The Hindu Business Line : Asean ties: India must look to the East with greater vision

In pursuance of India's "Look East" policy, the dialogue has moved from a limited sectoral partnership (1992) to a full dialogue partnership (1995) and membership of the high-profile strategic forum ARF (Asean Regional Forum) in 1996, culminating in Indo-Asean summits since 2002.

At the second Indo-ASEAN summit in 2003, India acceded to the Treaty of Amity and Co-operation (TAC) in South-East Asia, signed a declaration to combat international terrorism, and agreed on comprehensive economic co-operation to step up their current trade turnover of $12 billion. A Free Trade Agreement (FTA) between India and Asean would come into being in 10 years, and India is committed to aligning its peak tariff to East Asian levels by 2005.

The highlights of the framework agreement lays down that negotiations on FTA in goods would begin in 2004 and conclude by 2005.Talks on FTA in services and investments would start in 2005 and conclude by 2007. Areas of economic co-operation would include trade facilitation measures, sectors of co-operation and trade and investment promotion measures. The framework agreement provides for exchange of tariff concessions on the "early harvest programme" (EHP). Concessions and differential treatment have been given to Cambodia, Laos, Myanmar and Vietnam, the lesser-developed members of Asean.

India's economic potential and geo-strategic importance in South-East Asia in the post-Cold War world is today recognised as an important aspect of international diplomacy. However, India needs to have a clearer `focus' and even a `vision' with regard to its ties with the Asean. There is much scope for further expanding and deepening its cooperative agenda, synergising the economies of India and Asean and exploring new avenues for diplomatic complementarities.

Indo-Asean cooperation has progressed substantially in many spheres — science and technology, IT and electronics, HRD, transport and infrastructure, space technology, tourism and trade and investment. These initiatives are, however, not adequately reflected in trade figures. India also signed a landmark FTA with Thailand and four other accords for enhancing co-operation in agriculture, tourism and science. This will provide a free-trade area in goods, to begin with, by 2010 and, in services and investment, from 2006.

The Indo-Asean two-way trade grew 30 per cent from $7.6 billion in 1999 to $10 billion in 2002. Asean's trade to India is still at a very low level, accounting for only 0.9 per cent of Asean's global trade in 2002, while India's trade to Asean countries still hovers around 7 per cent of its global trade. The volume of trade is still small, considering the vast potential for trade that exists among countries of over 1.5 billion people, and it is hoped the target of $30 billion will be reached by 2010. The list of goods for which duties are brought down to zero by 2006 include petrochemicals and polyesters, apart from marine foods, white goods, electrical machinery, precious stones, office equipment, printed circuits and key auto-components such as gear box and petrol engines. The pact with Thailand is to be followed by a similar agreement with Singapore and, ultimately, the entire Asean region.

The level of investment flows on both sides has a lot of untapped potential and can easily rise to $1 billion by 2007, with sustained efforts by both sides. The redeeming fact is that there are substantial investments by both India and Asean in each other's countries.

Although there have been significant changes in commodity composition of India's trade with Asean countries in recent years, the components of the trade basket could do with substantial revision, with an increasing emphasis on India moving up the value chain.

India should also intensify its marketing thrust to the Asean countries to correct the asymmetry in trade relations. The exporters should negotiate much harder, offer more competitive terms, adhere to delivery schedules, and provide effective after-sales service. A marketing culture, combined with a bit of hard sell, could help India make decisive inroads into the Asean markets.

Intensive efforts to promote business synergies on the two sides in areas such as infrastructure, IT, biotechnology, tourism got a boost with the India-Asean Business Summits. A trade pact with Asean is the best beginning since India has traditionally enjoyed many links — economic and strategic — with the region, although there is a lot of untapped potential. However, there are major differences in "tariff rates" between India and the big five of Asean. Indian Customs duties are, on an average, at least twice, and, in many cases thrice, as high as in Asean. Thus, tariff equalisation and rationalisation will not be easy for a free trade to appear in the near future. Moreover, changes to domestic tariff and commercial policy will be difficult because it may hurt the interests of domestic producers.

India should also try to strengthen strategic alliances with the guanxi (overseas Chinese networks) which control most of the distribution channels in Malaysia, Singapore and, to some extent, Thailand. It should also make available information on its capabilities in fields such as IT, and market these better in countries such as the Philippines and Brunei, as trade with these two Asean countries is virtually non-existent.

The terms of the Indo-Asean engagement needs to be taken much more seriously. The possibilities for functional cooperation are limitless, and enthusiasm should translate into tangible gains. India also needs to deepen its links with the Mekong Ganga Cooperative forum (MGC) — a new co-operative forum floated by India with five of its eastern neighbours, Myanmar, Thailand, Cambodia, Vietnam and Laos. Tourism, culture and education are given precedence and priority in the cooperative framework. Transport, communications and infrastructure will be prioritised in the next phase. The MGC also provides immense opportunities for India's private sector to create a niche in the region. Indo-Asean cooperation in tourism, culture and education can also be strengthened in Indonesia and Malaysia. It must be remembered that India's cultural footprints in South-East Asia have been left because of trade and religion.

Its relations with Asean assume significance also in the light of the various cultural similarities it shares with the region. Buddhism is the natural link to South-East Asia, particularly the Mekong basin. The cultural ties with South-East Asia also need mention. Asean can also source its manpower requirements — technical and managerial — from India, as it both competitive and culturally compatible. Indian professionals teaching English and computer skills can raise the standards of education and knowledge base. The Asean-India HRD programme needs to be further strengthened.

India has today got a new dimension to its Look-East vision, developing its north-eastern States by linking them to South-East Asia through road and rail links via Myanmar. It is part of a larger project to build Eurasian land and rail corridors that could connect Singapore to Istanbul and Europe via both India and China. The Trans-Continental Highway and railway could lead to the ultimate link up of China, Russia and Central Asia, bringing immense benefits to all the countries. China has already agreed in principle to build a highway connecting connecting Bangkok with Kunming in the thriving Yunan province of China, through Laos.

A road from Kunming to Ruihi on the Chinese border with Myanmar already exists. China is also developing the "Irrawady Corridor" beginning from Kunming to the Western Coast of Myanmar facing the Indian Ocean Rim. China's interior provinces such as Yunnan, Sichuan and Gizhou will no longer have to depend on far away ports on China's eastern sea-board and can have access to the warm waters of the Indian Ocean. Thailand also has plans to build another highway linking it with Vietnam through Laos. That will give Thailand access to the Danang port on the Vietnamese coastline. To the East, Thailand hopes to connect this road to Moulmein in Myanmar.

There is also a possibility of building a railway line between the Chinese cities of Kunming and Mytikyima on the Myanmar border, where both the roads — Ledo to Patakai Range and Ledo to South Myanmar — meet. The Asian Development Bank has given a loan to the Myanmar Government to construct the railway through northern Myanmar linking India with China. India thus wants to develop its North-East by using Myanmar as a bridge to economically leverage with China and the other Asean nations.

The essence of this triangular road and rail diplomacy among India, China, Myanmar and Thailand is also about ultimately linking the Indian Ocean to the South China Sea. In economic and strategic terms, India wants to develop the North-East by increasing its connectivity with the rest of the world through commercial linkages with Asean. By taking advantage of Myanmar's links with other Asean countries, India hopes to transform the North-East from a security burden into a land of economic opportunity.

The Mekong Basin also has the potential to emerge as a major granary as its vast lands are very fertile. India and Thailand can do much to tame the Mekong River, and enhance cultivation by spreading irrigation.

Asean also faces the problem of disparity in development, the new entrants — Laos, Vietnam and Cambodia — showing lower levels of performance compared to the other members and will take time to integrate fully into the Asean framework. India can offer its help by providing interest-free credit facilities for speedier development of these countries, and cashing in on the tremendous good-will that existed for it in the Cold-War days.

There is also immense scope for further enhancing joint-ventures in manufacturing, consultancy, leasing and trading outfits between India and Asean. Other measures to promote greater India-Asean interaction should include relaxation of visa restrictions by Asean countries much more to facilitate greater collaboration among businessmen and technical personnel, opening up of the financial and banking sector, reduction of non-tariff barriers, sustained improvement in the delivery system of the Indian bureaucracy, and continuing to give explicit economic orientation to foreign policy.

At the geo-political level, India's membership of the ARF can serve to effectively protect and project India's strategic interests in the region, as Pakistan is kept out of all Asean-level meetings.

While the membership F enables it to participate in regional security issues, its long-term strategic and economic interests would be undermined if China's rapidly expanding economic and strategic profile in its eastern neighbourhood is not taken into account. While India's trade with Asean is now around $10 billion annually, China's trade with the Asean economies is multi-layered at $42 billion.

The second phase of India's Look-East policy also coincides with its dalliance with the US, as opposed to a formal alliance. India today has more intensive security links with US' allies in the ARF — Australia, South Korea and Japan. India's improved ties with the US have also created the space for a more confident and constructive engagement with China in both strategic and economic terms. India's "Look East" policy should also be integrated into a larger regionalisation strategy, encompassing South Asia, the Indian Ocean Rim, the Bay of Bengal Rim, and the Asia-Pacific. As SAARC continues to remain moribund because of the ego clashes in the region,India's future lies in having a definite focus eastwards — particularly with Asean — and strengthening the infrastructural (in terms of roads through Myanmar), economic, cultural and commercial relations with these countries.

India's new found enthusiasm to forge a trade pact with Asean also stands in stark contrast to its attitude towards SAARC, and even towards bilateral relations with its neighbours in South Asia. That a free trade area in South Asia remains a non-starter is not entirely the fault of Pakistan — India too has been reluctant to make the larger concessions that will make a more effective South Asian grouping.

As India pursues the idea of a free trade zone with Asean, it is hoped that simultaneously other regional initiatives lying moribund will also be re-activated, so that the economy develops a multi-layered set of networks in the larger Asian and Indian Ocean regions.

(The author is on the faculty of the Centre For Indian Ocean Studies, Osmania University, Hyderabad.)

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