International Relationship

India and south East Asian Countries

Term XI

Group 1

TYBBA

Names Ashley Coelho 01, Nidhi Jain 02, Ashish Nayak 04.

Introduction: The signing of the agreement on ASEAN-India Partnership for Peace, Progress and Shared Prosperity on November 11, 2004, at the ASEAN-India Summit Meeting in Vientiane, Laos, is a major milestone in the evolving relationship between India and Southeast Asia. This, along with a clutch of other agreements that have been entered into in the last few years on to combat terrorism, on accession to the Treaty of Amity and Cooperation (TAC), on a variety of other activities has resulted in further consolidation of what is known as Indias Look East policy that was initiated in the early 1990s. It has since remained a major priority of Indias foreign policy. On the defence and strategic front too the progress has been impressive through a number of agreements and embarking on a variety of other activities with member-states of ASEAN. While continuing the emphasis on Southeast Asia, the Look East policy is poised to enlarge the scope to encompass the rest of the Asia Pacific region. India and Southeast Asia are poised to reinforce their relations. In light of this, the India-ASEAN FTA negotiations and their enhanced security relations are some of the positive developments to reckon with. East Asia Summit along with other developments has provided a watershed in India's Asia-Pacific policy. The reviving of Nalanda University has added a cultural aspect to their relationship. Over the years, domestic factors have emerged to strengthen India's Look East

policy. No solution to the challenges facing India's northeastern states is likely to be possible without the assistance of Southeast Asia. India's relationship with the Southeast is not confined to the ASEAN region alone but also holds significance for the greater East Asian region. As Southeast Asia is redefining its relationship with East Asia, India too will have to redefine and reconstitute its relations with the region as a whole. As far as Indias relations with Southeast Asia are concerned, the objectives appear to be threefold: One, to institutionalize linkages with ASEAN and its affiliates (Dialogue Partnership, ASEAN Plus One Summit Meetings, and membership on the ARF); two, to strengthen bilateral relationships with member-states of ASEAN; and three, to carve a niche for itself in Southeast Asia both politically and economically.

India-Singapore Relations: Singapore remains an important factor in India's relations with the ASEAN and the bilateral aspect of India-Singapore relations needs to be seen in the background of India's sustained engagement with Southeast Asia. Singapore's prominence as an important entrepot and as a gateway to the region dates back to pre-colonial times. During the Cold War, India's relation with Singapore was largely "estranged" because of different economic and political paths chosen by the two countries. While Singapore followed a high-intensity export and growth oriented economy, India followed self-sufficiency and import-substitution model. In terms of political ideology, Singapore followed a pro-western foreign policy while India shared a close relationship with the Soviet Union which, in turn, led to further estrangement of their bilateral relationship. Several factors have contributed to the enhanced India-Singapore relations in the post-Cold War era. The most important factor is the environmental shift, as evident from the end of the Cold War and the end of the Cambodian conflict. Second, India's economic transition and the liberalization programme credibly altered the equations between India and Singapore. In fact, it was Singapore which promoted the logic of an 'India fever', projecting India as an important

investment opportunity. The multi-million dollar IT theme park in Bangalore, collaboration in the banking sector, pharmaceuticals, bio-technology and telecommunications are some of the areas in which the two countries engaged extensively with each other. The bilateral relationship entered a new phase with the signing of the Comprehensive Economic Cooperation Agreement (CECA), which is also being seen as a stepping stone for the India-ASEAN FTA.

India and Myanmar relations: Myanmar's increased interaction with China is critical to India. Besides, Myanmar offers an opportunity for India to have land border with the ASEAN region.

India and Vietnam relations: Trade complementarities between the two countries are very low. Vietnam is also a country with adaptability capacity. Therefore, there are many areas where India and Vietnam can augment their relationship which will require frequent meetings between the two countries.

Correlationship: Economic: The Look East policy also gave a tremendous boost to economic ties between India and Southeast Asia. A number of institutional mechanisms have been put in place to promote economic exchanges both at the governmental as well as private sector level. The ASEAN-India Joint Cooperation Committee and an ASEAN-India Working Group on Trade and Investment were set up along with the creation of an ASEAN-India Fund to promote trade, tourism, science and technology, and other economic activity. From virtually little or no investment from Southeast Asia in the early 1990s, Malaysia and Singapore have emerged as the tenth and eleventh largest in terms of approved investments respectively by 2002. Thailand is in the 18th

and Indonesia and the Philippines are in 33rd and 35th position respectively. Cumulatively these five countries constitute nearly 5 percent of the total approved investments in India. In the last few there has a spurt in Singaporean and Malaysian investments in Indias large investments projects. The progress with regard to bilateral trade is also equally impressive. The growth in Indias trade was the fastest with Southeast Asia compared to any other region between 1991 and 1997. While ASEAN exports kept the momentum, there was considerable slow down in imports as a result of the financial crisis in 1997-98. The exports grew from about US $1.4 billion in 1993 to over 6.2 billion in 2000. Imports by ASEAN on the other hand increased from 1.4 bn to 4.4 bn. in 1997 but nosedived to 1.71 bn in 1998 but have since picked up to reach about 3 bn in 2000. The US $ 13 billion bilateral trade between India and Southeast Asia is expected to reach 30 billion in the next few years.

The failure of multilateral processes has led to greater emphasis on regionalism, which the ASEAN has been following steadily through comprehensive reforms and financial liberalization, and through the enlargement of ASEAN+ networks. The Structural rigidity of the ASEAN in terms of expanding its membership has further facilitated the ASEAN+ processes, leading to the formation of the Chiang-Mai Initiative and the East Asian Summit. While the Chiang-Mai initiative paved the way for the integration of ASEAN + 3 economies including China, Japan and South Korea, the East Asian Summit has brought new players such as India, Australia and New Zealand. The rise of China and India has created enormous economic opportunities for entire East Asia, despite the western notion that their rise will benefit only them. Its growth has imprinted its hold in the ASEAN region. However, the question arises whether India has got any relevance to the ASEAN region or is it simply India's desire to be part of the ASEAN. It can be estimated that the exclusion of India in the East Asian FTA process will cost the region to the extent of US$48 billion. Similarly, the exclusion of India in the East Asian FTA will cost Japan US$26 billion, China US$5.5 billion and the ASEAN US$4.8 billion. Therefore, any design to exclude India from the region's economic engagements will be at the detriment of the region itself.

Political: As far as political engagement is concerned, it is two-dimensional: to establish institutional links and to target certain countries to elevate bilateral ties to a higher plane. After the initial Sectoral Dialogue Partnership with ASEAN in 1992, India became a full Dialogue Partner in 1995. Realizing its potential to contribute to regional security and economic development, India was made a member of the ARF in 1996, and a summit partner of ASEAN called ASEAN Plus One since 2002. India has also acceded to ASEANs Treaty of Amity and Cooperation (TAC) to underscore its commitment to ASEANs principles for inter-state relations. The linkages with ASEAN have been further buttressed by the recent ASEAN-India partnership agreement. Simultaneously, one can see a remarkable turnaround in Indias bilateral relations in particular with Singapore, the Indochina countries, Thailand, Myanmar and Indonesia.

Conclusion India has undertaken important growth-enhancing reforms over the past 15 years, placing considerable emphasis on achieving macroeconomic stability, liberalizing trade, strengthening the financial sector and improving the business climate. Over the years, this has resulted in higher trade and investment growth, especially to and from the Asian countries. The growth impulse has emanated from product specialization and natural comparative advantages arising from various geographical factors. Overall, China has emerged as Indias major trading partner. However, Indias share of exports to the Asian region remained sluggish and below the expected level. Indias FDI openness, despite an increase, is much lower than that of other Asian emerging economies. As Indias services exports are increasing at a rapid pace, the country is confronting challenges emanating from the uncertainty of access to cross-border exports of services and barriers to the movement of people. The role of the private sector is crucial for raising investment and productivity in the economy. Higher private investment, including foreign direct investment, can contribute to higher productivity through learning by doing and technology transfer. Public-private partnership is a key factor for boosting investment. The coming together of public and private sector representatives can be a catalyst for developing new regional initiatives in Asia aimed at expanding the private sector and thereby strengthening its positive

impact on economic growth. The new sources of competitive advantage will be in technology and human skills, not necessarily in low wages. Recognizing their complementary strengths, India is becoming increasingly linked to East Asian production networks. East Asian companies have begun to exploit Indias strengths in research and development (R & D), software and design by locating their global R & D centers in India. Several Indian companies have also begun to take advantage of cheaper manufacturing costs for hardware in China and other East Asian countries by rationalizing their production. This trend is likely to become more entrenched as the emerging free trade arrangements between India and Southeast Asian countries come into effect. It is important for India to forge a closer relationship for mutual trade and investment within the Asian region and also to adopt a proactive role vis-vis the ASEAN economies. India has already demonstrated its strength in the services sector, especially software. If complemented by the hardware and manufacturing base of East Asia, India and the region can prosper together in the new global scenario. The rapid change that has taken place in Asia provides new opportunities that must be seized by each side. Undoubtedly, the Look East policy has once again emerged as a major thrust area of Indias foreign policy after some hiccups in the mid-1990s. It is one of the most comprehensive and successful policies that India has formulated in the recent past. India has indeed come a long way since the Cold War days when most of the then ASEAN countries perceived India to be in the camp of the former Soviet Union. Against this background, the progress that India has made in cultivating multi-faceted relationships with ASEAN and its member-states is remarkable. While the emphasis so far has been on Southeast Asia, this policy is being extended to the rest of the Asia Pacific region, which means a greater Indian involvement in the region. While developing links with ASEAN and other ASEAN-led multilateral institutions, India is also pursuing to qualitatively improve bilateral links with member states. Despite enormous progress made since its enunciation in the early 1990s, economic dimension remains the weakest leg. Nonetheless, undoubtedly New Delhi has carved an important niche for itself. And the Look East policy is responsible in making India an inalienable part of Asia Pacifics strategic discourse. Just a decade back most discussions on the Asia Pacific would be conspicuous by the absence of any reference to India. The important thing is that a number of institutional mechanisms have been put in place so that Indias relationship does not suffer the fate as in the past.

Now that India has become a summit partner of ASEAN, it provides an opportunity for the top leadership to visit Southeast Asia every year for exchange of views with counterparts. The three distinct features of the Look East policy are: India has managed to develop a multi-faceted relationship; Successful defence diplomacy has been put in place; and India is not averse to participate in regional multilateralism, security or economic.

It is expected that Indias involvement in and interaction with Southeast Asia will increase further in the coming years, which will result in an enhanced Indian involvement in the Asia Pacific.