A two-day summit of South Asian leaders has begun in Dhaka aimed at boosting trade and fighting terrorism.
Leaders of India, Pakistan, Bangladesh, Sri Lanka, Bhutan, Nepal and Maldives are present
Addressing the summit, Indian Prime Minister Manmohan Singh issued a challenge to the region to work more closely together.
"We cannot be the crossroads of Asia but remain disconnected within our own region," he said.
About 40,000 police are on the streets of Bangladesh's capital to protect two presidents, four premiers and a king.
Critics say the 21-year-old group has often failed to deliver for the 1.4 billion people it represents.
The region is home to half the world's poor. The World Bank says about 40% live on less than $1 a day.
Mr Singh said: "The honest answer is that regional economic co-operation in South Asia has fallen far short of our expectations."
Bangladeshi Prime Minister Khaleda Zia said that "mindsets and perceptions emanating from the past" were affecting regional co-operation.
Mr Singh outlined several proposals for increasing economic and humanitarian co-operation in the region, including:
- A regional mechanism for disaster relief and management
- A regional food bank to meet shortages caused by natural calamities
At the last summit in January 2004 the leaders agreed to set up a free trade area by 1 January next year but negotiations have since stalled over disputes about which industries will remain protected by high tariffs.
India has also called for a joint approach to tackling terrorism.
Last month more than 60 people were killed in bomb blasts in Delhi and India's Prime Minister Manmohan Singh has hinted that militant groups backed by Pakistan might be to blame.
On Friday he also said the danger of emerging "failed states" was a concern for South Asia's security.
He did not specify any countries, but said: "We see signs of the ills of disaffection, alienation and conflict not only in India but also across our neighbourhood.
"We have to be alert to these developments and deal with the dangers that lie ahead."
Discussions are also likely on the entry of Afghanistan into the regional fold.
India has in the past been accused of acting like a big brother at the summits.
India has recently expressed concern over bombings in Bangladesh. It has also raised the issue of the flow of immigrants from Bangladesh to India, a charge Dhaka denies.
India has added more troops on the border with Nepal, where political unrest and violence continue.
The Saarc meeting was postponed in January this year following the Indian Ocean tsunami.
In the past, some Saarc meetings have been postponed because of the inability or refusal of one or more leaders to attend.