Can SAARC save the day?

President Gotabaya Rajapaksa earlier this week called on fellow South Asian leaders to come together and work to counter the serious economic fallout expected from the COVID-19 outbreak. The world’s most populous region is going to have to think differently if it wants to put up a collective effort and the latter may be the best hope it has of jumpstarting a different chapter. 

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 while fighting one of the worst virus breakouts of the 21st Century. 

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 the Association of Southeast Asian Nations (ASEAN). 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%, which alone highlights the trust and integration challenges before SAARC. 

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, the 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 over 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.

Against such a backdrop, President Rajapaksa’s call to set up a ministerial level group to share best practices and coordinate regional matters on combating COVID-19 is not expected to yield significant results. But if there was ever a reason to work together towards a unified vision, then COVID-19 would be it.