Why Saarc is still relevant for South Asia

When Tarique Rahman, the prime minister of Bangladesh, mentioned the revival of the South Asian Association for Regional Cooperation (Saarc) in his first post-election press conference, for many, this was a reminder of the existence of an organisation, in which Ziaur Rahman, the PM's father, played a pivotal role in its inception. 

However, when Saarc was established in 1985, it had an ambitious goal. The goal was to transform South Asia into a region of cooperation by ensuring collective economic growth and shared prosperity by facilitating intra-regional economic cooperation, and promoting social development among the eight neighbouring countries — India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives, and later Afghanistan.

Saarc aimed to grow intra-regional economic cooperation, alleviate poverty, and promote social development. The main motives included trade liberalisation, energy collaboration, and scientific cooperation, all underpinned by principles of sovereignty, mutual benefit, and regional solidarity.

However, for nearly four decades, the motives for which it was initiated remained largely unfulfilled. So, the question remains while organisations like the European Union (EU), the Association of Southeast Asian Nations (ASEAN), and relatively new ones like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) seem to ensure and promote regional connectivity, why Saarc has not been able to do the same?

Why Saarc never realised its full potential

To achieve inter-regional economic cooperation through an intergovernmental organisation like Saarc, it is necessary to ensure harmonious trade and customs procedures, like the EU and ASEAN have built through robust institutions and binding arrangements. As a result of these institutional frameworks, the EU has created a single market with free movement of goods, capital, services, and people, backed by a supranational commission and court. Similarly, ASEAN, by establishing the Free Trade Area and later the ASEAN Economic Community, along with clear blueprints and a powerful secretariat, has also driven tariff cuts and market integration. 

Saarc, on the other hand, has become more of an ornamental institution, which has a weakly enforced South Asian Free Trade Area (SAFTA) treaty, without having a binding enforcement or dispute-resolution mechanism. Moreover, Saarc's own secretariat in Kathmandu is underfunded. Without penalties or arbitration, member states can flout rules without consequence.

Due to these weak enforcement regulations, Saarc has often been used as a platform to sabotage other economies. Where, on one hand, the EU perceived integration as a peace project after World War II, or the ASEAN economies overcame past conflicts by adhering to the "ASEAN Way" of consensus-building and gradual liberalisation, on the other hand, the bilateral tensions, especially between India and Pakistan, have repeatedly derailed Saarc.

This economic integration has also been reflected in the statistics. In 2023, Intra-ASEAN trade accounted for roughly 21.5% of its trade, whereas South Asia's intra-regional trade remained stuck at only 5.6%. By 2025, ASEAN had eliminated over 98% of intra-member tariffs, and its total GDP reached about US$3.8 trillion.

Although Saarc has not been able to establish the environment needed to ensure a comprehensive customs union or a single market, in the context of different recent major power shifts and global crises, Saarc can be the institutional link that may be necessary to build trust and economic cooperation in this region.

An idea that still matters 

The urgency of reactivating Saarc has grown stronger than ever, considering that South Asia sits on the fault lines of major power shifts and the global crises in the current volatile world. 

The recent Iran-Israel conflict has driven oil prices up sharply, with US crude surging 6.28% to about $71/barrel and Brent to $77/barrel in early March 2026. These price disruptions, along with panic buying, led to long queues of vehicles in front of petrol pumps in economies like Bangladesh, which is only an indication of how the profit-seeking mentality may fuel inflation in energy-importing countries.

Along with the supply-chain disruptions, some of these South Asian economies are also vulnerable to climate shocks like floods and cyclones. A report by the Global Climate Risk Index estimates an economic loss of approximately $3.72 billion for Bangladesh from the 185 extreme weather events that it faced between 2000 and 2019. The Maldives, on the other hand, is on the verge of a serious existential threat from sea level rise. 

In this context, a cooperative Saarc could collectively hedge risks. Actions such as joint fuel purchasing, shared food reserves, or regional power grids would reduce exposure to any single external supply shock.

The geopolitical scenario is also changing in the meantime, where there is increasing pressure of the multipolar strategic competition due to the growing nationalism. The US Indo-Pacific push, China's Belt and Road initiatives, the Quad, and AUKUS security pacts are some of the examples that may redefine trade and investment flows in Asia.

Undoubtedly, a united regional front through Saarc would give small countries more bargaining power, protecting these regional economies from the pressure of aligning with great powers. It would also complement Bangladesh's own pivot. The new government, elected in 2026, is acutely aware of challenges. Growth has slowed to 4.7-4.9%, and inflation hovers above 8%, and Bangladesh is due to lose its LDC benefits by late 2026. 

Analysts warn that as a result, Bangladesh "can no longer rely on preferential access alone". In sum, Bangladesh needs new export markets and supply partners more than ever, which a rejuvenated Saarc could provide. 

Bangladesh's trade situation with South Asian economies has improved in recent times, with exports increasing by about $175.5 million, bringing total exports to these economies to about $1.9 billion in FY2025. However, as also found in last year's published report by the Saarc Finance Database Cell, Bangladesh's exports to regional economies like Afghanistan, Bhutan, and the Maldives are still not satisfactory. 

In this aspect, deeper value-chain collaboration, such as textile production co-integration between Bangladesh and India, agricultural cooperation with Nepal, and cross-border tourism circuits connecting Bhutan, India, and Sri Lanka, can generate new economic opportunities. To explore new economic opportunities, there is a need to update and strengthen the SAFTA. Often, it is seen that mistrust and political conflicts led the Saarc economies to use the institutional inefficiency of SAFTA, resulting in the enforcement of tariffs on other economies' products of the region that were not meant to be.

Strong regional integration can help South Asian countries pool resources, harmonise policies, and leverage comparative advantages, transforming the region into a single, more resilient economic bloc capable of responding collectively to global shocks, energy crises, and trade disruptions. It would also reduce dependence on distant markets, enhance bargaining power in international trade, and encourage coordinated investment in infrastructure, energy, and human capital.

For economies like Bangladesh, a fully activated Saarc could have been transformative. Reduced tariffs and harmonised customs procedures would open regional markets for both traditional exports like garments and emerging sectors (i.e., agro-processing, pharmaceuticals, and IT services). Shared infrastructure could unlock affordable renewable resources. 

For instance, cross-border grid links might import Nepalese or Bhutanese hydropower into Bangladesh, while Bangladesh can export solar or LNG to neighbours. Investing together in "diverse energy sources – renewables, natural gas, and cross-border trade" was explicitly recommended for Bangladesh's growth. A unified regional energy policy could buffer shocks when global oil spikes occur.

Saarc initiatives could align with complementary regional frameworks such as the Bay of Bengal Initiative for BIMSTEC or the Bangladesh, Bhutan, India, Nepal Initiative (BBIN). Starting with small, practical cooperation projects, particularly in connectivity, energy, and trade facilitation, could gradually rebuild trust and momentum.

In the volatile world dynamics of energy shocks, climate risks, and shifting alliances, regional cooperation is essential. A revived Saarc could transform South Asia from one of the world's least-integrated regions into a hub of collective resilience and economic opportunity.

Moreover, coordinated infrastructure development, including ports, railways, and inland waterways, would lower logistics costs and strengthen Bangladesh's competitiveness ahead of its LDC graduation in 2026.

Sketch: TBS

Sayed Arafat Zubayer is a Research Assistant at the Bangladesh Institute of Development Studies (BIDS).

Sketch: TBS

Syed Tahmid Alam is a graduate student in the Department of Economics at Shahjalal University of Science and Technology, Sylhet.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.