South Asia, home to over a quarter of the world’s population, remains one of the least integrated regions globally in terms of trade and connectivity. Intraregional trade accounts for barely 5% of the region’s total trade, a stark contrast to other regions: approximately 60% in Europe, 50% in East Asia and the Pacific, 22% in Sub-Saharan Africa, and 25% within the Association of Southeast Asian Nations (ASEAN). Moreover, the average costs of trade within South Asia are about 20% higher relative to country pairs in ASEAN. Given the shared history and cultural ties of the region, these figures are indeed alarming.
For decades, efforts to build an integrated economic and political framework in South Asia have faltered, primarily due to historical grievances and geopolitical tensions. Central to these efforts was the South Asian Association for Regional Cooperation (SAARC), established in 1985 with the aim of promoting regional cooperation and development. However, SAARC has been largely ineffective, hampered by mutual distrust among member states and the complex dynamics between India and its neighbors.
SAARC
Initiated by former Bangladesh President Ziaur Rahman, SAARC was envisioned as a platform for economic collaboration and regional connectivity. The founding members—Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka—sought to promote peace, stability, and prosperity in the region. Afghanistan joined the association in 2007, expanding SAARC’s membership to eight countries.
From its inception, SAARC faced significant challenges. The organization’s charter prohibits the discussion of bilateral and contentious issues, a clause intended to maintain neutrality but which effectively sidestepped critical political disputes. This limitation, coupled with the longstanding rivalry between India and Pakistan, has often led to gridlock in decision-making processes.
One of the primary objectives of SAARC was to enhance economic integration through initiatives like the South Asian Free Trade Area (SAFTA), which came into force in 2006. SAFTA aimed to reduce tariffs and promote trade among member countries. However, the agreement has fallen short of expectations. High tariffs, extensive sensitive lists (goods exempted from tariff reductions), and non-tariff barriers have impeded the growth of intraregional trade. For instance, more than one-third of intraregional trade falls under sensitive lists, comprising goods not included under SAFTA’s tariff liberalization. In the case of Bangladesh, nearly 46% of its imports from South Asia fall under sensitive lists.
Furthermore, the consensus-based decision-making model of SAARC means that any member can veto proposals, leading to frequent stalemates. The postponement of the 2016 SAARC summit in Islamabad, following a boycott led by India due to escalating tensions with Pakistan, exemplifies the organization’s vulnerability to bilateral disputes.
India’s Shift to BIMSTEC
In light of SAARC’s inefficacies, India has increasingly turned its attention to the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). Established in 1997, BIMSTEC comprises seven member states: Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand. Notably, Pakistan is not a member, which some analysts believe makes BIMSTEC a more viable platform for regional cooperation, free from the India-Pakistan rivalry that has often paralyzed SAARC.
India’s strategic pivot to BIMSTEC aligns with its “Act East” policy, aiming to strengthen ties with Southeast Asian countries. BIMSTEC’s focus areas include trade and investment, transport and communication, energy, tourism, and technology, among others. The organization has held several summits, ministerial meetings, and workshops to promote collaboration across these sectors.
However, BIMSTEC faces challenges similar to those that have hindered SAARC. The proposed BIMSTEC Free Trade Agreement, introduced in 2004, remains unimplemented, largely due to disagreements over market access and tariff reductions. Infrastructure and connectivity projects, such as the BIMSTEC Transport Infrastructure and Logistics Study (BTILS), have seen slow progress, often delayed by bureaucratic inertia and funding constraints.
Moreover, the asymmetry in economic and political power among BIMSTEC members has led to concerns about India’s dominance within the organization. Smaller member states have expressed apprehension that BIMSTEC could become an extension of India’s foreign policy, rather than a platform for equitable regional cooperation.
Reviving Regional Integration
The recent comments by Indian External Affairs Minister S. Jaishankar, suggesting that “SAARC is not off the table” and that the regional grouping has been “paused,” indicate a potential shift in India’s approach to regional cooperation. This statement comes after a prolonged period during which SAARC has been largely inactive, with the last summit held in 2014.
Reviving SAARC would require addressing the structural issues that have historically impeded its effectiveness.
- Reforming Decision-Making Processes: Moving away from the strict consensus-based model to a majority-vote system could prevent individual countries from unilaterally blocking initiatives, thereby enhancing the organization’s functionality.
- Reducing Trade Barriers: Member states need to commit to reducing tariffs, para-tariffs, and non-tariff barriers that hinder intraregional trade. Streamlining customs procedures and improving border infrastructure are crucial steps in this direction.
- Enhancing Connectivity: Investing in regional infrastructure projects, such as road and rail networks, energy grids, and digital connectivity, can facilitate smoother movement of goods, services, and people across borders.
- Building Trust: Establishing confidence-building measures, promoting people-to-people contacts, and encouraging cultural exchanges can help bridge the trust deficit that has long plagued the region.
- Empowering Regional Institutions: Providing adequate funding and authority to the SAARC Secretariat and related bodies can ensure better implementation of agreed initiatives.
Simultaneously, strengthening BIMSTEC requires:
- Implementing the Free Trade Agreement: Finalizing and operationalizing the BIMSTEC Free Trade Agreement can boost economic ties and signal the organization’s commitment to regional integration.
- Prioritizing Connectivity Projects: Accelerating the completion of key infrastructure projects, such as the Kaladan Multimodal Transit Transport Project and the Asian Trilateral Highway, can enhance physical connectivity in the region.
- Ensuring Equitable Participation: Establishing mechanisms that allow smaller member states to have a more significant voice in decision-making processes can mitigate concerns about dominance by larger countries.
- Expanding Cooperation Areas: Exploring new areas of collaboration, such as climate change mitigation, disaster management, and public health, can make BIMSTEC more relevant to the needs of its member states.
- Engaging with External Partners: Collaborating with external partners, including ASEAN and international financial institutions, can bring in technical expertise and funding for regional projects.
The aspiration for regional integration in South Asia has been a longstanding yet elusive goal. Both SAARC and BIMSTEC have encountered significant obstacles in their quests to promote economic cooperation and connectivity. While SAARC’s progress has been stymied by geopolitical tensions and structural inefficiencies, BIMSTEC’s potential remains under
