INDIA'S SAARC PRIORITIES: SAFTA IS KEY

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