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In the late 1970s, Bangladeshi president Ziaur Rahman proposed the creation of a trade bloc consisting of South Asian countries. The Bangladeshi proposal was accepted by India, Pakistan and Sri Lanka during a meeting held in Colombo in 1981. In August 1983, the leaders adopted the Declaration on South Asian Regional Cooperation during a summit which was held in New Delhi. The seven South Asian countries, which also included Nepal, Maldives and Bhutan, agreed on five areas of cooperation:

Agriculture and Rural Development
Telecommunications, Science, Technology and Meteorology
Health and Population Activities
Human Resource Development
Afghanistan was added to the regional grouping at the behest of India on November 13, 2005, and became a member on April 3, 2007. With the addition of Afghanistan, the total number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status. The European Union has also indicated interest in being given observer status, and made a formal request for the same to the SAARC Council of Ministers meeting in July 2006. On August 2, 2006 the foreign ministers of the SAARC countries agreed in principle to grant observer status to the US, South Korea and the European Union. On 4 March 2007, Iran requested observer status.
(http://www.saarcbuilders.com/about/history/3-history.html) www.saarc-sec.org