South Asian Economic Union (SAEU)

In 2014, SAARC countries had agreed to set up a South Asia Economic Union (SAEU) on the lines of European Union by facilitating a common market and removing trade barriers. This had to be achieved in a phased manner going through various stages viz.  Free Trade Area, a Customs Union, a Common Market, and a Common Economic and Monetary Union.

Analysis

The leaders of SAARC countries are great dreamers. They had dreamt of a SAFTA (South Asian Free Trade Area) in 2004 to foster intra-regional trade by creating a unified South Asia market. However, not much has happened since then. In 2014, the intra-regional trade in South Asia accounted only for 5% of total trade and is worth around 0.25 billion dollars which is abysmally low as compared to other such regional organizations. Though a clear road map { from FTA to Monetary Union}, but to begin to move in that direction, South Asian Free Trade agreement (SAFTA) needs to be implemented first. Based on SAFTA experience so far, the SAEU also appears a distant dream.

The socio-economic disparity, political differences and disturbances, mistrust; dangers from non-state actors in internal security, civil and ethnic conflicts etc. are some of the problems which don’t allow realizing a SAFTA or SAEU dream. At the same time, the geographical disparities and challenges hinder the intra-regional trade. Absence of required infra, required financial institution, cross border warehousing facilities, issues of smuggling and so on are some of the other major problems. The progress is slow and mainly visible in recent times in the form of BBIN-MVA.

Kindly note that the countries have also planned to start a SATIS {SAARC Agreement on Trade in Services} to spur trade in services between the countries. It also seems to be a distant reality as of now.