31/07/2006-Foreign Secretary on 31 July 2006, after conclusion of the first day of the SAARC

(i) Operation of SAFTA: As you are aware, A framework Agreement on South Asia Free Trade Area (SAFTA) was signed during the 12th Summit in Islamabad in 2004. Upon successful resolution of outstanding issues, SAFTA has come into effect retrospectively from January 1, 2006. SAFTA has been operationalised w.e.f. July 1, 2006 through a phased Trade Liberalisation Programme (TLP), which covers all tariff lines except those kept in the Sensitive (Negative) List by each member country.

Government of Pakistan has issued Notification (SRO No. 695(1)/2006) on July 1, 2006, regarding tariff concessions extended under SAFTA to SAARC countries. The Notification states that goods can be imported into Pakistan under agreed SAFTA Tariff Concession “subject to import policy order notified by the Ministry of Commerce”. The last qualification refers to the import policy order of July 21, 2005 which limits SAFTA tariff concessions for India only on items on the existing bilateral Positive List. This is clearly a violation of Article 23 of the SAFTA Agreement which states very clearly and I quote “This Agreement shall not be signed with reservations, nor will reservations be admitted at the time of notification to the SAARC Secretariat of the completion of formalities”.

This matter does not concern India alone, even though India has been singled out. This is not merely a technical or bilateral issue. It is a negation of SAFTA and jeopardizes the implementation of the Agreement. It affects all contracting parties and questions the future of the Agreement.

The objective of SAFTA is to promote free trade among member countries on a regional basis. The agreement operates on the basis of agreed “sensitive lists”. Pakistan negotiated a regional agreement with member countries of SAARC for as long as 4 years, with complicated and difficult negotiations on the respective sensitive lists.

A lot of time and effort was invested in good faith while negotiating SAFTA. All that effort has now become infructuous, because Pakistan has no intention to honour an understanding solemnly agreed to by all member countries. The question being asked is: Why did SAARC member countries spend 4 years negotiating this Agreement and its annexes including the Sensitive List if earlier country specific import policy takes precedence over SAFTA commitments?

Pakistan’s action contradicts the public pronouncements made by its leadership, who have publicly stated that once SAFTA is operationalised, it would constitute an MFN plus trading regime. It also contradicts the commitments made by the Leaders of the 13th SAARC Summit when they had reaffirmed their commitment to accelerate cooperation in economic and commercial fields. They had stressed the timely entry into force of the SAFTA Agreement, stating that launching of SAFTA would mark an important milestone on the road to a South Asia Economic Union.

This matter needs to be resolved with utmost urgency; otherwise SAFTA may well remain an Agreement only in words, with no way to implement it. This concerns all member states not just India. SAFTA should be implemented in the spirit in which it was negotiated with all parties living up to the commitment they have solemnly undertaken. This has a bearing on the success of the SAARC process itself, affecting all other aspects of cooperation among the Member countries.

Basically, this is what we have put forward during the Standing Committee meeting under the item of Economic Cooperation in SAARC, because we believe that economic cooperation under SAARC cannot be advanced unless this matter is resolved. After having raised this issue in the SAARC Standing Committee, of course we are also going to raise this matter in the SAARC Ministerial Council meeting because we believe this is a policy matter and a matter which requires urgent consideration by the SAARC Council of Ministers.

(ii) Terrorism: The other issue that we also discussed was one of terrorism, which is again of great importance to all the SAARC countries. We have stressed the importance of enabling legislation being passed by SAARC countries in order to give effect to the convention on counter terrorism which SAARC has already adopted. I also drew attention to the fact that the need for cooperation amongst all the SAARC countries on this major challenge that we face is something which has been brought home to us most recently by the terrible bomb blasts which have taken place both in Mumbai and in Srinagar, causing loss of lives of innocent people. We continue to believe that there is no cause which justifies the murder of innocent people. We believe that South Asian countries must stand together and fight this scourge and whatever cooperation is required amongst us in order to get rid of this scourge must be taken urgently.

(iii) SAARC related issues: There are a number of other issues that have been also taken up by our delegation. You would recall that during the 13th SAARC Summit, our Prime Minister had proposed that we should organize a car rally as a run up to the 14th summit, which would be held in India in 2007 and we have worked out a Concept Paper for this rally. This Concept Paper has been circulated to all member countries of SAARC and I am happy to say that the Standing Committee has approved the holding of this car rally. We have also decided to set up an organizing committee of representatives of SAARC countries who will then get down to assess the logistic details and how this is to be financed and what kind of arrangements need to be made, particularly in terms of media and the security arrangements which may be required along the routes. India has agreed to host the first meeting of the organizing committee in order to take up the proposal.

We have also made reference to some other important proposals which have been made by India. This has been in the context of the 13th SAARC Summit, when our Prime Minister suggested that we should set up a South Asia University, a common campus where students from all the SAARC countries could live and study together, a SAARC University which would have faculties drawn from best minds from member countries of SAARC and an institution, which we hope will become a Centre of Excellence, not only for our region, but also for the entire world.

We also have another very important project. We have drawn attention to the fact that South Asian countries occupy what can be described as a common cultural space. There are very strong cultural affinities amongst countries of SAARC and these affinities can be leveraged to create a greater sense of identity amongst the SAARC countries and to celebrate what is really a shared cultural legacy amongst us.

One of the proposals has been for setting up of a SAARC Museum of Textiles and Handicrafts. These are two areas where all South Asian countries have a very rich tradition, have demonstrated rich diversity and we believe that it would be very worthwhile for us to set up this kind of a museum which would provide a venue for craftsmen, for artisans from all these SAARC countries to demonstrate the diversity of their products. It would also enable them to interact with each other in a creative manner.

The third proposal is for setting up of a tele-media network, which could link together some of the very important Centres of Excellence in the medical/health field in our region. India is prepared to share our experience in this regard and also to contribute to the setting up of infrastructure, which is required for making this possible. Perhaps some of you may be aware that we are already involved in a very major and ambitious project for connecting all the African countries in a Pan African network which would use both satellite as well as fibre-optics network for tele education and tele-medicine. This is something which has been very much welcomed by the African countries. We are also working currently on a similar project with four ASEAN countries. So, we have considerable experience in this regard and we hope to offer this to all member countries in SAARC also.

You are aware that India has also been chosen to host the SAARC Disaster Management Centre and we have agreed to draw up modalities for the actual operation of this center. This is a center which is particularly relevant, after some of the natural disasters that our region has faced in the recent past like the tsunami and the earthquake which affected various parts of India and Pakistan. This is an institution which is of urgent necessity in our region. So, we are very proud of the fact that we would have the chance to host this center and also to make it a Centre of Excellence.

(iv) Afghanistan: I would also like to welcome the participation of representatives from Afghanistan led by their Deputy Minister. As you are aware, the decision has already been taken at the 13th SAARC summit to admit Afghanistan as a new member of SAARC, pending the formalities which are required to be gone through for them to attend as a full-fledged member at the 14th SAARC Summit. It was decided that they would be permitted to attend other meetings like Council of Ministers meeting, Standing Committee meeting as well as of some other meetings of SAARC as a guest which would enable them to familiarize themselves with the manner in which SAARC functions. We believe that with the entry of Afghanistan into SAARC, we have now completed the identity of SAARC in this region. We have agreed that an inter-governmental body would be set up to help finalise all the different modalities and issues which are involved in operationalising Afghanistan’s membership at the 14th SAARC summit.

(v) India’s Chairmanship of SAARC: As you know, it is India’s turn to chair SAARC, after completion of the current chairmanship of Bangladesh. We are very much looking forward to take up this challenging role. Bangladesh has done an excellent job in chairing SAARC. During Bangladesh’s Chairmanship, a number of major initiatives have been undertaken and it would be our privilege to take these initiatives forward and to add further substance to the relationship.

One of the areas which we believe is of great importance is inter-connectivity amongst SAARC countries. Again, if I could recall the speech made by our Prime Minister at the 13th SAARC summit, he drew attention to the fact that South Asia is really a compact economic unit. It is also a shared cultural space, it has a long history of trade amongst the different regions in South Asia and until 1947, in fact all parts of the subcontinent were well connected with highways and railway networks. Many of these inter-connections amongst South Asian countries have been interrupted in the past 50 years or so. If we really wish to realize the vision of South Asia economic unity and if we are to realize the promise of SAFTA, then it is very important that the lack of connectivity amongst the South Asian countries be addressed on an urgent basis. Our Prime Minister had stated during the 13th SAARC Summit that, as the largest country in the region, India is ready to provide transit on a reciprocal basis to all our neighbouring countries.

The centre of global economic activity is shifting to Asia. If India and China can continue to grow at 8-10% per annum, for the next few years, we can become an engine house for the world. The starting point is to be connected within our region, before we can start connecting with other regions. We need to restore highways, railways and telecom links using modern technology, as well as shipping and air-links. India has made progress in air connectivity with many countries. For instance, India and Sri Lanka now have over 100 flights per week, which is a substantial increase from the last few years. India is ready to play its part in establishing such links. We welcome the establishment of the SAARC Development Fund and India has offered US$ 100 million for Poverty Alleviation. The Fund can also be used for infrastructure development.

To conclude, India remains committed to the goal of a South Asian Economic Community and we hope to play a positive role during our Chairmanship