Time to give Saarc a facelift

By Kaushik Basu

Professor of economics, Cornell University

Most people, after participating in a conference, will tell you what a "great" conference it was.

To let the uninitiated in on a secret, this is not because all conferences are so good, but because conference organisers do not like to invite people who spill the beans and let those who were not invited know how bad the conference was.

So, if you wish to remain on the conference circuit, there is no better guarantor than to have a reputation for raving about conferences.

Despite knowing this, I have to admit that the one conference of the South Asian Association for Regional Co-operation (Saarc) that I have attended was utterly disappointing.

The dressed-to-kill women entrepreneurs from Bangladesh, India and Pakistan were stunning, there can be no denial. But by all criteria, excepting the sartorial, the conference was a failure.

Rather like the region, at least till recently.

The sports and cultural wing of this association was founded almost exactly 25 years ago, though Saarc as an economic unit was formally established in 1985, picking up on an idea that was first proposed by Bangladesh in the early 70s.

It has, for the most part, been a rudderless organisation, initially, of seven nations - Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka - and now eight, with Afghanistan joining the group earlier this year (just in case someone thought the association was short on failed states).


This is a cluster of very poor nations and it is not surprising that Saarc has been treated as a non-entity by the global powers.

It is, however, time to give Saarc a facelift. It has the potential to be an important organisation with far-reaching economic and political consequences. The reason is that South Asia as a region has done remarkably well in terms of growth in recent years.

The India story is, of course, well known, and has been written about widely by the regional and international media.

What most people, however, do not know is that India is not as big an outlier in the region as it is globally.

The entire region of South Asia has had a growth rate of 5% per annum over the last 20 years, which is double the world's average.

It is true that the region's average is pulled up by India, which has been among the world's three fastest growing economies (along with China and Vietnam).

But, if we take the most recent five years for which we have detailed data, India, Bangladesh, Pakistan and Sri Lanka with growth rates of, respectively, 6.9%, 5.3%, 4.8%, and 4.2%, have all out-performed the world average of 2.8%.

Strange growth

The country that has consistently lagged behind economically is Nepal. Afghanistan would also fall into this category but only if the word consistent was not used. Thanks to war and insurgency it has seen the wildest fluctuations in income.

The Maldives, which is the richest among the Saarc nations in terms of per capita income, has also seen a lot of fluctuations, caused mainly by natural phenomena, such as the tsunami.

Much has been written about India's strange pattern of growth, whereby it seems to be going from an agrarian economy to a service-based one, skipping over the "manufacturing phase", which virtually all nations that are today considered wealthy went through.

Of India's national income, well over 50% comes from the services sector. This is very unusual for a poor nation, but what is equally surprising and is less known is that all the large South Asian nations share this trait.

The services sector contributes more than 50% of the national income of Pakistan, Bangladesh and Sri Lanka.

What sets these countries apart from India however is that, within the services sector, India has seen the greatest growth in high-end activities such as finance, information technology and telecommunications, whereas for the other nations it has been the more traditional and informal activities that have seen rapid growth.


While the expansion of the aggregate economy has been laudable, where the Saarc countries have done badly is in removing poverty and assuring a basic standard of living for the masses.

India is home to the largest number of poor people in the world. Basic literacy in the region ranges from over 90% in Sri Lanka and the Maldives to 28% in Afghanistan. India's score of 65% is better than those of Pakistan and Bangladesh, but worse than even the poor sub-Saharan African nations.

Afghanistan is lagging behind economically

Saarc countries have done badly in removing poverty

Where the Saarc countries have done badly is in removing poverty and assuring a basic standard of living for the masses

India is among the world's three fastest growing economies

Life expectancy in the region ranges from 71 years for Sri Lankans to 46 years for the Afghans. India, Pakistan and Bangladesh are all around 64 years, a far cry from the world's longevity leader - Japan, with 82 years.

As Saarc matures, it can have a glorious adulthood.

For that it should capitalise on the region's superior growth performance and work to attract global trade and investment to the entire region, and to open up trade among the South Asian nations.

And, over and above this, it should bring to the region best practices for battling poverty, illiteracy, and ill-health.

India is home to the largest number of poor people in the world