Regional Cooperation: SAARC, BIMSTEC and the Impediments

South Asia is the least economically integrated region in the world, and the cause is not the absence of institutions but the presence of a bilateral dispute that the institutions were designed to exclude and could not.

This is chapter 57 of the PSIR Optional Notes, from the part on South Asia and the World Order in the Paper II syllabus. The complete book is a free download.

SAARC

Origins and design

Proposed by President Ziaur Rahman of Bangladesh in the late 1970s, and founded at the Dhaka summit of December 1985 by Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan acceded in 2007. Observers include China, Japan, the United States, the European Union, Iran, South Korea, Australia, Myanmar and Mauritius. The secretariat is at Kathmandu.

Two charter provisions determine everything that follows, and they were included at the insistence of the smaller states, who feared Indian dominance, and of India and Pakistan, who wished to keep their dispute out.

• Article X(1): decisions at all levels shall be taken on the basis of unanimity. Any member can block any decision.
• Article X(2): bilateral and contentious issues shall be excluded from the deliberations. The most consequential questions in the region are therefore formally outside the organisation’s remit.

The design was intended to protect cooperation from conflict. Its effect has been the opposite: because contentious issues cannot be discussed, they cannot be resolved, and because unanimity is required, an unresolved dispute paralyses everything else.

Record

Achievements, which should be stated before the criticism. SAPTA (1995) and then SAFTA (signed 2004, in force 1 January 2006). The SAARC Development Fund. The Food Bank and Seed Bank. The Convention on Suppression of Terrorism (1987) and its additional protocol. The Convention on Preventing and Combating Trafficking in Women and Children (2002). The South Asian University in Delhi. Agreements on social charter, environment and disaster management. And, not trivially, a habit of summitry that brought leaders together when bilateral relations were poor.

The record on trade. SAFTA’s tariff liberalisation programme required reduction to zero to five per cent over specified timelines with longer periods for least developed members. Intra-regional trade nonetheless remains around five per cent of the region’s total, compared with far higher shares in ASEAN and the European Union. World Bank estimates suggest actual India-Pakistan trade is a small fraction of its potential.

Why SAFTA underperformed.

• Sensitive lists. Members exempted large numbers of tariff lines, covering a substantial share of intra-regional trade, from liberalisation.
• Non-tariff barriers. Standards, testing, certification and customs procedures restrict trade more than tariffs now do.
• No services or investment. A framework agreement on services was concluded but has had limited effect, and services are where the complementarities lie.
• Transit. There is no regional transit regime. Goods from Afghanistan to India cannot cross Pakistan freely, and Nepal and Bhutan’s access to ports runs through a single corridor.
• Connectivity and visas. Restrictive visa regimes, limited direct transport links and poor border infrastructure raise transaction costs above tariff levels.
• Political interruption. Pakistan has not extended most-favoured-nation treatment to India, and trade was suspended after 2019.

The paralysis. The last summit was the eighteenth, at Kathmandu in November 2014, which produced an energy cooperation agreement while motor vehicle and rail agreements were blocked. The nineteenth summit, due at Islamabad in November 2016, was cancelled after India withdrew following the Uri attack, with Bangladesh, Bhutan, Afghanistan and later others also declining. Nothing has convened at leader level since, although the COVID-19 video conference of March 2020, an Indian initiative, showed that functional cooperation remains possible when it is framed narrowly.

BIMSTEC

Founded in June 1997 as BIST-EC and taking its present form and name with Myanmar, Nepal and Bhutan’s accession, it comprises Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand. Its secretariat is at Dhaka; its charter was signed in 2022 and entered into force in 2024, giving it legal personality for the first time after twenty-five years.

Why India has invested in it.

• It excludes Pakistan, and therefore is not subject to the veto that paralyses SAARC.
• It connects South and Southeast Asia, which makes it the natural vehicle for Act East and gives the North-East a regional rationale.
• It is Bay of Bengal centred, which aligns with the maritime and Indo-Pacific framing of Chapter 53.
• It includes Thailand and Myanmar, extending India’s regional economic space beyond South Asia.
• Its symbolic elevation was deliberate: BIMSTEC leaders were invited to the 2016 BRICS outreach at Goa and to the 2019 swearing-in, in place of SAARC leaders.

Its achievements. Sector-based cooperation reorganised into seven pillars with lead countries; a coastal shipping agreement; a disaster management exercise regime; the Grid Interconnection Memorandum (2018); a security architecture through National Security Adviser-level meetings; and, most significantly, the charter and institutional consolidation of 2022–24.

Its weaknesses, which an honest answer must give. The free trade agreement framework was signed in 2004 and its constituent agreements remain unconcluded after two decades. The secretariat is very small relative to its mandate. Summits have been infrequent. Myanmar’s crisis has stalled the land connectivity on which the grouping’s logic depends. Thailand’s engagement has been episodic, since ASEAN is its primary framework. And intra-BIMSTEC trade, while growing, remains a small share of members’ total trade.

The impediments to regional cooperation

The syllabus names these explicitly, so an answer should organise by them.

Prospects

The 2024 paper asked about SAARC’s future given India’s focus on ASEAN and BIMSTEC, and the answer should resist both the claim that SAARC is dead and the claim that it can be revived as it stands.

Why SAARC cannot simply be replaced. It is the only body containing all eight South Asian states, so anything involving Pakistan or Afghanistan can happen nowhere else. Its instruments, the university, the food bank, the development fund, exist and function at low intensity. Regional public goods, disease surveillance, disaster response, air pollution in the Indo-Gangetic plain, water data sharing, do not respect the political boundary and cannot be addressed in a forum that excludes half the region’s population. And its dormancy imposes a cost on the smaller members, for whom it was the one forum in which they met India as formal equals.

Why it cannot be revived unchanged. Unanimity and the exclusion of contentious issues are charter provisions, and amending them requires the unanimity they impose. The India-Pakistan relationship shows no sign of permitting summitry.

The realistic path. Variable geometry: sub-regional cooperation among willing members, which BBIN and BIMSTEC already represent, proceeding without waiting for consensus; functional cooperation framed narrowly enough to survive political disagreement, as the 2020 COVID initiative showed; and keeping SAARC’s institutions alive at official level so that they can be used when political conditions change. The honest formulation for an answer: BIMSTEC is India’s preferred vehicle and cannot be its only one, because geography does not permit South Asia to be reorganised around the Bay of Bengal alone.

Read the rest. This chapter is one of 58 in the complete PSIR Optional Notes, covering Paper I and Paper II in full — free to download.