The South Asian Association for Regional Cooperation (SAARC) has long been viewed as a failure of regional cooperation. Created in a region which remains the least economically integrated in the world, it now faces the challenge of increasing its share of global production and delivering growth to billions of people.
United National Party (UNP) leader Ranil Wickremesinghe, in a recent address on the issues faced by SAARC, pointed out that unlike SAARC, South East Asia started a slow but successful march towards regional integration – starting with ASEAN – The Association of Southeast Asian Nations. The ASEAN Free Trade Area was established in 1992. The ultimate goal is an ASEAN Economic Community.
Today ASEAN accounts for 8% of global production while SAARC accounts for just 1%.
Tiffs between India and Pakistan have also dominated SAARC since its formation in 1985, and played the central role of failing to boost economic growth and collective self-reliance. Both countries have undermined the bloc to the extent that members do more trade through bilateral partnerships than as a region and growth gaps in South Asia have been widening sharply as a result. Economists and political pundits fed up with the endless focus on political tensions, mostly over Kashmir, believe it highly unlikely SAARC will ever realise its potential as a trade bloc and an engine of regional growth. It is clearly high time member states develop alternative trading arrangements and not let SAARC’s lethargy hold back progress on achieving the association’s worthy goals.
An organisation bringing together Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, SAARC was initially regarded with cynicism by India and Pakistan. SAARC has neither enhanced the economic wellbeing of its member economies nor helped to reduce regional tensions. India argues that Pakistan has blocked the deeper integration of states in SAARC and hindered the realisation of its potential organisational benefits. Pakistan has assumed that deeper integration will strengthen India’s sub-continental dominance.
SAARC is yet to evolve into a structured trade bloc strong enough to generate intense economic activity among its member countries. SAARC states do little trade together as they mostly compete in similar products. India’s imports from Sri Lanka and Bangladesh make up only 0.1% of its total imports and it only sends 2.8% of its total exports to SAARC states. Intra-regional trade accounts for only 3% of SAARC members’ overall trade. Between them, India and Pakistan account for 80% of South Asia’s gross domestic product but only contribute 2% to intra-South Asia trade.
South Asia also desperately needs a strong services sharing framework, much like the liberalisation seen in the European Union, but here again political issues, memories and insecurities take precedence. Even the previous Government’s failed attempts to establish an Economic and Technology Cooperation Agreement (ETCA) has underscored the deep divisions with its closest neighbour and the potential political fallout at home if greater engagement goes awry.
South Asia’s growth is slowing and while East Asia is also struggling due to the novel coronavirus, it is not expected to have a long-lasting impact. South Asia, with a larger and generally younger population, also needs collective economic gains, which will be challenging if South Asia remains fractured because it cannot shake off its past to embrace a brighter future by working together.