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SAARC is probably alive somewhere in a diplomatic twilight zone but not many know where. Interest in forming SAARC was largely driven by trying to "equalise" all the South Asian countries into one regional space ensuring a similar status for all. Among many objectives, the most pertinent one was to reduce India's clout in the region where it reigns as the strongest power beyond all question.
This objective was no secret, including to India. So while India went along with the idea with Pakistan as an enthusiastic supporter of regionalism, it inevitably dried up over the years. SAARC is a body without a region and intent. Different countries have developed their own self-centred policies and the region itself doesn't matter much. Better options than SAARC are in town.
India has made it clear that any regional body that includes Pakistan will not be allowed to flourish. It has proposed and pushed BIMSTEC instead, which is neither regional nor inter-state relations based. It's billed as an Indian ocean rimmed body meant to promote the "blue "economy-ocean based resource mobilisation- but includes Bhutan which is land locked and Thailand. It's based in Dhaka but nobody has much idea about what it does.
Bangladesh has also proposed BCIM - Bangladesh, China (or a part of it, Yunnan province), India and Myanmar - but few even know much about it. It's heard that China has shown some interest and Pakistan is interested to push it from behind but hasn't been seriously discussed yet, let alone moved towards implementation. It's obvious that unless India is interested, such bodies will not take off as it sees them as attempts to put pressure on them. So the future of South Asian regional activation is weak.
But a very important factor is that the concept of the South Asian region has changed significantly and the need for regional bodies globally has declined outside the EU (that itself suffered Brexit). It was always motivated by strategic interest but given the current situation such bodies are not effective. Bi-or tri-lateralism dominates over regionalism.
The changing region
The Indo-Pak hostility has led to high wars several times and low wars without end. Why they fight on, particularly around Kashmir- and why both may need it is a separate matter but no regional bodies can work as long as this level of relationship exists. Since it's not about to end, the future for SAARCs is gloomy. Perhaps, the concept of the South Asian region is great for cricket tournaments but not viable for inter-state politics. So while keeping a polite face, one shouldn't invest in an idea which is not real anymore or maybe which never was.
The 7-state combine (should Afghanistan under US occupation really count?) also can't function because the most important de facto member state isn't South Asian. Let's face it, whether as friend or foe, the Chinese dragon is foremost in each SAARC member state's policy matrix. Its stupendous economic growth has made it a global contender and its impact on the region is high. As India has managed to make every country in the region and beyond hostile (including China), the smaller South Asians have gained a lot from this. Both India and China are obsessed with real estate domination including useless ones along their hot borders in very cold climates, which has led to mutual conflict and China to apply patience and skill in diplomacy. It has been successful in the region. China has positioned itself as an equalising force in South Asia and helped small states like Bangladesh or Nepal to be a little more competitive in terms of negotiating with India. So South Asia's scenario is often more impacted by the contingent effect of Indo-China relations than their own policies or needs. More hostility there is between the two, more concessions that come the smaller countries' way from both.
Pakistan's thaw policy: Thanks, but no thanks
India is still lagging behind in conceptualising the region which given its clout is inevitable. Its "domination" policy faces problems because the smaller states use China as a pivot and shield. India has not fully recovered from its past and needs better connection with regional realities of today where earlier attitudes don't work. Depending on the US in Afghanistan to balance threats from Pakistan over its Kashmir policy and then finding its platform lost as the US departed shows the threats to long term hostility policies in the region. Now Pakistan has greater clout in Afghanistan having sided with the Taliban and problems may arrive on India's door now.
As far as Pakistan is concerned, under Imran Khan it has sought actively to thaw Pak-BD relations - even to woo it away as part of efforts to rein in India - old SAARC strategy. It's understandable given their priorities. But the present dispensation in Bangladesh has proved a hard nut to crack. Just recently there would seem to be the first rays of light shining through as a result of these renewed efforts by Islamabad. Still nothing much beyond diplomatic niceties. Issues like trade and tourism are not a priority on BD-Pakistan's mind. Bangladesh will not join any disguised anti-Indian cluster as a point of principle, nor will it commit itself to any Indian initiatives to isolate Pakistan beyond a point.
Bangladesh's advantage is the lesser role played by its military in statecraft and that frees it from having impractical and costly ambitions that some states harbour. It also has no strategic role to play and no external military objectives like India and Pakistan. It can't fight India or has no reason to in the case of Myanmar. It needs economic growth and is not a part of conventional international/regional politics. Its aim is to remain as distant as practically possible from regional and global politics while speaking of "friendship towards all". Basically its diplomatic strategy is exactly what a peasant state demands and deserves. A village knows how to survive if given half a chance and in these days of conflict it will stay away from them all.
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