SAARC’s Failure to Achieve Regional Integration

On December 8th, the South Asian Association for Regional Cooperation (SAARC) marked 39 years since its establishment. 

About South Asian Association for Regional Cooperation (SAARC)

• Establishment: Established with the signing of the SAARC Charter in Dhaka in December 1985. 
• Secretariat: Set up in Kathmandu in 1987.
• Members: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. 
• Observers: Australia, China, European Union, Iran, Japan, South Korea, Mauritius, Myanmar, and the United States of America.
• Authority: The Meetings of the Heads of State or Government of Member States is the highest decision making authority under SAARC. 
• Hosts: Summits are usually held biennially hosted by a Member State in alphabetical order. 
  • The Member State hosting the Summit assumes the Chair of the Association.
• SAARC’s Specialised Bodies: SAARC Development Fund, SAARC Arbitration Council, South Asian Regional Standards Organization.

Achievement of SAARC

• South Asian Free Trade Area (SAFTA): SAFTA, Signed in 2004, is a free trade agreement between the members SAARC.
• SAARC Development Fund (SDF): SDF is the financial institution for SAARC to fund projects and programs in social sectors, such as poverty alleviation and development. 
  • The SDF was established in 2010 during the 16th SAARC Summit in Thimphu, Bhutan. 
• South Asia Preferential Trading Agreement (SAPTA): SAPTA was signed in Dhaka in 1993, to promote trade amongst the member countries and came into effect in 1995.
• South Asian Regional Standards Organization (SARSO): SARSO, established in 2011, is a Specialized Body to achieve and enhance coordination and cooperation among SAARC member countries in the fields of standardization and conformity assessment.
• Trade in services agreements: The Agreement has been ratified by all Member States and has entered into force in 2012.  
• Double taxation avoidance agreement: it was signed in 2005 by all members to avoid double taxation. India ratified in 2011.
• South Asian Association For Regional Cooperation University: Establish a SAARC university in India, a food bank and also an energy reserve in Pakistan.
• SAARC Disaster Management Centre (SDMC): It is an intergovernmental organization that helps member states reduce disaster risk, manage disaster risk, and promote regional cooperation.
• SAARC Social Charter: The SAARC Charter aims to accelerate social progress through collaboration and mutual assistance among member states.
• Linking South Asian economies with Southeast Asia: This will boost economic integration and prosperity in India, especially in the services sector. 

Ambitious Goals of SAARC

• South Asian Economic Union (SAEU): SAARC envisioned the formation of a South Asian Economic Union (SAEU).
  • It  included objectives such as the adoption of common trade policies, a unified external trade policy, and ultimately the introduction of a single currency for the region.
• Functional and dynamic free trade area: The organization aimed to establish a functional and dynamic free trade area.
  • To achieve this, the South Asian Free Trade Area (SAFTA) agreement was signed in 2006, and the SAARC Agreement on Trade in Services was introduced to enhance intraregional trade in services.

Importance of SAARC

• Promotes Regional Cooperation: SAARC provides a platform for eight South Asian nations to address shared challenges, such as poverty, illiteracy, and health crises. 
  • For instance, initiatives like the SAARC Tuberculosis and HIV/AIDS Centre aim to address public health concerns regionally.
• Facilitates Economic Growth: Agreements like the South Asian Free Trade Agreement (SAFTA) aim to boost trade among member states. 
  • Although implementation has been slow, the potential for enhanced intra-regional trade (currently at ~5%) remains significant for economic growth.
• Addresses Common Issues: South Asia faces shared challenges such as terrorism, climate change, and natural disasters. SAARC facilitates dialogue and cooperation to address these transnational issues. 
  • For example, the SAARC Disaster Management Centre fosters collaborative disaster preparedness.
• Encourages Cultural and People-to-People Exchanges: SAARC promotes cultural integration through events like the SAARC Film Festival and SAARC Literary Awards, which help foster mutual understanding and respect among the diverse cultures in the region.
• Strengthens Collective Bargaining Power: As a bloc, SAARC can enhance its bargaining position in international forums like the WTO or climate negotiations, ensuring that the region’s collective interests are represented on the global stage.
• Enhances Connectivity and Integration: Initiatives like the SAARC Motor Vehicle Agreement and the SAARC Satellite Project aim to improve regional connectivity. 
  • Although stalled, these projects have the potential to boost economic and social integration across South Asia.
• Fosters Regional Stability: By bringing countries like India and Pakistan to the same table, SAARC acts as a confidence-building mechanism to reduce tensions and foster dialogue. 
  • For example, SAARC summits have often facilitated bilateral meetings on the sidelines.

Failures of SAARC

• Postponed or Cancelled Summits: Over the past three decades, SAARC summits have been postponed more than 10 times due to political disagreements.
  • Example: The 2016 SAARC Summit in Islamabad was canceled after India, Bangladesh, Bhutan, and Afghanistan refused participation following the Uri terrorist attack.
• Weaker Organisation: South Asia’s regional cooperation has historically been weaker compared to other regions like ASEAN, the EU, and Africa.
  • African Continental Free Trade Area: Demonstrates the importance of regional trade integration.
  • MERCOSUR: Latin America’s regional integration project has outperformed South Asia.
• Inadequate Economic Integration: Despite the implementation of the South Asian Free Trade Agreement (SAFTA) in 2006, intra-regional trade remains at a mere 5% of the region’s global trade.
  • The potential for economic collaboration has not been realized due to limited trade liberalization and non-tariff barriers.
• Stalled Regional Initiatives: Key initiatives like the SAARC Motor Vehicles Agreement and SAARC Satellite Project have failed to materialize, primarily due to lack of consensus among member states.
  • This stalling reflects SAARC’s inability to deliver on regional connectivity and infrastructure projects.
• Failure to Address Regional Security Issues: SAARC has not been able to develop a collective security framework.
  • Example: Terrorism remains a divisive issue, with no consensus on addressing cross-border terrorism due to conflicting national interests.
• Underutilization of Resources: SAARC institutions, such as the SAARC Development Fund (SDF), have failed to meet their potential due to inadequate funding and a lack of impactful projects.
  • These institutions remain largely ineffective in promoting sustainable development across the region.
• Ineffectiveness in Crisis Management: SAARC’s response to regional crises, such as the COVID-19 pandemic, was minimal compared to other regional groupings.
  • Although India proposed a COVID-19 Emergency Fund in 2020, broader regional collaboration under SAARC was lacking.
• Shift to Alternative Platforms: The rise of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) as a more active and functional organization highlights SAARC’s inability to remain relevant.
  • BIMSTEC’s success in fostering regional cooperation contrasts sharply with SAARC’s stagnation.
• Perceived Irrelevance: Many member states prioritize bilateral relations or other regional groupings over SAARC, reducing its significance in addressing regional issues.
  • Example: India’s increasing engagement with BIMSTEC and the Quad demonstrates a shift in focus away from SAARC.

Challenges and Limitations Faced by SAARC

• Political Rivalries: The India-Pakistan rivalry, particularly over terrorism and Kashmir, obstructs cooperation.
  • Example: The cancellation of the 2016 Islamabad Summit due to the Uri terrorist attack highlights the impact of bilateral tensions on SAARC’s functioning.
• Lack of Trust among Member States: Distrust, especially between larger and smaller nations, hampers regional cohesion.
  • Pakistan’s frequent opposition to India-led initiatives, such as the SAARC Satellite and Motor Vehicles Agreement, demonstrates this issue.
• Weak Economic Integration: Intra-regional trade within South Asia remains at a mere 5.6% of the region’s total trade, far below ASEAN’s 25%. Non-tariff barriers, protectionist policies, and inadequate connectivity infrastructure exacerbate the problem.
  • Example: The South Asian Free Trade Area (SAFTA) has had limited success since its inception in 2006.
• Structural and Decision-Making Weaknesses: SAARC’s requirement for unanimity in decision-making often leads to deadlocks.
  • Important agreements, such as the SAARC Motor Vehicles Agreement and Regional Railways Agreement, remain unsigned due to lack of consensus.
• Limited Scope under the SAARC Charter: The charter restricts SAARC to dealing only with multilateral issues, excluding bilateral disputes.
  • This limits its ability to address pressing issues like India-Pakistan conflicts or cross-border terrorism.
• Perception of India’s Dominance: Smaller member states perceive India as a dominant “Big Brother,” creating apprehension and resistance to cooperation.
  • This sentiment undermines trust and makes smaller countries hesitant to engage fully in SAARC initiatives.
• Prioritizes bilateral relation: India’s foreign policy traditionally prioritizes bilateral relations with its neighbors.
• Low Intra-Regional Investment: According to the World Bank (2021), intraregional investments account for only 0.6% of global inward FDI in South Asia, the lowest among developing regions.
  • This lack of economic interdependence weakens SAARC’s relevance.
• Security Challenges: Differing threat perceptions among member states hinder security cooperation.
  • Example: India’s concerns over cross-border terrorism from Pakistan remain unresolved, stalling progress in regional security initiatives.
• Rise of Alternative Regional Platforms: The emergence of BIMSTEC as a viable alternative has shifted focus away from SAARC.
  • BIMSTEC’s focus on connectivity and shared objectives among its members has garnered more political and economic commitment.
• External Influences: China’s increasing influence in South Asia through initiatives like the Belt and Road Initiative (BRI) creates divisions within SAARC.
  • Pakistan’s alignment with China contrasts sharply with India’s cautious approach, adding to the discord.
• Internal Instability in Member States: Political instability within member states diverts attention from regional commitments.
  • Example: Afghanistan’s uncertain participation after the Taliban takeover in 2021.
• Logistical Inefficiencies: According to the Brookings Institution, Owing to protectionist policies, high logistics cost, lack of political will and a broader trust deficit, intra-regional trade in South Asia remains well below its potential at 5% of the region’s global trade. 
  • Initiatives like the South Asia Free Trade Agreement (SAFTA), though implemented in 2006, have seen minimal success in fostering trade and investment in the region.
  • Example: It is 20% cheaper for India to trade with Brazil than with neighboring SAARC countries.

Significance of SAARC for India

• Strengthening Neighborhood First Policy: SAARC aligns with India’s focus on fostering stronger ties with its immediate neighbors, promoting regional cooperation and development.
  • It provides a structured platform to address shared challenges, such as poverty and climate change, in collaboration with South Asian countries.
• Soft Power Projection: SAARC enables India to exert its influence as a dominant regional player. Initiatives like the South Asian University in Delhi enhance India’s cultural and educational appeal across member states.
• Countering China’s Influence: Reviving SAARC allows India to balance China’s growing influence through the Belt and Road Initiative by fostering economic and infrastructure collaborations within the region.
• Boosting Regional Stability: Through SAARC, India can promote trust-building measures, particularly with Pakistan, ensuring that regional interests take precedence over bilateral disputes.
  • It can help foster a stable environment essential for economic growth and regional peace.
• Economic Opportunities: Revitalizing SAARC could open up larger regional markets for Indian companies, especially in sectors like agriculture, pharmaceuticals, and services.
  • The full implementation of SAFTA can lower trade barriers, boosting India’s exports and reducing trade deficits with neighbors.
• Boost to Act East Policy: By linking South Asian economies with Southeast Asia, SAARC can further India’s Act East Policy, promoting economic integration and growth, particularly benefiting India’s underdeveloped eastern regions.

Way Forward for Reviving SAARC

• Reforming Decision-Making: Replace the consensus-based approach with majority voting to ensure that vital regional projects and initiatives are not stalled by bilateral disagreements.
• Foster India-Pakistan Dialogue: Initiate confidence-building measures and create a neutral platform for dialogue between India and Pakistan to address critical issues like terrorism and trade barriers.
• Focus on Economic Cooperation: Prioritize regional connectivity projects such as cross-border energy grids, railways, and road networks to enhance trade and interdependence among member states.
• Promote People-to-People Ties: Expand cultural, academic, and tourism exchanges to build trust and goodwill, reducing political tensions indirectly.
• Conflict Resolution Platform: Use SAARC as a forum for confidence-building measures, keeping dialogue open even amid political conflicts, particularly between India and Pakistan.
• Leverage Climate Cooperation: Develop collective strategies to address climate change, focusing on disaster management, renewable energy projects, and sustainable development.
• Cultural Affinity: SAARC represents the shared cultural, linguistic, religious, and historical identity of South Asia, emphasizing the region’s natural geographic and social connections.
• Integrate with Larger Goals: Align SAARC’s agenda with India’s Act East Policy by linking South Asia with Southeast Asia, fostering greater regional economic and strategic integration.

Conclusion

SAARC’s challenges are deeply rooted in political conflicts, structural inefficiencies, and economic underperformance. Comprehensive reforms, such as flexible decision-making, prioritizing regional trade, and resolving political disputes, are necessary to revive SAARC’s relevance and fulfill its mandate. It shall not only be in moments of crisis that SAARC nations build consensus. A unified approach to achieving peace, stability and growth shall be the compass guiding future SAARC meetings and reaping benefits of the Asian Century.