Diplomacy in East Asia should help expand India’s economic & strategic space

The Prime Minister’s visit during October 24-30 this year to Japan, Malaysia, and Vietnam, and related initiatives in the rest of Asia-Pacific represents a new phase which should expand India’s economic and strategic space.

During the visit, India and Japan concluded negotiations on a comprehensive economic partnership agreement, which is expected to deepen bilateral
economic and strategic partnership.

Planned regular ministerial level annual economic dialogue has the
potential to reduce information and perception gaps, and will facilitate
mutually beneficial measures to take advantage of demographic and other complementarities between the two countries.

Strategic understanding on maritime security, vital for both countries, can be advanced in cooperation with other Asia-Pacific countries such as Indonesia, Australia, Malaysia, and Singapore.

Japan has considerable expertise in generating and applying knowledge in many areas of crucial importance to India, including energy efficiency,
civilian nuclear technology, space, urban management, recycling of domestic and industrial waste, railways, and urban agriculture.

During the just concluded visit of President Obama to India, two initiatives which were announced were the official higher education summit between India and the US; and the 21st century knowledge initiative.

As generation, application, and diffusion of knowledge is vital for countries to achieve sustained high growth for a long period, and move from lower middle income to upper middle and higher income status, similar initiatives between India and Japan merits serious consideration.

India and Malaysia have completed negotiations on a comprehensive economic cooperation agreement (CECA) to transform bilateral engagement.

This agreement, unlike the Preferential Trade Agreement between India and the Association of Southeast Asian Nations (Asean), envisages a multifaceted partnership involving investments, services, higher education, and talent flows.

The CECA will be signed on January 31, 2011 and will come into force by July 1, 2011. Emphasis on developing a knowledge-based economy provides a common ground for both countries to be innovative in the partnership.

The current Malaysian prime minister’s One Malaysia concept, which aims to improve the socio-economic status of more than two million Malaysians of Indian origin, has set a conducive climate for the CECA. Malaysia has recognised that unless talents of all ethnic groups of the country are developed and utilised, it will be in the middle-income trap, and will not be able to restructure its economy.

It is therefore refining its affirmative action programmes to give much greater weightage to merit; and to more rigorously evaluate existing design and implementation of such programmes. This has important implications for similar programs in India.

As an export dependent economy, it also needs to seek large markets abroad to diversify its global risk, and retain a degree of policy autonomy. India’s international trade in goods and services is expected to be about $700 billion in 2010-2011; and is set to double in the next several years. Malaysia’s international trade was $336.5 billion in 2009. Exports of both countries are, however, heavily skewed toward intermediate inputs (62% for India, 56% for Malaysia). The CECA should aim to redress this imbalance.

At the East Asian Summit in Hanoi, The Prime Minister stressed the need for agreement on services and investments; and announced visa on arrival facilities for nationals of Cambodia, Vietnam, Philippines, and Laos. The benefits merchandise trade based PTA between India and 10-member Asean are heavily weighted in favour of Asean. So services and investment agreement will signal Asean’s willingness to substantively engage India and diversify global economic and strategic risks. The Prime Minister stressed connectivity, both physical and digital (India offered 100 IT scholarships to each of the Asean countries over the next five years):

cooperation in science and technology, including in space. Heads of space
agencies of India and Asean should meet regularly to monitor concrete progress. India is also engaging South Korea for deeper linkages, including in civilian nuclear technology and investments.

Korean society is, however, ageing more rapidly than Japan. So taking advantage of demographic complementarities should be an integral part of the agenda. This will be facilitated by closer  interaction in higher education and in science and technology.

Given the importance of connectivity, the proposed trade negotiations between India and Bangladesh should address this issue if more durable economic partnership between the two countries is to be built.

India’s ongoing negotiations with New Zealand on economic agreement should also emphasise connectivity, but with focus on movement of natural persons; and on cooperation in agriculture.
India must seek respect for its core
interests from New Zealand, particularly in South Asia, and on maritime security.

Deepening and strengthening of the Indian Diaspora in New Zealand will have mutual benefits. The invitation to the President of Indonesia to be the chief guest on India’s Republic Day on January 26, 2011 will further deepen India’s relationship with a very important country in its neighbourhood. Indonesia, a moderate and pluralistic country, has many complementarities with India.

Its democratic polity and decentralisation initiatives are similar to those of India. Regular high level meetings among economic, science and technology and education ministers, as well as closer cooperation on maritime security issues, particularly relating to Malacca Straits and the Indian Ocean, will benefit both sides. While Atlantic and Pacific Ocean rims have developed deeper linkages, the time has come to deepen linkages along the Indian Ocean rim.

The proposal to negotiate economic agreement with Indonesia, therefore, has the potential to advance Asian economic cooperation, while expanding economic and strategic space for both countries.

This is only a partial account of India’s very recent initiatives towards rest of Asia. As these initiatives move forward and are progressively refines, India should focus on how they can help to expand its economic and strategic space. India has been generous in the early stages of its Look East Policy, but the time has come for firmer approaches stressing balanced benefits, and respect for India’s core interests.

It is also essential to recognise that India’s increased integration globally,
including with Asia, is due to the perception that as knowledge intensity grows, so will India’s advantage. But this advance is not automatic.

Progressing towards a knowledge-based economy by laying the requisite institutional, physical and digital connectivity and better governance foundations is a national imperative.

The writer is a professor of public policy, National University of Singapore, and can be reached at sppasher@nus.edu.sg.