Researcher CAB, Volume 2, Issue 1, 2023 129

Political And Economic Relation in The SAARC Countries

Ishwori Prasad Kandel*

Abstract

The level of cooperation among the member countries of SAARC has increased after
its formation in 1985. SAARC was founded with the objective to improve living
standards of the people, contribute to political, cultural and regional economic growth
and to increase cooperation with another region of the world. Realizing the
importance of regional cooperation and development, SAARC members have
cooperated to establish and initiate various programs and forums for mutual benefit.
Agreement on Judicial cooperation on Counter-Terrorism, establishment of
Development Funds, Telemedicine Network, SAARC Writers and Literature
Foundation, South Asia Women’s Centre and South Asia Olympic Council. Other
major achievements include adoption of Social Charter in 2004, establishment of
SAARC Arbitration Council in Islamabad in 2005, and establishment of SAARC
Energy Center in Islamabad (2006), South Asian Regional Standards Organization
(SARSO) was established in Dhaka (2014), SAARC Disaster Management Center
was established in Gujarat in Nov 2016. Area of cooperation has been extended from
five to eight. The economic ties and integration have not been very strong in SAARC
countries.
Keywords: contribute, mistrust, independence, collaboration, integration
Introduction

The South Asian Association for Regional Cooperation (SAARC) is an

economic and political organization of eight countries in South Asia. It was
established in 1985. The diplomats understood the intricacies and inter-state problems
in the region, but they seemed to have been guided more by their political leaders than
the objective to form a regional forum. South Asian leaders, let alone academics, were
not cognizant of the ground realities that inhibited the evolution of regional
cooperation. The primary goal of SAARC is to advance political and economic
growth. SAARC aims to enhance the well-being of the people, strengthen group self-

* Dr. Kandel is an Associate Professor of Central Department of Political Science, TU.

Email: ishworikandel2026@gmail.com
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reliance, and accelerate economic and political development. SAARC constitutes one
fourth of the world population and comprises three percent of the world's area. It has
huge market for the trade and the human resources to achieve the high economic
development. The region is potential for the high level of economic activities for the
intraregional trade. Proper implementation of the SAFTA would bring the dramatic
change in the economic growth in the region. The political and social differences and
the lack of interests towards security and economies ties, the fundamental objectives
of SAARC are not being achieved yet. The mistrust between India and Pakistan has
resulted the slow economic integration. The two countries are trying to tie up with
other regional organization.

Statement of Problem and Object

It aimed to promote the welfare of the people of South Asia accelerating the
economic growth, social progress and cultural development in the region. In order to
develop the economy in the region, the SAPTA was signed in 1993 and later was
promoted to SAFTA in 2006 to promote intra-regional trade but due to the lack of
technical development in some of the member states and the disparity in the economic
development level it could not attained a high level of economic integration. Despite
its long history, SAARC is still considered as one of the least integrated and
insignificant regional organizations. Initially, it was thought that taking advantage of
SAARC platform, in due course of time the conflicting environment of South Asia
would settle down and socially and economically prosperous region would emerge.
Unfortunately, however, this has not happened till date. The general objective of this
research is to analyze the provision of regional cooperation arrangement for political
and economic development in SAARC.
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Research Methodology

This study will be based on Primary and secondary data. Primary sources
include historical and legal documents, eyewitness accounts, results of experiments,
statistical data, pieces of creative writing, audio and video recordings, speeches, and
art objects. Interviews, surveys, fieldwork, and Internet communications. In the
natural and social sciences, primary sources are often empirical studies. Secondary
sources describe, discuss, interpret, comment upon, analyze, evaluate, summarize, and
process primary sources.

Results and Discussion

Origin of SAARC

After visualizing the achievement of EU and analyzing the theories of

globalism and regionalism, the idea of regional cooperation was necessary. Then
evolutionary process of regional cooperation in south Asia termed as SAARC came in
action which observed four phases that includes; conception (1977-1980), the meeting
of foreign Secretaries (1981-1983) the meeting of foreign ministers (1983-1985), and
the summits (1985). The idea of regional cooperation was discussed earlier in different
conferences: the Asian Relations conference in New Delhi in April 1947, the Baguio
Conference in the Philippines in May 1950, and the Colombo Powers Conference in
April 1954 (Baral, 2000, p. 54). Whereas, the first proposal for establishing a
framework for regional cooperation in South Asia was made on 2 May 1980 by the
then president of Bangladesh Ziaur Rahman. Visualizing the existing human security
challenges like poverty, food, water, energy security and economic integration General
Ziaur Rahman, then President of Bangladesh, put forth the necessity of the regional
forum in South Asia. SAARC appeared in the world stage in 1985 as an organization
of seven South Asian nations: India, Pakistan, Nepal, Bangladesh, Sri Lanka,
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Maldives and Bhutan. Afghanistan formally became its member during the 14th
SAARC summit in 2007.

The Charter also emphasized that cooperation should be based on ‘respect for
the principles of sovereign equality, territorial integrity, political independence, non-
interference in internal affairs of other States and mutual benefit (Williams, 2019, p.
87). The member countries are expected to avoid the bilateral and contentious issues
and to come into conclusion through unanimous decisions. The institutional
mechanism of SAARC has a four-tier set up where the functions of various
committees are well demarcated. At the top most level there is an annual summit
meeting where the head of States come together and discuss the issues. At second,
third and fourth tier are the council of ministers, standing committee and technical
committee respectively which look after various objects of cooperation of members
states. The political ant economic ties and integration have not been very strong in
SAARC countries. The disparity level of economic growth and the existence of the
Tariff barrier is slowing down the economic integration in the region (Sabur, 2004,
p.45). SAFTA came into existence in 1985 which was taken as a vital step to foster
the economic activities but economic integration in SAARC countries has not yield
the abundant progress in economic activities.

The misuse of Tariff can also be taken as the slowing agent in economic ties.
The open policy of investment in the region should be welcomed by every member
countries. SAARC is established to promote peace and cooperation among its equal
partners. Amongst all the 8 member countries, India holds more than 70% of the region
and populace. India is the only country which holds the common border with 7 of the
countries which is not in case of others. So, as a result of this dominant position, there
is a bigger scope that India can play a hegemonic role among the nations (Baral, 2010,
p. 264). This insecurity has put a huge amount of negative impact in working of
SAARC. Therefore, even after more than three decades of its establishment, it is seen
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as one of the least integrated regional organizations. Due to distrust, member state
with complex interstate relation with India and nationalistic political culture among
member state the region is yet far away from being a community.

Achievements of SAARC

SAARC has been successful in achieving many intangible successes. The

level of cooperation among the member countries of SAARC has increased after its
formation in 1985. Realizing the importance of regional cooperation and
development, SAARC members have cooperated to establish and initiate various
programs and forums for mutual benefit which includes South Asian University
(New Delhi), SAARC International College (Bangladesh), Agreement on Judicial
cooperation on Counter-Terrorism, establishment of Development Funds,
Telemedicine Network, SAARC Writers and Literature Foundation, South Asia
Women’s Centre and South Asia Olympic Council. Similarly, SAARC Agriculture
Centre was established in Dhaka in 1988, SAPTA was signed in 1993 which was
promoted to SAFTA in 2006 to promote intra-regional trade. Other major
achievements include adoption of Social Charter in 2004, establishment of SAARC
Arbitration Council in Islamabad in 2005, and establishment of SAARC Energy
Center in Islamabad (2006), SARSO was established in Dhaka (2014), SAARC
Disaster Management Center was established in Gujrat in Nov 2016. Area of
cooperation has been extended from five to eight. Although, implementation part is
lagging, the institutional mechanism for regional cooperation has made progress
(Paudel, 2015, p.54). Nepal is a landlocked country which is dependent on friendly
relations with surrounding partner countries for external access to international sea
routes which enable transportation of resources and economic relations. For
example, in Europe landlocked states have developed access to sea ports through
navigable rivers and jointly shared transportation system. Landlocked countries
generally cultivate relations a number of coastal neighbours to ensure wider choices
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of access routes to global markets. markets and resources. SAARC decided to work
together against terrorism forming a Terrorist Offences Monitoring Desk in 1995 in
Colombo to collect, assess, and disseminate information on terrorist activities. After
the September 2001 attacks in the U.S. following the United Nations Security
Council Resolution (UNSCR) 1373 in 2001, the 1987 convention was updated with
an Additional Protocol. In 2008, SAARC signed a Convention on Mutual Legal
Assistance in Criminal Matters for investigating and prosecuting crimes linked to
terrorism. However, despite all this progress, cooperation on counter-terrorism
among SAARC member countries remains largely symbolic.

Role of SAARC countries

The think-tank in the world says that with its growing economy India could
become the world's third largest economy in the future. This will definitely affects the
economy in the SAARC region increasing import and export of the goods and
services. India has successfully diversified its manufactured product base and
enhanced its production capabilities. It is attracting foreign investments in key sectors
like defense, real estate, railways, and insurance, and progressed towards energy
efficiency. The well-formulated “Make in India” campaign has started supporting
local manufacturers and attracted multinational corporations and even nations to set
up manufacturing facilities in India across different industry and services sectors.
Pakistan’s economy is slowing down. The legacy of misaligned economic policies,
including large fiscal deficits, loose monetary policy, and defense of an overvalued
exchange rate, fueled consumption and short-term growth in recent years increased
external and public debt (Mathur, 2008, p.32). Structural weaknesses remained largely
unaddressed, including a chronically weak tax administration, a difficult business
environment and low labor productivity amid a large informal economy. Although
raking in the lowest growth rates in 2019, Pakistan trying to benefit from increased
investments from China.
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The financial sectors of Bangladesh are the second largest in the Indian
Subcontinent. The top export of Bangladesh is Non-knit Men's suit, Knit sweaters, Nit
T-shirts, Non-Knit Women's suits, non-Knit men's shirts. In recent years, Bangladesh
has emerged as a leading manufacturer of textile products and become a frontrunner
in South Asia. In fact, in 2019, Bangladesh had a growth rate of 8%, compared to
India's of 5.3%. As the trade deficit decreased, the growth in remittances grew strongly
by 9.6% in 2019 to reach a record $16.4 billion. It has potentiality in the transport
service sector. The forecast of an increase in domestic demand, hike in public sector
wages, and increased construction activity will bolster its economy in the near term,
as well. Other member states of SAARC could think of investing on transport trade
service and on textile products. On April 21 2019, multiple terrorist attacks hit
churches and high-end hotels in Colombo. While market conditions stabilized quickly
following the attacks, high frequency indicators point to a slowdown in economic
activity, notably in the tourism sector. The authorities have acted decisively to tighten
security measures and provide targeted relief to the tourism sector and the victims of
the attacks. In Nepal, the industry continues to advance with increased electricity
production, strong consumer demand, as well as efforts in Nepal to continue to recoup
the losses from the devastating 2015 earthquake. Nepal faces the challenge of
maintaining the recent growth momentum while creating conditions for sustained high
and inclusive growth (Muni, 2011, p. 35). Structural reform plans to improve the
business climate, strengthen governance and institutions, and enhance access to
finance to the underserved population should be swiftly implemented. Measures to
enhance the business climate include fostering competition, reducing the regulatory
burden for investment and upgrading transportation infrastructure.

In Bhutan, the travel service trade has huge potential which encourages other
member states to jump in for the investment. With the country now undergoing its
middle-income transition, continuous reforms and prudent policies are needed to
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contain economic and financial vulnerabilities, diversify the economy and enhance its
overall competitiveness to sustain growth, and further improve gross national. The
main near-term policy challenge relates to the implementation of the good and services
tax. This important initiative has the potential to counteract weaknesses in the
domestic revenue base and provide necessary resources to support Bhutan’s
development. In 2018, real Political uncertainty, security, and regional risks limit the
recovery and weigh on the outlook alongside the on-going U.S.-Taliban peace talks.

The authorities continue to address fiscal and banking vulnerabilities by

mobilizing revenue and strengthening financial sector supervision and enforcement.
Substantial medium-term grant financing will be needed to finance development and
security needs, facilitate the move toward fiscal sustainability, Structural reform
priorities include promoting private sector activity by boosting anti-corruption efforts,
accelerating financial sector reforms, and strengthening the business climate. Thus,
the SAARC countries have various trades potential. Because of COVID 19 crisis
economic growth was slowed down but now some of the member states economy is
recovering rapidly.

Future of SAARC

South Asian region has been weighed down with numerous other frictions
between the member- states which have resulted in fractious relationship between the
member states. Both India and Pakistan remain divided on the issue concerning the
precedence of economic integration and conflict resolution (Muni, 2011, p. 65).
Pakistan holds the view that political disputes should take precedence over economic
integration and has also voiced for the amendment. India on the other hand, favors the
priority of economic integration over bilateral issues. The cancellation of the 19th
SAARC summit in Pakistan marks a major turning point in the geopolitical situation
in South Asia as both India and Pakistan have been looking for alternatives to SAARC
Researcher CAB, Volume 2, Issue 1, 2023 137

to further their interests in South Asia and beyond. India views that though there
cannot be any SAARC initiative without Pakistan, it is Pakistan which does not allow
significant SAARC efforts initiated by India to proceed. India claims that Pakistan
opposes any degree of regional integration under the title of SAARC, manifested by
Pakistan's pulling out of SAARC satellite project and connectivity initiatives.

It is for this reason to segregate Pakistan that India has BIMSTEC

demonstrates its adamant stance in moving forward in pursuance of its neighborhood
recently been focusing its attention in Bay of Bengal Initiative for Multi-Sectoral
Technical and Economic Cooperation (Jinping, 2014, p.23). which includes India's
northern, southern and eastern neighbors, who are also members of SAARC.
Furthermore, India’s keenness to strengthen neighborhood first policy outside the
framework of SAARC is isolating Pakistan. Similarly, The South Asia Sub-Regional
Economic Cooperation program is likely to get an immense thrust from India as
Pakistan, along with Afghanistan, is not a member. India's such inclination towards
sub- regional initiatives like Bhutan, Bangladesh, India and Nepal (BBIN), Bengal
Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and
South Asia Sub-Regional Economic Cooperation (SASEC) is likely to further render
SAARC irrelevant, negating its importance as a firm regional organization. Pakistan,
on the other hand, has been advocating for the creation of greater South Asian
economic alliance to include China, Iran and neighboring Central Asian Countries. It
is obvious that Pakistan considers the CPEC as the key economic route linking to
south and Central Asia. Pakistan is also optimistic regarding China's role in
persuading Central Asian Republics and Iran to join the new arrangement (Hughes,
2016, p.34). Most of the countries especially Nepal, Bangladesh and Pakistan seek
China as a member of SAARC which may create conducive environment to address
pending security issues among member states counter balancing India. But, India’s
reservation to admit China from its observer status to a full member has been a hurdle
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for opportunity to enhance SAARC. Unless and until pending security issues are
addressed properly, SAARC seems to be lagging behind due to lack of trust among
the member states. Therefore, India and Pakistan should come together to boost the
regional integration putting aside their history long conflict, otherwise SAARC will
continue to be in grave dilemma (Shah, 2018, p.76), South Asia as a region has a
shared destiny. But due to external influence and post-colonial legacy, prevalent
mistrust and environment of suspicion in the region among member states, this region
is still far from being integrated even after the formation of SAARC for more than
three decades ago (Dash, 2008, p.65). SAARC was established with eight objectives
as stated in the charter as follows: to promote the welfare of the people of South Asia
and to improve their quality of life; to accelerate economic growth, social progress
and cultural development in the region and to provide all individuals the opportunity
to live in dignity and to realize their full potential; to promote and strengthen collective
self-reliance among the countries of South Asia; to contribute to mutual trust,
understanding and appreciation of one another’s problems; to promote active
collaboration and mutual assistance in the economic, social, cultural, technical and
scientific fields; to strengthen cooperation with other developing countries; to
strengthen cooperation among themselves in international forums on matters of
common interests, cooperate with international and regional organizations with
similar aims and purposes. The most important achievements of SAARC are to bring
members of states close and think about identity and regional issues. That is based on
positive aspect of individual state which should be attractive for people of SAARC
countries to emulate. It is important not to think as South Asian but feel proud of South
Asian identity within region. There is also serious need to cooperate and contact
among people, to improve cultural identities and break barriers among people of South
Asia. The contract was signed at the 12th Summit which was held in Islamabad. In
December 2005, the government of India approved SAFTA and flagged it for its
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official launch on 1st Jan. 2006, when it was hoped that all participating countries
would lower interest rates.

SAARC Development Fund: SAARC Development Fund was recognized by

eight SAARC Members in 2010. SDF was objective to promote the welfare for the
people of the South Asian region; to improve economic growth, to improve their
quality of life, social progress and poverty. It is one of achievements of Regional
Association for safety, prosperity and progress for the people of South Asia. The
SAARC Food Bank: The SAARC Food Bank was recognized originally to facilitate
as an emergency source for facing crisis in shortage or a natural disaster, floods,
earthquakes, and such other issues (Muhammad, 2017). In the 14th Summit at
Islamabad, signed the channel to accept a mutual attitude to unite “food security” for
the people of South Asia and then the formal development and procedure for strategies
must plan ahead to provide functional character.

South Asian University: The South Asian University is another achievement

by members’ state. It is an international university established in 2010 by SAARC
desk. At this time University is offering postgraduate and doctoral programs in several
disciplines. While SAARC may constantly be engaged in resolving political and
economic dilemmas amongst its members with limited success, optimists view
cooperation on education as one of few achievements of SAARC. It may also be a
catalyst for regional integration process. The university aims to create a center of
excellence and produce leaders who identify themselves as citizens of region with
common vision of success for both their home country and neighbours (Dogra, 2010,
p.21). SAARC Arbitration Council: The arbitration council is an achievement of
SAARC to provide a legal forum for South Asian nations for solving conflicts.
“SAARC Arbitration Council, Islamabad, is one of Specialized Bodies of South Asian
Association for Regional Co-operation; comprising eight-member States SAARC
arbitration council is inter-governmental body authorized to provide legal framework
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or forum within region for fair and effective settlement of commercial, industrial,
trade, investment banking, such their other issues and disputes, as may be referred to
it by member states and their people. Confidence-Building Measures (CBMs):
SAARC has enabled CBMs to be presented at highest level and also has succeeded in
reducing conflicts. Despite various obstacles created by main regional players and the
economic structure, SAARC has not only continued but had even gradually expanded
its reach, particularly in trade (Singh, 2016, p.18).

People to People Contact: The South Asian region could become conflict-free
area if members of the states and people of south Asian region build maximum
acceptance of concerns which are vital for the progress. A greater degree of assistance
and cooperation is compulsory for achievements and developments and security of
South Asia. It greatly depends upon South Asian outlook and behaviour of SAARC
members and the policies outlined to extend level of assistance in region. There is a
need of hour to make some serious efforts to create close understanding between
people of South Asia and sense of brotherhood which is important for conservation of
peace and harmony of region (Ahmar, 1982, p.65).

Analyzing the objectives and duration of its existence (more than three decades of its
establishment), SAARC has progressed minimal in almost all the areas of cooperation
stated in objectives. Although, SAARC has been successful in establishing various
regional institutions to carry out important regional programs like: creation of a
regional food security reserve, cooperation in the area of meteorology, health,
agriculture, poverty reduction, environment, forestry, transport, communications,
biotechnology, these have remained more in theory than in practice (Acharya, 2019,
p.54). Implementation part being poor, real integration is relatively very pitiable
compared to other regional organizations. Convention on Suppression of Terrorism
has not been effective as India and Pakistan have been unsuccessful to control the
movements of terrorist across their borders. Similarly, SAARC food security reserve
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could not be materialized when Bangladesh was hit by natural disaster in 1991. These
are few examples of ineffective implementation of agreements amongst the many that
exists. India being the regional power is not putting enough honest effort to resolve
conflicting issues to build confidence and trust among member states. Although India
wants to segregate Pakistan using various regional or sub-regional platforms, the
reality of Pakistan being SAARC member state will not change and Pakistan cannot
be removed from the region. Therefore, alternative to SAARC is not feasible and
practical (Bayle's, 2017, p.44). Instead, a high level of understanding and mutual
cooperation in the field of trade and commerce are required to be developed in order
to see the economically prosperous and brightened SAARC. So in order to establish a
high level of trade and economic cooperation the Tariff barrier which slowed the
integration of economics should be removed. The disparity in the level of political and
economic development of SAARC countries should be taken in consideration and
effort to develop high level of growth rate in order of market creation for goods and
services should be adopted.

Conclusion and Recommendations

SAARC constitutes one fourth of the world population and comprises three
percent of the world's area. It has huge market for the trade and the human resources
to achieve the high economic development. The region is potential for the high level
of economic activities for the intraregional trade. In addition, for economic, security,
social, and political interaction and cooperation, regional integration functions as an
effective platform. It also plays significant role to deal with other regional powers in
advantage of its own region. Hence bilateral and contentious issues were excluded
from its charter. Instead of establishing or giving priorities to extra-regional or sub-
regional organizations to isolate Pakistan, India being regional power, should realize
its responsibility and keep its effort to improve its conflicting relations with majority
of member states of SAARC such as Pakistan, Nepal, Bangladesh, Sri Lanka and
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Maldives to bring all the countries of this region together to enjoy security and
economic integration in reality. Pakistan should accept India as regional power and
move forward to work together to create secure and peaceful environment in South
Asia. In addition, India in South Asia should play leading role as Germany and France
have been doing in the EU. Other countries also need to compromise their interest for
regional community and integration. There must be mutual trust and conducive
environment for all countries to sacrifice their interest for economic integration. The
only way to resolve long-standing differences is possible through peaceful negotiation
which will help to make SAARC integrated and effective and will ultimately make
South Asia stable, peaceful and prosperous. SAARC charter should be amended to
address contentious political and bilateral issues. Similarly, provision of unanimous
decision-making process should be replaced by majority voting system in the charter
for effective and practical decision-making process. Security based integration should
be given priority like in other successful regional organizations such as EU, ASEAN
and SCO, which proved to be effective for regional integration and increase political
and economic relations.

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