ASEAN

The Association of Southeast Asian Nations (ASEAN) is a regional grouping that promotes
economic, political, and security cooperation among its ten members: Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
ASEAN countries have a total population of 650 million people and a combined gross
domestic product (GDP) of $2.8 trillion. The group has played a central role in Asian
economic integration, spearheading negotiations among Asia-Pacific nations to form one of
the world’s largest free trade blocs and signing six free trade agreements with other regional
economies.

Yet experts say ASEAN’s impact is limited by a lack of strategic vision, diverging priorities
among member states, and weak leadership. The bloc’s biggest challenge, they say, is
developing a unified approach to China, particularly in response to Beijing’s claims in the
South China Sea, which overlap with claims of several ASEAN members.
How ASEAN Works
ASEAN is headed by a chair—a position that rotates annually among member states—and is
assisted by a secretariat based in Jakarta, Indonesia. Important decisions are usually reached
through consultation and consensus guided by the principles of non-interference in internal
affairs and peaceful resolution of conflicts. Some experts see this approach to decision-
making as a chief drawback for the organization. These norms of consensus and non-
interference have increasingly become outdated, and they have hindered ASEAN’s influence
on issues ranging from dealing with China and crises in particular ASEAN states.
ASEAN has contributed to regional stability by developing much-needed norms and fostering
a neutral environment to address shared challenges.

ASEAN’s History

Formed in 1967, ASEAN united Indonesia, Malaysia, the Philippines, Singapore, and Thailand,
which sought to create a common front against the spread of communism and promote
political, economic, and social stability amid rising tensions in the Asia-Pacific. In 1976, the
members signed the Treaty of Amity and Cooperation in Southeast Asia, which emphasizes
mutual respect and non-interference in other countries’ affairs.
Membership doubled by the end of the 1990s. The resolution of Cambodia’s civil war in
1991, the end of the Cold War, and the normalization of relations between the United States
and Vietnam in 1995 brought relative peace to mainland Southeast Asia, paving the way for
more states to join ASEAN. With the addition of Brunei (1984), Vietnam (1995), Laos and
Myanmar (1997), and Cambodia (1999), the group started to launch initiatives to boost
regionalism. The members signed a treaty in 1995, for example, to refrain from developing,
acquiring, or possessing nuclear weapons.

Faced with the 1997 Asian financial crisis, which started in Thailand, ASEAN members
pushed to further integrate their economies. The Chiang Mai Initiative , for instance, was a
currency swap arrangement first initiated in 2000 between ASEAN members, China, Japan,
and South Korea to provide financial support to one another and fight currency speculation.

In 2007, the ten members adopted the ASEAN Charter , a constitutional document that
provided the grouping with legal status and an institutional framework. The charter
enshrines core principles and delineates requirements for membership. (East Timor
submitted an application for membership in 2011 but not all members back its accession.)
The charter laid out a blueprint for a community made up of three branches: the ASEAN
Economic Community (AEC), the ASEAN Political-Security Community, and the ASEAN Socio-
Cultural Community.
Economic Progress
ASEAN has made notable progress toward economic integration and free trade in the region.
In 1992, members created the ASEAN Free Trade Area with the goals of creating a single
market, increasing intra-ASEAN trade and investments, and attracting foreign investment.
Intra-ASEAN trade as a share of the bloc’s overall trade grew from about 19 percent in 1993
to 23 percent in 2017. Across the grouping, more than 90 percent of goods are traded with
no tariffs. The bloc has prioritized eleven sectors for integration, including electronics,
automotives, rubber-based products, textiles and apparels, agro-based products, and
tourism.

Despite the progress, some of the region’s most important industries are not covered by
preferential trade measures, and differences in income among members could make
economic integration challenging. Some experts see the AEC, through which ASEAN defines
its trade goals, as a potential catalyst for further economic integration.

In November 2020, ASEAN members joined Australia, China, Japan, New Zealand, and South
Korea in signing the Regional Comprehensive Economic Partnership (RCEP), a free trade
agreement they had been negotiating since 2012. Although the RCEP doesn’t cut tariffs
drastically, it covers more of the world’s population—30 percent—than any other trade bloc.
It will also help boost economic integration between Northeast and Southeast Asia. India,
which was initially involved in negotiations, decided in 2019 that it would not join. ASEAN is
also party to six free trade agreements with countries outside of the grouping.

Regional Security Challenges

Security challenges include maritime disputes, such as in the South China Sea, human
trafficking, narcotics trafficking, refugee flows, natural disasters, food insecurity, and
terrorism and insurgencies. While the vast majority of issues are dealt with outside of
ASEAN, including bilaterally or with outside moderation, there are several ASEAN-led forums
through which regional issues are discussed:

ASEAN Regional Forum. Launched in 1993, the twenty-seven-member multilateral grouping

was developed to facilitate regional confidence-building and preventive diplomacy on
political and security issues. The forum represents a wide array of voices—including ASEAN,
its dialogue partners, North Korea, and Pakistan, among others—yet it is often mired in
geopolitical disputes that limit its effectiveness.
ASEAN Plus Three. The consultative group, which was initiated in 1997, brings together
ASEAN’s ten members, China, Japan, and South Korea.

ASEAN Plus Six. This group consists of ASEAN’s ten members plus Australia, China, India,
Japan, New Zealand, and South Korea. It played a central role in pushing forward the RCEP.

East Asia Summit. First held in 2005, the summit seeks to promote security and prosperity
and is often attended by the heads of state of ASEAN members, Australia, China, India,
Japan, New Zealand, Russia, South Korea, and the United States. “The summit remains the
only opportunity for the president of the United States to sit down and collectively engage
his Asia-Pacific counterparts on the main political and security issues of the day,” wrote the
U.S. Institute of Peace’s Vikram Singh and the Brookings Institution’s Lindsey Ford. However,
U.S. President Donald J. Trump has never attended an East Asia Summit.

Amid the coronavirus pandemic and subsequent economic crisis in 2020, ASEAN countries set
up several bodies and mechanisms to procure medical supplies, distribute a COVID-19
vaccine, coordinate economic recovery plans, and facilitate the safe resumption of regional
travel.

Despite these diplomatic forums, disagreements over security issues continue to challenge
ASEAN’s unity. The group’s most glaring issue has been finding a joint response to the rise of
China. China’s re-emergence as the major power in the East Asia region is not only likely to
transform Southeast Asia’s relations with China, but also perhaps the internal relations of
ASEAN itself.
Maritime disputes in the South China Sea have been among the biggest irritants. Brunei,
Indonesia, Malaysia, the Philippines, and Vietnam claim features in waters contested with
China. For those countries, China’s moves to reclaim land and build artificial islands are seen
as violations of their national sovereignty. In response, some have invested in modernizing
their militaries. For other ASEAN members, tensions in the South China Sea are
geographically distant and not a priority. A few, such as Cambodia, even tend to support
China’s claims. In 2002, ASEAN and China signed the nonbinding Declaration of Conduct of
Parties in the South China Sea. Efforts to make it a legally binding code of conduct have
regained momentum in recent years, with Beijing voicing support for reaching an agreement
by 2022.

The United States, which has a strong interest in preventing China from controlling the South
China Sea, has responded by continuing military cooperation with ASEAN members,
including the Philippines and Vietnam, and increasing its maritime presence to enforce
freedom of navigation in international waters.

ASEAN members have been divided over their ties to China and to the United States. The
region is in need of investment, trade, and infrastructure development, and China has moved
to fill these needs. But ASEAN members are anxious about becoming economically
dependent on China; in turn, these nations look to the United States to hedge.

Way Forward
ASEAN brings together countries with significantly different economies and political systems.
Singapore boasts the highest GDP per capita among the group’s members at more than
$65,000 based on 2019 World Bank figures; Myanmar’s is the lowest at around $1,400. The
members’ political systems include democracies, authoritarian states, and hybrid regimes.
Demographics differ across the region, too, with many religious and ethnic groups
represented. ASEAN’s geography includes archipelagos and continental land masses with
low plains and mountainous terrain.

Given such diversity among its members, the bloc remains divided over how to address many
issues, including China’s claims in the South China Sea, human rights abuses, including ethnic
cleansing against the Rohingya minority in Myanmar, and political repression in member
states such as Cambodia.
Some experts have suggested that ASEAN reimagine its framework and decision-making
practices. It is recommended substantive changes to ASEAN that could help it lead economic
and political integration efforts in Asia. These include strengthening its secretariat and
empowering a high-profile secretary-general to speak on its behalf, abandoning consensus
decision-making, and demonstrating that ASEAN can build its own free trade area. Others,
such as CSIS’s Hiebert, see the organization thriving under a coalition-of-the-willing format,
in which some of the group’s members could decide to act on certain issues, such as joint
maritime patrol initiatives, and others could join later.

Difference in approach of EU and ASEAN

1. EU is intrusive (it imposes lot of conditionalities) on member countries even in
domestic sphere. ASEAN follow ASEAN way. It is based on Panchsheel – Non
interference in domestic affairs and respect for sovereignty and territorial integrity.
2. EU is supranational (having power that transcends national boundaries.), ASEAN is
international.
3. EU has introduced qualified majority whereas ASEAN follows consensus based
approach.
4. Both EU and ASEAN are communities. ASEAN has not gone for single currency
model, they have currency swap arrangement.
5. In one way ASEAN is more advanced than EU. EU still does not have its charter,
ASEAN has its own charter.
6. Both EU and ASEAN have been the stabilizing forces in their regions.

Comparison between ASEAN and SAARC

1. Both are examples of the regional integration in third world.
2. If ASEAN is the most advanced example, SAARC is the worst example of regional
integration. According to former foreign secretary S Jaishankar, SAARC is a
jammed vehicle. According to C Rajamohan, Pakistan is a camel in the carvaan of
SAARC, which slows down the traffic.

India and ASEAN relations

If there is any region where India punches beyond its weight, it is South East Asia. Look East /
Act East proved to be the most successful initiative of South Block. Today India is well placed
in the economic architecture as well as the security architecture in the region. India has been
inducted into East Asia Summit even before US and Russia. A lot of credit goes to ASEAN
countries in giving such centrality to India in Asia Pacific.

What is the significance of ASEAN in Asia Pacific?

ASEAN is called as the nucleus of Asia Pacific. ASEAN is also called as the gateway of India to
the region. We should not ignore the fact that center of gravity of international politics and
economy has shifted in the Asia Pacific region. ASEAN is the biggest ally of India in the
region.
Timeline of India ASEAN relations.
1967 – When ASEAN was formed and India was invited to be a part of the initiative, India
ignored ASEAN
After the end of cold war, as India lost USSR and opened up its economy, there was no
positive environment in immediate neighbourhood, India had to look towards the extended
neighbourhood. If South Asia forms the first mandal, South East Asia and West Asia come in
the second concentric circle.

1992 – India became sectoral dialogue partner. Same year Pakistan also became sectoral
dialogue partner.
1996 – India became full dialogue partner.
2002 – India’s status was elevated and India became summit level partner.
ASEAN invited India to be a part of all of its initiatives like ASEAN regional forum, East Asia
Summit, ADMM+ and RCEP.
2012 – India and ASEAN have become strategic partners. It is to be noted that Pakistan
continues to be sectoral dialogue partner.
2010 – India entered into its first and only regional trading agreement with any block. (AIFTA
– ASEAN India Free Trade Area).
2015 – India ASEAN free trade agreement in services.
Significance. There is huge imbalance in India ASEAN trade, which is tilted towards ASEAN.
Inclusion of services will play in bringing the balance in the trade.
ASEAN is India's fourth largest trading partner with about $86.9 Bn in trade between India
and the ten ASEAN nations
India and ASEAN are also involved in sub regional initiatives like Mekong Ganga
Cooperation. India and Thailand are working together for the advancement of CLMV
countries (Cambodia, Laos, Myanmar, Vietnam), LDCs of the region. (China also has a similar
initiative known as GMR – Greater Mekong Region.)

Mekong Ganga initiative has been India’s strategic initiative to weaken the initiative of
China. It was formed in year 2000. The four pillars of cooperation have been education,
culture, tourism, transport and communication. Like all other Indian initiatives, it has also
been languishing. Thailand became too disappointed and launched its own initiative
(Irrawaddy Chaophraya). Modi govt. has given a new lease of life to the platform. In 2016, a
plan of action was adopted to expand cooperation in infrastructure, IT, pharmaceuticals and
intermediate goods. India has given $2bn LoC to CMLV countries. Mekong and Ganga are
known as civilizational rivers, there is huge influence of India in the region, India should give
strategic view to the region which is a land bridge to connect further with South East Asia.
Connectivity is the thrust area. The two major projects involving India are Kaladan
Multimodal Transit and Transport Project.
India Myanmar Thailand trilateral highway which will start in Moreh (Manipur), Bagan
(Myanmar), Maesot (Thailand).

Kaladan Multimodal Project.

It is a $500mn project, connecting Kolkata to Sittwe port of Myanmar. Then through Kaladan
river to Paletwa in Chin region of Myanmar. Then via road route to Aizawl in Mizoram. It is
expected to operationalized by 2020.
It will reduce distance of 1880 km to mere 900 km to Aizawl from Kolkata.
However the route of the project along Kaladan river and Paletwa port is troubled with Chin
conflict, Rohingya conflict and some militant groups.

The India–Myanmar–Thailand (IMT) Trilateral Highway (Friendship Highway)

It is a highway under construction that will connect Moreh, India with Mae Sot, Thailand via
Myanmar. The road is expected to boost trade and commerce in the ASEAN–India Free Trade
Area, as well as with the rest of Southeast Asia. India has also proposed extending the
highway to Cambodia, Laos and Vietnam. The proposed approx 3,200 km (2,000 mi) route
from India to Vietnam is known as the East-West Economic Corridor (EWEC).

The 17th ASEAN- India Summit, 2020

The Summit saw Prime Minister Modi highlighting the Indo-Pacific region. That’s because a
cohesive, responsive and prosperous ASEAN is seen as vital to India's Indo-Pacific Vision and
to Security and Growth for All in the Region (SAGAR). India’s decision to opt out of RCEP,
even when all ASEAN member countries are signatories to that agreement, will mark a shift
in how India enhances bilateral engagements with ASEAN nations with greater strategic
intent.
The ASEAN India Strategic Partnership is an important part of India’s Act East Policy,
especially since India has chosen not to join the recently signed Regional Comprehensive
Economic Partnership (RCEP).
The PM Modi gave primacy to the Indo-Pacific region. That’s because a cohesive, responsive
and prosperous ASEAN is seen as vital to India’s Indo-Pacific Vision and to Security And
Growth for All in the Region (SAGAR).

On trade and investment, India emphasised the need for regional value chains (RVCs) – a
factor that influenced India’s withdrawal from RCEP which was finally launched on 15
November 2020. India now needs to push for a suitable review of the India ASEAN FTA and
to secure its vital interests in services using reciprocity appropriately. That may help a more
balanced trade regime and facilitate new cross investments in resilient supply chains. The
cohesive and responsive ASEAN that PM spoke about must also cover trade and investment
issues.

In pursuit of a free, open, inclusive and rules-based Indo-Pacific region India looked for an
alignment between the 2019 ASEAN Outlook on the Indo-Pacific and the Indo-Pacific Oceans
Initiative, which the PM announced at the same summit last year. The Indo-Pacific Oceans’
Initiative is based on sustainable development goal 14 (SDG 14) and proposes a safe, secure
and stable maritime domain. India also brought up the fight against terrorism.

India addressed the challenges in the South China Sea directly and asking for a rules-based
order in the region, upholding adherence to international law, especially the United Nations
Convention on the Law of the Sea (UNCLOS). Despite assertions by many that the South
China Sea must be governed by UNCLOS and the freedom of third parties to operate, it is
evident that the draft Code of Conduct (COC) which China is negotiating with ASEAN
excludes these vital elements and seeks ASEAN concurrence to make China the hegemon of
the South China Sea as it has physically become. As ASEAN hedged, it was Chinese PM Li
who pushed for an early conclusion of the COC in an effort to bring forward the 2021
timeline! ASEAN is uncomfortable with the direction that the COC is taking and has used the
COVID-19 pandemic as the reason to avoid discussion virtually.

With respect to the COVID-19 pandemic, PM Modi announced a contribution of $1 million to

the COVID-19 ASEAN Response Fund. Hopefully, this will form the basis of larger exports of
related medicines and medical equipment from India to ASEAN countries.

To support physical and digital connectivity the PM reiterated the offer of a $1 billion line of
credit (LOC) which has not been utilised for several years. There does not appear to be a
cogent policy pursued for this by Indian companies nor do ASEAN members see this as more
attractive than what is offered by the Belt and Road Initiative (BRI) and the Asian
Infrastructure Investment Bank (AIIB).

However, the demands for connectivity are immense and it is best if India uses the
partnership with Japan and Australia to create a suitable project, like a strategic port, in
ASEAN. It must, however, take into consideration the relatively slow implementation of the
U.S.–Japan-–Australia Infrastructural Trilateral initiative in the region which reveals the
difficulties in undertaking coordinated projects in third countries.

While India stays the course and supports ASEAN Centrality, its patience wearing thin due to
lack of appropriate ASEAN responsibility for its own region. ASEAN is struggling to deal with
China as well as the growing interest in the Indo Pacific. The Quad is seen as a challenge to
ASEANs sentiments as it forces ASEAN to consider dealing with Chinese intrusions more
robustly.

Due to COVID-19, countries are redefining their sense of national security. The focus on
strategic autonomy with an emphasis on resilient supply chains could be a robust
movement. India has steadfastly grown its bilateral engagement with select ASEAN
members like Indonesia, Vietnam and most recently Philippines.Cooperation against
terrorism and in defence has been initiated more robustly.

As Asia looks for multipolarity, developing relations with individual ASEAN members with
matching security concerns is bound to acquire importance for India.
 RCEP

RCEP was originally being negotiated between 16 countries — ASEAN members and
countries with which they have free trade agreements (FTAs), namely Australia, China,
Korea, Japan, New Zealand and India.
The purpose of RCEP was to make it easier for products and services of each of these
countries to be available across this region. Negotiations to chart out this deal had been on
since 2013, and India was expected to be a signatory until its decision last November.
Why did India walk out?
India decided to exit discussions over “significant outstanding issues”. According to a
government official, India had been “consistently” raising “fundamental issues” and
concerns throughout the negotiations and was prompted to take this stand as they had not
been resolved by the deadline to commit to signing the deal. Its decision was to safeguard
the interests of industries like agriculture and dairy and to give an advantage to the
country’s services sector. According to officials, the current structure of RCEP still does not
address these issues and concerns.
China factor
Escalating tensions with China are a major reason for India’s decision. While China’s
participation in the deal had already been proving difficult for India due to various economic
threats, the clash at Galwan Valley has soured relations between the two countries. The
various measures India has taken to reduce its exposure to China would have sat
uncomfortably with its commitments under RCEP.

Major issues that were unresolved during RCEP negotiations were related to the exposure
that India would have to China. This included India’s fears that there were “inadequate”
protections against surges in imports. It felt there could also be a possible circumvention of
rules of origin— the criteria used to determine the national source of a product — in the
absence of which some countries could dump their products by routing them through other
countries that enjoyed lower tariffs.
India was unable to ensure countermeasures like an auto-trigger mechanism to raise tariffs
on products when their imports crossed a certain threshold. It also wanted RCEP to exclude
most-favoured nation (MFN) obligations from the investment chapter, as it did not want to
hand out, especially to countries with which it has border disputes, the benefits it was giving
to strategic allies or for geopolitical reasons. India felt the agreement would force it to
extend benefits given to other countries for sensitive sectors like defence to all RCEP
members.
RCEP also lacked clear assurance over market access issues in countries such as China and
non-tariff barriers on Indian companies.

Cost to India
There are concerns that India’s decision would impact its bilateral trade ties with RCEP
member nations, as they may be more inclined to focus on bolstering economic ties within
the bloc. The move could potentially leave India with less scope to tap the large market
that RCEP presents —the size of the deal is mammoth, as the countries involved account for
over 2 billion of the world’s population.
Given attempts by countries like Japan to get India back into the deal, there are also worries
that India’s decision could impact the Australia-India-Japan network in the Indo-Pacific. It
could potentially put a spanner in the works on informal talks to promote a Supply Chain
Resilience Initiative among the three.
However, India’s stance on the deal also comes as a result of learnings from unfavourable
trade balances that it has with several RCEP members, with some of which it even has FTAs.

India has trade deficits with 11 of the 15 RCEP countries, and some experts feel that India
has been unable to leverage its existing bilateral free trade agreements with several RCEP
members to increase exports.

Way forward :
India, as an original negotiating participant of RCEP, has the option of joining the
agreement without having to wait 18 months as stipulated for new members in the terms
of the pact. RCEP signatory states said they plan to commence negotiations with India once
it submits a request of its intention to join the pact “in writing”, and it may participate in
meetings as an observer prior to its accession.

However, the possible alternative that India may be exploring is reviews of its existing
bilateral FTAs with some of these RCEP members as well as newer agreements with other
markets with potential for Indian exports. Over 20 negotiations are underway.

India currently has agreements with members like the ASEAN bloc, South Korea and Japan
and is negotiating agreements with members like Australia and New Zealand. Two reviews
of the India-Singapore CECA have been completed; the India-Bhutan Agreement on Trade
Commerce and Transit was renewed in 2016; and the India-Nepal Treaty of Trade was
extended in 2016. Eight rounds of negotiations have been completed for the review of the
India-Korea CEPA, which began in 2016. India has taken up the review of the India-Japan
CEPA and India-ASEAN FTA with its trading partners.
Look East Policy of India

Initiated in 1991, it marked strategic shift in India’s perspective of world. Under last
government, it was changed from Look East to Act East.

Recently, at the 2018 edition of the Shangri La Dialogue, PM

Narendra Modi in his keynote address emphasized the centrality
of ASEAN to the newly emerging geopolitical construct of the
Indo-Pacific.
He also shared India’s vision of an inclusive, rules-based order taking shape in the region,
which, he concluded, is large enough to amicably accommodate the rise of all the
stakeholders.
1. India’s historical and cultural linkages with region.
2. Hinduism and Buddhism. Non assertive conversion.
3. India helped in decolonization of SEA. But couldn’t do much during Cold War.
4. Several connectivity projects like Kaladan, Friendship Highway etc.
5. Large Indian diaspora in the region.
6. Culture, Commerce, Connectivity : PM Modi. Allocation of $1bn for physical and
digital connectivity.

From Look East to Act East

China’s growing assertiveness in the region undercuts India’s historical tradition of economic
and political non-alignment.
Until the end of the Cold War Indian economic policy was driven by protectionism . India’s
position of economic isolation began to be dismantled following the end of the Cold War,
especially via the 1991 liberalization reforms introduced by then-PM Narsimha Rao and his
Finance Minister Manmohan Singh.
A substantial part of these liberalization programs aimed to integrate India into the
economic markets of Southeast Asia via the ‘Look East Policy’ (LEP) announced by Rao in
1991. ‘Looking East’ towards the Association of Southeast Asian Nations (ASEAN), Rao
hoped, would allow India to replicate the “economic miracle” some ASEAN and East Asian
countries had performed in the decades prior. In the pursuit of an economic “miracle”, India
significantly reduced its trade barriers to deregulate its domestic import and export markets,
and ASEAN consequently emerged as one of India’s most important trading markets. Since
then, the politico-economic integration of India and ASEAN has been further
institutionalized: India became ASEAN’s dialogue partner in 1996, a summit level partner in
2002, and a free trade agreement (AIFTA) was signed in 2010 before the relation was
upgraded to a strategic partnership in 2012. India is now also a member of regional forums
such as the East Asia Summit (EAS) and the ASEAN Regional Forum, reflecting the deepening
political ties between India and ASEAN and India’s growing significance in the regional
economic architecture.

In line with a nationalist discourse, PM Narendra Modi ambitiously announced in 2014 that
India would start to not only ‘look’ East, but also to ‘act’ East. Based on the three C’s
(Culture, Commerce, and Connectivity), India’s ‘Act East Policy’ (AEP) aims to deepen India’s
given connectivity with Southeast Asia and expand India’s economic and political integration
into East Asia and the Pacific as a whole via a set of bilateral and multilateral economic and
political arrangements. Crucially, the AEP also incorporates a variety of security-related
arrangements that deepen India’s security policy cooperation with regional partners and
interlinks the geostrategies of India with that of other regional actors by ‘coupling’ the
geographical sphere of the Indian Ocean with that of the Pacific.
AEP seeks to address the LEP’s shortcomings and diverges from the LEP in its regional scope
and its security-related initiatives vis-à-vis China. As such, the AEP can be conceptualized as
a reconfiguration of India’s geostrategic posture and aims to establish a counterweight to
China’s increasing assertiveness in the South China Sea and the Asia-Pacific as a whole. The
necessity to counterbalance China in the Indian and Pacific Ocean is particularly apparent in
consideration of the recent border clashes and Beijing’s sustained territorial claims over
Arunachal Pradesh. In practical terms, the AEP positions New Delhi in political opposition to
China and marks the convergence between Indian security interests and those formulated in
the American-Japanese discourse of the Free and Open Indo-Pacific (FOIP), thus potentially
leading to a further strategic convergence between India and other regional security actors.

The LEP and its Economic Impact

The increased market integration of Indian and Southeast Asian economies has played a key
role in India’s economic rise: in 1991, the total trade volume between ASEAN and India
accounted for $2 billion - by 2017/2018, the trade volume had grown to $72 billion.
Cooperation with ASEAN can be discerned as particularly desirable given India’s
geographical proximity with ASEAN, the emergence of ASEAN as a demographically-
economically expanding and increasingly prosperous consumer market, and the partially
comparable stages of economic development that facilitate the processing of integration on
equal politico-economic terms. India furthermore shares religious and cultural affiliations
with many ASEAN States and possesses significant links to large diaspora communities in
countries such as Indonesia and Malaysia, which can aid in facilitating further connectivity.

Although the LEP has contributed to India’s economic development, it has also exhibited
limitations in the extent to which it enables integration. Firstly, the distributional impact of
economic liberalization reforms within India has been highly unequitable. India’s north
east has remained excluded from the economic benefits of this process.
Secondly, the LEP has been successful in enhancing the trade connectivity between ASEAN
and India in terms of imports from ASEAN and, to a lesser extent, improving Indian exports
to ASEAN. Over time, India has grown more dependent on ASEAN markets than vice versa,
which is epitomized by the differing import/export share rates. As a result, India’s trade
balance with ASEAN has developed negatively. Increasing trade deficit marks a worrying
trend for India .

Equally worrying is India’s economic performance in the region relative to its geopolitical
competitor in Beijing. Whilst China’s investment in the region has multiplied , which also
correlates to China’s surging investment in the context of the Belt-and-Road Initiative (BRI),
India’s has either stagnated or decreased. What is more is that China’s trade footprint in the
region is likely to amplify in the years and decades to come due to the enhanced connectivity
of the BRI, which India has remained opposed to and thus excluded from. To be sure, if
successful, the BRI is likely to produce trade volumes that will significantly exceed India’s
already wavering extent of regional integration and trade.
Factors limiting India’s connectivity:

 Firstly, India has maintained fairly high tariff levels, which has culminated in the
sustenance of trade barriers that hinder further integration and epitomizes the
influence of prior, protection-based policies.
 The lack of physical trade and network infrastructure .
 The connectivity of India’s NER is also detrimentally impacted by domestic political
volatility as the NER has been historically plagued by separatist movements.
 The organised crimes in the region have contributed to a volatile political and
financial environment that undermines safe returns on investments and therefore
constrains the NER’s development.

The LEP was originally designed as a trade policy that furthered India’s integration into
the global and regional economy, and whilst the positive economic impact of the LEP
has been undeniable, it appears to have reached its limits in terms of the extent of
integration it can facilitate.
 Moreover, integration has been predominantly of economical nature, and not of political
nature, and the efficacy of the LEP in enhancing connectivity is limited by a series of
economic, infrastructural, and partially security-related factors, which the Act East Policy
seeks to address.

Act East
The AEP was first announced by Indian PM Modi at a regional summit in Myanmar in 2014,
where he suggested that "A new era of economic development, industrialisation and trade
has begun in India. Externally, India's 'Look East Policy' has become 'Act East Policy’”. Since
then, PM Modi has reiterated India’s intent to ‘act East’ on numerous occasions and has
described ASEAN as the “anchor” of the AEP. Importantly, the AEP is, comparable to the
LEP, not a policy that has been put into legislation, but an overarching strategy that marks
a transformation in how India addresses the shortcomings of the LEP and the geopolitical
challenges of the 21st century, especially in regards to China.
To address the inequitable domestic distributional implications and trade limitations, the
AEP emphasizes the need to link the NER with Southeast Asia as the poor infrastructural
connectivity is a major impediment in how well India connects to its eastern partners. The
India-Myanmar-Thailand Trilateral Highway seeks to address this issue: the transport
network, agreed on in 2009, will connect the Indian town of Moreh in Manipur to Mandalay
in Myanmar to Western Thailand. Within Thailand, rail networks connect the transport
chains to the East to Bangkok and to the South to Malaysia and Singapore, making Thailand
subsequently operate as a distribution point for further trade networks that connect India to
Southeast Asian markets, thereby reducing India’s reliance on maritime traffic and choke
points such as the Malacca Strait and the Lombok Strait. In the context of enhanced
connectivity, there have also been talks of extending the Trilateral Highway to the bordering
countries of Laos, Cambodia, and Vietnam, and the strategic significance of mainland
Southeast Asia is further embodied by the growing Indian investment in these countries.
In spatial-economic terms, a key difference between the LEP and the AEP is its geographical
scope; Whereas the LEP was focused almost exclusively on Southeast Asia, the AEP extends
this perspective to the economies of East Asia and the Pacific, and Japan and South Korea in
particular have been key for India’s growing regional ambitions.

Japan and India have institutionalized 2+2 Ministerial Dialogues, and a host of bilateral
arrangements regulate New Delhi’s and Tokyo’s coordination in terms of security, defence,
energy, counterterrorism, cyber strategy, and maritime cooperation. India and Japan also
signed a free trade agreement in 2011, despite which the trade volume between both
countries has slightly decreased in volume, yet Japanese FDI into India has almost tripled
between 2014 and 2017, which mirrors India’s general economic trajectory of growing trade
imbalances. Japan has also been important for the AEP and India’s ambitions insofar as it
has openly committed itself to investing into infrastructure projects in the NER.
Relations between Japan and South Korea have undergone a similar trajectory, aligning with
Seoul’s Southern Policy, which seeks to enhance South Korea’s regional economic ties. The
foreign ministers of both countries have been meeting regularly since 1996, and a free trade
agreement was signed in 2009, and although this agreement has not significantly boosted
trade, South Korean FDI into India has steadily increased. Again, the growing trade
imbalances are hereby an issue that Indian policy-makers will need to address in the coming
years.

Australia marks another emerging economic partner for India as India has grown to be
Australia’s fifth-largest export market, and New Delhi derives a significant share of its
enriched uranium from Australia, making cooperation with Canberra key for energy
provisions. Although the connectivity of the Australian and Indian markets has improved and
is likely to further deepen in the future, economic relations are still somewhat novel and
subsequently do not possess the scope and size of other economies ties. Increased Indian
engagement with Australia could be incentivized by facilitating economic exchange as well
as improving the connection between India and the South Asian diaspora communities in
Australia. Whilst the Australian-Indian economic relation is a comparatively new one, it has
emerged as a vital one for both countries.

Ultimately, the expanding geographical scope of the AEP has reformulated India’s emphasis
towards deepening the trade cooperation with traditional and non-traditional partners in
East Asia, Southeast Asia, and the Pacific. Whilst this has stimulated New Delhi’s regional
trade relations, the extent of this trade remains limited as of now. Similarly, to India’s
engagement in Southeast Asia, relations are characterized by the penetration of Indian
markets through FDI and, as with ASEAN, this is likely to exacerbate India’s trade deficit in
the future.

Strategic dimension
The AEP has also expanded the operational scope of the LEP beyond one that is merely
focused on economics to one that integrates matters of security in the Indo-Pacific region.
This links the AEP as a geostrategy to other regional geostrategies, resulting in a
convergence of security aims and a subsequently emerging security cooperation. A
particularly pertinent framework is that of the Free and Open Indo-Pacific (FOIP), pursued by
Tokyo and Washington, and although most of India’s security collaborations are in their
infancy, they mark significant reconfigurations in the regional security architecture.

Whilst the LEP was effectively an economic strategy, the AEP expands on this by adding a
geostrategic defence component: in 2016, PM Modi argued for the enhancement of the
security cooperation between India and ASEAN given the shared security threats of terrorism
and radicalization, with the cooperation between ASEAN and India thus far mainly taking the
form of bilateral security arrangements with ASEAN member States rather than ASEAN as
such. This can be understood as a result of the partially differing security interests and
strategies within ASEAN, and Indian security cooperation has been particularly expressive
with Vietnam, Indonesia, and Malaysia.

India entered a strategic partnership with Hanoi in 2007, and Vietnam has become a main
importer of Indian arms owing to a set of bilateral agreements and a $500 million line of
credit that was extended to Vietnam for the purchase of defence equipment. In 2015, the
two countries also announced the ‘Joint Vision Statement 2015-2020’, which initiated joint
military exercises, thus intensifying the security cooperation between India and Vietnam.

Similar bilateral agreements have been struck between New Delhi and the respective
administrations in Jakarta and Kuala Lumpur. Indonesia and India have conducted joint
naval controls since 2002, and a 2018 announcement of a strategic partnership extended
this cooperation to joint military exercises, the sharing of best practices, and the enhanced
coordination of military research. Similarly, a deepened 2015 integration between India and
Malaysia was to focus on engaging in joint military exercises, cyber and naval security
efforts were to be coordinated, and there has been an increased exchange between top
foreign policy officials.

The geopolitical dimensions of these security arrangements are key for Indian foreign policy:
Indonesia and Malaysia are situated adjacent to the Lombok Strait and the Malacca Strait,
and ensuring access to these waterways is of key significance for India’s economic
endeavours in the region and for the general tradability on international waters. The
Malacca Strait in particular is also vital for China, with 80% of Beijing’s annual energy supply
passing through the strait. Control over these maritime choke points thus provides the
controlling actors with leverage over countries that rely on the free tradability of waterways,
indicating the geostrategic relevance of the region and the geostrategic dimension of
regional security cooperation. Likewise, Vietnam has made territorial claims in the South
China Sea, which is fully claimed by China and henceforth pitches Hanoi against China’s
expansionist territorial ambitions in the region. Beijing is indeed the common denominator in
these countries’ concerns as Chinese assertiveness threatens the legal status quo in the
region, especially in regards to international trade, resulting in the strategic interests of
regional players converging in their suspicion regarding China.

The increased integration of security cooperation and multilateralization of security

arrangements is embodied by the Quadrilateral Security Dialogue (Quad). The Quad
subsequently embodies the geostrategic and geo-economic framework of the FOIP, which
can be interpreted as a geopolitical alternative to China’s ambitious BRI.

Participation in the Quad signifies a significant turn in foreign policy conduct for India that is
indicative of an active reformulation of India’s regional security posture.
Conclusion

The AEP has significantly shifted India’s geostrategic posture in the Indo-Pacific and has
reformulated India’s approach to one that is more strategically assertive. In an often realist-
controversial security environment, the AEP can thus be conceptualized as a
counterbalancing effort against Chinese influence in the Asia-Pacific .

All things considered, the AEP marks an ambitious reformulation of India’s security policy
abroad, and, if successful, can enhance India’s economic and political role in the regional
security architecture. The path there is uncertain, and may intensify the historical
geopolitical rivalry between China and India. However, one thing is certain; China’s strategic
and aggressive opportunism may result in the new reality that India, formally and openly
entrenches itself in the opposite camp, thereby tilting the balance of power further to
Beijing's disadvantage.