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In his book cooperation and conflict in South Asia (1989) Partha Ghosh presented the view that although SAARC had been launched ‘the domestic contradictions of the state would militate against making the associations and effective vehicle of regional cooperation’.

He mentioned several broad systematic diversities and felt that unless they were removed, the future of SAARC was bleak. These diversities have been referred to above via forms of government, state religion interactions, structural linkages with the global system, nation-building strategies, and so on. The situation does not seem to have changed much. In the context of Indo-Pak relations it has worsened. Given the historical context, topographic and demographic features, natural resource endowments and socio-cultural ethos, South Asia could be the most natural unit of cooperation and integration.

There are certain inherent points with the region that must, however, be kept in mind. For example, the regional “insecurity syndrome” has probably been overstated. South Asia is one of the world’s least militarised regions. The region, where 20 per cent of the world’s population fives, accounts for only 1% of the world’s military expenditure.

Other developing regions (Excluding China) with comparable populations spend about 15 per cent of the global military expenditure. If compared to the developed world, the region’s record is even better. The develop world, which is proud to announce that there has not been any war on its soil since the Second World War, spends 80 per cent of the global military expenditure and is responsible for 97 per cent of the world’s arms trade and 97 per cent of the global military R&D.

South Asia’s fiscal defense burden accounts for about 3 per cent of the region’s GNP, which is higher than Latin America’s remarkably low 1.2 per cent, but less than Africa’s 3.2 per cent, and East Asia’s 10.9 per cent. It is even lower than the overall developing world’s 4-3 per cent. Without being optimistic about the future of SAARC, it must be conceded that the organisation by giving opportunities to regional leaders to meet at somewhat regular intervals has provided a diplomatic forum in which they have either settled or water down their differences.

The Indo-Sri Lankan accord of July 1987 had its origin in the bilateral talks between India’s the then Prime Minister Rajiv Gandhi and Sri Lanka’s President Junius Jayewardene during the Second SAARC Summit at Bangalore in November 1986. It has been argued that without SAARC Indo-Pak relations would have been even worse. Despite a snail’s pace progress, one of the remarkable contributions of SAARC has been the fact that it has been able to trigger off a whole range of activities outside the official SAARC forum.

These activities in private sector, in non­governmental organisations and community level activities across the region, have in fact, withstood all kinds of political ups and downs. The SAARC History Congress, the SAARC Sociological Congress, anti-Child labour coalitions, traders forum, SAARC writers forum, SAARC forum of media people and gathering of human rights activists and other professional including engineers, architects, chartered accountants are resulting in an ever increasing inter-state intellectual tourism.

So the process goes on regardless of SAARC’s officialdom. In fact, the parallel process of activities has far overtaken the official process with the latter pulling back the former. These are the activities which will hold SAARC in good stead in the long run and sustain the process.

This also goes to emphasize the emerging vital and critical roles of non-state actors in the management of South Asian affairs. In a way, the entire spectrum of confidence building measures (CBMs) in South Asia have to be re-evaluated, redesigned and rebuilt. So far we have extensively depended on military and political CBMs in South Asia. However, in the last 50 years, no political and military CBMs have sustained.

The peace and cooperation constituency in the region always got marginalized. A majority of these CBMs were addressed to only those who had serious stake holding in perpetuating the conflict and keeping the conflict alive. Fortunately, these negative stake holders have always been in microscopic minority. So we have to think of designing new CBMs particularly in case of India-Pakistan conflicts.

This takes us to the domain of economic CBMs-the business and other economic cooperation (Track III diplomacy) as a measure CBM and peace building in South Asia. As there are stake holders in keeping be conflict alive, there are stake holders for building the peace.

We have never addressed ourselves to the latter. The ongoing economic reforms triggered challenges have started drastically changing the political economy of regional cooperation in South Asia. Economic liberalisation have tended to increasingly outclass political prejudices, inhibitions and are literally forcing South Asia to shed the old mind 3ets of latent hostility.

The impact of internal schisms overflowing the regional vestiges is getting outweighed by the steady rise in the cost of non-cooperation. The very context and modalities of public policy making which were neither transparent nor accountable have begun to show more openness and boldness.

Against this background, major macro issues like harmonization of economic reforms with socio-political shift in paradigms in the region as a whole, the widening base of MNCs participation with a distinct slant on natural resource, technology and management and the ability and capability of the SAARC partners to withstand both endogenous and exogenous shocks and forge ahead towards a collective survival are the three fundamental challenges. The absorptive and the maneuvering capacity of the SAARC partners would largely be determined by the approaches towards and consolidation of each area as they together represent a vast majority of the regional core competence.

The Ninth SAARC Summit held in Male in 1997 directed the establishment of two regional high level committees viz., the Independent Expert Group to examine the functioning of the Integrated Programme of Action (IPA) and the Group of Eminent Persons (GEP) primarily to develop a long range vision, formulate a perspective plan of action including a SAARC agenda for 2000 and beyond and spell out the targets that can and must be achieved by the year 2020. The IEG recommended the drastic revamping and restructuring of the entire programmes of SAARC. As a result, the areas of activities under SIPA were reduced from the original eleven to five which included energy and environment also. On the other hand, the GEP provided a very comprehensive and clear road map.

The GEP recoinmended that regional economic integration is necessary and suggested a time bound plan which includes negotiation of a Treaty for South Asian Free Trade Area by 1999 with implementation commencing immediately thereafter and stretching to 2008 for SAARC members and to 2010 for the SAARC LDCs. It also envisages a SAARC Customs Union by 2015 and a SAARC Economic Union by 2020. It also made far reaching recommendations in social arena including on poverty alleviation, empowerment of women and trafficking of women and children.

The 12th SAARC Summit held in Islamabad also marked a remarkable improvement in the bilateral relations between India and Pakistan.

It reiterated its commitment made at the 11th SAARC Summit at Kathmandu for the creation of a South Asian Economic Union. Accordingly, the summit decided to move towards the first step of integration process i.e. the operationalisation of South Asian Free Trade Area (SAFTA) by 2006.