US embassy cable - 05NEWDELHI6036

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 006036 
 
SIPDIS 
 
E.O. 12958: DECL: 08/04/2015 
TAGS: PREL, ETRD, ECIN, EAID, BG, SL, NP, PK, ML, BU, IN, SAARC 
SUBJECT: INDIA'S SAARC PRIORITIES: SAFTA IS KEY 
 
 
Classified By: PolCouns Geoffrey Pyatt, for Reasons 1.4 (B, D) 
 
1.  (C) Summary: In a July 28 meeting, newly appointed MEA 
Joint Secretary for the South Asian Association for Regional 
Cooperation (SAARC) P.K. Kapur highlighted the GOI's 
priorities for the November 12-13 meeting in Dhaka, including 
the South Asian Free Trade Area (SAFTA), a poverty and 
infrastructure development fund, and energy initiatives. 
Kapur agreed that SAARC was an important tool for improving 
Indo-Pak relations and was optimistic that progress in the 
Composite Dialogue had positively impacted the GOI's SAARC 
agenda vis-a-vis Pakistan.  Although India faces some 
resistance from the lesser developed SAARC members, Kapur 
says he has top level support from the GOI and perceives an 
improvement in Pakistani and Bangladeshi attitudes towards 
the upcoming summit.  We should make SAFTA a priority; we'll 
need to push all sides hard for SAFTA to become a reality. 
End Summary. 
 
Top Priority: SAFTA Implementation Date Looms Ahead 
--------------------------------------------- ------ 
 
2.  (C) Kapur said the GOI is working on a joint mechanism in 
preparation for the January 1, 2006 entry into force of 
SAFTA, as agreed during the Twelfth SAARC Summit in January 
2004.  Several details of the agreement are still under 
negotiation, but Kapur was optimistic that SAARC members will 
have the "Mechanism for Compensation of Revenue Loss for 
Least Developed Member States" ready for singing before the 
upcoming summit.  He reported that member countries have 
agreed on a formula that would "give the SAARC summit a big 
impact."  While India, Pakistan and Sri Lanka were "on the 
giving side" with a "relaxed attitude" about the mechanism 
and wanted it signed, they were facing some resistance from 
the lesser-developed members.  Kapur also commented that the 
"Sensitive List of Products" is under review, but did not 
give a timeline for further review. 
 
SAARC Development Funds In The Works 
------------------------------------ 
 
3.  (C) After poverty alleviation was declared the 
overarching goal of all SAARC activities at the last summit, 
the group is working on a Fund for Poverty Alleviation and 
Infrastructure.  SAARC has called a meeting in early 
September to discuss "brewing proposals" on the fund.  Both 
the World Bank and the Asian Development Bank have expressed 
interest, but Kapur backed away from endorsing their 
participation, saying "until our own house is in order, we 
are not comfortable inviting others in." 
 
4.  (C) Discussing attitudes towards the compensation and 
poverty initiatives, Kapur told us that India, Pakistan and 
Sri Lanka are each trying to persuade their Finance Ministers 
to part with the necessary resources.  Although it is 
difficult for the GOI to find money for poverty alleviation 
for its neighbors, some of whom have rocky bilateral 
relationships with India, he observed that the effort has 
been boosted by the country's top leaders, who have given a 
political impetus to the SAARC process.  As Kapur noted, it 
helps the Indian interagency process when the PM has said 
"get it done."  Regional energy initiatives are also a major 
focus at the political level, but technical discussions have 
been bogged down by a lack of funds. 
 
Delhi's Views of Its Neighbors 
------------------------------ 
 
5.  (C) Kapur gave us a rundown of the preparatory meetings 
before the November summit.  Following consultations on 
health cooperation on June 28 in Sri Lanka, Kapur said the 
Commerce Ministers will meet, but did not yet know the date 
or location.  MEA Joint Secretary-level discussions are 
scheduled for August 13 and 14.  Directly before the summit 
in Dhaka, there will be a Foreign Secretaries meeting on 
November 10 and a Foreign Ministers meeting on November 11. 
Kapur commented that the bureaucracies were moving slowly, 
but that "lots of parallel meetings are gaining full steam on 
their own."  Separately, FM Natwar Singh will visit Dhaka on 
August 6. 
 
6.  (C) While describing GOI plans for the summit, Kapur was 
also optimistic about the positive impact of such 
multilateral cooperation on India's bilateral ties with 
Pakistan.  As the economic aspects of the relationship take 
on a greater importance, Pakistan would hopefully see how 
India can be viewed as an opportunity rather than just a 
threat.  He observed that Pakistan "used to be the sticking" 
point in multilateral negotiations, but the GOI had seen the 
change in their attitude required for "SAARC to take off." 
Noting that Bangladesh also felt a sense of ownership around 
the summit, he stressed that the GOB was "putting in a lot of 
effort" and "coming to the table with a positive approach." 
 
Twice Canceled, Third Time A Charm? 
----------------------------------- 
 
7.  (C) Kapur understood how sensitive Bangladesh was about 
the previous cancellations of the SAARC summit, but remained 
optimistic about a successful meeting in November.  The 
summit provides a deadline for the GOI to focus on many of 
its goals for greater engagement with Bangladesh and an 
opportunity for PM Manmohan Singh to try to mend ties in 
Dhaka from the top down.  Through high level support and the 
multilateral format, Kapur believes SAARC is giving the GOI a 
chance to cooperate in ways that would be politically 
unfeasible if left to bureaucracies or bilateral avenues. 
 
Comment: We Should Push For SAFTA 
--------------------------------- 
 
8.  (C) Comment: Trade is the key to peace in South Asia.  We 
should push hard in Washington and in the region for SAARC 
countries to take SAFTA implementation seriously.  End 
Comment. 
BLAKE