By Tridivesh Singh Maini

Date:April-June 2005

Source: South Asian Journal

This paper aims at analysing the efforts made towards regional integration in South Asia and possible recommendations for the future. It explains why neo-classical approaches of economic integration may not work in South Asia. Apart from questioning traditional approaches to economic integration, it also provides examples from the Indian and Pakistani province of Punjab, to show that traditional approaches to integration (neo-classical models) may need to give way to unconventional approaches (functional models) which have been successful in certain African countries.

The basic thrust of the paper is on:

1. Following the development and project based approaches of cooperation (which have been used successfully in parts of Africa) and which are being followed to some degree by Indian and Pakistani Punjabs1.
2. Laying emphasis on all five tracks of diplomacy:

• Track One: Official government-to-government diplomatic interaction;
• Track Two: Unofficial, non-governmental, analytical, policy-oriented, problem-solving efforts by skilled, educated, experienced and informed private citizens interacting with other private citizens;
• Track Three: Businessman-to-businessman, private sector, free-enterprise, multinational corporation interactions;
• Track Four: Citizen-to-citizen exchange programs of all kinds, such as scientific, cultural, academic, educational, student, film, music, art, sports, and youth exchanges,
• Track Five: Media-to-media based efforts designed to expose and educate large segments of the population to the philosophy, ideas, culture and needs of the other national, society, or ethnic group with whom they are in conflict2.

• Intra-SAARC trade currently is a tiny 3.6 per cent of the region's total trade. Its members could push it to 25 per cent, which though still small compared to other regional groupings, like OPEC, NAFTA and EU at nearly 50 per cent, it would be a major improvement.
• Trade between SAARC's Big Two, India and Pakistan, through official channels, is US$ 250 million a year. But, the overall trade via third countries like Singapore and Dubai is estimated at US$ 1.5 billion a year. It shows the potential for SAFTA to become a regional economic player of standing7.

• Stage wise economic integration
• Special emphasis on trade creation and diversion
• These models are applicable to countries where:
• Countries wanting to trade with each other specialise in the production of different types of goods.
• There are well developed means of communication and transportation between these countries.

• There should be cooperation in areas which could benefit all.
• Trans-national networks of social and economic affairs are imperative for economic development

One major lacuna in his assumption was that he assumed the separation of politics from economics, which is certainly not true for developing regions. Later proponents of this school of thought: Haas, Ravenhill and Oden12, suggested a more realistic version of functional integration where a slow and cautious beginning (focusing on project based cooperation in areas like infrastructure) is made to economic integration.

The functionalists' main assumptions are:

• International Cooperation should be initiated in technical or core areas.
• Once success has been achieved in these areas it will lead to a spill-over in other areas.
• The integration process in functional areas will lead to political spill-over (Oden 1993).
• This sort of approach is acceptable to all as it does not surrender the sovereignty of any country and at least lays some foundation for economic integration apart from giving countries a chance to know each other better and familiarise themselves with differences and similarities. It has been followed by the South African Development Community (SADC) bloc.

It must be noted that the model is recommended as a mere beginning and can only lay the platform for single currency and trade and is no substitute for conventional models of economic integration.

Cooperation Between the Two Punjabs
The Punjab, called Pentapotamia by the Greeks, derives its name from two Persian words, panj (five), and aab (water, having reference to the five rivers which confer on the country). Punjab is a region that encompasses Northern India and Eastern Pakistan. Punjab is bounded on the north by the vast Himalayan ranges, which divide it from China, Tibet and Kashmir; on the east by the river Yamuna, the North-Western Provinces and the Chinese Empire; on the south by Sind, the river Sutlej, which separates it from Bhawalpur, and Rajputana; and on the west by the Sulaiman range, which divides it from Baluchistan, and Afghanistan, which joins the Khyber13.

To acquaint individuals not familiar with the geographical location of the two Punjabs, below is a map of the Punjab region in India and Pakistan. One of Pakistan's biggest cities, Lahore, is in the Punjab region. On the Indian side, Amritsar, the holiest city of the Sikhs, is in the Punjab region, very close to the Pakistani border.

On an emotional plain, there are strong cultural commonalities between the two Punjabs, which include amongst other things a common language -- Punjabi, and similar eating habits. In addition to this, Punjabis on both sides feel as if the partition of 1947 was more like a partition of Punjab, not a partition of India. Present day inhabitants of Pakistani Punjab, migrated from what is now Indian Punjab and vice-versa14.

The two Punjabs (regions which exist in both India and Pakistan- East Punjab being part of the former and West Punjab part of the latter) have often tried to go against the tide of hatred which has dominated Indo-Pak relations. Indian and Pakistani Punjab have begun cooperation in a similar way to that recommended by the functional model:
The West Punjab leadership has given in to a demand from Indian Punjab to facilitate better links between Amritsar (Indian Punjab, which is not only a holy city of the Sikhs, but also an important economic focal point in the future, for the whole of South Asia) and Nankana Sahib (in West Punjab). Nankana, where Guru Nanak Dev ji (Guru Nanak Dev, was the founder of Sikhism and ji is a form of respect in the Punjabi language) was born, is the holiest of shrines for the Sikh Community; however, it has remained inaccessible to Indians for all these decades. On his recent Lahore visit, Captain Amarinder Singh (Chief Minister of Indian Punjab) along with Chaudhry Pervaiz Elahi (Chief Minister of Pakistani Punjab) laid the foundation stone for a new road to Nankana Sahib. The first lot of 10 buses carrying Sikh devotees from Amritsar to the historic town is likely to begin on April 13th which happens to be the one of the most important Sikh holiday's known as Baisakhi15. In fact, if a few more roads are to come up like the one between Amritsar and Nankana Sahib, South Asian regional cooperation may move even faster than anticipated, without SAFTA coming into force one of it's important provisions (Article 1 k) which aims at development of communication systems and transport infrastructure is already in force16.

The road will not only make it easier for pilgrims from India, but could also emerge as an important trade route for the future. A major problem for the South Asian region is that the infrastructure and transportation facilities are not sufficient to carry out trade. With just one land crossing point at present between India and Pakistan, it is extremely ambitious to plan for free trade between the two countries17. Apart from its other advantages, the road between Amritsar and Nankana Sahib has pushed other states in India, to examine the feasibility and viability of improving connectivity with neighboring countries in South Asia. This point was brought out very well in an article on Indo-Pak relations18.

'In Assam, there is mounting pressure from regional leaders of all political hues to open up the old Stilwell Road that links India and China through upper Myanmar. The chief minister of Sikkim Pawan Chamling wants a bus service between Gangtok and Lhasa. In Jammu and Kashmir, the people of Ladakh want to know why the border with China cannot be opened up to facilitate tourism into western Tibet? If a bus can run between Srinagar and Muzafarrabad, and between Amritsar and Lahore, why not one between Ladakh and Mount Kailash? Kolkata and the two Bengals will gain immeasurably from the revival of transit trade between India and China across the many passes in the Eastern Himalayas. Why can't Chittagong in Bangladesh regain its status as the main seaport for North East India?'

Amongst other important measures, the Government of Pakistan is considering allowing non-resident Indian Sikhs to construct their houses at Nankana Sahib. Chaudhary Pervaiz Elahi, Chief Minister, West Punjab, and top bureaucrats of Pakistan have agreed to explore the possibilities of establishing a big colony of NRI Sikhs. At present, there is no provision for allowing any Indian or NRI Sikhs to build their houses in Pakistan19. If this move goes ahead, it will be a good opportunity for both sides (India and Pakistan) to know each others' economic needs better.

On its part the East Punjab (Indian Punjab) side has also been quite positive about increasing cooperation with Pakistani Punjab. In December 2004, the first Punjab games (where athletes and sportsmen from both the Punjabs participated) were held at Patiala (Indian, Punjab). While these games were going on Captain Amarinder Singh, Chief Minister of Indian Punjab was quick to take advantage of the bonhomie and took a crucial step, in converting track two exchanges into a useful economic process. At a press conference he was quick to ask some visiting Pakistani businessmen 'Why are you buying wheat from Russia? We have huge reserves and can supply it immediately,' 'If the Berlin Wall could be demolished, what stops us from breaking barriers20,'. Markfed (Marketing Cooperative of Indian, Punjab) is awaiting clearance from the external affairs ministry to supply 2 million tonnes of wheat to flour mills in Pakistan through the Wagah border21.

One of the significant moves which is an indicator of increasing closeness between the two Punjabs is the Indian Punjab's State Mandi (Marketing) Board proposal of linking the fruit and vegetable markets of Ludhiana (Indian, Punjab) and Lahore (Pakistani, Punjab) by giving them the nomenclature of sister market committees. Stating this, after returning from a visit to Pakistan, Mandi Board chairman Sant Ram Singla said a proposal to this effect had been moved by the Pakistan Agricultural Department authorities. He said the Mandi Board would put forward a case for closer cooperation between the market committees of both Punjabs. Mr Singla said the Mandi Board would also exchange expertise on grading and packing of fruits and vegetables with its counterpart, besides extending cooperation towards creating a cold chain to ensure effective transportation of goods. The Mandi Board chairman said the Pakistan Punjab Government was in the process of setting up an agricultural marketing board on the Punjab pattern22. This move would give both Indian Punjab and Pakistani Punjab, the opportunity to modernise their marketing systems by learning new facets of agricultural marketing from each other.

In many ways, the two Punjabs are moving in a similar direction as the South African Development Community (SADC) model where the initial focus was on project development, (with significant emphasis on cooperation in the areas of transport and communications). Later SADC expanded to other areas like food security, energy and industry and trade23. It must be said, though, to the credit of the Punjabs, that they are giving serious thought to trade in the very initial stages of cooperation24.

The next stage of integration which South Asia needs to think of is development integration. It talks about broader cooperation in political spheres and also lays emphasis on equitable distribution of economic gains.

Development Integration
The main proponent of the Development model is Hans Blomqvist25. This approach basically emphasises cooperation in policy formation, building common economic institutions and taking care of the interests of smaller countries. It begins by dealing with the basic infrastructural and institutional problems in countries and if implemented in a sensible way provides the chance to grassroot actors to play an important role as in certain SADC countries. Some of its key assumptions are:

• A conscious emphasis on cooperation and interdependence amongst member states.
• Political cooperation is considered imperative for implementation.
• It believes in equitable distribution of the benefits produced by regional cooperation. At the lowest level this is done by compensatory measures. At a higher level it is resolved by corrective measures such as planned regional industrial development that favours less developed members and funds or regional development banks that give priority to LDC loans26.

This model could be a good second stage in the case of South Asian regional integration, where political cooperation would help in a large degree to do away with the mutual hatred and suspicion of the past. Following such a model will also keep smaller countries interested in economic integration, as there interests will not be ignored or brushed aside.

Conclusion
The conclusion is divided into two sections, economic and political. Apart from giving examples of how economic cooperation in South Asia could be beneficial to the whole region, political implications of increasing South Asian cooperation in general and that of the Punjabs in particular is also given.

Economic
The signing of the SAFTA agreement augurs well for South Asian integration. However, it remains to be seen whether stipulations in SAFTA can be implemented within the next year. Track two exchanges between India and Pakistan must carry on and move purposefully towards fulfilling clearly defined economic objectives. If they can, then basic problems of economic unemployment, can be tackled. According to an estimate, liberalised India-Pakistan trade in the agro-sector itself, would generate around 2.7 lakh (hundred thousand) jobs in India and 1.7 lakh (hundred thousand) jobs in Pakistan. The food and agri-business industry has a significant impact on the regional economy. This industry has one of the highest economic multiplier effects among the various industries, even ahead of the telecom or power sector. Another area where Indo-Pak cooperation would be beneficial is production of basmati rice.

India and Pakistan merely hour and a half distant apart, could leverage areas of mutual strengths to be world leaders in Rice Exports. Pakistan India direct trade could be beneficial in terms of freight component which is merely 5%, in comparison to 15-20% if traded through a third country. India & Pakistan, in general and the region of Punjab, in particular is strategically located and has ideal climatic conditions best suited for the desired quality of Basmati Rice. Together, the two countries could cater world demand of Basmati Rice globally.27.

It will be important for South Asian countries to realise that a different approach to economic integration may be needed from that of the European Union's model. Unlike Europe, most South Asian countries specialise in similar types of goods (which means, that the theory of comparative advantage may not be applicable) apart from this there is no homogeneity of political institutions and connectivity between different nations. Perhaps a gradualist and minimalist beginning to economic integration in the form of a project-based and development-based integration would be most appropriate and practical allowing for test case corrections on a more manageable scale.

• Developing World intellectuals should try to cooperate and build networks amongst themselves. South Asian intellectuals should study African models of integration in more depth and try to see how they may fit in the South Asian context.

Political

• The increasing interaction between the two Punjabs and ultimately other regions in South Asia could be the prelude to 'a closer understanding and interaction of cultures' and be a reminder that the 'clash of civilizations' theory is a highly exaggerated one. To some degree, this also raises a question as to what is more powerful 'civilisations' as described by Samuel Huntington or 'cultures'.
• The example of the two Punjabs shows that it is time to think beyond thinking in terms of nation-states; while this in no way implies political/geographic transformations, it certainly does call for a transformation in mindsets and more imaginative thinking on the parts of governments in South Asia.
• Track Two diplomatic efforts should not be thought of as a substitute for Track One efforts, but rather as an indispensable preparation for and adjunct to them. Ideally, Track Two diplomatic efforts should pave the way for Track One negotiations and agreements by encouraging Track One official diplomats to recognise and utilise crucial information and insights obtained by Track Two citizen diplomats.
• Economics, by itself, will not help in removing the mistrust and suspicion of the past. It has been rightly suggested that:

A psychological strategy should try and tackle the psyche of the people of the region. It should evolve naturally through sustained economic, cultural, academic, social interaction. Political management of economics and psychology is the key to a solution. We will have to have an optimal blend of economics, politics and psychology in order to pursue a solution.

(Tridivesh Singh Maini works with the American Security Council Foundation (Washington DC) as a Researcher on South Asian Affairs (with reference to Economic Integration, Trade and Agriculture) and a Consultant with the Latin America and Carribean -- Public Sector Group)

End Notes

1. Southern Africa: Towards Economic Liberation- A declaration by the Government of Independent States of Southern Africa, SADCC Report (1980). Also see C. Raja Mohan, 'Balle balle at Mohali', The Indian Express, New Delhi, 8th March 2005.
2. John W McDonald, 'Further Exploration of Track Two Diplomacy,' in Louis Kriesberg & Stuart J. Thorson (ed.), Timing the De-Escalation of International Conflicts, (Syracuse, NY: Syracuse University Press, 1991), pp. 201-220.
3. B Asif and S. Farrell,'India-Pakistan: Breaking the Deadlock', South Asia Newsletter, Number 67, ( Center for Strategic and International Studies, Washington D.C., 2004), pp. 1-3.
4. M. Dubey, 'SAFTA: A perspective', The Hindu, January 10, 2004.
5. Ibid
6. M. Aftab, 'Can SAFTA lead to a South Asian Economic Union?', Dawn, Karachi, January 19, 2004.
7. See M. Dubey, (2004).
8. See C. Raja Mohan, 'Balle balle at Mohali', The Indian Express, New Delhi, 8th March 2005.
9. See B. Balassa, The Theory of Economic Integration (London: Allen and Unwin, 1961) and Trade Creation and Trade Diversion in the European Common Market (London: Allen and Unwin, 1967); J. Viner, The Customs Union Issue (Carnegie Endowment for International Peace, NewYork, 1950); J. Tinbergen, Centralization and Decentralization in Economic Policy, (Amsterdam, 1954) and Shaping the World Economy: Suggestions for an International Economic Policy (Twentieth Century Fund: New York, 1962); Paul Krugman, 'Increasing Returns, Monopolistic Competition, and International Trade', Journal of International Economics 9, (University of Wisconsin Press, Madison, November, 1979,), pp.469-479 and 'Pricing to Market When the Exchange Rate Changes,' in Sven W. Arndt and J. David Richardson, Real-Financial Linkages Among Open Economics ( Cambridge: MIT Press,1991) Geography and Trade (Cambridge: MIT Press ) pp. 49-70.
10. Paul A. Samuelson, 'International Factor-Price Equalisation Once Again,' Economic Journal 59, (June), Royal Economic Society, London, 1949. pp. 181-197 . Also contains factor price equalization, Heckscher-Ohlin Model), 'Prices of Factors and Goods in General Equilibrium,' Review of Economics and Statistics, (Cambridge: M.I.T Press, 1953), pp. 1-20. (Has a good description of the Heckscher-Ohlin Model), 'The Transfer Problem and Transport Costs, II: Analysis of Effects of Trade Impediments,' Economic Journal 64, (June), (Royal Economic Society, London, 1954), pp. 264-289.
11. D. Mittrany, 'The Road to Security', Peace Pamphlet No.29 (London, NPC, 1944); A working peace system (Chicago: Quadrangle, 1966).
12. E. B. Haas, The Uniting of Europe (1958), Beyond the Nation State (1964) and 'The Study of Regional Integration: Reflections on the Joy and Anguish of Pre-Theorizing' in Lindberg and Scheingold (eds.), in Regional Integration (1971); J. Ravenhill, 'The Future of Regionalism in Africa', in R.I. Onwuka & A. Sesay (eds.), The Future of Regionalism in Africa, (London and Basingstoke: Macmillan, 1985) pp. 205-224; B. Oden, South Africa after Apartheid- Regional Integration and External Resources (1993); The Scandinavian Institute of African Studies, Uddevalla, Bohuslanningens Tryckeri
13. Punjab Online Website: (http://www.punjabonline.com)
14. See C. Raja Mohan, March 8th 2005.
15. S. Dhaliwal, 'Buses to Nankana Sahib this Baisakhi', The Tribune, March 17th 2005.
16. SAFTA, Agreement on South Asian Free Trade Area, 12th South Asian Association for Regional Cooperation (SAARC) summit, 2004 ( SAARC secretariat website: www.saarc-sec.org/, and Ministry of External Affairs, Government of India, New Delhi).
17. N. Kumar, 'SAFTA:Trade or Development', The Hindu, January 5, 2004.
18. See C. Raja Mohan, March 8th, 2005.
19. V. Walia, 'NRI Sikhs may own houses at Nankana Sahib', The Tribune, March 20, 2005.
20. 'Buy wheat from India, Amarinder tells Pakistan', South Asia Monitor, December 3rd 2004.
21. 'Markfed awaits govt nod for wheat exports to Pakistan', The Economic Times , New Delhi, January 24th 2005.
22. 'Move to link Lahore, Ludhiana fruit markets', The Tribune , Chandigarh, 18th March 2005.
23. G. N. Muuka, D. E. Harrison and J. P. McCoy, Impediments to Economic Integration in Africa: The Case of COMESA, (1998).
24. See C. Raja Mohan, March 8th 2005.
25. H. Blomqvist, Some Experiences from Regional Cooperation between Third World Countries- A South African perspective, Helsinki, Swedish school of Economics and Business Administration, (1992).
26. See H. Blomqvist, (1992).
27. Address delivered by Mr. Abdul Rahim Janoo (Chief Executive, Hina Exports) at a meeting between Bombay Chamber of Commerce & Industry and the Rice Exporters Association of Pakistan (REAP) at the Bombay Chamber of Commerce and Industry, Bombay on March 16th 2004, source Bombay Chamber of Commerce Website (www.bombaychamber.com/agri-16-3.doc)

• M. Aftab, Can SAFTA lead to a South Asian Economic Union?, Dawn, Karachi January 19th 2004.
• A. Baruah, ‘Lets reject conflict, says Vajpayee’, The Hindu, New Delhi, India 13th December 2003.
• H. Blomqvist, Some Experiences from Regional Cooperation between Third World Countries- A South African perspective, Helsinki, Swedish school of Economics and Business Administration, 1992.
• Address delivered by Mr. Abdul Rahim Janoo (Chief Executive, Hina Exports) at a meeting between Bombay Chamber of Commerce & Industry and the Rice Exporters Association of Pakistan (REAP) at the Bombay Chamber of Commerce and Industry, Bombay on March 16th 2004. Bombay Chamber of Commerce Website (www.bombaychamber.com/agri-16-3.doc).
• S. Dhaliwal, ‘Buses to Nankana Sahib this Baisakhi’, The Tribune, March 17th 2005.
• D. Ganguly, ‘SAARC all Talk’, World Press Review, Vol. 49, No.3, 2002 (World Press Review website: http://www.worldpress.org/Asia/399.cfm).
• E. B. Haas, The Uniting of Europe (Stanford University Press, 1958) and Beyond the Nation State. Functionalism and International Organization (Stanford University Press, 1964); Lindberg and Scheingold (eds.), The Study of Regional Integration: Reflections on the Joy and Anguish of Pre-Theorizing in Regional Integration, (Stanford University Press, 1971)
• 'Such Charming simplicity', editorial, Himal South Asian, January, 2004 (http://www.himalmag.com/2004/january/editorial.htm).
• S. Kelegama, Impediments to Regional Co-operation in South Asia, Paper presented at a conference organized by the Coalition for Action on South Asian Co-operation and Friedrich Ebert Stiftung, Colombo office , December 2001, Friedrich Ebert Stiftung Publication # 49, Colombo, (FERS website http://www.fessrilanka.org).
• Paul Krugman, ‘Increasing Returns, Monopolistic Competition, and International Trade,’Journal of International Economics 9, (November), (University of Wisconsin Press, Madison, 1979) pp.469-479 ; ‘Pricing to Market When the Exchange Rate Changes,’ in Sven W. Arndt and J. David Richardson, Real-Financial Linkages Among Open Economics, (MIT Press, Cambridge, 1987) pp. 49-70; Geography and Trade (MIT Press, Cambridge, 1991).
• N. Kumar , (2004) 'SAFTA: Trade or Development', The Hindu, New Delhi, January 5, 2004.
• John W. McDonald, 'Further Exploration of Track Two Diplomacy,' in Louis Kriesberg & Stuart J. Thorson (eds.), Timing the De-Escalation of International Conflicts, (Syracuse, NY: Syracuse University Press, 1991), pp. 201-220.
• D. Mittrany, 'The Road to Security', Peace Pamphlet, No.29 (London, NPC, 1944); A working peace system (Chicago: Quadrangle, 1966).
• G. N. Muuka , D. E. Harrison and J. P. McCoy, 'Impediments to Economic Integration in Africa: The Case of COMESA', The Journal of Business in Developing Nations, Volume 2, Article 3 (Rennselaer Institute, Hartford, 1998).
• PunjabOnlineWebsite:(http://www.punjabonline.com/servlet/library.history?Action=Page&Param=2)
• C. Raja Mohan,(2005) Balle balle at Mohali The Indian Express, New Delhi, 8th March 2005
• J. Ravenhill, 'The Future of Regionalism in Africa', in R.I. Onwuka & A. Sesay (eds.), The Future of Regionalism in Africa, (London and Basingstoke: Macmillan, 1985).
• SADCC Report (1980), Southern Africa: Towards Economic Liberation- A declaration by the Government of Independent States of Southern Africa, (SADC website: http://www.sadc.int/index.php?lang=english&path=about/background&page=history)
• SAFTA, (2004) Agreement on South Asian Free Trade Area, 12th South Asian Association for Regional Cooperation (SAARC) summit (Source SAARC secretariat website: www.saarc-sec.org/, and Ministry of External Affairs, Government of India, New Delhi)
• Paul A. Samuelson, 'International Factor-Price Equalisation Once Again,' Economic Journal 59, (June, 1949), Royal Economic Society, London, pp. 181-197. Also contains factor price equalization, Heckscher-Ohlin Model), 'Prices of Factors and Goods in General Equilibrium,' Review of Economics and Statistics, (M.I.T Press, Cambridge, 1953), pp. 1-20. (Has a good description of the Heckscher-Ohlin Model), 'The Transfer Problem and Transport Costs, II: Analysis of Effects of Trade Impediments,' Economic Journal 64, (June, 1954), pp. 264-289 (Royal Economic Society, London).
• 'Markfed awaits govt nod for wheat exports to Pakistan', The Economic Times, New Delhi January 24th 2005.
• 'Move to link Lahore, Ludhiana fruit markets', The Tribune (2005) , Chandigarh, 18th March 2005
• J. Tinbergen, Centralization and Decentralization in Economic Policy, (Amsterdam, 1954) and Shaping the World Economy: Suggestions for an International Economic Policy (Twentieth Century Fund: New York, 1962)
• J. Viner, The Customs Union Issue (Carnegie Endowment for International Peace, NewYork, 1950)
• V. Walia, (2005) 'NRI Sikhs may own houses at Nankana Sahib', The Tribune, Chandigarh,March 20th 2005.