Dec 08, 2024 10:15 PM IST
After 39 years since its establishment, it can be said that Saarc has spectacularly failed to achieve any significant regional integration
Sunday, December 8 was South Asian Association for Regional Cooperation (Saarc) Charter Day. On this day in 1985, seven South Asian countries — India, Pakistan, Bangladesh, Bhutan, Nepal, Maldives, and Sri Lanka — convened in Dhaka and signed a charter to establish Saarc to promote peace, and development in one of the world’s poorest and least integrated regions, which has historically been marred by conflicts.
In terms of economic integration, Saarc set ambitious goals, such as the formation of a South Asian Economic Union (SAEU). This would be a trade bloc where all member countries would adopt common policies regarding the movement of goods and a unified external trade policy. Ultimately, Saarc aimed to develop into a common economic and monetary union, which would entail having a single currency. These objectives were reiterated during the last Saarc summit held in 2014.
After 39 years since its establishment, it can be said that Saarc has spectacularly failed to achieve any significant regional integration. Rather than becoming an economic union, South Asia is not even a dynamic and functional free trade area. Although the South Asian Free Trade Area agreement was signed in 2006, intraregional trade within South Asia remains a meagre 5.6% of the region’s total trade. This figure becomes even more striking when compared to the intra-regional trade rates of 25% in Asean and 22% in Sub-Saharan Africa. Additionally, Saarc countries have signed the Saarc Agreement on Trade in Services to enhance intraregional trade in services, yet the level of trade in services within South Asia remains very low.
South Asia’s situation regarding investment integration is even more troubling than its trade integration. A 2021 World Bank report reveals that intraregional investments account for only 0.6% of the global inward foreign direct investment received by South Asia. This is the lowest figure among developing regions; for example, Sub-Saharan Africa’s share stands at 10.8%. There is a significant gap between the current reality and the region’s potential. To illustrate, the trade potential between India and Pakistan alone is estimated at $37 billion, according to the World Bank.
Three critical questions arise in this context. First, can South Asia remain an exception to the concept of regionalism and the success stories of regional cooperation, and still expect to grow and prosper? The evidence does not support this idea. Take regional international trade integration as an example. The success stories of the Asean region and the EU are well-documented in boosting intraregional trade and pulling up the economies of the participating nations. African nations have recognised the importance of deeper regional trade integration, leading to the establishment of the African Continental Free Trade Area, which aims to create a single market. Even MERCOSUR, Latin America’s regional integration project, has performed remarkably well compared to South Asia, despite its weaknesses.
Second, while the neighborhood-first approach holds a prominent place in India’s foreign policy, can it be effectively pursued solely through bilateral relations? When we examine nations that wield influence in international affairs, we find that they successfully utilise both bilateralism and regionalism to engage and win over their neighbours. Is India’s South Asian policy an exception to this trend? Recognising the significance of South Asian regionalism, India has increasingly supported the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (Bimstec), an organisation established in 1997: Bimstec includes five South Asian countries: Bangladesh, Bhutan, Nepal, India, and Sri Lanka, along with two Asean nations, Myanmar and Thailand. However, despite years of negotiations and optimistic discussions, Bimstec has yet to finalise a comprehensive free trade agreement that would facilitate deeper regional integration.
The third and most important point is: Should the failure of Saarc lead us to abandon the very concept of South Asia? Institutions are simply tools for implementing ideas. The failure of an institution should not be interpreted as a rejection of the idea itself. Therefore, it is crucial to either revive Saarc or, if that is not possible, to replace it with a more dynamic regional institution. However, India should not give up on the idea of South Asia. A peaceful and prosperous South Asia, cultivated through a shared sense of South Asian identity — regardless of the institutional label — is essential for enhancing India’s standing as a key global power.
Prabhash Ranjan is a professor of law at the Jindal Global Law School. The views expressed are personal
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