SAARC revival possible through BIMSTEC?

Since its establishment in December 1985, the South Asian Association for Regional Cooperation (SAARC) has sought to increase economic integration between India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and the Maldives. This bloc, designed to accelerate economic and social progress of member-states, has failed to deliver while similar regional trading bodies such as the European Union, ASEAN, BIMSTEC and NAFTA continue to do quite well. Contrary to the four above-mentioned bodies, trade between SAARC member-states has remained limited, though these states are in close proximity and each of them is part of world trade. A growing emphasis on attracting foreign investment and seeking access to new markets in the SAARC region indicates that economic progress is central to the future of South Asia.

Historically, SAARC has played a limited role and this is unlikely to change in the  foreseeable future because of India’s considerable position of power over other SAARC states. This imbalance of power allows conflicts between India and its neighbors to undermine economic integration within the SAARC framework. This factor resulted in the establishment of BIMSTEC consisting of SAARC states and Thailand, a Southeast Asian country.

Non-consensus between South Asian countries on different issues has rendered regional trade agreements largely ineffective, making way for SAARC states to advance their economic interests through bi-lateral agreements, thereby reducing their incentives to engage multilaterally. In the future, SAARC is likely to become more of a forum for regional negotiations through conferences and seminars than as an architect of regional economic policy. Over the decades since the establishment of SAARC, India and some other member-states have increased their focus on economic development. Since 1991, when a debt crisis forced it to undertake a serious program of market-oriented economic reforms, India in particular and other South Asian countries in general gradually opened up their economies to the world. Over time, the South Asia region has moved from a closed economy with heavy central planning to a more privatized economy with lower tariffs, resulting in increased growth rate for the regional economy after 1991. Foreign investment has been increasing in India and other South Asian countries after the start of economic liberalization in the region. To sustain their growth, these countries have sought access to new markets and an increase in foreign investment. Foreign policies of countries in the region have placed serious emphasis on increasing their economic growth. This emphasis on growth is likely to continue in the future. Looking back, the shift toward market economy in 1991 brought ‘irreversible’ changes in the region's economic thinking—changes that will force this region to remain active in the global economy. A majority of South Asian leaders, irrespective of their political parties, believe that globalization and privatization are necessary for the whole region to reduce its mass poverty. This has led SAFTA signatories to gradually reduce tariffs and other trade barriers over the past decades, while several other commitments remain on paper. Nepal and Sri Lanka, both reliant on the Indian economy as a supplier and market for their goods, would like to increase intra-regional trade and foreign investment in their developing industries. Bangladesh is also looking for new markets to export goods. These examples show SAARC states want regional trade to expand. But the very structure of SAARC often makes regional cooperation difficult. Within the SAARC, India is the strongest member-state in terms of economic gains and international influence. Its regional supremacy gives SAARC the unique features not found in ASEAN. Pakistan was initially unwilling to join SAARC, fearing that the Indian domination would end up rendering the bloc ineffective. Smaller states in South Asia realize that they will need India’s help to facilitate faster economic growth, though they are reluctant to work with India fearing the latter’s dominance of SAARC. Bangladesh is afraid of India exploiting its geographical location to redirect water flows vital to its farms. Nepal and Bhutan are still worried about India’s control over their world trade and transit links as their geographical position will always make them dependent on India. These and other neighboring realities have directly affected SAARC. Attempting to promote regional cooperation while doing little to resolve regional conflicts makes realization of SAARC’s cherished goals nearly impossible. Moreover, SAARC has no up-to-date institutional mechanisms that can address the issue of lack of consensus on thorny issues . Currently, trade between South Asian states remains relatively low compared to other regional blocs. Moreover, political and economic ties between states rest on shaky foundations. Non-consensus  among countries in the region have made regional cooperation difficult, making way for bilateral efforts to achieve economic goals. SAARC is still a valuable forum for political dialogue in South Asia, but conflicts and tensions between member-states have taken a toll on its possible economic role in the region. Until these conflicts are resolved to the point where South Asian states are willing to reduce barriers to trade, an economically interdependent South Asia seems to be more of a dream than reality. In such a context, will BIMSTEC be able to reactivate the  SAARC? The author is former deputy executive director, Trade and Export Promotion Center