State of Regional Integration in South Asia: Does post-Sri Lanka Crisis have Positive Impact?

Even if we separate all the existing political tensions between the states, in terms of trade and people-to-people contact, South Asia is one of the least integrated regions in the world. With an intention of regionalism, in year 1985 the South Asian Association for Regional Cooperation (SAARC) was established consisting of eight states (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka) from South Asia. The establishment of SAARC itself can be analyzed in many ways, as some prefer to call it ‘small states gang up against India’. Due to its size and socio-political indicators, India alone holds almost 80% of all indicators, including economy, size, and population. Thus, the whole regional integration of South Asia has and will depend on India’s intention regarding SAARC. As a consequence of many bilateral tensions between member states of the organization, the SAARC mostly has been coined as a dysfunctional, talk shop, and a dead organization. Since the last summit in 2014, SAARC has not been able to have its next summit, which was supposed to be in Pakistan. On the one hand, the psycho-politics of South Asia suggest that the existence of small state big state complexities has always been the major reason behind dysfunctional regional integration of South Asia. And, on the other hand, India has always preferred to deal bilaterally with small states of South Asia and have invested less on easing the complexities between states. On top of that, due to the increasing presence of China, the changing geopolitics of the region signals the complication on India’s position in South Asia. However, China’s intention and involvement in the region through Belt and Road Initiative (BRI) have brought many questions like debt trap, transparency, and corruption. The Sri Lanka crisis is the latest stage of increasing China’s presence in the region and the associated complication. However, in this time of economic turmoil, India and Sri Lanka have an opportunity to restore their tumultuous bilateral relations after more than a decade. As Colombo struggles, New Delhi has an opportunity to mend and rebuild its traditional ties with its island neighbor. Likewise, one can argue that India also has an opportunity to repair the broken regional integration starting with Sri Lanka. 

State of SAARC and Regional Integration 

India, Pakistan, the Maldives, Sri Lanka, Bhutan, and Bangladesh were the original members of the SAARC. Afghanistan became a member in 2005. The EU, the United States, Japan, and China are among the nine observers of the organization. The SAARC’s founders wanted to enhance intra-regional commerce and investment, inspired by other successful regional organizations such as the Association of Southeast Asian Nations (ASEAN), the North Atlantic Free Trade Agreement (NAFTA), and the EU at the time. The SAARC’s efficiency, on the other hand, has been criticized. SAARC was established to ensure the welfare of the region’s population, improve commerce, and promote regional peace and cooperation. Poverty, terrorism, extremism, social and political conflicts were all issues that all member states were dealing with. The South Asian Free Trade Agreement (SAFTA) is one of SAARC’s most laudable achievements. The SAAFTA, which succeeded the SAARC’s preferential agreement, has been significant in more ways than one. For example, the 2006 tariff reduction plan was successfully implemented in two phases. In two years, India and Pakistan cut their tariffs on commodities to 20%, while other countries lowered their tariffs to 30% in three years. In the second phase, India and Pakistan dropped prices to 0-5 percent in five years; other countries required seven years to do the same. The SAARC has also stated its willingness to work with foreign countries to invest in financial intermediation, resource integration, technological transfer, market development, and educational assistance.

Although SAARC has accomplished a great deal, the regional organization faces a number of hurdles in its quest to achieve maximum efficiency. One of the key difficulties impeding SAARC expansion is the Kashmir border dispute. The SAARC still lacks an effective platform for discussing and addressing terrorism-related issues in the region. Although most of the causes that have contributed to detachments with an organization are bilateral tensions, the SAARC charter strictly overruled the possibility of discussing bilateral issues in the summit or in meetings. In addition, India has taken a hegemonic approach. It attempts to persuade SAARC member states to support Indian national interests. This, understandably, does not sit well with India’s neighbors. In terms of population and area, India is the largest member of the SAARC. As a result, New Delhi perceives itself as a regional hegemon, a point of view shared by none of the other SARRC states. Of course, the SAARC operation is hampered by tense relations between India and Pakistan. Other member states will always be caught in the crossfire until these two countries are capable of resolving their security challenges. As a result, India has shown less and less interest in SAARC and has promoting sub-regional organization such as BBIN (Bhutan, Bangladesh, India, and Nepal) and other organization such as BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation). Both organizations do not include Pakistan. 

Sri Lankan Crisis and China in South Asia

Sri Lanka, an island nation, has been in a financial crisis since 2019. Since the country’s independence in 1948, there has been an economic conflict between ethnic groupings and socioeconomic classes. Excessive borrowing from overseas lenders is the new and divergent factor, and its poor economic track record is to blame for the current financial crisis’ severity. Although foreign debt and financial mismanagement is one of the major factors that crippled Sri Lanka’s economy, the huge tax cut, the COVID-19 pandemic and the Russia-Ukraine war are also contributing. Sri Lanka has been going through the worst time any country could imagine, and there were calculations of opportunities and challenges for regional and extra regional powers. India’s position in the region was unchallenged for many decades of independence, since there was no other external power with materialistic capabilities in its transit. However, since the announcement of BRI, China has accelerated its presence in South Asia. Pakistan, Sri Lanka, Nepal, Bangladesh, and the Maldives already have deep financial ties to China that automatically challenged India’s position in its neighbourhood.    

However, the current crisis in Colombo has thrown China’s foreign policy into disarray, and it could have major ramifications for Beijing’s presence in the Indian Ocean and the future possibilities of its global infrastructure investment plan. China’s failed infrastructure projects are already fueling claims that the country’s infrastructure investment is a “debt trap.” These revelations will cause alarm in all of South Asia’s minor states that are linked to China via the Belt and Road Initiative. Therefore, India now has the opportunity to regain its influence in South Asia and the possibility to act as a regional leader that can substantially contribute in regional integration. Nevertheless, India itself has many constrains as well as the dilemma of choosing multilateralism against bilateralism that they have long adopted. 

Post-Sri Lankan Crisis Emerging Trends

As a consequence of the Sri Lankan crisis, regional geopolitics started to become turbulent. On the one hand, instability in Sri Lanka, whether political, social, economic or security-related, is detrimental to India’s interests. Due to its proximity to the island nation, India is the first country in the South Asian region to face the effects of man-made or natural disasters. On the other hand, China is working hard to disassociated its image as a debt lord. China has stepped in to help, offering a $1.5 billion credit line and a $1 billion loan. It has also pushed for the signing of a free trade agreement between China and Sri Lanka, which China believes will help indigenous Sri Lankan goods. In addition, China contributed 2,000 tons of rice to help alleviate food shortages. To its credit, New Delhi extended a $1 billion line of credit to Colombo for food, medicine, and other necessities. Harsh Vardhan Shringla, India’s Foreign Secretary, recently reaffirmed that Sri Lanka is a key component of Prime Minister Narendra Modi’s Neighborhood First policy, which aims to reduce anti-India sentiment and improve relations with regional countries.

In contrast, although India provided a great deal of developmental support to Sri Lanka, a large part of it was in the form of grants, China grew its presence dramatically between 2010 and 2014. It is true today as well; China still has geopolitical upper hand in the region, and India still have turbulent relationship with its neighbours. Afghanistan crisis after Taliban takeover, bitterness about the relationship with Nepal after political map saga, historically disturbed relationship with Pakistan, and now Bhutan’s unilateral communication with China on the settlement of border disputes signals India’s failure on dealing with its nature. Similarly, it also suggests that India needs to change its approach to deal with its neighbours and establish a multilateral regional framework that not only allows India to practice leadership, but also helps mitigate regional issues from a broader perspective. 

[Photo by AntanO, CC BY-SA 4.0, via Wikimedia Commons]

Saroj Kumar Aryal is a Ph.D. researcher at Faculty of Political Science and International Studies, University of Warsaw, Poland. His area of expertise includes regionalism in South Asia, India and China in South Asia, and geopolitics of South Asia. He has been writing research articles, policy papers, and perspectives in reputed journals.

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