Forty Years, Five Percent, and Two Billion People: Why SAARC Remains South Asia's Greatest Unrealized Opportunity
On a recent episode of the Good to Great podcast, hosts Masrur Rahman and Samanata Thapa from Nepal posed a question that cuts to the heart of South Asia's economic future: Why does a region of nearly two billion people, one of the youngest workforces on the planet, and a manufacturing and consumer base of enormous scale still trade more with countries thousands of miles away than with its own neighbors?
To explore that question, the hosts were joined by Md. Shamsul Haque, a former Director General of the SAARC Wing and Additional Foreign Secretary at the Ministry of Foreign Affairs of Bangladesh, who now serves as CEO of CodersTrust Bangladesh, one of the country's most forward-looking digital workforce development organizations. With deep institutional knowledge of SAARC's inner workings and a front-row seat to the decisions that shaped the bloc's trajectory, Mr. Haque brought a perspective that is both rare and remarkably candid.
What followed was not nostalgia, but a rigorous diagnostic of what went wrong and a practical blueprint for what could still go right.
01. A Baby Born in Bangladesh, Raised in Kathmandu
SAARC, the South Asian Association for Regional Cooperation, was founded on December 8, 1985 in Dhaka, Bangladesh, through the signing of the SAARC Charter. The brainchild of President Ziaur Rahman, the organization was established with a sweeping ambition: to foster peace, prosperity, and economic development across eight member states through regional cooperation. Its secretariat was placed in Kathmandu, Nepal, where it remains today.
Mr. Haque framed the founding with affection and pride: "SAARC was born in Bangladesh, a baby born in Bangladesh, as the brainchild of President Ziaur Rahman. But I also recognize and honorably look up that SAARC got its home in Nepal. Bangladesh is the initiator. The baby born in Bangladesh is now raised and nurtured in Kathmandu."
The original vision was not modest. SAARC was designed to knit together Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka into a cohesive economic bloc. The region represents approximately 21 percent of the world's population and accounts for roughly $4.47 trillion of global GDP. The premise was simple and powerful: if these nations could trade freely, invest collaboratively, and build shared infrastructure, South Asia would become one of the most consequential economic blocs on the planet.
Nearly four decades later, that premise remains largely theoretical.
Key Context: SAARC encompasses 3 percent of the world's land area, 21 percent of its population, and roughly 5.2 percent of global GDP, yet it remains the least economically integrated region in the world.
02. The Five Percent Problem
The numbers tell a stark story. Intra-regional trade within SAARC sits at approximately five percent of total trade, a figure that has barely moved in decades. For comparison, ASEAN's intra-regional trade has reached approximately 25 percent. The European Union operates at closer to 60 percent. According to the World Bank, trade among South Asian countries currently totals approximately $23 billion, far below an estimated potential of at least $67 billion. That represents roughly 67 percent of regional trade potential left unrealized.
Perhaps most revealing: the World Bank has found that it is approximately 20 percent cheaper for a company in India to trade with Brazil, a country on the other side of the Atlantic, than with a neighboring South Asian nation. Intra-regional trade costs in South Asia run at approximately 114 percent of the value of goods traded, making it one of the most expensive regions in the world for cross-border commerce.
Mr. Haque confirmed the scale of the problem from firsthand experience: "SAARC trade is only five percent, but there are huge potentials that this trade volume can go high up, having nearly one-third of the global population."
The Asian Development Bank has estimated that intra-regional agricultural exports alone could rise from $8 billion to $22 billion per year if barriers were removed. Yet year after year, the barriers persist.
03. What Went Wrong: Structural Failures and Political Deadlock
When asked to identify the two or three factors that have most consistently prevented SAARC from converting potential into outcomes, Mr. Haque pointed to a convergence of structural rigidity, institutional obsolescence, and political tension.
First, the consensus requirement. Unlike ASEAN, where policy decisions require unanimous agreement but implementation allows for flexible participation, SAARC operates on a strict unanimity principle at every stage.
"All members will have to agree on every issue," Mr. Haque explained. "It doesn't work that way. I proposed in the SAARC system that we can adopt that kind of approach," referring to ASEAN's more flexible model, "but of course, politically, ASEAN countries are more or less less disturbing than the SAARC countries."
Second, institutional stagnation. SAARC was built with structures and organizations that reflected the priorities of the 1980s. Several of its specialized centers, including the SAARC Meteorological Center, have effectively closed. Yet the radical reforms needed to modernize the organization have not materialized.
"Things have changed drastically during the last four decades, especially after the 2000s when digital technology came up," Mr. Haque observed. "But the radical changes that were necessary to accomplish those goals were not there."
Third, and most critically, political tensions between member states, particularly between India and Pakistan, have paralyzed the organization's leadership mechanisms. The 18th SAARC Summit was held in Kathmandu in November 2014 under the theme "Deeper Integration for Peace and Prosperity." Pakistan was scheduled to host the 19th Summit in Islamabad in November 2016, but following the Uri terror attack in September of that year, India withdrew its participation, and several member states followed. The summit has never been rescheduled.
"All high-level meetings are stalled except meetings at the Director General's level called the Programming Committee," Mr. Haque confirmed. "Foreign ministers, trade ministers, heads of governments must meet to generate new blood into the system. But SAARC is unprivileged for that reason that they are not meeting."
The result is an organization where the people who have the authority to make transformative decisions have not been in the same room for over a decade.
Structural Insight: SAARC's unanimity requirement, combined with the absence of summit-level meetings since 2014, has created an institutional paralysis in which even willing member states cannot advance meaningful reforms.
04. Connectivity: The Missing Infrastructure of Integration
Trade agreements, no matter how well drafted, are meaningless without the physical and logistical infrastructure to execute them. SAARC has both the South Asian Preferential Trading Arrangement (SAPTA), established in 1995, and the South Asian Free Trade Area (SAFTA), which came into force in 2006. Yet the agreements have produced limited results, in large part because the roads, railways, and transport corridors needed to move goods across borders simply do not exist at the required scale.
"Connectivity is a problem," Mr. Haque said. "Our roads and highways are not connected. There is a pending motor vehicle agreement."
At the 18th SAARC Summit, three connectivity agreements were expected to be signed: the SAARC Motor Vehicle Agreement, the SAARC Regional Agreement on Railways, and the SAARC Framework Agreement for Energy Cooperation. Only the energy agreement was signed. Pakistan blocked the vehicular traffic and railway agreements, citing incomplete internal processes.
This failure captures the recurring pattern: promising frameworks reach the finish line only to be derailed by the political dynamics that SAARC was deliberately designed to keep off the agenda.
05. SAFTA's Unfulfilled Promise
SAFTA was conceived as a stepping stone toward a fully integrated South Asian Economic Union. At the 18th Summit, leaders formally renewed their commitment to achieve the South Asian Economic Union (SAEU) in a phased manner through a Free Trade Area, a Customs Union, a Common Market, and eventually a Common Economic and Monetary Union.
But Mr. Haque identified a fundamental contradiction within the agreement itself: "If we sign a trade agreement and then keep tradable items outside the purview of the agreement, it has no meaning."
The reference is to SAFTA's extensive sensitive lists, the product categories that member states exempt from tariff liberalization. These lists are so broad that they effectively neutralize the agreement's intent. Countries sign onto free trade in principle while protecting their most commercially significant sectors in practice.
Mr. Haque's prescription is direct: "Bringing more tradable items within the list of tax-free export-import will help. A review of the SAFTA agreement and digitalizing it."
Trade Reality: SAFTA's sensitive lists are so extensive that they undermine the agreement's core purpose. True free trade within South Asia will require a fundamental renegotiation of what is and is not on the table.
06. The Workforce Imperative: From Unskilled Export to Digital Capability
Mr. Haque's transition from diplomatic service to leading Coders Trust Bangladesh is, by his own account, deeply intentional. He sees workforce development not as a separate agenda from regional trade, but as its foundational requirement.
Most SAARC member states are significant exporters of labor to the Middle East, Europe, and the United States. Historically, this has meant construction workers and other low-skilled categories. But the global labor market is shifting rapidly.
"There is a new threat coming that sourcing our labor or our human resources with unskilled export will be stopped," Mr. Haque warned. "There are many competitors: the Philippines, even China, with trained workforces. They are preparing."
His proposed solution leverages an existing but underutilized SAARC resource: the SAARC Development Fund (SDF). Established in 2010 and headquartered in Thimphu, Bhutan, the SDF has an authorized capital of $1.5 billion and a capital base that has grown to approximately $672 million. It operates across three windows: Social, Economic, and Infrastructure. Human resources development is one of twenty recognized areas of SAARC cooperation.
"I see huge potentials in using that fund in converting our unskilled or semi-skilled workforces into skilled, digitally skilled workers with in-demand skills by training them through the SAARC structure," Mr. Haque said.
He confirmed that he has personally discussed this approach with the SAARC Secretary General, who showed strong interest. The idea is sound, the funding mechanism exists, and the institutional mandate is in place. What is missing is the political leadership to activate it.
07. The Case for Informal Diplomacy
Perhaps Mr. Haque's most actionable recommendation concerns the mechanics of diplomatic engagement itself. SAARC's charter does not provide for informal meetings. There is no equivalent of the permanent representatives accredited to the United Nations who can meet continuously, negotiate behind closed doors, and prepare the ground for formal decisions.
"Our ambassadors in Kathmandu are not accredited to the secretariat to deal with day-to-day matters," Mr. Haque explained. "Diplomatic negotiation has two processes. One is a formal meeting, but there is a long process of informal meetings, which is practiced in New York by different permanent representatives and their offices. In the SAARC system, we don't have that."
This absence of informal diplomatic infrastructure means that when formal meetings stall, as they have since 2014, there is no mechanism to maintain momentum. Issues accumulate, positions harden, and the organization drifts.
Mr. Haque's proposal: even before the SAARC charter is formally reviewed, member states can initiate informal meetings on the sidelines of UN sessions and other multilateral forums. Foreign ministers can invite counterparts for unofficial discussions that are not formally classified as SAARC meetings but address SAARC agenda items.
"If good sense prevails among the member states, informal meetings on the sideline of the UN meetings or other forums, our ministers can meet informally, discuss, and suggest for the SAARC system."
This is not a constitutional overhaul. It is a procedural workaround that could restart dialogue without requiring the very consensus that has been impossible to achieve.
Diplomatic Insight: The absence of informal negotiation channels within SAARC means the organization has no mechanism to maintain momentum when formal meetings stall. Creating such channels, even informally, could restart dialogue without requiring constitutional reform.
08. Bringing Politics to the Table
The SAARC charter deliberately excludes bilateral political disputes from its agenda. This was a pragmatic choice in 1985, intended to prevent the India-Pakistan dynamic from dominating every conversation. But after four decades, Mr. Haque argued, this exclusion has become counterproductive.
"Our progress was stopped due to political misunderstanding among the member states. But I think the time has come that we bring political agenda gradually on the table so that we can discuss."
He noted that security-related cooperation already exists within the SAARC framework. The SAARC Regional Convention on Suppression of Terrorism was one of the organization's early achievements, and disaster management mechanisms are operational. The precedent for discussing sensitive political matters within the SAARC structure has already been set.
The suggestion is not to transform SAARC into a political mediation body overnight. It is to begin, informally and gradually, acknowledging that the political barriers cannot be permanently walled off from the economic agenda. Trade corridors run through the same borders that political tensions close.
09. Three Agreements for the Next Decade
When asked to name three agreements he would push hardest for if he were in the room, Mr. Haque outlined a sequenced strategy:
Immediate win (within twelve months): A connectivity agreement, specifically the long-pending SAARC Motor Vehicle Agreement. Physical connectivity is the prerequisite for everything else. Without roads and transport corridors linking member states, no trade agreement can deliver its intended benefits.
Medium-term structural reform (two to three years): Institutionalize informal diplomatic channels within the SAARC system. Accredit ambassadors to the secretariat in Kathmandu. Create the infrastructure for continuous negotiation that currently does not exist.
Decade-defining move: A comprehensive review and modernization of the SAFTA agreement, reducing sensitive lists to bring genuinely tradable items under the free trade framework, and digitalizing the agreement's implementation to reduce friction and increase transparency.
Conclusion: Unfinished, Not Lost
The barriers holding SAARC back are not fundamental. They are political, institutional, and historical. And that distinction is crucial, because it means they are solvable.
SAARC represents a region of approximately two billion people with a combined GDP exceeding $4.4 trillion. Its workforce is among the youngest in the world. Its manufacturing base is already globally significant. The frameworks for integration exist: SAFTA provides a trade architecture, the SAARC Development Fund provides a financing mechanism, and the 18th Summit's commitment to the South Asian Economic Union provides a long-term vision.
What is missing is not capability or even will at the technical level. It is the political leadership to restart the conversation and the institutional flexibility to keep it going.
As Mr. Haque put it, with the quiet authority of someone who spent years inside the system and now views it from outside: "SAARC can have its new dynamism with fresh blood and spirit injected into the SAARC veins and arteries."
South Asia's two billion people deserve that dynamism. The question is no longer whether integration is possible. It is whether the region's leaders are ready to make it happen.