Why SAARC Trade Stalled While ASEAN Thrived
According to Kabir Hassan, a professor of finance at the University of New Orleans, the foundational architecture of the South Asian Association for Regional Cooperation failed to build a dense layer of interdependent firms, factories, and workers. Writing in the Dhaka Tribune, Hassan points out that signing a charter does not automatically generate trade. He notes that it is roughly twenty percent cheaper for an Indian company to trade with Brazil than with a neighboring South Asian nation.
Institutional Flaws and Political Paralysis
A primary structural defect within the SAARC framework is Article X, which mandates that all decisions require consensus while barring the organization from discussing contentious issues. Hassan explains that this rule allows political friction to quickly turn into total institutional paralysis. Following the Pahalgam attack, governments could easily ban trade, close airspace, and suspend visas because no powerful commercial constituency in India or Pakistan had a financial stake in preventing those disruptions. Unlike ASEAN, where cross-border production networks thrive regardless of geopolitical friction, South Asia lacks industrial clusters that supply vital components across borders.
Did you know? According to financial analysis by Professor Kabir Hassan, trading with Brazil is approximately 20 percent cheaper for an Indian firm than trading with an immediate South Asian neighbor due to steep border barriers and weak commercial integration.
BIMSTEC Stagnation and Proposed Alternatives
While the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation brings together six South Asian countries alongside Thailand, it has failed to secure a breakthrough on a free trade agreement since 2004. To overcome these persistent hurdles, Hassan recommends that Dhaka revive the South East Asian Cooperation initiative, known as SEACO, uniting Bangladesh, Brunei, Indonesia, Malaysia, and the Maldives. Rather than assuming integration will happen automatically, Hassan suggests focusing on practical, ground-level steps such as common halal certification, interoperable electronic certificates of origin, dedicated feeder shipping services, and bankable regional projects funded by the Islamic Development Bank.
Frequently Asked Questions
Why did SAARC fail to create a viable economic bloc?
According to Professor Kabir Hassan, SAARC failed because policymakers prioritized political ambition and secretariats over building a dense layer of interdependent businesses, manufacturers, and workers whose economic survival depended on cross-border trade.
What role does BIMSTEC play in regional trade?
BIMSTEC connects six South Asian nations and Thailand, though it has struggled to finalize a functional free trade agreement since 2004.
What alternatives are being proposed for Bangladesh?
Hassan suggests that Bangladesh engage in a mix of regional arrangements, including BIMSTEC and a revived SEACO, focusing on practical measures like shared halal certifications and regional feeder shipping services.
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