian Muslims are the primary sources of irritation forIndian leaders. The unresolved Kashmir dispute, over which India and Pakistanhave fought three major wars, reflects this deep-seated animosity between India

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and Pakistan. Another indication of this animosity is the acquisition of nuclearbombs by Pakistan following India’s nuclear tests in 1998. While the acquisitionof nuclear bombs by India is based on its strategic regional and global calcula-tions, Pakistan’s acquisition of nuclear bomb was solely based on its objectiveof achieving a strategic balance of power and nuclear deterrence against India.The acquisition of nuclear bombs by both India and Pakistan, as discussed inChapter 5, may have introduced a stability–instability paradox into the SouthAsian region. But, it has not led to and is unlikely to result in the elimination ofrivalry between India and Pakistan in near future given their historically shapedanimosity.

The other South Asian states and their relations withneighbors

The relations among South Asian states are primarily shaped by the rivalrybetween India and Pakistan and divergent perceptions of each other. Indian poli-cymakers consider South Asia as India’s legitimate sphere of influence andoppose any external intervention in South Asian affairs. Leaders of other smallerSouth Asian states, however, constantly worry about India’s predominance inthe region and her influence and potential intervention in their domestic affairs.In nutshell, India is perceived by smaller states as a source of threat. Not surpris-ingly, the primary basis of foreign policy of the South Asian states, from thebeginning, has been how to cope with India’s overwhelming power in ways thatwould not precipitate direct Indian intervention in their domestic affairs (Wrig-gins et al. 1992: 120). Several Indian actions in the past have contributed to thisfear of South Asian leaders. India’s military intervention in the independencemovement of Bangladesh in 1971, absorption of Sikkim into Indian Union in1975, deployment of Indian troops to deal with Sri Lanka’s ethnic crisis in 1987,sending Indian troops to Maldives to foil a coup in 1988, and profound influencein Nepal’s domestic affairs are often interpreted by Indian neighbors as India’swillingness to exercise its military power to support its strategic objectives inSouth Asia. It is not surprising that India’s neighbors have pursued classic bal-ancing policies by seeking the support of external powers and encouraging mul-tilateral as opposed to bilateral engagements to deal with India. The followingsection explores this.

Bangladesh

After becoming independent in 1971, Bangladesh signed a Treaty of Friendship,Cooperation, and Peace with India for closer economic and political links. Withher extreme poverty, limited natural resources, proneness to frequent floods andcyclones, absolute aid dependency, and limited industrial, scientific, and techno-logical development, Bangladesh’s capacity to cope with the nation-buildingprocess was severely limited. Thus, Bangladesh had an enormous interest indeveloping strong bilateral economic and political cooperation with India. A

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generous flow of foreign aid and economic aid from India provided the neces-sary support for Bangladesh’s economic development. But soon, the flow offoreign aid dried up. There were resentment among Bangladeshi entrepreneursand middle class against Indian economic domination. Demand for protection-ism against Indian industrial goods grew in Bangladesh, contributing to eco-nomic and political tension between the two countries. The cancellation of threejoint Indo-Bangladesh projects (i.e. urea fertilizer plant, sponge iron project, andcement plant) during 1973–75 provides evidence of such tension (Sobhan 1991:44–45). More importantly, the Indo-Bangladesh relations deteriorated after theassassination of President Mujibur Rahman – whose government India had sup-ported so actively – in a coup d’etat in 1975.

One of the critical issues that adversely affected Bangladesh’s cordial rela-tionship with India in the post-1975 period related to the conflict over thesharing of the Ganges water. In the early 1950s, India developed a plan to buildthe Farakka Barrage to divert the Ganges flow during the dry season into Bhagi-rathi–Hoogly river to flush out the silt from Kolkata port. With the completionof the construction of Farakka Dam, the plan became operational in April 1975.India’s diversion of Ganges water deprived Bangladesh of adequate supply ofwater needed for its downstream agriculture, fishery, and navigation. India’sunwillingness to negotiate an increase in the supply of water with thepost–Mujibur Rahman military regime led by Ziaur Rahman intensifiedBangladesh’s bitter feelings toward India. The main argument of Indian politicalleaders was that since 2,036 kilometers of the 2,177 kilometers of the Gangesflow through Indian territory, India as the upper riparian state is entitled to asmuch water as it requires (Mansingh 1984: 298). Such a legalistic argument byIndia was seen by Bangladesh as India’s insensitivity to the needs ofBangladesh. Capturing the emotional intensity of Bangladeshi feeling on thisissue, some analysts observed that the Farakka by 1975 had become the“Kashmir of Bangladesh’s grievance against India” (Rizvi 1986: 135). Almosttwo decades later, and after several rounds of negotiations, India andBangladesh signed a 30-year Treaty on Ganges water sharing in December1996. While Indian leaders attempt to showcase the agreement as a model ofbilateral cooperation to resolve bilateral issues, Bangladeshi political leaders donot consider this as the permanent solution. In addition, an Indian proposal todevelop a mega project by linking all major rivers that flow through both Indiaand Bangladesh (India and Bangladesh have some 54 rivers in common) hasproduced resentment in Bangladesh.

There are several other irritants in Indo-Bangladesh relations. The Indianoccupation of New Moor Island (known as South Talpatty to Bangladesh) nearSundarban in 1981 despite strong claim to it by Bangladesh convinced Bang-ladeshi leaders of India’s uncompromising attitudes on territorial issues. Anotherthorny issue that had generated increased tension in Indo-Bangladeshi relationswas the flow of refugees across the border to India as a result of the tribal insur-gency in the Chittagong Hill Tracts. Bangladesh blamed India for supporting theChakma Shanti Bahini who were fighting the Bangladesh government for

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greater autonomy for the tribal people of the Chittagong Hill Tracts. India, inturn, blamed Bangladesh for supporting Mizo National Front rebels againstIndian Union. India’s decision to erect a barbed wire along the Indo-Bangladeshborder reflected the lack of goodwill between India and Bangladesh. India’s con-tinuation of the deployment of its Border Security Force (BSF) along the Indo-Bangladeshi border to check the migration of Bangladeshi citizens to Indianeastern territory for economic reasons is seen in Bangladesh as India’s efforts toexercise undue influence in the domestic affairs of Bangladesh.

The political realities of India and Bangladesh in the post-1990 period havemade the leaders of these two countries less accommodative. Successive weakgovernments (defined in terms of narrow political base, coalitional nature ofgovernments, and weak legislative control) in India since 1990s have con-tributed to a lack of willingness among the political leaders to take a bolderpolicy initiative on these politically sensitive issues. On the other hand, theexistence of weak governments in Bangladesh in the post-1990 period offersonly limited opportunities for the leaders to take any bold or innovativeapproach to resolve the bilateral problems with India. Instead, the Bangladeshileaders seem to thrive by resorting to combative regional postures and scape-goating (blaming India for its intransigent attitudes).

Except for India, Bangladesh has no outstanding disputes with any SAARCcountry. Bangladesh’s political and economic relations with Pakistan haveimproved after a brief disruption from 1971 to 1975. Throughout the 1980s,Pakistan accounted for almost 60 percent of Bangladesh’s exports to South Asia.There is still more scope to improve Bangladesh’s exports to Pakistan in suchitems as tea, newsprint, jute goods, and leather. In turn, Bangladesh can import,at a competitive price from Pakistan, such items as textiles, cement, light engin-eering goods, machinery, and railway rolling stock. The visit of BangladeshPrime Minister Khaleda Zia to Pakistan in April 1995 and her cordial and high-level political talks with Pakistani Prime Minister Benazir Bhutto revived tradecooperation between the two countries. In a bold move, President PervezMusharraf offered a near-apology to Bangladeshis for the 1971 events during hisvisit to Bangladesh in 2002, the thirtieth anniversary of Bangaldesh’s separationfrom Pakistan (Cohen 2004: 77). During this visit, President Musharrafexpressed his confidence that the bilateral relations between Pakistan andBangladesh would improve further given their common religious and culturalheritage. Trade cooperation between the two countries can be restored soonbecause it is relatively easy for the entrepreneurs of both Pakistan andBangladesh, who were either involved in interregional trade or had been locatedin the two countries prior to 1971, to renew and reestablish their contacts. Themain motivation that drives both Pakistan and Bangladesh to come together istheir shared concern about India.

Bangladesh’s relations with India are shaped by the political and economicdilemma of a relatively smaller regional state and a strong proclivity to assertthe separateness of its identity to counter India’s sociopolitical and socioculturalinfluence. Not surprisingly, Bangladesh has pursued a strategy of “demonstra-

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tive distancing” from India after 1975. Bangladesh’s assertion of its Islamicidentity, closer links with Pakistan, Middle Eastern states, China, and the UnitedStates, and quest to play an active role in international forums are part of thisstrategy. Surrounded by India on three sides and having no common boundarywith other South Asian states (India-locked as Bangladeshi observers like to putit), Bangladesh’s ability to counter Indian domination is extremely limited.Thus, the Bangladeshi leaders prefer and insist on multilateral ties with somehopes of using the collective strength of smaller states to counter Indian hege-mony. Bangladesh’s initiatives to create a multilateral regional forum, SAARC,in the late 1970s, as discussed in the next chapter, are based on this logic.

At the economic level, the Bangladeshi leaders know that India has the capa-bility to meet Bangladesh’s need for manufactured goods, such as steel, chemi-cals, light engineering goods, capital goods, coal, and limestone. At the sametime, India can increase its imports substantially in such areas as urea, spongeiron, semi-processed leather, and newsprint from Bangladesh to reduce thelatter’s trade deficit with India. Besides, both India and Bangladesh can agree toset up joint ventures to improve the latter’s export base and the mutual capacityof the two countries. But a lack of political will between the leaders of these twocountries has restricted the trade on mutually beneficial items and prevented theprospect of setting up industries with Indian capital and technology inBangladesh. Given the current trend of a limited flow of official developmentassistance (ODA) from developed economies to the South Asian countries in theface of competition from countries in Eastern Europe and the Central Asianrepublics, Bangladesh’s limited structural abilities, and the hesitation of theWorld Bank and the International Monetary Fund to provide continuously con-cessional loans, Bangladesh’s need to improve economic cooperation with Indiaand other countries in South Asia has increased in recent years. Of late, Indiahas shown considerable interest in expanding economic cooperation withBangladesh. But given the Bangladeshi leaders’ apprehensions and political sen-sitivity to continuing dependence on and potential domination by India, closereconomic cooperation with India appears to be more feasible under the cover ofmultilateral arrangements, such as SAARC programs, rather than bilateralarrangements with India.

Nepal

The relations between Nepal and India have been determined by geography,history, and culture. Geographically, Nepal is landlocked between India andChina. Both India and Nepal share the Gangetic plain, and there are no naturalfrontiers between the two countries. Nepal covers nearly 500 miles of India’snorthern border, and three Indian states – Uttar Pradesh, Bihar, and West Bengal– are located on the west, south, and east side of Nepal. Nepal shares nearly a1,000-mile border with Tibet to its north, which is critical to India’s securityinterest vis-à-vis China. Therefore, India has always sought to maintain a closestrategic relationship with Nepal.

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Nepal has close ethnic and cultural links with India. About 90 percent ofNepal’s population are Hindus, and the Hindu caste system is widely prevalentthere. There are over a million Indian settlers in the fertile Terai region of Nepal.Over five million Nepalese live and work in India and over a 100,000 seasonalworkers come to India every year. Although Nepali is the official language ofNepal, Hindi is widely used in the country. There is no visa restrictions fortravel between Nepal and India. India remains the preferred vacation destinationfor many rich and upper-class Nepalis who also send their children to school inIndia. Not surprisingly, majority of Nepal’s elites maintain close political, eco-nomic, and cultural links with India.

Given Nepal’s geographical proximity, cultural affinity, and strategic import-ance for India’s security, India has sought to maintain a special relationship withNepal since independence. However, India’s overwhelming influence in thepolitical and economic life of Nepal has produced tensions in their bilateral rela-tions. Five major issues can be identified in the bilateral relations between Indiaand Nepal. First, given the critical significance of Nepal as a buffer state, BritishIndia signed a defense treaty with Nepal in 1923. Three years after independencefrom Britain, India signed a Treaty of Peace and Friendship with Nepal in 1950,essentially reiterating the security provisions of 1923 treaty (Muni 1998: 143).The 1950 Treaty of Peace and Friendship obligated the governments of Nepaland India to consult with each other in devising effective countermeasures tomeet a security threat to either of the countries emerging out of foreign aggres-sion. The treaty also stipulated that the two governments must inform each otherof any serious friction or misunderstanding with any neighbouring country thatmay be likely to adversely affect the friendly ties between India and Nepal(Baral 1986: 104). The Nepalese ruling elites under the monarchical regimehave long resented this provision of the treaty because it essentially restrictedthe autonomy of Nepal in conducting its foreign policy and provided scope forIndian domination. It is not surprising that Nepal occasionally attempted to usethe China card to move away from the Indian sphere of influence. The mostserious Indo-Nepalese dispute occurred when Nepal allowed China to build theLhasa–Kathmandu road after the Sino-Indian conflict in 1962 (Rose 1971: 137).India considered this move as Nepal’s acquiescence to China’s overall militarystrategy in South Asia which was a serious threat to India’s security interest.Consequently, throughout the 1960s and the 1970s, Indo-Nepal relationsremained at a low ebb.

The second major issue in Indo-Nepalese relations is related to the declara-tion of Nepal as a zone of peace and India’s reluctance to endorse this proposal.India’s annexation of the autonomous state of Sikkim into India in 1975 led to agrowing apprehension among Nepal’s ruling elites about a similar Indian designfor Nepal. Consequently, Nepal sought to distance itself from India in defenseand security matters by developing closer relationship with China and demand-ing a status of zone of peace for the country.

Third, both India and Nepal accuse each other of exploiting the open Indo-Nepal border. Nepal argues that the open border has encouraged Indian migra-

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tion into Nepal and the smuggling of Indian goods to the detriment of Nepal’seconomy. The Gurung Commission report of 1983 found that of the total immi-grants in Nepal’s Terai region, more than 97 percent came from India. Thereport alleged that the total control of Terai’s commercial and industrial sectorsby the Indian immigrants and their indulgence in capital flight and tax evasionadversely affected Nepal’s economy. Accordingly, the report suggested thatIndian and other foreigners should not be allowed to work in Nepal withoutwork permits (1983: 17). Nepal’s accusation of Indian demographic invasiondrew strong condemnation from New Delhi. According to Indian officials,Nepal’s accusations seemed baseless as more than five million Nepalese live andwork and over a 100,000 seasonal workers come to India every year (Rizvi1986: 143). In addition, substantial number of Gurkha armed personnel areemployed in the Indian army. Although there has been significant improvementin the Indo-Nepal relations in the post-1990 period (Prasad 1989: 38–41), themigration issue remains one of the major irritants and need immediate attentionto further improve the two countries’ bilateral relations.

The fourth major issue in Indo-Nepali relations is Nepal’s limited economicautonomy and a total economic dependence on India. With one of the world’slowest per capita income and gross domestic product (GDP) growth over thepast decades, Nepal desperately needs economic development. Nepal has nostrong industrial sector, and its export base is quite narrow. The country is criti-cally dependent on India for foreign assistance and its imports, including oil,petroleum, cement, and coal. Nepal’s India-centric economy has occasionallyproduced tension in the Indo-Nepal bilateral relationship. One of the major irri-tants in Indo-Nepali relations relates to the trade and transit treaties betweenboth countries. These two treaties were concluded in 1978, providing Nepal withfavorable trade terms and transit rights. But, in 1989, Rajiv Gandhi administra-tion refused to renew these two treaties and, instead, imposed a trade embargoon Nepal and closed 13 of 15 transit routes into the landlocked kingdom (Taras2006: 64). The main reason for India’s action was Nepal’s decision to purchaseanti-aircraft and armored personnel carrier from China without prior consulta-tion with India in violation of the 1950 Treaty. Some Indian sources claimed thatNepal’s arms agreement with China also included surface-to-air missiles and analleged secret intelligence sharing agreement between Nepal and China (Rose1990: 53), leading to a serious security threat to India. Although Nepal’s govern-ment retaliated by ending duty-free privileges for goods coming from India, thetrade embargo exposed the limited nature of Nepal’s economic autonomy andcaused enormous economic difficulties in Nepal, increasing Nepali govern-ment’s bitterness toward India’s “bullying” behavior. Some analysts observethat worsening economic conditions following India’s economic blockade led topolitical turbulence and ultimately to a change in Nepal’s political system(Ahmed 2004: 11). The Indo-Nepali relations, however, improved substantiallyfollowing three significant developments in the 1990s: the establishment ofdemocratic regime in Nepal; India’s economic liberalization; and India’s enunci-ation of “Gujral Doctrine” named after the former Prime Minister I.K. Gujral

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(1996–97), making what is often referred to in New Delhi’s policy circles as “non-arithmetical reciprocity” or non-expectation of reciprocity as a basis forimproving India’s bilateral relations with her small neighbors.

The fifth major issue that influences Indo-Nepali relations is related to thepolitical system of Nepal. While a multiparty, representative government inNepal has sought to maintain balance between its two giant neighbours, Indiaand China, and has shown more preference to pursue accommodative diplomacywith New Delhi, a monarchical regime had been perceived as more pro-Beijing.From 1962 to 1990, Nepal was run under a system of governance known as pan-chayat democracy. The panchayat (national assembly), which consisted of highcaste and high-class political elites chosen by the king and thus obeyed the willof the king, largely played an advisory role. Popular resentment against decadesof this undemocratic political system under the absolute monarchical rule ofKing Birendra, on the throne since 1972, led to a democratic revolution in Nepalin 1990. This revolution produced a more pro-Indian coalition government ledby Nepal’s Congress Party leader, Girija Prasad Koirala, who had long associ-ation with India. But soon, Prime Minister Koirala found himself unable tomanage the complexities of democratic governance. His inability to manageintra-party infightings and to forge successful coalitions with other politicalparties led to the collapse of his government and a new election in 1994. Since1994, Nepal had 12 governments, with each government lasting for only fewmonths (Adams 2005: 125). Political instability and uncontrollable political cor-ruption led to widespread disappointment and disillusionment among commonpeople in Nepal, providing a conducive environment for the Maoist rebel groupsto start a civil war in 1996. The violent Maoist insurgency has proven to becostly for Nepal in terms of the loss of human lives and political and economicinstability.

Nepali political leaders focus on the transnational links between the country’sMaoist rebel groups and India’s Naxalites in six states – West Bengal, Bihar,Uttar Pradesh, Andhra Pradesh, Orissa, and Chattisgarh. Given these links andthe frequent visits of Maoist leaders to India for material help, it is widelybelieved that India has the leverage to shape the outcome of this conflict. India,on the other hand, seems to be concerned with the links between Nepali Maoistgroups, violent Naxalites movements, and secessionist movements in India’srestless northeast region. It is this security threat posed by the transnationalMaoist movement that has prompted both Nepal and India to start a pilotprogram that requires more rigorous documentation checking along a popularNepal–India border crossing point (at Nepalguni) in 2005. It also has led to anIndian plan to increase its border troops to 40,000 along the Nepal and Bhutanfrontiers by 2007 (Taras 2006: 66). While political leaders in both countriesseem to understand the rationale for such Indian actions, these actions have ledto an increasing uneasiness among Nepali population. Public denial notwith-standing, political leaders in both New Delhi and Kathmandu agree that a long-term solution to Nepal’s Maoist movement requires the representation andparticipation of Maoist groups in the country’s governance process.

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Indo-Nepali relations suffered a major setback following the palace massacreof June 2001. King Gyanendra, who was anointed as the next monarch becausehe was the nearest surviving male kin, ended Nepal’s decade-long experimentwith democracy in October 2002 by sacking the prime minister, assuming exec-utive authority himself and postponing elections indefinitely. King Gyanendramaintained the pretense of democracy until February 2005, when, working handin hand with the army, he staged a military coup and seized all political powers.While China, Pakistan, and Russia viewed the king’s power grab as a purelydomestic issue, India, along with Britain and the United States, reacted nega-tively and suspended military supplies. India’s suspension of military aid inresponse to the king’s coup was a significant move for two reasons: first, India isNepal’s main military weapon supplier; second, although a thriving democracy,India has never made democracy an integral part of its diplomacy. By linkingmilitary aid with restoration of democracy in Nepal, India for the first timedeparted from its long-held diplomatic principle of non-interference in internalaffairs of a country. The Indian government also refused to attend the annualSAARC meeting in 2005 in order not to meet the king and ligitimise his coup.Pakistan made a public offer to replace any economic and military aid sus-pended by India (Adams 2005: 129). But, Nepal refused to accept it for the fearof offending India. Under sustained pressure from India and other Westernpowers, and months of popular protest in Nepal, the king finally relented andgave in to popular demands by inviting political parties to form a democraticgovernment in 2006.

The Indo-Nepali relations reflect a typical South Asian structural dilemma.As the major regional player, India can intervene more substantially in Nepal’sdomestic politics. However, any overt intervention in Nepal would be a strategicmistake for India. Because such a move would almost certainly bring China’sopposition and involvement, leading to regional instability. At the same time,lack of Indian initiatives and involvement in Nepal has its own risks. Nepal’ssocial and economic development could be undermined by continued politicalviolence and instability, providing further fuel for insurgencies. Indian strate-gists worry that a weak, unstable, and “failing” Nepal might provide China withopportunity to directly interfere in South Asia. Thus, from New Delhi’sperspective, a balanced (and not too blatant) intervention remains a necessarycourse of action to maintain Nepal’s political and economic stability. FromNepal’s perspective, while friendship with India is her strategy for survival,good relationship with South Asian neighbors and other external powers isnecessary to balance Indian influence.

Sri Lanka

While other countries in South Asia have contiguous neighbours besides India,Sri Lanka has only India as its neighbor to the north, and on all other sides, thereis the Indian Ocean. Sri Lanka is separated from the southern Indian state ofTamil Nadu by a mere 20 miles of the Palk Strait. Such a geographic reality,

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coupled with India’s overwhelmingly superior size, population, naturalresources, military, economic, and technological power, generates a great deal ofanxiety in Sri Lanka. While Sri Lanka recognizes India’s dominant power, itdoes not want to be overshadowed by India’s domination. Not surprisingly,since its independence in 1948, Sri Lanka has always been keen to maintain itsdistance from India. Sri Lanka was the first South Asian state to sign a defenseagreement with an external power, Britain, and in the 1950s, 1960s, and 1970s,it sought membership and active role in such international or regional organi-zations as the United Nations, the Colombo Plan, the Non-Aligned Movement(NAM), and ASEAN. Sri Lanka’s interest was shaped by the thinking that mem-bership in a regional or international organization would provide some scope fordeveloping a collectivity of small states anxious about larger neighbours.

The Indo-Sri Lankan bilateral relationship is also shaped by a persistent con-flict between the two main ethnic groups of Sri Lanka – the Sinhalese-speakingBuddhists who constitute over 70 percent of the population and the Tamilminority who constitute about 20 percent of the island’s population and aremainly Hindus. The Tamils were originally brought to Ceylon from southernIndia by the British in the mid-nineteenth century to work for the tea and rubberestates. After independence in 1948, Sri Lanka passed a series of citizenshiplaws which discriminated against the Tamils. According to the two CitizenshipActs in 1948 and 1949, various ethnic groups in Sri Lanka (Sinhalese, SriLankan Tamils, Moors, and Burghers) were considered natural citizens bydescent. But Indian Tamils were required to prove a two-generation ancestry inSri Lanka to be granted citizenship status. According to one estimate, only 12percent of 825,000 Tamil applicants became eligible for citizenship on the basisof two-generation ancestry criteria (Kanesalingam 1991b: 182). To deal with theremaining people, Sri Lanka’s government created a “stateless” category ofIndian Tamils and sought to have India “repatriate” them. After several negotia-tions, an agreement was reached between Sri Lankan President Sirimavo Ban-daranaike and Indian Prime Minister Lal Bahadur Shastri in 1964, whichstipulated that India would grant Indian citizenship to 600,000 stateless Tamilsand repatriate them, while Sri Lanka would grant Sri Lankan citizenship to375,000 such persons. Until the 1980s, stateless Indian Tamils did not receivefull Sri Lankan citizenship (Kanesalingam 1991b: 183). Frustrated with thislong-drawn process, some of the Indian Tamils started migrating to the northernand eastern province of Sri Lanka, where Tamil militancy was growing.

A series of anti-government riots by Tamil militants in the Jaffna peninsula inthe 1980s and the subsequent crackdown by Sinhala-dominated governmentforces intensified ethnic crisis. In 1983, anti-Tamil riots by Sinahalese zealots inColombo with the help of some members of government killed hundreds ofTamils and burned hundreds of Tamil business and homes. Unable to get urgentprotection from the government, thousands of Tamil families fled to Tamil Naduin India (Kanesalingam 1991b: 180–183). These events not only provoked angryprotests from Tamil Nadu politicians, but also radicalized many Sri LankanTamils who were neutral until this point, believing that a negotiated compromise

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solution was still possible. Under the pressure of Tamil politicians in Chennai(formerly Madras), New Delhi decided to provide humanitarian and militaryassistance and training to Tamil militants in Sri Lanka.

With the memory of Indian interventions in East Pakistan and the consequentbreakup of Pakistan in 1971 not so distant, Sri Lankan leaders acted quickly toengage India in becoming a part of the solution. Unable to defeat the Jaffnamilitants or to concede to the independence demands of the Tamil Tigers, organ-ized under Liberation Tigers of Tamil Eelam (LTTE) with Velupillai Prabakha-ran as its leader, President Jayewardene signed a Peace Accord with IndianPrime Minister Rajiv Gandhi in late June 1987. According to this Accord, Indiaagreed to deploy an Indian Peace Keeping Force (IPKF) at President Jayewar-dene’s invitation to maintain peace and stability in the Jaffna peninsula. Bysigning this bilateral Peace Accord, Sri Lanka acknowledged India’s geostrate-gic security concerns and accepted India’s role as the region’s dominant power.The approval of the treaty by both the United States and the Soviet Union was atacit recognition of India as South Asia’s preeminent power.

The Indian military engagement in Sri Lanka’s civil war proved to be largelyunsuccessful. Instead of laying down their arms, the Tamil militants foughtguerrilla warfare against the IPKF, causing loss of lives of about 1,000 Indiansoldiers between 1987 and 1989 (Rao 1988: 19–37). In addition, the TamilTigers carried out a series of assassinations of Indian political and militaryfigures. There were also some evidence of support provided by the Tamil Tigersto the separatist groups in Kashmir and northeastern region in India (Cohen2001: 240). After three years of bitter and unsuccessful war with the Tamilmilitants in Sri Lanka, India finally pulled out its troops. India’s failure in SriLanka raised serious questions about New Delhi’s military ability to manageregional conflicts. But, given the close emotional ties between Tamils in bothsides of the Palk Strait, a pure military solution leading to Sri Lanka’s disinteg-ration is not in the interest of India.

Not surprisingly, in order to deal with the ethnic crisis in Sri Lanka, Indiasupports a policy of maximum devolution within a sovereign and territoriallyintegral Sri Lanka. Several Indian concerns have shaped this policy. First, SriLanka’s division along the ethnic lines would have a spillover effect on theviolent separatist movements in India’s northeastern states. Second, the emer-gence of a separate Tamil state in Sri Lanka might revive Tamil nationalism inIndia and the demand for a greater Tamil-speaking state, in a Tamil version ofthe “two-nation” theory. Third, Sri Lanka’s disintegration would be a challengefor India’s claim as a regional power capable of maintaining regional stability.Thus, India is engaged in a delicate balancing act: it provides training to SriLankan army but refuses to sign a defense treaty with Colombo to avoid anyperception of supplying lethal weapons to Sri Lankan troops that can be usedagainst Tamil fighters. Making a departure from its earlier stance, India has alsoquietly allowed other powers like the United States, United Kingdom, Canada,Australia, and most recently European Union in May 2006 to assist Sri Lanka.However, it is unlikely that India would tolerate any direct foreign intervention

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in Sri Lanka. At the same time, India cannot allow further deterioration of thesituation. This dilemma has led to New Delhi’s decision to add LTTE to its listof banned terrorist groups so as to intensify diplomatic isolation and cut offexternal sources of funding to put pressure on LTTE for a negotiated settlement.To what extent these policies will succeed remains uncertain. But given themagnitude of this crisis, assisting Sri Lanka to find a political solution to theethnic problem in a reasonable time period is in India’s own long-term interest.

External influence and regional balancing

In South Asia’s regional system, the structural imbalance between India andPakistan and other smaller states has created contrasting policy objectives.Given their relatively small size, population, economic underdevelopment, andgeographical location, the smaller states in South Asia cannot hope to exertmuch influence in the South Asian regional system. At the same time, thesestates do not want to be overshadowed by India. In order to limit India’s pre-dominance inherent in bilateral relationship between large and small states, thesmaller South Asian states have shown preference for multilateral diplomacyand actively sought to engage external powers in their bilateral disputes withIndia. On the other hand, India’s policy objectives since independence reflecther grand strategy based on both regional and global ambition. ExplainingIndia’s grand strategy, C. Raja Mohan (2006: 19) aptly observes:

India’s grand strategy divides the world into three concentric circles. In thefirst, which encompasses the immediate neighborhood, India has soughtprimacy and a veto over the actions of outside powers. In the second, whichencompasses the so-called extended neighborhood stretching across Asiaand the Indian Ocean littoral, India has sought to balance the influence ofother 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 oneof the great powers, a key player in international peace and security.

While India’s policy objectives in the second and third concentric circles –that is at the extended regional level and global level – are yet to be fulfilled, herpolicy objectives at the regional level have met with some success. Given herpreeminent regional position, Indian policymakers have sought to advocate apolicy of autonomy at the regional level. Regional autonomy, as articulated byNew Delhi, requires the whole of South Asia be free of outside influence. Thus,India has always opposed outside intervention in South Asian affairs. Thispolicy appears to be successful in the case of Nepal and Bhutan. India exertssignificant control over Nepal and Bhutan because these two countries dependon India for all their import and export needs as well as their access to theoutside world. The same, however, cannot be said in the case of Pakistan, SriLanka, and Bangladesh.

Of all the South Asian countries, Pakistan’s economic, security, and ideo-

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logical challenge to India’s predominance in South Asia has remained the mostsubstantial. The security dilemma, as discussed earlier, remains one of the majordriving forces for an unhealthy arms race, including nuclear weapon develop-ment between India and Pakistan, making regional cooperation a prime casualty(Carranza 1998: 111). It is true that rivalries between India and Pakistan andtheir domestic politics are the fundamental reasons for the lack of growth ofaccommodative policies between India and Pakistan. At the same time, the roleof external diplomatic, economic, and security assistance in enhancing acountry’s comparative capability and, in turn, helping sustain its rivalry with theneighbor cannot be undermined. External helps to Pakistan from China, Gulfstates, and the United States from mid-1950s to 1965, 1980s–90s, and againfrom 2001 onward have contributed to Pakistan’s resistance to India’s claim ofnatural domination and a hierarchical regional order in South Asia. Similarly,external support of Soviet Union made India less willing to accommodate Pak-istan’s claims during the Cold War period. Whether the end of the Cold War,shifting US support to India in the 1990s, and improving Sino-Indian relationssince the late 1990s would help India and Pakistan to be more accommodatingor would only intensify their rivalry remains to be seen.

India’s ability to exert too much control over Bangladesh and Sri Lanka islimited by three factors. First, although India has provided considerable aid andassistance to her smaller neighbors because of her relatively more developedeconomy, she is not fully capable of meeting with all their development needs.Hence, the smaller states have sought external aid and assistance, limitingIndia’s influence over them. Second, the Indo-Pakistan rivalry, Sino-Indianrivalry, and China’s ready willingness to support the independent status of thesmaller South Asian states have provided these states with an opportunity todemand larger political and economic concessions from India, which, given theirsize and economic vulnerability, would not have been otherwise possible.Finally, most South Asian countries perceive their main security threat to beIndia. Accordingly, South Asian states have actively sought military, economic,and diplomatic assistance from external powers to offset India’s influence. Insuch an environment, regional accommodation policies have become increas-ingly difficult.

Two other issues are worth noting to explain the dynamics of South Asianregionalism. First, South Asian countries do not share a common external threatperception, which makes it difficult for the leaders of these countries to worktoward common regional security strategies. While the South Asian states per-ceive their main security threat from India, New Delhi perceives an externalthreat from cross-border terrorism and Pakistan’s military challenge with thesupport of external powers. The narrow political base of South Asian rulingelites provides few opportunities for them to ignore this perceived regionalsecurity threat. Consequently, blaming the neighbor (scapegoating) has becomea preferred policy for South Asian ruling elites, making growth of regionalcooperation an extremely slow process. Second, South Asian states also worrythat any regional trade arrangements will favor India, and Indian goods will

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dominate the regional market. This concern explains why Pakistan remainsopposed to any Indian initiative for trade liberalization in South Asia. In nut-shell, India’s hegemony, the lack of trust among South Asian states, and Pak-istan’s continuing challenge to India’s domination in South Asia havecontributed to the slow growth of regional cooperative arrangements under therubric of SAARC. Has the prospects of SAARC in terms of institutional devel-opment, new initiatives, and program implementation improved after the firstdecade of its existence? This is examined in Chapter 4.

78 Regional dynamics

4 Origin and evolution of SAARC

Although the idea of SARC was discussed by South Asian leaders from time totime in the post-independence period, the concrete initiatives for establishing acomprehensive regional organization in South Asia came only in the late 1970s.After examining the earlier attempts for regional cooperation by South Asianleaders, this chapter explores the important domestic, regional, and externalfactors that led President Ziaur Rahman of Bangladesh to take some concretesteps for regional cooperation in South Asia in 1977. Examining the dynamicsof domestic politics and the interrelationship between domestic and regionalpolitics, this chapter explains why smaller states in South Asia – Bangladesh,Nepal, and Sri Lanka – were more enthusiastic for regional cooperation and whyIndia and Pakistan were initially reluctant to join the regional grouping. It exam-ines the domestic and external factors that led to changes in India’s and Pak-istan’s decision in favor of joining the regional association. This chapter thenprovides an overview and evaluation of SAARC’s record in terms of institu-tional developments and program implementation.

Early regional cooperation efforts in South Asia

The idea of a South Asian regional forum can be traced to April 1947, whenthe non-official Indian Council of World Affairs convened the Asian RelationsConference in New Delhi. Attended by delegates from 25 Asian countries andpresided by Indian Prime Minister Jawaharlal Nehru, the Asian RelationsConference, which was held from March 23 to April 2, 1947, devoted muchtime to the question of Asian unity, economic development of the newlyindependent post-colonial states in Asia, and the need for greater regionalcooperation (Gupta 1964: 34). However, the two Asian giants, India andChina, made their differences open on two issues at this conference. First, bothIndia and China were in contention about their respective desires to assumethe leadership role in Asia. Second, the Chinese objected to a map whichshowed Tibet as a separate state (Gupta 1964: 36; Ganguly 1993: 274). Theconference ended without any concrete proposals for regional cooperation.The next meeting, scheduled for China in 1949, did not take place because ofthe civil war and the Chinese Revolution. After ten years of inconsequential

existence, the Asian Relations Organization was quietly dissolved in 1957(Haas 1989a: 276).

An important official initiative for Asian cooperation was taken by India,when Prime Minister Nehru invited concerned Asian governments to participatein a conference on Indonesian situation following the Dutch invasion of Indone-sia on December 18, 1948. This conference on Indonesia, held in New Delhi onJanuary 20, 1949, was attended by 18 Asian countries. Among the three resolu-tions adopted at the Indonesia conference, the first two resolutions condemnedthe Dutch invasion on Indonesia and urged the UN to take effective actionagainst the Dutch action. The final resolution called for establishing an institu-tional base for cooperation among Asian countries (Gupta 1964: 40). Based onthis third resolution, the Indian Council of World Affairs at New Delhi, whichorganized the Asian Relations Conference in April 1947, published an articledescribing the informal structure of an Asian Union or the Organization of AsianStates. The article further argued that the structure of the proposed Organizationof the Asian States should be less formal than the Organization of AmericanStates (Gupta 1964: 32). However, the Indian urgency for regional integration inthe Asian region eroded in 1949–50 with the establishment of Communistregime in China and the onset of two blocs Cold War politics in Asia. PrimeMinister Nehru realized that the commitment for an Asian regional grouping hadweakened among the Asian countries as the urgent task for all the countries inAsia was now to devise a policy toward the Cold War and to face the rise ofcommunism in Asia. Consequently, Nehru became more interested in develop-ing a Third World NAM rather than focusing on regional integration initiativesin Asia.

With Indian lack of enthusiasm for a regional grouping, the Philippines tookthe initiative next in convening a conference of Asian countries to discuss theprospects of regional cooperation in Asia. At the invitation of the Philippinesgovernment, India, Pakistan, Australia, Indonesia, Thailand, and Ceylonattended the Baguio Conference of May 1950, held in the Philippines, to carryout discussion about the possibilities of regional cooperation. Although this con-ference exhorted its members to promote greater cultural cooperation, in sub-stantive terms the conference achieved little (Gupta 1964: 47). The Cold Wardivision was very much evident in this conference. While Australia and thePhilippines were distinctly pro-West and anti-Communist, India, Pakistan,Indonesia, Thailand, and Ceylon were neutral to varying degrees.

With the intensification of the Cold War tensions, the idea of regional cooper-ation in Asia underwent a shift at this point. Instead of exploring the possibilitiesof regional cooperation, the focus now turned to the possibilities of keeping Asiafree from superpower competition. Jawaharlal Nehru played a major role instressing this idea. His main concern was that involvement with the superpowerconflicts would not only lead to the militarization of Asian societies, therebyjeopardizing the prospect of peace in Asia, but also would divert the leaders’attention from the urgent task of economic development. Nehru’s ideas, thoughdetested by the superpowers, found favor with some Asian leaders.

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Influenced by Nehru’s ideas, the Prime Minister of Ceylon, John Kotelawala,invited the leaders from Asia to Colombo in April 1954 to exchange views anddiscuss problems of common interest. This conference, known subsequently asthe Colombo Powers Conference, was attended by Burma, Ceylon, India,Indonesia, and Pakistan. The leaders at this conference discussed such diverseissues as events in Indochina, atomic bomb tests, representation of China in theUnited Nations, problems of Tunisia and Morocco, difficulties of Arab refugeesin Palestine, and considered proposals relating to economic cooperation andmutual aid (Haas 1989a: 276). The bilateral differences, particularly Pakistan’sefforts to bring up the unresolved question of Kashmir, and divergent viewsabout the Cold War limited the scope of discussion regarding regional coopera-tion in this conference (Ganguly 1993: 276). The conference participants,however, agreed to convene a meeting of African–Asian nations to explore areasfor cooperation among these countries. After the first Afro-Asian conferenceconvened in Bandung in April 1955, the Colombo Powers never met again,believing perhaps that the task of building Third World solidarity was on its way(Haas 1989a: 276).

Although the Bandung conference of 1955 discussed the idea of regionalcooperation in the area of energy among South Asian countries, no machinery orinstitutional means for achieving such cooperation were specified (Salahuddin1985: 16). The leaders’ divergent perception about the world politics and acuteshortage of funds to implement any cooperative venture may have contributed tothe lack of agreement on specific proposals. Despite the lack of progress of theBandung conference in the area of regional cooperation, the conference providedthe basis for a larger Third World movement, known as the NAM, and enumer-ated a long agenda of cooperative ventures between African and Asiancountries.

After 1955, the idea of a South Asian regional forum was discussed inform-ally from time to time among the leaders of South Asian countries mostly at theinternational forums like the United Nations and NAM. In September 1961, aconference of Asian Economic Planners was held in New Delhi, which wassponsored by the UN Economic Commission for Asia and the Far East(ECAFE), to discuss the prospects of regional cooperation in Asia and amongSouth Asian countries. The conference was successful in establishing an AsianInstitute of Economic Development and a Regional Advisory group on Eco-nomic Development and Planning in Asia. But the discussion on regional coop-eration in South Asia did not produce any positive result because of India’s lackof enthusiasm and, more importantly, lack of endorsement to the idea of SouthAsian economic integration by the representatives of Ceylon and Pakistan(Gupta 1964: 83). The opposition of Ceylon and Pakistan to the idea of aSouth Asian economic integration was based on their fear of India’s economicdomination.

It is reasonable to argue that despite some earlier initiatives, South Asiaremained relatively unaffected by the “old regionalism” of 1950s and 1960s,when Western European countries made some exciting advances toward

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regional integration (Palmer 1991: 75). Nehru’s focus on internationalism, Indo-Pakistan conflicts, mutually antagonistic alliances of the two principal SouthAsian states – Pakistan with the United States and India with the Soviet Union –Sino-Indian conflict, India fear, and mutual distrust among South Asian coun-tries seemed to have prevented South Asian leaders from taking any concreteinitiatives toward regional cooperation. Although the Bangladesh war of 1971brought further urgency to the idea, countries of the region waited until the early1980s to embrace regionalism (Haas 1989a: 276).

The Bangladesh initiative

In his letter to the Heads of State or Government of seven South Asian countrieson May 2, 1980, President Ziaur Rahman of Bangladesh made the first concreteproposal for establishing a framework for regional cooperation in South Asia(Huq 1986: xxiii). However, the Bangladesh President seemed to have beenworking on the idea of an ASEAN-like organization in South Asia for at leastthree years before giving it a concrete shape and presenting it to the South Asianleaders in 1980.1 During his visit to India in December 1977, President ZiaurRahman discussed the issue of regional cooperation with the new Indian PrimeMinister Morarji Desai (Muni and Muni 1984: 30). During the same period, inhis inaugural speech to the Colombo Plan Consultative Committee, which met inKathmandu in December 1977, King Birendra of Nepal gave a call for closeregional cooperation among the South Asian countries in sharing river waters.The King’s call was welcomed by President Ziaur Rahman during the former’svisit to Bangladesh in January 1978 (Muni and Muni 1984: 31). President ZiaurRahman had also informally discussed the idea of regional cooperation with theleaders of South Asian countries during the Commonwealth Summit in Lusaka(1979) and the Non-Aligned Summit in Havana (1979) (Huq 1986: 67). Finally,the Bangladesh President seemed to have given a concrete shape to the proposalafter his visit to Sri Lanka and discussion with the Sri Lankan President J.R.Jayawardene in November 1979 (Muni and Muni 1984: 31). Why did thePresident of Bangladesh seek regional cooperation in South Asia? What factorsshaped his preference for regional cooperation that involved coordinating pol-icies with the neighbors? The following section examines the domestic, regional,and international factors during 1975–79 that shaped President Ziaur Rahman’schoice for seeking to establish a regional organization in South Asia.2

Domestic factors

As outlined in Chapter 2, the main motivations that shape political actor’s pref-erences toward regional cooperation are power-retaining objectives, externali-ties, intraregional and extraregional security considerations, and lock-indynamics. To what extent these motivations influenced the Bangladesh Presid-ent’s initiatives for establishing a regional organization in South Asia? GeneralZiaur Rahman came to power in a military coup in 1975 after overthrowing the

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popular civilian regime of Sheikh Mujibur Rahman, who was supported by Indiaduring both the freedom struggle and post-independence era of Bangladesh.General Ziaur Rahman’s top most priority was to retain his power that requiredlegitimacy for his military regime through domestic and external support.Domestically, he understood that for a young Bangladeshi state, the most press-ing needs were economic growth, employment, and political stability. Exter-nally, his most immediate concern was to improve the bilateral relations withIndia so as to insure India’s economic and security support for his regime.India’s support was necessary not only for the legitimacy of his coup d’etatregime, but also for domestic political problems and economic growth. At thesame time, given the Bangladeshi sensitivity to India’s economic and securitydomination, the President believed that Bangladesh’s bilateral problems withIndia could be better addressed in a regional forum than through bilateralapproach.

President Ziaur Rahman’s interest in regional cooperation was also fueled bythe need to deal with externalities or spillover effect of India’s policies on theeconomy and security of Bangladesh. The President knew that his overthrow ofthe democratically elected and India supported Mujib regime was a majorsetback to Indian foreign policy. It was a matter of deep concern for him thatIndira Gandhi-led Congress administration during this time had come to believethat the new military regime in Bangladesh might seek external assistance moreto legitimize its rule.3 He was aware that such a move of the new regime inBangladesh would not be congruent with India’s strategic security thinking inthe region and would, therefore, intensify India’s opposition to his rule. Hefirmly believed that improved communication, regular consultations, and closerpersonal connections were necessary to allay Indian misgivings about the inten-tions of the new military regime and generate trust among the Indian leaders.The establishment of a regional organization, President Ziaur Rahman con-cluded, would help accomplish this objective.

Given Bangladesh’s “India-locked” geography and the fact that both Indiaand Bangladesh share water and land resources, Bangladesh has to deal withnegative externalities of India’s policies on a regular basis. President ZiaurRahman and his key advisors shared the belief that regional cooperation involv-ing India and Nepal would be beneficial for Bangladesh on a number of issuesfacing the country – such as natural disasters, irrigation, fishing, hydroelectricitygeneration, water sharing, and energy issues. In his calculation, the domesticpolitical and economic benefits from regional cooperation outweighed the costs– that is the outcome of non-cooperation was seen as worse than the outcome ofcooperation. His new regime concluded that in the wake of non-regional cooper-ation, the domestic economy and security would be worse off, adversely affect-ing the new leader’s power-retaining objectives. Thus, initiatives for regionalcooperation were seen as a “smart policy” for a military regime in search ofpolitical legitimacy and longevity in power.4

Finally, some analysts observed that one of the reasons why PresidentZiaur Rahman was so enthusiastic and took so many initiatives for regional

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cooperation in South Asia was that he wanted to transform his image from a mil-itary dictator of a least-developed country to that of a powerful Third Worldleader, claiming a place in history with Gandhi, Nehru, Jinnah, and Sukarno. Bybecoming a leader of a regional cooperation movement in South Asia, he hopedto bring prestige and an historical legacy of great regional leadership to his rule(Khan 1991: 34–35).

Regional factors

India’s annexation of Sikkim as a full-fledged state in 1975 became a source offear for the small neighboring countries. This demonstration of muscular diplo-macy by India created negative externalities for smaller neighbors in the issuearea of security policy, generating greater need for urgent security cooperationwith India. President Ziaur Rahman’s initiative for a regional cooperationscheme, as some analysts observe (Datta Ray, 1992), was based on this need ofBangladesh for security cooperation with an unstated objective of neutralizingIndia’s potential expansionism. The logic of regionalist entrapment – that is cre-ating regional institutions to contain the hegemonic power of dominant India inthe South Asian region – provided a strong basis for Bangladesh initiative for aSouth Asian regional organization.

In 1977, most of the countries in South Asia witnessed changes in theirpolitical regimes. Morarji Desai of the Janata Party became the new prime minis-ter of India after defeating Mrs Indira Gandhi and her Congress Party in the elec-tion of 1977. In Pakistan, General Ziaul Haq captured power from the civilianregime of President Bhutto through a military coup in 1977. In Sri Lanka, MrsBandarnaike’s government was replaced by the United National Party (UNP), ledby J.R. Jayawardene, in the same year. After a series of coups and countercoupsthat followed the violent overthrow of the Mujib government in August 1975,Ziaur Rahman finally established himself as the president of Bangladesh in 1977.All these new leaders displayed a distinctive style of accommodative leadershipand put first priority on improving relations with the neighboring countries.Moreover, the new regimes, which came to power in South Asian countries aftera prolonged power struggle, had not yet consolidated their positions in relation totheir powerful domestic opponents. They, therefore, as Muni and Muni (1984:22) have observed, “needed each other’s help, support and understanding insecuring their respective internal legitimacy and credibility.”

During the second half of the 1970s, almost all the countries in South Asiawere suffering from an acute balance of payment crisis, which was furtheraggravated by the second oil crisis in 1979. In 1974–75, South Asia’s economicsituation deteriorated, with the growth rate reaching an all time low at 2.2percent, while population increased at 2.4 percent (Muni and Muni 1984: 23).With North–South negotiations not yielding any result and the protectionism ofthe developed countries increasing, “South Asian countries had enough compul-sions to look inward the region and toward each other to seek new options forpreparing themselves to meet the then prevailing challenges” (Muni and Muni

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1984: 23). In fact, these developments seemed to have increased the openness ofpolitical leaders of the smaller South Asian countries toward “logrolling” strategy– that is “I’ll vote for your issue if you vote for mine” – at North–South and otherinternational forums. Empirical studies on the Scandinavian groups, ASEAN, andCARICOM show the benefits of “logrolling” strategy for a regional grouping. Bypooling their negotiation resources, and formulating common policy stances, themembers of these groupings have been able to reduce their negotiation costs,increase their bargaining power, and exert greater influence outside the region atvarious regional, multilateral, and North–South meetings than would have beenpossible had they acted unilaterally or independently (Schiff and Winters 2003:203–204). It is reasonable to argue that the potential benefits of “logrolling” werea major motivation during this economic crisis period that could explain the enthu-siastic support of the political actors of smaller South Asian states for the idea ofestablishing a South Asian regional organization.

After almost a decade of inaction, ASEAN was given a greater momentum in1976, when the Southeast Asian leaders held their first summit meeting at Bali.The Bali summit declaration with concrete programs of cooperation in the polit-ical, economic, social, cultural, and informational and security fields (Galbraith1980: 34) had a profound influence on President Ziaur Rahman’s thinking aboutthe usefulness of a regional organization. He, in fact, approached the ASEANfor Bangladesh’s membership into the organization. After Bangladesh’sapproach to ASEAN for membership was turned down, he launched seriousinitiatives for regional cooperation in South Asia (Bajpai 1990: 53).

Finally, the political actors’ initiatives for regional cooperation receivedstrong support from a group of scholars in the South Asian countries, who beganto exchange ideas on potential social, cultural, and economic areas of regionalcooperation. In September 1978, these group of scholars formed a Committee onStudies for Cooperation in Development (CSCD) in South Asia to carry outstudies on specific regional projects. These projects provided detailed back-ground analysis and information to the officials involved in working out thedetails of the new regional organization, under the direction of the foreign secre-taries and foreign ministers of the South Asian states (Rostow 1986: 131; Haas1989a: 277; Saksena 1989: 82).

International factors

The 1970s can be described as a critical decade during which a number of initi-atives for South–South cooperation were taken. Such international developmentsas NIEO (1974), the call for South–South action programs for collective self-reliance adopted at the successive Non-Aligned Summits in Colombo (1976)and Havana (1979), the United Nations conference on technical cooperation in1978, and the Arusha program of collective self-reliance adopted by the G-77 inFebruary 1979 underlined the need for collective approach at regional levelsamong the southern countries to achieve economic growth. It is quite possiblethat President Ziaur Rahman’s preference for a regional cooperation scheme in

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South Asia has been shaped by such international debates that produced a strongwave of intellectual and political support for collective action among the devel-oping countries (Khan 1991: 35; Mohanan 1992: 2).

After regime changes in South Asia in the mid-1970s, US President JimmyCarter and British Prime Minister James Callaghan visited India, Pakistan, andBangladesh in January 1978. These leaders urged the new South Asian regimesto make special efforts to establish peace, amity, and cooperation in the region.They also assured the South Asian leaders of economic assistance for multilat-eral cooperative projects on sharing water resources of Ganga and Brahmaputra(Muni and Muni 1984: 26). Such assurance of financial assistance madecooperation on water-sharing projects and other regional projects all the moredesirable.

The Soviet military intervention in Afghanistan in December 1979 had a pro-found impact on regional security in South Asia. The Soviet invasion undoubt-edly led to a further deterioration of regional security in South Asia, makingregional security cooperation more compelling. But, the subsequent US decisionof military aid to Pakistan and India’s opposition to this decision made regionalsecurity cooperation almost impossible. The Bangladesh President faced adilemma. On the one hand, given the new regional security situation, it was dif-ficult for him not to include security as an issue area for regional cooperation. Atthe same time, he was not sure how India would react to the idea of any securitycooperation given the great divide between India and Pakistan on the issue ofSoviet invasion of Afghanistan. Despite this uncertainty, he sent a formal pro-posal in the form of a letter in May 1980 to the heads of the other South Asianstates, proposing a South Asian Summit meeting to discuss a framework ofregional cooperation with a goal of achieving “peace, stability, and security” inthe region (Muni and Muni 1984: 31; Palmer 1991: 81).

The reluctant partners: India and Pakistan

By the early 1980s, the South Asian political, security, and economic environ-ment had deteriorated significantly. With substantial US military aid to Pakistan,Indo-Pakistan tensions increased. After only two years of power, intra-partysquabbles led to the defeat of the Janata party and the Congress party underIndira Gandhi came back to power in India. With the return of Indira Gandhi asthe prime minister, India’s commitment to regional accommodative policybecame questionable. Bangladesh President Ziaur Rahman was assassinated inMay 1981 and was immediately succeeded by Vice President Abdus Sattar, wholed the BNP (established by General Ziaur Rahman) to victory in elections heldin 1981. But, only few months later, army chief General Ershad staged a coupand took over power from the elected government. In early 1980s, the Colombogovernment faced the Tamil militancy, which later became a violent separatistmovement under the leadership of the Tamil Tigers. In addition to these turbu-lent political and security environment, the South Asian countries faced a graveeconomic crisis caused by the twin shocks of oil price increase and severe

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drought. Given this regional context, initiatives for regional cooperation weredifficult, yet enormously desirable.

Understandably cautious but convinced about the benefits of regional coopera-tion, the smaller states in South Asia – Nepal, Sri Lanka, Maldives, and Bhutan –were first to endorse the Bangladesh proposal for establishing a framework forregional cooperation. But both India and Pakistan were skeptical initially. India’spolicymakers, particularly Prime Minister Indira Gandhi, feared that theBangladesh proposal for regional cooperation might provide an opportunity for thesmall neighbors to regionalize all bilateral issues and to join with Pakistan to“gang up” against India. India was also concerned that a regional organizationmight impinge on her freedom in foreign affairs. Indian policymakers realized thatif regional cooperation was institutionalized and decisions were taken by majority,India would stand to lose. Thus, in order to protect itself against being maneuveredby the other states in South Asia, India insisted on the following issues: unanimityon decisions at all levels, exclusion of bilateral and contentious issues, and unani-mous approval for external assistance or intervention. At one stage of negotiation,India even asked its neighbors to go ahead and set up a regional organizationwithout India’s participation if that suited the rest. But this was merely a tacticalmove to persuade the neighbors to keep the bilateral and contentious issues out ofthe purview of the regional forum. India very well knew that no regional organi-zation would succeed in South Asia without its participation (Muni 1988b: 8).

Like India, Pakistani leaders also believed that a regional organization wouldimpinge their freedom in foreign affairs. Thus, while Bangladesh was eager foran early summit meeting, Pakistani leaders were hesitant, preferring step-by-stepapproach to avoid raising expectations of the potential security and economicbenefits of the proposed regional organization. In addition, Pakistani leadersassumed that it might be an Indian ploy to gather the subcontinent against Pak-istan and insure a regional market for Indian products, thereby consolidating andfurther strengthening India’s economic dominance in the region (Thornton 1991:136; Wriggins 1992: 132–133). The Pakistani business community, an importantsupport base of the government, was opposed to any regional trade liberalizationpolicy because of the fear of Indian domination. Analyzing Pakistani oppositionto regional economic cooperation, Gowher Rizvi (1993: 147–149) perceptivelyobserves that historically, one reason why the Muslim bourgeoisie so stronglysupported the movement for an independent Pakistan was that they wanted tomonopolize their share of trade and commerce within a protected nationalboundary and without any competition from the Hindu business elites. Sinceindependence, Pakistan’s dominant political and economic ideology has been tomove away from India. Growth of regional cooperation would entail at least apartial aligning of Pakistan’s economy with that of India. Such prospects seemedto be unacceptable to the political and business elites of Pakistan at this time.This explains Pakistan’s hesitation and preference for a step-by-step approachfor regional cooperation in South Asia.

However, after initial reservations regarding the Bangladesh proposal’s refer-ence to security consideration and lack of clarity about the theme of economic

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and social development, India and Pakistan expressed their willingness toparticipate in the discussion. What followed was a series of quiet diplomaticconsultations between the South Asian foreign ministers at the UN headquarterin New York from August to September 1980 (Muni and Muni 1984: 34).Finally, it was agreed that given the detailed works of the initial proposal,Bangladesh should be entrusted with preparing the draft of a working paper fordiscussion among the foreign secretaries. Bangladesh prepared and circulatedthe draft, which was basically a reformulation of President Ziaur Rahman’s pro-posal, to all South Asian countries in November 1980 (Muni and Muni 1984:35). While endorsing the idea of a regional organization, the draft paper droppedall references to security matters and suggested that the areas of cooperationshould be confined to “non-political” and “non-controversial” items. Explainingthe rationale for a regional organization and advocating regional conferences atvarious levels, the draft identified 11 potential areas for cooperation in the eco-nomic, cultural, and scientific spheres.5

The Bangladesh draft paper became the basis for discussion among theforeign secretaries of seven South Asian countries, who first met at Colomboduring April 21–23, 1981. The Colombo meeting identified five areas for coop-eration: agriculture, rural development, telecommunications, meteorology, andhealth and population. The Colombo meeting also decided to establish a Com-mittee of the Whole, with Sri Lanka as its chairman, to prepare an IntegratedProgram of Action (IPA) in the agreed areas of cooperation. At second meetingof the foreign secretaries, held at Kathmandu on November 2–4, 1981, threemore areas were identified for cooperation: transport, postal services, andscience and technology. At this meeting, the foreign secretaries of smaller SouthAsian countries recommended a meeting at the level of foreign ministers tobring political urgency to the discussion. But, both India and Pakistan resisted,calling for more progress before involving the foreign ministers and taking thediscussion to the next political level.

At the third meeting of the foreign secretaries, held at Islamabad duringAugust 7–8, 1982, one new area, that is, sports, arts, and culture, was added. TheCommittee of the Whole then met at Colombo during January 10–13, 1983, todraw up an IPA, which ranged from organizing workshops to the establishmentsof regional institutions and eventually to major capital investment in infrastruc-ture. At their fourth meeting, held at Dhaka during March 28–30, 1983, theforeign secretaries approved the IPA prepared by the Committee of the Whole.However, it was decided to launch the IPA at a meeting of foreign ministers tobe held at New Delhi. In these four meetings, the foreign secretaries were able toprepare considerable groundwork on two major aspects of regional cooperation:organizational aspects and identification of the areas for cooperation, includingan IPA (Muni and Muni 1984: 37).

The first foreign ministers’ conference was held at New Delhi during August1–3, 1983, signaling the political momentum of regional cooperation in SouthAsia. At the completion of the meeting, the foreign ministers launched the IPAand adopted a Declaration on Regional Cooperation, formally beginning an

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organization known as the SARC. The Delhi Declaration marked the completionof the preparatory phase and the beginning of a new phase of active implementa-tion of joint programs in a number of specific areas, which required political willand cooperation of the South Asian leaders. Following the New Delhi meeting,three more meetings of the foreign ministers were held at Male (July 10–11,1984), Thimpu (May 13–14, 1985), and Dhaka (December 5, 1985) to discussinstitutionalization issues and determine a date and place for the first meeting ofSouth Asian heads of state. Given the role of Bangladesh in initiating the proposalfor regional cooperation, the Male foreign ministers meeting decided to hold thefirst summit meeting of SARC at Dhaka in the last quarter of 1985. Sri Lanka ini-tially refused to attend the foreign ministers meeting scheduled to be held atThimpu (Bhutan) because of alleged Indian support for Tamil militants, who weredemanding a separate Tamil state in Sri Lanka. However, India’s new PrimeMinister Rajiv Gandhi and Pakistani President Zia-ul-Haq successfully persuadedSri Lankan President Jayawardene to reverse his decision, thus preventing a poten-tial breakdown of SARC movement. At the Dhaka foreign ministers’ meeting in1985, a decision was taken to change the name of the organization from SARC toSAARC. The change in the acronym was based on the thinking that while SARCrefers to the process of SARC, SAARC marks the establishment of an association(organization) to promote and develop such cooperation (Kanesalingam 1991a: 1).

The Dhaka Summit and formation of SAARC

Five years after the formal process began, sufficient political momentum wasgenerated for the leaders of the seven South Asian nations to hold a summitmeeting to advance regional cooperation. The first Summit meeting of the Headsof State or Government of the South Asian countries was held at Dhaka duringDecember 7–8, 1985. The Summit meeting formally launched the SAARC byadopting its Charter. The Charter lists eight objectives of SAARC:

to promote the welfare of the peoples of South Asia and to improve theirquality of life; to accelerate economic growth, social progress and culturaldevelopment in the region and to provide all individuals the opportunity tolive in dignity and to realize their full potentials; to promote and strengthencollective self-reliance among the countries of South Asia; to contribute tomutual trust, understanding and appreciation of one another’s problems; topromote active collaboration and mutual assistance in the economic, social,cultural, technical and scientific fields; to strengthen cooperation with otherdeveloping countries; to strengthen cooperation among themselves in inter-national forums on matters of common interests; and to cooperate withinternational and regional organizations with similar aims and purposes.

(Article I)

The Dhaka Summit Declaration stated that cooperation should be “based onrespect for the principles of sovereign equality, territorial integrity, political

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independence, non-interference in the internal affairs of other states and mutualbenefit.” These principles are in line with India’s famous Panchsheel or “FivePrinciples of Peaceful Coexistence” foreign policy enunciated by Prime MinisterJawaharlal Nehru. The Declaration also mentioned that regional cooperationshould “not be a substitute for bilateral and multilateral cooperation but shallcomplement them” and that cooperation should not be “inconsistent with bilat-eral and multilateral obligations” (Article II of the Charter). The Declarationfurther stipulated that decisions at all levels in SAARC “shall be taken on thebasis of unanimity” and that “bilateral and contentious issues shall be excludedfrom the deliberations” (Article X of the Charter). The last two principles weremeant to insure that every member is equal, has a “veto power,” and that discus-sions in the forum would not be contentious. The South Asian leaders at DhakaSummit decided to exclude security, bilateral, and contentious issues fromSAARC meeting discussion because of India’s stated opposition. The Summitalso reached an agreement to establish SAARC headquarter and secretariat inKathmandu, the capital of Nepal.

The Dhaka Summit brought out the central issues on which regional coopera-tion in South Asia is considered absolutely desirable. As the Heads of State orGovernment at the Summit (1985) acknowledged:

the countries of South Asia, constituting one-fifth of humanity, were facedwith the formidable challenges posed by poverty, underdevelopment, lowlevels of production, unemployment and pressure of population com-pounded by exploitation of the past and other adverse legacies. They feltthat, bound as their countries were by many common values rooted in theirsocial, ethnic, cultural and historical traditions, regional cooperation pro-vided a logical response to these problems.6

Recognizing the differences between the member countries, the Summitsettled for a slow and steady growth of SAARC, which, the leaders felt, wouldfacilitate mutual confidence building more than impatient plunges and impracti-cable undertakings. Accordingly, rather than adding anything new, the leadersreaffirmed their commitment to the implementation of the IPA in nine mutuallyagreed areas, as suggested at the New Delhi foreign ministers meeting in 1983 –agriculture, rural development, telecommunications, meteorology, health andpopulation control, transport, sports, arts and culture, postal services, and scient-ific and technical cooperation.

As expected, all the leaders of South Asia at the first summit preferred tohighlight the commonalities among the South Asian countries and their coun-tries’ readiness to make this endeavor fruitful, an accomplishment thus farlargely unrecognized.7 Probably, the greatest success of the first Summit wasthe opportunity for the leaders to meet on the sideline of the SAARC forum todiscuss their bilateral problems and reach some kind of unofficial agreement.For example, General Ziaul Haq of Pakistan and President Jayawardene of SriLanka met informally and agreed to intensify trade and other transactions

90 Origin and evolution of SAARC

between the two countries. India’s Prime Minister Rajiv Gandhi and GeneralZiaul Haq of Pakistan also met informally and discussed bilateral issues. Afterthe meeting, General Ziaul Haq accepted Prime Minister Rajiv Gandhi’s invita-tion to visit India on December 17, 1985, which generated great optimismabout future Indo-Pakistan relations. A sentimental irritant between India andPakistan was also removed when General Ziaul Haq agreed to allow KhanAbdul Ghafar Khan, a towering figure of India’s liberation struggle, to visit theCongress centenary celebrations at Bombay in late December 1985 (Mohanan1992: 67).

The Dhaka Summit also got some moral-boosting recognition from inter-national leaders. Mr Zhao Ziyang, the Chinese premier, hailed the Summit as“an event of great significance in the South Asian Region.”8 The US PresidentRonald Reagan, congratulating the South Asian leaders, described SAARC as a“significant new venture in international cooperation” (Tribune October 20,1986). The UN Secretary General, Mr Javier Perez de Cuellar, expressed thehope that the Summit would open “a new era of progress and help reduce thetension in the region” (The Hindustan Times December 8, 1985). Mr JacquesDelors, president of the Commission of the European Community, and the Com-monwealth Heads of State Summit at Vancouver congratulated the leaders ofSouth Asia for launching SAARC and hoped that the Association would con-tribute to the region’s peace, stability, and progress (The Statesman October 19,1987).

Growth and achievement of SAARC: an overview

The first decade (1985–95)

In spite of a slow and cautious start, SAARC’s institutional structure developedquite early. The Dhaka Declaration of 1985 provided for a modest institutionalstructure. Since then, a complex organizational structure has emerged (seeFigure 4.1). The highest organ of SAARC, the Heads of State or GovernmentMeeting (also known as the Summit Meeting), meets once a year. This SummitMeeting provides overall direction and officially approves new initiatives forSAARC. The Council of Ministers, comprising the foreign ministers of memberstates, meets twice a year and may meet in extraordinary session as and whennecessary to formulate policies, review progress, decide upon new areas ofcooperation, and establish additional mechanisms to carry out SAARC’s activ-ities. The Standing Committee, which consists of the foreign secretaries of themember states, meets as often as deemed necessary, but at least once a year, andsubmits periodic reports to the Council of Ministers. It is entrusted with theresponsibility to monitor and coordinate programs of cooperation, approve pro-jects and modalities of their financing, mobilize regional and external resources,and identify new areas of cooperation based on appropriate studies. By the endof the thirteenth summit at Dhaka in 2004, the Standing Committee has held 31regular sessions and four special sessions.

Origin and evolution of SAARC 91

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The Standing Committee is assisted by a Programming Committee, whichcomprises senior officials. The Programming Committee usually meets prior tothe Standing Committee sessions to scrutinize the Secretariat budget, finalize thecalendar of activities, and take up any other issues assigned to it by the StandingCommittee. The Programming Committee now has been assigned to considerthe reports of the SAARC regional centers, recommendations of the TechnicalCommittees and submit its comments to the Standing Committee. The StandingCommittee, when necessary, can also set up Action Committees, with represen-tatives from member states. Action Committees are responsible to implementprojects involving more than two, but not all, member states.

Next in the hierarchy are the Technical Committees, which have representa-tives from all member states. The Technical Committees report to the StandingCommittee and are responsible for the formulation, implementation,coordination, and monitoring of programs in their respective areas. Chairman-ship of the Technical Committees rotates among member states in alphabeticalorder every two years. Under the new SAARC Integrated Program of Action(SIPA), the number of Technical Committees has been reduced from thirteen toseven mainly through the amalgamation of the different sectors covered by thevarious Technical Committees. The main rationale of the reduction in number ofTechnical Committees has been to increase clarity in terms of the goals andtargets of the activities undertaken, as well as to improve the quality and effec-tiveness of the Committees by eliminating overlapping, duplication, and waste.The seven Technical Committees under SIPA now cover: agriculture and devel-opment; communications and transport; social development; environment, mete-orology, and forestry; science and technology; human resources development;and energy (ICSW 2003: 5).

Apart from these structures, SAARC has also provided for Ministerial Meet-ings on vital areas of cooperation. Since 1985, a number of SAARC MinisterialMeetings have been held on important areas such as trade, manufactures, and ser-vices; basic needs; human resources development; database on socioeconomicindicators; energy modeling techniques; and poverty alleviation strategies.Under this rubric, the Planning Ministers and Commerce Ministers of SouthAsian countries have met several times to provide policy directives for strength-ening regional economic cooperation. The SAARC Commerce Ministers alsomeet from time to time to develop common positions on issues before WTOMinisterial Meetings. In the thirteenth Dhaka Summit (2005), the Heads of Stateor Government of SAARC countries agreed for regular finance ministersmeeting immediately after every summit to explore and strengthen avenues offinancial cooperation in South Asia (Dhaka Declaration November 13, 2005). Inorder to assist these Ministerial Meetings, there are several committees avail-able. In the Male Summit (1991), SAARC leaders established a Committee onEconomic Cooperation (CEC) comprising commerce/trade secretaries ofmember states. The CEC is mandated to formulate and oversee implementationof specific measures in intraregional trade issues.

In addition to SIPA under several Technical Committees, SAARC leaders

Origin and evolution of SAARC 93

have agreed to establish several regional centers over the years to harmonize themember countries’ efforts to carry out activities in important areas of commoninterests. Each regional center is managed by a director and a governing body,which consists of representatives from member countries. The governing boardreports to the Standing Committee (ICSW 2003: 6). So far, the followingregional centers have been established: SAARC Agriculture Information Center(SAIC) and SAARC Meteorological Research Center (SMRC) in Dhaka(Bangladesh); SAARC Tuberculosis Center (STC) in Kathmandu (Nepal);SAARC Documentation Center (SDC) in New Delhi (India); SAARC HumanResource Development Center (SHRDC) in Islamabad (Pakistan); and SAARCCoastal Zone Management Center (SCZMC) in Male. In addition, SAARCleaders have approved to set up four more such SAARC regional centers inmember countries: SAARC Cultural Center (SCC) in Colombo (Sri Lanka);SAARC Information Center (SIC) in Kathmandu (Nepal); SAARC ForestryCenter (SFC) in Thimpu (Bhutan); and SAARC Energy Center (SEC) in Islam-abad (Pakistan).

Unlike ASEAN, which got its own secretariat almost a decade after its found-ing, the leaders of South Asian countries decided to establish a SAARC secretariatat Kathmandu (Nepal’s capital) just one year after the first summit. Although thefirst Dhaka Summit hinted about establishing a Secretariat, the details were notspelled out. During the second Summit at Bangalore (1986), the foreign ministerssigned a Memorandum of Understanding (MOU) on the establishment of theSAARC Secretariat, delineating in some detail the modalities of staffing, funding,and functioning of the Secretariat.9 The Secretariat was inaugurated in Nepal’scapital Kathmandu, on January 16, 1987. The role of the Secretariat is to coordi-nate and monitor the implementation of SAARC activities, provide professionalservice to various SAARC meetings, and serve as the channel of communicationbetween SAARC and other international organizations. As the headquarter, thesecretariat provides a neutral venue for various SAARC meetings.

The Secretariat comprises the secretary general, one director from eachmember country, and general services staff. The Council of Ministers appointsthe secretary general upon nomination by a member country. The appointment isbased on the principle of rotation in alphabetical order and is made for a non-renewable tenure of three years. Until the ninth SAARC Summit at Male (1997),the tenure of the secretary general was for two years. Since, a two-year tenure istoo short a time to achieve anything, the SAARC leaders have raised the tenureof the secretary general to three years since 1997. According to the decision ofthe eleventh Summit held at Kathmandu in 2002, the secretary general holds therank and status of a minister. Fittingly, the first Secretary General, Abul Ahsan,was from Bangladesh. Since then, seven other diplomats have assumed theoffice of the secretary general.10 The seven directors are appointed by the secret-ary general upon nomination by the member countries for a period of threeyears. In special circumstances, the secretary general can extend a director’sappointment for a period not exceeding three more years in consultation with theconcerned member country. A director is in charge of a functional unit called a

94 Origin and evolution of SAARC

division. Frequent interdivisional meetings, presided over by the secretarygeneral, are held to insure close interaction and coordination among the divi-sional units. Initially, four directors were appointed by India, Nepal, Pakistan,and Sri Lanka. The Council of Ministers meeting in Islamabad in November1989 decided to expand the numbers to seven directors. Thus, directors fromBhutan, Bangladesh, and Maldives joined the Secretariat in 1990 (SAARCRecord November 1990: 20). The General Services Staff are appointed by thesecretary general from the nationals of the member countries through an openrecruitment process. Outside of this formal structure, several other institutions –such as SAARC Chamber of Commerce and NGOs – exist which provideimportant information on specific issues to the secretary general.

Broadly speaking, there are three levels of financial arrangements forSAARC activities. At the first level, member countries make annual pledges forfinancing SAARC activities at the national level. The allocated funds remain atthe disposal of member countries and generally cover the cost of hosting ofmeetings and organization of SAARC-related events within the country and ofsending delegations to meetings, seminars, and workshops held in other coun-tries. The second level of financial arrangements concerns with the budget of theSAARC Secretariat. At the Bangalore Summit (1986), the member countriesagreed on a formula according to which each member country is required tocontribute a minimum of 3 percent toward the annual budget expenditure of theSecretariat (Table 4.1). The minimum 3 percent payment indicates equalityamong the seven member states. Besides, 3 percent payment, each countrymakes an additional contribution assessed on the basis of its per capita incomeand the economic capability. The third level of financial arrangements relates tothe expenses of regional institutions. The host country is required to bear 40percent of the cost of regional institutions. The remaining 60 percent is distrib-uted among all seven countries on the basis of the same formula applied to thebudget expenditures of the SAARC Secretariat.

Origin and evolution of SAARC 95

Table 4.1 Contribution of SAARC countries to annual budget expenditures of thesecretariat

Member state Equal contribution Assessed contribution Total share(%) (%) (%)

Bangladesh 3 8.35 11.35Bhutan 3 2.00 5.00India 3 29.10 32.10Maldives 3 2.00 5.00Nepal 3 8.35 11.35Pakistan 3 20.85 23.85Sri Lanka 3 8.35 11.35

Total 21 79.00 100.00

Source: Abul Ahsan (1992), SAARC: A Perspective, p. 14.

Institutional evaluations

During the first decade, SAARC has evolved slowly in terms of institutions andprograms.11 However, it is true that most of the programs and achievements ofSAARC exist on paper. The much talked about SAARC Food Security Reservecould not be utilized to meet the needs of Bangladesh during its worst naturaldisaster in 1991. The Convention on Suppression of Terrorism appears to be afailure, as both India and Pakistan have failed to curtail the movement of terror-ists across their borders. It is also true that most SAARC activities are confinedto “soft” areas of cooperation and to the holding of seminars, workshops, andshort training programs. These activities may be useful, but they do not addresspriority core areas of trade and security and therefore lack visibility and regionalfocus, so essential for evolving a South Asian identity. Most importantly,SAARC suffered from an acute resource crunch, leading to non-implementationof most of its projects.

SAARC’s existence, however, has enabled the South Asian political leadersto meet regularly and carry on informal discussion to address their mutual prob-lems. This is not an insignificant achievement given South Asia’s past historyand low level of interaction among South Asian countries since their independ-ence. Informal talks among the leaders at regularly held SAARC meetings haveled to inter-elite reconciliation on many sensitive issues, producing some note-worthy results in South Asia. The informal talks between the Indian and Pak-istani prime ministers at the second SAARC Summit meeting at Bangalore inNovember 1986 led to the diffusion of tension between the two countries on theissue of India’s troop exercise (Operation Brasstacks) on the Indo-Pakistanborder. An informal discussion between Indian Prime Minister Rajiv Gandhiand Sri Lankan President Jayawardene at the 1986 Bangalore Summit eventuallyled to a peace accord on the Tamil problem in 1987. As a result of an informalmeeting and discussion between the prime ministers of India (Narasimha Rao)and Pakistan (Nawaz Sharif) at Davos (Switzerland) in 1992, the Pakistanigovernment took action to prevent the move of the Jammu and Kashmir Libera-tion Front (JKLF) to cross the CFL in Kashmir later that year. The Davosmeeting was possible because of an earlier informal agreement between the twoleaders at the sixth SAARC Summit meeting at Colombo in December 1991.

Despite this utility of SAARC annual summit meetings, at least threesummits were cancelled or postponed during 1985–95 period because of polit-ical tensions between India and her neighbors. After the Bangalore summit, theIndian decision to use her Air Force jets to drop off relief materials in the JaffnaPeninsula against the wishes of Colombo led to a serious crisis between Indiaand Sri Lanka in 1987. The Indian action was a violation of Sri Lankan airspaceand was widely condemned by all the South Asian countries as an attack on thesovereignty of Sri Lanka. As a protest to such action, Sri Lanka refused to attendthe SAARC foreign ministers’ conference scheduled for New Delhi during June18–19, 1987, to finalize the draft for the Kathmandu Summit. It is significantthat while all the neighboring South Asian countries condemned India’s action

96 Origin and evolution of SAARC

in the strongest possible terms, none of them tried to cash in on India’s possiblediscomfiture at the Sri Lankan boycott of the SAARC meeting. On the contrary,they seemed anxious to stave off any such embarrassment (The Hindu June 13,1987). Determined to keep SAARC alive, the foreign ministers of Pakistan,Bangladesh, Maldives, and Nepal wrote personal letters to Sri Lanka’s presidentand foreign minister, urging them to participate fully in the SAARC session atNew Delhi (The Hindu June 17, 1987). Pakistan took an important initiative todiffuse the crisis. In his letter to the foreign minister of Sri Lanka, Mr A.C.Shahul Hameed, the Pakistani foreign minister, Mr Yakub Khan, wrote: “Unfor-tunate differences have arisen on the eve of a highly important meeting ofSAARC which has made noteworthy progress. It is of the utmost importancethat nothing should happen that should constitute a setback to the consolidationof SAARC” (Mohanan 1992: 70). Finally, the Sri Lankan government agreed toparticipate in the forthcoming SAARC foreign ministers meeting in New Delhi.Two implications of this crisis can be noted here: no South Asian countrywanted the premature demise of SAARC, and it is fair to say that in the absenceof SAARC, each country would have dismissed the crisis as bilateral concernsand a collective regional initiative to defuse the crisis would not have occurred.

The third Summit meeting of South Asian Heads of States or Governmentwas held at Kathmandu during November 2–4, 1987. There were clearly twoagendas discussed in this Summit:

1 the private agenda, which dealt with such hard issues as security of SouthAsian countries, border issues, membership of Afghanistan in SAARC,South Asia as a nuclear-free zone, and bilateral problems between the SouthAsian countries;

2 the official agenda, which discussed the soft, apparently non-controversial,issues that resulted in a common declaration.

Hard issues of the private agenda were discussed in behind-the-scene meetingsbetween the Heads of States or Government and foreign ministers. For instance,the Indian Prime Minister, Rajiv Gandhi met with Sri Lankan PresidentJayawardene for two hours after dinner on the first night of the Summit andagain for the same duration on the second night. They discussed a wide range ofissues, including a defense pact between the two countries. Similarly, India’sExternal Affairs Minister, Natwar Singh met with his counterpart in Sri Lanka,Hameed to discuss the Tamil issues in Jaffna. The meeting between the Indianprime minister and the Sri Lankan president led to what could be considered themost notable achievement of the Summit, the signing of Indo-Sri Lankan PeaceAccord (The Hindustan Times November 4, 1987).

In addition to his meeting with the Sri Lankan president, Prime MinisterRajiv Gandhi had also informal breakfast meetings with King Birendra of Nepaland the King of Bhutan, Jigme Singye Wangchuk, to review bilateral issues(Dawn November 5, 1987). Indian prime minister and President Ershad ofBangladesh met on the second day of the Summit. The two leaders agreed to

Origin and evolution of SAARC 97

start discussions at the tripartite level with Nepal to augment water flows of theGanges river. President Ershad was reportedly happy to know from the IndianPrime Minister that the process of administrative and legal formalities forhanding over the Tin Bigha corridors to Bangladesh was in the final stage (TheHindu November 3, 1987). After informal discussions over a period of threedays, Prime Minister Junejo of Pakistan and the Indian Prime Minister agreed toconvene an early meeting of their respective secretaries for economic affairs toexplore various areas of economic and trade cooperation. Both prime ministersalso agreed to convene an early meeting of secretaries for interior and homeaffairs to take appropriate measure to prevent illegal crossing of borders. TheSiachen glacier issue, the second most important irritant after Kashmir in Indo-Pakistan relations, was discussed by the two leaders, and it was decided that athird meeting at the defense secretary level would be held to address this issue assoon as possible. Both leaders also agreed to appoint surveyor generals for thepurpose of demarcating international boundaries at Sir Creek, close to the Rannof Kutch. They decided to settle the maritime boundaries in accordance with theinternational law covering the sea lines (Bangladesh Observer November 4,1987). As a result of so many unexpected agreements between the two countries,Pakistan reportedly withdrew its proposed contentious amendment – that is todeclare South Asia as a nuclear-free zone region, which India opposed – to thedraft declaration (Mohanan 1992: 78).

The Kathmandu Summit can be described as a triumph of accommodativediplomacy. It demonstrated that high-level agreements can be reached on difficultbilateral problems through informal, behind-the-scene negotiations. Not all out-standing issues were addressed, much less agreed upon, in the Summit meeting.But, given the tension-ridden atmosphere in which the conference began, thethree-day Summit meeting can be considered an important step in the growth ofSAARC. Reflecting the general sentiment of the South Asian leaders assembledat Kathmandu, the outgoing chairman of SAARC, Rajiv Gandhi, commented:“We have succeeded in nurturing South Asian Regional Cooperation because it isfirmly grounded in the realities of the region. Ours is a concord for cooperationand not a concourse for controversy” (Patriot November 3, 1987).

The fourth Summit at Islamabad was held as scheduled in 1988 in a changedregional environment. In 1988, President Ziaul Haq died in a plane crash. After11 years of militarist rule under Zia, Pakistan had a democratic election in 1988,and Benazir Bhutto, winning the election with a comfortable margin, became thenew prime minister. Indian Prime Minister Rajiv Gandhi’s visit to Islamabad toattend the SAARC Summit meeting was considered significant, as he was thefirst Indian prime minister to pay an official visit to Pakistan in 28 years. Themeeting between Benazir Bhutto and Rajiv Gandhi brought back historical andpersonal memories of the “Simla spirit” in Indo-Pakistan relations. The slainparents of these two leaders, Indira Gandhi and Zulfiqar Ali Bhutto, had signedthe historic Simla Agreement in 1972 to resolve Kashmir issue. As widelyexpected, the informal meetings between Benazir Bhutto and Rajiv Gandhi –described as the “representatives of a new generation” in the media of South

98 Origin and evolution of SAARC

Asian countries – led to important bilateral agreements at the IslamabadSummit. Both Pakistan and India agreed not to attack each other’s nuclearinstallations and facilities. They also agreed to begin “constructive dialogue” onthe Kashmir issue (Dawn December 31, 1988). Benazir Bhutto categoricallystated that her country would not use the Sikh card against India any more(Mohanan 1992: 80), a daring statement, given Pakistan’s constant denial of anysuch involvement in Punjab. In short, the three most important political irritantsin Indo-Pakistan relations, that is, Kashmir, cross-border terrorism, and nuclearissues, were deliberated privately at the Islamabad Summit. Such discussionsunderlined the utility of SAARC as a confidence-building mechanism (Muni1988a: 13–26). As Ross Masood Hussain, director general of the Institute ofStrategic Studies at Islamabad, has perceptively remarked:

But for the association [SAARC], a meeting between the Indian and Pak-istani Prime Minister might not have been possible so soon after the revivalof representative government in Pakistan. The significance of these confi-dence building exchanges between SAARC leaders can hardly be exagger-ated.

(1990: 4)

After the Islamabad Summit, the SAARC movement suffered a setback, asColombo refused to host the fifth Summit in 1989 because of New Delhi’sfailure to completely withdraw the IPKF from the northeastern part of SriLanka. When the last batch of IPKF left on March 25, 1990, Sri Lanka offeredto host the fifth SAARC Summit. It was, however, agreed at the Islamabadmeeting that Colombo would host the fifth Summit in 1989, and Maldives wouldbe given the special honor of hosting the sixth Summit in 1990, to coincide withthe latter’s twenty-fifth anniversary of independence from Britain (Male Decla-ration 1990: 14). A diplomatic confrontation ensued between Maldives and SriLanka. With the intervention of other SAARC members, Sri Lanka finallyrelented in favor of Maldives, where the fifth Summit was held during Novem-ber 21–23, 1990.

The successful completion of Male Summit did not mark the end of SAARCSummit crisis. The sixth SAARC Summit, which was scheduled to be held atColombo during November 7–9, 1991, was postponed following the King ofBhutan’s (Jigme Singye Wangchuk) inability to attend the Summit because ofthe officially stated reason of widespread domestic violence and unrest in thecapital city of Thimpu. While the idea of holding the Summit with a representat-ive of the King of Bhutan was agreeable to Pakistan, Sri Lanka, Bangladesh,Maldives, and Nepal, India opposed it on technical grounds. According to Indianarguments, holding the summit in the absence of one of the heads of state wouldviolate the SAARC Charter. The Charter stipulates that the Heads of state orGovernment of all the member nations must be present for the summit to takeplace. Moreover, India argued that holding a summit meeting without heads ofthe state or government would set an unwelcome precedent and undermine the

Origin and evolution of SAARC 99

significance of summit meetings. While India might not have played a role ininstigating Bhutan to sabotage the conference, as was widely reported in themedia in Colombo and Pakistan,12 the Indian government certainly did notempathize with the beleaguered Sri Lankan President to save the sixth Summit(Dhanjal 1991: 25–27). Several developments can be mentioned to explainIndia’s unhelpful action.

Relations between New Delhi and Colombo began to deteriorate after Ranas-inghe Premadasa succeeded Jayawardene as the new president of Sri Lanka inJanuary 1989. The new president’s stubborn stance about the immediate with-drawal of IPKF from the island, without taking into consideration the logisticalproblems, was not appreciated by New Delhi. India’s proposal of a phased with-drawal of the IPKF was rejected by the new Sri Lankan president. Even Presid-ent Premadasa refused to host the SAARC Summit in Colombo in 1989 on thisground. Moreover, in an effort to undermine the role of India, he invited theLTTE leaders for direct negotiation and sought the Tamil militants’ support tofight against the “common enemy” – IPKF. Such actions exposed the hollow-ness of New Delhi’s foreign policy, caused quite a bit of embarrassment in NewDelhi’s policy-making circles and, more importantly, led to an increase intension between Tamil Nadu and New Delhi.

During 1989–91, President Premadasa’s failure to deal with the domesticcrisis in Sri Lanka was criticized by the opposition parties. In October 1991,there was a move to impeach President Premadasa, who was convinced that theimpeachment move by the opposition party was inspired by New Delhi in orderto discredit him. To save himself from further political humiliation, he blamedIndia and expelled the local correspondent of All India Radio on the charge offalse and malicious reporting. Such symbolically provocative actions furtheraggravated relations between Colombo and New Delhi.

The initial cancellation of the Colombo summit was widely perceived as thecollapse of the SAARC movement. Commenting on the failure of the sixthSAARC Summit, The Economist observed, “it [SAARC] looks more than everlike an idea whose time has yet to come” (November 16, 1991). However, as aresult of intensive diplomatic consultation, mainly undertaken by the Presidentof Maldives, Maumoon Abdul Gayoom, it was agreed to hold a one-day Summitat Colombo on December 21, 1991. The King of Bhutan’s apology for hisfailure to attend the November SAARC Summit helped remove some of the mis-understandings and bitterness among policymakers in Colombo. The holding ofthe sixth SAARC Summit proved the skeptics wrong and confirmed the fact thatSouth Asian ruling elites were still committed to keep SAARC alive.

SAARC since 1995

Expectation for a greater momentum for SAARC in the second decade washigh following two summit meetings at Male (1997) and Colombo (1998),where Indian and Pakistani prime ministers showed considerable warmthtoward each other and resolved to take concrete initiatives to address their bilat-

100 Origin and evolution of SAARC

eral problems. Holding informal discussions on the sidelines of the SAARCSummit meeting at Male in 1997, Indian Prime Minister I.K. Gujral and Pak-istani Prime Minister Nawaz Sharif agreed to follow up the Simla Agreementprinciples to resolve their outstanding issues. This initiative was significantbecause the two countries came together for the first time to work toward mutu-ally acceptable solutions in the spirit of Simla Agreement principles nearly twodecades after signing the Agreement. The Colombo summit in 1998 wassignificant because it was the first contact between the newly elected IndianPrime Minister from the BJP party, Atal Behari Vajpayee, and Pakistani PrimeMinister Nawaz Sharif after the nuclear tests by the two leaders in the sameyear. The informal personal meeting at Colombo seemed to have broken the icebetween the two leaders and started a process that culminated in the Lahore busjourney in 1999 to renew the peace efforts between India and Pakistan.However, this optimism of a greater momentum for SAARC plummeted afterthe Kargil war in 1999 and the military coup in Pakistan in the same year. From1999 to 2002, no SAARC annual summits were held because of India’s refusalto attend the summit meetings.

India’s decision not to participate in the SAARC summits during this periodwas driven primarily by three issues. First, there was a strong official oppositionin New Delhi to the Indian prime minister’s sharing of a platform with GeneralMusharraf, who came to power through a military coup. Although New Delhi’sofficial position was that the Indian prime minister’s visit to Islamabad wouldunnecessarily confer legitimacy on General Musharraf’s military coup, whichIndia had condemned strongly, the real reason was a strong mistrust and suspi-cion among Indian policymakers toward General Musharraf, who was the prin-cipal architect of the Kargil war. Second, Prime Minister Vajpayee was deeplydisappointed with the failure of his peace initiative at the Agra summit in July2001, where, despite India’s opposition, President Musharraf sought to focus onthe resolution of Kashmir issue. Third, Prime Minister Vajpayee, responding todomestic pressure, took a strong stand against Pakistan’s alleged involvement ina terrorist attack on Indian Parliament in December 2001. Although India lateragreed to attend the summit meeting in Kathmandu in 2002 – where the “famoushandshake” between President Musharraf and Prime Minister Vajpayee waswidely perceived as a peace overture between the two countries – it refused toattend the summit in 2003 scheduled to be held at Islamabad. Indian leaders’distrust toward Pakistani military regime, Pakistan’s insistence on Kashmir as acore issue, and Pakistan’s refusal to reciprocate the most-favored nation (MFN)status with India were some of the main reasons for India’s refusal to attend theIslamabad summit meeting. Confronted with the arguments that New Delhi’sstance was causing damage to the regional grouping, Indian Prime Minister Vaj-payee decided to attend the delayed Islamabad summit in 2004. However, theDhaka summit scheduled for January 2005 got postponed twice – first timebecause of the Tsunami in the Indian Ocean; second time because of the refusalof the new Indian Prime Minister Manmohan Singh to attend the meeting.India’s stated reason for not attending the summit was a rapidly deteriorating

Origin and evolution of SAARC 101

security environment in Bangladesh following the assassination of the country’sforeign minister.

But, this was not the real reason for India’s decision. The unexpected polit-ical developments in Nepal, where King Gyanendra, disregarding New Delhi’sadvice, assumed dictatorial power by dissolving Parliament and all other demo-cratic institutions was the main reason for India’s decision. It was felt in NewDelhi that Indian Prime Minister’s sharing of a platform with King Gyanendrawould confer legitimacy on the King and his dictatorial regime, which India wasin no mood to oblige. Several months of intense diplomatic negotiationsbetween India, Bangladesh, and Sri Lanka, including King Gyanendra’s willing-ness to negotiate with Nepal’s political parties to restore democracy, led India tochange its mind. Eventually, after ten months of delay, the thirteenth Dhakasummit was held on November 13, 2005, saving another possible collapse of theorganization. Indian leaders’ decisions to cancel or delay several SAARCsummit meetings are seen as part of India’s coercive regional diplomacy by herneighbors and have evoked resentment among the leaders of other South Asiancountries.

Although the momentum of progress of SAARC in the second decade has notpicked up as expected, SAARC summit meetings, nonetheless, have producedsome important agreements. At the twelfth summit in Islamabad (2004), twoimportant agreements were signed. One was a SAFTA, providing a broad frame-work for economic cooperation among South Asian states. The adoption of theSAFTA framework, as discussed in Chapter 6, is a major initiative to deepenregional integration efforts in South Asia. The SAFTA framework is animprovement over the existing SAPTA, which was signed on April 11, 1993,and came into force in December 1995. Although SAPTA has run into troublesbecause of Indo-Pakistani disagreements over the lists of tradable items withreduced tariffs, it is fair to say that there has been some advances in the processof trade negotiation under SAPTA to further trade liberalization in the region.13

The other important agreement signed at this summit was an Additional Protocolto SAARC Convention on Suppression of Terrorism, outlining various measuresto combat terrorism in South Asia. The success of this protocol, however,depends primarily on the level of cooperation between Indian and Pakistanileaders.

At the thirteenth Summit in Dhaka (2005), the Islamic Republic ofAfghanistan was admitted as the eighth member of SAARC. At this summit,India also agreed with other leaders to grant observer status to China along withJapan. While Pakistan and Bangladesh supported China’s candidature to joinSAARC in the past, India was more reluctant about the prospect of Chinesemembership. Indian willingness to accept China’s observer status at SAARCreflects the growing positive relationship between the two giants in Asia. By2005, SAARC has secured the United Nations Observer Status in addition tosigning number of MOU with various UN agencies for collaboration. In August2006, the SAARC Council of Ministers agreed to grant observer status to theUnited States, South Korea, and the European Union. Such moves not only

102 Origin and evolution of SAARC

enhance SAARC’s external visibility, but also may put additional pressure onSAARC members to seek implementation of agreed upon cooperative projects.As in the case of ASEAN, these transregional linkages can provide increasingcredibility to SAARC’s status as an important regional organization. It can alsogive SAARC members a somewhat bigger voice in global institutions, includingthe United Nations.

Given the magnitude of poverty in the region, the Heads of State or Govern-ment of South Asian countries at the thirteenth Dhaka Summit decided to estab-lish a much-needed SAARC Poverty Alleviation Fund (SPAF) withcontributions “both voluntary and/or, assessed, as may be agreed by memberstates” (Dhaka Declaration November 13, 2005). This initiative was taken byBangladesh with full support from other members of SAARC. It was alsodecided to deepen SAARC linkages with Asian Development Bank (ADB) andWorld Bank to explore funding opportunities to implement various SAARC pro-jects. The summit leaders agreed to integrate SAARC development goals withMillennium Development Goals (MDGs) in order to tap on external resources toimplement various development projects.

Despite the promise of developing into the most important regional organi-zation in South Asia, SAARC’s growth has remained slow in terms of institu-tional developments and program implementation. Not surprisingly, there isconsiderable basis for less positive evaluations, and the organization hasreceived a wide range of open criticism in the SAARC countries. In fact, two ofthe principal members of SAARC – India and Pakistan – have led the chorus ofpublic criticisms against the organization. Expressing deep disappointment at thelack of any substantial achievement of SAARC, Indian Prime Minister, A.B.Vajpayee, noted at the inaugural function of the SAARC Information Ministers’conference in December 2003:

Since its inception in 1985, SAARC has been struggling to emerge from theconcept to the practical reality of close regional cooperation . . .. It is timewe recognize what it means for all of us in South Asia. If SAARC cannotorganize itself, it will simply miss the boat. Other alignments will developto seize the economic opportunities offered by close integration.

(The Hindu December 9, 2003)

Pakistan’s Information Minister, Sheikh Rashid, echoed this sentiment at thesame meeting by describing that “SAARC’s role had remained marginal inSouth Asia” (The Hindu December 9, 2003). In order for SAARC to grow andbecome a relevant organization in South Asia, Pakistani leaders have argued atseveral forums to include political and security issues in the SAARC agenda inthe pattern of ASEAN and European Union.

During the past two decades, SAARC has been able to establish a number ofregional institutions to initiate and carry out important regional programs. Forexample, creation of a regional food security reserve, cooperation in the area ofmeteorology, health, agriculture, poverty reduction, environment, forestry,

Origin and evolution of SAARC 103

transport, communications, biotechnology are some of the important SAARCinitiatives. But, it is fair to say that these institutions and their initiatives haveoffered more promise than performance. Ironically, none of these regionalcenters are truly regional as yet but can be described as national centers prone tovarying degrees of domestic political imperatives. The activities of theseregional institutions are normally confined to holding of seminars, training pro-grams, and exchanging of information on rather low priority of issues. Theseactivities have so far lacked a regional focus. Since the activities of the regionalcenters are mostly financed by national governments, the scope and frequency ofthese activities are largely determined by domestic politics and the financialhealth of a particular country. In more than a decade of existence, these regionalinstitutions have not undertaken a single collaborative project. There is a deepresistance to undertaking anything that could be collaborative in nature. Thereasons for this, as explained in subsequent chapters, rest with two variables:weak governments and lack of endorsement by key domestic groups.

The Secretariat of SAARC seems to be patterned after the ASEAN Secre-tariat. But while ASEAN took almost nine years to set up its Secretariat,SAARC accomplished this task in less than two years (since the first Summit in1985). Establishment of the Secretariat within such a short time indicates will-ingness among the policymakers in South Asia to give a sense of permanence toSAARC. However, the role of the Secretariat and the Secretary General remainunclear. Unlike the ASEAN and European Union, where the secretariat has theauthority to initiate programs and coordinate projects to strengthen regionalcooperation, SAARC Secretariat performs none of these roles. In case ofSAARC, the Standing Committee and the Technical Committee, which consistsof representatives of member countries, are responsible to monitor and coordi-nate SAARC activities (Ahsan 2004: 5). Since these committees are intergov-ernmental institutions, it is not surprising that members of these committees takepositions of their respective governments rather than sharing any regional per-spectives. All activities of SAARC – program initiation and implementation –are undertaken by the member states. The Secretary General has no respons-ibility and power in matters of program initiation and implementation. As theexperiences of ASEAN and EU demonstrate, the role of a strong secretariat andsecretary general is central to the cooperative process. In case of SAARC, SouthAsian leaders have not shown any preference for a stronger secretariat andsecretary general. The reasons for this rest with two issues: lack of confidenceand trust among SAARC leaders and the unwillingness of SAARC leaders topart with their sovereignty (Ahsan 2004: 8). In the absence of a strong secre-tariat and secretary general, it is difficult to move SAARC forward.14

The SAARC Charter also partly explains the organization’s limitation in car-rying forward concrete cooperative agendas. The Charter provides that“decisions at all levels in SAARC are taken on the basis of unanimity.” Thisunanimity clause makes decision-making process extremely slow and difficult.Even after a decision has been taken, SAARC has no ability to enforce imple-mentation of agreed upon measures. Further, the Charter provides that “bilateral

104 Origin and evolution of SAARC

and contentious issues are excluded from the deliberations of the Association.”The inclusion of this principle in the Charter in 1980s was considered as prag-matic, given the existence of a host of bilateral problems primarily betweenIndia and Pakistan, but also between India and its smaller neighbors, includingNepal, Bangladesh, and Sri Lanka. But, it has serious implications for SAARC’sgrowth. While bilateral issues can be understood and well defined, the “con-tentious issues” are clearly subjective determination of member states becausethere is no specific criteria in the Charter that defines a contentious issue. In theabsence of specific criteria, a member state can consider any issue as contentiousand thus prevent its discussion or resolution at the SAARC forum. It can beargued that by excluding contentious issues from discussion at SAARC forum,the regional leaders lost a vital opportunity to allow a critical role for SAARC asa mediator in regional conflicts. Consequently, SAARC has been mostly a placefor dialogue with an aversion to addressing the core issue of security and limitedinvolvement in concrete cooperation.

SAARC and security issues

Even though the framers of SAARC insisted that they were not setting up asecurity-oriented organization, security matters have tended to dominate recentsummit meetings of top SAARC leaders. As discussed earlier in this chapter,security concerns formed an important part of considerations for the establish-ment of SAARC. In fact, in his initial proposal, the late President of Bangladesh,Ziaur Rahman, underlined the need for security cooperation among South Asiancountries because of his conviction that peace and security were prerequisitesfor economic progress in South Asia. However, it was necessary to leave outsuch a role for SAARC because of the serious opposition from Indian and Pak-istani leaders (Mohsin 2005: 36). The SAARC formula, which developed after aprolonged discussion among South Asian political leaders, was to eschew secur-ity problems, leaving these problems to national action and bilateral or multilat-eral cooperation through other channels. The objectives of SAARC were set toenhance economic and other forms of non-military cooperation among SouthAsian countries. It was thought that increasing cooperation in the economic area(low politics) and other soft areas would eventually lead to stability, develop-ment, and peace in the region.

Two different visions seem to have emerged among South Asian leadersabout the role of SAARC in the region. While Indian leaders emphasize thatSAARC’s energy should be directed to achieve regional economic progress andprosperity, other SAARC leaders see SAARC as an instrument for peace,stability, security, and development. This divide in the vision between Indianleaders and other South Asian leaders has prevented SAARC from addressingthe core issue of security in a transparent manner. It is true that military topicsare kept off the formal agenda of SAARC meetings of the heads of the govern-ment and foreign ministers of South Asian countries. But, the top officials at

Origin and evolution of SAARC 105

these meetings have often taken advantage of the opportunities to discusssecurity-related issues outside of formal sessions. However, after two decadesand since the Islamabad Summit in 2004, South Asian leaders have started toopenly talk about the need for security cooperation in South Asia. Commentingon the need to strengthen regional cooperation efforts in South Asia at thetwelfth SAARC summit in Islamabad (2004), Indian Prime Minister Vajpayeemade indirect references to the imperatives of security cooperation in SouthAsia. He called for an end to “mutual suspicions and rivalries” and emphasizedthat “history can remind us, guide us and warn us. It should not shackle us . . ..We have to look forward now with a collective approach in mind to achievepeace, stability, and prosperity in the region” (Mohsin 2005: 38; emphasisadded). Other South Asian leaders were less indirect in their comments on theneed for security cooperation at this summit. Describing the twelfth Summit as a“key watershed event,” Prime Minister Begum Khaleda Zia of Bangladeshexpressed hope that it would lead to peace and security in South Asia. PrimeMinister Zafarullah Jamali of Pakistan told the participating delegates at thissummit that greater economic integration is inexplicably linked to the creationof requisite political climate of peace and stability. Without security coopera-tion, he contended, deeper economic cooperation in South Asia would remain adistant dream. Hailing the peace overtures between India and Pakistan at thesummit, Sri Lankan President Chandrika Kumaratunga observed that peacebetween India and Pakistan would “boost chances of saving South Asia fromglobal marginalization.” While President Maumoon Abdul Gayoom of Maldivesmade a strong plea for security cooperation among the South Asian countries,Nepalese Prime Minister Surya Bahadur Thapa underscored the critical import-ance of collective efforts to combat terrorism in South Asia.15

The open references to security cooperation by South Asian leaders reflectthe growing importance of security consideration in SARC process. They alsodemonstrate that for effective implementation of regional cooperation programsin a region like South Asia, it is necessary to address political and securityissues, no matter how controversial they are. At least, four developments can bediscussed here to explain the imperatives for regional security cooperation inSouth Asia. First, the asymmetry between India and her neighbors in respect tosize, demography, military, technology, and economic capabilities has generatedapprehension among smaller South Asian countries about India’s regional stra-tegic goals. Unlike other regions, where states demonstrate their preoccupationwith security from external interferences, smaller countries in South Asia arepreoccupied with security from Indian interference. As discussed in the previouschapter, these countries have sought external intervention to counter theprospect of any Indian intervention into their domestic affairs. Indian policy-makers in recent years recognize that their failure to inspire trust and confidenceand to remove threat perceptions among South Asian neighbors will onlystrengthen the prospects of more external intervention in the region. In addition,India’s neighbors have been experiencing domestic turmoil, political instability,and worsening security situation. India’s concern is that continuation of such

106 Origin and evolution of SAARC

turbulence and volatile environment in her neighborhood would be less attract-ive for foreign investors who are looking at India as a new investment destina-tion. This would have an adverse impact on India’s economic growth andaspiration for global leadership. Thus, with widespread instability and uncer-tainty in the neighborhood, India has no choice but to actively engage in securityarrangements with her neighbors to bring peace and stability to the region.

The enormous economic, military, and humanitarian cost of managing conflictsin South Asia provides the second imperative for regional and even multilateralsecurity cooperation. In their efforts to bring stability and peace to the region,Indian policymakers have slowly realized that it is no longer possible and evendesirable to prevent the involvement of major powers in the region’s securityaffairs. The cost of peace, the need for India’s defense modernization, and India’sstrategic goal of a major global power require India to pursue, what C. Raja Mohan(2004) calls as a policy of “security multilateralism.” This policy tolerates inclusionrather than exclusion of major powers in managing South Asia’s security-relatedissues. In the post-Cold War era, security multilateralism is in India’s interest andremains a realistic option for India to secure her global objective.

The acquisition of nuclear bombs by India and Pakistan and the resulting“stability–instability paradox” that South Asian region has fallen into (Ganguly2001: 126–129) provides the third imperative for regional security cooperationin South Asia. After their nuclear tests in May 1998, both Indian and Pakistanileaders sought to initiate active diplomatic engagements, including high-profilesummitry meetings, to develop preventive measures. The failure of these initialefforts, coupled with the outbreak of Kargil war in 1999 and continuing low-intensity conflicts in Kashmir, has increased the urgency of security cooperationbetween the two nuclear weapon capable states. The possibilities of nuclearaccidents, nuclear terrorism and blackmail, misperception, unauthorized nuclearuse, and technological error have reinforced the importance of regional securitycooperation to manage conflicts between India and Pakistan. In this context, theconcept of “cooperative security” can be advanced to capture the logic ofregional security cooperation in South Asia (Dewitt 1994; Nolan 1994; Banerjee1998; Raja Mohan 2004). Although the term “cooperative security” has beenextensively used by security scholars in the post-Berlin Wall (1989) discourse toexplain the changing international relations in Eastern Europe and former SovietRepublics, there is no consensus on the meaning of the term. C. Raja Mohan(2004: 7) provides a description of the term, which is specifically relevant toSouth Asian security environment:

Cooperative security could be understood as policies of governments, whichsee themselves as former adversaries or potential adversaries to shift fromor avoid confrontationist policies. Cooperative security essentially reflects apolicy of dealing peacefully with conflicts, not merely by abstention fromviolence or threats, but by active engagement in negotiation and a search forpractical solution and with a commitment to preventive measures. Coopera-tive security assumes the existence of a condition in which the two sides

Origin and evolution of SAARC 107

possess the military capabilities to harm each other . . .. Establishing cooper-ative security runs into a complex process of building confidence and trustand there could be repeated failures.

Given the reality of security and economic interdependence in South Asiaand the prevailing security complex in which both India and Pakistan developtheir security strategies, the idea of cooperative security offers a realistic frame-work for Indian and Pakistani leaders to address the issues of conventional mili-tary and nuclear conflict management in the region.

Finally, the most important imperative for regional security cooperationcomes from the threat of cross-border terrorism in South Asia. There is a con-vergence of dominant public and official opinion in South Asia on the linkagebetween terrorism and decline in investment and economic growth. Given thesurge in terrorist activities in South Asia after September 11, 2001, South Asiangovernments have shown greater interests in regional efforts to fight against ter-rorism. The signing of an additional protocol on terrorism at the thirteenthDhaka Summit by the leaders of South Asian countries is an indication of thisintention. However, South Asia’s record of implementing regional programs infighting against terrorism is far from impressive. The heads of government ofseven SAARC countries signed a Regional Convention on Suppression of Ter-rorism in November 1987. After ratified by all member states, this accord cameinto force in August 22, 1988. Although touted as the most significant achieve-ment of SAARC, this accord remained a non-starter from the beginning withonly lip-service endorsements from Pakistan and other SAARC countries. Theaccord exists today but perhaps as a statement of an ultimate goal than anythingelse. The success of any regional accord to address issues of terrorism in SouthAsia effectively requires coordination and application of complex policies. Towhat extent South Asian leaders can realistically implement these policies giventheir domestic political compulsions remains an open question.

Conclusion

To be fair, SAARC has produced some positive results. One of the mostsignificant achievements of SAARC relates to its annual summit meetings,which is provided by the SAARC Charter. The primary objective of the annualsummit meetings is to facilitate face-to-face interaction and communicationsbetween heads of South Asian states or governments which would not have beenotherwise possible. It is true that through improved communications and closerpersonal interaction on an annual basis, South Asian top political leaders haveachieved some success in finding mutually acceptable solutions to their manydomestic and regional problems. But, during the past two decades (1985–2005),eight annual summits – three summits between 1985 and 1995 and five summitsbetween 1995 and 2005 – had been missed because of political tensions betweenIndia and her neighbors.16 The failure to hold these annual summits has,undoubtedly, deprived the South Asian leaders of an important opportunity for

108 Origin and evolution of SAARC

constructing relationships based on shared interests and has generally becomecounterproductive for moving SAARC agenda forward.

In nutshell, rhetoric has generally outdistanced performance in South Asia’sefforts at regional cooperation. Over the past two decades, there has been a pro-liferation of SAARC-related meetings and declarations, while real progress hasbeen elusive. Deeper regional cooperation in South Asia has not been possiblebecause of the disparate nature of the region and Indo-Pakistani antagonism. It isironic that the two major powers in South Asia are simultaneously quarrelingwith one another and urging greater South Asian institutionalized cooperation.Unless Indo-Pakistani tensions diminish, real progress of SAARC will not bepossible. From the point of view of SAARC’s growth, it remains problematicthat the political leaders of both India and Pakistan find it more useful to buildrelationship with China, countries in Central Asia, Middle East, and Westernpowers than to invest their political energy and capital to help build a greatercommonality of interest and perspectives among themselves and their SouthAsian neighbors. Despite all the big talk of growing need for regional coopera-tion by the smaller states of South Asia, their governments remain focused ontheir own internal problems and bilateral relations with their immediate giantneighbor, India. It is not surprising, therefore, that more than 20 years after itscreation, SAARC has achieved little tangible results, and there is no real senseof a SAARC community except among a small group of officials and scholars.This is recognized by the political leaders of South Asian countries. Addressingthe Foreign Ministers’ meeting in November 2005, which was held just beforethe thirteenth SAARC Summit meeting at Dhaka in December 2005,Bangladesh Foreign Minister, Morshed Khan, stated: “this summit will not be asummit of declaration, it would be a summit of implementation” (FinancialExpress November 13, 2005). Lack of implementation of agreed upon programshas, undoubtedly, diminished the relevance of SAARC. Why has SAARC notbeen able to implement its programs effectively can be explained by examiningseveral serious challenges that political leaders face in South Asia. These chal-lenges are discussed in the next chapter.

Origin and evolution of SAARC 109

5 The challenge of regionalism inSouth Asia

This chapter examines four major challenges that have significant bearing on thegrowth of regional cooperation in South Asia: India’s hegemonic status and Pak-istan’s continuing challenge to India’s position, existence of weak ruling coali-tions, ethnic crisis, and nuclear issues. Specifically, I explore the followingquestions. How has India’s hegemonic status affected the regional cooperationactivities in South Asia? Is India’s structural domination a “facilitating con-dition” for the growth of regional cooperation in South Asia? How has thestrength of South Asian governments affected the process of regional coopera-tion? What are the implications of ethnic dynamics for national cohesion andregional accommodative diplomacy in South Asia? And finally, what are theimplications of overt nuclear capability of India and Pakistan for regionalstability and cooperation in South Asia?

Hegemony and regionalism

The growing literature on hegemony and regionalism suggests that regionalgroupings operating with the presence of a benevolent hegemonic power aremore likely to experience an enhanced level of regionalism accompanied by thecreation of regionalist institutions than are groups without a benevolent hege-monic power (Walt 1987; Hurrell 1992: 121–139; Crone 1993; Waltz 1993:44–79). The basic line of argument in this literature is that the benevolentleading country within a region can serve as an institutional focal point in thecoordination of rules and policies and through side-payments can help to easetensions that arise from the inequitable distribution of gains from regional coop-eration. Absence of hegemonic leadership leads to coordination dilemma (CD)and can make coordination problem very difficult to resolve. The relativesuccess of the European Union with Germany as the regional leader andNAFTA with the United States as the dominant power provides evidence to thisassertion. In contrast, absence of regional leadership and the consequent CDhave led to the lack of success of many regional cooperation schemes. Some ofthe examples of less successful regional cooperation schemes are the LAFTA,the ANDEAN Pact, Caribbean Community, Arab Common Market, and Eco-nomic Community of West African States.1

India occupies a preeminent position in the South Asian regional system interms of its size, GDP, population, and military capability. Table 5.1 provides acomparative summary of economic, demographic, and military attributes ofregionally dominant powers in selected regional systems and their implicationsfor the growth of regional cooperation. India’s territory accounts for 73 percentof the total region, and its population is more than three times of the combinedpopulation of all other South Asian countries. India also accounts for 75percent of the region’s GDP, 79 percent of value added in manufacturing, 78percent of the total exports, and 60 percent of all imports into South Asia.Additionally, India has 100 percent of the total resources in the region withrespect to iron ore, bauxite, copper, gold, lead, silver, and zinc and more than80 percent of the region’s coal and crude oil reserves. India’s military superior-ity remains unmatched in South Asia (The Military Balance 1999–2000,2004–2005; World Bank World Development Data: Country Data 1999, 2000,2005).

The literature on hegemonic stability theory offers four major arguments toexplain how a hegemonic power can provide a powerful stimulus for regional-ism and the creation of regionalist institutions (Hurrell 1992: 129). Table 5.2summarizes these four arguments as:

1 balance of power – states seek subregional groupings to improve theirbalance of power vis-à-vis a regionally dominant or threatening state;

2 regionalist entrapment – states support the creation of regionalist institu-tions to limit the free exercise of hegemonic power;

3 bandwagoning – weaker states seek accommodation with the regional hege-mony in order to receive military and economic rewards;

4 declining hegemony – declining hegemony may force the hegemon to initi-ate common institutions to pursue its interests, to solve common problems,and to generate international support and legitimacy for its policies.

However, as Table 5.2 illustrates, South Asia presents a far more complexregional system in which India’s hegemony has produced a dynamic that is notalways conducive to the growth of regional cooperation.

Balance of power

In many parts of the world, subregional groupings have developed as a means ofchanging the balance of power vis-à-vis a regionally dominant or threateningstate. Although formed in 1967, the ASEAN was galvanized into action only in1976 when the security threat from Vietnam increased with the victory of NorthVietnamese forces over the United States and its Southern proxy. The prospectof improving balance of power against the overpowering presence of SouthAfrica in the region motivated political leaders to establish SADCC in 1980.Similarly, the establishment of Mercosur in 1991 (presumably against the domi-nance of the United States) and the GCC in 1981 (against the dominance of Iran)

Challenge of regionalism in South Asia 111

Tab

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th A

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ican

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e 19

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ss, 1

999)

; The

Mil

itar

y B

alan

ce19

99–2

005

(Lon

don:

IIS

S, O

ctob

er 1

999)

.

Tab

le 5

.2H

egem

ony

and

regi

onal

coo

pera

tion

dyn

amic

s in

Sou

th A

sia

Arg

umen

tsR

egio

nal d

ynam

ics

Sout

h A

sian

dyn

amic

s

Bal

ance

of

pow

erS

tate

s se

ek s

ubre

gion

al g

roup

ings

to im

prov

e th

eir

Sec

urit

y di

lem

ma

betw

een

Indi

a an

d P

akis

tan,

ba

lanc

e of

pow

er v

is-à

-vis

a r

egio

nall

y do

min

ant s

tate

co

ntri

buti

ng to

unh

ealt

hy a

rms

race

and

the

(AS

EA

N a

gain

st V

ietn

am in

197

6); S

AD

CC

aga

inst

de

velo

pmen

t of

Nuc

lear

Wea

pons

Sou

th A

fric

a un

til 1

992;

EC

OW

AS

aga

inst

Nig

eria

; M

erco

sur

agai

nst U

SA

; GC

C a

gain

st I

ran)

Reg

iona

list

ent

rapm

ent

Sta

tes

supp

ort t

he c

reat

ion

of r

egio

nali

st in

stit

utio

ns in

In

dia’

s fe

ar o

f S

outh

Asi

an n

eigh

bors

’ ga

ngin

g up

or

der

to c

onst

rain

the

free

exe

rcis

e of

heg

emon

ic p

ower

ag

ains

t Ind

ia. H

ence

, Ind

ia h

as c

onsi

sten

tly

(Eur

opea

n C

omm

unit

y ve

rsus

Ger

man

y in

195

7)op

pose

d an

y ag

enda

of

regi

onal

set

tlem

ent o

fdi

sput

es a

nd f

avor

ed b

ilat

eral

set

tlem

ent o

f di

sput

es

Ban

dwag

onin

gW

eake

r st

ates

hav

e a

tend

ency

to s

eek

acco

mm

odat

ion

Tro

jan

Hor

se f

ears

, i.e

. Sou

th A

sian

cou

ntri

es’

fear

w

ith

the

regi

onal

heg

emon

in o

rder

to r

ecei

ve s

ecur

ity

of c

ross

-bor

der

ethn

ic li

nks

wit

h In

dia

and

its

and

econ

omic

rew

ards

(M

exic

o in

NA

FT

A)

pote

ntia

l sab

otag

ing

effe

ct in

thei

r na

tion

-bui

ldin

gpr

oces

s

Dec

lini

ng h

egem

ony

Dec

lini

ng h

egem

ony

may

for

ce th

e he

gem

on to

take

S

outh

Asi

an n

eigh

bors

’ fe

ar o

f In

dia’

s po

tent

ial

init

iati

ves

for

the

crea

tion

of

com

mon

inst

itut

ions

to

expa

nsio

nism

and

wid

espr

ead

mis

trus

t tow

ard

purs

ue it

s in

tere

sts,

to s

olve

com

mon

pro

blem

s, a

nd to

In

dia

gene

rate

inte

rnat

iona

l sup

port

and

legi

tim

acy

for

its

poli

cies

(ro

le o

f th

e U

S in

NA

FT

A a

nd A

PE

C)

suggest how states in a particular region seek to form or strengthen regionalorganizations to balance against a regionally dominant power.

In South Asia’s regional system, the structural imbalance between India andPakistan and other smaller countries is quite clear. This structural imbalance hasled policymakers to pursue contrasting policy objectives. While India desires tomaintain a hierarchical regional order, Pakistan and other South Asian countriesare opposed to this design. Of all the South Asian countries, however, Pakistan’sopposition to India’s predominance in South Asia has remained the most sub-stantial and has contributed to a classic security dilemma in the region (Buzanand Rizvi 1986: 8).

This security dilemma has led to an unhealthy arms race, including nuclearweapons development, between India and Pakistan, making regional cooperationa prime casualty. Since independence, Pakistan’s regional policy has revolvedaround two objectives: to achieve balance of power vis-à-vis India and to liber-ate Kashmir to prove the validity of the two-nation theory.2 In order to achievethese two objectives, Pakistan has always sought external support. During theCold War era, Pakistan joined the two United States-sponsored organizations,the South-East Asian Treaty Organization (SEATO) and the Central TreatyOrganization (CENTO), to insure American support in case of any military con-frontation with India. From 1947 to 1970, despite India’s relative victory in twoIndo-Pakistani wars on Kashmir in 1948 and 1965, Pakistan was largely suc-cessful in challenging India’s predominance in the region with economic andmilitary support from the United States, China, and Turkey.

The liberation of Bangladesh in 1971, with India’s military intervention,changed the structural dynamics of power in South Asia. The emergence ofBangladesh as an independent state had two important implications: first, Pak-istan suffered a substantial reduction in its structural strength; and second, thetwo-nation theory became irrelevant to South Asian politics. Pakistan’s breakupinduced a deep sense of insecurity in the minds of its policy-making and polit-ical elites. Cognizant of their military’s structural weakness to deal with Indianconventional military superiority, the Pakistani elites chose to pursue three strat-egies to offset India’s dominance in the region:

1 seek increasing military and economic support of China, the United States,and the Gulf countries;

2 develop a clandestine nuclear program;3 seek to internationalize the Kashmir issue, despite the Simla agreement of

1972 in which both India and Pakistan agreed to resolve their disputethrough bilateral negotiations.

With the acquisition of nuclear bombs in May 1998 by both India and Pakistan,the latter’s objective of improving balance of power with India may have beenpartially fulfilled. However, as illustrated in Table 5.3, India remains far aheadof Pakistan in terms of conventional military capability.

The development of nuclear weapons by India and Pakistan does not guaran-

114 Challenge of regionalism in South Asia

Tab

le 5

.3T

he b

alan

cing

act

– I

ndia

and

Pak

ista

n

Indi

aP

akis

tan

Def

ense

spe

ndin

g (%

of

GD

P)

2.7

(198

5)6.

7 (1

985)

2.7

(199

8)6.

5 (1

998)

2.6

(200

3)4.

5 (2

003)

Num

ber

of A

ctiv

e A

rmed

For

ces

1,20

0,00

0 (1

985)

575,

000

(198

5)1,

180,

000

(199

8)60

0,00

0 (1

998)

1,32

5,00

0 (2

003)

619,

000

(200

3)

Cat

egor

ies

of W

eapo

nsD

esig

nati

onU

nits

Dat

eD

esig

nati

onU

nits

Dat

e

Sub

mar

ine-

laun

ched

-bal

list

ic m

issi

les

Sag

arik

a–

Dev

elop

men

t–

––

Sur

face

-to-

air

mis

sile

SA

-3b,

SA

-8b,

SA

-16

––

––

Cru

ise

mis

sile

Bra

hMos

–20

03–

––

Sur

face

-to-

surf

ace

mis

sile

Pri

thiv

i I (

150

km)

–20

04H

atf

III

(280

km)

–20

03P

rith

ivi I

I (2

50km

)–

2004

Sha

heen

I (

750

km)

–20

03A

gni I

(70

0km

)–

2004

Sha

heen

II

(200

0km

)–

2004

Agn

i III

(3,

000

km)

–D

evel

opm

ent

Gha

uri I

(13

00km

)–

2004

Gha

uri I

II (

3000

km)

–D

evel

opm

ent

Fig

hter

Pla

nes

(gro

und

atta

ck)

MiG

-21

220

2003

Mir

age

III

4320

04M

iG-2

350

2003

F-7

P&

F-7

PG

132

2005

MiG

-27

7020

03M

irag

e68

2004

Su-

30K

1820

03–

––

Su-

30M

KI

1020

03–

––

Jagu

ar64

2004

––

–M

irag

e 20

0040

2004

––

–

Mai

n ba

ttle

tank

Arj

un12

420

04A

l-K

hali

d45

2004

T-9

031

020

05T

-80U

D32

020

04

Sou

rce:

The

Mil

itar

y B

alan

ce 1

999–

2000

; 20

04–2

005,

Int

erna

tion

al I

nsti

tute

for

Str

ateg

ic S

tudi

es (

Lon

don:

IIS

S, O

ctob

er 1

999,

200

5).

tee a lasting peace or growth of cooperative activities in the region. As discussedlater in this chapter, the overt nuclearization of India and Pakistan has intro-duced a regional “stability/instability paradox” in South Asia. In the presence ofsuch a paradox, bilateral talks between India and Pakistan have acquired moresignificance than multilateral cooperation. In addition, the Kashmir issue stillremains the major bone of contention between India and Pakistan and continuesto limit the growth of regionalism in South Asia.

Regionalist entrapment

States often take initiatives to create regional institutions in order to contain thehegemonic power of a dominant state in a region. The position of Germany inthe European Community is a classic illustration of this regionalist entrapmentstrategy (Hurrell 1995: 50–51). In South Asia, smaller states are always con-cerned about border disputes with India and the latter’s unsolicited intrusion intotheir domestic affairs. Thus, Bangladesh’s initiative to create SAARC in the late1970s and the enthusiastic endorsement of this initiative by Bhutan, Maldives,Nepal, and Sri Lanka is partly guided by this regionalist entrapment sentimentvis-à-vis India. The regionalist entrapment logic explains why the initialBangladesh draft paper for regional cooperation in 1979 included security as oneof the areas of cooperation among the South Asian countries. However, India’sopposition to the security matters led Bangladesh to introduce a new draft paperin 1980, which dropped all references to security matters and suggested onlynon-controversial areas for cooperation.3

Except for Bhutan and Maldives, all SAARC member countries had soughtexternal assistance to limit India’s exercise of hegemonic power in the region.After the 1975 assassination of its democratically elected President, MujiburRahman, military and civilian rulers in Bangladesh have often sought externalinvolvement from the United States, the United Nations, and member countriesof the Organization of Islamic Conferences (OIC) to resolve the Ganges waterdispute with India. During the early 1980s, Sri Lanka has made consistentefforts to involve external powers in the sponsorship of a UN resolution to makethe Indian Ocean a nuclear-free zone. Despite the existence of an Indo-NepalFriendship Treaty since 1950, and India’s serious objection to the proposal ofdeclaring Nepal a “zone of peace,” Nepal’s monarchy during the late 1980ssought continuous support from the United States and China to make this pro-posal a reality. The South Asian ruling elites’ policies of externalization andexternal mediation of bilateral disputes are presumably designed to limit India’ssphere of influence in South Asia and have directly contradicted Indian rulingelites’ objective of Indian autonomy in the region (Buzan and Rizvi 1986).Autonomy for India, as envisioned by its political leaders, requires that thewhole of South Asia be free of outside influences. Thus, India has alwaysopposed outside intervention in South Asian affairs.

The Indo-centric geographic structure of South Asia has led India’s policy-makers to articulate a regional doctrine of Delhineation (that is Delhi’s world

116 Challenge of regionalism in South Asia

view), which essentially argues that in order to achieve regional peace, security,and stability in South Asia, India has to remain strong and maintain militarysuperiority in the region (Lyon 1992: 25039). Indian policymakers believe thatonce India’s military superiority is recognized by its neighbors, regional peacewill prevail in South Asia. In order to maintain its military superiority in theregion, India has engaged in various military-related activities during the late1980s and 1990s: “Operation Brasstacks” (military exercise on the Indo-Pakistan border) in 1987; peace-keeping operation in Sri Lanka from 1987 to1990; sending troops to Maldives to foil a coup in 1988; and holding joint mili-tary exercises with the United States in the Indian Ocean at regular intervalssince 1992. These moves, however, are viewed by its neighbors as India’saggressive hegemonistic designs and have generated a fear of New Delhi’spotential expansionism and unsolicited intrusion into their domestic affairs. Notsurprisingly, all of India’s neighbors since the 1980s have actively sought topromote regionalism to restrict India’s hegemonic power.

The logic of regionalist entrapment is apparent in South Asian neighbors’insistence to place all bilateral disputes with India on the SAARC agenda fordiscussion. But India remains strongly opposed to such an idea because of itsfear that discussions on bilateral conflicts will eventually lead to its isolation andwill provide an opportunity for South Asian neighbors to “gang up” againstIndia. India’s insistence on a bilateral approach, as opposed to its neighbors’emphasis on using a multilateral approach to resolve bilateral conflict issues, hasfurther strengthened their mutual acrimony and distrust and has prevented anybold initiatives for a permanent settlement of the Kashmir dispute and for thegrowth of regionalism in South Asia.

Bandwagoning

Neo-realist literature suggests that weaker states in a regional system tend topursue a bandwagoning strategy – seeking accommodation with the localhegemon in order to receive economic and military benefits (Waltz 1993:54–61). Bandwagoning is most likely to emerge as a preferred strategy for thesmall states when they are located in close geographical proximity to thehegemon and when there is a great power disparity. In South Asia, all the statesshare a common border with India. Given the geographical proximity, greatpower disparity, and the potential for economic and security benefits from analliance with India, it would seem that bandwagoning would be a preferred strat-egy for smaller South Asian countries. Yet, except for Bhutan and Maldives,other small states such as Nepal, Sri Lanka, and Bangladesh have not employedthis strategy because of domestic opposition and ethnic tensions. Much ofdomestic opposition from dominant domestic actors like bureaucracy, military,business, and religious leaders is rooted in the existence of a widespread fear ofIndia’s overwhelming military and economic domination in the region. Thedynamics of regional ethnic relations (which is discussed later in this chapter)and ethnic tensions in which India’s hand is generally suspected by its neighbors

Challenge of regionalism in South Asia 117

have also largely undermined cooperative endeavors of smaller South Asianstates.

Declining hegemony

A central argument of Hegemonic Stability Theory is that, by virtue of itsdominant position, a benevolent hegemon can insure the stability and smoothfunctioning of regional institutions and thus can promote growth of regionalcooperation. But, if a hegemon’s dominance is extreme, it will make the processof institutionalized regionalism irrelevant (Hurrell 1992: 52–53). On the otherhand, declining hegemony may force the hegemon to take initiatives for the cre-ation of regionalist arrangements and institutions to promote its interest and togenerate international support and legitimacy for its policies and leadership posi-tion (Crone 1993: 167–183). India’s active role toward promoting regionalism inSouth Asia in the post-1990 period supports the declining hegemony argument.Until the early 1990s, India’s policymakers chose to take only a cautiousapproach to any regional cooperation initiative in South Asia because of theirbelief that India is unlikely to accrue substantial economic benefits from anySAARC arrangement.

But, the end of the Cold War provides many new challenges for India to reex-amine its regional policy options. India’s aspiration for a global leadership rolehas received a serious setback as a result of:

1 the Soviet Union’s demise, and consequently, India’s loss of a strong ally ininternational forums;

2 growing acceptance of China’s strategic capability and leadership by theworld community;

3 declining relevance of the NAM;4 the rise of Malaysia, Indonesia, and South Africa as new leaders on Third

World-related matters, eclipsing India’s role in such multilateral forums asCommonwealth meetings and G-15 meetings, etc.

Indian leaders have realized that New Delhi needs to demonstrate its leader-ship first in South Asia to generate legitimacy for its leadership in the inter-national arena. As stated by India’s former Prime Minister, I.K. Gujral, “India’sfuture depends on what its neighbors think of it. If India’s energies are wasted infights with neighbors, India will never become a world power” (Basu 1998: 4).Successive Indian leaders have echoed this sentiment and have shown their will-ingness to improve relations with their neighbors in order to accomplish India’slarger goal of regional leadership.

Several important policy initiatives by India since becoming a nuclearweapon capable state in 1998 illustrate India’s willingness to improve its rela-tions with neighbors, particularly with Pakistan. First, in February 1999, PrimeMinister A.B. Vajpayee inaugurated a bus service between the border cities ofAmritsar in India and Lahore in Pakistan. At the end of this bus trip, Prime

118 Challenge of regionalism in South Asia

Minister Vajpayee and the Pakistani Prime Minister Muhammed Nawaz Sharifsigned the Lahore Declaration, reiterating their determination to resolve bilateralissues in a peaceful manner. The declaration, which included the principles ofSimla Agreement of 1972, led to much euphoria in New Delhi’s policy-makingcircle about its potential positive spillover in the regional and internationalcontext. However, this euphoria was short-lived. In May 1999, Pakistani troopsattempted to intrude into the Indian controlled territory in Kashmir by crossingthe LoC at Kargil sector (Ganguly 2001: 83–88). Despite a massive mobilizationof its troops, India resisted from engaging in a full-fledged war with Pakistan.The role of international diplomacy led by the United States, the UnitedKingdom, and European Union, the fear of a nuclear war, and India’s desire togain world’s recognition as a responsible great power can be considered as someof the important factors for India’s decision not to engage in a full-scale warwith Pakistan over the Kargil issue.

India’s second policy initiative was Prime Minister Vajpayee’s invitation toPakistan’s military ruler, General Pervez Musharraf, to a high-powered AgraSummit in 2001 to resume bilateral talks for improving relationship betweenIndia and Pakistan despite the general’s known active role in the Kargil war. TheSummit failed to produce any positive result due to India’s objection to Presid-ent Musharraf’s efforts to use this summit platform to raise the Kashmir issue.Third, despite intense domestic pressures, Prime Minister Vajpayee refused togo for any military retaliation over the sensitive issues of Pakistani-trained ter-rorists groups’ – Lashkar-e-Taiba (LeT) and Jaish-e-Muhammad (JeM) – attackson Indian Parliament in New Delhi in December 2001. In addition, continuouskillings of hundreds of innocent civilians in Kashmir during 2002–03 addedpressure on Vajpayee administration for decisive military actions. Instead, PrimeMinister Vajpayee insisted on diplomatic negotiations and took another import-ant initiative in October 2003 by offering to resume dialogue with Pakistan toimprove bilateral relations. Pakistan reciprocated to India’s peaceful overturesby announcing cease-fire along the 150-kilometer stretch of LoC, restoringdiplomatic relations and resuming bilateral talks on all issues, includingKashmir and intraregional trade. Finally, India’s rapid response of economic andmilitary support to help the earth quake victims in Pakistan-occupied Kashmir inthe fall of 2005 seems to provide an opportunity for the two countries to engagein peaceful diplomacy.

After 2001, almost all of India’s neighbors have experienced deterioratingeconomic and security conditions. Growing political instability in Pakistan,Bangladesh, and Nepal, continuing turmoil in Sri Lanka, and the worseningsecurity situation in Afghanistan have led observers to describe these states as“failing states.”4 India’s concern is that a volatile neighborhood and continuingturbulence in the region may discourage foreign investors who are looking atIndia as a new economic destination. This may retard India’s growth and itsaspiration of becoming a global player. Consequently, achieving peace, prosper-ity, and stability in South Asia has become one of the top priorities of India’sexternal policies. As Prime Minister Manmohan Singh observes:

Challenge of regionalism in South Asia 119

We face a turbulent neighborhood. It is our foremost challenge to create astable and cooperative atmosphere in our region that will allow us to con-centrate our energies on tackling the problems at home and in our region.Peace, prosperity, and stability in South Asia are the top priorities of ourexternal policies . . .. Our emphasis is on extending our support and coopera-tion to our neighbors so that causes of instability are minimised.5

Moreover, Indian policymakers also know that as long as South Asia remainsone of the world’s least economically and politically integrated regions, China’sgrowing influence in the region will be difficult to contain. There is a growingconsensus among Indian policymakers about SAARC’s potential to insureregional stability, status quo in South Asia, and to provide opportunity forimproving bilateral relations through regular informal meetings. Not surpris-ingly, Indian policymakers have shown renewed enthusiasm for improvingIndia’s relations with its neighbors and for the growth of SAARC in recentyears. From an economic perspective, Indian policymakers have realized that anintraregional trading arrangement is beneficial for India’s economic interest.This shift in attitude has strengthened New Delhi’s commitment to SAARC’sgrowth in recent years.

Despite India’s renewed enthusiasm for regional cooperation, SAARC’sgrowth has remained slow due to South Asian states’ fear about India’shegemony and its potential intrusion into their domestic affairs. South Asianstates also worry that SAARC’s growth will enable Indian goods to dominatethe regional market. This concern explains why Pakistan remains opposed toany Indian initiative for trade liberalization in South Asia. In nutshell, India’shegemony, the lack of trust among South Asian states, and Pakistan’scontinuing challenge to India’s domination in South Asia have contributed to theslow growth of SAARC in terms of institutional development and programimplementation.

Ethnic politics

South Asia is one of the world’s most ethnically and linguistically complexregions. All the states of South Asia are home to multiethnic and linguisticgroups. Ethnic political mobilization has been a marked feature of their historiesand nation-building experience. The partition of the subcontinent in 1947, reor-ganization of Indian states’ territorial boundaries in 1956, the secession of EastPakistan in 1971, and the continuing civil war in Sri Lanka have been influ-enced, to a large extent, by ethnopolitical and ethnolinguistic considerations.Ethnic minorities in all the states of South Asia feel disadvantaged and resentthe inability of the central governments to deal with their concerns effectively.

Understandably, South Asian governments are concerned about the destabi-lizing effect of ethnic disorder. Ethnic issues influence both domestic andregional politics in South Asia. At the domestic level, South Asian governmentsremain worried about the possibility of transformation of an ethnic crisis into an

120 Challenge of regionalism in South Asia

autonomist–separatist movement. At the regional level, South Asian govern-ments worry about the spillover effects of the ethnic crisis from one country tothe other and potential involvement of neighboring countries in their domesticaffairs. Some of the major ethnic crises and their implications for regional rela-tions are discussed below.

Given the complexity of Indian society with its multitude of languages,ethnic groups, castes (jatis), and “little societies” within which individual identi-ties are determined by inherited affiliations, Indian state remains vulnerable toethnic unrest and its potential disintegrative effects (Hardgrave 1970: 8). India’sachievement in maintaining its pluralistic political system in the face of suchdiversity cannot be undermined. But, at the same time, efforts of central govern-ment at New Delhi to maintain control over states’ politics and administrationhave fostered resentment against the center among various regional and ethnicgroups and leaders. There is fear among Indian policymakers that ethnic andregional agitation could lead to the emergence of separatist and autonomistmovements resulting in the country’s partition. Thus, New Delhi is worriedabout Dravidian movement in Tamil Nadu, unrest in the northeastern hill areasalong the Chinese, Burmese, and Bangladesh borders – Assam, Nagaland andManipur; in Kashmir; and the Sikh Khalistan movement in Punjab in the 1980s.The assassination of Prime Minister Indira Gandhi by Sikhs in 1984 at NewDelhi and her son Rajiv Gandhi by Tamil militants in 1991 in Tamil Nadu indic-ates the extent of political violence ethnic bitterness can cause. Despite India’semphasis on secularism, political mobilization of Hindus and Muslims by theirlocal leaders often leads to sectarian violence, resulting in the killings of manyinnocent people from two religious faiths. The spread of caste-based deadly riotsrepresents another dimension of ethnic violence in India. Coping with India’sdiversity has always been a challenge and the political leaders in New Delhioften worry about the role of outsiders – in particular, Pakistan and Pakistan-based terrorist organizations – in exploiting this diversity to weaken theircountry.

Like India, Pakistani society has diverse ethnic and linguistic groups. Each ofPakistan’s four provinces comprises a single ethnolinguistic group: Punjab withPunjabis, Sindh with Sindhis, Baluchistan with Baluchis, and the NorthwestFrontier Province (NWFP) with Pashtuns. Punjabis are the largest single ethnicgroups and control much of Pakistan’s military and civilian government power.Other ethnic groups – the Sindhis, Pathans, Baluchis, and Muhajirs (people whocame from India at partition) – resent Punjabi domination in Pakistan’seconomy, politics, and military. Unlike India, which has embraced federalism tocope with its diversity, Pakistan under Jinnah and the subsequent civil and mili-tary rulers has opted for a unitary centralized political structure to deal with itsprovincial ethnolinguistic issues (Ahmed 1997: 236). The idea of greater provin-cial autonomy has been rejected by Pakistani rulers since independence. Formany observers, this has become problematic in Pakistani politics (Cohen 2004:227–229). Stephen Cohen provides an insightful analysis of this issue. Until the1970s, the deepest “fault line” was between East Pakistan and West Pakistan

Challenge of regionalism in South Asia 121

with Bengalis of East resenting the domination of Punjabi-led ruling establish-ment of West Pakistan. After the creation of Bangladesh in 1971, this “faultline” has become more “diffused” with the spread of autonomist movements invarious provinces of Pakistan mainly as a reaction against the domination ofPunjabi-led civil–military leadership at the central government (Cohen 2004:206).

Despite the existence of separatist movements in all the provinces of Pak-istan, it is unlikely that the country will experience another Bangladesh or ethno-linguistic breakup. Nonetheless, in the absence of genuine decentralization andany democratic representation in the central government, Pakistani ruling estab-lishment will continue to face separatist–autonomist movements in comingyears. Three factors – two internal and one regional – explain the likely con-tinuation of these kinds of ethnolinguistic separatist movements in Pakistan.

First, until 1970s, the dominant narrative used by the Pakistani ruling estab-lishment for the country’s national identity was to describe Pakistan as a “home-land” for oppressed Indian Muslims. This narrative was defined entirely in termsof Pakistan’s relations with India’s Hindu-dominated ruling elites. While itserved the interest of the military–bureaucratic elites well, it ignored the struc-tural contradiction of Pakistani society, that is, domination-deprivation of onegroups of Muslims vis-à-vis other groups of Muslims. In the post-independencePakistan, while Punjabi Muslims dominated the country’s military and politics,other ethnic groups’ experienced marginalization in terms of equal politicalrepresentation and sharing of political power. A fundamental structural issuethat intensified East Pakistan’s separatist–autonomist movement under theleadership of Sheikh Mujibur Rahman of Awami League during 1960s was theresentment of Bengalis against the Punjabi domination and the latter’s refusal toaddress their demand for shared political power. Despite the country’s breakup,Pakistan’s leaders are not showing any urgency to modify the post-independencenarrative and to address the issues of political representation and sharing ofpolitical power as raised by other ethnic groups.

The second internal factor is the lack of willingness of Pakistani ruling elitesto grant more political autonomy to the provincial authorities to deal with theethnic issues. As the experience of India suggests, multiethnic states are difficultto govern through centralized politics. Instead, regional autonomy may be neces-sary to manage regional ethnolinguistic aspirations. But, Pakistan’s leaders,including the current military regime under general Musharraf, do not seem tohave fully grasped the effectiveness of this regional management principle.Instead, they have always sought to weaken provincial power and centralizepolitics. As Stephen Cohen has perceptively observed:

It is noteworthy that almost all of Pakistan’s ethnolinguistic agitations weretriggered by the central government’s dismissal of a provincial government,for example, in East Bengal and Sindh in the 1950s, Baluchistan in 1973and 1988, and the NWFP in 1947 and 1973.

(2004: 229)

122 Challenge of regionalism in South Asia

What Pakistan needs today to deal with these ethnolinguistic movements is moreprovincial autonomy and representative government rather than more centralizedrule from Islamabad.

The third factor for Pakistan’s continuing ethnolinguistic separatist move-ments has a regional dimension. Pakistan’s every ethnolinguistic group has hadcross-border ties with India and Afghanistan. From Islamabad’s perspectives,both these states, and particularly India, have the potential to encourage ethnicseparatist movement in its soil. Thus, instead of addressing the demands of itsethnic groups, Pakistan blames India for supporting the separatist movement.Using ethnic unrest as an instrument of foreign policy, Pakistan resorts to aretaliatory policy of supporting and encouraging separatist movements in India.Thus, Pakistan has supported Kashmiri separatists for decades and housed ter-rorists on its soil. It provided active support to Sikh separatists in the mid-1980spossibly as a response to India’s support for Bengali separatists in the late1960s. While blaming India serves Pakistan’s short-term objective, the long-term solution requires the Pakistani rulers to address these ethnolinguistic sepa-ratist movements within a pragmatic framework of political decentralization andpolitical representation at the center.

Sri Lanka’s ethnic crisis offers a significant lesson of how important it is for apost-colonial state to address the issues of ethnic aspirations with urgency and ina timely manner to achieve political stability. In Sri Lanka, there are severalethnic groups – Sinhalese, Tamils, Moors, and Burghers. But the major ethnicdivide exists between the majority Sinhalese and the minority Tamils, who con-stitute about one-fifth of the island’s populations. Several factors explain theethnic divide. First, a highly biased historical chronicle, the Mahavamsa, whichhas been maintained by Buddhist monks since the third century, has kept aliveancient anxieties among the majority of Sinhalese. The narrative of this GreatChronicle blames successive Tamil invasions from South India between theeighth and twelfth centuries for many of the Sinhalese problems in Sri Lanka (deSilva 1981: 9–16; Wriggins 1992: 122). Second, after independence in 1948,many politicians used the “threat from India” argument to mobilize the Sin-halese support. This political mobilization of the majority around Sinhalese cul-tural nationalism mainly to improve the leaders’ support base among theSinhalese seemed to have marginalized Tamil participation in the politicalprocess. In 1956, government measures for the linguistic Sinhalese-only legisla-tion and quotas for the Sinhalese majority at University alienated young Tamils,making them more prone to violent methods.

Third, as discussed in Chapter 3, the issue of the future citizenship rights ofIndian Tamil estate workers who were brought to Ceylon by the British in themid-nineteenth century to work for the tea and rubber estates contributed to theethnic divide between Tamils and Sinhalese. When Sri Lanka’s citizenship lawswere enacted in 1948–49, various ethnic groups in Sri Lanka (Sinhalese, SriLankan Tamils, Moors, and Burghers) were considered natural citizens bydescent. But Indian Tamils were required to prove a two-generation ancestry inSri Lanka to be granted citizenship status. According to one estimate, only 12

Challenge of regionalism in South Asia 123

percent of 825,000 Tamil applicants became eligible for citizenship on the basisof two-generation ancestry criteria (Kanesalingam 1991b: 182). To deal with theremaining people, Sri Lanka’s government created a “stateless” category ofIndian Tamils and sought to have India “repatriate” them. After several negotia-tions, an agreement was reached between Sri Lankan President Sirimavo Ban-daranaike and Indian Prime Minister Lal Bahadur Shastri in 1964, whichstipulated that India would grant Indian citizenship to 600,000 stateless Tamilsand repatriate them, while Sri Lanka would grant Sri Lankan citizenship to375,000 such persons. Until the 1980s, stateless Indian Tamils did not receivefull Sri Lankan citizenship (Kanesalingam 1991b: 183). Frustrated with thislong-drawn process, some of the Indian Tamils started migrating to the northernand eastern province of Sri Lanka, where Tamil militancy was growing.

Finally, a series of anti-government riots by Tamil militants in the Jaffnapeninsula in the 1980s and the subsequent crackdown by government forcesintensified ethnic crisis. In 1983, anti-Tamil riots by Sinahalese zealots inColombo with the help of some members of government killed hundreds ofTamils and burned hundreds of Tamil business and homes. Unable to get urgentprotection from the government, thousands of Tamil families fled to Chennai inIndia (Kanesalingam 1991b: 180–183). These events not only provoked angryprotests from Chennai politicians, but also radicalized many Sri Lankan Tamilswho were neutral until this point, believing that a negotiated compromise solu-tion was still possible. Under the pressure of Tamil politicians in Chennai, NewDelhi decided to provide humanitarian and military assistance and training toTamil militants in Sri Lanka.

With the memory of Indian interventions in East Bengal and the consequentbreakup of Pakistan in 1971 not so distant, Sri Lankan leaders acted quickly toengage India in becoming a part of the solution. Unable to defeat the Jaffnamilitants or to concede to the independence demands of the most extremefaction of Tamils – Tamil Tigers organized under LTTE with VelupillaiPrabakharan as its leader – President Jayewardene saw no alternative but to signa Peace Accord with Indian Prime Minister Rajiv Gandhi in late June 1987.According to this Accord, India agreed to deploy an IPKF at President Jayewar-dene’s invitation to maintain peace and stability in the Jaffna peninsula by nego-tiating a peace agreement with Tamil militants. This engagement of India hadseveral serious consequences. First, instead of laying down their arms, the Tamilmilitants fought guerrilla warfare against the IPKF. To deal with this situation,India was forced to increase its military troops from the original number of3,000 in 1987 to about 60,000 in 1989. In the process of fighting the Tamilguerillas, India lost about 1,000 soldiers between 1987 and 1989, leading toNew Delhi officials’ allegation of lack of cooperation by Sri Lankan authority.

The second consequence of India’s engagement in Sri Lanka’s ethnic crisis isthe ultimate political price – in terms of the assassination of Prime MinisterRajiv Gandhi – that New Delhi had to pay for its failure to contain Tamil mili-tancy. The presence of Indian troops in Sri Lanka evoked anger among Sin-halese nationalists. The radical Janatha Vimukthi Peramuna (JVP – People’s

124 Challenge of regionalism in South Asia

Liberation Front) used this as an attack on Sri Lanka’s sovereignty to build a ter-rorist movement against the government. Unable to cope with the growing Sin-halese opposition, coupled with the failure of IPKF to defeat Tamil Tigers,President Premadasa, Jayewardene’s successor, insisted for the withdrawal ofIndian troops in 1990. Finally, New Delhi’s perceived betrayal of the Tamils notonly angered Sri Lankan Tamils but also fuelled a discontent in Tamil Nadu.This led to easy infiltration of Tamil militants into Chennai. One year after theIPKF withdrawal from Sri Lanka, India’s former Prime Minister, Rajiv Gandhi,was assassinated in Chennai by a female LTTE suicide bomber in 1991.

Since the 1990s, in addition to India, other external powers, notably, theUnited States, EU, Norway, Sweden, and Denmark, have also been engaged inthe peace process without much success. Tamil militants’ repeated violation ofseveral cease-fire agreements, negotiated between the LTTE and Sri Lankangovernment as well as outside powers over the past decade, leaves little hope foran early solution of this crisis. This ethnic crisis, which has turned into a costly“civil war,” has significant implications for Sri Lanka’s domestic stability aswell as India’s domestic politics. Politicians in New Delhi and Chennai remainworried about the steady exodus of Sri Lankan Tamils to India. In 2005, 1,300Sri Lankan Tamils crossed the Palk Strait to join the 55,000 Tamil refugeesliving in 102 camps across the state of Tamil Nadu.6 At present, this may notpose a serious challenge to India. But Indian politicians worry that if this trend iscontinued, it will add to the discontent of Indian Tamils, leading to politicalinstability in Tamil Nadu.

India’s official policy on this ethnic crisis is to support the formula ofmaximum devolution within a sovereign and territorially integral Sri Lanka.This policy is based on several Indian concerns. First, if Sri Lanka is divided onethnic lines, it would have a spillover effect on the violent separatist movementsin India’s northeastern states. Second, the emergence of a separate Tamil state inSri Lanka might revive Tamil nationalism in India. Third, as mentioned earlier,India’s neighbors are Asia’s most troubled countries. Another failing state on itsborder would challenge India’s claim as a regional power capable of maintain-ing regional stability. Thus, India is engaged in a delicate balancing act: it pro-vides training to Sri Lankan army but refuses to sign a defense treaty withColombo to avoid any perception of supplying lethal weapons to Sri Lankantroops that can be used against Tamil fighters. Along with the United States,United Kingdom, Canada, Australia, and most recently European Union in May2006, India has decided to add LTTE to its list of banned terrorist groups.India’s basic objectives are to intensify diplomatic isolation and cut off externalsources of funding to put pressure on LTTE for a negotiated settlement. To whatextent these policies will succeed remains uncertain. But Sri Lanka’s costlyethnic crisis has an adverse impact on the prospect of regional stability in SouthAsia.

Challenge of regionalism in South Asia 125

Regional dimension

Since ethnic minorities in all states of South Asia have close affiliation withtheir kinfolks in neighboring states, cross-border ethnic identities widely prevailin South Asia. This aspect of ethnic relations has several negative implicationsfor interstate relations in South Asia and consequently for SAARC’s growth.First, ethnic conflicts in one state draw natural support from the co-ethnic groupsin neighboring states, contributing to the growing strength of ethnic subnational-ism in South Asia. This has resulted in the proliferation of separatist and terroristmovements and the destabilization of governments in South Asia. Not surpris-ingly, each country blames the other for assisting separatist movements on itssoil. India accuses Pakistan for encouraging separatist movements in Kashmirand Punjab, while Pakistan blames India for the separatist movements in Pak-istan’s Sindh province. Until the signing of the Chakma Peace Accord inNovember 1997, Bangladesh blamed India for assisting separatist movement inthe Chittagong Hill tract, while India counteraccused Bangladesh of supportingterrorist groups in India’s eastern state of Tripura. Sri Lanka blames India for itssupport of the Tamil rebels’ demand for an independent state. Consequently, anatmosphere of mutual distrust and suspicion prevails in South Asia, making thegoal of regionalism difficult to achieve.

A second negative implication for SAARC’s growth is that since India’sethnic groups overlap into all neighboring states, India’s hand in all ethnic con-flicts is strongly suspected by the other South Asian states. Moreover, India’sstructural position of regional preeminence leads its policymakers to believe thatIndia has a legitimate role to play in resolving the ethnic crisis in neighboringcountries. Such Indian belief, however, is not mutually reciprocated by its neigh-bors and often leads to tension in South Asia (Mansingh 1984: 238–240).

Third, the ethnic composition of South Asia is such that the majority group ofsmall South Asian states suffers from a minority complex (Sen Gupta 1988:4–17; Phadnis 1989; Ghosh 1991). The Indian Nepalese of the Tarai regiontogether with their co-ethnics in the Indian states of Bihar and Uttar Pradesh out-number the Nepalese of Nepal. Sri Lankan Tamils together with the Tamils ofIndia’s southern state of Tamil Nadu outnumber the Sinhalese in Sri Lanka.Bhutan’s Nepalese groups together with Indian Nepalese outnumber Bhutan’smajority Drukpas. Although Pakistan and Bangladesh do not suffer from such acomplex, the activities of Sindhis in northern India and of Bengali Hindurefugees in West Bengal do sometimes cause worries for these two neighboringstates. Such an ethnopolitical configuration has led to Trojan-horse fears amongIndia’s neighbors. The Trojan-horse fears refer to the South Asian countries’concerns that a subordinate ethnic group might use its cross-border links withIndia to turn against a state in which their clan or group is disadvantaged. Thefear of India’s potential intrusion and its sabotaging effect in their nation-building process has made South Asian countries distrustful toward India.

126 Challenge of regionalism in South Asia

Institutional structures and government strength

An important factor for the slow growth of regional cooperation in South Asiaduring the past decade was the weak strength of South Asian governments. Lackof wide public support and social base makes it difficult for the leaders in weakgovernments to pursue bold domestic and foreign policies independentlywithout the support of dominant domestic actors. The support of domesticactors, as discussed in Chapter 2, is important for the leaders of weak govern-ments in order to pursue bold policies, including regional cooperation policiesbecause of:

1 the domestic actors’ ability to politicize issues, thereby making implementa-tion of regional agreements more difficult;

2 the leaders’ concern for political survival.

Weak coalitions are under greater pressure to accommodate the varying demandsand interests of their political opponents to insure their political survival. It oftenbecomes difficult for leaders of weak coalitions to downplay regional securitythreat and to ignore scapegoating (blaming external enemy) as an instrument oftheir national policies (Solingen 1997: 78). Thus, weak coalitions remain tentativeabout taking more active regional cooperative initiatives.

Political leaders of all South Asian countries are encumbered with weak coali-tions. They face various levels of domestic dissent, either in terms of cultural andethnic demands for political decentralization or in terms of broad-based secession-ist movements (Jalal 1995: 65–72). South Asian leaders have not been able topursue bold policies to resolve these domestic crises because of their narrow polit-ical base (limited popularity) and lack of legislative autonomy. Tables 5.4 and 5.5provide a snapshot of South Asian countries’ government strength in terms of theirnature of regime, legislative independence, and popular support.

In Bhutan and Maldives, despite having authoritarian regimes and a central-ized decision-making system, these governments can only be described as relat-ively strong because of the leaders’ narrow social base of support. Since 1990s,Nepal has experienced a deficit democracy, which refers to the reduced publicparticipation in the policy-making process that resulted from moving politicalauthority from elected representatives to Monarchy. In Nepal, the transitionfrom Monarchy to a parliamentary democracy in 1990, followed by King-ledauthoritarian rule during 2001–06, and again transfer of power from Monarchyto political representatives as a result of prolonged popular unrest organized byvarious political parties in 2006 has not helped its government’s strength. On thecontrary, the Nepalese government demonstrates all the attributes of a weakgovernment: continuous conflict between the King and other political leaders,resulting in a divided government; intra-party strife; divisions within Parliament;and unpopular political leaders.

The Sri Lankan government suffers from considerable weakness of a dividedgovernment because of its “semi-presidential political system.” In such a

Challenge of regionalism in South Asia 127

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system, a blend of presidential and parliamentary system is employed. As longas the president comes from the same party that has legislative majority, thissystem works like a unified presidential system and can be quite effective. But,if the president and prime minister represent different political parties with dif-ferent agendas, the government remains divided in which the conflict betweenpresident and prime minister can be intense, making the government quite inef-fective (Lijphart 1981). In Sri Lanka, the constitutional division of powerbetween the president and the prime minister, continuous struggle between thetwo executives to demonstrate their control over the two crucial institutions ofthe bureaucracy and the military, ineffective and unpopular heads of state, divi-sion in the ruling party, and a narrow majority of the ruling party in the legis-lature have all contributed to the weakness of government.7

Challenge of regionalism in South Asia 129

Table 5.5 Ruling party’s strength in South Asia, 1990–2005

Countries Ruling party % of total seats in % of votes the lower polledhouse of central legislature

Bangladesh1991 Bangladesh Nationalist Party 42.4 30.31996 Bangladesh Awami League 48.0 34.22001–06 Bangladesh Nationalist Party 63.6 48.0

Bhutan N/A – –

India1991 Congress I 42.5 36.51996 United Front 32.4 32.01999 Bharatiya Janata Part 33.3 32.82004– Congress I 26.6 26.7

Maldives N/A – –Nepal1994 Communist Party of Nepal 42.9 30.81999 Nepali Congress 55.1 46.32001–05 King-led rule off and on;

Parliament dissolved in 2005 – –

Pakistan1993 Pakistan People Party 39.6 37.91997 Pakistan Muslim League-Nawaz 63.13 46.81999–2005 Military coup and National

Assembly dissolved – –

Sri Lanka1994 People’s Alliance Party 46.6 48.02001 United National Party 48.4 53.62004– United People’s Freedom

Alliance 46.7 45.6

Source: Banks et al. 1992, 1997, 2000–02, 2005.

Moreover, the Colombo government confronts an ongoing vicious civil waragainst the Tamil minority’s fight to secede. In the election of November 2005,Mahinda Rajapakse of the People’s Alliance Party was elected as the newPresident of Sri Lanka with the support of the Sinhalese nationalist hard-liners.It is widely assumed that Tamil rebels engineered Mr Rajapakse’s election bypreventing Tamils in the north and east from voting. Mahinda Rajapakse got50.3 percent vote while his opponent Ranil Wickramasinghe, who campaignedfor appeasement with LTTE, polled 48.4 percent votes. This slenderest marginof victory, coupled with a lack of majority of People’s Alliance Party in thelegislature, makes the formulation of any bold domestic or foreign policies diffi-cult for the Rajapakse administration.

Since independence, Pakistan has been mostly ruled by military leaders. Inbetween several military regimes, Pakistan has also experienced what can bedescribed as “quasi-democracies.”8 Quasi-democracies are fragile politicalsystems where the political leaders, despite their election through popular vote,are critically dependent on the support of the military for foreign and domesticpolicies. Unlike mature democracies in Western Europe and North America,where political leaders can take bold initiatives on foreign policy issues withwide public support, leaders in quasi-democracies are severely constrained toformulate or implement only those kinds of policies that are supported by themilitary and the bureaucracy. In Pakistan, democratically elected leaders haveoften lost their power when their policies are inconsistent with the militaryleaders’ goals and objectives (Lamb 1991). The intervention of the army insecuring the resignation of two elected prime ministers, Benazir Bhutto andNawaz Sharif, and President Ghulam Ishaq Khan in the 1990s testifies to thecontinuing domination of army in Pakistan’s politics.

The military and bureaucratic elites in Pakistan have mostly shown morepreferences for domestic-oriented and external-oriented policies than policieswith a regional thrust. This attitude of the military and bureaucracy has led to adampening of enthusiasm among the civilian leaders of Pakistan to pursue anybold regional accommodation policies with their neighbors. In Pakistan, thedemocratically elected governments of Benazir Bhutto and Nawaz Sharif in the1990s enjoyed only a narrow popular base and faced serious opposition from thefundamentalist religious groups and the military, contributing to the govern-ment’s weakness. Not surprisingly, both Bhutto and Sharif administrationspursued the ideology of Islamic Nationalism in order to appease the military andthe fundamentalist religious groups. The central thrust of Pakistan’s IslamicNationalism is to promote the collective solidarity of the Muslim Pakistanis byconstantly nourishing hostility toward the Indian Hindus. For the Pakistaniruling elites, this ideology of Islamic Nationalism has served two principal stra-tegic functions:

1 It has provided a strong rationale to maintain a well-financed and powerfulmilitary as a defense against India.

2 It has enabled the successive administrations to use force to silence opposition.

130 Challenge of regionalism in South Asia

On the other hand, the ideology of Islamic Nationalism has intensified India’smistrust toward Pakistan and has become counterproductive for the growth ofregional cooperation in South Asia.

The military coup in Pakistan led by General Musharraf on October 12, 1999,which ousted Nawaz Sharif’s government and brought Pakistan under directmilitary rule for the fourth time since independence, has brought additionaltension to the Indo-Pakistani relations. Military regimes, when in conflict with aneighboring democracy, tend to engage in military confrontation, scapegoating,(i.e. blaming the neighbor for domestic problems in order to insure their politicalsurvival), externalization of bilateral problems, and support for external media-tion in resolving bilateral disputes (Solingen 1996: 81–86). Since independence,Pakistan’s four wars with India (two over Kashmir in 1948 and 1965, one overBangladesh liberation issues in 1971, and one over Kargil in 1999) have eitherbeen initiated by military regimes or decided by intense military pressure oncivilian regimes. Like Pakistan’s former military rulers, General Musharraf hasoften resorted to scapegoating, as manifested in a series of militant anti-Indiapostures, to remain in power and to acquire legitimacy. Pakistan’s militaryrulers, who have intermittently ruled Pakistan for 32 of its 59 years, have alwayssought external engagement in resolving their bilateral disputes with India. Toinsure Pakistan’s strategic significance for extraregional powers and to maintaindomestic political clout, Pakistan’s military regimes often have preferreddomestic-oriented and external-oriented policies vis-à-vis a regional thrust.General Musharraf has already shown his preference for all these kinds ofmethods in dealing with India (Bearak 1999). Such policies of externalizationand external mediation of bilateral problems, which India opposes strongly, haveprevented close and continuous regional interactions between India and Pak-istan, making regional cooperation goals difficult to achieve.

In Bangladesh, the successive formation of coalition governments due to theruling party’s lack of a comfortable majority in the Parliament, coupled withineffective political leaders who do not enjoy a broad political base of support,has produced consistently weak governments since 1990s.9 In the 1991Bangladesh election, the ruling party (BNP) under Khaleda Zia secured 42percent of the total seats in the Central Legislature and 30 percent of the totalvotes polled. In the election of June 1996, the Bangladesh Awami League underSheikh Hasina emerged as the ruling party with a 48 percent control of the totalseats in the Central Legislature. But the party polled slightly more than 34percent of the total votes. Besides, Prime Minister Sheikh Hasina faced seriousopposition from the dominant religious groups and opposition parties, weaken-ing her government’s strength. In the 2001 election, BNP-led coalition underKhaleda Zia came back to power. Although the coalition won a majority of seatsin the central legislature, it polled only 48 percent of the total votes. Since 2001,Prime Minister Khaleda Zia has struggled to deal with intra-party squabblesamong the coalition partners, political differences between the president andprime minister that led to a serious constitutional crisis, opposition from thepopular Awami League party on the government’s economic and foreign

Challenge of regionalism in South Asia 131

policies, continuing political violence, unrest, and strikes, and the demand fromthe influential Islamic fundamentalists groups to declare Bangladesh as anIslamic state with the institution of Islamic Shari’ah law. Such pressing domesticissues have increased substantially the domestic insecurity of the Bangladeshigovernment. To deal with these issues and to expand their domestic politicalbase, the governing elites of Bangladesh have increasingly pursued nationalistand populist policies. Consequently, although regional cooperation remains animportant goal for Bangladesh, policies toward regional cooperation havereceived low priority from the government in recent years.

In the case of India, the decline of the Congress Party, the formation of coali-tion governments at the center since the 1990s, lack of unity among the partymembers, unpopular and corrupt political leaders and their lack of publicsupport, burgeoning political parties at the regional and national levels withdiverse socioeconomic agendas, interparty strife, constitutional constraints limit-ing the power of the Head of State, and the existence of a quasi-federal decision-making system have contributed to the government’s weakness.10 India hasexperienced four weak liberalizing coalitions since the 1990s:

1 the minority government of Narasimha Rao of the Congress Party(1991–96);

2 United Front Party’s coalition government with outside support of Congressparty led by Deve Gowda and later I.K. Gujral (1996–97);

3 a 23 party coalition government under the leadership of A.B. Vajpayee ofthe Bharatiya Janata Party (BJP) (1998–99, 1999–2004);

4 a 12-party United Progressive Alliance coalition government led by Man-mohan Singh of the Congress Party (2004–).

Given their limited popularity and domestic political insecurity, the leaders ofthese coalition governments have basically relied on three strategies – scape-goating (i.e. blaming the neighbors, particularly, Pakistan); combative regionalpostures; and nationalist policies – to advance their domestic agenda, that is,legitimize their rule and strengthen political base. Consequently, althoughregional stability remains an important goal, Indian leaders’ regional cooperativeinitiatives have remained tentative and fragmented.

It is obvious from the above discussion that in almost all South Asian coun-tries, weak coalitions are under greater pressure to accommodate the varyingdemands and interests of domestic groups to insure their political survival.Leaders in such weak coalitions require strong domestic support to pursue anykind of bold domestic or regional accommodations policies. As discussed indetail in Chapter 7, domestic support (in terms of affective and utilitariansupport) remains low for regional cooperation in South Asia. As a result of thislow support, weak coalitions remain tentative about taking more active regionalcooperative initiatives.

Slow growth of regional cooperation in South Asia in the past decade wasalso caused by the lack of transparency in communication among South Asian

132 Challenge of regionalism in South Asia

countries. Both print and electronic media (India is an exception) are highlygovernment-regulated in South Asia, thereby distorting and delaying informa-tion flows. In addition, the intelligence agencies in India and Pakistan carry outsystematic disinformation campaigns against each other on a regular basis. As aresult, accurate and timely information about policy preferences and domesticconditions of their neighbors are not readily available. Such lack of domestictransparency and contained pattern of communication have several negativeimplications for regional cooperation.

First, inadequate information on countries’ domestic conditions has con-tributed to mutual distrust and has prevented transnational logrolling of people’ssupport for regional cooperation. Transnational logrolling refers to spread of onepopulation’s support for regional cooperation to neighboring countries throughsmooth exchange of information. Second, a lack of domestic transparency hasmade it difficult for the partners of SAARC to predict the intention and behaviorof other partners. This is particularly evident in the dealings of two large part-ners of SAARC – India and Pakistan. This problem of uncertainty has becomeeven more acute with the advent of military rule in Pakistan and weak coalitiongovernments in India. Such uncertainty, in addition to lowering incentives forregional cooperation among SAARC partners and raising the cost of buildingSAARC institutions, has also contributed to non-implementation of such import-ant SAARC programs as anti-terrorism act, which was signed by SAARCmember in 1987. Third, lack of transparency has deprived SAARC partners ofpositive externalities – i.e. they have been unable to develop frequent formal andinformal communication networks among policymakers and non-governmentalactors essential for strengthening regional cooperation.

Nuclear issue

On May 11 and 13, 1998, India tested a series of five nuclear devices at thePokhran test cite in the northern state of Rajasthan after more than two decadesof maintaining a policy of nuclear ambiguity.11 Two weeks later, Pakistan fol-lowed suit by testing six nuclear devices on May 28 and 30, 1998, abandoningits policy of nuclear ambiguity and equaling India’s total number of explosionssince 1974. By conducting these tests, India and Pakistan became the only twoneighboring countries in Third World region to have demonstrated a real nuclearweapon capability. What are the implications of nuclear weapon capabilities ofIndia and Pakistan for South Asia? Has their decision to go overtly nuclearenhanced the prospects of regional peace and stability or has increased thechance of war? The following section examines these questions.

The evolution of nuclear program in India

India’s nuclear program was started by the Cambridge-educated scientist DrHomi J. Bhabha in 1944 at the newly established Tata Institute of FundamentalResearch (TIFR). After India’s independence in 1947, Prime Minister Nehru

Challenge of regionalism in South Asia 133

provided full support and political patronage to this program and showed strongpreference for a nuclear dual track policy – that is India’s development ofnuclear energy should be for peaceful purposes,but could be used for defensivepurposes if necessary. By early 1960s, India had developed the capability toproduce nuclear weapon. Although Nehru rejected Bhabha’s request to make anuclear bomb using plutonium, he kept the option open.12 Nehru’s preference fornuclear option was further strengthened by India’s defeat in the Sino-Indian warof 1962 and China’s nuclear explosion in 1964. After Nehru’s death in 1964,Prime Minister Lal Bahadur Shastri continued India’s nuclear dual-track policy.

With Shastri’s death in 1965, the political push for nuclear explosion sloweddown. However, the changing political landscape of South Asia during early1970s provided a new political momentum to Prime Minister Indira Gandhi’sadministration for carrying India’s first nuclear explosion. The US efforts toestablish rapprochement with China in July 1971 and to strengthen its relation-ship with Pakistan incited New Delhi’s fear that the balance of power on thesubcontinent might become unfavorable. In December 1971, India sent its troopsto East Pakistan to fight against West Pakistan. In showing support for Pakistan,the United States sent the Task Force 74 of the Seventh Fleet which consisted ofEnterprise, the world’s largest attack carrier, with 75 nuclear-armed fighterbombers on board into the Bay of Bengal. Although India defeated the Pakistaniforces and secured Bangladesh’s independence, it was resentful of the USgunboat diplomacy and the nuclear threat.13

In the political calculation of Mrs Gandhi and her close advisors after India’svictory in the Indo-Pak war of 1971, a single peaceful nuclear explosion (PNE)would offer India the best possible policy option by achieving the followingobjectives:

1 India would be able to reject the non-proliferation regime, the main archi-tects of which were the United States and the former Soviet Union.

2 It would demonstrate the limits of Soviet influence on New Delhi.3 It would provide deterrence against China.4 By demonstrating its capability to build nuclear weapons and then choosing

not to do so, India would be able to claim moral superiority over othernuclear weapon states;

5 It would enable India to reassert its autonomy in world affairs and legit-imize its non-alignment policy.

While the preparation for India’s first nuclear explosion started in May 1972when the Purnima reactor went critical, the timing of the PNE reflected the inter-play of domestic and external considerations. By 1974, Mrs Gandhi’s domesticpopularity had declined because of growing factionalism within the CongressParty, rapidly deteriorating economy due to sudden rise in oil prices as a resultof Arab-Israeli war in 1973, labor unrest as represented by the ongoing longest(three-week long) railway strike, and the wave of Jayaprakash Narayan’s move-ment for “total revolution.” To divert people’s attention from domestic problems

134 Challenge of regionalism in South Asia

and boost her and the Congress party’s popularity, Mrs Gandhi, after consultingwith a few of her closest advisors – P.N. Haksar, the former principal secretaryto the Prime Minister; P.N. Dhar, the incumbent principal secretary; Dr NagChaudhary, scientific advisor to the Defence Minister; H.N. Sethna; and RajaRamanna – decided to go for a nuclear explosion. On May 18, 1974, India deto-nated its first PNE at the site of Pokharan in Rajasthan.14

By conducting the PNE, India achieved its nuclear policy objective, that is,its nuclear complex became more self-reliant. But the adverse international reac-tions had a sobering effect on India’s nuclear programs. For next two decades,Indian policymakers maintained a policy of nuclear ambiguity until the adventof the comprehensive test ban treaty (CTBT) debate in 1995. In pushing for aCTBT, the United States gave highest priority to the issue of non-proliferation.For India’s nuclear establishment, this was a strategy for permanently foreclos-ing India’s nuclear option. This belief was reinforced by the repeated statementsof several senior American officials that Washington’s goal was to “cap, reduce,and then eliminate” India’s and Pakistan’s nuclear weapon capabilities and thecapabilities of other states (Cohen 2001: 173–174). This was a sensitive issuefor India’s pro-nuclear lobby and nationalist politicians who have long opposeda two-class international system with “nuclear haves” versus “nuclear have-nots” that would perpetuate the dependence of less-developed countries on tech-nologically advanced countries.

The CTBT debate during 1995–97 created an environment in which thedecision to go nuclear was domestically permissible in India. By 1998, there waswidespread support for any decision that would preserve India’s nuclear optionand maintain the country’s pride and independence. Indeed, it was widelyagreed that India’s nuclear weapons would greatly enhance India’s quest forgreat power status. The other strategic calculations of India’s political eliteswere that India’s acquisition of nuclear bomb would put India on a level-playingfield with China, pressuring Beijing to negotiate seriously over the long-contested border disputes with India. It would also insure India’s dominant posi-tion in South Asia, dissuading Pakistan from playing any disruptive role inKashmir. The 1998 Indian election brought the most pro-nuclear party, the BJP,to power. Even during his brief stint as the Prime Minister for 13 days only inMay 1996, the BJP leader, Atal Behari Vajpayee, had vowed to break with pastpolicy of nuclear ambiguity and to begin an openly declared nuclear buildup.Two years later, when BJP came to power, the strategic and political reasons fora nuclear test were there. In addition, the BJP leaders’ desire to increase theparty’s popularity so that it would retain power in the event of a fresh electionbecame a driving force for its decision to go for a nuclear test in May 1998.

The evolution of nuclear program in Pakistan

Although Pakistan’s nuclear research program started in March 1956 with theestablishment of the Pakistan Atomic Energy Commission (PAEC) under thechairmanship of Cambridge-educated Dr Nazir Ahmad, the Pakistani nuclear

Challenge of regionalism in South Asia 135

program did not really take off because of lack of bureaucratic and militarysupport. With the defeat of Pakistan in the 1971 Indo-Pakistani war and theemergence of Bangladesh as an independent state, President Zulfiqar Ali Bhuttodecided to acquire nuclear weapon technology (Ahmad 1999: 178–204). Pak-istan’s basic objective of developing a nuclear bomb was to achieve strategicmilitary parity with India, thereby enhancing its security and national esteem(Bhutto 1969). President Bhutto was convinced that nuclear weapons are thecontemporary currency of international power and only with them in hand couldPakistan neutralize growing influence of India in the region and recapture someof its lost prestige in the 1971 war.

India’s test of its nuclear device in 1974 provided further impetus to Presid-ent Bhutto’s plan to develop nuclear weapons for military purposes. In October1974, Pakistan signed an agreement with France for building a plutonium repro-cessing plant, which was designed to produce fuel for a series of nuclear plants.In 1975, Dr Abdul Qadir Khan, a prominent scientist, returned to Pakistan afterhis training at a Dutch consortium, URENCO, where he seemed to haveacquired substantial knowledge on centrifuge enrichment process. PresidentBhutto hired him as the head of a team of research scientists engaged in a secretprogram to manufacture nuclear weapons. As the head of the team, Dr Khan waspromised sufficient autonomy from bureaucratic and military interference tocarry out his activities. With this power, Dr Khan soon got engaged in severalclandestine activities to acquire technologies and equipment from abroad, oftenthrough third parties and subterfuge. By 1977, under the leadership of Dr Khan,Pakistan was able to develop an enrichment plant at Kahuta, near Islamabad.

Although not enthusiastic initially, the military support for the developmentof nuclear weapons program changed dramatically after General MohammedZia-ul-Haq came to power in a military coup in July 1977, overthrowing theBhutto administration. Like India, General Zia-ul-Haq embraced a nuclear ambi-guity policy, publicly denying any effort to manufacture nuclear weapons whilevigorously pursuing nuclear weapon development program secretly. The Sovietinvasion of Afghanistan in December 1979 led to a weakening of the US pres-sure on Pakistan from acquiring nuclear weapons. As a part of its strategic mili-tary plan, the United States needed to use Pakistan’s territory to funnel militaryand economic assistance to Afghanistan’s resistance forces. To accomplish thisobjective, the United States sought Pakistan’s cooperation by providing militaryand economic aid and relaxing its pressure on Pakistan’s nuclear program.Taking advantage of this shift in US policy which brought massive military andeconomic assistance to Pakistan, General Zia was able to channel the necessaryfunds for Pakistan’s nuclear weapon development program under Dr A.Q. Khan.

By 1987, Pakistan seemed to have developed some capability for nuclearweapons.15 However, Pakistan’s first official admission that it maintainsunassembled nuclear weapons came in February 1992, when Foreign SecretaryShahryar Khan told the Washington Post that Pakistan possesses “elements,which, if put together, would become a device.” He also said that Islamabad hadin 1991 frozen its production of highly enriched uranium and bomb cores but

136 Challenge of regionalism in South Asia

would not destroy its existing cores unless India reciprocated (Hagerty 1998:173). By claiming to freeze its production of fissile material and at the sametime linking its nuclear program with India, Pakistani policymakers sought toaccomplish an important policy objective: retain a measure of nuclear deterrenceagainst India without suffering the negative diplomatic consequences associatedwith nuclear weaponization. Several reports suggest that with China’s supply oftechnology for the short-range M-11 missile and sale of magnets used to refinebomb-grade uranium in 1995, Pakistan’s nuclear weapon program movedforward, albeit secretly.16 Finally, the Indian nuclear test of May 1998 providedan opportunity to the Pakistani Prime Minister, Muhammad Nawaz Sharif, whoon the advice of the senior military leaders, decided to conduct six nuclear teststwo weeks later to match India’s nuclear strength.

Nuclear deterrence and regional stability

Following the South Asian nuclear tests, an intense global debate reemergedbetween the nuclear non-proliferation community and supporters of nucleardeterrence. Fundamentally, two nuclear worldviews guide this debate. First, thenuclear non-proliferation community led by many American analysts andobservers argue that the Indian and Pakistani nuclear tests make the South Asianregion more unstable and war-prone.17 On the other hand, guided by neo-realistworldview, supporters of nuclear deterrence school argue that overt nucleariza-tion of India and Pakistan will enhance regional stability. The latter group islargely represented by South Asian decision-makers and a majority of SouthAsian military and non-military observes and analysts for whom it is now anarticle of faith that nuclear weapon capabilities deter war between India andPakistan (Subrahmanyam 1993: 184; Singh 1998; Mattoo 1999). Which one ofthese views provides a more accurate assessment of South Asian nuclearsituation?

According to the nuclear proliferation analysis, given the geographical prox-imity, historical and political tension, and systematic disinformation campaigns(as carried out regularly by India’s Research and Analysis Wing and Pakistan’sInter-Services Intelligence) between India and Pakistan for decades, inadvertentnuclear use is possible in the wake of a crisis. Any false warning of an impend-ing missile attack from one country would produce extraordinary pressure forthe other country to launch a counter-missile attack for the fear of “immediatedecapitation” (Ganguly 2001: 109). The short flight distances between Indianand Pakistani targets leave so little time for the decision-makers that it would bedifficult to correctly assess the situation and respond accordingly. This makesthe situation extremely dangerous.

While compelling on the surface, this argument does not hold up to sustainedscrutiny. Although they were not declared nuclear powers until 1998, both Indiaand Pakistan have been nuclear-armed rivals for over a decade. In addition tonumerous low-intensity crises, India and Pakistan had experienced at least twomajor military crises – 1990 Kashmir crisis and 1999 Kargil crisis. There is no

Challenge of regionalism in South Asia 137

reliable evidence to suggest that either side had resorted to nuclear weaponsduring these crises. Several geopolitical factors influence the Indo-Pakistaninuclear relations. First, the logic of existential deterrence dissuades India andPakistan from fighting a full-scale war (Hagerty 1998: 181). Existential deter-rence, as defined by Marc Trachtenberg, refers to:

a strategic interaction in which the mere existence of nuclear forces meansthat, whatever we say or do, there is certain irreducible risk that an armedconflict might escalate into a nuclear war. The fear of escalation is thus fac-tored into political calculations: faced with this risk, states are more cau-tious and more prudent than they otherwise would be.

(1985: 139)

Several prominent nuclear strategists in India and Pakistan firmly argue thatnuclear weapons have cast an existential deterrent shadow over Indo-Pakistanirelations. As Subrahmanyam observes:

In 1965 when Pakistan carried out its “Operation Gibraltar” and sent ininfiltrators, India sent its army across the cease-fire line to destroy theassembly points of the infiltrators. That escalated into a full-scale war. In1990, when Pakistan once again carried out a massive infiltration of terror-ists trained in Pakistan, India tried to deal with the problem on Indian terri-tory and did not send its army into Pakistan-Occupied Kashmir.

(1993: 184)

Concurring with Subrahmanyam’s observation, India’s former Army Chief,K. Sundarji, argues:

The reason why Indian leaders have hesitated to take recourse to their statedavowed strategy of reacting in the plains conventionally is because of thenuclear equations. . . . What the nuclear capability does is to make sure thatold scenarios of Indian armour crossing the Sukkur barrage over the Indusand slicing Pakistan in two are a thing of the past.

(quoted in Hagerty 1998: 168)

Similar views have been expressed by Pakistan’s two most prominent nuclearstrategic analysts. Abdul Sattar notes, “Pakistan’s nuclear capability has madeindispensable contribution to deterrence of aggression and maintenance ofpeace” (1995: 20). Echoing this view, Pakistan’s former COAS Mirza AslamBeg observes, “Far from talk of nuclear war, there is no danger of even a con-ventional war between India and Pakistan. As compared to previous years, thereis no possibility of an India-Pakistan war now” (quoted in Hagerty 1998: 168).These observations illustrate the perspectives of many South Asians for whomnuclear weapon capabilities serve as a deterrence to war between India andPakistan.

138 Challenge of regionalism in South Asia

A second reason why nuclear first strike is not considered as a realistic policyoption by either India or Pakistan is because of the short distances separatingIndian and Pakistani targets. Policymakers in both the countries share theconcern that radioactive fallout resulting from a nuclear strike could affect theirown territory. The possibility of widespread radiation poisoning and the conse-quent human cost is a serious concern. Also, preemptive nuclear strikes areextremely unlikely, because of the deterrent power of “first-strike uncertainty.”Leaders in New Delhi and Islamabad are not certain if they could destroy all ofthe opponent’s nuclear weapons preemptively. The devastating consequences ofsuch failure are too critical for leaders to ignore. In fact, such considerationsmay have formed the basis of the India–Pakistan Nuclear Non-Attack Agree-ment in December 1988 according to which both India and Pakistan have agreednot to attack each other’s nuclear facilities. The third reason why New Delhi andIslamabad are dissuaded from nuclear aggression is the fear that any outbreak ofnuclear hostilities would lead to international isolation, economic sanctions, anddisruption of foreign investment, adversely impacting their economic goals.

The 1999 Kargil war between India and Pakistan offers a useful test caseabout the implications of overt nuclearization on regional stability. The outbreakof the war challenged the assumption that overt nuclearization would deter Indiaand Pakistan from launching a conventional war. On the other hand, the decisionnot to use nuclear weapons and escalate the war horizontally by two nuclearrival neighbors supports what Sumit Ganguly describes as “stability/instabilityparadox” situation in South Asia.18 According to this argument, the knowledgeof sheer destructive power of nuclear weapons makes the execution of a full-scale war between India and Pakistan most unlikely. At the same time, limitedand calculated incursions across the LoC are possible despite the mutual acquisi-tion of nuclear capabilities. In fact, lower-level engagements as witnessed inKargil crisis in 1999 and Kashmir crisis in 1990 are likely to occur given thepolicymakers’ belief that either side would not attempt a full-scale war for fearof use of nuclear weapons by the opponent.

While the debate on the two competing positions about nuclear stability andinstability will continue, some other critical issues in South Asia are the possi-bilities of nuclear accidents, nuclear terrorism and blackmail, misperception,unauthorized nuclear use, and technological error. Such challenges will con-tinue to persist unless addressed by India and Pakistan by embedding theirnuclear weapons in robust command, control, communications, and intelligenceinfrastructure (Tellis 2001). Until such arrangements are made, nuclear issueswill provide an additional element of tension to the Indo-Pakistani bilateralrelations.

Conclusion

This chapter examines four critical issues in South Asia that have an importantbearing on the growth of regional cooperation: India’ hegemonic power, exist-ence of weak ruling coalitions, ethnic crisis, and nuclear issues. What are the

Challenge of regionalism in South Asia 139

implications of these issues on the growth of regional cooperation in SouthAsia?

First, as discussed in this chapter, despite India’s hegemonic position, there isno consensus among South Asian countries to recognize India as the region’sundisputed leader. Additionally, South Asian countries do not share a commonexternal threat perception, which makes it difficult for the leaders of these coun-tries to work toward common regional security strategies. Most South Asiancountries perceive their main threat to be India. On the other hand, India per-ceives an external threat from Pakistan’s military challenge with the support ofexternal powers. The narrow political base of South Asian ruling elites providesfew opportunities for them to ignore regional security threats or to transcendtheir dominant domestic constituencies. Thus, blaming the neighbor (scapegoat-ing) has become a preferred policy choice for South Asian ruling elites, makingregional accommodation a difficult goal. It is not surprising, therefore, thatSAARC-related policies and programs have received low priorities by SouthAsian ruling elites over the past decade.

Second, weak strength of ruling coalitions throughout South Asia has madethe leaders of these countries critically dependent on the support of importantdomestic groups. The leaders’ need for domestic support for political survivalhave led them to pursue populist, nationalist, and self-reliant policies. In Indiaand Pakistan, the leaders have pursued not only such policies but also haveemphasized military-intensive policies. While these policies may have broughtshort-term political payoffs to the ruling elite in India and Pakistan, they havebecome enormously counterproductive for the growth of regional cooperation.

Third, the states in South Asia are all multiethnic and highly permeable. Theyremain vulnerable to ethnic regionalism that can generate separatist movements.This vulnerability has increased domestic insecurities in all the states in SouthAsia. Each state blames the neighboring state for supporting its ethnolinguisticseparatist movements. In particular, India is blamed by its neighbors for its rolein ethnic crises. Since India’s ethnic groups overlap into all neighboring states,India’s hand in all ethnic conflicts is strongly suspected by the other South Asianstates. Moreover, India’s structural position of regional preeminence leads itspolicymakers to believe that India has a legitimate role to play in resolving theethnic crisis in neighboring countries. Such Indian belief is not mutually recipro-cated by its neighbors and often leads to tension in South Asia. Consequently, anatmosphere of mutual suspicion and distrust prevails in South Asia, which is notconducive for the growth of regional cooperation.

Finally, the overt nuclearization of India and Pakistan in 1998 may haveintroduced a regional stability/instability paradox in South Asia. On the onehand, policymakers’ realization of the devastating consequences of nuclearweapons makes the execution of a full-scale war most unlikely. On the otherhand, the deterrent insurance provided by possession of nuclear weapons maytempt both sides to engage in limited war by initiating military adventurismalong the LoC. Episodes like Pakistani incursion across LoC in 1990 and Kargilwar are likely to occur until a political resolution is found in the Kashmir issue.

140 Challenge of regionalism in South Asia

If political and military tensions between India and Pakistan remain unresolved,regional cooperation among South Asian leaders will continue to be weak andinconsistent, making only a “stop-and-go” pattern of growth of SAARC pos-sible. In such a pattern of growth, some regional cooperation policy initiativesare possible. But then, these initiatives will be followed by protracted stalematesduring which regional institutional developments and implementation ofSAARC-related programs will remain uncertain.

The recent move of the South Asian countries toward economic liberalizationhas generated some optimism for increasing regional cooperation in South Asia.Will economic interests drive the South Asian countries toward greater coopera-tion? This issue is explored in the next chapter.

Challenge of regionalism in South Asia 141

6 Domestic politics and regionaleconomic cooperation in SouthAsia

By signing the Framework Agreement on SAFTA at the Islamabad SAARCSummit in January 2004, South Asian leaders took an important step to intensifytheir intraregional economic cooperation. Will SAFTA agreement drive SouthAsian countries toward deeper regional economic cooperation? This chapter pre-sents a political economy framework to address this question by evaluatingdomestic factors in the design and evolution of regional economic cooperationarrangements in South Asia. In Chapter 2, employing the two-level game frame-work, I argued that regional cooperation is a two-level process in whichdomestic support and regional bargains and negotiations must overlap if cooper-ation is to proceed (Putnam 1988). While attempts to achieve regional coopera-tive agreements involve bargaining and negotiation among governmental actorsin various issue areas, domestic support is essential for successful implementa-tion of these negotiated agreements. In the issue area of trade, state actors’ pref-erences for regional arrangements are shaped to a large extent by pressure frombusiness groups. Given this argument, the present chapter argues that willing-ness of political actors and support of domestic business groups are necessaryfor the success of deeper regional economic cooperation. As the experiences ofEU and NAFTA illustrate, the demand for regional rules, regulations, and pol-icies by market players is a critical driving force for deeper regional economiccooperation. Thus, the purpose of this chapter is to answer two questions. First,under what conditions will domestic business groups support regional tradeagreements? Second, under what conditions will governmental actors show pref-erences for regional trade arrangements?

Regional trade preferences by domestic actors are shaped by their expecta-tions about the dynamic effects of regional integration. Studies on regionalintegration identify three kinds of dynamic effects (Balassa 1961; Chase 2005:23). First, regional integration enhances consumer interests by increasingcompetition and breaking the monopolies that leads to reduction of prices.Second, by uniting regional economies, regional integration creates largermarket, which promotes intraindustry specialization through economies of scale.Third, reallocation of factors of production is possible because of factor pricedifferences between countries. While political actors show more preference tothe first dynamic effect of regional integration related to price reduction and

consumer benefits, market actors like the second and third dynamic effects – thatis increased market size with scale economies and factor movements.

Thus, the existence of significant market potential for economic gains frommarket exchange within a region is a critical facilitating condition for thesupport of business groups toward deeper regional economic cooperation.Several empirical studies have shown that if there is little potential for marketgain because of either lack of complementarity of regional economies orabsence of relatively large size of regional markets with insignificant economiesof scale, the process and outcome of regional economic cooperation will not besuccessful (Milner 1997: 85–88; Mattli 1999: 42–43; Chase 2005: 16–27). Thisis because market players will not have sufficient incentives to demand forregional trade. These studies show that market gains are a function of three con-ditions – increasing returns to scale (IRS); size of domestic market available tofirms; and complementarities of regional economies.

First, using the new international trade theory, recent work on regionalintegration argues that firms with IRS support regional trade liberalization morethan firms which do not have IRS (Milner 1997; Chase 2005). IRS – that is firmsachieve declining average production costs as they increase their output – isimportant because the firms can expect to achieve greater profit in imperfectmarkets as production becomes more efficient with scale. Contrary to neoclassi-cal economic assumption of constant returns, industries with increasing returnsachieve efficiency with level of production. As the number of units producedincreases, their cost decreases, insuring maximization of profits for firms. Cost-reduction effects of increasing returns, as the analyses of Corden (1972) andPearson and Ingram (1980) show, are important motivations for firms to supportregional trade strategy. Cost-reduction is best realized when two conditions exist– geographic proximity and economies of scale.

Geographic proximity is important because it brings down transportationcosts substantially. Free trade areas in geographically non-contiguous regionsmay lose the benefits of scale because of the high costs of transport. It is recog-nized by both classical and contemporary literature on international trade thatscale economies are important methods of production that can provide IRS tofirms in the era of imperfect market competition. The central logic of scaleeconomies – that is large-scale production can achieve lower costs – has beendemonstrated in the writings of Adam Smith (for example his famous pinfactory analysis in The Wealth of Nations), John Stuart Mill, and strategic tradetheory literature. As John Stuart Mill, in his classic Principles of PoliticalEconomy, observes, “The larger the scale on which manufacturing operationsare carried on, the more cheaply they can in general be performed.”1 In morerecent strategic trade literature, Paul Krugman (1992) has advanced the exportpromotion model, where import protection policies by governments encouragedomestic firms to increase their outputs with scale economies, reducing theiraverage costs until they can profitably export. Extending the strategic tradelogic, several scholars have adopted a political economy approach to argue thatonce firms achieve scale economies, they will seek regional trade liberalization

Domestic politics and regional economic cooperation 143

to export their products to regional markets in order to reap maximum profit(Froot and Yoffie 1993; Busch and Milner 1994; Milner 1997; Chase 2003,2005). Building from these insights, I argue in this chapter that if IRS are large,producers will support regional trade liberalization to increase output, reduceunit costs, and earn more profits. If IRS are small, producers will have littleincentives in regional trading arrangements because of minimal economic gains.

Second, domestic market size influences support for FTAs. Firms with IRShave limited opportunity to reap profits from small domestic markets. Thus, ifthe home market is small, firms with IRS will support regional trading arrange-ments to reap greater profits and reduce unit costs. In contrast, if the homemarket is large, firms with IRS may be less interested in regional tradingarrangements since they may be already the beneficiaries of large domesticmarkets in terms of profits and unit costs (Casella 1996; Milner 1997). By thesame logic, if the regional market is too small, then producers will not be able toachieve cost reduction and hence will show little interest in regional tradingarrangements.

Third, complementarity of regional economies is an important condition forFTAs. If firms produce and export similar products in a region, they will havelittle incentives to support regional trading agreements because of limited or nodemand for their products. When firms compete with similar products, there is atendency to support for the protection of domestic markets. Trade complemen-tarity is said to exist when the structures of a country’s important exports matchwith its partners’ import basket. In case of the existence of substantial tradecomplementarity, firms are likely to be more supportive of FTAs. The absenceof trade complementarity will diminish firms’ support for FTAs.

Of course, only the support of domestic business groups is not sufficient toinsure the success of regional economic arrangements. Since governmentsmake economic policies and negotiate regional and multilateral economicagreements, it is clear that no change will occur unless governmental actorstake initiatives and positively respond to the demand or support of the businessgroups. It is, therefore, necessary to understand preferences of governmentalactors. Thus, this chapter seeks to answer the second question: under what con-ditions the political actors will be motivated to show preferences for regionaleconomic cooperation arrangements. As discussed in Chapter 2, if regional eco-nomic cooperation policies enhance political actors’ prospects of retainingpower by significantly improving domestic economic conditions, then thesepolicies are likely to be enthusiastically pursued. Otherwise, political actorswill show little preference for pursuing regional economic cooperation policies.Thus, power-retaining objective is the primary motivation of political actors forpursuing regional economic cooperation policies (Milner 1997: 85–88; Mattli1999: 42–43).

However, a cursory look at outcomes of various regional integration schemessuggests that even willing political leaders may be unable to sustain regionaleconomic cooperation because of collective action problems (Mattli 1999). Twotypes of collective action problems – prisoners’ dilemma (PD) and CD games –

144 Domestic politics and regional economic cooperation

have been identified in the international cooperation literature to explain whynation-states choose or not choose cooperation among themselves (Stein 1983:115–140; Keohane 1984; Snidal 1985: 923–942; Martin 1992: 765–792; Garrettand Weingast 1993: 173–206). These two collective action problems provideimportant insights which can be relevant to the study of regional economiccooperation in South Asia.

The PD game, where the pursuit of narrow self-interest and private gain pre-vents two actors from reaching a desirable outcome of cooperation, is often con-sidered as a useful framework in evaluating the difficulties of cooperationbetween two states. This framework also explains defection of states even afteragreeing to cooperative arrangements because both states continue to haveincentives to defect. The extension of PD game from two-actor to the multiple-actor (or n-actor) situation further increases the difficulties of cooperation.Given the increasing problems of information and communications in multiple-actor cooperative arrangements, it becomes easier for nation-states to cheat andthus prospects of sustained cooperation diminish. However, as Robert Axelrod(1984) has shown, by playing the PD game repeatedly and for number of times,political actors can develop confidence in each other’s behavior and can reducethe problems of information and communications, improving the long-termprospects of cooperation among themselves. Similarly, as Duncan Snidal (1985)has shown, by establishing issue-linkages across several issue areas, politicalactors can improve the long-term prospects of cooperation. This is becauseissue-linkages produce a fear of non-cooperation spillover, that is, non-cooperation in one issue area may lead to the same outcome in another issuearea and thus provide less incentives for governmental actors to defect for short-term issue-specific gains (Snidal 1985: 939).

While PD game has been studied extensively in the literature of internationalcooperation and undoubtedly has offered important insights to study regionaleconomic cooperation schemes, the second collective action problem – CDgame – has received inadequate attention. But, as Walter Mattli (1999) hasshown, CD game is equally, sometimes more, salient for regional economiccooperation schemes. After all, successful regional economic arrangementsrequire coordination of regional rules, regulations, and policies. If coordinationproblems persist, it is difficult to sustain regional economic cooperation. Howcan coordination problems be resolved? Summarizing the outcomes of variousregional economic cooperation schemes, Mattli (1999: 42) argues that the pres-ence of a benevolent leading country is necessary to resolve coordination prob-lems. He reasons:

Such a [leading] country serves as a focal point in the coordination of rules,regulations, and policies; it may also help to ease tensions that arise fromthe inequitable distribution of gains from integration, for example, throughside-payments. Contested institutional leadership or the absence of leader-ship makes coordination games very difficult to resolve.

(1999: 42)

Domestic politics and regional economic cooperation 145

This observation supports the argument that when a region lacks an undis-puted leader, it is difficult to sustain regional economic arrangements (Figure6.1). This does not necessarily mean that the absence of leadership rendersregional economic cooperative arrangements impossible, but it makes theirsuccess more elusive. In sum, this chapter argues that for regional economiccooperation to succeed, three conditions must be present. First, strong supportfrom business groups (market actors) is necessary. Business groups will showpreferences for regional economic arrangements when there is strong potentialfor gain in terms of regional economic complementarity or large size of regionalmarkets with significant economies of scale. Second, political actors must bewilling to initiate the process of regional economic cooperation. As discussedabove, political actors will be more motivated to pursue regional economiccooperation policies if such economic arrangements serve their power-retaininggoals by improving their country’s overall economic conditions. Third, when aregional grouping is led by an undisputed leader, its prospects of sustainedsuccess improves considerably (Figure 6.1). As illustrated by EU and NAFTA,the role of an undisputed regional leader for the success of a regional economicgrouping is critical because such a leader can “serve as a focal point in thecoordination of rules, regulations, and policies, and is able to ease distributionaltensions by acting as a regional paymaster” (Mattli 1999: 190).

In light of the above arguments, this chapter profiles the market size andstructure of economy of South Asian countries to evaluate regional economiccomplementarities and economies of scale. It, then, examines the levels ofintraregional imports and exports among South Asian countries to determine the

146 Domestic politics and regional economic cooperation

CACM (after 1969)AFTA

ECOWASLAFTA

Andean PactCaribbean CommunityArab Common Market

GCCSAFTA?

Potentialmarket

gains

Regional leadership

Uncontested Contested

Significant

Insignificant

3 2

2 1

European UnionNAFTA

EFTA (until 1973)

EFTA (after 1973)APEC

MERCOSUR

CACM (until 1969)

Success rate: 3 � highest; 1 � lowest

Figure 6.1 Regional leadership, potential market gains, and regional integration outcomes(source: adapted from Mattli (1999).

extent of their economic interdependence. It explains several reasons for SouthAsia’s limited intraregional trade with a focus on domestic policies towardregional trade. This chapter, then, examines the nature of political coalitions andtheir preferences to provide a realistic assessment of the prospects of deeperregional economic cooperative arrangements in South Asia. In conclusion, thedynamics of India’s bilateral and transregional economic relationship is dis-cussed.

Overview of South Asian economy

The scale of South Asian industry

One way to explain preferences of domestic business groups for regional tradingarrangements is to examine the dynamics of scale economies in a region. Indus-tries with large-scale economies in small domestic markets are more likely tosupport regional trade liberalization for realizing cost reduction and greaterprofits. However, these type of industries will show less interest for regionaltrade if their domestic market is large and regional markets are too small.Regional trade liberalization is also not a preferred goal for industries withsmall-scale production as they are likely to face pressure of increasing competi-tion, price decline, possible takeover, or exit from production. Not surprisingly,these type of industries will show more preference to national protection policiesthan to regional trade liberalization.

Put in a regional context, except for few selective industries in India –information technology, pharmaceuticals, automotives (for example motorcycles and two-wheeler scooters), and industrial goods – there is no scaleeconomies for other countries in South Asia. These few Indian industries, asrepresented by Tata groups, Bharat Forge, Ranbaxy, Infosys, and Wipro, supportregional trade liberalization in principle. At the same time, however, they havenot made any vigorous efforts to put pressure on Indian government for expan-sion of regional trade because of the small market sizes of South Asian coun-tries. Instead, they have sought global markets – United States and EU inparticular – for their investment and industry expansion. According to a reportpublished by ASSOCHAM in March 2007, these firms invested US$15 billionin EU and United States in the first quarter of 2007. While this trend of globalquest for some Indian firms and industries is likely to continue, the prospect oftheir regional expansion, investment, and manufacturing appears unlikely giventhe insufficient market size, protected and fragmented national markets, andlimited skilled labor force of South Asian countries.

On the other hand, small-scale producers of South Asian countries haveresisted opening of their domestic markets to Indian firms because of their fearof losing business. For example, manufacturing firms in Pakistan, Bangladesh,and Sri Lanka are too small to effectively compete with firms from India. As aresult, South Asian countries have adopted import protection policies with highimport tariffs on import of manufactured products from India. Not surprisingly,

Domestic politics and regional economic cooperation 147

more than 53 percent of export of manufacturing goods from India goes toNAFTA and EU, while exports of India’s manufacturing goods inside theSAARC region is very small (Bandara and Yu 2003: 1306). In addition, there isa lack of complementarity of regional economies, and South Asian countriesenjoy comparative advantage on a relatively narrow range of products (Table6.1). This has led to competition among the endowment-based industries inSouth Asia for the same market and same products. Given this dynamics, manyanalysts believe that in the context of the establishment of a FTA, companiesfrom Pakistan, Bangladesh, and Sri Lanka will make fewer gains than theirIndian rivals.

The textile industry is South Asia’s traditional area of strength. Althoughtextile products do not constitute significant portion of India’s total exports,Indian firms are still major players in textile industry. Pakistani, Bangladeshi,and Sri Lankan producers also maintain strong positions in volume-intensivetextile products. A quantitative assessment by Bandara and Yu (2003: 1305)based on GTAP model and database shows that while the wearing apparelsector has been the most dominating export production in Sri Lanka andBangladesh (36 percent and 42 percent of their total exports, respectively),textile products remain the major export item of Pakistan (about 41 percent ofthe country’s total exports). In textiles and apparel, a few firms in theseSAARC-4 countries (India, Pakistan, Bangladesh, and Sri Lanka) have reachedworld-class levels of outputs. But the export of these firms to South Asianregion is minimal because of state protection policies in terms of value-added

148 Domestic politics and regional economic cooperation

Table 6.1 Regional complementarities

Country Revealed comparative advantage (products)

Bangladesh Fish, vegetables, jute, tea, leather, textile yarn, clothing, woven cottonfabrics.

India Food, beverages, tobacco, meat, fish, crustaceans, rice, fruits, nuts, tea,coffee, spices, oilseeds, cotton, iron ore, concentrates of basic metals,petroleum, petrochemical products, chemicals, synthetic materials,medicinal and pharmaceutical products, cosmetic and soaps, insecticidesand herbicides, leather, textile and clothing, machine tools, transportequipment, household equipment, steel, motor vehicles, motor cycles,scooters, and bicycles.

Nepal Textile clothing accessories, floor coverings.

Pakistan Fish, crustaceans, rice, fresh and dried fruits, sugar, spices, vegetables,cotton, oil seeds, textile and clothing, leather, medical instruments, toysand cutlery.

Sri Lanka Fish, crustaceans, fruits, nuts, spices, tea, synthetic rubber, oilseeds, fuelwood, paper, textile fibers, rubber tires, wood manufactures, pottery,pearls and precious stones, textile yarn, woven fabrics, electric powermachinery.

Source: Kemal (2004).

taxes, import tariffs, and labeling requirements. Instead, these firms competewith each other for world market share. For example, a study by Bandara andYu (2003: 1306) shows that in case of wearing apparels, more than 80 percentof India’s exports and 97 percent of exports from Pakistan, Sri Lanka, andBangladesh goes to NAFTA and EU region, while export of this good insideSouth Asia is very small.

The preceding discussion suggests that given South Asia’s industrial andmanufacturing dynamics – that is domination of Indian firms, existence ofnarrow range of products according to comparative advantage among SouthAsian countries, and their export orientations to similar destinations – a SAFTAoffers few opportunities to South Asian firms. Instead, small-scale South Asianfirms fear that the establishment of SAFTA and the phasing out of importrestrictions would lead to disruption in sheltered national markets, negativelyimpacting their profits and business. Consequently, these firms show little pref-erence for a FTA in South Asia.

Market size

As summarized in Table 6.2, the national economies of SAARC countries differsignificantly from each other in terms of population and national income. Interms of per capita income, all South Asian countries fall in low-income devel-oping countries and have wide income differentials. India alone accounts formore than 79 percent of gross national income (GNI) in the region. In contrast,the shares of Nepal and Sri Lanka are significantly low. Nepal, Sri Lanka, alongwith two other SAARC original member countries – Bhutan and Maldives – canbe described as small economies with very small market size. Although theshares of Pakistan and Bangladesh are relatively larger than Nepal and SriLanka, they are no match to India’s enormity in South Asia. The market size ofboth Pakistan and Bangladesh remains significantly smaller compared to India’smarket size. This chapter argues that if the domestic market is small, firms withIRS will support regional trading arrangements to reap greater profits and reduceunit costs. However, firms in all South Asian countries, with the exception ofIndia, do not have scale economies, and IRS is non-existent. Thus, domestic pro-ducers in these countries do not have incentives to seek regional trading arrange-ments. On the other hand, although some Indian firms have achieved scaleeconomies and generally support regional trading arrangements, they haveshown hesitation to expand to regional markets for two reasons. First, India’sdomestic market size is quite large in comparison with other South Asianmarkets. Even the combination of all South Asian markets will be smaller thanIndian market size, providing no extra incentives for Indian firms to seekregional trade liberalization. Second, political tension among South Asian coun-tries prevents expansion of intraregional trade.

Domestic politics and regional economic cooperation 149

Tab

le 6

.2S

outh

Asi

an m

arke

t siz

es

Cou

ntry

Pop

ulat

ion

in 2

004

GN

I in

200

4

Mil

lion

s%

shar

e in

reg

ion’

s

�

Mil

lion

US$

% s

hare

in

Per

cap

ita

popu

lati

onre

gion

’s G

NI

inco

me

US$

Ban

glad

esh

139

9.8

61.3

7.2

440

Indi

a1,

080

76.2

673.

279

.062

0N

epal

271.

96.

60.

725

0P

akis

tan

152

10.7

90.7

10.6

600

Sri

Lan

ka19

1.34

19.5

2.2

1,01

0

Sou

rce:

Wor

ld D

evel

opm

ent I

ndic

ator

s, 2

006

Complementarities of regional economies

A close look at the trade and production structure of South Asian countries sug-gests that there is a considerable degree of overlapping in agricultural productssuch as jute, cotton, and tea. In the industrial sector, except for India and tosome extent Sri Lanka, other South Asian countries do not have diversifiedproduct base. As shown in Table 6.1, with the exception of India and Sri Lanka,South Asian countries enjoy comparative advantage in a relatively narrow rangeof products. Several studies have established that there is a lack of strong com-plementarity in the bilateral trade structures among South Asian countries(Hassan 2001; Bandara and Yu 2003; Kemal 2004). Lack of complementarity ofregional economies has two significant implications for intraregional trade inSouth Asia. First, South Asian countries do not find it useful to intensify tradeamong themselves. Consequently, intraregional trade remains low in South Asia.A World Bank study reveals that South Asia’s intraregional trade is only 0.8percent of GDP, one-eighth of Latin America’s level and only a fraction of EastAsia’s nearly 27 percent of GDP.2 Second, these countries export similar goodsand compete for similar destinations. As discussed earlier, the major destinationsfor South Asia’s exporting goods are not South Asian countries. Rather, NAFTAand EU remain the main destinations.

Current levels of economic interdependence

The relative share of the foreign trade in GDP of a country is a significant indi-cator of the preference and potential influence of business groups on theformulation of trade policies. It is widely recognized that the attitudes of busi-nesspeople engaged in foreign trade is likely to be less narrowly nationalisticthan are the attitudes of businesspeople chiefly oriented toward domesticmarkets. Also, as argued in this chapter, firms with economies of scale insmaller markets show greater preference toward regional trading arrangementsthan firms from larger markets. Table 6.3 shows that among all South Asiancountries, India’s share of trade in GDP is the lowest. India’s low reliance ontrade can be explained by the fact that it has a relatively large domestic market,providing substantial profits to its firms with economies of scale. In contrast,Sri Lanka’s highest trade ratios indicate the country’s greater reliance on trade.Given its narrow resource base and small domestic market, Sri Lanka’s firmshave shown more preference toward outward-orientation than other SouthAsian countries. Despite their relatively smaller size of markets in comparisonwith India, both Pakistan and Bangladesh have substantially less share of tradein GDP than Sri Lanka or Nepal. This shows an inward-orientation ofBangladeshi and Pakistani firms. Another important trade-related issue is thathigher trade ratios of smaller South Asian countries are a function of their tradewith the world, NAFTA and EU in particular, rather than with their region. Assummarized in Table 6.4, South Asian countries seem to practice only reluctantregionalism as they have substantially lower share of intra-SAARC trade as

Domestic politics and regional economic cooperation 151

compared to their world trade over a period of more than two decades from1980 to 2005.

As Table 6.5 shows, exports and imports among SAARC countries are quitemodest. The low level of intraregional imports and exports of India and Pakistanindicate how little these two relatively developed economies in South Asiadepend on the region’s markets. By contrast, the industrialized countries remain

152 Domestic politics and regional economic cooperation

Table 6.3 Share of foreign trade in GDP (percentage)

Country 1980 1990 1995 2000 2002

BangladeshShare of Import In GDP(%) 7.36 8.82 11.02 15.38 14.21Share of Export In GDP (%) 20.22 16.20 18.69 21.50 20.04Total Trade In GDP (%) 27.58 25.02 29.78 36.88 34.25

IndiaShare of Import In GDP(%) 6.64 7.59 11 13.31 14.78Share of Export In GDP(%) 10.00 9.09 12.20 14.24 16.06Total Trade In GDP (%) 16.63 16.68 23.21 27.55 30.84

NepalShare of Import In GDP (%) 11.54 10.53 24.22 23.28 14.89Share of Export In GDP(%) 18.73 21.10 34.61 32.43 29.34Total Trade In GDP (%) 30.27 31.63 58.83 55.71 44.23

PakistanShare of Import In GDP (%) 7.99 16.93 16.90 18.01 16.91Share of Export In GDP(%) 12.74 18.49 21.43 19.35 16.32Total Trade In GDP (%) 20.72 35.42 38.33 37.37 33.22

Sri LankaShare of Import In GDP (%) 31.36 30.55 35.89 39.27 36.08Share of Export In GDP(%) 53.35 38.53 45.52 49.74 42.38Total Trade In GDP (%) 84.71 69.08 81.41 89.01 78.46

Sources: Estimated from United Nations, Statistical Yearbook (1993, 1996, 2001, 2004, 2006).

Table 6.4 Intra-SAARC trade in relation to world trade

Year Intra-SAARC trade World trade of SAARC Percentage share of (exports + imports) countries (exports + intra SAARC trade (US$ million) imports) (US$ million) in world trade

1980 1,210.0 37,885.3 3.21985 1,088.7 43,759.5 2.41990 1,584.7 65,490.0 2.41995 2,919.0 83,110.0 3.52000 5,315.0 14,1494 3.72005 14,165.4 317,796.6 4.5

Sources: Estimated from The IMF Direction of Trade Statistics Yearbook (1985, 1992, 1995, 2006),Washington, DC: International Monetary Fund.

Tab

le 6

.5S

outh

Asi

an tr

ade

depe

nden

ce in

dice

s (i

n pe

rcen

tage

s), 1

980–

2006

Impo

rts

from

Exp

orts

to

Indu

stri

al

Dev

elop

ing

Asi

aSA

AR

C

�In

dust

rial

D

evel

opin

g A

sia

SAA

RC

co

untr

ies

coun

trie

sco

untr

ies

coun

trie

sco

untr

ies

coun

trie

s

Ban

glad

esh

1980

48.1

35.4

16.4

3.68

36.0

56.7

26.1

8.68

1990

42.2

42.1

34.0

6.8

71.3

24.0

10.1

3.6

2001

25.4

59.6

51.8

17.4

74.5

9.5

5.4

2.7

2003

21.3

67.8

57.4

16.6

75.3

9.0

5.2

1.7

Indi

a19

8046

.243

.58.

90.

948

.731

.011

.53.

619

9060

.636

.117

.20.

460

.325

.813

.02.

720

0140

.536

.117

.21.

452

.443

.823

.15.

720

0334

.645

.423

.30.

950

.445

.825

.44.

6M

aldi

ves

1980

67.4

32.8

29.7

23.3

60.0

40.0

31.8

26.5

1990

23.1

76.9

76.4

11.4

50.2

49.8

49.7

14.0

2001

18.8

81.2

65.5

9.2

72.9

27.1

24.5

3.7

2003

20.7

79.2

68.0

24.3

58.4

41.6

40.7

14.0

Nep

al19

8039

.961

.159

.947

.948

.451

.644

.937

.819

9039

.160

.960

.311

.772

.727

.726

.57.

120

0115

.781

.260

.931

.855

.043

.242

.636

.620

0315

.880

.555

.423

.943

.454

.453

.551

.6P

akis

tan

1980

50.1

47.6

14.1

2.3

36.4

60.9

25.3

6.3

1990

55.2

43.8

19.5

1.6

60.8

36.8

20.9

3.9

2001

32.5

67.4

24.7

3.1

57.0

42.9

42.6

5.1

2003

34.3

65.7

28.2

2.4

55.6

44.3

18.7

2.9

Sri

Lan

ka19

8045

.552

.520

.45.

139

.642

.915

.27.

019

9040

.159

.740

.57.

061

.532

.39.

63.

620

0131

.268

.555

.712

.374

.023

.08.

52.

720

0330

.866

.856

.117

.668

.926

.811

.76.

8

Sou

rces

: Est

imat

ed f

rom

IM

F D

irec

tion

of T

rade

Sta

tist

ics

Yea

rboo

k (1

985,

199

9, 2

003,

200

7).

the major trading partners for SAARC countries. As evident in Table 6.5,intraregional exports of SAARC members, with the exception of Nepal, havesignificantly declined during 1980–2003. The relatively large exports of Nepalto SAARC region can be explained by the existence of a preferential traderegime between Nepal and India. Sri Lanka’s exports to SAARC region declinedduring 1980–2001 but picked up during 2001–03 due to a FTA with India in thelate 1990s. Intraregional imports of SAARC members, with the exception of SriLanka, also show a significant declining trend during 1980–2003. In sum, theSAARC countries’ trade with industrial countries, developing countries, andother Asian countries far outweigh trade among themselves.

Why is intraregional trade so low in South Asia? Several factors account forthis. First, with the exception of India and Pakistan, SAARC countries do nothave a diversified product base. Being primary producers, they tend to exportsimilar items and thus compete with each other. Thus, lack of complementarityin regional economies has contributed to low level of intraregional trade. Inaddition, despite their small market size, lack of scale economies, except forsome firms in India, makes exports less profitable and thus prevents domesticproducers of SAARC countries from exporting their products to each other’smarkets.

Second, the existence of a high rate of tariff and non-tariff barriers in SouthAsian countries is an important factor for constraining the expansion of intrare-gional trade.3 In the 1980s, tariffs in South Asia were nearly 70 percent on anunweighted average basis, compared to East Asia’s 27 percent and LatinAmerica’s 32 percent (Newfarmer 2004: 4). Although tariffs have declined inSouth Asia from 70 percent to 35 percent in the 1996–98 period and about 18percent in 2002 (Pursell and Sattar 2004) because of trade liberalization bySouth Asian countries over the last two decades, tariff rates are still higher inSouth Asia than other regions. One reason that explains this disparity is the con-tinuous tariff cuts at a more rapid pace by other regions in comparison withSouth Asian countries.

The other reason is that tariff revenues are an important source of govern-ment revenue for most South Asian countries. Political leaders in these countriesare concerned about any loss of tariff revenues because that will reduce theirability to redistribute government funds to special interests or spend on publicwelfare schemes. Given the growing budget deficits and absence of substantialexport earnings, the loss of tariff revenues poses problems for South Asianleaders. These revenues are necessary for political leaders to enhance theirprospects of retaining power. Consequently, unlike developed countries, tariffrevenues have remained a significant part of the government budget in SouthAsian countries and tariff cuts have moved at a much slower pace than otherregions of the world.

In the 1970s and 1980s, most South Asian countries pursued import substitu-tion industrialization (ISI) policies. Sri Lanka is the only South Asian country tohave pursued trade and investment liberalization policies since 1977 after thefailure of its ISI policies from 1970 to 1977. The adoption of protectionist

154 Domestic politics and regional economic cooperation

import substitution policies by South Asian countries turned their economiesinto one of the most inward-oriented and regulated economies with stringenttrade and exchange controls and pervasive state intervention in all areas of eco-nomic activity. Promotion of public sector dominance in the economy was pre-ferred policy options for South Asian governments during this period. Twoimplications of these policies are particularly important for intraregional trade inSouth Asia. First, these policies were highly unfavorable to private sector activ-ities in general and export production in particular. There was a significant anti-export bias in the economy, which was not conducive to promote intraregionaltrade. Under the pressure of economic crises and the multilateral agencies likethe International Monetary Fund, and the World Bank, South Asian countrieshave pursued economic liberalization policies since early 1990s. While tradeand investment liberalization marked a clear departure from two decades ofimport substitution policy preferences by political actors, these policies wereclearly partial and not accompanied by comprehensive reforms. South Asiancountries continue to impose restrictions on foreign direct investment (FDI)entry on several sectors, including service sector. Consequently, South Asiancountries have not received FDI at nearly the level of other regions. Accordingto one estimate by the World Bank, available FDI at a global scale rose from$15 billion in 1980–82 to $140 billion in 2001–03 (Newfarmer 2004: 6). But thepreferred destinations for most FDI inflows are East Asia and Latin America.While China has attracted about $50 billion and Latin America has attracted $58billion during 2001–02, South Asia has received less than $5 billion during thesame period (Newfarmer 2004: 6). The legal barriers to and limits on FDI inSouth Asian countries are the primary reason for this trend.

Drawing on the evidence of NAFTA, EU, and Japanese FDI into ASEAN,several studies have shown that FDI coming from multinational corporationsserves as an important driving force for integration through trade (Blomstromand Kokko 1997; Robson 1998; Newfarmer 2004; Chase 2005). The dynamicsof setting up integrated production facilities and supply chains in different coun-tries by multinational corporations to take advantage of local factors of produc-tion (such as local labor) is the principal reason why FDI typically facilitatescross-border trade between neighboring countries. Geographic proximity offersseveral benefits for multinational firms: lower transport cost; easier coordinationwith suppliers; better prospects of just-in-time delivery of products; and shorterlead times for quick adaptation to changes in demand or consumer tastes (Chase2005: 32). These benefits drive multinational firms to get involved in regionalproduction sharing, region-specific sourcing, manufacturing, and marketing,thereby facilitating cross-border trade. In addition, inward flows of FDI can playa role in stimulating local production in related industries, in transferring techno-logy, and in raising productivity in firms. These benefits of FDI generallyenhance economic capacity of a country and are helpful for improving prospectsof intraregional and extraregional trade. The limited inflow of FDI into theregion has deprived South Asian countries of potential economic gains withserious implications for limited intraregional trade.

Domestic politics and regional economic cooperation 155

The lack of adequate transport and information links among the South Asiancountries poses serious problems for major imports and exports. Lack of com-munication and information links between the South Asian countries has made itdifficult for business groups to know each country’s production, consumptionand trade patterns, and business opportunities in general. Not surprisingly, therehas been only negligible interaction among business groups in the region for thepast several decades. In addition, a highly unfavorable freight structure for ship-ping services, coupled with a lack of well-developed land and water routesbetween India, Pakistan, and Bangladesh, has increased transportation costs con-siderably, making trade unattractive. For example, freight for Kolkata–Khulna(Bangladesh) is higher than that for Kolkata–Singapore; and freight forKarachi–Mumbai is higher than that for Karachi–Hong Kong. Shipments ofcargo through foreign vessels from India to Karachi and Chittagong are subjectto lengthy and cumbersome bureaucratic procedures. Unless shipping facilities,licensing, and bureaucratic procedures improve, the current limited volume oftrade among South Asian countries is unlikely to change.

Finally, political differences and a lack of willingness to create trade comple-mentarities among the leaders of the South Asian countries contribute to thecurrent low level of intraregional trade. In this context, the persistent hostilitybetween India and Pakistan is particularly important. Despite great potential fortrade between India and Pakistan, the volume of trade is insignificant betweentwo countries because of political tension. The share of total trade between Pak-istan and India measured by their bilateral exports amounts only to 0.4 percentof total exports from India and Pakistan. This is only one-fifth of the bilateraltrade between Malaysia and China, two countries of comparable GDP and prox-imity, and only one-sixteenth of the trade that occurs between Argentina andBrazil, other two countries of comparable size.4

Economic liberalization policies

In the post-1990 period, India, Pakistan, Bangladesh, and Nepal have adoptedpolicies of economic liberalization in response to their severe economic crises.As the experiences of regional cooperation efforts in Latin America (MERCO-SUR) and Southeast Asia (ASEAN) suggest, economic liberalization canprovide a good foundation for the growth of regional cooperation. Two lines ofargument – virtuous circle and market gains – link economic liberalization pol-icies with growth of regional cooperation. According to the virtuous circle argu-ment, economic liberalization policies encourage foreign investors, whotypically prefer to invest in politically stable areas. Regional cooperation effortsreduce the propensity for conflict among the partners and promote regionalpolitical stability. This reduces the risks for international investors and financialinstitutions, resulting in the much-needed inflow of foreign investment, techno-logy, aid, and concessional financial loans to the developing countries, benefit-ing their leaders’ domestic economic agenda. In order to be successful,economic liberalization policies need maximum possible saving of resources for

156 Domestic politics and regional economic cooperation

investment in development-oriented projects. Reducing expenditure in unpro-ductive military sectors enables the governments to save substantial resourcecapital. Such a result is possible when peace prevails in the region, an outcomefacilitated by regional cooperation efforts.

According to the market gains logic, countries pursuing economic liberaliza-tion policies require access to regional markets, which is made possible by coop-eration commitments among participating member countries. Besides becominga driving force for accelerating intraregional trade and investment and maintain-ing the region’s economic dynamism, regional cooperation can also help sub-stantially in enhancing technology transfer, improving infrastructure, developingnatural and human resources, and protecting the environment. Such outcomesare, indeed, some of the most important objectives of economic liberalizationpolicies.

The success of South Asian countries’ current economic reforms dependsupon, among other things, an increase in their exports and their ability to findnew markets both in the developed and in the developing countries. But giventhe slow growth of the world economy in the 1990s, the formation and expan-sion of such regional economic blocs as NAFTA, EU, AFTA, and MERCO-SUR, and growing desire of these blocs to increase intraregional trade amongthe participating members, the South Asian countries may not find it easy to gainaccess to these markets. Since the 1980s, most of the world’s FDI has flown toLatin America, East Asia, and Southeast Asia as a result of these countries’ eco-nomic liberalization policies, leaving the South Asian countries with minimalinvestment. For example, during the past decade, while in East Asia privateinvestment was 54 percent of total GDP, it was only 2 percent in South Asia.The expectation of the South Asian countries for increase in FDI may not mate-rialize until they are able to create a stable political climate in the region,thereby increasing their attractiveness as a large integrated regional market forthe Western investors.

Indian policymakers’ earlier thinking that India is unlikely to get any substan-tial benefits from any SAARC economic arrangements appears to have changedafter the mid-1990s. India’s economic liberalization policies since the early1990s have produced significant economic growth and export opportunities forits firms. With this change, Indian leaders realize that it is in India’s interest topromote intraregional trade for the expansion of regional market. Not surpris-ingly, India has agreed to implement SAPTA agreement and to expedite theprocess of SAFTA agreement.5 India’s keen interest to boost trade ties withSouth Asian countries is evident in what is now known as the “Gujral Doctrine,”named after Mr I.K. Gujral, India’s prime minister during 1996–97. The doc-trine, which is the basis of India’s recent push for a policy of positive unilateral-ism, stipulates that India, as the region’s dominant power, should be willing togrant its neighbors concessions without expecting reciprocity.

Such a paradigmatic shift in India’s regional policy can be explained by thepost-Cold War global political–economic developments. Indian leaders knowwell that the success of their country’s economic liberalization largely depends

Domestic politics and regional economic cooperation 157

upon its ability to increase exports to new markets in the developed and devel-oping countries. Until recently, India has achieved only restricted access to themarkets of Japan, North America, and Western Europe due to these countries’protectionist policies and various kinds of non-tariff barriers against Indianproducts.6 With the collapse of the Soviet Union and the gradual incorporationof Eastern Europe into the West European economy, India has lost two of itsprivileged market links. In an effort to expand its market links, India hasrecently taken many initiatives, some of which include its active diplomatic rolein the formation of the Indian Ocean Rim Association for Regional Cooperation(IORARC)7 in March 1997; its association with the ASEAN as a dialoguepartner; its active interest in joining the Asia-Pacific Economic Cooperation(APEC); and its renewed focus on the “Look East” policy in order to strengthenits trade ties with the East Asian and Southeast Asian countries. However,although India will continue to explore markets in other regions, it can no longerignore its own base in South Asia, where it enjoys a comparative advantage inalmost every economic sector.

Like India, the success of Pakistan’s economic liberalization policy depends,among other things, on increasing its exports to the markets of developed anddeveloping countries. But so far, Pakistan has gained only a limited access to themarkets of Japan, North America, and Western Europe because of these coun-tries’ protectionist policies. As a result, Pakistan has taken initiatives to form theEconomic Cooperation Organization (ECO)8 to boost its exports and improveintraregional trade with Central Asia. But Pakistan’s success in Central Asianmarkets are likely to be limited, given the competition of the developed coun-tries to capture these markets. In meeting the needs of Central Asian republics,Pakistan’s capital and technology are no match to what the Western Europe, theUnited States, Japan, and even Russia have to offer. Although the Gulf countriesremain a major destination of Pakistan’s exports, competition from other OICcountries9 like Malaysia, Indonesia, Bangladesh, Iran, and Egypt has put afurther limitation on Pakistan’s exports to these markets. Consequently, Pakistancan no longer ignore the South Asian markets, where, next to India, it enjoyssome comparative advantage. Reviving normal trade relations with India withinthe SAPTA and SAFTA framework makes economic sense as it would givePakistan access to India’s large market and cheap raw materials.

Additionally, given the shortage of development funds worldwide and theindustrialized countries’ aid fatigue, Pakistan will have to compete with Indiaand other South Asian countries as well as Eastern Europe and the former SovietUnion to attract ODA and private investment. The Pakistani leaders know wellthat in order to survive in Pakistan’s turbulent politics, new economic initiativesare necessary so that the country does not remain hostage to a collapsingeconomy for long. One of the critical factors for the loss of power of Pakistan’stwo former prime ministers, Benazir Bhutto and Nawaz Sharif, during the 1990sis their inability to turn around Pakistan’s rapidly deteriorating economy. ThePakistani policymakers are also well aware of the fact that an environment ofregional confrontation will only deter foreign investors which will be detrimen-

158 Domestic politics and regional economic cooperation

tal to Pakistan’s interest. Regional cooperation thus remains a pragmatic policyinitiative for Pakistan’s own interest.

Other South Asian countries are facing the same kind of difficulties like Pak-istan. Given the current trend of limited flow of ODA to South Asia in the faceof competition from countries in Eastern Europe and Central Asia, World Bankand the International Monetary Fund’s reluctance to increase concessional loans,and their own limited structural abilities, i.e. few manufacturing sectors, smallgross domestic savings, and small scale of economies, both Bangladesh andNepal have an urgent need to attract more investment into their countries and toexpand economic cooperation with India, Pakistan, and other countries in SouthAsia. Consequently, since 1994, both of these countries have been pursuing eco-nomic liberalization policies to attract foreign investment and promote intrare-gional trade.

During the 1980s, Sri Lanka reaped substantial benefits in terms of exportsand investment largely due to its economic liberalization policies. But in recentyears, Sri Lanka’s exports to the developed countries have declined significantlybecause of adverse terms of trade and growing protectionism. With the smallersize of its home market relative to the optimal scale of production, Sri Lankaneeds Indian and other South Asian markets for its exports. The country has alsobeen losing FDI because of its protracted civil war. Not surprisingly, Sri Lankahas shown the most interest in regionalism and has strongly advocated for theexpansion of intraregional trade through the framework of SAPTA since 1992.

From SAPTA to SAFTA

Although one of the important reasons for the formation of SAARC was toincrease regional trade cooperation among South Asian countries, no serioussteps were taken until 1990s to achieve this objective. The first attempt toachieve this goal was made by the SAARC Secretariat in 1990 when it commis-sioned a study on trade, manufactures, and services. The SAARC Council ofMinisters endorsed the report of this study in July 1991 and decided to set up ahigh level CEC to explore trade-related opportunities in South Asia. After ayear-long deliberations, the CEC recommended a draft agreement on SAPTA.Following the CEC recommendation, the Heads of State at the Colombo Summitin December 1991 approved the establishment of the Inter-Governmental Group(IGG) to examine the institutional framework for SAPTA. On the basis of IGGrecommendations, the Council of Ministers signed an agreement to formSAPTA in April 1993, which became operational in December 1995.

Since the launching of SAPTA in 1995, three rounds of preferential tariffreductions have been negotiated – SAPTA-1 in 1995, SAPTA-2 in 1997, andSAPTA-3 in 1998. Although a fourth round of SAPTA negotiation (SAPTA-4)was initiated in 1999, it could not be ratified by member states because of thepostponement of SAARC summit. Given the highly tedious nature ofcommodity-by-commodity negotiation under SAPTA rounds, the SAPTA-4 waseventually replaced by SAFTA agreement.

Domestic politics and regional economic cooperation 159

Under SAPTA negotiations, a two-tier structure of tariff reductions for twocategories of members – LDCs and non-LDC members – have emerged in SouthAsia. The tariff concessions for LDCs – Bangladesh, Bhutan, Maldives, andNepal – are higher than that of non-LDC members (India, Pakistan, and SriLanka). The SAPTA-1 round produced modest results as only 226 products atsix-digit HS level (about 6 percent of traded goods) were granted tariff conces-sions. After four rounds of negotiations (that is completed SAPTA-1, SAPTA-2,SAPTA-3, and the non-ratified SAPTA-4), SAARC members have agreed toprovide tariff concessions on 4,700 six-digit HS items (Weerakoon andWijayasiri 2003). As expected, India has offered the largest number of conces-sions, followed by Bangladesh and Pakistan. Out of a total list of 4,667 consoli-dated items, India has provided concessions on 2,554 items, Bangladesh on 521items, Pakistan on 491 items, Nepal on 491 items, Bhutan on 233 items, SriLanka on 199 items, and Maldives on 178 items (Weerakon and Wijayasiri2003).

Despite the concessions to a seemingly large number of products, theprogress of preferential trade under SAPTA remains modest. One of the mostimportant limiting factors of SAPTA has been the actual preferential imports bymember countries as compared to their total values of imports. Mukherji (2004)has estimated that products imported under SAPTA concessions reached to only15 percent of total imports among SAARC member countries. A World Bankreport on South Asian trade estimates that on average only 8.4 percent of tarifflines in the case of imports from non-LDCs and 6.2 percent in the case ofimports from the LDCs are covered under SAPTA (World Bank 2005). Theseestimates support the argument that SAPTA has little or no impact in changingthe existing low trade patterns in South Asia. At least, three reasons account forthe insignificant product coverage under SAPTA. First, negotiations underSAPTA have been conducted mainly on a product-by-product basis, which areextremely time-consuming. Second, proposed tariff cuts offered under SAPTAare not deep enough to have any significant impact on trade volume. Finally,most of products, which received concessions, are not widely traded in theregion and thus have limited trade value for SAARC member countries.

Given the slow progress of SAPTA, the signing of the SAFTA at the 12thSAARC Summit at Islamabad in January 2004 represented a major developmentin South Asia’s search for deeper economic cooperation in the region. With thesigning of SAFTA in 2004, regional trade cooperation gained momentum andthe once difficult-to-achieve objectives of a free trade area appeared increasinglyachievable in South Asia. However, the limited progress and slow movement ofSAFTA since its signing has raised some questions about its relevance as a toolof liberalizing regional trade. There are two major viewpoints found in the liter-ature on the prospects of SAFTA. The supporters of SAFTA hold that SouthAsian economies, small economies in particular, would substantially gain ifSAFTA comes into existence (Pigato et al. 1997). Several empirical studiesshow that despite the potential for trade diversion, SAFTA would bring signific-ant benefits to small countries in the region and would facilitate unilateral trade

160 Domestic politics and regional economic cooperation

liberalization in South Asia (Srinivasan and Canonero 1995; Srinivasan 1998).Using the framework of gravity model, a recent empirical study by New Delhi-based Research and Information Systems institute suggests that complete elimi-nation of tariff under SAFTA is likely to increase intraregional trade by 1.6times (Kemal 2004: 16).

In contrast to these findings, the second view represented by SAFTA criticsargue that SAFTA is hardly beneficiary for its members and will mostly lead totrade diversion and slow down unilateral trade liberalization in South Asia(Panagariya 1999). Using the example of MERCOSUR, Panagariya (1999: 376)provides empirical evidence to support this view. He argues that after joining theSouthern American Common Market, both Brazil and Mexico have abandonedunilateral trade liberalization and raised their tariff. He contends that such out-comes are possible in case of South Asian countries, and from this perspective,SAFTA is considered undesirable in South Asia. While the debate on SAFTAcontinues, a general notion that a free trade area in South Asia would facilitatedeeper regional integration and thus would strengthen ties between membercountries seems to have persisted in the minds of South Asian policymakers. Towhat extent this belief is consistent with the political and economic realities ofSouth Asian countries? The following discussion addresses this issue.

SAFTA was first mooted at the 8th SAARC Summit in Delhi (1995). It wasthen suggested that SAFTA would come into effect by 2005. But frustrated bythe slow pace of progress of SAARC including SAPTA rounds of negotiations,and driven by the potential economic and political benefits of a free trade areaagreement, the policymakers of South Asian countries took a decision at the 9thSAARC Summit at Male (1997) to advance the effective date of SAFTA from2005 to 2001.10 The Male Summit also decided to set up a forum called Groupof Eminent Persons (GEP) to look into various aspects of intraregional trade inSouth Asia and prepare a feasibility report on SAFTA. The GEP report entitled“SAARC Vision Beyond the Year 2000” was presented at the 10th SAARCSummit in Colombo (1998). According to this report, the year 2008 was con-sidered a realistic timetable for the launching of SAFTA (GEP Report 1998). Onthe basis of the recommendations of this GEP report, the policymakers at theColombo Summit agreed to first complete a “Framework Treaty” for SAFTA by2001. However, preparation of the Treaty by 2001 was not possible because ofrapidly deteriorating political and security environment in South Asia triggeredmainly by the following events – nuclear tests by both India and Pakistan in1998, Kargil conflict between India and Pakistan in 1999, military coup in Pak-istan in 1999, and India’s refusal to recognize the new military regime ofGeneral Musharraf, political turmoil in Nepal, worsening security environmentin Afghanistan and the beginning of US military engagement in Afghanistan in2001. The preparation of the Framework Treaty for SAFTA was finally com-pleted in January 2004, leading to a formal launching of the SAFTA at the 12thSAARC Summit at Islamabad in January 2004.

The Islamabad Summit Declaration provided two different timetables forimplementation of SAFTA agreements. SAFTA will become fully effective for

Domestic politics and regional economic cooperation 161

non-LDC members (India, Pakistan, and Sri Lanka) by 2013 and for LDCmembers (Bangladesh, Bhutan, the Maldives, and Nepal) by 2016.11 There aretwo issues in the Framework Agreement of SAFTA – tariff liberalizationprogram (TLP) and sensitive list of goods – that are important to our discussionhere. According to SAFTA’s TLP, non-LDC members are required to reducetariffs to 20 percent within two years of implementation of the agreement and toa range of 0–5 percent in the next five years. Given the small size of economy,Sri Lanka was given an additional one-year time to achieve this objective. LDCmember countries are required to reduce tariffs to 30 percent in three years andto a range of 0–5 percent in the next eight years.

While the adoption of the above progressive non-linear reduction formulatakes into account differential levels of economic development of South Asiancountries and may contribute to the reduction of average tariffs, it is not withoutshortcomings. It is important to note that this formula of tariff reduction is notconsistent with the recommendations of the GEP report but somewhat closer tothe suggestions made by the SAARC Chamber of Commerce and Industry(SCCI) (Mukherji 2004). The experience of AFTA suggests that it is alwaysmore efficient if convergence is achieved initially by all countries lowering theirtariff to a maximum rate and then proceeding further (Kelegama 2004). Asimilar pattern of convergence tariff reduction followed by SAFTA-type non-linear tariff reduction would have been more beneficial to all SAARC members.

Another shortcoming is that the TLP under SAFTA does not include trade inservices. While this may not be a major concern for LDCs for now, the non-LDC members are certainly disadvantaged. In contrast to SAFTA, bilateralFTAs – for example the India–Sri Lanka FTA (ISFTA) and Pakistan–Sri LankaFTA (PSFTA) – have included liberalization of services. The BIMSTEC group-ing, which brings together the littoral states of the Bay of Bengal – Bangladesh,India, Myanmar, Sri Lanka, and Thailand – has agreed to implement an FTA in2007 that includes liberalization of services.12 Consequently, these FTAs havebecome more attractive for non-LDC SAARC members.

One of the most critical issues in SAFTA is that the TLP is not applicable togoods on the sensitive list of items by each member country. It is understandablethat SAFTA member countries, given their various levels of industrial develop-ment, are concerned about protecting some of their sensitive industries fromincreased competition. But, what is of considerable concern is the large numberof sensitive lists that member countries are allowed to keep and absence of anybinding provision in the Framework Agreement that requires member countriesto reduce the number of sensitive lists over time. According to SAFTA agree-ment, member countries can retain a sensitive list of 20 percent of tariff lines fornon-LDC member states and slightly less for LDC member countries (Weer-akoon and Thennakoon 2006: 3920). Table 6.6 provides the number of sensitivelists for SAFTA members.

The large number of sensitive lists is clearly not favorable for the growth ofintraregional trade in South Asia. Since the signing of SAFTA, several eco-nomic analyses have pointed to the negative impact of sensitive lists on South

162 Domestic politics and regional economic cooperation

Asian trade volume. Analyzing trade data for the SAFTA members from theWorld Integrated Trade Solution (WITS) database, Dushni Weerakoon andJayanthi Thennakoon (2006) argue that nearly 53 percent of the total importtrade between SAFTA members has been subject to the negative lists of therespective countries. This study, as summarized in Table 6.6, reveals that exceptfor Pakistan and India, all other South Asian countries protect more than 50percent of their total imports from SAFTA countries under their negative lists.

Despite their negative implications for intraregional trade, why do SouthAsian countries maintain such large number of items under their negative lists?Two factors explain this. First, trade liberalization can adversely impact small-and medium-scale industries. With trade liberalization and tariff reduction,industries in which a country does not have comparative advantage are likely toclose down. In such a case, countries face unwelcome challenges of unemploy-ment, political and social unrest. Second, there is a fear among smaller SouthAsian countries that tariff liberalization would bring more benefits to largercountries like India and Pakistan. These two factors have largely contributed tolack of enthusiasm among political actors to push for rapid trade liberalization inSouth Asia.

The above analysis suggests that growth of intraregional trade in South Asiais far from satisfactory despite four rounds of SAPTA negotiations and thesigning of SAFTA agreement. It is clear that unless South Asian countries makeserious commitments to reduce the size of sensitive lists over a reasonableperiod of time, SAFTA’s progress will remain limited. It is necessary to intro-duce a formal binding provision in the Framework Agreement that will requireSAFTA members to reduce their sensitive lists. In this context, the experience ofAFTA agreement offers a useful lesson. According to the AFTA agreement,member countries are required to phase out their temporary exclusion lists(similar to SAFTA’s sensitive lists) in five equal installments. Although there isa provision in SAFTA agreement for the review of sensitive lists by member

Domestic politics and regional economic cooperation 163

Table 6.6 Sensitive lists of SAFTA members

Sensitive items Sensitive items Value of imports Value of exports for non-LDCs for LDCs from SAARC to SAARC

subject to NLs (%) subject to NLs (%)

Bangladesh 1,254 1,249 65.0 22.0Bhutan 157 – – –India 884 763 38.4 56.5Maldives 671 – 74.5 57.6Nepal 1,310 1,301 64.0 46.4Pakistan 1,183 – 17.2 34.0Sri Lanka 1,065 – 51.7 47.0

Source: Weerakoon and Thennakoon (2006); SAFTA; WITS data.

NoteNL – negative list.

countries at least every four years in order to reduce the number of sensitive listitems, the provision is not binding on member countries. Such open-endedapproach to address sensitive list issues makes implementation of SAFTA provi-sions time-consuming and difficult. It took SAARC members ten years to opera-tionalize SAPTA in 1995. It took another nine years to move from SAPTA toSAFTA. In the absence of any specified timetable, it remains unclear as to howlong it will take to implement SAFTA provisions.

Given the uncertainty of a regional trading arrangement, SAFTA membershave focused on various bilateral, subregional, and transregional FTAs, whichare expected to move faster than SAFTA. For example, following a policy of“positive economic unilateralism” after the mid-1990s,13 India has signed bilat-eral FTAs with Sri Lanka, Nepal, Bhutan, and Bangladesh. Similarly, Pakistanhas signed bilateral FTAs with Sri Lanka and Bangladesh. Since these smallcountries have received far more favorable preferential treatment from India interms of market access and tariff reductions, their interest on SAFTA remainslimited. India has also actively participated in the creation of a subregionalgrouping known as South Asian Growth Quadrangle (SAGQ). In addition toIndia, Bangladesh, Bhutan, and Nepal are the members of this grouping. TheADB, under its South Asia Sub-regional Economic Cooperation (SASEC) initi-ative, supports various initiatives of the SAGQ. Modeled after the successfulGreater Mekong Sub-Region cooperation, the SAGQ has taken initiatives todevelop transportation, energy, waste management, trade, agribusiness, telecom-munications, and tourism projects in member countries with the technical andfinancial support of ADB. Under its SASEC initiative, the ADB has also estab-lished a South Asia Business Forum (SABF) to facilitate private sector andgovernment cooperation for the promotion of trade and investment in the region.To what extent all these bilateral and subregional initiatives will be successfulremains unclear. But their existence poses challenge to SAFTA.

In addition to bilateral and subregional trade initiatives, India is also involvedwith various transregional trading arrangements – for example India–ASEANFTA, India–Singapore FTA, India–China trade negotiation, and BIMSTECFTA. All these transregional trading arrangements hold much promise for Indiaas they provide a larger market to Indian goods than the SAFTA market. Inaddition, the BIMSTEC FTA, India–ASEAN FTA, and India–Singapore FTAhave less number of negative lists and are expected to move much faster thanSAFTA. From the perspectives of Indian policymakers and industrial groups,the success of these initiatives will be vital for India’s trade interest.

Although business groups in South Asian countries are generally supportiveof the idea of SAFTA, their support for the implementation of SAFTA agree-ment remains weak. Under the initiatives of the SCCI, the apex business organi-zation of SAARC, various seminars and conferences have been conducted inboth South Asia and abroad to discuss about the promises and challenges ofSAFTA. The SCCI sponsors a SAARC Business Leaders Conclaves every yearwhen business leaders from South Asian countries meet in one of the membercountries to discuss various business initiatives. Two premier business associ-

164 Domestic politics and regional economic cooperation

ations in India – Federation of Indian Chambers of Commerce and Industry(FICCI) and Confederation of Indian Industry (CII) – have also taken some initi-atives in organizing conferences and seminars over SAARC and SAFTA issues.These two organizations have published several monographs and researchpapers on SAFTA and South Asian economy. Various Chambers of Commercein Pakistan, Bangladesh, Sri Lanka, Bhutan, Maldives, and Nepal also organizeconferences and publish conference proceedings on SAFTA-related issues.While these discussions remain useful in terms of establishing some “talkingpoints,” the efforts of South Asian business groups toward SAFTA can be char-acterized as half-hearted and inconsistent.14 When it comes to solid action planin terms of lobbying their governments strongly for the implementation ofSAFTA agreement, business groups have generally shied away. Business groupsin Bangladesh, Pakistan, and Sri Lanka have shown little interests in removingsensitive lists within a reasonable span of time and instead have shown morepreferences for trade protection because of their vulnerability vis-à-vis Indianbusiness.15 The general argument for the business groups’ preference for tradeprotection is that sensitive lists are an important tool for saving their industryand domestic market from the glut of imports, mostly from India. The lack ofstrong support from business groups provides little incentives to political actorsto move forward in achieving free trade objectives in South Asia.

Political coalitions and FTAs

Despite their economic liberalization policies and the conducive internationalclimate for strengthening regional cooperation, SAARC’s progress has remainedlimited during the past decades due to the emergence of two mutually competingruling coalitions – i.e. weak liberalizing coalitions in India and nationalist–fun-damentalist coalitions in Pakistan.16 As summarized in Figure 6.2, liberalizingcoalitions show more favorable preference to regional trade arrangements thannationalist coalitions. Ruling liberalizing coalitions (pursuing economic liberal-ization policies) generally embrace regional cooperation policies for at least twopositive payoffs:

1 regional cooperative order enables these coalitions to avoid the enormousopportunity cost of military expenditure and diversion of societal resourcestoward developmental projects;

2 regional cooperative arrangements can offer positive global and regionalexternalities by providing some access to foreign and regional markets,capital investment, technology transfers, and foreign aid which can help theruling coalitions to maintain or even broaden their domestic support base.

While strong ruling liberalizing coalitions can pursue regional cooperation forthe above reasons, weak liberalizing coalitions face different domestic politicaldynamics. Contrary to strong liberalizing coalitions, the political base of weakliberalizing coalitions is narrow and unstable. Consequently, weak liberalizing

Domestic politics and regional economic cooperation 165

coalitions are under greater pressure to dilute their reform agenda and may bemore inclined to accommodate the varying demands and interests of their polit-ical opponents to insure their political survival. It often becomes difficult forweak liberalizing coalitions to downplay regional security threat and to ignorescapegoating17 (blaming external enemy) as an instrument of their national pol-icies. Not surprisingly, India’s four weak liberalizing coalitions since the 1990s– Congress administration of Narasimha Rao (1991–96), United Front Adminis-tration of Deve Gowda and I.K. Gujral (1996–97), BJP administration underA.B. Vajpayee (1998–2005), and UPA (Congress and Left Party alliance)administration of Manmohan Singh (2005–) – have generally remained tentativeabout regional cooperative postures, although they have not demonstrated thesame degree of antipathy toward regional cooperation policies as the national-ist–fundamentalist coalitions.

The nationalist–fundamentalist ruling coalitions follow a combative regionalpolicy as they thrive on myths of self-reliance, military prowess, sovereignty,and national pride. Their goals of military strength and economic independenceare naturally incompatible with the objectives of regional cooperation, whichinvolve downsizing military endowments and promoting economic interdepen-dence through lowering trade barriers. The two main pillars of domestic supportfor the nationalist–fundamentalist coalitions are the military and both privateand state monopoly enterprises. Private and state monopoly enterprises, whichgenerally perceive a threat from the competition of regional counterparts, resistlowering trade barriers. The interest of the military is better served in an atmo-sphere of regional conflict and instability. Consequently, parochialism or acombative regional policy becomes preferred policy choices for anationalist–fundamentalist coalition.

In Pakistan, economic liberalization policies by weak liberalizing coalitionsunder Benazir Bhutto and Nawaz Sharif since the 1990s have not contributedsubstantially to any regional cooperative initiative. Rather, Pakistan has becomemore tentative about the cooperative process than India and other South Asian

166 Domestic politics and regional economic cooperation

Potentialmarket

gains

Nature of coalitions

Liberalizing Nationalist

Significant

InsignificantWeak support for freetrade arrangements

Weak support for freetrade arrangements

Strong support for freetrade arrangements

Weak support for freetrade arrangements

Figure 6.2 Nature of political coalitions, potential market gains, and preferences for freetrade arrangements.

countries. The primary reasons for Pakistan’s lack of enthusiasm for any trade-creating scheme in South Asia are

1 its leaders’ apprehension of being dominated economically and militarily bya stronger India and

2 the consequent backlash from the dominant domestic groups, further weak-ening the liberalizing coalition’s position at home.

The logic of political survival forced Pakistan’s two Prime Ministers, BenazirBhutto and Nawaz Sharif, to pursue a reactive and combative regional policyvis-à-vis India during 1990–99.

The military coup in Pakistan on October 12, 1999, which brought Pakistanunder direct military rule for the fourth time since independence, has producedadditional tension in the Indo-Pakistani relations. As discussed in Chapter 5,military regimes, when in conflict with a neighboring democracy, tend to followone or combination of all of the following policies: engage in military confronta-tion; scapegoating (i.e. blaming the neighbor for domestic problems in order toinsure their political survival); externalization of bilateral problems and supportfor external mediation in resolving bilateral disputes.18 Since independence,military-dominated regimes in Pakistan have fought three major wars with India– twice over Kashmir in 1948 and 1965 and once over Bangladesh liberationissue in 1971. Although the Kargil war of 1999 between India and Pakistan wasfought by the civilian regime of Prime Minister Nawaz Sharif, available evid-ence suggests that this war was primarily masterminded and conducted by Pak-istan’s military under the leadership of General Musharraf.19 Pakistan’s rulingelites, particularly military rulers, have often resorted to scapegoating, as mani-fested in a militant anti-India posture, to remain in power and to acquire legiti-macy. To insure Pakistan’s strategic significance for extraregional powers and tomaintain their political clout in domestic politics, the military regimes haveoften shown greater preference for external mediation in their bilateral disputeswith India and focused more on domestic-oriented and external-oriented policiesthan policies with a regional thrust.

Such policies of externalization and external mediation of bilateral problemshave prevented close and continuous regional interactions between India andPakistan, making regional cooperation goals difficult to achieve. Despite someinitiatives, no substantial change in this type of bilateral relationship is evidentin policies of Pakistan’s present military ruler, General Pervez Musharaf.20 Onits part, India also continues to reject international mediation on the Kashmirissue despite the wide recognition of international mediation as an effectiveinstrument in resolving border disputes, as evident in northern Ireland, theMiddle East, and the Peru–Ecuador border dispute in 1996. Such inflexibleposture by India has been counterproductive for the growth of regional coopera-tion in South Asia.

It is a widely shared belief in South Asia that the political tension betweenIndia and Pakistan has contributed to a lack of substantial progress in regional

Domestic politics and regional economic cooperation 167

cooperation and regional trading arrangements in the region. Because of thispolitical tension, ruling coalitions of both India and Pakistan have shown greaterinterests in the growth of subregional and “spoke–spoke” integration initiativesrather than focusing exclusively on the growth of SAARC. These“spoke–spoke” cooperation initiatives have taken a variety of forms. Some initi-atives can be described as “hub-and-spoke” type of cooperation, in which thelargest country in a region signs bilateral agreements with many small countries.India’s initiatives for the growth of bilateral FTAs between India and Sri Lanka,India and Nepal, India and Bangladesh, and India and Bhutan are examples of “-hub-and-spoke” type of cooperation. Similarly, Pakistan has also taken initi-atives in signing bilateral FTAs with Sri Lanka and Bangladesh. A secondvariant of “spoke–spoke” pattern of cooperation is the growth of subregionalgrouping within a regional grouping.21 India’s initiatives for the formation ofSAGQ with Bangladesh, Bhutan, and Nepal is an example of this type of coop-eration initiatives. While this pattern of cooperation may lead to an improvementof market access of smaller countries, it can also diminish the relevance ofregional FTA.

Conclusion

This chapter has argued that three conditions must be present for sustainedsuccess of regional economic cooperation in a region – potential for significantmarket gain; political actors’ willingness to pursue regional economic coopera-tion policies; and the presence of an undisputed regional leader. Regional eco-nomic arrangements typically entail a lengthy process of establishing rules,regulations, and policies, which are neither easy nor automatic. Only regionalgroups that satisfy the above three conditions are likely to achieve sustainedsuccess in establishing regional institutions, while groups that satisfy none ofthese conditions are least likely to succeed.

As discussed in this chapter, with the exception of India, the economies ofSAARC members are not complementary. Since SAARC countries export thebulk of their primary commodities and manufactured goods to the same worldmarkets, they tend to compete in the same industrial sectors with each other.Indeed, most of SAARC members’ trade is with the United States and Europethan with their neighbors. Given the small size of markets and insignificanteconomies of scale, there is limited scope for mutually beneficial marketexchange among South Asian countries. Consequently, demand for deeper eco-nomic cooperation by market actors is weak.

Although SAARC members have pursued economic liberalization policiesafter the early 1990s, these policies have not led to deeper regional economiccooperation. The emergence of two types of competing domestic coalitions inIndia and Pakistan – that is liberalizing coalitions and nationalist–fundamentalistcoalitions – is the important reason to account for this failure. While India’sruling–liberalizing coalitions have more or less supported economic liberaliza-tion and regional economic cooperation policies, their weakness made it almost

168 Domestic politics and regional economic cooperation

impossible for national leaders to pursue deeper regional economic cooperationpolicies in the 1990s. This trend continues. The nationalist–fundamentalist coali-tions in Pakistan, as represented by Pakistan’s radical Islamic Jamaat-i-IslamParty and its current military regime, generally have shown less enthusiasm fordeeper regional economic cooperative arrangements.

Within SAARC, India is the largest member state in terms of size, popu-lation, and market. But, there is no consensus among South Asian countries torecognize India as the region’s undisputed leader. In particular, Pakistan con-tinues to challenge India’s leadership. The continuing squabble between Indiaand Pakistan does not augur well for the future of SAARC. Absence of leader-ship within SAARC implies that there is no “paymaster” or no regional leader toease distributional problems. Absence of leadership has also made coordinationof rules, regulations, and policies difficult and time-consuming. It is notsurprising that under SAPTA and SAFTA agreements, individual countries con-tinue to undermine free trade principles by excluding numerous products fromtariff cuts by keeping them under the sensitive lists.

The rivalry between India and Pakistan signifies trouble for SAARC’s futureand any prospects of deeper regional economic cooperation. Already the policydifferences of India and Pakistan have driven these two countries to engage inseveral “spoke–spoke” and “hub-and-spoke” type of cooperative arrangements.In addition, both India and Pakistan are involved in other transregional eco-nomic arrangements, such as IORARC and BIMSTEC in case of India and ECOand OIC countries in case of Pakistan. India’s involvement in a “noodle bowl”of bilateral trade agreements with Singapore, Thailand, Vietnam, Japan, China,South Korea, Sri Lanka, Nepal, Bhutan, and Bangladesh and her initiatives forthe “spoke–spoke” pattern of economic cooperation among subgroups of SouthAsian countries – for example SAGQ – are motivated in part by Pakistan’sunwillingness to increase the speed of free trade negotiation with India. Whilesuch transregional and “spoke–spoke” pattern of trade cooperation may providesome short-term solutions to India’s need for trade expansion and market access,given their lack of commonality and quite different rules of origin, it is not clearas to what extent these type of trade agreements will facilitate deeper economiccooperation. SAFTA would make a good deal more practical sense and wouldbe an essential underpinning of an emerging regionalism in South Asia. But, thelevel of regional economic interdependence achieved so far and the pace atwhich South Asian countries are progressing in their negotiation for FTAs willleave South Asian countries at an appreciable distance from the goal of SAFTAeven after a decade. Any substantially faster rate of progress on FTAs would bea desirable goal. But, that would require a substantially greater political effortfrom South Asian political leaders – Indian and Pakistani leaders, in particular.

Domestic politics and regional economic cooperation 169

7 Domestic preferences for regionalcooperationCross-national comparisons

Regional cooperation in South Asia is an intergovernmental process, wherepolitical leaders engage in bargaining and negotiation to promote their respec-tive state’s multiples national interests. Growth of regional cooperation, thus,depends on the willingness of the political leaders to pursue regional coopera-tion policies. The political leaders’ willingness depends greatly on the payoff ofregional cooperation to political leaders. The most valuable payoff for the polit-ical leaders is to retain political power. In order to retain political power, polit-ical leaders need adequate domestic support for their policies. It is, therefore,reasonable to assume that the power-retaining motivation of political actors willforce them to anticipate the reactions of key societal groups on specific regionalcooperation policies and avoid those policies that will bring them into confronta-tion with dominant domestic groups. Thus, lack of adequate domestic support ornegative reactions for regional cooperation policies can contribute to a dampen-ing of enthusiasm among the ruling coalitions to seek deep levels of regionalcooperation. In contrast, adequate domestic support or positive reactions fromdomestic groups toward a specific regional cooperation policy can create a morefavorable environment for policymakers to pursue cooperation policies. Giventhis dynamic, the present chapter examines the nature of domestic support forregional cooperation in South Asia.

In examining the nature of domestic support for regional cooperation, thischapter focuses on elite-level support. In South Asia, regional cooperationpolicy essentially remains a foreign policy issue and is thus an issue in elite poli-tics. Issues of regional cooperation policy are largely beyond the immediateconcern of mass citizens and do not involve large number of people. SouthAsian mass publics are, thus, generally uninformed and unconcerned aboutregional cooperation. The South Asian elites, on the contrary, are aware of theextensive nature of regional cooperation policies as well as the interdependenceof regional and domestic politics. Thus, they remain more interested andinvolved in the formulation of regional cooperation policies. In addition, elitesin South Asia have greater potential to influence indirectly the course of govern-ment policy. As opinion leaders, these elites have the capability to politicizeissues, mobilize masses, and even increase saliency of a particular issue bymeans of debates, media writing, and discussion.

In a pluralistic elite structure like India and Sri Lanka, functional elites some-times act as interest groups lobbying to secure certain goals. At other times, theyact as veto groups who must be placated before a given policy can be imple-mented. In order to understand why a particular policy is preferred by governingelites in India and Sri Lanka, it is usually necessary to know the nature ofsupport to those policies by key domestic groups. In other SAARC countries –Pakistan, Bangladesh, Nepal, Bhutan, and Maldives – where the elite structureremain tightly integrated to a varying degree, few functional elites, such as themilitary, bureaucrats, industrial and landed elites, and religious leaders, haveaccess to power and wealth. In such a system, a leader may have more autonomyin the policy-making process. Yet, it will be unreasonable to assume that aleader single-handedly initiates and implements policy measures to keep theentire country functioning. The leader depends on advices, information, andsupport of associates comprising various functional elites. The number of theseelite groupings surrounding the leader is few. But, typically, these few elitegroupings have a support base on which the leader must depend in order toexpand his own support base for legitimacy and retaining power. Hence, the per-spectives and preferences of these elite groupings are of particular significancefor gauging trends in regional cooperation policy formulation. Given this under-standing, the present chapter seeks to examine the nature of elite preferences forregional cooperation policies in South Asia.

As discussed in Chapter 2, preferences of domestic elites for specific regionalcooperation policies are based on their utilitarian evaluation of and/or affectiveallegiances toward regional cooperation agreements and institutions. While utili-tarian preferences of elites are determined by their perception of benefits – eco-nomic, security, social welfare, and so on – from a specific regional cooperativearrangement, affective allegiances of elites are based on their shared values,attachment, sympathy, and trust toward a regional organization. Several empiri-cal studies in the context of EU show that examining the level of utilitarian andaffective support provides a useful explanation in understanding the scope andspeed of regional integration.1 In the literature of regional integration, there is noagreement among scholars about which kind of support, affective or utilitarian,precedes the other. According to functionalists and neo-functionalists, utilitariansupport generally precedes affective support because rewards and gains are saidto be prerequisites for trust and confidence. In contrast, communitarian scholarsargue that existence of affective support facilitates utilitarian support. Trust andconfidence, communitarian scholars argues, are the prerequisites for the growthof economic transactions between member countries of a regional grouping.Despite the plausibility of the arguments by both schools of thought, it is prob-lematic to determine which kind of support emerges first. However, the neces-sity for both utilitarian and affective support for the growth of a regionalorganization is widely accepted in the literature (Lindberg and Scheingold 1970;Hewstone 1986; Gabel 1998). Following this literature, this chapter seeks toexamine the nature of utilitarian and affective support by South Asian elites forSAARC.

Cross-national comparisons 171

To evaluate the nature of South Asian domestic elite-level support along theaffective and utilitarian dimensions toward SAARC, this chapter has soughtanswers to the questions listed in Table 7.1. Using primary data derived fromextensive open-ended interviews with 780 elites from five South Asian countries– India, Pakistan, Bangladesh, Sri Lanka, and Nepal – over a period of two years(May 2002 to November 2004), this chapter provides an assessment of domesticelite preferences for deeper regional cooperation in South Asia. Table 7.2describes the profile of the elite respondents.2

Affective support is abstract and broad in nature, representing elites’ emo-tional attachment and loyalty to such ideals as regional identity and regionalcommunity. To tap the affective dimension of support, the respondents wereasked questions on South Asian identity, solidarity, and national image (Table7.1). The question on South Asian identity asks specifically about respondents’South Asian identification. The question on solidarity assesses respondents’solidarity with South Asian citizens outside their own country and their willing-ness to undergo economic sacrifice for the sake of other SAARC members. Thequestion on national image evaluates respondents’ positive or negative percep-tion of neighboring countries in terms of such issues as military aggression,authoritarianism, political stability, economic dependency, and external orienta-tion. Thus, these questions capture respondents’ political identification withSAARC and mutual obligations toward each other, which are fundamentalindicators of growth and legitimacy of regional institutions. Since utilitariansupport reflects an evaluation of the perceived benefits of cooperation, thisresearch has made an attempt to elicit manifest attitudes of the respondentstoward deeper cooperation by asking questions on evaluation of membership andperception of inequity (Table 7.1). The questions on evaluation of membershipask specifically about respondents’ level of satisfaction with SAARC achieve-ments so far and their positions (favorable or not favorable) on the issue ofexpansion of regional cooperation in South Asia. The questions on perception ofinequity evaluate respondents’ perception of their country’s relative contributionto and benefit from SAARC arrangements. Overall, responses to these questionsshould represent respondents’ perception of economic gains and losses from thecurrent stage of regional cooperation arrangements and their perception of likelybenefits from future economic arrangements between SAARC members.

South Asian identity and solidarity

Table 7.3 provides a comparison of the national percentage of positive responsesto the questions related to South Asian identity and solidarity. When asked abouttheir sense of South Asian identity, less than one-fifth of the respondents in Indiaand about one-eighth of the respondents in Pakistan indicated that they oftenthink of themselves as citizens of South Asia. With regard to this question, lessthan one-fourth of the respondents in Bangladesh and more than one-third of therespondents in Nepal and Sri Lanka answered more positively. This shows thatregional identity is much less developed in case of elites of both India and Pak-

172 Cross-national comparisons

Tab

le 7

.1A

ffec

tive

and

uti

lita

rian

sup

port

que

stio

ns

Aff

ecti

ve s

uppo

rt q

uest

ions

Sout

h A

sian

Ide

ntit

y1

Do

you

ever

thin

k of

you

rsel

f no

t onl

y as

a c

itiz

en o

f yo

ur c

ount

ry, b

ut a

lso

a ci

tize

n of

Sou

th A

sia?

Soli

dari

ty2

Are

you

, per

sona

lly,

pre

pare

d to

mak

e so

me

pers

onal

sac

rifi

ce, f

or e

xam

ple

payi

ng m

ore

taxe

s or

sup

port

ing

your

cou

ntry

’s le

ader

s to

cha

nnel

you

r co

untr

y’s

reso

urce

s to

hel

p ou

t ano

ther

cou

ntry

in S

outh

Asi

a in

econ

omic

dif

ficu

ltie

s?N

atio

nal I

mag

e3

Do

you

thin

k th

at y

our

neig

hbor

ing

coun

trie

s’s

poli

tica

l beh

avio

r is

con

duci

ve f

or r

egio

nal p

olit

ical

stab

ilit

y?4

Do

you

thin

k th

at y

our

neig

hbor

ing

coun

trie

s’s

econ

omic

pol

icie

s ar

e co

nduc

ive

for

regi

onal

eco

nom

icgr

owth

?5

How

do

you

desc

ribe

you

r ne

ighb

orin

g co

untr

ies

in te

rms

of th

e fo

llow

ing

attr

ibut

es?

aP

olit

ical

sta

bili

tyb

Aut

hori

tari

anc

Eco

nom

ical

ly d

epen

dent

dE

xter

nal o

rien

tati

one

Agg

ress

ivel

y m

ilit

aris

tic

Uti

lita

rian

sup

port

que

stio

ns

Eva

luat

ion

of M

embe

rshi

p6

Are

you

sat

isfi

ed w

ith

SA

AR

C’s

ach

ievm

ents

so

far?

7In

gen

eral

, are

you

for

or

agai

nst e

ffor

ts b

eing

mad

e to

exp

and

regi

onal

coo

pera

tion

in S

outh

Asi

a?P

erce

ptio

n of

ineq

uity

8In

you

r op

inio

n, w

hich

mem

ber

coun

try

is li

kely

to b

enefi

t mos

t fro

m S

AA

RC

?9

In y

our

opin

ion,

whi

ch m

embe

r co

untr

y is

like

ly to

ben

efit l

east

fro

m S

AA

RC

?10

In y

our

opin

ion,

whi

ch m

embe

r co

untr

y is

like

ly to

con

trib

ute

mos

t to

SA

AR

C?

11In

you

r op

inio

n, w

hich

mem

ber

coun

try

is li

kely

to c

ontr

ibut

e le

ast t

o S

AA

RC

?

174 Cross-national comparisons

Table 7.2 Interviewees according to occupational categoriesa

Bangladesh India Nepal Pakistan Sri Lanka

Civil servants (Active and Retired) 12 51 7 25 12Journalists 33 70 23 45 32Scholars 35 77 29 49 34Business executives 17 59 14 36 21Othersb 12 47 5 25 10

Total (780) 109 304 78 180 109

Notesa Interviewees include two previous Secretary-Generals of SAARC.b Others include religious leaders, trade union leaders, NGO leaders, retired military personnel,

judges, and lawyers.

istan than their counterparts in smaller South Asian countries. For the questionon solidarity, only about one-fourth of the respondents in India, Nepal, andBangladesh and less than one-fifth of the respondents in Pakistan were preparedto make a personal sacrifice to help another SAARC member state experiencingeconomic difficulties. In contrast, a slightly fewer than one-half of the respon-dents in Sri Lanka expressed a willingness to make a personal sacrifice to helptheir neighboring country in times of economic difficulties.

These results indicate the existence of a low level of affective support amongSouth Asian elites for the growth of regional cooperation. Only a small portionof South Asian elites think of themselves as South Asian citizens and are willingto make personal sacrifices to help another SAARC member state experiencingeconomic difficulties. While such attitudes among elites from economicallyweaker countries in South Asia are understandable, demonstration of such atti-tudes among Indian and Pakistani elites remains problematic for the growth ofSAARC. These results have important implications for evaluating the progressof SARC. First, it is evident that public legitimacy for SAARC institutions,grounded in widespread affective attachment, does not exist in South Asia. Theexistence of low level of affective sentiment is hardly encouraging for SouthAsian policymakers to push for deeper regional cooperation policies. Second,the low level of affective attachment among South Asian elites indicates theirstrong national political loyalties and lack of development of any supranationalidentity and allegiances. Such an environment is hardly conducive for thegrowth of regional institutions.

National image

Several studies on regional integration have established that policies supportingregional cooperation are more likely to receive domestic support when people ina country perceive neighboring countries positively or favorably (Deutsch 1957;Lindberg and Scheingold 1970; Shepherd 1975; Smith 1993). Lindberg andScheingold (1970: 45) argue that when people of one country have positive

images or good feelings about another country, they tend to develop an “identi-tive support” to regional cooperation policies. In such an environment, thedecision-makers feel more encouraged to pursue regional cooperation policiesthan when people have negative images of their neighboring countries. Negativeimages of their neighboring countries make people reluctant to support regionalcooperation policy initiatives. Several studies suggest that people have negativeimages of a country when it is perceived as aggressively militaristic, authorit-arian, economically dependent, and more externally oriented. On the other hand,when a country is perceived as politically stable, economically and industriallydeveloped, and friendly toward neighbors, people are likely to have positiveimages of that country (Hewstone 1986: 81).

Table 7.4 provides a comparison of the national percentage of positiveresponses to the questions on national image. When asked about their perceptionof national images of their neighboring countries in terms of the five attributes(i.e. political stability, economically dependent, external orientation, aggres-sively militaristic, and authoritarian), about three-fourths of the respondentsdescribed India and about one-half of the respondents described Pakistan asaggressively militaristic. These results indicate an absence of positive perceptionof national images of India and to a lesser extent of Pakistan among the SouthAsian respondents. India and Sri Lanka were viewed as least authoritarian.Except for Pakistan, other South Asian countries were also viewed as lessauthoritarian. More than three-fourths of the respondents described Pakistan asauthoritarian. In terms of economic strength and weakness, not surprisingly,India was considered as economically and industrially most developed. Next toIndia, Sri Lanka was considered as less economically dependent. More thanthree-fourths of the respondents described Nepal as economically weak anddependent. A substantial majority (70 percent) of the respondents describedBangladesh the same way. More than one-half of the respondents viewed Pak-istan as economically weak and dependent. Surprisingly, on the issue of politicalstability, except for Sri Lanka, all other South Asian countries were consideredby more than a majority of the respondents as politically unstable. Finally, for

Cross-national comparisons 175

Table 7.3 Comparison of measures of affective support

South Asian identity: Solidarity: % who often think of themselves % prepared to make as citizens of South Asia a personal sacrifice

Bangladesh 22 27India 19 26Nepal 34 24Pakistan 12 18Sri Lanka 38 48

Source: Author.

NotePercentages given on the basis of total number of responses in a category.

the question on external orientation, slightly fewer than three-fourths of therespondents described Pakistan as most externally oriented. More than one-halfof the respondents viewed Bangladesh, Sri Lanka, and Nepal as externally ori-ented. India also scored high on this issue. A slightly less than one-half of therespondents viewed India as externally oriented. External orientation is a detri-mental factor for the growth of regionalism. It is evident from the high scores ofexternal orientation that respondents do not consider South Asian countries asvery supportive of the idea of regional cooperation.

The evidence presented in this section indicates the existence of a low levelof affective support among the South Asian elites for the growth of regionalcooperation. The existence of widespread negative perceptions of nationalimages of the neighboring countries has an adverse effect on the development ofany supranational identity and allegiances, making deeper cooperation in termsof institutional development extremely problematic. Due to the low level ofaffective support, the results indicate that utilitarian evaluations remain animportant determinant of support for deeper cooperation in South Asia. DoSouth Asians elites demonstrate adequate utilitarian support for SAARC? Thenext section explores this issue.

Perception of inequity

In this study, utilitarian support for SAARC was assessed by asking questionsabout perception of inequity and evaluation of SAARC membership. In thecontext of perception of inequity, four specific questions were asked:

1 which member country benefits most;2 which member country benefits least;3 which member country contributes most;4 which member country contributes least.

As several studies suggest, people’s perceived inequity, that is, people’s percep-tion that their country is likely to contribute more than it receives from a

176 Cross-national comparisons

Table 7.4 National image of SAARC countries

India Bangladesh Nepal Sri Lanka Pakistan(%) (%) (%) (%) (%)

Aggressively militaristic 74 5 0 3 48Authoritarian 8 18 14 10 77Economically dependent 14 70 80 40 54Political instability 58 60 75 44 68External orientation 43 65 55 60 70

Source: Author.

NotePercentages given on the basis of total number of responses in a category.

regional organization, appears to be related to their attitudinal support for aregional organization.3 Individuals who believe that their own country will bothcontribute most and benefit least will have more negative or indifferent attitudestoward a regional organization than those who believe that their own countrywill either contribute least or benefit most. The attitudes of the latter group willbe considerably more negative or indifferent than those of individuals whobelieve that their country will neither contribute most nor benefit least.

Figure 7.1 provides a comparison of respondents’ perception of inequity.When asked about their perception of which country contributes most toSAARC-related activities, slightly fewer than three-fourths of the respondentsindicated that India’s contribution is highest. At the same time, more than one-half of the respondents also indicated that India is likely to benefit most fromany SAARC arrangements. This assessment seems to be based on India’s relat-ively larger economic size. Most Indian respondents, however, disagreed withthis assessment. A substantial majority of Indians (77 percent) viewed theircountry as the least likely beneficiary from SAARC and 82 percent of the Indianrespondents felt that India is likely to contribute most.4 Indian perception ofinequity may not lead to the formation of negative attitudes toward SAARC overthe long run. But, it certainly contributes to an attitude of indifference towardSAARC. As one respondent from India remarked: “If SAARC succeeds, it iswell and good. If it doesn’t, well, doesn’t matter.” Such an attitude is notencouraging for the growth of SAARC.

Interestingly, few South Asians thought that their own country would belikely to benefit most from SAARC and contribute least to SAARC. However,after Bhutan and Maldives, Pakistan was viewed by large numbers of respon-dents from India (56 percent), Bangladesh (54 percent), Nepal (64 percent), and

Cross-national comparisons 177

36%

72%

18%14% 14%

4%

11%

2%

17%

8%

Per

cent

age

80

70

60

50

40

30

20

10

0India Pakistan Bangaldesh Nepal Sri Lanka

Benefits leastContributes most

Figure 7.1 Relative benefits and contributions of South Asian countries (source:Author’s calculation).

NotePercentages given on the basis of total number of responses in a category.

Sri Lanka (49 percent) as likely to contribute least. Most Pakistani respondents(71 percent) disagreed with this assessment. On the other hand, like mostIndians, most Pakistani respondents (68 percent) felt that Pakistan would con-tribute more and 62 percent of the respondents felt that Pakistan would benefitless from SAARC.5 Pakistani elites’ perception of inequity, which is almostsimilar to their Indian counterparts, has led to an attitude of indifference towardSAARC. This attitude of indifference by both Pakistani and Indian elites bodesill for the growth of SAARC, which needs active support from both India andPakistan to succeed.

Evaluation of SAARC membership

Several studies on regional integration have established that evaluations ofachievements and failures of a regional organization provide useful understand-ing about what societal actors expect from a regional organization and what arethe goals and principles that they value most (Deutsch 1963; Shepherd 1975;Hewstone 1986). Such understandings are crucial because they provide policy-makers with relevant information to focus on issues and areas, where policy ofregional cooperation can receive more support from societal actors and knowabout issues and areas, which may need improvement or change of governmentpolicy to strengthen cooperative activities. Given this logic, this study sought toexplore respondents’ views on positive and negative issues of SAARC.

For the question on evaluation of membership, the summary of responses isgiven in Figures 7.2 and 7.3. The most widely viewed (78 percent) positiveaspect of SAARC was the practice of holding regular meetings among theheads of states or governments, foreign and other ministers and bureaucrats.Given South Asia’s widespread mutual distrust and limited intraregional inter-action, it is significant that most South Asian respondents viewed the meetingsas critical for confidence-building purposes. Most respondents pointed to thefact that informal talks among the leaders at regularly held SAARC meetingshave led to inter-elite reconciliation on many sensitive issues, producing somenoteworthy results in South Asia. The following are some of the major eventsmentioned by the respondents. The informal talks between the Indian and Pak-istani prime ministers at the second SAARC summit meeting at Bangalore inNovember 1986 led to the diffusion of tension between the two countries on theissue of India’s troop exercise (Operation Brasstacks) on the Indo-Pakistanborder. The India–Sri Lanka talks at the 1987 SAARC foreign ministers’meeting led to their accord on the Tamil problem. As a result of an informalmeeting and discussion between the Prime Ministers of India (Narasimha Rao)and Pakistan (Nawaz Sharif) at Davos in 1992, the Pakistani government tookaction to prevent the move of the JKLF to cross the CFL in Kashmir later thatyear. The famous “handshake” between Pakistani President General PervezMusharraf and Indian Prime Minister A.B. Vajpayee at the 11th SAARCsummit meeting at Kathmandu on January 6, 2002, appeared to have broken icebetween the two leaders and eventually led to resumption of dialogue on

178 Cross-national comparisons

bilateral issues between the two countries, which were suspended after thefailure of Agra Summit in 2001.

The second most positively viewed achievement of SAARC was cultural,technical, and scientific cooperation among the members. Many respondentstalked about the necessity of confidence-building measures in South Asia byundertaking cooperation at cultural, technical, and scientific levels. More thanhalf of the respondents (53 percent) acknowledged SAARC’s positive contribu-tion in this regard. This finding reflects a growing awareness among South Asianelites about the importance of soft areas of cooperation in building confidenceamong South Asian countries. What is significant is that a majority of SouthAsian respondents view that cooperation in such areas as culture, science, andtechnology is possible and desirable that can eventually lead to cooperation inother more salient areas like trade and security.

SAFTA initiatives were mentioned as the next most positive aspect ofSAARC by nearly half of the respondents (48 percent). Given South Asiancountries’ low level of intraregional trade and their trade dependence on indus-trialized countries (as discussed in Chapter 6), this finding is encouraging andmarks a shifting attitude toward deeper trade cooperation in South Asia.However, while more than half of the respondents from India (56 percent) and

Cross-national comparisons 179

78%

53%

48%

44%

31%

22%

22%

13%

Regular meetings between headsof state, foreign and other ministers,

secretaries at all levels

Cultural, technical, andscientific cooperation

SAARC Free Trade Area initiatives

People to people contact

Visa relaxation for MPs,Supreme Court Judges, and

heads of academic institutions

SAARC RegionalFood Security Reserve

Poverty alleviation

Terrorism and drug trafficking

900 10 20 30 40 50 60 70 80

Percentage

Figure 7.2 Positive issues of SAARC (source: Author).

NotePercentages given on the basis of total number of responses in a category.

Sri Lanka (66 percent) supported expansion of intraregional trade cooperation,there was low support for SAFTA from Nepal (33 percent), Bangladesh (44percent), and Pakistan (38 percent).6 Nepal’s special trade agreement with Indiaand the realization that it has nothing more to gain through intraregional tradedue to its relatively smaller economic size might have contributed to a lack ofenthusiasm on this issue among Nepalese respondents. Bangladesh’s fear ofIndian goods dominating the country’s market and India’s high rate of tariff andnon-tariff barriers as well as lack of any unilateral openness to Bangladeshiproducts explain the existence of a low level of support for trade liberalizationunder SAFTA. In fact, many respondents in Bangladesh observed that sinceIndia is the largest economy in South Asia and makes up 80 percent of theregion’s GDP, it should unilaterally open its markets and grant its neighborsconcessions without expecting reciprocity. Similarly, low support among Pak-istani respondents for SAFTA reflects the country’s fear of India’s economicdomination in the region.

Next to SAFTA initiative, people-to-people contact received much supportfrom South Asian elites. A little less than half of the South Asian respondentsmentioned about SAARC’s positive role in enhancing people-to-people contactin South Asia. It is significant to note that currently there is only limited travel,media, and academic interaction among South Asians. For South Asian elites,this is detrimental for the development of a South Asian community sentiment.

180 Cross-national comparisons

48%

38%

34%

29%

29%

14%

72%

Percentage

Indo-Pakistanconflict

Fear of Indiadomination

Few concreteachievements

Unresolved bilateraldisputes

Competition betweenmembers

Too much import–exportrestrictions

Too much border/passport control

800 10 20 30 40 50 60 70

Figure 7.3 Issues with negative effects on SAARC’s growth (source: Author).

NotePercentages given on the basis of total number of responses in a category.

There seems to be a growing recognition among South Asian elites that SAARCcan play an important role in facilitating contacts between South Asian people.It is more of SAARC’s potential than its actual achievement in terms of facilitat-ing people’s interaction that received support from South Asian elites. Not sur-prisingly, a little less than one-third of South Asian elite respondents supportedSAARC’s efforts for visa relaxation to facilitate more interaction among SouthAsian people.

SAARC’s Regional Food Security Reserve and plans for poverty alleviationwere mentioned as positive aspects of SAARC by a little less than one-quarterof respondents. Ironically, however, respondents from small and relatively lessdeveloped countries in SAARC (Bangladesh, Nepal, and Sri Lanka), for whomRegional Food Security Reserve is important, were less enthusiastic about theReserve than respondents from India and Pakistan. Such low appraisal of theSAARC Regional Food Security Reserve by small countries may be due to theirfrustration in not getting adequate support from the Reserve during their time ofneed caused by natural disaster. SAARC’s efforts to combat terrorism and drugtrafficking received support from slightly more than one-tenth of respondents.While most respondents from India (77 percent) and Pakistan (74 percent) dis-missed this as a positive achievement of SAARC, majority of respondents inNepal (66 percent), Bangladesh (62 percent), and Sri Lanka (58 percent) sup-ported SAARC’s positive role on this issue.7

The Indo-Pakistan conflict, fear of Indian domination, and few concreteachievements of SAARC were considered as the three most negative factors inSouth Asia (Figure 7.3). While 72 percent of South Asian respondents men-tioned Indo-Pakistan conflict, about half of the respondents cited India’s domi-nation as a major negative factor for the lack of growth of SAARC. More thanone-third of the respondents mentioned lack of any tangible achievements8 andunresolved bilateral disputes with India as other negative factors for the growthof SAARC. As the biggest partner of SAARC, many respondents mentioned thatIndia should make more unilateral sacrifices by making concessions on bilateralissues, such as opening its markets for other small South Asian countries. Thegeneral consensus among smaller South Asian countries, to quote a respondentfrom Bangladesh, is: “India can make or break SAARC.” Other issues cited bythe respondents that had negative effects on the growth of SAARC are competi-tion between members (29 percent) for same products, too much import–exportrestrictions (29 percent), and too much border/passport control (14 percent).

Responses in Table 7.5 represent respondents’ perception of likely benefitsfrom future economic arrangements between SAARC members. More than amajority of respondents in Sri Lanka and a little less than one-half of respon-dents in Nepal and Bangladesh are convinced about future economic benefits ofSAARC to their countries and thus support expansion of regional cooperation.In contrast, about one-third of respondents in India and less than one-third ofrespondents in Pakistan favored expansion of SAARC activities. However, onlyone-fifth of Indian respondents oppose SAARC’s future expansion and a littleless than one-half of Indian respondents remain uncertain about SAARC’s

Cross-national comparisons 181

future. This result indicates that a majority of Indians remain indifferent towardSAARC and a shift in their attitude toward SAARC’s future will depend on therelative utilitarian achievements of the organization. The opposition to expan-sion of SAARC activities in economic sphere by about one-third of Pakistanirespondents reflects their fear of Indian economic domination in the region. Atthe same time, more than one-third of Pakistani respondents expressed uncer-tainty about SAARC’s future. This kind of evaluation of SAARC by Pakistanirespondents is clearly influenced by lack of mutual trust between India and Pak-istan and the Indo-Pakistani political tension over their bilateral problems,including the Kashmir issue.

It is significant to note that contrary to popular perception, the nuclear issue isnot considered as a major impeding factor for strengthening regional cooperationin South Asia. Although most Pakistanis (85 percent) and Indians (72 percent)were apprehensive and critical of each others’ nuclear plan, no single respondentfrom these two countries considered the nuclear issue to be an obstacle to regionalcooperation. The same view was expressed by most respondents from Bangladesh(72 percent), Nepal (65 percent), and Sri Lanka (60 percent).9 Many respondentseven pointed to the growth of EU despite the presence of two nuclear powers –France and United Kingdom. From this result, one can speculate that nuclearnationalism is not a serious issue for the growth of regional cooperation. Instead,nuclear issues, like many other bilateral problems, can be addressed by informalmeeting of South Asian leaders at various SAARC forums.

Discussion – the myth of a South Asian community

The findings of elite responses reported above suggest that across nations, vari-ation in positive responses to the affective and utilitarian questions follows asimilar pattern. Within India, Pakistan, Bangladesh, Sri Lanka, and Nepal, thevarious respondents were generally closer in their views to each other than theywere to the opinion of their counterparts in the other country. This indicates astrong nationalist bias and lack of regional outlook among South Asians. On thequestion of South Asian identity, Indians, Pakistanis, and Bangladeshisdemonstrated less positive attitude than Sri Lankans and Nepalis. It is ironic thatwhile most Bangladeshi elites were aware of Bangladesh’s contribution to the

182 Cross-national comparisons

Table 7.5 Attitudes toward expansion of regional cooperation in South Asia

Bangladesh India Nepal Pakistan Sri Lanka(%) (%) (%) (%) (%)

Favor 42 34 46 30 55Oppose 13 20 15 32 16Don’t know 45 46 39 38 29

Source: Author.

NotePercentages given on the basis of total number of responses in a category.

creation of SAARC, they were far away from a construct of South Asiancommunity. The considerably less positive attitude of Indians and Pakistanistoward a South Asian community is a reflection of their deep divide caused byhistory and continuing political tension. Memories of the partition in 1947,Kashmir issue, and Indian role in the partition of Pakistan in 1971 are stillprominently recalled in Pakistan. Most Indian elites fault Pakistani ruling elitesfor their failure to deal with its past and for perpetuating the path of confronta-tion with India. At the same time, they recognize the need for Indo-Pakistanicooperation for South Asia’s peace and prosperity. As one Indian scholar put it:“Because of size, geography, history, and strategic perspectives, there willalways be common and competitive interests in our bilateral relations with Pak-istan regardless of how wisely or unwisely we jointly manage the relationship.”

The evidence on South Asian solidarity reveals that South Asians are lessinclined to support their neighboring countries in times of economic difficulties.While this may be a reflection of weak socioeconomic development of mostSouth Asian countries, such a lack of “we-feeling” among South Asian elites ishardly encouraging for the growth of regional cooperation. A combination offactors can be mentioned here to explain why South Asians show low sense ofsolidarity with each other. Of course, limited economic opportunity is an import-ant reason. In addition, vast differences in the nature of individual states, preoc-cupation with domestic issues, lack of cross-border travel, less or negative presscoverage of South Asian affairs, distorted history text books, and limited inter-action among South Asian governments have influenced, to varying degrees,South Asians’ attitude toward each other. One of the principal goals of SAARCwas to promote people-to-contact in the region so that South Asians would bemore supportive of a regional entity. The evidence presented here indicates thatvery few South Asian elites express a strong South Asian community sentiment.Apparently, despite its existence for more than two decades, SAARC is yet topromote a South Asian community sentiment among its people.

The picture that emerged from the analysis of national images by SouthAsian countries is hardly encouraging for the development of a trans-nationalentity. Most South Asian elites viewed their neighbors negatively. India wasdescribed by most respondents as economically and militarily strong and lessauthoritarian. Such positive perception of India, however, was neutralized whenmost South Asians described India as “aggressively militaristic.” This indicatesa widespread distrust toward India’s role in the region. Similarly, Pakistan wasalso viewed on a negative light by most South Asians on the measures of“authoritarian,” “political stability,” and “external orientation.” While smallerSAARC members (Bangladesh, Nepal, and Sri Lanka) were seen as lessauthoritarian, Bangladesh and Nepal were characterized by most South Asiansas neither economically developed nor politically stable. Sri Lanka was viewedrelatively more favorably on the dimensions of economic development andpolitical stability. However, all the three smaller countries scored high on theirexternal orientation. Taking all the five measures of national image – militaris-tic, authoritarian, economic development, political stability, and external

Cross-national comparisons 183

orientation – together, one can say that there is a significant presence of negativeperception of national images of their neighboring countries, which interfereswith their support for a regional entity. South Asians, in a nutshell, are less posi-tively inclined toward a development of South Asian community.

The finding of high degrees of perceived inequities – that is their countrywould contribute most but benefits least – among Indians is not surprising. Butthe fact that respondents from all four other members of SAARC think the sameway offers a crass example of self-interest. In all fairness, this might have beenexpected from politicians but not informed elites. The existence of perceivedinequity to varying degrees among South Asian elites along with lack of con-crete achievements of SAARC appears to be associated with their relative indif-ference toward SAARC. This remains worrisome and obviously requires mucheffort from South Asian policymakers to convince their people that membershipin SAARC is worthwhile.

On the issue of relative cost and benefit of SAARC membership, most SouthAsian respondents did see some benefits in SAARC’s role in facilitatingconfidence-building process in the region. At the same time, most of them alsoexpressed their disappointment about SAARC’s lack of concrete achievementsin more salient issues like trade and security. Not surprisingly, continuing Indo-Pakistan conflict was mentioned by most respondents as the primary reason forSAARC’s lack of achievements. In addition to Indo-Pakistan antagonism, lowlevel of intraregional trade over the past decades has also contributed to lowlevel of utilitarian support for SAARC. Most respondents feel that unless thereis a substantial improvement in the current low level of intraregional trade,SAARC’s utility will remain limited.

Existence of low levels of utilitarian and affective support for SAARC doesnot augur well for the growth of the organization. It appears that the activities ofSAARC have not yet captured the imagination or interests of even the region’smost enlightened people. This is the reason why a relatively high number ofrespondents in Bangladesh, India, Nepal, and Pakistan showed lack of interest inthe expansion of regional cooperation activities. SAARC’s lack of visibility canbe attributed to its failure to address salient issues such as trade and security inSouth Asia. The existence of a high degree of indifference toward SAARCreveals the gulf between rhetoric and reality in South Asia. In brief, SAARCsuffers from a credibility gap. Some of the major reason that have contributed toSAARC’s credibility gap are South Asian countries’ repeated failure to imple-ment important regional conventions on terrorism and narcotic drugs, lack ofresources to implement SAARC-related projects in a timely manner, lack of sat-isfactory progress in the creation of trade complementarities under the provi-sions of SAPTA during the past decade, lack of urgency to implement SAFTAprovisions, and continuing political differences and hostility between India andPakistan. There is no denying the fact that if SAARC is to achieve sustainedsuccess, then more positive utilitarian evaluations of this organization by keysocietal actors in South Asia is necessary. Some major progress in the core areasof economics and security will help achieve this.

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Conclusions and implications

The findings of this chapter reveal that domestic elite support for SAARC alongaffective and utilitarian dimensions remains limited. The findings have twoimportant implications for understanding the growth of regional cooperation inSouth Asia.

The first implication is that absence of strong positive domestic elite supportfor SAARC-related activities has contributed to the dampening of enthusiasmand weakening of commitments among the South Asian policymakers for bolderregional cooperative initiatives and implementation of various regional agree-ments. Consequently, SAARC’s growth has remained slow and modest over thepast two decades. Of course, limited domestic support is not the only factor forthe slow growth of SAARC. But when seen in the context of some South Asianregional dynamics, that is, the existence of weak governments in South Asia andthe ruling coalitions’ need for domestic support for political survival, lack ofstrong domestic support, doubtless, has contributed to the policymakers’ inertiatoward SAARC.

The second important implication is that South Asian elites expect thatSAARC has important consequences for South Asia’s political and economicwelfare related to trade, security, and regional peace and stability. The results ofthe analysis indicate that South Asian elites incorporate these utilitarian consid-erations in their appraisal of SAARC. In fact, SAARC’s few concrete achieve-ments in the areas of trade, security, and regional peace are linked to itscredibility gap. Many South Asian elites pointed out that SAARC-relatedrhetoric has generally outdistanced SAARC’s performance over the past fewdecades. As long as SAARC’s credibility gap continues, societal actors’ indif-ference toward this organization will persist. This indifference does not indicatethe formation of negative attitude. Rather, it suggests that societal actors maynot be strong catalyst and advocate for regional cooperation. At the same time,their indifference does not put any urgent pressure on policymakers to pursueregional cooperation policies, but it certainly provides governing elites with anacquiescent domestic environment in which to pursue regional cooperationpolicies.

The elite indifference also suggests that majority of South Asian elites couldbe persuaded about SAARC’s utilitarian value by changing circumstances andnew information about SAARC achievements. As shown in Table 7.5, exceptfor Pakistan, fewer respondents actually oppose expansion of regional coopera-tion activities. Taking “favorable” and “don’t know” responses together, one canargue that majority of South Asian respondents do expect SAARC to performbetter. In nutshell, the prevailing indifference of societal actors can be trans-formed into greater utilitarian support for SAARC with a show of more positiveresults of SAARC in the areas of trade and security. In this context, the politicalactors in South Asia have to play more decisive roles in realizing the goals ofregional cooperation. As this analysis indicates, two major factors – Indo-Pakistani political tension and a general fear of India’s overwhelming military

Cross-national comparisons 185

and economic domination – remain major obstacles for the growth of SAARC.Given this dynamic, it is reasonable to argue that resolution of Indo-Pakistaniconflict and some active positive unilateral economic initiatives by India towardits neighbors to overcome their fear can serve as driving forces that could galva-nize South Asian governments to move ahead with regional cooperation efforts.

The adverse impact of Indo-Pakistani conflict on the growth of SAARC isdiscussed earlier. Suffice it to say here that the continuing conflict between thesetwo countries contributes greatly to the negative evaluation of SAARC by SouthAsian domestic elites. Unless Indo-Pakistani antagonism abates, the prospects ofSAARC’s growth will not gain much lift.

There is a growing recognition among governing elites in South Asia thatwhile regional political tension will take time to resolve, economic issues createsome urgency for cooperation. Thus, deepening regional cooperation is seen bymany South Asian countries as a potentially important political tool to helpaddress conflict in the region and address political tension with India. After1990s, smaller South Asian countries have been showing more preferences toenter into free trade area agreements with India. The underlying reasoning forthis move is that smaller South Asian neighbors would like to tie India into aweb of reciprocal obligations and benefits that they believe will enhance India’sself-interest in using its growing power prudently and taking fuller account of itsneighbor’s interests. On the other hand, Indian governing elites seem to havefound new confidence that given its growing strength, some positive unilateraleconomic initiatives such as opening its markets to South Asian neighborsthrough preferential trade agreements; granting MFN status to South Asianneighbors without demanding reciprocity; and some restraints on its freedom ofaction may be an acceptable price for reassuring the neighborhood that itsgrowing strength is not a threat to its neighbors. Indian governing elites alsobelieve that the success of SAARC will demonstrate Indian leadership in theregion and, more importantly, reduce external influence.

While the above scenario is promising for SAARC’s growth, another not-so-promising scenario deserves to be mentioned here. As the results of this chapterand our discussion in Chapter 6 indicate, low level of utilitarian support of SouthAsian elites for SAARC can be partly attributed to low intraregional tradedependence among South Asian countries. To the extent that SAARC membersredirect their trade toward global market away from the SAARC market, utilitar-ian support for SAARC should decline. Indian trade interests are particularlyimportant in this regard. As India looks more and more to markets beyond SouthAsia, its economic interests in SAARC market will decline. Given its largemarket and the potential to become the main engine of South Asian economicgrowth, a substantial diversion of Indian trade away from regional market couldreduce economic interdependence in South Asia and thereby reduce utilitariansupport for SAARC across its member states. In the absence of adequate affec-tive support among South Asian elites, such a scenario will be, doubtless, detri-mental for the future growth of SAARC.

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8 Conclusion

I have argued in this book that regional cooperation is a two-level process inwhich domestic support of key societal actors and regional bargains and negotia-tions among governmental actors must overlap if cooperation is to proceed(Putnam 1988). Attempts to achieve regional cooperative agreements involvebargaining and negotiations among governmental actors in various issue areas.But, domestic support is essential for the implementation of these negotiatedagreements. Policymakers know this, and hence, when negotiating regionallythey always anticipate domestic reactions. Thus, policymakers’ anticipation andcalculation of the size and nature of domestic support largely determine theirscope of bargains and negotiation on various regional issues.

External factors, outside pressure for opening domestic markets, privatecapital flows, and country’s degree of economic openness, affect leaders’ polit-ical calculations about deeper regional cooperation policy initiatives. But,external factors alone are not enough. Growth of regional cooperation alsodepends on the nature of domestic institutional structure and strength of thegovernment. When the governmental actors enjoy legislative autonomy and arerelatively well insulated domestically, they can afford to pursue bold andaccommodative regional policies. Conversely, a weak government may forcegovernmental actors to pursue more nationalistic and domestically oriented pol-icies, with regional cooperation initiatives a prime casualty. It is, therefore,important to understand the nature of domestic institutions, and the strength ofthe government, in order to explain why states do or do not deepen regionalcooperation initiatives.

Before examining the nature of domestic institutions, I discussed in Chapter3 some important South Asian regional dynamics – the role of history, geo-graphy, Indo-centric structure, small versus large states – that affect interstaterelationships among South Asian countries. A major contribution of the realistscholars has been the emphasis on the security dilemma and how it serves toaggravate intraregional security environment thereby weakening regional coop-eration efforts. In this chapter, I discussed the extent to which securitydilemma, particularly between India and Pakistan, has been a crucial barrier toeffective regional cooperation in South Asia. Another underlying assumption inthe realist literature that shapes preferences of political actors for regional

cooperation is the need for extraregional security, that is, the need to unite toface a common external threat. The potential threat can come from a regionalhegemon or other extraregional power. As discussed in Chapter 3, South Asiancountries do not share a common external threat perception, which makes it dif-ficult for the leaders of these countries to work toward common regional secur-ity strategies. Most South Asian countries perceive their main threat to be India.To offset India’s influence in the region, South Asian countries have activelysought military, economic, and diplomatic assistance from external powers. Onthe other hand, India perceives an external threat from Pakistan’s military chal-lenge with the support of external powers. In such an environment, regionalaccommodation policies have become increasingly difficult. The narrow polit-ical base of South Asian ruling elites provides few opportunities for them toignore regional security threats or to transcend their dominant domestic con-stituencies. Thus, blaming the neighbor (scapegoating) has become a preferredpolicy choice for South Asian ruling elites, making regional accommodation adifficult goal. Consequently, SAARC-related policies and programs havereceived low priorities by South Asian ruling elites over the past decades.

This was demonstrated in the evaluation of SAARC and SAARC-related pro-grams and institutions in Chapter 4. Although SAARC has produced some posit-ive results – one of the most significant achievements of SAARC relates to itsannual summit meetings of South Asian heads of states or governments –rhetoric has generally outdistanced performance in South Asia’s efforts atregional cooperation. Over the past two decades, there has been a proliferationof SAARC-related meetings and declarations, while real progress has beenelusive.

A central argument in this book focuses on understanding the nature ofdomestic institutions and the strength of the government to explain why statesdo or do not deepen regional cooperation initiatives. In light of this argument,this book examines the institutional structures and the strength of the govern-ments in South Asia. South Asian countries experience various kinds of politicalsystems – democratic, authoritarian, and quasi-democratic political systems. Asdiscussed in Chapter 5, regardless of their type of political systems, almost allSouth Asian governments have suffered from considerable weakness in terms oftheir political leaders’ narrow political base and lack of legislative autonomysince 1990s. Weak strength of ruling coalitions throughout South Asia has madethe leaders of these countries critically dependent on the support of importantdomestic groups. The leaders’ need for domestic support for political survivalhave led them to pursue populist, nationalist, and self-reliant policies. In Indiaand Pakistan, the leaders have pursued not only such policies but also haveemphasized military-intensive policies. While these policies may have broughtshort-term political payoffs to the ruling elite in India and Pakistan, they havebecome enormously counterproductive for the growth of regional cooperation.

In Chapter 5, I examined the challenge of ethnic regionalism that politicalleaders face in South Asia. The states in South Asia are all multiethnic andhighly permeable. They remain vulnerable to ethnic regionalism that can

188 Conclusion

generate separatist movements. This vulnerability has increased domestic inse-curities in all the states in South Asia. Each state blames the neighboring statefor supporting its ethnolinguistic separatist movements. In particular, India isblamed by its neighbors for its role in ethnic crises. Since India’s ethnic groupsoverlap into all neighboring states, India’s hand in all ethnic conflicts is stronglysuspected by the other South Asian states. Moreover, India’s structural positionof regional preeminence leads its policymakers to believe that India has alegitimate role to play in resolving the ethnic crisis in neighboring countries.Such Indian belief is not mutually reciprocated by its neighbors and often leadsto tension in South Asia. Consequently, an atmosphere of mutual suspicion anddistrust prevails in South Asia, which is not conducive for the growth of regionalcooperation.

The implications of the overt nuclearization of India and Pakistan for region-alism are also discussed in Chapter 5. The overt nuclearization of India and Pak-istan in 1998 may have introduced a regional stability/instability paradox inSouth Asia. On the one hand, policymakers’ realization of the devastating con-sequences of nuclear weapons makes the execution of a full-scale war mostunlikely. On the other hand, the deterrent insurance provided by the possessionof nuclear weapons may tempt both sides to engage in limited war by initiatingmilitary adventurism along the LoC. Episodes like Pakistani incursion acrossLoC in 1990 and Kargil conflict in 1999 are likely to occur until a political reso-lution is found in the Kashmir issue. The continuation of political and militarytensions between India and Pakistan has contributed to the lack of any realprogress of SAARC over the past two decades.

In Chapter 6, I focused on the dynamics of economic interdependence andprospects of regional economic cooperation in South Asia. This chapter identi-fied three conditions for sustained success of regional economic cooperation in aregion – potential for significant market gain; political actors’ willingness topursue regional economic cooperation policies; and the presence of an undis-puted regional leader. With the exception of India, the economies of SAARCmembers are not complementary. Since SAARC countries export the bulk oftheir primary commodities and manufactured goods to the same world markets,they tend to compete in the same industrial sectors with each other. Indeed, mostof SAARC members’ trade is with the United States and Europe than with theirneighbors. Given the small size of markets and insignificant economies of scale,there is limited scope for mutually beneficial market exchange among SouthAsian countries. Consequently, demand for deeper economic cooperation bymarket actors is weak.

Although SAARC members have pursued economic liberalization policiesafter the early 1990s, these policies have not led to deeper regional economiccooperation. The emergence of two types of competing domestic coalitions inIndia and Pakistan – that is liberalizing coalitions and nationalist–fundamentalistcoalitions – is the important reason to account for this failure. While India’sruling liberalizing coalitions have more or less supported economic liberaliza-tion and regional economic cooperation policies, their weakness made it almost

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impossible for national leaders to pursue deeper regional economic cooperationpolicies in the 1990s. The nationalist–fundamentalist coalitions in Pakistan, asrepresented by Pakistan’s radical Islamic Jamaat-i-Islam Party and its currentmilitary regime, generally have shown less enthusiasm for deeper regional eco-nomic cooperative arrangements.

Within SAARC, India is the largest member state in terms of size, popu-lation, natural resources, and market. But, there is no consensus among SouthAsian countries to recognize India as the region’s undisputed leader. In particu-lar, Pakistan continues to challenge India’s leadership. Contested leadershipwithin SAARC has, at least, two negative implications for regional cooperation:first, there is no “paymaster” or no regional leader to ease distributional prob-lems; second, the absence of a regional leader makes coordination of rules, regu-lations, and policies extremely difficult and time-consuming. It is not surprisingthat under SAPTA and SAFTA agreements, individual countries continue toundermine free trade principles by excluding numerous products from tariff cutsby keeping them under the sensitive lists.

The rivalries between India and Pakistan in terms of leadership and trade-related policies have driven these two countries to engage in several“spoke–spoke” and hub-and-spoke type of cooperative arrangements. India’sinvolvement in a “noodle bowl” of bilateral trade agreements with Singapore,Thailand, Vietnam, Japan, China, South Korea, Sri Lanka, Nepal, Bhutan, andBangladesh and her initiatives for the “spoke–spoke” pattern of economic coop-eration among subgroups of South Asian countries – for example SAGQ – aremotivated in part by Pakistan’s unwillingness to increase the speed of free tradenegotiation with India. While such transregional and “spoke–spoke” pattern oftrade cooperation may have provided some short-term solutions to India’s needfor trade expansion and market access, it has proven counterproductive for thegrowth of regional economic cooperation in South Asia. The level of regionaleconomic interdependence achieved so far and the pace at which South Asiancountries are progressing in their negotiation for FTAs will leave South Asiancountries at an appreciable distance from the goal of SAFTA even after adecade. Any substantially faster rate of progress on FTAs would be a desirablegoal. But, that would require substantially greater political efforts from theIndian and Pakistani leaders.

One of the basic arguments of this book is that while political actors negotiateregional agreements, their preferences for specific regional cooperation policiesare influenced by the preferences of societal actors. The “power-retaining” moti-vation of political actors forces them to anticipate the reactions of societalgroups on specific cooperation policies and avoid those policies that will bringthem into confrontation with dominant domestic groups. In this sense, politicalactors tend to choose cooperation policies that are more or less consistent withthe policy preferences of key societal groups. In Chapter 7, I examined prefer-ences of key societal actors along the affective and utilitarian dimension. Thefindings reveal that domestic elite support for SAARC along affective and utili-tarian dimensions remains limited. This result has two important implications

190 Conclusion

for understanding the growth of regional cooperation in South Asia. First,absence of strong positive domestic elite support for SAARC-related activitieshas contributed to the dampening of enthusiasm and weakening of commitmentsamong the South Asian policymakers for bolder regional cooperative initiativesand implementation of various regional agreements. Second, there is a gapbetween what South Asian elites expect from SAARC and what SAARC hasactually achieved over the past two decades. In fact, SAARC’s few concreteachievements in the areas of trade, security, and regional peace are linked to itscredibility gap. As long as SAARC’s credibility gap continues, societal actors’indifference toward this organization will persist.

In this concluding chapter, I will discuss the implications of this study forregional cooperation in South Asia. Next, examining the development ofregional cooperation so far, I will draw some useful lessons on how regionalismin South Asia can be fully realized.

Implications for regional cooperation in South Asia

SAARC’s credibility gap

Examining the record of achievements and failure of SAARC in the past twodecades, one can argue that SAARC’s rhetoric has generally outdistanced itsperformance. SAARC has achieved few concrete results in the core areas oftrade, security, and economic welfare. Not surprisingly, as the results of eliteinterviews in this study revealed, SAARC activities have not yet captured theimagination or interest of South Asia’s enlightened citizens. Rajni Kothari’sremark sums up a generally shared view in South Asia: “SAARC may haveprospered as an inter-governmental and inter-bureaucratic organization, but as apolitical process it has not accomplished any objective.”1

Since its inception, the primary operating principle of SAARC has been“non-interference” in one another’s internal affairs. Instead of focusing on eco-nomic development, building state capacity among its members, addressingregional environmental issues, and assisting member countries in their fightsagainst poverty, illiteracy, and disease, SAARC has mostly spent its time on for-mulating declarations and such slogans as “decade of girl child,” “decade ofimplementation,” “decade of youth,” and “decade of poverty alleviation.” Therehas been proliferation of meetings and initiatives without resource and politicalcommitments to follow up on those initiatives. Thus, it is hard to fault the criticswhen they describe SAARC as a mere “talking shop” without any seriousinvolvement in concrete cooperation.

More than 20 years after its creation, there is still no real sense of a SAARCcommunity except among a small group of officials and scholars. As an institu-tion, SAARC makes its decision on the basis of consensus and has no ability toenforce implementation of agreed upon measures. Non-implementation ofalready-signed regional conventions by South Asian countries on terrorism andnarcotic drugs, failure of the timely release of food supplies from the SAARC

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Food Security Reserve to member countries at the time of the country’s worstnatural disasters, a lack of serious commitment among South Asian countriesregarding the implementation of SAPTA and SAFTA provisions, failure oftimely implementation of some already approved development-related projects,and extreme resource crunch have contributed to SAARC’s credibility gap inSouth Asia.

The results of the elite analyses in this study indicate that South Asian elitesexpect that SAARC has important consequences for South Asia’s political andeconomic welfare related to trade, security, and regional peace and stability.Low level of utilitarian support of the elites for SAARC indicates that SAARC’sperformance over the past two decades has not met with the expectation ofSouth Asian elites. The presence of a general elite indifference toward SAARCdoes not indicate the formation of negative attitude. Rather, it suggests that soci-etal actors may not be strong catalyst and advocate for regional cooperation. Atthe same time, their indifference does not put any urgent pressure on policymak-ers to pursue regional cooperation policies, but it certainly provides governingelites with an acquiescent domestic environment in which to pursue regionalcooperation policies.

The overall impression from the results of the elite interviews is that whilethe idea of regional cooperation is considered favorably in South Asia, there isno strong domestic support for SAARC. Overall, the elites of South Asia may beindifferent, but they do not seem to be hostile or unduly negative towardSAARC. Over a period of time, this indifference toward SAARC may swing ineither favorable or unfavorable directions, depending on the achievements of theorganization and the domestic politics of South Asian countries. As long asSouth Asians do not turn hostile or negative, the prospect of SAARC’s survivaland even slow progress is not going to be adversely affected. However, there is ageneral feeling that unless SAARC speeds up its activities and addresses suchareas as trade and security issues it is likely to become a moribund and largelymeaningless institution.

National identities prevail over regional identity

For the functionalist and neo-functionalist schools of integration, the progress ofregional integration is closely linked to the gradual shift from national to supra-national loyalty (Haas 1968). An important indicator of this shift is when cit-izens think of themselves as not citizens of a particular country but citizens of aregion. The shift from national identity to regional identity enables citizens tothink more in terms of supranational issues, interests, and institutions and thusprovides a conducive environment for regional integration to move forward(Deutsch et al. 1967).

Such a shift, as our analysis suggests, has not occurred in South Asia. Resultsof elite responses, as discussed in Chapter 7, reveal no strong tendency toeschew nationalism and that very few South Asians think of themselves as “cit-izens of South Asia.” Instead, a strong sense of nationalism prevails in South

192 Conclusion

Asia and there is little likelihood that this sense of nationalism will be super-seded by a new sense of supranational loyalties anytime soon. Currently, there isno general consensus among South Asian countries, between India and Pakistanin particular, for any kind of major common policies. Given the current dynam-ics of domestic politics in South Asia, it is likely to take more than a decade forSouth Asian leaders for the development of such a consensus to sustain a majorcommon regional policy.

In light of above argument, it is reasonable to conclude that South Asiaremains a region of nation-states.2 In the minds of South Asian people, con-sciousness of the nation remains infinitely stronger than a sense of South Asiancommunity. In fact, it can be argued that in the absence of a complete regionalintegration, this national consciousness is likely to persist. This, however, maynot be a major problem for the continuation of regional cooperation efforts.While death of nationalism is a strong indicator of complete regional integrationor regional unification, it is not required for the progress of regional cooperation.What is useful for the progress of regional cooperation in South Asia is thedevelopment of multiple loyalties and identities – both national and regional –among South Asian citizens. Development of regional identity and loyalty ispossible through concrete achievements of SAARC that can create solidarityamong South Asian people. By solidarity, we mean in this study, the develop-ment of a “sense of community” (Deutsch 1967) or a “we-feeling among agroup of people” that work together on the basis of mutual trust and a sharedsense of common history, culture, geography, and political experience (Easton1965: 332). So far, however, this sense of solidarity remains elusive in SouthAsia. There are several reasons for this.

First, history has not been favorable for the growth regionalism in SouthAsia. History has influenced enormously people’s thinking and behavior inSouth Asia over the past decades. The history of the subcontinent’s partition hascast a long shadow of distrust and suspicion over the relationship between Indiaand Pakistan. The ruling elites in Pakistan play the “history card” in everyopportune moment to sell the idea to the general public that “India had neveraccepted the partition at heart and would not let any opportunity to undo it [par-tition] slip by” (Prasad 1989: 14). India’s role in the emergence of Bangladeshas an independent state in 1971 has strengthened this impression. On the otherhand, the Indian elites often show a profound sense of “historical distrust” intheir obsession with the idea that Pakistan might go to any extent to destabilizeIndia. Not surprisingly, Pakistan’s hand is strongly suspected in most communalriots and secessionist movements in India. Also any move by Pakistan to mod-ernize its defense with the help of outside powers is perceived to be a seriousdanger to India’s stability.

After the partition, India and Pakistan became committed to mutually incom-patible models of nation-building. India opted for secularism, democracy, and fed-eralism. Pakistan, on the other hand, settled for authoritarianism, a centrallycontrolled administration and an Islamic state. The practice of diametricallyopposite principles of political organization in two contiguous countries with no

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natural frontiers led to enormous tension and anxiety between India and Pakistan.In addition, the territorial disputes over Kashmir intensified bitterness between thetwo countries. Despite the Simla agreement in 1972 to resolve the Kashmir issuepeacefully, conflict between the two countries has continued. The degree of viol-ence in Kashmir and the two countries’ intransigence on reaching a peaceful solu-tion have left deep scars on the national psyche of both India and Pakistan.

History has also played a critical role in the evolution of Indo-Bangladeshrelations. Despite India’s crucial role in the liberation movement of Bangladesh,Indo-Bangladesh relations began to deteriorate soon after Bangladesh’sindependence principally for two reasons. First, a large section of Bangladeshielites shared Pakistan’s distrust for India because of their involvement in thepre-partition freedom struggle on the subcontinent. Indeed, the people in theeastern wing of Pakistan, which later became Bangladesh, were even moredeeply involved in the Muslim League sponsored struggle to partition India thanthe people in the western wing (Prasad 1989: 14). Second, Bangladeshi elitesalso shared Pakistan’s suspicion of India’s hegemonistic ambitions.

The Tamil–Sinhalese conflict in Sri Lanka is often sustained by historical ref-erences to Tamil invasion and Sinhalese injustice by their respective protago-nists. There is a perception among the smaller states in South Asia thatindependent India’s foreign policy is more or less based on the same hegemonic,cultural, geopolitical compulsions and calculations of the British Indian Empire(Prasad 1989: 14). The way the princely state of Sikkim, formerly a protectorate,was annexed by India in 1975 as the twenty-second Indian state appears to havestrengthened smaller states’ perception of India’s hegemonistic ambition. Suchactions of India have made the smaller states hyperconscious and hypersensitiveof their separateness and individuality (Ahsan 1992: 2). The smaller states notonly criticize India for practicing Kautilyan principles in its foreign policybehavior, but they have also sought assistance on many occasions from outsidepowers to limit India’s dominance in the region. India, on the other hand, viewssuch actions and the smaller states’ criticism of India as a hegemonistic poweras hostile and unfriendly to the cause of SAARC spirit. Despite some progressthrough the 1990s in terms of increasing diplomatic intercourse and economiccooperation between India and her neighbors, levels of trust remain low in SouthAsian countries. Proliferation of SAARC meetings and ritualized friendshiptoasts has not suppressed small states’ anxieties about regional ties.

Second, given their widespread poverty and development gap, South Asiancountries have given more priorities to domestic issues. Their concern and pre-occupation with domestic problems has stood in the way of regionalism. Polit-ical and societal elites of each South Asian country are anxious to achieve anormal national identity after feeling humiliated and frustrated by the domina-tion of foreign powers resulting from the colonial rule and decades of depend-ency on economically and militarily powerful country. This dynamics ofdomination and dependency has created a psychology of victimization amongSouth Asian elites who are essentially distrustful of development strategies thatfavor regionalism with one economically and militarily dominant power.

194 Conclusion

Third, the assumptions of realists that security dilemma between the twomajor South Asian countries – India and Pakistan – has been decisively import-ant in limiting the growth of a regional identity in South Asia are correct. Inaddition, concerns for national security, perception of threats to territorialintegrity, autonomy, and balance of power have been the principal barriers totrust among South Asian countries and seem to have trumped economic interestsin building a basis for regionalism.

Fourth, problems in bilateral relations between South Asian countries accen-tuated partly by their focus on building national identities played an importantrole in preventing the growth of regionalism. Despite frequent calls by SouthAsian leaders for building trust and mutual confidence in their relations, theground reality remains unchanged. While the current strategy of South Asianleaders to set aside contentious issues in order to build trust gradually throughconcrete acts of economic cooperation is a sound one, it will take a long timeand test the will power of the leaders. Yet, it can be argued that any seriouseffort to escape from the current level of distrust and tie South Asian countriestogether will require a breakthrough in the development and implementation ofmajor economic projects in the region.

Fifth, the role of the national press in providing inadequate coverage ofSAARC, but excessively emotional coverage toward one or more of the otherregional countries during the past decades, is also an important reason for the slowgrowth of regionalism in South Asia. The Indian and Pakistani press is particularlyresponsible for fueling nationalism. Old stereotypes, lack of empathy, and negat-ive images of neighboring countries and their leaders have dominated the presscoverage in India and Pakistan. Such a pattern of coverage has only accentuatedleaders’ worries about the atmosphere for various bilateral talks, leaving littleroom for any substantial discussion on real issues of regionalism.

Cross-national differences – the Indian factor

One Bangladeshi respondent noted: “India can make or break SAARC.” Theimplication of this statement is that given South Asia’s geopolitical realities, it isclear that SAARC will face a troubled future without Indian support. However,our analysis and evidence in this book suggest that there is low level of supportfor SAARC in India. The low level of Indian support remains the most worri-some factor for the future growth of SAARC. India’s initial hesitation aboutjoining SAARC and the continuing opposition to include bilateral issues in theformal SAARC agenda are based on the Indian policymakers’ apprehension thatsmall South Asian countries might “gang up” against India. But this apprehen-sion alone does not explain the relatively low level of Indian support forSAARC. The following four snapshots explain the dynamics in which India’ssupport toward SAARC can be examined.

First, in the structure of South Asian regional system, India remains at thecenter and is the most powerful country. It is strongly believed by a section ofIndian elites, apparently close to the ruling circles, that regional security will

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lead to India’s security and vice versa (Ghosh 1989: 221). India’s regional pre-eminence leads its leaders and some powerful elites to believe that in order toachieve peace, security, and stability in South Asia, India must remain strongand maintain superiority in the region. Although a few scholars have contributedto such belief, K. Subrahmanyam, a leading security scholar, stands out as themost influential protagonist of this kind of thinking.3 Strongly arguing India’scase for regional preeminence, Subrahmanyam observes that there is a necessityfor India to establish and project its military power in the region. Once India’smilitary superiority is accepted by its neighbors, there is no danger of violationof peace in the subcontinent. Subrahmanyam’s views not only reflects the Indiangovernment’s thinking on strategic issues in South Asia over a number of yearsbut also is shared by a large section of the elites in India. It is not surprising thatIndian government’s effort to maintain a high military profile in the subconti-nent’s security affairs has always received domestic support.

The only open challenge to such a regional system comes from the region’ssecond-ranking state, Pakistan. Although the smaller regional states appear to bemore reconciled to the preeminent position of India, they nevertheless resentIndia’s hegemonistic aspiration and share Pakistan’s sense of frustration indealing with India. Indian ruling elites and opinion makers are very much awareof such feelings on the part of neighboring countries. Consequently, Indianpublic has come to share the Indian policymakers’ apprehension that SAARCwill provide an official forum for India’s neighbors to “gang up” against India. Itis no wonder that India has opposed in the past, and still continues to oppose,any move by the member countries to include bilateral conflicts in the SAARCagenda for discussion. Some Indians fear that India will not only be isolated butalso will lose much respect in the eyes of the international community if issuesof bilateral conflicts are discussed because of India’s involvement in almost allthe bilateral conflicts in South Asia.4

Second, a high degree of perceived inequity – that is perception that theircountries will contribute more and benefit less from SAARC – among Indiansseems to be a major impediment for the growth of SAARC. It is common know-ledge in South Asia that SAARC suffers from an acute resource crunch. Unlessthe resource situation is improved, most SAARC projects will not achieve anysuccess. Given, India’s economic strength vis-à-vis other South Asian countries,it is expected that only India can contribute substantially to improve the resourceposition of SAARC. This fact has contributed to the widespread Indian percep-tion that their membership in SAARC is disadvantageous and inequitable. Suchperceptions have a negative spillover and certainly contribute to the develop-ment of negative attitudes and low levels of support toward regional organi-zation. While most Indians feel that their country is likely to contribute moreand benefit less from SAARC, the majority of citizens in Bangladesh, Nepal,Pakistan, and Sri Lanka believe that India is likely to benefit most from anySAARC arrangement. The success of SAARC as a durable political entitycannot be guaranteed if the arrangement is perceived as benefiting some states atthe expense, or to the exclusion, of others.

196 Conclusion

Third, Indian leader’s believed during the past decades that their country wasunlikely to get substantial economic benefits from any SAARC arrangements.Thus, in New Delhi’s economic equation, SAARC’s importance was secondaryto India’s bilateral relations with Japan, South Korea, ASEAN, Australia, China,Europe, and the United States. This belief, however, has changed in the post-Cold War period. India’s attitude toward South Asian regionalism has becomemuch more positive. But, instead of building a vision of regionalism capable ofwinning trust from others, India has failed to communicate its own trust inregionalism to its neighbors. A primary reason for India’s failure is its leaders’obsession with Pakistan’s external orientation. Although most South Asiancountries have developed external linkages because of their fragile political andeconomic structure and the dynamics of neocolonialism, Indians seem to bemore obsessed with Pakistan’s external linkages and orientation. Since its birthas an independent state in 1947, Pakistan has always looked westward, eitherthrough the now-defunct Regional Cooperation for Development (RCD), whichis an intergovernmental organization with Turkey and Iran as members, orthrough bilateral ties with the United States and the Arab world (Sobhan 1989:21). In pursuing such policies, Pakistan’s ruling elites may have been guided bytheir desire to make their country strong and independent vis-à-vis India. But thepolicy of moving away from India has strengthened the misperception amongIndians about Pakistan’s hostile intentions and untrustworthiness. While the restof South Asian countries believe that SAARC’s slow progress is primarily dueto India’s lack of solid support, Indian policymakers and the press have put theblame on Pakistan. India has always considered Pakistan’s efforts to raise theissue of Kashmir in such international forums as the Non-alignment Summits,the Commonwealth Summits, the United Nations, and the OIC as serious set-backs to regional peace and stability. Indian policymakers have, on several occa-sions, cited Pakistan’s initiatives and involvement in the OIC and the ECO withIran, Turkey, and the newly independent Central Asian Muslim republics asevidence of Pakistan’s extraregional orientation and lack of sincerity regardingSAARC.5

Misperceptions about each other’s strength and intentions have played acrucial role in Indo-Pakistan relations. The ruling elites of both the countries,due to insecurity at home, have time and again tried to strengthen this misper-ception. Pakistan has always justified its policy of external linkages to neutralizeIndia’s domination, while India has sought to interpret Pakistan’s policy as theprimary cause of regional tension. The policymakers in both the countriesrealize very well that they can gain from regional cooperation. But they seem tosuffer from a prisoner’s dilemma dynamics and thus seek unilateral advantageby pursuing non-cooperation strategies.6 Over the years, the policymakers ofthese two countries have been quite successful in conveying this message totheir citizens through the help of their press, which has strengthened the cit-izens’ misperceptions and mutual suspicions.

Fourth, Indian leaders’ perceptions, personalities, and styles have influencedthe course of regional politics in South Asia.7 Thus, when Morarji Desai became

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India’s prime minister in 1977, his restraining style assuaged neighbor’s anxi-eties. The Janata government under Desai’s stewardship defined India’snational interest differently and followed a friendly neighborly policy. Bilateralrelations among South Asian countries, including Indo-Pakistan relations,improved remarkably during Desai’s premiership. Indira Gandhi, on the otherhand, during the pre- and post-Janata regime, was more concerned to assertIndia’s preeminence and was perhaps less responsive to India’s smaller neigh-bors. Accordingly, she was less trusted by other leaders of South Asia, and theregion was filled with tension and anxieties during her stewardship. RajivGandhi’s eclectic personality and sometimes his indecisiveness were a sourceof confusion for the region. Both Rajiv Gandhi and Benazir Bhutto wereresponsible for creating an improved environment, even though it lasted for ashort time (1988–89), in Indo-Pakistan relations. But Rajiv Gandhi’s unrespon-sive attitude toward Nepal on trade matters during 1988–90 and towardBangladesh on water sharing and Chakma refugee issues during 1988–90brought enormous tension to their bilateral relationship. Rajiv Gandhi’s policytoward Sri Lanka during 1987–90 was a mixed bag, sometimes appreciated forbold initiatives and sometimes condemned for insensitivity toward a smallneighbor. From 1991 to 1995, Prime Minister Narasimha Rao focused on eco-nomic liberalization policies and basically pursued a friendly regional policy.Since 1996, India has pursued a dual regional policy – positive unilateralismtoward small neighbors and pragmatic bilateralism toward Pakistan. The policyof positive unilateralism, initiated by India’s former Prime Minister, I.K. Gujralin 1996 and pursued since then by successive Prime Ministers A.B. Vajpayeeand Manmohan Singh, provides preferential access to the products from smallneighboring countries on a substantially reduced tariff basis without anyreciprocity. The primary goal of the policy of positive unilateralism is to winthe trust of its regional neighbors that can facilitate the growth of South Asianregionalism. While India may have achieved some success in this policy towardsmall neighbors, its policy of pragmatic bilateralism with Pakistan hasremained problematic. India’s policy of pragmatic bilateralism, which com-bines accommodative diplomacy with combative regional posture, hasremained worrisome for Pakistani policymakers and has become counterpro-ductive for the growth of regional cooperation in South Asia.

Future of regionalism in South Asia: some lessons

After more than 20 years of existence, SAARC has not produced any significantresults. Although some progress has been made, one cannot say with confidencethat regionalism is firmly rooted in South Asia. On the basis of our analysis inthis book, one can identify the following lessons that can serve as facilitatingconditions for the future growth of regionalism in South Asia.

198 Conclusion

Lesson 1: recognizing India’s leadership

South Asian regionalism is unlikely to grow without India’s serious support. Incomparison with other South Asian countries, India enjoys an absolute compara-tive advantage in almost every sphere. While one can empathize with neighbors’resentment over India’s overwhelming economic and political influence in theregion, India’s dominant power and capability can hardly be questioned. DespitePakistan’s challenge to India’s regional leadership, it is clear that India is thenatural leader in South Asia and has a disproportionate say in the region.

While Pakistan’s challenge to Indian leadership in South Asia is driven byhistorical rivalry, Kashmir dispute, and its objective to achieve balance of powervis-à-vis India, lack of consensus among small South Asian countries on Indianleadership is based on their fear of India’s hegemonic arrogance, potentialexpansionism, and unsolicited intrusion into their domestic affairs. Generallyspeaking, there is a lack of trust for India’s benevolent hegemony in South Asia.Indian failure to build trust in South Asia has considerably slowed the progressof SAARC in the past decades. India, on its part, remained less enthusiasticabout SAARC primarily because of two reasons:

1 potential use of SAARC platform by neighbors to discuss their bilateralconflicts with India;

2 Indian leaders’ belief that India is unlikely to accrue substantial economicbenefits from any SAARC arrangements.

However, New Delhi’s reevaluation of its economic and political options in thepost-Cold War era drives India to overcome its earlier reticence toward regional-ism in South Asia.

Since independence, Indian leaders’ have always desired to play a greaterrole in the global arena. This desire had driven them to play a leadership role insuch multilateral forums like the NAM, the G-15, and Commonwealth meetings.These groupings, however, have lost much of their relevance with the end of theCold War. Indian leaders have realized that for any country to play a globalleadership role, the demand of the new global order requires that country tofulfill at least three conditions:

1 be an important member of WTO;2 be able to negotiate successful FTAs;3 be able to demonstrate capability to maintain a stable regional order.

India’s active initiatives in GATT/WTO negotiations, its decision to become a“dialogue partner” with ASEAN, its willingness to become a member of APEC,its eagerness to contribute to G-8 agenda and dialogue on global issues, its activelobbying to become a permanent member of the United Nations Security Council,and its active initiatives to implement SAPTA and achieve SAFTA are indicativeof its growing desire to play a more active regional and global leadership role. On

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the issue of SAFTA, Indian Prime Minister Manmohan Singh’s comment at the13th SAARC Summit in Dhaka in 2006 is instructive.

The region risks missing out on Asia’s dynamic economic growth if it doesnot act speedily on SAFTA . . .. Is SAARC prepared to be an integral part ofthe emerging Asian resurgence or is it content to remain marginalized at itsperiphery?

This statement implies India’s frustration with the slow progress of SAFTA aswell as its keen desire to achieve a FTA through regionalism.

To the extent that Indian political leaders perceive that membership inSAARC can lead to political stability in the region and future improvements ofIndia’s bilateral relations with its neighbors, one would expect a validation andstrengthening of New Delhi’s commitment toward regionalism in South Asia. Infact, India’s changing attitude toward SAARC is evident in India’s post-1995policy of positive unilateralism toward its neighbors. This policy seeks toprovide preferential access to the products from neighboring countries on a sub-stantially reduced tariff basis without any reciprocity. India’s agreements ofbilateral FTAs with Sri Lanka, Bangladesh, Nepal, and Bhutan, which are moreor less favorable to these countries, are an indication of India’s willingness tocontinue its policy of positive unilateralism. India seems to have realized thatpositive unilateralism serves one of its critical policy objectives – that is to winthe trust of its regional neighbors that can facilitate the growth of South Asianregionalism.

Indian leaders know well that the success of India’s economic liberalizationlargely depends upon its ability to increase exports to new markets both in thedeveloped and in the developing countries. Until recently, India has achievedonly restricted access to the markets of Japan, North America, and WesternEurope due to these countries’ protectionist policies and various kinds of non-tariff barriers against Indian products.8 Additionally, with the collapse of theSoviet Union and the gradual incorporation of Eastern Europe into the WesternEuropean economies, India has lost two of its privileged market links. In aneffort to expand its market links, India has recently taken many initiatives. Someof India’s important initiatives include its active diplomatic role in the formationof the IORARC in March 1997, its desire to join APEC and its renewed focus onthe “Look East” policy in order to strengthen its trade ties with the East Asianand Southeast Asian countries. However, although India will continue to exploremarkets in other regions, it can no longer ignore its own base in South Asia,where it enjoys a comparative advantage in almost every economic sector.

Indian leaders have also realized that they cannot expect to win the confi-dence of the global community without proving their leadership capability tomaintain regional order and stability in South Asia. After 2001, almost all ofIndia’s neighbors have experienced deteriorating economic and security con-ditions. Growing political instability in Pakistan, Bangladesh, and Nepal,continuing turmoil in Sri Lanka, and the worsening security situation in

200 Conclusion

Afghanistan following the 9/11 development have led observers to describethese states as “failing states.” India’s concern is that a volatile neighborhoodand continuing turbulence in the region will not only lead to a loss of globalconfidence on India’s capability to maintain a stable regional order, it may alsodiscourage foreign investors who are looking at India as a new economic desti-nation. This may retard India’s growth and its aspiration of becoming a globalplayer. Consequently, achieving peace, prosperity, and stability in South Asiahas become one of the top priorities of India’s external policies.

Moreover, Indian policymakers also know that as long as South Asia remainsone of the world’s least economically and politically integrated regions, China’sgrowing influence in the region will be difficult to contain. There is a growingconsensus among Indian policymakers about SAARC’s potential to insureregional stability, status quo in South Asia, and to provide opportunity forimproving bilateral relations through regular informal meetings. Not surpris-ingly, Indian policymakers have shown renewed enthusiasm for improvingIndia’s relations with its neighbors and for the growth of SAARC in recentyears.

It is important for Indian leaders to realize that it is much easier to win thetrust of regional neighbors and remove their anxiety about a rising India throughprojection of “soft power” rather than “hard power.” The idea of soft power, asargued by Joseph Nye (2005), is that countries can often best achieve theirobjectives by persuasion rather than force. While the instruments of hard powerare military and economic, the instruments of soft power are cultural and ideo-logical. Soft power arises from the attractiveness of a country’s culture, politicalideals, and policies. A country’s soft power is enhanced when its images areseen as positive, and its policies are considered as legitimate in the eyes ofothers. India’s negative image among its neighbors, as found in this study,requires to be addressed urgently by Indian leaders if they are serious to main-tain their leadership in the region.

India’s potential for soft power in the region remains significant. Indian films,music, and television shows are quite popular across the region. Despite officialcensorship on Indian films in Pakistan, DVDs of Indian films are widely avail-able in Pakistan. In higher education, India has some of the finest world-classuniversities, medical, technological, and management institutes. Although onlyfew South Asian students attend these universities currently because of bilateralproblems, these universities can attract more students in future once bilateralissues are resolved. It is encouraging that India’s support for more culturalexchanges in the region has been growing in the past decade. With the finalagreement in 2007 to establish a South Asian university in New Delhi with sub-stantial Indian resources, cultural exchanges among South Asians are likely toexpand as visits to India from other South Asian countries become even morenumerous.

Contested leadership will be problematic for regionalism in South Asia. Theslow growth of South Asian regionalism in the past decades can be attributed tothe lack of consensus on Indian leadership. In the absence of a regional leader,

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coordination problems have become difficult to manage in South Asia, resultingin the slow progress of SAARC. With its rising political and economic power inthe global and regional arena, and its leaders’ increasing interest to project theirsoft power, India holds the key as the main pillar of South Asian regionalism.

Lesson 2: finding a political solution to Kashmir dispute

The tension between India and Pakistan is a key factor for the slow growth ofregionalism in South Asia. At the center of this tension lies the Kashmir dispute.Experts on South Asia agree that territorial disputes over Kashmir remain themost divisive issue in the subcontinent and a major source of bitterness betweenIndia and Pakistan. Unless there is a political solution to the Kashmir dispute,prospects of South Asian regionalism will remain uncertain. Although India andother SAARC members are quite willing to give priority to economic coopera-tion with the logic that deep commitment to economic cooperation betweenIndia and Pakistan will eventually address Kashmir dispute, this approach is notacceptable to Pakistan. Given Pakistan’s unwillingness to put economics overpolitics and its continuation of support to Kashmir militants, political efforts toresolve Kashmir dispute cannot be postponed to a later date if regionalism has tomake any meaningful progress.

There are compelling economic reasons for the political solution of theKashmir dispute. First, the trade between India and Pakistan is far below theirpotential because of the prevailing political tension. Economists argue that theIndo-Pakistan trade can easily see a ten-fold increase over the current tradevolume once SAFTA provisions are implemented.9 Second, an end to Kashmirdispute will make it unnecessary for both Pakistan and India to go for highdefense spending that holds back their growth by diverting away resources frommore productive uses, such as investment in infrastructure. For this reason, thebusiness communities in both the countries support a détente between India andPakistan. Third, the resolution of Kashmir dispute will benefit other SAARCmembers too. The conflicts between India and Pakistan have stymied the eco-nomic integration in South Asia. The progress of SAPTA and SAFTA hasremained modest because of the frictions between New Delhi and Islamabad.

There is hardly any issue in the Indo-Pakistan relations which is capable ofarousing so much public passion on both sides of the border as the Kashmirdispute. Therefore, Kashmir dispute cannot be set aside as if it will magically beresolved after economic cooperation has been realized. Yet, given the nature ofKashmir conflict, associated with deep-rooted historical and emotional scars,religious and ideological differences, questions of political legitimacy of bothIndia and Pakistan, it is not easy to find a solution within a short span of time.Kashmir conflict can only be addressed in a spirit of compromise. It will requirepatience, diplomatic skill, and long-term commitment by the Indian and Pak-istani political leaders. South Asian political leaders and public must look aheadto goals that bind nations together. To what extent South Asian political leaderswill demonstrate urgency and spirit of compromise to resolve this issue remain

202 Conclusion

uncertain. But one thing is beyond doubt that an end to the Kashmir disputewould bring enormous economic and political rewards to SAARC region.

Lesson 3: establishing a South Asian regional forum

While South Asian countries have been focusing on regional economic coopera-tion with signing of FTAs, there has been little talk of a region-wide SouthAsian security cooperation. Although security concerns are and have been amajor element of South Asian countries’ foreign policy behavior, there is no ref-erence to security in the original SAARC Charter. Many South Asians believethat Bangladesh’s initiative for SAARC and the small South Asian countries’immediate and enthusiastic response to the idea of regional cooperation mayhave been based on security considerations – that is to contain an Indian militarythreat. It is also argued in some quarters that India, after initial hesitation,accepted the SAARC proposal to contain extraregional security links of smallSouth Asian countries, which might pose a threat to India’s security (Bajpai1990). Despite SAARC agreements on cross-border terrorism and drug-trafficking, cooperation on these issues among South Asian countries, India andPakistan in particular, has been generally tentative and non-serious.

In the past decades, security dilemma has defined the bilateral relationsbetween India and Pakistan, where neither side is willing to give the other a one-sided advantage. This has resulted in unhealthy arms race between the two coun-tries, contributing to the deterioration of security environment in South Asia. Ifregionalism has to sustain in South Asia, a balance must be struck between thesecurity aspirations of India and Pakistan. The primary reason why India andPakistan have been unable to engage in any meaningful security cooperation istheir structural imbalance and pursuit of contrasting policy objectives to addressthis imbalance. While India, as the preeminent power of the region, seeks to playthe role of a regional security manager with a focus on resolving intraregionalsecurity issues bilaterally, Pakistan opposes this design and seeks to involveextraregional powers to resolve security issues.

With the emerging globalization of regional security in the post-Cold Warperiod and more significantly in the post-9/11 era, India’s approach to manage thesecurity affairs of the subcontinent by itself looks neither credible nor effective.Simply put, India does not have the necessary military, technological, and eco-nomic resources to deal with such issues as cross-border terrorism, nuclear secur-ity, and drug-trafficking on its own. This realization makes Indian policymakersmore receptive to the idea of security multilateralism, which refers to the willing-ness of major powers to engage in security cooperation with a number of coun-tries to enhance their mutual interest. India’s defense cooperation with the UnitedStates, its willingness to cooperate with the United States in Afghanistan, itsdecision to cooperate with the United States, Canada, and European countries toresolve ethnic war in Sri Lanka, and its willingness to support Commonwealthcountries and United Nations to deal with Maoist insurgency in Nepal are indica-tions of New Delhi’s growing commitment toward security multilateralism.

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In the context of this shifting attitude of New Delhi toward security multi-lateralism, South Asian countries should be encouraged to create a SAARCRegional Forum (SRF) like their ASEAN counterpart, where the ASEANRegional Forum (ARF) has been operating since 1994. The SRF can bring allmembers of SAARC and SAARC’s new dialogue partners including the UnitedStates, Japan, Australia, China, and South Korea to an annual meeting of foreignministers to discuss regional security matters. While the immediate success ofthis institution cannot be guaranteed, its long-term potential remains importantfor South Asian security and regionalism. The creation of such an institutionacquires added urgency because, unlike the ASEAN, two members of SAARCare nuclear powers and their conflicts have global implications. Immediatelyafter their respective nuclear tests of May 1998, both India and Pakistan initiatedseveral measures to engage in constructive dialogues with each other. But, thesemeasures were largely unsuccessful as exemplified by the advent of Kargil warin 1999 and failure of a high-profile Agra Summit between India and Pakistan in2001. The failure of these steps has reinforced the importance of SRF to providea regular consultation mechanism to manage conflicts in South Asia. If nothingelse, the establishment of such an institution will put pressure on SAARCmembers, including India and Pakistan, to attend the annual meeting and engagein a confidence-building process. This will also provide opportunity for SAARCmembers and other major powers to consult with each other and hopefullydevelop a mechanism to reduce chances of conflict in South Asia.

Lesson 4: embracing globalization

Regionalism in South Asia is likely to be guided by what Ernst Haas (1990: 65)has described an “ideology of pragmatic antidependency” that seeks to promoteregional interdependence among South Asian countries to achieve economicgrowth without delinking them from the global system.10 Embracing globaliza-tion is essential for South Asian region whose economic growth depends onexports to global markets. Sri Lanka’s export-driven economic growth modelsince 1970s makes global linkage inevitable for its economy. In the post-1990period, most South Asian countries – India, Bangladesh, Nepal, and Pakistan –have adopted economic liberalization polices and regional trade liberalizationpolicies. However, given their low levels of economic development and smallsize of domestic (with exception of India) as well as regional markets, these pol-icies are unlikely to produce any significant positive results without globalintegration. In light of this, it can be argued that the full realization of SAFTArequires global economic integration.

Indian leaders know well that the success of their country’s economic liberal-ization largely depends upon its ability to increase exports to global markets.After decades of slow progress, India’s economy has grown at more than 7percent a year since the mid-1990s, making it one of the world’s best perform-ance economies for a quarter century. Global market links is necessary for Indiato sustain its current level of economic growth. Like India, the success of

204 Conclusion

Pakistan’s economic liberalization policy depends, among other things, onincreasing its exports to the markets of developed and developing countries. Inaddition, Pakistan also needs substantial FDI from global corporations to boostits economic growth. This economic logic requires Pakistan to maintain strongties with the United States, China, EU, and countries in Central Asian and Gulfregion.

The regional security dynamics in South Asia after 1998 made global linkageinevitable for India and Pakistan. Immediately after becoming nuclear weaponcapable states in 1998, both India and Pakistan got involved in a border war(Kargil war) in 1999. The anxiety of a possible nuclear attack, however remoteit might have been, made intensive engagement of global powers in the regionpossible. Finally, the global war against terror in South Asia following the 9/11al-Qaeda attacks on the United States in 2001 brought forces of globalization ledby the United States back to the region. Given South Asia’s ever-growing cross-border terrorism, the need for resources to manage nuclear security betweenIndia and Pakistan, and to fight against domestic poverty and militancy, SouthAsian countries are likely to remain open to the support of global powers. Thelogic of uncertainty of the war on terror and economic growth that requiresglobal market and global investment dictates South Asia’s firm linkage withglobalization in the coming decades.

Lesson 5: building the support of the quartet – the United States,Europe, Japan, and Russia – for South Asian regionalism

Developing countries generally view regionalism as a path to escape fromdependency. Yet, South Asian countries have increasingly recognized thatgrowth of regionalism in South Asia will require the support of the quartet, com-prising the United States, Japan, Russia, and Europe, for security and economicreasons. Majority of South Asian experts agree that for regionalism to be real-ized in South Asia, the US involvement needs to be greater than it was duringthe Cold War period. There is little doubt that SAARC members need substan-tial economic assistance for their growth. Although the United States has beenproviding economic support to these countries, more American support in termsof economic aid, investment, and market access is necessary. For India and Pak-istan, in addition to economic cooperation, security cooperation with the UnitedStates has become increasingly necessary. For the United States, South Asia’sgeostrategic importance has increased following its military involvement in thewar of terror in Afghanistan and development of nuclear weapons by both Pak-istan and India. Pakistani support is critically necessary for the United States tosucceed in fighting against al-Qaeda led terrorists forces. At the same time, theUnited States seeks active engagement with New Delhi for two reasons: stra-tegic and ideological. Strategically, the US–Indian cooperation will provideWashington with some ways to manage China’s growing influence. Ideologi-cally, the United States is pleased to present India’s rise as an economic poweras a successful example of the linkage between liberal democracy, principles of

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Washington consensus, and sustained economic growth. Given this mutuality ofinterest between the United States and two major South Asian countries, build-ing of the US support for South Asian regionalism will not be difficult.

Europe remains the best example of regionalism. In their pursuit of deeperregionalism that requires development of regional institutions, South Asiancountries can learn from the EU about what works and what does not work.South Asian countries have growing economic and political ties with someEuropean powers. Given the enormous economic need of the South Asian coun-tries, there is a need to strengthen economic cooperation between Europe andSouth Asia. Although many smaller European countries have been critical of thenuclear developments of India and Pakistan, and the nuclear deals between theUnited States and India, two nuclear powers of Europe, France and the UnitedKingdom, have been supportive of India’s new status. Although critical of SouthAsia’s record of human rights, the EU countries seek engagement with SouthAsian countries for peace-keeping purpose. NATO is involved in the war ofterror in Afghanistan. Norway and the EU are actively involved in resolving SriLanka’s civil war between Tamils and Sinhalese. In the last several years, manyEU countries including France, the United Kingdom, Germany, and Italy havestarted to seize economic opportunities in India. France and the United Kingdomhave also been supportive of New Delhi’s regional and global leadership aspira-tions in such multilateral forums as the United Nations and G-8 group. Overall,strengthening economic and security cooperation between the EU and SouthAsian region will be mutually beneficial.

Japan has emerged as an important partner for South Asian economic devel-opment. It has been one of the largest donors of ODA to South Asian countriesin the past couple of decades. Although not comparable to Southeast Asia,Japanese investment in South Asian countries – India, Pakistan, Bangladesh, andSri Lanka – has been growing. In fact, along with the ADB, Japan has showninterest in joint regional projects in the area of infrastructure development.Needless to say, such infrastructure projects if come to fruition with the help ofJapanese assistance will be extremely beneficial for the growth of regionalism inSouth Asia.

Japan’s relations with India and Pakistan deteriorated after 1998. Respondingharshly to the nuclear tests by India and Pakistan, Japan resorted to economicsanctions and diplomatic actions to censure India and Pakistan in the UnitedNations and other multilateral forums. However, Japan’s fear of a growingChina, strong military cooperation between India and the United States in thepost-2001 period, India’s increasing attraction as a large market, economicpower, and as an IT service provider led Japan to significantly improve its rela-tions with India after 2001. During his visit to New Delhi just two weeks afterChinese Premier Wen’s visit in April 2005, Prime Minister Koizumi announceda close “strategic partnership” with India, recognizing India as a key player inJapan’s long-term plan for Asian security and economic prosperity. DespiteChina’s opposition, Japan took initiatives to invite India to participate in theinaugural East Asian Summit in December 2005. On its part, India has

206 Conclusion

recognized that it is extremely beneficial to strengthen its cooperation withJapan for three reasons – economic benefit due to growing Japanese FDI inIndia, big IT opportunities in Japan for Indian companies, and Japan’s criticalrole in maintaining a balance of power in Asia. Further strengthening of bilateralrelationship between two Asian democracies is expected and will be guided bytheir concern for potential threat from China and calculation of mutual economicbenefits. At the same time, Japanese investment interest in other South Asiancountries are also likely to grow as a part of its need to diversify its Asian eco-nomic portfolio. If SAARC is perceived to be instrumental in mitigating polit-ical risks for Japanese investment in South Asia, Japan’s interest in the growthof South Asian regionalism is likely to grow.

Although Russia’s influence has significantly declined after the end of theCold War, Russia’s contribution to the growth of South Asian regionalismcannot be underestimated. Pakistan will always suspect Russia’s motive becauseof its close relations with India and support to India’s global leadership aspira-tion and stance on Kashmir. However, President Putin’s policy to support thewar on terror in Afghanistan, open condemnation for Islamic militancy schemesto kill General Musharraf, and improved relations with China has contributed toIslamabad’s reduced fear about Moscow in South Asia. With its surplus of oiland gas resources, Russia can play an important role in South Asia, whereenergy security is a growing concern. In fact, by actively participating inregional energy projects and management, Russia can effectively address India’sand Pakistan’s growing energy needs. Given its key role and position in the poli-tics and economic management of Central Asian countries, with which SouthAsian countries’ economic and political cooperation is likely to grow in future,Russia’s participation in South Asian regionalism should be welcomed.

Lesson 6: encouraging China’s active involvement

Given its geographical proximity to five SAARC member countries (India, Pak-istan, Nepal, Bangladesh, and Bhutan), China is an important player in SouthAsian political and economic landscape. While China’s relations with SouthAsian countries have remained more or less constructive, its relations with Indiahave fluctuated over the past years. The Sino-Indian dispute in 1962 and India’sdefeat in the hands of Chinese military in that war had made Indian leadersextremely distrustful toward China. From India’s perspective, China’s motiveshave often been suspect, given its close friendship with Pakistan and sympa-thetic support to Nepal’s economic and political causes. During the 1960s,1970s, and 1980s, Indian leaders feared that China was too close to Pakistan andan integral part of Pakistan–US–China nexus. Preventing China from gainingexcessive influence in India’s neighborhood and Indian leaders’ deep-seatedreluctance to play a second fiddle to China in Asia also shaped India’s cautiousand not-so-friendly foreign policy toward China during the past decades.However, the Sino-Indian relations have improved significantly since 1992because of growing economic cooperation between the two countries.

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Pakistan has always found China’s friendship reliable. Since 1960s, Chinahas been a steady economic and military partner with Pakistan, providing hugeeconomic and military assistance, including nuclear technology. Bangladesh andNepal often like to play the “China card” to neutralize Indian influence. After1990s, China’s economic influence in Bangladesh has grown. Overall, givenChina’s growing economic and political influence, South Asian countries arelikely to offer China a larger role in their economic plans. Not surprisingly, allSAARC members, except for India, supported China’s membership in SAARCas an observer since 2003. In 2005, SAARC admitted China with an observerstatus when India dropped its opposition to China’s membership. India’s shifttoward China from hostility to friendly overtures can be explained by the polit-ical and economic developments since 1992.

With the disintegration of Soviet Union, China’s lessened worry about India asa client of Soviet Union enhanced prospects for improved Sino-Indian relations.The signing of a “landmark agreement” between China and India in September1993 to reduce troop levels in the mountainous borders of two countries and tohonor the existing border in the disputed territory of Arunachal Pradesh in north-eastern India after three decades of hostility is an indication of this improved rela-tions. In addition, China’s promise of not talking about Kashmir publicly after2002 and to categorize Kashmir dispute as a bilateral dispute that should beresolved on the basis of bilateral negotiation between India and Pakistan hasearned appreciation from India. The Chinese leaders, on the other hand, interpretAmerican tilting to India in the post-Cold War period as a strategic move tocounter China’s growing military and economic influence in Northeast Asia,Asian region, and beyond. Chinese leaders have realized that improving relationswith India will be strategically much more productive than isolating India.Recently, growing trade and business transactions between China and India (in2007, China was the second largest trading partner of India) has brought these twogiants of Asia together. In addition, the need for energy security by both India andChina has enhanced the prospects of their strategic cooperation. In 2003, in aspirit of compromise, India communicated to China about its decision to seek set-tlements of its border dispute with China on a political basis rather than on thebasis of legal and historical claims. Reciprocating India’s gesture, ChinesePremier Wen Jiabao agreed on a set of political principles to guide the final settle-ment of Sino-Indian border dispute during his visit to New Delhi in April 2005.With improving Sino-Indian relations, and China’s enormous potential to con-tribute to South Asia’s economic development and political stability, China shouldbe encouraged to play more active role in the growth of South Asian regionalism.

Lesson 7: promoting regional identity

Despite their shared historical, political, and cultural experiences, South Asianshave reservations about their regional identity. Narrow national identities, rein-forced by mutual distrust and problems in bilateral relations, prevail in SouthAsia and have shaped each country’s interactions with neighbors in the past

208 Conclusion

decades. Such an environment is hardly conducive for the growth of regional-ism. What is required in South Asia is a determined and consistent effort bySouth Asian leaders to overcome narrow national identities. To achieve this,South Asian leaders must redefine and take a more consistent long-term view oftheir national interests consistent with the goals of regionalism. While the redefi-nition of national interest – in terms of political, economic, and security interests– will take time, immediate actions in the following areas can be initiated tostrengthen regional identities in South Asia. The transnational connectionsforged through sports, music, tourism, personal travel, contacts, and interactionamong citizens will deepen regional interdependence and promote peace inSouth Asia.

It is widely acknowledged that people who travel to another country oftendevelop both a deeper understanding and a deeper appreciation for it. Peoplewho maintain person-to-person contacts and friendships across borders seem tobe less favorably disposed to regional conflicts. Despite the enormous potentialof tourism in South Asia and SAARC’s recognition of its benefits, tourism pro-grams have not really caught on the popular imagination because of an utterlyinadequate information campaign regarding the facilities each country providesto the SAARC tourists. Given the substantive benefits of cross-border travel andtourism to create a regional awareness, the South Asian governments, with thehelp of SAARC Secretariat, should improve their propaganda efforts in media toreach out to more people.

There is also a necessity to increase and make the SAARC scholarship pro-grams more widely known to raise the number of exchange students in theregion so that more and more students can learn about the neighboring countriesand share their experiences with each other. Such kinds of networking willimprove regional sensitivity among the younger generation of the South Asiancountries. In this area, India can play a crucial role. With its world-class educa-tional institutions in the field of technology, science, medicine, and business,India can offer more incentives to students from all over South Asia to benefitfrom its educational facilities. In this context, the decision taken by SAARCcountries in 2007 to open a South Asian university in New Delhi with substan-tial Indian resources is encouraging. The full operation of this university islikely to increase cultural exchanges among the younger generation of SouthAsia and thus establish a foundation of deeper understanding and appreciation ofneighboring countries.

It is a positive development that the South Asian countries have agreed torelax visa regulation for members of Parliament, Supreme and High Courtjudges, senior journalists, and academic chairs of the universities for intrare-gional travel. However, further visa relaxation is necessary to facilitate wideinteraction among the general public in South Asia. Sometimes, when heads ofstate do not see their common interests because of political imperatives, ordinarycitizens try to raise awareness of such mutual interests on both sides. Travel anddiscussion by private individuals and groups toward this end have been calledcitizen diplomacy, and it occurs fairly regularly (though not very visibly) when

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conflicting states are stuck in a cycle of hostility. Citizen diplomacy has beenparticularly successful in the context of Sino-American rapprochement in 1970sand US–Russia relations in 1980s.11 It is encouraging to note that citizen diplo-macy, as evident in the growing number of meetings of journalists from SouthAsian countries, private visit of prominent citizens both as a group and individu-ally to various South Asian countries, visit of SAARC citizen group, whichcomprises prominent citizens from the SAARC countries, to supervise electionsin the neighboring country and discuss important matters of mutual interests,appear to be gaining popularity in South Asia. Further visa relaxation in SouthAsia is necessary to facilitate travel of more ordinary citizens and promotecitizen diplomacy.

Sports competitions among South Asian countries held annually since 1984under the auspices of South Asian Federation Games (SAF) appears to have cap-tured the imagination of sports enthusiasts in South Asia. This is good news forSAARC. Sports are often seen as a force for peace. Although sports competitionmay sometimes stir up nationalism and animosities between neighbors, sportsalso bridge differences, promote friendship, create a sense of participation in asupranational community, and bring people from different countries together inshared activities (Allison 1993). In the context of sports some thoughts can begiven to utilize cricket, the most popular game in South Asia, to generate activeinterest in SAARC activities. Next to war, cricket seems to have the most emo-tional appeal in South Asia. In fact, there are some evidence to suggest thatSouth Asian leaders have employed “cricket diplomacy” successfully to addressIndo-Pakistan tension. For example, the late President of Pakistan, Ziaul Huq,employed “cricket diplomacy” very effectively to diffuse Indo-Pakistan bordertension created by “Operation Brasstacks” in the winter of 1987. Similarly,President General Musharraf used “cricket diplomacy” to restart peace dialoguewith India in 2004. President Jayawardene of Sri Lanka watched a cricket matchwith Prime Minister Rajiv Gandhi of India in 1987 when the talk of an IPKFseemed to have been initiated. Given the enormous popularity of cricket inSouth Asia, a cricket camp for South Asian youth can be organized with starplayers from South Asian countries participating as coaches. Informal coachingby Pakistani cricketers to Indian players and vice versa regularly occurs duringtheir visits to each other’s country and even at the international cricket competi-tion venues. Such programs will go a long way to bridge the gap among theyounger generations of South Asia.12

Socially constructed knowledge, as Ernst Haas (1990: 73–75) has argued, isextremely crucial for the policy-making process because it shapes the worldview of the decision-makers and thus influences their reaction to particular issueareas and determines their modes of interaction at national, regional, and inter-national level.13 Similarly, people’s reaction to a particular decision or institutionis based on their level of knowledge. As discussed in this book, even most of theeducated citizens of South Asia appear to be ignorant about SAARC and eachother. Lack of knowledge about each other has led to misunderstanding andmutual prejudices among South Asian neighbors. One of the important goals of

210 Conclusion

SAARC and the South Asian ruling elites, therefore, should be to create aneffective public information campaign. Without an informed public, most ofSAARC’s goals cannot be accomplished. As found out in this book, a high per-ception of inequity in India and Pakistan is a major impeding factor for thegrowth of SAARC. It is urgently necessary, therefore, for the governments ofboth India and Pakistan to address this issue. Commonsense perceptions amongIndians and Pakistanis may not be in proportion to the “economic reality.” Inorder to rectify this misperception, the governments of India and Pakistan shouldcarefully provide information to their citizens as to how these two countries’ netbudget contribution to SAARC is proportional to the “peace dividend” in SouthAsia. It will not be a very hard sale to convince the citizens of India and Pak-istan that peace and stability in the region can save these two countries substan-tial amount of revenues which are currently spent on the acquisition ofunproductive defense arsenals.

The envisaged public information campaign cannot be assumed to haveimmediate or dramatic effects on the perceptions of South Asian public regard-ing SAARC. But it surely can be argued that a carefully conceived campaign bythe media, governments, and the Secretariat can raise the salience of SAARC,thereby generating public interest on the regional cooperation issues in SouthAsia. A clear and honest feedback – not in the form of dull, abstract statistics,but in a form consistent with commonsense views – should be provided to SouthAsian peoples on what has so far been achieved and what can be realisticallyachieved. In this effort, the media in SAARC member countries should play asupportive role. So far, a vision of regionalism is lacking in the media coverage.A vision of regionalism can temper the degree of nationalism and emotionalintensity with which the media covers bilateral conflicts between South Asiancountries. In the past decades, the media coverage, based mainly on narrownational interests, contributed to misperceptions and the level of distrust amongSouth Asian countries. A reversal in this type of coverage will improve the basisfor mutual understanding in South Asia.

Lesson 8: learning from other regional groupings

SAARC is a case of “late regionalism,” which refers to the development ofregionalism through learning. Regional organizations in one area can learnlessons from, or what Etzioni describes “fashion” its growth after the experi-ences of other regional organizations in other areas (1991: 317). Being a case oflate regionalism, SAARC has the distinctive advantage of avoiding the pitfallsof other regional organizations that led to their decline. At the same time,SAARC can incorporate their successful principles. From LAFTA’s case, it isobvious that embarking on an overambitious project of free trade may not bepractical or even desirable for developing countries and South Asia in particular.A slow, cautious, and gradual approach to regionalism, as demonstrated byASEAN, appears to be the best strategy for South Asian countries. Cooperationat micro-level and then advancement to the macro-level, as the Nordic Council’s

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experience reveals, may be more appropriate for the growth of regionalism inSouth Asia.

Some principles of “late regionalism” have been articulated by various schol-ars in various ways. Michael Haas (1992: 240), for instance, has suggested thefollowing six principles:

(1) respect for the equality of cultures (rather than hierarchical, coercivemethods of conducting diplomacy), (2) consensus building (rather thanvalue maximization), (3) incrementalism (rather than blueprintish granddesigns), (4) attention to principles (rather than technical details), (5) uniquesolutions (rather than universalistic remedies) and (6) a stress on coopera-tion (rather than integration)

Michael Antolik (1990) has proposed two principles, i.e. (7) self-restraint, asdemonstrated by non-interference in other’s domestic affairs, and (8) mutualaccommodation. To these eight principles, two more might be added: (9) accept-ing a gradual timetable and (10) open regional communications to create anawareness among the public about the potential benefits of a regional organi-zation. The last principle is important because a regional organization can bemaintained only as long as both the political leaders and the public of themember countries perceive its continued existence as advantageous to them.

While six of the above ten principles of late regionalism are already found inSouth Asia, the remaining four – i.e. (4) attention to principles (rather than tech-nical details), (7) self-restraint as demonstrated by non-interference in other’sdomestic affairs, (8) mutual accommodation, and (10) open regional communi-cation – appear to be absent. The sooner SAARC leaders are able to adopt theseprinciples, the better the prospects of SAARC’s growth will be.

Lesson 9: building “engines” of regional cooperation

Some “engines” of regional cooperation need to be developed within South Asiafor South Asian regionalism to move forward. The most important engines arejoint projects, transportation corridors, energy grid, monetary cooperation, andSouth Asian Development Fund (SADF).14

Development of joint projects, big or modest scale, by SAARC countries willbring visibility to South Asian regionalism. SAARC countries should negotiatewith the United Nations Development Program (UNDP) and ADB for the devel-opment of joint projects. Some innovative approaches such as the ADB’s visionof growth triangles merit serious attention. Development of joint projects withthe assistance of ADB in smaller units can create new opportunities and helpestablish linkages with other regions. For instance, promising economicopportunities exist, and with respective governments’ support, extensive eco-nomic cooperation is possible in parts of Bangladesh, Northeast India,Myanmar, and Thailand, or South India, Sri Lanka, the Andaman and NicobarIslands, and Northwest Indonesia. There are other joint projects possible in

212 Conclusion

South Asia – that is oil and gas pipelines between India and Pakistan, hydroelec-tric projects between India, Nepal, Bhutan, and Bangladesh, joint road andrailway projects between India, Pakistan, and Bangladesh, joint energy gridbetween Sri Lanka and South India. Developments of such joint projects have atleast two important implications for regionalism. First, it will generate trust,calm fears, and enhance confidence-building process among South Asian coun-tries. Second, joint project planning and implementation has the potential forturning the rivalry between India and Pakistan into a workable partnership. That,itself, will be a significant achievement.

Improved transportation facilities in each member country and their integra-tion across the region are an important engine for the growth of regionalism inSouth Asia. Most of the South Asian countries have inherited common trans-portation infrastructure – such as railways, roads, inland water transport, andports – from the British. However, after independence, regional transport link-ages were broken due to what Rehman Sobhan calls “pathologies of inter-stateand domestic politics” (2005: 10). Much of the transportation infrastructure inSouth Asia is in bad condition. There are several studies which indicate that lackof transportation connectivity and the costs associated with it is a serious imped-iment to the growth of regional trade and cross-border interaction among peoplein South Asia (Dubey 2005: 32–33; Sobhan 2005: 10–11). Many of the trans-portation infrastructure projects can be rebuilt or repaired with reasonable cost.The existing road and railways facilities when repaired can enable Indians, Pak-istanis, and Bangladeshis to travel via bus or train to various urban centers inDelhi, Mumbai, Kolkata, Lahore, Karachi, Islamabad, Dhaka, and Chittagongmore frequently. In addition to the obvious advantages of increasing cross-border travel of South Asians, such transportation linkages will also significantlyreduce the cost of intraregional trade.

For example, imports of a consignment of cotton from Pakistan byBangladeshi textile industry currently take 40 days to move from West Punjab toChittagong via Karachi with trans-shipment in Colombo or Singapore. A freighttrain from Lahore moving across India can bring the same consignment ofcotton to Dhaka within four days (Sobhan 2005: 10). Similarly, transportation ofa container from Delhi to Dhaka takes 45 days now. It will take only two tothree days through railway traffic. According to one estimate, transportation ofgoods from northeastern part of India to Kolkata via Chittagong airport inBangladesh will cut the total journey time by 60 percent (Dubey 2005: 32).Since no transit facilities through the Pakistan territory are allowed for Indiangoods being transported to Afghanistan and beyond to Central Asian countries,India is currently incurring huge costs by using circuitous routes through Iran toreach these destinations. By denying transit facilities to Indian goods,Bangladesh and Pakistan are foregoing freight and license charges in foreignexchange amounting to billions of dollars.

The obvious benefits of building and integrating transportation facilitiesacross the region are compelling to pursue these projects seriously. SouthAsian leaders promised to take urgent action on this issue at the Islamabad

Conclusion 213

Summit in 2004. So far, however, there has been very little concrete action onthis issue except for few official talks. Building adequate transportation infra-structure and establishing their connectivity across the region is a challengegiven their cost and political tension among South Asian countries. While the“cost challenge” can be overcome by seeking financial assistance from multi-lateral institutions and private sectors, the “political challenge” remains crit-ical. But this challenge needs to be seriously addressed for the growth ofregionalism in South Asia.

In South Asia, India and Pakistan are energy deficit countries and shareserious energy security concerns. In contrast, Nepal and Bhutan have vasthydropower potential through their river waters and Bangladesh has natural gaspotential. Coordinated development of these various energy resources and theirtrading in the region will be substantially beneficial for SAARC members. Thereis a need for common distribution system in the region based on single regionalgrid which interconnects the national grids. Such a coordinated effort will go along way in enhancing the prospects of regional cooperation. Anothercoordinated effort which can prove useful for the growth of regional cooperationis the laying of pipelines across the region for the transportation of gas fromBangladesh and Myanmar in the East, and from Iran, Qatar, and Turkmenistanin the West, to India and Pakistan (Dubey 2005: 34).

Monetary cooperation is often considered as critical for deeper regionalism.Apparently impressed by the implications of a single currency (Euro) on Euro-pean integration process, India’s Prime Minister A.B. Vajpayee suggested forthe adoption of a common currency for South Asian region in January 2004. Therealization of a single currency requires harmonization of economic policies inthe area of exchange rates, interest rates, fiscal deficits, price support mechan-isms, etc. Establishment of a free trade area and a Custom Union are generallyconsidered as preconditions for achieving the harmonization of economic pol-icies. South Asian countries are far away from these goals. While adoption of asingle currency will take a longer time period, two other measures of monetarycooperation hold greater promise for South Asian countries. First, SAARCmembers can create a South Asian Monetary Fund (SAMF) to provide hard cur-rency to a member country facing monetary and other balance-of-paymentcrisis. Given its economic growth and considerable accumulation of reserves offoreign exchange, India will have to play a key role in this scheme. Second, theSouth Asia Development Cooperation Report in 2004 floated the idea of creat-ing a parallel regional currency which can be used parallel with the national cur-rencies of the individual member countries. Explaining the dynamics of thisparallel currency, Muchkund Dubey, a member of SAARC Eminent PersonGroup (EPG), observes:

This currency would amount to Supplementary Drawing Rights (SDR) atthe regional level and can be used as a unit of account for settling transac-tions under regional arrangements, like payments under a clearing system.. . . It can also be used for funding the creation of regional public goods in

214 Conclusion

the area of transport and communication, energy, information technology,bio-technology, food security, tourism and science and technology.

(2005: 31)

This is an important idea, which will facilitate the growth of regional institu-tions. South Asian countries must give serious consideration to this idea to movetheir goal of regionalism forward.

Finally, it is necessary to put the already established SADF into action. TheSADF came into existence more than a decade ago but has remained inactivebecause of lack of adequate resources. The SADF can undertake large regionalinfrastructure projects to improve infrastructure facilities in South Asia. In addi-tion, the SADF can finance poverty-alleviation programs, provide lending to acomprehensive human resource development program, support intraregional andextraregional trade by arranging finance for export credit and commodity stabi-lization, and support the operational expenditure of the existing SAARC institu-tions. Resources for the SADF can come from contributions of South Asiancountries, external sources, regional and international financial institutions. Rev-enues for the Fund can also be generated through regional and internationalcapital markets. Japan has already shown interest in contributing 20 percent ofJapanese ODA to a common SAARC fund. Other donor countries like theUnited States, the EU countries, Canada, and OECD members can also be per-suaded to contribute some percentage of their ODA to the SADF. If adequateresources are available to SADF, it will be able to provide the much-neededfinancial support to regional projects, the completion of which will strengthenregional interdependence among the South Asian countries.

What South Asia needs today is peace, stability, prosperity, and internationalrecognition, objectives that can best be accomplished through enhanced regionalcooperation. Given the nature of the nation-building process in South Asia,SAARC may not be able to provide immediately any molecular attraction thatwill induce the member states to act in unison. Bilateral differences will persist,and they are likely to be addressed through bilateral negotiations. SAARC maybe able to facilitate dialogues among the South Asian ruling elites and to serveas a supplementary method for advancing national development.

While the leaders of Bhutan, Maldives, and Nepal will continue to supportSAARC for the purpose of security, international prestige, recognition, andsome economic benefits, the leaders of India, Pakistan, Bangladesh, and SriLanka are likely to support SAARC for the purpose of peace and stability athome and in the region and economic benefits. It is reasonable to believe that theruling elites of South Asian countries have realized that there is no alternative toSAARC. The alternatives to SAARC are economic nationalism, destabilization,social conflicts, and ultimately political tensions that may escalate into war.Thus, SAARC appears to provide a possible path toward a stable South Asianregional order. At this critical moment of history, it seems unlikely that theruling elites in South Asia will ignore SAARC and thus miss a splendidopportunity for peace and development.

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South Asian regionalism is likely to be based on leadership initiatives fromIndia, a path-breaking accord between India and Pakistan over Kashmir dispute,openness to globalization, and some special arrangements for China and thequartet forces – the United States, EU, Russia, and Japan – so that these coun-tries remain involved in South Asia’s regional cooperation activities and shareSouth Asia’s inclusive rather than exclusionary vision of regionalism. There is aneed for incremental growth of deeper regional cooperation and fostering ofregional identity that can deepen as select number of engines of regionalism tieSouth Asian countries together, strengthening their mutual trust and confidence.The burden of high expectations for progress combined with South Asian coun-tries’ low preparedness to win mutual trust has shaped the contours of develop-ment of South Asian regionalism over the past two decades. These contours ofdevelopment, to say the least, are disappointing. The credibility gap betweenexpectation and performance of SAARC has led many observers to ask the ques-tion, Will regionalism in South Asia ever take off? What is needed for thegrowth of regionalism in South Asia is a shared will, bold thinking for deepen-ing cooperation, and high preparedness of South Asian leaders to win mutualtrust. What are not needed are excessive optimism, grandiose goals, and bunchof political rhetoric that is not based on ground realities.

216 Conclusion

Notes

1 Introduction

1 In North America, a FTA between the United States and Canada was signed in 1989.This agreement grew into the NAFTA when Mexico joined in 1994. Since 2001, Chinaand Japan have been actively engaged in signing number of FTAs with ASEAN coun-tries. In the post-2001 period, ASEAN+3 (that is ten members of ASEAN plus Japan,China, and South Korea) has emerged as a significant regional cooperative arrange-ment in Asia. For various regional cooperative arrangements and initiatives in North-east Asia, see Rozman (2004).

2 Expansion of European integration activities include the creation of a Single Market in1992; the signing of Maastricht Treaty in 1992 seeking monetary union (EMU) andcloser political union; the signing of European Economic Area (EEA) in 1992; theexpansion of the EU in 1995 by admitting new members – Austria, Finland, andSweden; and the enlargement of EU in May 2004 by admitting ten new members –Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slo-vakia, and Slovenia.

3 Jagdish Bhagwati (1993: 26), for instance, has predicted a fragmented world of fourblocs: an augmented EC; NAFTA extended into the Americas; a Japan-centered Asianbloc; and a fourth bloc of marginalized nations such as those of South Asia and Africa.

4 Ernst Haas (1990) has constructed five world-order ideologies – classical liberalism,managed liberalism, structural antidependency, pragmatic antidependency, and eco-holism – to explain various purposes and forms of collaboration among the nation-states. For an explanation of these five types of ideologies and examples of regionalorganizations based on these ideologies, see Haas (1990: Chapter 4, 225–226).

5 The term “deep cooperation” is used in this study to describe relentless efforts by gov-ernments to cooperate in developing and implementing common norms or rules in aparticular area, such as trade, security, and economic welfare. Efforts to set commonnorms may be limited to intergovernmental cooperation or may involve a decision todevelop supranational institutions for rule-setting. Deep cooperation is different from“deep integration,” the term favored by Lawrence (1996: 7), in terms of scope ofcoordination of economic policies. Deep integration refers to agreements such as theEU that aim at achieving some measure of economic union and that create supra-national institutions for pursuing this goal. In this study, deep cooperation is used forless far reaching coordination on domestic policies and regulations.

6 For an insightful discussion comparing Deutsch and Durkheim, see Merritt and Russett(1981: Chapter 7).

7 Although the concept of “spillover” is central to the neo-functionalist thought, the termis used in the functional theory through such euphemistic phrases as “ever-wideningcircles.”

8 For a full discussion of the implications of these variables – system capacity, support,

demand, and leadership – on the development of regional integration, see Lindberg andScheingold (1970: 115).

9 Max Weber’s theory of social change seems to have influenced the central perspectivesof integration theorists. Weber had shown how capitalism’s demand for rational calcu-lations was responsible for certainty and stability in the society. Stability was created,according to Weber, by the emergence of rational-bureaucratic nation-states andsociety’s recognition and dependence on legitimate central authority. The integrationtheorists presumed that transformation of anarchic international order was possible bythe creation of legitimate supranational authorities over states. For an overview of thisliterature, see Genco (1980: 55–80); Crawford (1991: 438–468).

2 Explaining regional cooperation in South Asia

1 Rosenau’s (1967) discussion of differences between domestic policy and foreignpolicy issue areas offers useful insights to my analysis of regional cooperation as acommunity policy issue area. For some excellent reviews of literature and criticalexamination of Rosenau’s conceptualization of issue areas, see Potter (1980:405–427); Evangelista (1989: 147–171).

2 Shepherd (1975) provides an earlier support for this view.3 For a representative literature on the second-image-reversed perspective, see Goure-

vitch (1986); Rogowski (1989); Katzenstein (1985); Milner (1988); Frieden (1991).4 For representative literature, see Huelshoff (1994: 255–279); Sandholtz and Zysman

(1989: 95–128); Keohane and Hoffmann (1991); Moravcsik (1991); Bulmer (1983:349–363); Eichenberg and Dalton (1993: 507–534); Parker and Peel (2003).

5 For a discussion of this view, see Hiden and Farquharson (1989); Ra’anan (1983);Gunther (1980).

6 For insightful discussion on statist literature, see Nordlinger (1981); Katzenstein(1978); Krasner (1984: 223–246); Rockman (1989: 173–203).

7 For an excellent review of this literature, see Mitchell (1991: 77–96). For various cat-egorization of the term state in the non-Western context – such as hard state, adminis-trative state, soft state, bureaucratic polity, and repressive-developmentalist state –see the review of statist literature by Crone (1988: 252–268). For an excellent discus-sion of states as quasi-states, see Jackson (1990).

8 For an extension of this argument, see Huelshoff (1994: 264–265); David (1991:16–17).

9 This discussion is based on Huelshoff’s argument. For an excellent discussion onweak and strong governments and their respective preferences for regional coopera-tion policies, see Huelshoff (1994: 262–264).

10 This argument relies on the burgeoning literature concerned with such issues as thedevelopment and form of state structures, their capacity and autonomy in particularcontexts, and the interaction of the state with various societal groups and organi-zations. Among the many studies in this area, see the following major works: Evanset al. (1985); Nordlinger (1981); Miliband (1969); Krasner (1978); Midgal et al.(1994).

11 For an explanation of “stop-and-go” pattern of regional cooperation, see Schneiderand Cederman (1994: 636–638).

12 For systematic elite studies on regional integration, see Deutsch et al. (1967); and forsystematic elite studies on South Asian foreign policy issues, see Free (1950); Singer(1964); Cortright and Mattoo (1996).

3 Regional dynamics

1 On June 1, 2001, Crown Prince Dipendra, using automatics weapons, massacredalmost the entire royal family, including his father King Birendra, his mother, his

218 Notes

sister, his brother, and then shot himself. Gyanendra, King Birendra’s brother and thenearest surviving male kin, was anointed as the next monarch of Nepal following thisunfortunate incident.

2 For an excellent survey of the realist principles embedded in the mandala, see Modelski(1964: 549–560). For a modern translation of The Arthashastra, see Rangarajan (1987).

3 See Alberuni’s India edited by Sachau (1991: 22). Alberuni, whose full name wasAbu-Raihan Muhammed Ibn Ahmad al Beruni, was taken prisoner my Mahmud ofGhazni in Khiva and accompanied him to India as a court historian.

4 The sepoy mutiny of 1857 has been described as an uprising by Pakistani historians, amutiny by the British, and the First War of Independence by Indian nationalists.

5 Quoted in Sherwani (1990: 10); also see Cohen (2004: 28).6 The leaders of the Pakistan movement referred to India’s Islamic period as a golden era

during which much of high cultural, material, and spiritual progress was achieved.Hindu nationalists, on the other hand, portrayed the Muslim rule as a dark age, markedby the mass destruction of places of worship, forced conversions, and a frontal attackon Hindu social order.

7 While historians debate over the exact casualty figures, it is commonly estimated thatapproximately 500,000 Hindus, Muslims, and Sikhs were killed during the tragicprocess of partition (Baxter 1991: 59).

8 Quoted in Ganguly (2001: 32).9 Siachen Glacier, which is 75 kilometers long, is located in the Karakoram Range in the

disputed state of Jammu and Kashmir. Referred to as “Third Pole” because of itsextremely inhospitable cold climate (the surface temperature on the glacier drops tominus 40 degree Celsius in the winter and blizzards in the area can generate winds upto 150 knots), the glacier was not adequately demarcated in the 1965 and 1971 Cease-Fire Line (CFL) agreement between India and Pakistan. It was, therefore, possible forboth India and Pakistan to stake their claim over the glacier. Because the SiachenGlacier Complex was situated along the disputed territory of Aksai Chin (the area,India claims, was illegally ceded by Pakistan to China), India considers it strategicallyimportant. Although analysts differ as to which of the two countries (India or Pakistan)staked its claim over the glacier first, overwhelming evidence suggests that India diddeploy troops on the glacier first to establish its claim. For a detailed discussion on thisdispute, see Ganguly (2001: 83–85).

4 Origin and evolution of SAARC

1 Bajpai (1990) has argued that Bangladesh launched serious initiatives for regionalcooperation in South Asia after its approach to ASEAN for membership was turneddown. Bajpai’s assertion, however, is not based on firm evidence. See for a discus-sion, the dissertation of Kanti Prasad Bajpai (1990: 50–53).

2 For an extensive discussion on various external and domestic moves and initiativesconcerning the growth of regionalism in South Asia, see Muni and Muni (1984:Chapters 2–3); Bajpai (1990: Chapters 1 and 4).

3 Interview with former secretary of External Affairs Ministry in New Delhi, December17, 2002.

4 The linkage between the leaders’ concern for legitimacy and political survival andtheir policy preferences for cooperation with powerful neighbors has been wellexplored by Steven David in what he called an “omnibalancing theory.” For an expla-nation of this theory and how it is different from the balance-of-power theory, seeDavid (1991: 233–256).

5 For the Bangladesh draft paper and the areas or items suggested for cooperation, seeMuni and Muni (1984: 35).

6 See Dhaka and Bangalore Summits’ declarations and joint press releases, Kathmandu,1986, p. 2.

Notes 219

7 The Bangladesh Observer, on December 6, 1985, published an interview with thePakistan President, Ziaul Haq, who eloquently spoke about the common heritage,culture, and necessities of regional cooperation in South Asia. He also mentioned theutility of a regional identity in South Asia and Pakistan’s sincere desire to makeSAARC a success. Similarly, all the leading newspapers in South Asia carried head-line news and editorials quoting statements from their respective leaders about thepositive aspects of regional cooperation in South Asia and the readiness of their coun-tries to make this endeavor fruitful.

8 See, SAARC (1988) published by Lok Sabha Secretariat, New Delhi, p. 53.9 The MOU on the Establishment of the Secretariat was singed on November 17, 1986, at

Bangalore, India, by the foreign ministers of the seven member countries of SAARC.The Memorandum contains 16 articles, which spell out various aspects of the Secretariat.My discussion about the features of the Secretariat is based on these articles.

10 The eight secretary generals of SAARC are Abul Ahsan from Bangladesh (January16, 1987–October 15, 1989); Kant Kishore Bhargava from India (October 17,1989–December 31, 1991); Ibrahim Hussain Zaki from the Maldives (January 1,1992–December 31, 1993); Yadav Kant Silwal from Nepal (January 1, 1994–Decem-ber 31, 1995); Naeem Ul Hasan from Pakistan (January 1, 1996–December 31, 1998);Nihar Rodrigo from Sri Lanka (January 1, 1999–2002); Q.A.M.A. Rahim fromBangladesh (January 11, 2002–February 28, 2005); Chenkyab Dorji from Bhutan(March 1, 2005–2008).

11 Some of the important achievements of SAARC during the first decade are asfollows. In 1987, a permanent SAARC Secretariat was established in Kathmandu.The SAARC Audio-Visual Exchange Program (SAVE) became operational inNovember 1987. The same year, a SAARC Food Security Reserve of 2,415,680 tonsof wheat and rice was established for use by member states in times of natural calami-ties. The decision to operationalize SAPTA is by far the most important achievementof the Delhi summit in 1995.

12 Colombo accused India for wrecking the Summit. See particularly the editorials ofDaily Observer and Daily News, November 8–9, 1991. Front page articles in PakistanTimes, November 14, 1991, also supported Colombo accusation about India’s role inwrecking the Summit. However, editorials in prominent newspapers in India – TheTimes of India (November 12, 1991), The Statesman (November 12, 1991), and TheHindu (November 13, 1991) – supported India’s decision. For the defense of India’sposition, see the article “SAARC: A ‘Summit Fiasco,’ ” in Mainstream December,1991.

13 For a detailed evaluation of SAPTA, see Chapter 6.14 For a detailed evaluation of SAARC Secretariat and Secretary General, see Ahsan

(1992, 2004).15 For detailed evaluation of the 12th SAARC Summit and its contribution to peace and

security in South Asia, see Mohsin (2005: 36–46).16 By 2006, 13 summit meetings of the Heads of State or Government have been held

respectively in Dhaka (December 7–8, 1985), Bangalore (November 16–17, 1986),Kathmandu (November 2–4, 1987), Islamabad (December 29–31, 1988), Male(November 21–23, 1990), Colombo (December 21, 1991), Dhaka (April 10–11,1993), New Delhi (May 2–4, 1995), Male (May 12–14, 1997), Colombo (July 29–31,1998), Kathmandu (January 4–6, 2002), Islamabad (January 2–4, 2004), and Dhaka(November 12–13, 2005). Going by the SAARC Charter mandate, South Asianleaders should have held 21 summits by 2006 instead of 13 summits.

5 The challenge of regionalism in South Asia

1 See Mattli (1999: 59–67).2 The two-nation theory was formally enunciated by Mohammad Ali Jinnah, the leader

220 Notes

of the All-India Muslim League Party at the Party’s annual session in Lahore inMarch 1940. According to this theory, Indian Muslims were a separate nation interms of their distinctive religious and sociocultural beliefs and practices. Hence, theMuslim-majority provinces in the northwest and the northeast of India should begrouped to constitute an independent state for the Muslims. The two-nation theorybecame the basis of partition of the subcontinent into two independent countries –India and Pakistan – in August 1947. For an excellent discussion of South Asia’shistory, the partition of India and the creation of Pakistan, see Bose and Jalal (1998:Chapters 16–17).

3 Muni and Muni (1984: 29–31).4 According to Foreign Policy Magazine’s 2006 rankings of failed states, Pakistan is

ranked number 9 among 148 countries surveyed. It is followed by Afghanistan (10),Myanmar (18), Bangladesh (19), Nepal (20), and Sri Lanka (25). Foreign Policy,May–June 2006.

5 See Prime Minister Manmohan Singh’s speech at the Ministry of External Affairs(MEA) in Delhi on May 5, 2006, as published in India Today, June 5, 2006. Italicizedemphasis is mine.

6 Johnson and Merchant (2006).7 Sri Lanka’s ruling party (People’s Alliance Party) controlled only 46 percent of the

total seats in the Lower House of the Central Legislature and has secured 48 percentof the total votes polled in the election of 1994. Although Mrs ChandrikaKumaratunga of People’s Alliance Party was reelected as the President of Sri Lankafor the second six-year term in the election on December 21, 1999, her victory marginwas sharply lower than in 1994. She received 51.12 percent of total vote, a decline of11 percentage points from the November 1994 Presidential Election. This declinefurther contributed to her weakness to pursue any bold domestic or regional policyinitiatives. See Mydans (1999).

8 Some features of “quasi-democracy” as discussed in this article are identified byMyron Weiner.” See Weiner (1986).

9 For Bangladesh election in 1991, see A Report on the Elections to the Fifth NationalParliament, February 27, 1991 (Dhaka: BAMNA, 1991), pp. 62–63; for 1996 elec-tion, see The Bangladesh Times, June 23, 1996.

10 Since the late 1980s, no single political party in India has received absolute majority inthe Lok Sabha (lower house of the Parliament). As a result, only coalition governmentshave been possible at the center. See David Gardner, “Indian Parliament in Disarrayover Hindu Nationalists,” Financial Times, February 25, 2000. According to the Elec-tion Commission of India, there are over 550 registered political parties in India repre-senting different shades of ideologies, regions, caste, color, and socioeconomic factors.Different preferences of these political parties have contributed significantly to theweakness of central government in India since the late 1980s. See V.J. Thomas, “IndiaHas Largest Number of Parties,” Times of India, July 26, 1999. For an insightful discus-sion on several aspects of government weakness in India, see Kohli (1990).

11 Policy of Nuclear ambiguity refers to a country’s official assertion that it is not pro-ducing nuclear weapons despite its capability of acquiring a nuclear explosive device.The central objective of this policy is to send a signal to another nuclear capable statethat the country has a deterrent that is less threatening than an explicit weapons capa-bility would be but that is serious enough to induce caution in any planning of unilat-eral attack. See Subrahmanyam (1984b: 132–133).

12 On India’s capability to produce nuclear weapons, see U.S. Department of State,Director of Intelligence and Research, “Research Memorandum, INR-16,” U.S.Department of State, Washington, DC, May 14, 1964. For a discussion on Bhabha’srequest to make a nuclear bomb, see Kapur (1976: 221).

13 For a detailed official account of the US decision to send the Enterprise into Bay ofBengal and its consequences, see Schwartz and Derber (1990: 103–106).

Notes 221

14 See Ramanna (1991: 88–89). According to one estimate, the cost of India’s Bombwas US$370,000. See Nature, 250, No. 5461 (July 5, 1974), p. 8.

15 In an interview with widely respected Indian journalist, Kuldip Nayar, on January 28,1987, Dr A.Q. Khan reportedly asserted that Pakistan had acquired the capability tobuild nuclear bombs. See Ottoway (1987).

16 On China’s sale of M-11 and atom parts to Pakistan, see Weiner (1996).17 See Proceedings of the 2000 Carnegie International Non-Proliferation Conference,

March 16–17, 2000, Washington, DC: Carnegie Endowment for International Peace.18 For detailed explanation of “stability/instability paradox” in South Asia, see Ganguly

(2001: 126–129). For an earlier discussion of this paradox in the US–Soviet nuclearrelationship, see Snyder (1965: 184–201).

6 Domestic politics and regional economic cooperation in South Asia

1 Quoted in Chase (2005: 23).2 For detailed discussion and policy recommendations on SAFTA, see Newfarmer

(2004).3 For insightful discussion, see Panagariya (1999: 353–377); Pama, M. “Free Trade

Regime in South Asia,” The Economic Times, July 30, 1998.4 For various estimates of Indo-Pakistan trade, see Newfarmer (2004).5 SAPTA was launched at the Dhaka Summit in April 1993. After two years of negoti-

ation, SAPTA came into effect on December 7, 1995, with the ratification of the lastSAARC member Pakistan in October 1995. At the eighth SAARC summit in NewDelhi (1996), the South Asian Heads of Governments took a decision to createSAFTA by 2005.

6 For a discussion, see Rizvi (1993: 159–162).7 Initiated by Mauritius in 1995, IORARC was formally launched in March 1997 with

its first Ministerial Meeting in Mauritius from March 5 through 7, 1997. The 14 initialmembers of this new regional grouping are India, Australia, Mauritius, Singapore,Indonesia, Malaysia, South Africa, Oman, Madagascar, Mozambique, Sri Lanka,Tanzania, Yemen, and Kenya. The organization’s secretariat is located in Mauritius.

8 ECO was formed in February 1992. Its members are Pakistan, Iran, Turkey, and thenewly independent Central Asian republics – Azerbaijan, Kazakhstan, Turkmenistan,Uzbekistan, Tajikistan, and Kirghizstan. The primary objective of this organization isto facilitate trade and other economic cooperation among member countries.

9 OIC has 57 members, most of which are Islamic countries from Africa, Middle East,Central Asia, South Asia, and Southeast Asia. Although India has shown interest tobecome a member of OIC on the basis of its substantial Muslim population, it only enjoysan observer status in the organization because of Pakistan’s opposition to its membership.India’s request for OIC membership is supported by Egypt and Saudi Arabia.

10 The then Indian Prime Minister I.K. Gujral took active initiatives to persuade SAARCleaders to agree to advance the date of SAFTA from 2005 to 2001. See Bagchi, I.‘SAARC Wants Economic Union, a la EU’, The Economic Times, July 25, 1998;Najeeb, M. “Towards SAFTA: Import Tariff on 1200 Items to Go,” The EconomicTimes, May 16, 1998.

11 To insure effective implementation of SAFTA agreement, the Islamabad Summitdecided to establish the SAFTA Ministerial Council as the highest decision-makingauthority and a Committee of Experts (COE) responsible for monitoring implementa-tion of SAFTA programs. The Committee of Experts is required to update the Minis-terial Council every six months on the progress of the agreement.

12 Set up in 1997, BIMSTEC, named after its founding members, was known asBangladesh, India, Myanmar, Sri Lanka, and Thailand Economic Cooperation. Withthe entry of Nepal and Bhutan, its name was changed to Bay of Bengal Initiative forMulti Sectoral Technical and Economic Cooperation. BIMSTEC focuses on enhanc-

222 Notes

ing cooperation among its member countries in crucial areas like transportation links,trade, investment, tourism, fisheries, and agriculture. BIMSTEC includes five of theseven member countries of SAFTA with the key exclusion of Pakistan.

13 India’s policy of positive economic unilateralism has its origin in what is called asGujral Doctrine, named after India’s former Prime Minister, I.K. Gujral. This strategyessentially requires India to pursue favorable economic policies toward her smallneighbors in terms of market access and tariff reductions without expecting recipro-city from them. India’s FTAs with her small neighbors are based on this principle.

14 In July 2006, the SCCI conducted a survey on SAFTA to gather inputs from businessstakeholders – business organizations, industrialists, traders, and service providers.About 2,000 questionnaires were sent out to chosen business stakeholders to obtaintheir feedback on SAFTA. Only 20 percent response was received. This shows a lackof interest and enthusiasm in SAFTA activities. See Survey Report on SAFTA (2006).

15 One anomaly related to the negative list is that even items not produced in a SAARCcountry is put in the negative lists. For example, automobiles have been put in thenegative lists by SAARC members other than India. Auto manufacturers from Indiastrongly argue that items not being produced and imported significantly in a membercountry should not be placed in the negative list. So far, no decision on this has beenmade.

16 For an insightful discussion of why different coalitions pursue different regional andforeign policies, see Solingen (1998: Chapters 3 and 6).

17 For a discussion on why weak liberalizing coalitions prefer scapegoating strategy, seeSolingen (1997: 68–100).

18 For a discussion on the authoritarian regimes’ preference for extreme and violentsolutions of their bilateral problems with democracies, see Solingen (1996: 81–86);Snyder (1993: 104–140); Mesquita and Lalman (1992).

19 See “Who Really Runs Pakistan?” The Economist, June 26, 1999; Perlez (1999: A.1);Dugger (1999: A9); Weisman (1999: Section IV, 8); Kumar, D. “Secret Tapes Barethe Strategy of a State within a State,” Times of India, June 12, 1999.

20 For detailed discussion, see Bearak (1999).21 For a discussion on spoke–spoke cooperation initiatives at regional level, see Haggard

(1997: 41–42).

7 Domestic preferences for regional cooperation: cross-nationalcomparisons

1 For a detailed discussion of the utilitarian and affective dimensions of support forEuropean Union, see Lindberg and Scheingold (1970); Hewstone (1986: 129–135);Gabel (1998: 16–35).

2 The study method consists of face-to-face interviews of approximately 45 minutes’duration with individual respondents in five South Asian countries. The targetsample was 820 with 780 responses. All the respondents have college and more thancollege degrees and their socioeconomic status is much higher than general popu-lation. About 20 percent respondents were women. About 75 percent of respondentswere in the age bracket of 35–55, while about 25 percent were in the age bracket of56–70. Two types of response percentages are given in this study: percentages aregiven on the basis of total number of responses in a category and percentages arealso calculated on the basis of total number of responses from a particular occupa-tional group in a given category. Only those statistically significant findings arereported in the discussion.

3 Equity theory, as developed in social psychology and economics, is broadly con-cerned with how people judge what is just, fair, deserved, or equitable and how theseperceptions influence behavior. Although equity theory has been applied to variousissues, the first systematic application of the theory to analyze perceptions of the

Notes 223

European Community was made by Hewstone (1986). In this study, by asking separ-ate questions about which member states are likely to contribute and benefit most orleast, the level of perceived inequity of the member states of SAARC has been ana-lyzed. For further discussion and literature review on equity theory, see Hewstone(1986: 129–135).

4 This percentage of response is based on the responses of Indian respondents only.5 These responses are estimated from the data set developed by the author for each indi-

vidual SAARC country.6 These responses are from author’s data set.7 Estimated from author’s data set.8 Some respondents expressed disappointment over few concrete achievements of

SAARC, including the much touted two regional conventions on terrorism (1987) andnarcotic drugs (1990). The low appraisal of the SAARC Food Security Reserve by therespondents from smaller South Asian countries is due to their frustration in not gettingadequate and timely support from the reserve during times of natural disasters such asdrought, cyclone, and flood. A few respondents also mentioned the lack of resources tocarry out SAARC-related projects and expressed their disappointment with the fre-quent cancellation of SAARC annual summits.

9 Estimated from author’s data set.

8 Conclusion

1 Interview with Rajni Kothari at New Delhi, June 13, 1992; 2002.2 Our analysis supports a conclusion similar to what Karl Deutsch et al. (1967) con-

cluded about European Union four decades ago – that is “Europe remains a Europe ofnation states.”

3 For some characteristic samples of K. Subrahmanyam’s earlier writings on India’ssecurity dynamics, see Subrahmanyam (1981, 1984a).

4 Air Commodore Jasjit Singh, noted for his study of airpower, expressed this viewduring my interview with him in New Delhi.

5 A number of journalists and civil servants from India and Sri Lanka have particularlymentioned the OIC and the ECO examples to describe Pakistan’s shift of interestsfrom SAARC. These elites argue that Islamabad is more likely to align its foreignpolicy and make trading arrangements with the Central Asian republics and Islamicbelt than with SAARC countries. Most Pakistani respondents, however, disagree withsuch views.

6 Those familiar with game theory literature will agree that many episodes in Indo-Pakistan relations can be explained in terms of the Prisoner’s Dilemma. See alsoJervis (1976, 1988).

7 For a detailed discussion on how the leader’s perception and misperception influencethe decision-making process, see Jervis (1976); Axelrod and Keohane (1985:226–254).

8 For a discussion, see Rizvi (1993: 159–162).9 For the linkage between the resolution of Kashmir dispute and growth of trade in

South Asia, see Johnson (2005).10 For a detailed discussion on pragmatic antidependency and other strategies, see Haas

(1990: 225–226).11 For a useful discussion on this theme of citizen diplomacy, see Warner and Schuman

(1987).12 In Israel, one of the most successful programs for bridging the gap between Jewish

and Arab children is a soccer camp in which Jewish and Arab star players (eachadmired in both communities) participate together as coaches (Goldstein 1994: 420).The historic process of Sino-American rapprochement of 1971 is said to have begunafter the US ping-pong team’s first official visit to China.

224 Notes

13 For a useful discussion on how knowledge can transform the decision-makers’ inter-est and improve the prospects for regional and international cooperation, see Stein(1983: 49–53).

14 For a discussion on engines of regionalism in Northeast Asia, see Rozman (2004:376–377).

Notes 225

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240 Bibliography

Index

academia, support for regional cooperation85

affective and utilitarian support 38–9,171–2

Afghanistan, Soviet invasion of 86Afro-Asian conference 81Ahmad Khan, Saiyid 56Ahmad, Nazir 135Alberuni 54Ali, Rahmat 56amalgamated security communities 5Andean Pact 14Antolik, Michael 212Arthashastra (Kautilya) 53ASEAN Free Trade Area (AFTA) 14, 163ASEAN Regional Forum (ARF) 204Asian Economic Planners conference 81Asia-Pacific Economic Cooperation

(APEC) 158Asian Relations Conference (1947) 79–80Asian Union (proposed) 80Asian Way to cooperation 15ASSOCHAM 147Association of South East Asian Nations

(ASEAN) 14, 35, 85Axelrod, Robert 145

Baguio Conference (1950) 80balance of power and hegemony 111, 113,

114, 115, 116Bandara, J.S. 148–9Bandung conference 81bandwagoning 117–18Bangladesh 46, 47, 48; birth of 63;

economic liberalization policy 159;government strength 128, 129, 131–2;implications of emergence of 114;

initiative towards regional cooperation82–6; president’s motivation forcooperation 82–4; relations with India66–9, 194; relations with Pakistan 68

Beg, Mirza Aslam 138Bhabha, Homi J. 133Bhagwati, J. 1Bhutan 47, 127, 128Bhutto, Benazir 98–9Bhutto, Zulfiquar Ali 60bilateral and subregional initiatives 164BIMSTEC 164, 223Birendra of Nepal, King 82, 218Bose, S. 55–6Britain in India 55–6business: efforts regarding SAFTA 164–5;

influence on political actors 37Buzan, Barry 58

CD game 145Central American Common Market

(CACM) 14, 35Chadwick, Richard 6Chakma Peace Accord 126China: impact of support from 77;

involvement of 207–8; and relationsbetween India and Nepal 70, 71, 73

Chola kingdom 54Confederation of Indian Industry (CII) 165citizen diplomacy 209–10coalitions, political and free trade

agreements 165–8Cohen, Stephen 121–2Cold War 80collective action problems 144–5Colombo Powers Conference 81commitment mechanisms 35–6

Figures are indicated by bold page numbers, tables by italics.

Committee on Studies for Cooperation inDevelopment (CSCD) 85

communication, lack of transparency in132–3

communication links between countries156

communications theory 4–7communitarian perspective on regional

cooperation 15community, sense of between nations 5–6community policy 20–4, 22cooperation, regional 15–16; affective and

utilitarian support for 38–9; attitudestowards expansion of 181–2, 182;Bangladesh initiative 82–6; buildingengines of 212–15; as community policyissue area 20–4, 22; and domesticpolitics 16–17; early efforts 79–82; theIndia factor 195–8; low level ofaffective support for 174, 176; monetary214–15; nuclear power not obstacle to182; and perceptions of inequity 176–8,177, 184; and preferences of politicalactors 31–6; and security 34–5; in SouthAsia 40–4; and strength of government29–31, 31; as a two-level game 24–6;see also regionalism

cooperative security 107–8credibility gap of SAARC 184, 185, 191–2cricket diplomacy 210currency 214–15

Dahl, Robert 26democracy: deficit democracy 127; quasi

democracy 130, 221Deutsch, Karl 4–7, 36–7developing countries: communitarian

perspective on regional cooperation in15; eurocentric explanations ofintegration 12–16, 20; and liberalization2

development fund 215distributional politics 42domestic issues, priority given to 194domestic market size 144domestic politics: actors in 27–8; and

foreign policy 20–4, 22; institutions of28–9; and regional cooperation 16–17

domestic preferences for regionalcooperation: affective/utilitarian based171–2; elites 170–2; national identity172, 173, 174; and national image174–6, 176, 183–4; solidarity with othercountries 174, 183, 193

Dougherty, J.E. 7–8Dubey, Muchkund 214–15Durkheim, Emile 5

East African Common Market 34–5Easton, David 38–9Economic Cooperation Organization

(ECO) 158, 197, 222economic growth rates in South Asia 49economic liberalization policies 156–9economics as motivation for regional

cooperation 186ecosystem of South Asia 51elites 43–4, 170–2; elite structure and elite

opinion in South Asia 130energy, coordination of resources 214entrapment, regionalist 116–17equity theory 223–4; perception of

inequity 176–8, 196ethnic politics/violence 51–2, 120–6ethnolinguistic movement, agitation 122–3Etzioni, Amitai 13Europe: regional integration in 6; support

from 206European Coal and Steel Community

(ECSC) 6European Union: East and Central

European countries 35; and the revivalof regionalism 1, 2; support for 39

evaluation of SAARC 178–82Evans, P. 36externalities (positive and negative) 33–4

failing states 119, 221feedback: positive and negative 36–7FICCI 165foreign direct investment, restrictions on

155foreign policy and domestic politics 20–4,

22forum, South Asian regional 203–4free trade agreements: bilateral and

subregional initiatives 164; and politicalcoalitions 165–8, 166; see also SouthAsian Free Trade Agreement (SAFTA)

Friedrich, Carl J. 6functionalism 7–8, 9Gabel, M. 39Gandhi, Indira 84, 87, 89, 134, 198Gandhi, Mohandas Karamchand (Mahatma

and Bapu) 56Gandhi, Rajiv 91, 96–7, 98–9, 125, 198,

210

242 Index

Ganges water sharing 67George, Stephen 9Ghulam Ishaq Khan 130global interdependence 10globalization 204–5government, strength of 29–31, 31,

127–33, 128Gowda, Deve 166Grotius, Hugh 5Group of Three (G-3) FTA 14Gujral, I.K.: Gujral doctrine 132, 157Gulf Cooperation Council (GCC) 14, 35Gupta empire 53–4Gyanendra, King 102

Haas, Ernst 2, 3, 6, 8, 9–10, 12Haas, Michael 14–15, 212Hansen, Roger 10, 13hard power 201Hasina, Sheikh 131Haq, Ziaul 84, 89, 91, 136hegemony: and balance of power 112, 113,

114, 115, 116; bandwagoning 117–18;declining 118–20; and India 111; andregional coordination 110, 111;regionalist entrapment 116–17

history of South Asia, influence of 52–7,193–4

hub-and-spoke initiatives 168Hussain, Ross Masood 99

identity, regional 172, 172, 174, 175,192–5

image, national 174–6, 176, 183–4import substitution industrialization (ISI)

policies 154–5increasing returns to scale (IRS) 143–4India 46, 47; and Bangladesh 66–9, 194;

British domination of 55–6; and China207–8; and Delhineation 116–17;discussions with Pakistan at SAARCsummits 100–1; dominance in theregion 66; dominance of and Pakistan114, 115, 116; and ethnic crisis in SriLanka 124–5; ethnic politics in 121; andexternal influences 76; as factor insuccess of SAARC 195–8; andglobalization 204–5; governmentstrength 128, 129, 132; as hegemonicpower 111; Indo-Pakistan war, 197162–4; and Japan 206–7; Kashmirdispute 59–62, 202–3; leadership role of199–202; limited control overBangladesh and Sri Lanka 77; and

Nepal 69–73; non-attendance at SAARCmeetings 101–2; nuclear power 114,116, 133–5, 137–9; and Pakistan 52,57–9, 64–6, 167–8, 183, 193–4;Pakistan and evolution of SAARC 86–8;regional imbalances 52; scale ofindustry 147; and security 203–4; shiftin economic liberalization policy 157–8;and Sri Lanka 73–6; transregionaltrading arrangements 164

Indian National Congress, 56–7Indian peace keeping force (IPKF) 124–5,

210industry in South Asia 147–9inequity, perceptions of 176–8, 177, 196Inglehart, R. 6institutions: institutional structures 26–7,

127; of domestic politics 28–9; publicsupport for 38

integration: dynamic effects of 142–3;eurocentric explanations of indeveloping countries 12–16, 20

integration theory: functionalism 7–8, 9;intergovernmentalism 11–12; neo-functionalism 8–11; transactionalism4–7

intergovernmentalism 11–12international relations theory 5intraregional trade 151–6, 152, 153, 186IORARC 158, 200, 222Islam 54–5issue area 20–24, 38; foreign policy issue

area and domestic policy issue area21–22; community policy

issue-linkage 10; fragmented issue linkage10

Jalal, A. 55–6Janatha Vimukthi Peramuna (JVP) 124Japan, relations with 206–7Jayawardene, J.R. 84, 96–7Jinnah, Mohammed Ali 56–7joint projects 212–13

Kargil War 131, 137, 139Kashmir dispute 59–62, 202–3Kautilya 53Khan, Abdul Qadir 136Knight, Jack 28Kothari, Rajni 191Krugman, Paul 143Kumaratunga, Chandrika 106

late regionalism 211–12

Index 243

Latin American Free Trade Association(LAFTA) 14

Latin American Integration Association(LAIA) 14

leadership: regional 146; role of India199–202

liberal intergovernmentalism 12Lijphart, Arend 5Lindberg, L.N. 6, 8, 39, 174–5logrolling strategies 85LTTE 124–5

Mahavamsa 123Maldives 47, 127, 128, 129mandala doctrine 53March, J. 28market gains logic 157market size of South Asian countries 149,

150Mattli, Walter 8–9, 12, 145–6Maurya empire 52–3media coverage 195Mercado Comun del Sur (MERCOSUR)

14, 161Mill, John Stuart 143Milner, Helen 26–7, 32, 33monetary cooperation 214–15Morarji Desai 197Moravcsik, Andrew 12, 15–16motivation of political actors 31–3Mughal empire 55Mukherji, I.N. 160Musharraf, Pervez 131, 167, 178Muslim League 56–7Mytelka, Lynn 13

national and regional identities 192–5National Food Security Reserve 181national image 174–6, 176, 183–4Nehru, Jawaharlal 80, 82neo-functionalism 8–11neo-liberal institutionalism 11–12Nepal 47, 48; economic liberalization

policy 159; government strength 127,128; and India 69–73

Nerves of Government, The (Deutsch) 36–7NICs 49North, Douglass 28North American Free Trade Agreement

(NAFTA) 2nuclear power: as deterrent for India and

Pakistan 137–9; India 133–5; notobstacle to regional cooperation 182;Pakistan 59, 114, 116, 135–7

Nuclear ambiguity 221; nuclear dual trackpolicy 134; nuclear deterrence 137–9;PNE 134–5; comprehensive test bantreaty (CTBT) 135

Nye, Joseph 8, 10, 201

office-retaining motivation 32–3; power-retaining motivation 42

OIC 197, 222Olson, J. 28Organization of Asian States (proposed)

80organizational structure of SAARC 91–5,

92, 95

Pakistan 46, 47; discussions with India atSAARC summits 100–1; economicliberalization policy 158–9; ethnicpolitics in 121–3; external assistance for77; foreign assistance 58–9; formationof 56–7; and globalization 205;government strength 128, 129, 130–1;India and evolution of SAARC 86–8;and India’s dominance 114, 115, 116;Indo-Pakistan war, 1971 62–4; Kashmirdispute 59–62, 202–3; nuclear power59, 114, 116, 135–7, 137–9; politicalcoalitions and FTAs 166–8; regionalimbalences 52; relations withBangladesh 68; relations with China207–8; relations with India 52, 57–9,64–6, 183, 193–4; and security 203–4

Palmer, Norman 14Panagariya, A. 161Pareto frontier 26partition of Indian subcontinent 56–7Pentland, Charles 21, 23–4perceptions of inequity 176–8, 177, 184, 196permissive consensus for European

integration 3Pfaltzgraff, R.L. 7–8pluralistic security communities 5political actors: influence on of societal

actors 36–7; preferences of 31–6political coalitions and free trade

agreements 166Political Community and the North

Atlantic Area (Deutsch) 4–5polyarchies, states as 26–7population growth in South Asia 49positive economic unilateralism, Indian

policy 164, 223poverty: SAARC Poverty Alleviation Fund

103; in South Asia 49

244 Index

Prabhakharan, V. 124pragmatic antidependency 204preferences: of political actors 31–6; of

societal actors 36–9Premadasa 125press coverage 195prisoners’ dilemma (PD) game 144–5promotion of regional identity 208–11public information campaign 210–11public opinion 39public support 39Putnam, Robert 24–6, 28

quasi-democracies 130

Rahamat Ali. Choudhary 56Rahman, Ziaur 82–4Raja Mohan, C. 76, 107–8Rajapakse, M 130Rao, Narasimha, 132Ravenhill, John 13regional cooperation, defined 15;

facilitating conditions for regionalcooperation 18, 19; deeper regionalcooperation 3; deep cooperation 217;difference between deep cooperationand deep integration 217

regional identity: and national identity192–5; promotion of 208–11

regionalism: eurocentric explanations of indeveloping countries 12–16, 20;formation and impact of SAARC 3;revival of 1–3; see also cooperation,regional

regionalist entrapment 116–17reverberation, positive and negative 25Rosenau, J.N. 21, 23ruling coalitions 165–7Russia 207

SAARC Regional Forum 204; see alsoSouth Asian Association for RegionalCooperation (SAARC)

scale of industry in South Asia 147–9scapegoating 166–7Scheingold, S.A. 39, 174–5Schmitter, P.C. 9, 12scholarship programs 209second-image-reversed perspective 25sectoral integration 8–9security: complex: 58; dilemma 57–8, 114,

195, 203; impact on of Soviet invasionof Afghanistan 86; and India andPakistan 203; issues as barriers to trust

195; multilateralism 107, 204; andregional cooperation 34–5, 84;relationships between countries 58–9;and SAARC 105–8

sensitive lists 162–4, 163sepoy (or sipahi) mutiny 55, 219services, liberalization of 162Sharif, Nawaz 131, 137, 167Shastri, Lal Bahadur 124, 134Simla agreement 63Singh, Manmohan 119–20, 200single currency 214Smith, Adam 143Snidal, Duncan 145societal actors, preferences of 36–9soft power 201solidarity with other South Asian countries

172, 174, 175, 183, 193Solingen, Etel 30South Asia: commonalities between

countries 45; complementarity ofeconomies 151; dominance of India 66;economic growth rates 49; ecosystem of51; ethnic politics in 120–6; externalinfluences and regional balancing 76–8;and globalization 205; identity in 172,182–3, 192–93, 208–9; increasing ethnicviolence in 51–2; Indo-centrism 46;intraregional trade 151; lack of commonexternal threat 77; lack of growth ofregionalism 45, 77–8; lack oftransparency in communication 132–3;population growth in 49; poverty in 49;regional complementarities 148;regional cooperation in 40–4 (see alsocooperation, regional); regionalimbalences 51–2; scale of industry147–9; security relationships betweencountries 58; shared characteristics ofcountries 49, 50, 51–2; see alsoAfghanistan; Bangladesh; Bhutan;India; Maldives; Nepal; Pakistan; SriLanka

South Asian Association for RegionalCooperation (SAARC) 14; benefits atcultural, technical and scientific levels178–9; benefits from informal meetings96–9, 178–9; Colombo Summit 99–100;credibility gap of 184, 191–2; criticismsof 103–5; and cross-border ethnicidentities 126; Dhaka Summit 89–91;early meetings 88–9; evaluation of108–9, 178–82; financial arrangements95; formal beginning 88–9; formation

Index 245

South Asian Association for RegionalCooperation (SAARC) continuedand impact of 3; implications of eliteindifference 185; India and Pakistandiscussions 99–101; India as factor insuccess of 195–8; Islamabad Summit98–9; Kathmandu Summit 97–8; keyindicators of member countries 47; aslate regionalism 211–12; low level ofaffective support for 174; National FoodSecurity Reserve 181; negative issues of180, 181; objectives of 89;organizational structure 91–5, 92, 95;and people-to-people contact 180–1; andperceptions of inequity 176–8, 177;positive issues of 179, 181; PovertyAlleviation Fund 103; reasons for slowgrowth of 120; regional centers 93–94,104; SAFTA 102; secretariat 94–5, 104;secretary general and directors 94–5;and security 105–8; socio-economicprofiles of member countries 50;transregional and international links102–3; unanimity and contentious issues104–5

South Asian Development Fund (SADF)215

South Asian Free Trade Agreement(SAFTA) 102, 160–5, 179–80

South Asian Growth Quadrangle (SAGQ)164

South Asian Monetary Fund (SAMF) 214South Asian Preferential Trading

Arrangement (SAPTA) 159–61South Pacific Forum (SPF) 14South-South cooperation, initiatives for 85Southern African Development

Coordination Conference (SADCC) 35spillback and spillaround 9spillovers 8–9, 217spoke-spoke initiatives 168sports competitions 210Sri Lanka 47, 48; economic liberalization

policy 159; ethnic politics in 123–5;government strength 127, 128, 129,129–30; relations with India 73–6;Tamil-Sinhalese conflict 74–6, 194

states: categorisation of as weak or strong29; as polyarchies 26–7

stop-and-go pattern of growth of regionalcooperation 30, 141, 218

strength of government 29–31, 31, 127–33,128

Subrahmanyam, K. 138, 196subregional initiatives 164Sundarji, K. 138support, affective and utilitarian 38–9synergy 25

Tamils situation in Sri Lanka 74–6tariff barriers and revenues 154tariff liberalization program (TLP) 162textile industry 148–9Thapar, Romila 53Third World countries: communitarian

perspective on regional cooperation in15; eurocentric explanations ofintegration 12–16, 20; and liberalization2

Third World regionalism 12–13tourism programs 209Trachtenberg, Marc 138trade liberalisation: and domestic market

size 144; increasing returns to scale(IRS) 143–4; and trade complementarity144

transactionalism 4–7transparency in communication, lack of

132–3transport infrastructure 156, 213–14turbulent non growth 3two-level game, regional cooperation as

24–6two-nation theory 57, 220

United States: and regional integration 1;support from 205–6

utilitarian and affective support 38–9,171–2

Vajpayee, A.B. 101, 103, 119, 132, 135,166, 214

virtuous circle argument 156–7visa relaxation 209

Weber, Max: theory of social change 218win-sets 24–5Wriggins, Howard 58

Yu, W. 148–9

Zia, Khaleda 131

246 Index