The Hindu Business Line : Regional integration and Vajpayee years

After trying Curzonian "Great Games" in its neighbourhood, instead of focusing on building strong regional and economic ties cooperation in South and South-East Asia, New Delhi signed a framework agreement to establish SAFTA that was an achievement it can be proud of. Its policy of liberalisation and free trade should also serve the country well in the long-term, says G. Parthasarathy.

AS THE nation prepares to go to the polls, it would be useful to analyse whether the last few years have seen any real progress in relations with countries in our immediate neighbourhood, ranging from the Persian Gulf Region to our west, to the Straits of Malacca to our east. Any attempt by us to focus attention solely on our South Asian neighbours would be myopic, as Indian security and strategic interests extend well beyond South Asia.

We should never forget our crucial economic stakes in the Persian Gulf from where we get over 70 per cent of our oil supplies and over 3.5 million Indians who remit back over $7 billion annually reside. Similarly the countries of South East Asia or of the Association of South East Asian Nations are set to re-emerge as one of the fastest growing regions of the world, with rapidly expanding markets for Indian goods and services. The events following the terrorist attacks on New York and Washington have also brought about profound changes in our entire neighbourhood. The defeat of the Taliban has led to the scattering of terrorist elements all across the Indian Ocean Region — from the Philippines and Indonesia to our east, to Saudi Arabia and Iraq to our west. The entire region is now the focus of continuing American and NATO military involvement.

New Delhi has responded to the challenges posed by the dispersal of global terrorism imaginatively. Friendly ties have been established with the Karzai Government in Afghanistan. An effective programme of economic assistance has been initiated. A strategic partnership has been developed with Iran to ensure that landlocked Afghanistan is freed from Pakistani blackmail, by getting access to the sea through Iran. While there has been much hype about a "breakthrough" in our relations with Pakistan, following the Vajpayee-Musharraf meeting in Islamabad in January, time alone will tell whether Pakistan will irrevocably end use of terrorism as an instrument of state policy. The last five years have been a rollercoaster ride on relations with Pakistan, with overblown rhetoric and unrealistic expectations often getting the better of mature judgment. We also have to acknowledge that precious little was done in the last five years, to give meaningful and substantive content to our relations with Arab Gulf countries, where millions of Indians reside.

South Block wasted the first three years of the Vajpayee Government by pretending that it could play Curzonian "Great Games" in its neighbourhood, instead of focusing on building strong ties of regional and bilateral economic cooperation in South and South East Asia. With Mr Jaswant Singh at the helm of the Ministry of External Affairs, there was little recognition of the fact that economic integration is the most crucial element in the conduct of foreign policy in today's world. Many of our smaller neighbours felt that we were being overbearing and supercilious in our conduct towards them. It was only during the Kathmandu SAARC (South Asian Association of Regional Cooperation) Summit that New Delhi belatedly got its neighbours to endorse a time-bound plan to establish a South Asian Free Trade Area (SAFTA).

We are now moving towards establishing a South Asian Economic Union. The signing of a framework agreement for establishing SAFTA is an achievement that New Delhi can be proud of. But when one goes through the fineprint of the SAFTA, there is cause for concern. We have provided an unprecedented, open-ended commitment to compensate Bangladesh for revenue losses in import duties. New Delhi evidently failed to realise, even during the Kathmandu Summit, that such an open-ended provision is unprecedented and, in the long-term, unworkable.

New Delhi's mistake in agreeing to the Bangladesh demand for compensation soon became evident when Asean countries such as Myanmar and Thailand flatly turned down a Bangladesh proposal for such compensation when negotiations were held recently in Thailand to conclude a free trade agreement between Bhutan, Nepal and the members of the BIMSTEC (Bangladesh, India, Myanmar, Thailand and Sri Lanka) grouping. Bangladesh may well find itself excluded from this free trade agreement if it persists with its demand.

The most notable achievement of the Vajpayee Government on regional cooperation is, however, the Framework Agreement on Comprehensive Economic Cooperation signed with ten members of Asean in Bali on October 8, 2003. This agreement opens the way for free flow of goods, services and investment between India and the dynamic economies of Asean. New Delhi would now have to move ahead purposefully in implementing this agreement. We would be in a good position to derive maximum benefit from it by meaningful economic reforms within India, like the removal of barriers on inter-state commerce and the early introduction of a comprehensive value added tax.

If the free trade and comprehensive cooperation agreements that we have signed in the past few months are properly implemented, we could look forward to a giant free trade area extending from Peshawar to our west, to the Philippines to our east, within the next 12 years. One sincerely hopes that the vision of an economically integrated and growingly prosperous Asia will persuade the rulers of Pakistan that invocations of Jehad against India are not the best way to progress and prosperity. What is, however, most heartening is that our initial apprehensions about the opening of our market to China have been proved to be baseless. With our bilateral trade with China reaching around $7.6 billion last year, we are one of the few countries that actually have a surplus balance of trade with China. And Chinese manufactures have not unduly disrupted domestic industry in India.

The last five years have thus been marked by some notable developments in our economic relations with countries in our neighbourhood. But we should remember that the improvements in our relations with our Asean neighbours really commenced with the enunciation of a distinct "Look East" Policy by the Narasimha Rao Government.

It is, however, to the credit of the Vajpayee Government that it overruled the objections of organisations such as the Swadeshi Jagran Manch and of protectionist lobbies in Indian trade and industry and adopted a policy of trade liberalisation and free trade that will serve us well in the long-term.

While there has been some debate in India on whether George Bush or John Kerry would be the better bet for promoting Indo-American relations, there has been virtually no analysis of how the outside world views the coming elections in India. While outside powers have been predictably silent on their hopes and expectations, one does get an inkling of how others feel about the contenders for political power in India.

The pragmatic and non-ideological Russians appear to believe that Indo-Russian ties are strong enough to remain unaffected by changes in government.

It does, however, seem that the Americans, Israelis and the Musharraf dispensation in Pakistan would be more comfortable if a Vajpayee-led government is voted back to power. While the Chinese appear quite pleased with the determination of the Vajpayee Government to resolve the vexed border issue, they are wary about India's expanding ties with the US and its growing readiness to assert its place in the sun in its neighbourhood.

While the Sri Lankans were concerned about the presence of pro-LTTE parties and individuals in the NDA Government, they appear to be taken aback by the Congress(I) aligning with those who have constantly eulogised Velupillai Prabhakaran.

But within the Arab world there is little love for the present dispensation and nostalgia for the days when India had few options to respond to their constant criticism at the OIC, on Jammu and Kashmir.

(The author is former High Commissioner to Pakistan.)

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