SAARC: NO SUMMIT IN SIGHT, SAFTA ON TRACK

UNCLAS NEW DELHI 002410

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD ECIN PREL IN PK NP BG SAARC
SUBJECT: SAARC: NO SUMMIT IN SIGHT, SAFTA ON TRACK

REF: A. NEW DELHI 1426


B. NEW DELHI 1298


1. (SBU) Summary: Prospects for a rescheduled SAARC Summit
in 2005 are diminishing amidst scheduling difficulties and
Indian concerns over the coup in Nepal and instability in
Bangladesh. In a March 30 meeting with USAIDoff and Poloff,
MEA Joint Secretary (SAARC) V. Ashok expressed optimism,
however, that SAFTA would still be implemented on schedule in
January 2006. Ashok was confident that Islamabad would, as a
result of SAFTA, grant India preferential trade status. He
indicated that if members were not willing to make SAARC
successful, India would leave it behind in favor of other
regional groupings. End Summary.

Summit Still Stymied
--------------


2. (SBU) Local media reported on March 31 that a SAARC
Summit in 2005 was unlikely, clarifying earlier suggestions
that India had agreed to an April Summit. Joint Secretary
Ashok's March 30 remark on the Summit ("whenever that is")
supported this suggestion. Ashok's cynicism contrasted with
the GOI's public statements. An MEA official stated in
Parliament on March 17 that SAARC relations had not suffered
a setback as a result of the Summit's cancellation.


3. (SBU) Commenting on the prolonged postponement, the
"Hindustan Times" Diplomatic Correspondent Nilova Roy
Chaudhury told Poloff that India is saying "yes in principle
to the Summit, but finding fault with the scheduling as a way
to say no." While scheduling is indeed difficult due to
Parliament sessions, travel schedules, and the impending
monsoon, New Delhi is not prepared to attend a Summit soon
because GOI political and security concerns with Nepal and
Bangladesh remain, she observed.

SAFTA Moving "With or Without the Summit"
--------------


4. (SBU) Ashok reported that the South Asia Free Trade Area
(SAFTA) was progressing well. He was "very hopeful" that the
agreement would be finalized by July 2005 and implemented in
January 2006, as scheduled. Noting that the once-postponed
seventh meeting in the Maldives was held last week, and that
the next session was planned for Kathmandu in April, Ashok
explained that the discussion in Male focused on a
compensation mechanism for customs revenue loss and a formula
to determine whether an increase in trade volume will offset
lost revenue.


5. (SBU) On India receiving MFN status from Pakistan, Ashok
was again upbeat, citing as an example Pakistani PM Shaukat
Aziz's remark in India in November 2004 that when SAFTA is in
place, "it will be MFN-plus." Ashok saw "realism seeping
into SAARC" as members see the success of other regional
organizations, and sense that they have "missed the bus."
Nonetheless, he reiterated the Foreign Secretary's point (Ref
A) that if SAARC is not willing to join India at its pace,
New Delhi will work more closely with other groups, such as
the Bay of Bengal Initiative (BIMSTEC).

Comment
--------------


6. (SBU) New Delhi seems increasingly willing to let the
2005 SAARC Summit fizzle, although it remains interested in
SAFTA and the improved trade status with Pakistan it may
include. The GOI can only use the excuse of scheduling
conflicts as a reason for postponement for so long, and will
eventually have to clarify how much of a priority SAARC
really is for its foreign policy.
MULFORD