Battlefield Next - Africa

If time plays in a cycle then perhaps the next destination is Africa. With Asia already bursting with development, Africa will play a crucial role in running the engines of the giants – India and China. The question is whether it will be able to accommodate the two giants simultaneously and fairly. The concern is also about sustainable development of the native African population and their secure futures. And for a long time it will be unclear whose futures are more at stake than others.

The gravest requirement and investment is in the field of infrastructure which is blooming at a frantic pace. The Chinese are building presidential palaces (as souvenirs to the governments), railway tracks, roads and ports across the continent. With their advent into strategic areas like mining, railways and ports the Chinese investment might well be beyond 90 billion US dollars (counting unrecorded deals) while its bilateral trade stands at 130 billion dollars.

Just as the reasons for China‘s interest in Africa are complex, so too are the reasons that so many African leaders are receptive to Beijing‘s entreaties.  First, China can provide much-needed funds for development (or simply to avoid become more impoverished).  This is important because many African states are desperate for investment and aid, and, (promises to the contrary notwithstanding) because many Western countries are providing relatively less aid or providing aid in ways that are less appealing to recipient countries.  Second, China‘s approach to providing aid or investment is a congenial one to many African leaders. China generally requires only that the recipient country refuse to recognize Taiwan. Beyond this, China‘s approach is, to many African leaders, refreshing:  it is pure capitalism, without attempts to work social or political changes through the pursuit of wealth. Besides, the Chinese do seem to cut their way through labyrinthine government policies – no meetings, no environmental impact assessment, no demand for anti-corruption measures and no check on private benefits for local leaders.

Long ignoring this case of ‘Dutch Disease’, the after effects of this in-pour of wealth have been neglected. The cases of over reliability on one goods (banana republic), a marginalized manufacturing sector, over dependency on FDI from a single source shall culminate into a deep hangover for the over-zealous countries.

Contrast this with Indian investments - mainly in the private sector, notably in telecom, pharmaceuticals and manufacturing. Interestingly, some Punjabi farmers have got farming outsourced from the Kenyan farms where the natives find themselves unable of being able to handle vast stretches of land. Besides, we are doing, what we do best – being a soft power. Despite the relatively neglected role of India in Africa compared with that of China, India’s trade with the continent has grown ten-fold over 4 years to $39.5 billion in 2008-09 (over half of the US’s $77 billion).  The turning point, came in 2008 with the India-Africa summit in Delhi, which led to a doubling of credit to Africa (to $5.4 billion over 5 years), a focus on African human capital development programs, and a duty free preferential tariff scheme for the 34 least developed countries in Africa (with 94% of all tariff lines opened).

The young population, the second fastest growth rate of any continent, and the possession of nearly a third of the world’s natural resource value are the main motivations for India’s interest in Africa. While Chinese investments were merely extractive in purpose, India’s were more transformative, focusing on small and medium businesses, agricultural productivity, information technology, and investments in health care.

The mounting investments in Africa specially come into limelight by the name of expenditure on development. Vastly simplified, the theory is that if rich countries provide a big push of aid, and if the aid is used to address a wide range of problems simultaneously, then people in poor countries will, in a generation or so, begin to enjoy the kind of economic development that those in the west have seen. Broadly speaking, this approach emphasizes the transfer of wealth from rich to poor countries, the targeting of aid to meet human needs, and a strong role for rich and poor governments.  A second model is similar to the first, but with much less faith in the power of governments and aid agencies to meet the needs of people.  Argued most provocatively by William Easterly, this model accepts the need for Western countries—including governments—to contribute generously to the development needs of those in poor countries. And it accepts a limited role for Western aid agencies in fostering economic development.  But it is deeply skeptical of the efficacy of conventional aid programs because they rely on plans developed by outside experts and provide little room for aid recipients to influence the programs designed to help them.

Recent time brought an unpredicted change to the African black waters – social revolution. Prima facie it has over thrown authoritative governments, but on second thoughts it has triggered something bigger. The Africans are more aware of their place in the world than ever. The policies of ‘neo-colonialism’ cannot fool them forever. The issues of drainage of wealth and resources from Africa can no longer be put on back burner. But equally true is that the rate of development can only be accelerated by putting certain industries on accelerated rate while ensuring that the development process in all the areas goes along simultaneously.

As an African official candidly put – the Chinese are investing in the present of Africa while the Indians are investing in its future. Sooner or later, the Africans will rise enough to judge what is right for them; none of the players in their development process would want to show a laggard performance.

South Asian Union

The South Asian wave of regionalism started in 1980 when the former President of Bangladesh proposed the formation of an institutional arrangement for regional cooperation in South Asia. Barred by bureaucratic tussles, the idea finally took shape in 1985, when the heads of South Asian states met to form the South Asian Association for Regional Cooperation (SAARC) and adopted a formal charter. The seven member countries affirmed their commitment to achieve economic integration for mutual prosperity. An organization that began with an initial membership of seven countries has today grown by admitting Afghanistan as a full member in 2005 and six other countries with observer status.

Lessons from the EU

At the end of World War II, Europe was going through one of the most traumatic periods of its history; paradoxically this helped create the 'circumstances' under which a successful partnership could take shape. The urge for closer cooperation often arises from the difficult times a nation or a continent has to go through. Unfortunately, the comparison stops here. The motives of those who built Europe were different. Jean Monnet, the father of Europe, and his German colleagues believed that to avoid a new conflict, the surest way was to come together on the very thing which had previously divided the nations.

As both Germany and France had to rebuild their industries; the proposal was to create a supranational higher authority which could manage the resources in coal and steel for both nations. This was the birth of the European Coal and Steel Community. A treaty was signed in Paris in 1951 establishing the embryo of the European Community. A close partnership between the enemies of yesterday was set in motion. Though (or because) no 'ideology' was involved, Germany and France were able to collaborate and work together.

For India and Asia, the Asian Relations Conference was a continuation of their freedom struggle. An official document states that one of the purposes of the event was: 'How to terminate foreign dominion, direct or indirect, and to achieve freedom to direct their affairs in accordance with the will of the people concerned.'  The proceedings lasted till April 2 when Gandhi delivered the valedictory address: 'If you want to give a message again to the West, it must be a message of Love; it must be a message of Truth.'

Here lies the difference of approach between the two continents. While the Europeans were not bothered about philosophy and ideas, but coal and steel only, the Indian leaders thought that they could build the future of Asia on 'love and truth' only. Unfortunately hardly five months after this first attempt at uniting Asia, the sub-continent was itself partitioned and by the end of 1947, the circulation of people and ideas between South Asian nations and particularly India and Pakistan had stopped. During the same period, the former enemies in Europe had no problem to travel from one country to another.

Another positive feature of the European integration is the active presidency of one of the 27 nations for six months during which the presidency presides at least at two summit meetings and works hard to leave his 'national' mark in the integration. It is certain that if South Asian leaders are serious to advance towards a closer South Asian cooperation, if not integration, more meetings will be required.

Uneven Progress & Key Players

Instead of working on a solid basis for creating peace, security and prosperity in South Asia, the Association, for the first several years, emphasized cooperation of a technical nature in areas such as agriculture, education, meteorology and communication. The emphasis on a social charter or free trade area came much later and was considered ‘too little, too late’ since by then, the organization had already acquired the reputation of being a non-performing entity.

Apart from the delayed realization of its essential goals, SAARC has also fallen prey to regional political tensions. South Asian countries, especially India and Pakistan, continue to live with acrimonious feelings, engendered by the partition that dates back to the colonial period.

Within SAARC, India is the largest member state and was the only country that shared borders with all the other member states, prior to the induction of Afghanistan in the organization. Hence, without doubt, India bears a disproportionate responsibility for the success or failure of SAARC and is regarded as the necessary engine as well as the likely obstacle in the fulfillment of the organization’s potential.

Historically, democracy in Pakistan has been weak and not given a proper chance to grow roots and develop. Parliamentary elections have been marked by low turnouts and those elected did not truly represent the Pakistani people. Pakistan is ‘a federal parliamentary democracy, but with strong army influence’. The military has ruled Pakistan for 35 of its 61 years as an independent state. Soon after he came to power, General Musharraf argued that he intended to move Pakistan from ‘sham democracy’ to ‘true democracy’. There had never been ‘real democracy in Pakistan because democracy is certainly not having elected governments’, but ‘how an elected government behaves’. To him, there was no ‘rebuilding’ of democracy, but the building of democracy. According to Sayyid, ‘those who claim to believe in democracy do not wish to practice it, and those who claim not to believe in democracy promise to implement it’.

Nepal, in recent years has been unable to achieve a democratically elected government. There have been issues of power-grabbing by the Maoists. Although, there has been support from GoI, EU, UN yet the formation of government remains an internal matter for a country and without a concrete functioning government to expect any progress on the union’s front from Nepal would be foolishly optimistic.

Sri Lanka has just got over its problem of civil war with LTTE. It is on the right path of developing infrastructure much of which will be needed for its further progress, inside the union or outside it. Regional partners such as India and Bangladesh must be helpful in advancing the necessary prerequisite for the process of nation-building in Sri Lanka. With a healthy democracy at helm one can expect them to play active role in the sub-continent in future.

Bangladesh is also performing well on several parameters despite being laggard on certain others. Previous regimes there have been troublesome for the peaceful atmosphere in the region – ephemeral tension with India and Myanmar.  Their initiative in micro financing is setting examples for the world over and we are sanguine to achieve great feat with such endeavors.

Bhutan remains an underactive yet important partner of SAARC. Being a landlocked hilly terrain, it has not many opportunities in agriculture or industry, but can achieve significant results in tourism. It has been host to many SAARC meetings earlier and is of profound importance in South Asian culture. Myanmar is having its tryst with military junta. Despite all the misgivings of an alleged nuclear program the country has made small yet significant leaps in infrastructure. Being the eastern most partner geographically it is the gateway of SAARC to South-East Asian countries and hence very important by the point of view of trade.

The Economic Imperative

South Asia has great economic strength in terms of market potential, rich natural resources and human capital. Unfortunately, the large comparative advantages that the SAARC countries have in certain export services are reduced considerably due to poorly managed customs services. This hinders the large, untapped potential for economic growth and employment. South Asia’s imports and exports are a much smaller share of each country’s GDP than in Latin America or East Asia, and tariffs are among the highest in the world. Intra-regional trade is insignificant, representing only 4 per cent of their total trade as against 62 per cent in the European Union, 55 per cent in the NAFTA and 35 per cent in ASEAN. The collective share of the SAARC region in world trade is a dismal one per cent.

SAFTA can act as a vehicle through which all participants in the region can gain by exploring their competitive advantages. Integration of economies in South Asia would lead to the emergence of a big market for investors. Though SAFTA has managed to get all the SAARC members on board, there still exist barriers, as not all member states are equally optimistic, especially the Least Developed Countries (LDCs). They are skeptical and suspicious as they fear the risk of revenue-erosion and collapse of their already weak domestic industrial bases due to a decrease in tariffs. As a result, the timeframe for the complete implementation of the agreement, by reducing tariffs to 0-5%, has been set to 2016.

In the case of South Asia, bilateral tensions will prove detrimental to the implementation of SAFTA in letter and spirit. For example, both India and Pakistan are members of the WTO. While India has accorded the Most Favored Nation status (MFN) to Pakistan, the latter has not reciprocated in the same way, as it claims that SAFTA has no clauses with regard to granting MFN status to India. This goes against the WTO norms (Article 1 of the General Agreement on Tariffs and Trade 1994). Adhering to the principle of bilateralism, India has not brought this up for discussions at the WTO. Thus, the objective of SAFTA will be defeated if these two relatively developed trading partners fail to increase their mutual trade.

Challenges

The progress of economic integration depends upon the willingness of national authorities to confer real powers on supranational authorities. South Asia is in dire need for implementation of trade facilitation measures in order to improve economic growth. The failure to implement trade facilitation measures can also be a detriment to the transit rights of landlocked states like Afghanistan, Nepal, and Bhutan. There are very few developed transit points between every country as most of the trade links through sea and road are almost on the verge of collapse. Therefore, necessary recommendations must be made by the SAARC Intergovernmental Group on Transport so that necessary ideas can be developed to curb this problem.

Trade facilitation measures are not enough and a lot needs to be done on the infrastructure front. For example, most of the SAARC trade takes place by sea. The average number of days required for customs clearance is over eight days in South Asia, compared to less than six days in East Asia and just about two days in the developed countries. As a result, trade is getting diverted to the informal sector.

Apart from that the people-to-people connection is very low as there are no air links connecting the capital cities of the member states in the SAARC region. SAFTA does not include trade in services even though the service sector accounts for a huge chunk of the economies of the South Asian countries. Apart from reduction in tariffs, importance must also be given to the reduction of para-tariff and the non-tariff barriers that contribute equally to the stalling of free flow of goods and services across borders.

For an unsuccessful SAARC is to transition into a successful South Asian Union, the countries of the region will have to break free from their past and build a different kind of relationship in the future that is devoid of the ‘trust deficit’. Without this, SAFTA is likely to be stillborn, or at the very least lead to sub-optimal levels of implementation. The formation of institutes such as the SAARC Chamber of Commerce and SAARC Finance are commendable achievements, but they can only be successful if there is political will.