The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka. Being founded in 1985, the organization promotes development of economic and regional integration.

POTENTIAL 

SAARC has potential to emerge as powerful economic union like ASEAN, EU.

• Strong cultural identities between nations likely to ensure effective integration.

• Democracies and open economies in the region.

• With 21% of the world's population and Nations with younger demography, SAARC nations have human resource pool for industrial activities as well as provide market for big companies.

• At a time when global economy is almost stagnant, SAARC with fast growing economies has potential to become powerful economic union.

FAILURE 

However, SAARC has failed to live upto its expectations and failure can be seen on various fronts.

• Low trade: South Asian Free Trade Agreement (SAFTA) has not resulted into increased trade between nations and trade between nations remain at just 3.5% of their total volume of trade.

• Even sub-regional initiatives like BBIN Motor Vehicle Agreement have stalled.

• Visa issues remain between countries.

• Irregular summits.

• SAARC satellite modified to South Asian satellite.

Failure is attributed to following reasons-

• Regional politics:SAARC nations consider each other as threat.Therefore rather promoting economic interest, countries are busy to maintain balance of power in the region. Example: Demand to grant permanent member status to China, by Nepal, mainly to counter India.

• Historical distrust between the nations like India-Pakistan and bilateral issues (Pakistan-Bangladesh) have affected SAARC negotiations leading to failure of SAARC as a economic unit. 

• Politics take front seat than economics: politicians of SAARC nations cater to domestic issues without having broad regional vision. Example: Years to sign and  implement treaties (SAFTA).  

• Failure of experiment of democracy, except in India, is also responsible for the state of affairs. 

• India’s inability to play leadership role. Being indifferent to sensitivities of neighbours also furthers mistrust.