Moreover, a country has to switch its exchange rate policy between corner solutions and intermediate regimes according to the demands made by the condition of its economy. That is, the choice of exchange rate regimes does depend upon a country’s characteristics. A country’s exchange rate regime varies depending upon the specific situation of the country and also varies across time, and SAARC member countries are also found to be adopting different exchange rate regimes over time. It is also interesting to note that India, Pakistan and Sri Lanka have adopted a more flexibility approach and become responsive to market sentiment in making choices of exchange rate regime, while the Bhutanese and Nepali currencies have been essentially rigid vis-a-vis the Indian currency.

As such, a dual currency system has been adopted by Bhutan and Nepal with their national currencies pegged to Indian currency. It has somehow already opened a path to a kind of monetary integration between Bhutan and India, as well as between Nepal and India. Some schools of thought interpret this as the beginning of informal monetary union. An idea has been flourishing among some concerned fora as to whether a common currency can be introduced in the SAARC region to give impetus to intra-trade amongst SAARC countries through the proper level of financial integration. It is also worth mentioning here that the evolution of the Euro since January 1, 1999 has raised the above notion in the mind of eminent economists of the South Asian region as to whether there is the possibility of using a regional currency in this region.

In this respect, the ASEAN countries did heavy homework to look into the feasibility of adopting a regional currency in South East Asia. They arrived at the conclusion that irrespective of wider divergence in the areas of convergent factors, the countries of the region could proceed for the first stage of economic and monetary union if there is strong political will among member countries. In South Asia also, the establishment of SAARC is considered a milestone in long-term economic cooperation between member countries. Over the years, SAARC has surprisingly expanded its core area of economic cooperation into various fields relating to economic as well as social structures. It is in line with this spirit of economic cooperation that a SAARC Finance network was established in 1998 under the combined guardianship of the central banks and Ministries of Finance of member countries for enhancing the collective capacity of SAARC for policy analysis in various fields of financial, monetary, trade and investment activity.

The primary goal of the SAARC Finance network has been, among other things, to identify an effective mode of payments for a potentially growing SAARC trade, ultimately passing over to the concept of a clearing union arrangement, payments and credit arrangements and coordinated foreign exchange rules for fostering a congenial financial cooperative environment at the end. The SAARC Finance network is yet to receive official recognition under the SAARC Charter. It should, however, be realized that the steps towards regional cooperation have to get over several stages of harmonization of economic policy framework among the participating countries. There are at least six stages in the process of economic cooperation (from Trade Policy through Free Trade Area, Customs Union, Common Market, Economic Union and Complete Economic Integration).

The current position of SAARC trade suggests that trading relations amongst SAARC countries are heavily affected by high level of tariffs and a cluster of non-tariff barriers including quantitative restrictions and discriminating practices. SAPTA (South Asian Preferential Trade Arrangement), which envisaged initially introducing trade concessions through the reduction of tariff, para-tariff and non-tariff barriers has, in fact, been moving at a very slow pace, only enlisting altogether 5,553 items in the National Schedule of Concessions by the third round of negotiations in 1998. It does mean that there is still a long way ahead for transition from SAPTA to the launching of SAFTA (South Asian Free Trade Area) and then onwards to the constitution of a Customs Union to ultimately reach complete economic integration. While efforts towards economic cooperation are hindered by the longtime postponement of the SAARC summit, the feasibility of a monetary union with the objective of using a common currency amongst the SAARC member countries also depends upon the levels of economic development of the regional countries.

Although the macro economic trends of the SAARC countries do not show much variation in terms of real growth, movement of prices and fiscal deficit-GDP ratio relative to the strength of the domestic currency, there exist significantly wide differences in exchange rate depreciation. Exchange rate movement between 1991-97 among the SAARC countries shows a range from as low as 17.8 percent to as high as 80.6 percent, suggesting that a major ratification is needed to improve the current account and capital account in order to stabilize the domestic currency. Also suggested is adopting of strong measures in facilitating bilateral trade in terms of preferential arrangements for those facing a relatively low comparative advantage. On the other hand, the intra-regional trade in 1996 accounted for only 4.5 percent of total exports and 9.6 percent of total imports, indicating the meager share of intra-SAARC regional trade in total world trade.

The prospect of enhancing the share of regional trade volume among SAARC countries largely depends upon the degree and extent of trade concession and market access provided by member countries, especially those with larger and stronger economies. In this connection, India enjoys the highest share of around 77 percent of total SAARC GDP at 1990 prices while its share of intra-regional imports to its total imports constitutes 0.4 percent only. Thus the SAARC group, characterized by a single country (India) being dominant in terms of size as well as overall economic position, does pose some challenges with respect to uniformity in trade concessions, market access and so on. India’s significant economic size in relation to the insignificant intra-SAARC trade share has to be rectified, if the politico-economic will towards adopting a common currency in the region is to be achieved in future.

Besides, lack of any formalized and quantitative measurement of actual size and volume of the informal cross-border transactions, that are taking place among SAARC countries does act as a bottleneck not only in the field of trade but also in the services sector, including the financial sector, ultimately posing a threat to monetary union. And even if the above constraints are mitigated, the difficulty for the weak economies of meeting the convergent criteria in establishing monetary union will come up as a great setback to the prospect of having a common currency in the region. This is made clear by the fact that the Euro has had a very hard time containing its volatility because of the problem encountered by some member countries in adhering to the benchmark set under the convergent criteria. Examples of Italy not being able to maintain the fiscal deficit to GDP ratio under the benchmark and high unemployment rate observed in Germany in the past are still fresh to us.

It is well accepted that India has a valuable role to play in terms of its capacity to make sacrifices in achieving harmonization of economic activity in the SAARC region at a faster rate for opening a path towards monetary union. As considerable divergence exists in the size and structure of the economies of SAARC member countries in terms of level of development, resource endowment, production capacity, economies of scale, labour productivity etc, any uniformity in the level of concessions offered on trade and payments might lead to polarization of benefit to the more efficient and dominant members creating dissatisfaction among others.

By Ritesh Shrestha

As the night got deeper, in the company of twat (local liquor), I found that it was getting cold and my life was getting even colder. Newly occupied chairs of the Free Students might have made it warmer for my friends. But for my part, even the bottles and bottles of liquor proved too feeble to keep me mentally sound. The day that had passed had surely added yet another milestone to wonder or ponder over. A series of shouts occasionally came from the polling centre, unsure whether the count had ended.

Chances were still that I could have owned the presidential post of the Nepal Engineering Student’s Society (NESS), if I had played my cards right that very day. Well, it would have been a different story if the very word "if" wasn’t there. What if the "if lady" from the Central Congress committee hadn’t come to call down my nominee informally? A day before, we were confident that we would carry it off even though we had stood on an independent panel, which was a part of the Nepal Bidhyarthi Sangha (NBS), and also as a rival party of the pure panel of NBS. And now that the polling had already hit one hour ahead, the lady was demanding to withdraw my name. Actually, NESS is a non-political organization but the lady looked too much worried about the stand of Congressi students in our Engineering campus at Pulchowk. Or, was it that she was bothered about her stand in an upcoming central committee staff leader nomination? She did mention this at the end of her one time visit. She said she had came all the way from Khotang only to resolve this problem. She got angry at the last hour simply because we hadn’t informed them. Why the hell should I inform the committee that we had some discrepancy among the same party students, which gave rise to two separate panels of NBS? When questioned about how she came to know about our campus stuff, I indirectly caught her flimsy tongue slip. It was the president of the other panel of NBS who had called her to ward off the weak position of NBS over ANNFSU (combined student’s Communist party). The young lady could have cried out for his post. But you knew who would yield. Otherwise, you wouldn’t have come to our campus with such determination. And suddenly you could change and mould our mind and desire even though we didn’t know you at all.

This was my debut into campus politics, and you know how nemby-pamby I stood in playing my part of the card. I don’t think I can imagine that kind of strategies, policies, blah, blah are involved in the actual politics of our country. If a flower smells so foul what about the whole garden of char barna chhattish jaat?

Nothing has changed since. Whether the defence deals or the stock markets, the same old mania of personal gain overtakes those in power or those who can manipulate. People are first bamboozled, then cheated and finally discarded.

Some 25 years ago, the Congress was in the dock because of the acts it carried out with impunity. Today, the BJP and the Samata are the accused following the disclosures by a website portal how their chiefs, Bangaru Laxman and Jaya Jaitly, respectively, exploited their position - and the bureaucracy - to ‘strike’ certain defence deals.

The nation has helplessly watched how the warning administered by the Shah Commission has gone awry. There is no difference between one set of political parties and the other. For most of them, the dividing line between right and wrong, moral and immoral has ceased to exist. And they are freelance, freewheeling politicians.

The saddest part is that the BJP, the main partner in the ruling National Democratic Alliance (NDA), has been found wanting even though its claim to probity and patriotism has been the loudest. The charge of corruption in defence deals exposed through photographs and tapes cannot be taken lightly. It is not a political matter to be decided by a majority in parliament. The rot is deeper and bureaucrats are very much part and parcel of it.

Home Minister LK Advani’s reported remark that the foreign company through which the deals were sought to be made was fictitious. Of course, it was ‘constituted’ to show defence deals could be secured "for a price." If there was nothing in the allegation, why were two major generals and some other high officials suspended within 24 hours of the disclosures? One of them has admitted accepting Rs 50,000. That no action has been taken against politicians gives credence to the general belief that when it comes to them - they are supposed to set high standards - the yardstick is different.

Defence Minister George Fernandes should have stepped down voluntarily. What happens in his ministry is his responsibility. By suspending officials he cannot wash away the stigma of corruption smeared on his ministry’s face. It is outrageous that in a democratic set-up, where political bosses are answerable, the minister-in-charge should hide behind the khaki. And what about his party president Jaya Jaitly, who says that the decisions are dependent on ‘the Saheb’ (meaning George)? Both George and Jaya have been part of Jayaprakash Narayan’s movement, which was for cleansing the public life. Corruption was its main target. Both of them have their faces tarnished after the website tapes. Having spent so many years in public life, they should have realised that their continuation would embarrass the ruling group to which they belong. It is ironical that George is the convenor of the NDA.

The government has said that it is willing to hold any kind of inquiry if the Opposition wants it. In both houses of parliament and elsewhere the BJP top leaders are plugging the same line. Is the charge of dishonesty by itself not a matter of scrutiny? What about the people who are losing faith in the institution of government? Whether the opposition, which too is a set of politicians, wants an inquiry or not matters little. It is the government, which has to make up its mind. By delaying the process, it has evoked several doubts.

It has been suggested informally that a sitting Supreme Court judge should look into the charges. Once again it would be a long, tortuous legal process. The example of the Liberian Commission looking into the gamut of Babri masjid demolition is still going on even after eight years of its appointment.

A probe by a joint parliamentary committee (JPC) is preferable. Again experience shows that such a course gets bogged down in politics. The JPC in the Bofors gun scandal was hogwash. The probe in the scam created by Harshad Mehta did not punish anyone, although the complicity of every Congress minister was proved.

Inquiries and probes may pinpoint who tried to grab how much. To some extent, norms of justice can be met. But can the image of integrity, which the government should have, come back? Some punishments may even show that the guilty are not being spared. But will the ‘real’ guilty be ever punished? They are in every party and they are behind the scenes. Their relations or friends do not get exposed, let alone punished. Will this operation, if carried out, rehabilitate the BJP in the eyes of the people? The party has been criticised for communalism but not for wheeling-dealing, which shows its members in as much bad light as others.

The BJP leaders know it took some persuasion to make Bangaru Laxman submit his resignation. After the cabinet meeting, held soon after the disclosures, he was cross-examined by a cabinet minister in the presence of two others. One of them was against his appointment as the BJP chief in the first instance. Laxman’s reply left all the three ministers in no doubt that he was not above board.

Indeed, defence deals are seldom above board. The kickbacks are, in fact, part of the price charged. There are so many arms dealers functioning in Delhi that it is difficult to know whether the information reaching you is to stall a parallel deal or to warn against a corrupt bargain. Still it is important to look into the allegations reaching you.

Take the government’s decision to acquire the T-90. The deal, for some reasons, was struck without proper field trials in India. I wrote the following letter to the Prime Minister.

"I do not know if I am in time to give you information that the tank T-90, which we are purchasing from Russia has not made the grade _ i.e., it required an engine of 1,000 hp but the engine which the Russians brought and mounted on the tank did not go beyond 840 hp. They have promised that the engine they would mount on the T-90 tank for us will be of 1.000 hp, but it will be tested on Russian soil. In all fairness, it should be tested in India because this is where we want the tank. Also, the tank could not negotiate the desert terrain properly. The contract, I believe, is to be signed on January 29. I thought I would let you know what came to my knowledge."

Two weeks later, I got the reply, with the stamp of the PM’s signature affixed, saying that the matter was being looked into. This was a stock reply to an MP. The letter probably did not even reach the Prime Minister before the deal was finalised. The letter must be stacked somewhere in the PMO.

The government has to evolve a method whereby deals on defence are transparent. I have not known any minister since Jagjivan Ram who has not been charged with corruption. In the case of the late Prime Minister Rajiv Gandhi, the cut was probably the maximum in the Bofors gun deal. The Congress is wearing the cross. Maybe, there should be a committee of three, four senior ministers, including the Defence Minister, which should finalise defence deals because the money involved is in hundreds of crores. And, above all, the nation’s security should be the primary consideration. The growing belief is that because of kickbacks the best of weapons are not purchased.