Why PM Modi Could Be Good for SAARC

(WPS Sidhu and Rohan Sandhu are respectively, Senior Fellow, Foreign Policy, and Research Assistant at Brookings India. This essay is a part of a Brookings India policy briefing book titled "Reinvigorating SAARC: India's Opportunities and Challenges," available on www.brookings.in)

Since his election in May 2014, Prime Minister Narendra Modi has ascribed high priority to establishing stronger relations with India's neighbors. While the gesture of inviting South Asian Association for Regional Cooperation (SAARC) leaders to his swearing-in ceremony might be considered symbolic, it provided the necessary impetus in bringing SAARC to the forefront of India's foreign policy lexicon. 

Several measures since then have reinforced the government's resolve to forge closer strategic ties with countries in the region.  High-level visits to Nepal, Bangladesh, and Bhutan - alongside summits with larger economic and geopolitical powers such as Japan, China, and the United States - not only signal their importance in India's foreign policy priorities, but have also laid the groundwork for stronger and more substantive cooperation.

During the visit of the Prime Minister of Nepal to India, Modi described SAARC as a "vital instrument to add to the strength of each member nation and advance collective action for shared prosperity in the region."

The steps taken over the past few months have infused a new life and hope for greater integration and cooperation in the region and, in light of this, the 2014 SAARC Summit provides an opportunity (despite several challenges) to reinvigorate the goals, objectives and future direction of the grouping.  Indeed, there is great expectation that this year's SAARC Summit could be a turning point for the organization.

SAARC's roots lay in the Declaration on South Asian Regional Cooperation and the Integrated Programme of Action (IPA), adopted by the foreign ministers of South Asia in 1983, calling for regional cooperation in the areas of agriculture, rural development, telecommunications, meteorology, and health and population activities. Subsequently, SAARC was formally established in 1985, during its first Summit in Dhaka, Bangladesh.  The overarching objective of the alliance was to consolidate South Asia's economic and geopolitical potential, and promote the welfare of the population of the region and improve their quality of life.

But more than three decades since it was formed, SAARC stands on shaky ground, and according to some experts has largely been a "somnolent and disappointing body," its achievements meager and unconvincing. 

Economically, the region is one of the least integrated in the world, with very low levels of intra-regional trade and investment. Intra-regional trade is under 5 percent of total official trade - less than it was fifty years ago - while intra-regional foreign investments as a proportion of total investment figures are just as paltry.  Juxtaposed to this, intra-regional trade accounts for nearly 35 percent of the total trade in East Asia, 25 percent in Southeast Asia, and almost 12 percent in Middle East and Africa.  The SAFTA (South Asian Free Trade Agreement) group comprises a region that has tremendous economic potential, but despite having 23 percent of the world's population, the region accounts for only 6 percent of Purchasing Power Parity based global GDP, 2 percent of world goods trade, 3 percent of global foreign direct investment, but more than 40 percent of the world's poor.

SAARC has also done little to improve bilateral disagreements and skirmishes, and the Regional Convention on Suppression of Terrorism has failed to combat terrorist activity.

While SAARC's failure to realize its goals may be attributed to several factors - ranging from terrorism, strained bilateral relations, and the absence of military and strategic cooperation - India's own engagement with SAARC has been found wanting, even though it has evolved over the years.

India's initial attitude towards SAARC was, according to one observer, "akin to the attempt by the Lilliputs to tie down Gulliver."  It, consequently, played a limited role in the alliance, choosing instead to engage with its neighbors bilaterally based on reciprocity.  However, as its economic clout grew in the mid-1990s, India began to assume a greater role as a regional leader.

The International Monetary Fund finds, however, that India's growth has had only a minuscule impact on the growth of its neighbors.   Within the region, India remains the least open country, with the lowest trade-to-GDP ratio.

Despite SAARC's dismal past, Modi has boldly stroked new hope for its future. Modi is widely seen as a reformist Prime Minister, who is expected to open up the economy and liberalize trade. 

Modi's ambition for SAARC, however, is confronted by a variety of external and internal challenges. Externally, the continuing tensions with Pakistan, the uncertainty over Afghanistan, and the role of outside actors, notably China, pose threats to reinvigorating SAARC. Internally, the limited capacity of the Indian state, particularly the miniscule size of the foreign service, as well as the ability to engage key state governments as stakeholders in foreign policy are also challenges that need to be addressed.

Despite these challenges, or indeed because of them, cooperation through SAARC on infrastructure, energy, water, trade, climate change mitigation, higher education, healthcare, terrorism, space and even military cooperation, would contribute significantly to India's twin goals of development and stability in the neighborhood. These are all areas wherein SAARC members face similar problems, and would thus, benefit from multilateral and bilateral action within the framework of SAARC.

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