The world’s most populous and linguistically and culturally diverse region bound by historical ties, South Asia is also one of the least integrated regions in the world.
By Garima Sahdev and Geethanjali Nataraj | East Asia Forum
Despite being founded with the lofty ideal of promoting regional development and integration over 30 years ago, regional unity continues to elude the South Asian Association for Regional Cooperation (SAARC). Momentous opportunities for cooperation are repeatedly squandered.
In December 2018, India’s External Affairs Minister Sushma Swaraj stated that India will not participate in the 19th SAARC Summit hosted by Pakistan until the latter takes concrete measures to curb cross-border terrorism. It has been over four years since the last summit — intended to be biennial — was held in Kathmandu in 2014. Notably, the 2016 summit was cancelled after boycotts by India, Bangladesh, Afghanistan and Bhutan in the wake of terror attacks in the Indian towns of Uri and Pathankot.
In yet another ego tussle in 2016, Pakistan decided to pull out of the SAARC satellite project. The GSAT-09 satellite, popularly known as the ‘South Asia satellite’, was built by India for all countries of the SAARC region. While the use of the satellite is collaborative, its development was not taken up at the regional level. India declined technical and financial assistance from Pakistan after declaring the project to be India’s gift to the South Asian region.
Earlier in 2014, a regional transport corridor proposed by New Delhi for boosting intra-SAARC connectivity served as another front between New Delhi and Islamabad. Submitting to its paranoia about India gaining direct land access to Kabul, Pakistan objected to the proposed corridor. This compelled India, Bangladesh, Nepal and Bhutan (which pulled out in 2018) to take the South Asia Subregional Economic Cooperation route and sign a Motor Vehicles Agreement.
Tensions in the region are not restricted to India–Pakistan rivalry. A congenial atmosphere for furthering connectivity is also disturbed by complex India–Afghanistan–Pakistan dynamics, and Islamabad’s alleged interference in Bangladesh’s domestic politics.
The world’s most populous and linguistically and culturally diverse region bound by historical ties, South Asia is also one of the least integrated regions in the world. The dismal numbers of 5 per cent intra-regional trade, less than 1 per cent intra-regional investment and 3 per cent India–SAARC trade paint a bleak picture of South Asian economic integration. India–SAARC trade is worth only US$19 billion against India’s US$637.4 billion trade with the rest of the world.
The South Asian Free Trade Agreement (SAFTA) to liberalise trade in goods came into force in 2006. Having missed its target of achieving zero duties across the subcontinent by 2016, its intended goal of helping the SAARC to emerge as a South Asian Economic Union remains a far cry. Nearly 53 per cent of intra-SAARC imports remain outside the purview of liberalised trade.
Bilateral trade between India and Pakistan, the two largest economies in the region, remains dismally low owing to tariff and non-tariff barriers imposed due to domestic political compulsions. Pakistan is yet to grant India most favoured nation status. Other SAFTA countries have also identified tough regulatory standards in India as trade-restrictive and defeating the purpose of an intended lower tariff regime.
The SAARC Agreement on Investment has been in abeyance for over a decade now. The absence of desired protections for foreign investors is seen as a key obstacle hindering intra-regional FDI (at a bleak 1 per cent against 18 per cent intra-ASEAN FDI).
Indian Prime Minister Narendra Modi’s Neighbourhood First policy elicited considerable interest in the region, including from Pakistan. But no such foreign policy can be a game-changer as long as a no-war-no-peace situation persists between India and Pakistan.
Consequently, with the SAARC hamstrung by political bickering, member states are looking elsewhere for regional connectivity options. Sub-regionalism is the order of the day. Many crucial and previously sidelined areas of regional cooperation like infrastructure, health and energy are being taken up at the sub-regional level.
Concurrent with slow negotiations at the SAARC, another regional grouping called BIMSTEC, or the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, is receiving a renewed push. This 5+2 grouping is increasingly looked to for advancing contiguous economic connectivity between its five South Asian members (India, Bhutan, Bangladesh, Sri Lanka and Nepal) and two Southeast Asian members (Thailand and Myanmar).
India recently acknowledged the long-standing demands of Nepal, Bangladesh and Bhutan to remove non-tariff barriers to trade and liberalise the energy sector. The three countries of the Bangladesh, Bhutan, India, Nepal (BBIN) initiative have tremendous hydropower potential waiting to be harnessed by an energy-starved India. New guidelines will allow cross-border trade in energy through multi-country public-private partnerships and the creation of a robust regional power market.
While India continues to outflank Islamabad by investing in sub-regional initiatives like the BBIN and BIMSTEC, Pakistan is similarly looking beyond the SAARC for regional camaraderie with China.
While the spirit of multilateralism is at an all-time low in the SAARC, there is a deeper understanding among its members of the significance of intra-regional connectivity to fulfill their development aspirations. But the sub-regional approach misses out on a crucial aspect. It cuts war-torn Afghanistan loose from the fruits of regional connectivity and development. Renewed focus must be brought back to strengthening the SAARC as a vibrant regional grouping to promote nation-building and development in Afghanistan.
Article Source: East Asia Forum
Garima Sahdev is a researcher in international trade and investment law.
Geethanjali Nataraj is Professor of Economics at the Indian Institute of Public Administration.