Compete as you cooperate

India is on course for a closer engagement with the Asean countries

Mukul G Asher

The recently concluded annual round of meetings in Cebu (Philippines) involving India, Asean (Association of South East Asian Nations), East Asian countries (China, Japan, and Korea), Australia and New Zealand provides a convenient occasion to reflect on the progress in India's engagement with the region.

India's current trade with the countries that attended this meeting is around $125 billion, and growing rapidly. The presence of Indian businesses and diaspora in these countries is also increasing. This augurs well for deepening of India's linkages with them.

There were three separate but overlapping set of meetings in Cebu, with 10-member Asean involved in all the meetings. The Asean realises that the major Asian and non-Asian powers are content to have the Asean take the lead in organisational matters. The Asean, however, must deepen integration and unilateral domestic reforms in each country if it is to remain economically relevant.

Its decision to gradually implement the Asean charter, which will make it a more formal, rule-based institution, is a step in the right direction. But this change will not be easy. The lack of interest on the part of the economically more successful Asean countries in assisting the others manage globalisation has inhibited economic integration within the Asean.

The ability and willingness of many of the Asean members to manage globalisation will be tested, as the macroeconomic environment becomes less benign in 2007. So will be their willingness to actually carry out nice-sounding resolutions on the rights of migrant workers, and on terrorism.

The second set of meetings were between the Asean and China, Japan, and Korea (Asean plus three), and Asean plus one (India). The Asean members now recognise that greater engagement with India would help hedge their geo-economic and strategic risks.

The Malaysian Prime Minister's remarks about a possible India-Malaysia joint production of movies and other entertainment programs indicate that there is a re-think by normally hostile Malaysia about engaging India in a more constructive manner.

One hopes that the progress achieved in Cebu on India-Asean FTA will not be held hostage to palm oil (India is a major market for Indonesia and Malaysia), pepper, and tea (of interest to Vietnam), particularly as India has made concessions to the Asean on manufactured goods.

India has legitimate interests in protecting its large number of small farmers. It should, however, speed up reforms of the agricultural sector with the aim of competing with the Asean.

It should seek requisite investments and technical expertise to achieve this aim. Indian businesses in manufacturing and services will not be able to reap full benefits of the Asean market (with or without the FTA) unless agricultural reforms are undertaken urgently.

India's Comprehensive Economic Cooperation Agreement (CECA) with Singapore also involves investment, services, and manpower flows. We must become more pro-active in monitoring progress in these areas to ensure that CECA benefits are more evenly shared.

India must also negotiate bilateral agreements involving broader economic cooperation. India's demographic complementarities with Japan, Korea, and Australia provide fruitful opportunities for mutual gains from outsourcing, offshoring, and temporary movement of persons.  

The third set was the East Asian Summit involving the Asean plus six countries. The recognition that the terms 'Southeast Asia', 'South Asia', and 'East Asia' are primarily colonial-Cold War terms, and therefore there is nothing odd about including India, Australia and New Zealand is long overdue and welcome.

Japan's leadership in imparting a broader meaning to 'East Asia' has been constructive and will help Asia play a larger role in global affairs.

Declarations on energy security, including reducing the dependence on fossil fuels, is a welcome step, particularly as it has been backed by Japan's financial and technical commitment. India should use this to further integrate with the summit partners, promote efficient energy use, and diversify its energy sources. 

The Cebu meetings have on balance been positive for our diplomacy. But as India learns to simultaneously cooperate and compete with others, it should continue to pursue unilateral liberalisation, deregulation, and reforms which lead to real resource efficiencies, and empower its population though increased competencies.

The writer is professor of public policy, National University of Singapore.