An extreme imbalance of power among member states has given rise to fears over security resulting from domination by India, and fostered an environment of suspicion and mistrust. Such a situation generates built-in retardants to cooperation among members. In the case of Saarc, this process has given rise to several distortions such as avoiding and/or restricting trade with India, discouraging FDI coming from India, creating an unwillingness to work together to resolve regional issues, and externalising bilateral and regional issues. If the environment of mistrust and suspicion among Saarc members remains unaddressed, it will be a long time before significant progress in regional cooperation and economic integration can be realised. This is because cooperation and integration requires aligning member states economic structures more closely with that of the Indian economy, which would further deepen interdependence with India. In the absence of trust and amid prevalent fears of Indian domination, however, smaller Saarc members will continue to tread this path cautiously. The critical need to develop congenial interstate relations for deepening and accelerating the process of cooperation in the region cannot be overemphasised. While a growing awareness of the economic costs of the lack of cooperation seems to have pushed Saarc members towards increased cooperation, the overarching influence of inter-state relations cannot be overlooked.
* VV Desai, Political Economy of Regional Cooperation in South Asia, WP 54, ADB, July 2010