Taking Kashmir To SAARC

Eminent intellectual and economist Dr Haseeb Darbu delivered a lecture on leveraging SAARC for regional cooperation and solving Kashmir issue in the University of Kashmir’s UNESCO MS Institute of Kashmir Studies on June 17. Riyaz Ul Khaliq brings an edited transcript to the public domain

Haseeb DrabuIn what way could SAARC be leveraged for greater cooperation in terms of economics? Can we leverage SAARC for the resolution of Kashmir dispute?

And what are the five or six things that we could do concretely, not in terms of political theory but in terms of specific policy prescriptions? What could we do in over next five years to see if something can evolve? If problem is small and intractable, it stands to reason to make it a part of larger problem. Then the problem tends to declare as the old saying goes – if you can’t pull out a cork, then push it in.

So can we make J&K a part of larger SAARC regime? And that is one thing we may just happen to see at European Union. Irish and Wellish problems were handled because the issues were part of a much larger whole.

Post world War, the basic global trend, perhaps one of the biggest trends, is that we have moved towards bigger economic spaces, and smaller political spaces. So if you look from 1930s, economic spaces have become larger and political spaces have become smaller, like Germany. The political states have shrunken, the economies have increased like European Union.

This is driven by the fact that globalisation doesn’t see political boundaries as market boundaries. So it has moved away from a situation whereby political boundaries become restrictive market boundaries. If you look at large changes in economic policy making, we have moved from a position where in an administrative order used to be also an economic order. So when we cross a border, for example Indian and Pakistan, that border is just not an administrative demarcation of a country that is also demarcation of a certain economic regime. Borders have certain political meaning but they have economic significance as well.

You put barriers to entry that you can’t leave ones state without full filling the following requirements. But when I cross that boundary, I have to pay tariffs so it becomes an economic boundary.

There are physical barriers to entry that you can’t import certain things without paying taxes levied on it. And there are quantitative restrictions as well.

If you look at how it has evolved over the time, these restrictions have died down. There were huge restrictions on labour and capital. Till 1991, no foreign investment was allowed in India. Why? There was a reason for it. There was a policy that India wanted to build its own capital and labour as well.

In J&K, for instance, there is a boundary at Lakhanpur which is an administrative boundary. That is the point where tariffs are levied, so it is an economic boundary.

Now, these are significances that globalisation has glossed over. Globalistaion has ensured that there is no such boundary. The biggest thing that has happened in last twenty years is that notions of sovereignty have changed. In EU, you don’t know in which state you are stationed as boundaries have dried down. Currencies are equally valued.

The first thing is there are larger economic spaces and smaller political spaces. Second impact is in public policy: economic diplomacy has replaced political diplomacy.

In Kissinger era, political diplomacy was the art and was taught in the public schools of America. People are now into economic diplomacy. So it has changed the way people were thinking.

Shall we continue with political diplomacy with Pakistan when it comes to Kashmir issue or shall we switch over to Economic diplomacy? And there are good and genuine reasons to move in this direction.

We have been stuck for sixty years for one issue and all manner of things are bought to bear upon this: prestige, logic of sovereignty. Can we slightly change the perspective and look at it differently, try and navigate the keys and see if there is a possibility of a resolution?

So the logic is: if we want SAARC which is political construct, to be successful, it can’t be on emotional, sentimental or cultural basis. It has to be based on hard core economic basis!

If we really talk of this, we need to answer what we mean. Are we talking of regional cooperation or regional integration? Even that distinction has to be made.

Regional cooperation is purely between governments while regional integration is much more enriching because it involves civil societies. But it should not be dominating, big ones hovering over smaller ones.

Integration goes back to my childhood when we in Kashmir would never listen to Akaashvani for weather updates but would switch over to Radio Pakistan. That doesn’t mean that people are pro-Pakistan, which is trivialization. The fact of the matter is this that Kashmir is geographically closer to Pakistan. The metrological office of India was based in Nagpur. How could they determine the weather of Kashmir? Then, technology was zero and we had no Google survey or mapping. Instead, the the man sitting in Muzaffarabad was sitting closer to Kashmir than one in Nagpur.

So what are the things to set up the frame work for SAARC?

The first thing which could make SAARC integration possible is our understanding of sovereignty. We need to understand what is sovereign?

In 1930s, sovereignty was about running ones country politically and economically. Today, EU has no central bank. They have central monetary policy. They have given a large chunk of economy yet they have not lost sovereignty. Globalisation has changed the notion of sovereignty and when we come to Kashmir, the question arises: where does the sovereignty rest?

And the model that was brought to Kashmir whether it was Article 370 or Instrument of Accession, it was a model of shared sovereignty, that you are giving certain constitutional authority.

And when we speak of dual currency, it is also a shared sovereignty. It is important. And when the notion of sovereignty under goes a change, the notion of what we share also under goes a change.

If people are interested in building SAARC, the post colonial baggage of what sovereignty is must change. We have a lot of pride and prestige associated with it.

From the economics point of view, only three things need to be sovereign: credit, constitution and the currency. These three are must.

Jammu and Kashmir has two of these: constitution and credit. And if that is so, we must be prepared to share sovereignty across and not be stuck in what was in 1940s. The world has changed!

Secondly, you need to have a robust economic policy. We can’t afford a restrictive economic policy. You must engage with the world, world will engage with you. Within SAARC, we can have a coordinated economic policy.

We need to look at what our economies have in store. How competitive the economies are. Then you shall have economic spaces.

USA has a restrictive entry because they don’t want labour to come into their country. Yet they want capital should come. But India has other problem. They have enormous labour but they don’t have capital.

We need to change the notion of sovereignty and adapt to it. And how do we share it.

Thirdly, how do you look at sub-regional integration? This is a very relevant area in political economy. You need to empower your sub-regions. Unless you do that, you won’t make SAARC.

Let India’s Assam belt start trade with Bangladesh, Tamil Nadu with Sri Lanka and Kashmir with Pakistan. But the question is: Are you prepared to deal with this? Do you have enough confidence in institutions which will allow this to happen?

Are you ready to empower these regions? Now if the biggest hurdle to SAARC is dominance of India, is this not the better route to take? So, Bangladesh will be little less scared to deal with West Bengal, Tamil Nadu with Sri Lanka, Gujarat with Pakistan and Kashmir with Pakistan.

Pakistan will be at ease doing business with Kashmir and Punjab. And what happens as a by-product of all this? In the process you start resolving regional conflicts. As I talked about Irish and Wellish cases, both are less intense today because EU has given favour to them.

Now if India has regional conflicts, prime one Kashmir itself, Telangana, Tamil Nadu, Punjab conflicts, would you resolve them by engaging them at sub regional levels? You may not resolve them because resolution will be done by the sovereign not the sub sovereign.

And then, what I have been looking at it personally, will India look at Article 370 as a model of federalism. Give some sort of powers to states. India will have to be ‘united states’ of India and not unitary state of India. It will have to restructure its federalism in some way.

India has its own stakes in the sub regional conflicts. They get dissipated and that is when you see possibilities of negotiations. That is how you engage and political diplomacy gets subsumed in economic diplomacy.

Allow sub regional engagements to happen!

I suggest, as a part of this frame work, can we start from J&K?

Can we start looking at two parts of J&K? Coordinate their economic policies, horticulture, weather, disaster management, floriculture, tourism. We will not declare PaK as MFN. We will not say no to tariff regime. There are tariffs between India and Pakistan which we will follow. No problem. Except that I will put them at zero. The structure remains same and the effect will be what we want. The problem policy makers have is with the structure not with the number.

Can we say that we will have an ecological-environmental zone stretching from Muzaffarabad to Baramullah? We will have same budget allocations. We would have body from both the parts which will over look at it.

We will then easily look at rehabilitation and resettlement of Kishenganga. We will be doing joint ventures in hydro power projects.

Then we will come to calibrating taxes. If they have 5 percent tax, we will also follow that. We won’t temper with that. What does this do is that it makes the space neutral to tax regime.

And if we want to develop an economic model for this region, I will suggest keeping currency out of it for the moment. Once we trust each other in these things, then we shall think of common economic spaces, instituting a dual currency system, harmonizing of economic legislations. Those are the three things that will then drive it.

What we can do then is lessen the tariffs and not elevate them. Not for Indian or Pakistani mainland but for ‘Greater J&K’. What we have done is, using the SAARC frame work, we have created a sub regional space wherein lot of things can happen without disturbing the sovereignty of India or compromising it. Do it in five blocks of India.

Yet the key question remains: will India allow it?

If it doesn’t, let us stop it there. After you have done preferential trade agreement (PTA). Look at sub-regional free trade area which is based on elimination of tariffs between the two parts of J&K. While maintaining the tariffs on imports from rest of the world including India and Pakistan for the state of J&K, if as a state subject of J&K I want to go to Muzaffarabad, I will have to show permit but when I intend to enter territory of Pakistan, I will have to show my passport and vice-versa when any one wants to visit India. And this feature shall be part of trade between the divided J&K but once we do trade with India or Pakistan tariffs and taxes apply.

The third step would be to eliminate tariff in ‘Greater J&K’ and set up a common tariff between India and Pakistan, a uniform tariff across the divide.

It will take three to five years, we will have confidence in each other, we will have good human beings on both sides. Now, it is time for some innovations. EU members made a European monetary. If a single unit of this Union has any fiscal deficit, the Union Monetary shall come to help.

And in case of J&K, we will make both the currencies valid. Indian as well as Pakistani rupee shall be valid. It may not be the dual currency but, more correctly, is co-circulation of the currencies.

The currencies will just be modes of exchange. It happened in Bhutan and in Nepal till 1967 Indian stamped rupee was valid. What happens when we use credit cards? If we use Indian credit card in Pakistan, we will get Pakistani rupee. It is the mutual agreement of banks in the two countries that make it possible. That is exactly what I mean.

At the moment, the national currencies are just the territorial parts and what we want is just make them part of ‘Greater J&K’. And if we monitor the change in currencies at world level, the currencies are being de-territorializing.

And then all this is done, we are moving in an economic union.

What happens to government spending, in the end?

If government spending is different in these two parts, then inflation rates are different. So some degree of fiscal harmonization is to be done but that can wait, at least.

Now, what are the things to be put it into operation?

First one is a trade component: remove trade barriers and allow PTA.

Second is the regulatory component: who will regulate and control it? A body comprised of members from the two sides will do it. Regulatory merger in a case. Some uniformity is must.

Third: getting political acceptability for all this. Striking a delicate balance at national level of supra-nationalities, Indian nationhood, and sub regional nationalities. It must form in broad parameter. Some degree of political sensitivity is a must.

If I really want to see it from integration principles then these are very broad parameters. But we can start from certain points to form common economic spaces.

Let us have common agriculture market, a common horticulture facility, at least. It will revive the common markets post partition of the sub continent. Why can’t our banks have branches across border? J&K Bank had its branch in Lahore up to 1964 after that the banking relations were put to halt by the two countries.

So having said this, if it is allowed, other blocks can follow. West Bengal, Tamil Nadu, Gujarat, or Punjab can do the same.

 Besides political autonomy, one has to look at fiscal as well as economic autonomy as well.

Article 280 of Indian constitution says that states should have fiscal autonomy. In 2004 when I wrote speech of the then governor S K Sinha for the joint session of J&K Legislative Assembly, the first thing I wrote is that state wants fiscal autonomy. The governor objected to that but I put before him the constitution of India to which he straight way agreed and it is on record of assembly now.

So we need to have that fiscal autonomy to implement economic autonomy then political autonomy shall follow.

I don’t want the Kashmir we today have. I said it always that I am not a Kashmiri because of Article 370. We can’t be fighting 60 years of battle on historic ground, there has to be some sort of positivism in it. We are not just destroying the fabric of the society but our economy as well.

Somehow, if tomorrow I wake up and I am free, the economy I shall have, would be so over burdened that we shall collapse as a nation. And that is something we need to really think about!


  1. I can’t understand, why Kashmiri politicians and pakistanis don’t accept the fact that Jammu and Ladakh are also parts of Jammu and Kashmir. There can’t be any solution into the issue of Kashmir without consent of the people of both these regions. Whenever they talk about Kashmir issue they talk about the people of Kashmir only, they always take Jammu and Ladakh for granted. People in these two regions have their own views, they have their own aspirations, without addressing which there can’t be a uniform solution into this political dispute.


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