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India-Asean Economic Relations

By Bertil Lintner

India-Asean Economic Relations: Meeting the Challenges of Globalization, by Nagesh Kumar, Rahul Sen and Mukul Asher (editors). Institute of Southeast Asian Studies, Singapore, and Research and Information System for Developing Countries, New Delhi. 313 pages. $25.

For years India has been stifled by outdated laws, trade restrictions and a burgeoning bureaucracy. But in 1991, India adopted a package of reforms "to deepen the integration with the world economy," as the authors point out in the introduction to this collection of papers. At about the same time, India launched its "Look East Policy" with the aim of increasing trade and economic cooperation, primarily with the dynamic economies of the Association of Southeast Asian Nations.

To discuss these matters the Institute of Southeast Asian Studies organized the Asean-India Forum in Singapore in February 2004. The papers presented at this conference have been revised, updated, and published together to produce a comprehensive overview of India-Asean trade relations.

Two papers look at India's and Asean's respective macroeconomic performance and other sections deal with intraregional trade and the approach to the World Trade Organization, foreign direct investment in Asean and India, subregional cooperation and, finally, a very optimistic scenario for longer-term partnership between India and Asean. The editors are leading experts on these issues: Nagesh Kumar of Research and Development Systems for Developing Countries, New Delhi; Rahul Sen of Singapore's ISEAS; and Mukul Asher, a professor at the National University of Singapore.

The editors state that, "the emerging partnership between India and Asean can be taken forward for mutual benefit, so that the two sides can leverage on each other's strength to better negotiate the forces of globalization." It is undeniable that trade between India and the now 10 members of Asean has grown rapidly over the past decade.

Between 1991-92 and 2003-04, India's exports to Asean increased more than five times to $5.7 billion from $1 billion while its imports from Asean increased nearly seven times to $7 billion from $1.3 billion during the same period. The aim, the authors say, is to "increase merchandise trade between India and Asean to $30 billion by 2007."

These figures are no doubt impressive and indicate a trend, but they are dwarfed by Asean's much more remarkable trade relations with China. In 2005 the two-way trade between China and Asean reached $120 billion, and the target is to increase this to $200 billion by 2010. In July 2005 China and Asean also agreed to "gradually cut and even remove duties on more than 7,445 kinds of products," according to Japan's Kyodo news agency.

Even Australia is currently a more important trading partner to Asean than India. In 2005, Australia's merchandise trade with the bloc totaled $33.3 billion, with exports to Asean around $12.1 billion and imports over $21.2 billion.

Compared with China, India is clearly at a serious disadvantage in trade relations with Asean. For decades, trade in commerce in most Asean countries has been in the hands of ethnic Chinese who, even during the darkest periods of strict communism in China, maintained links with relatives and associates in their ancestral towns and villages. When China liberalized its economy following Deng Xiaoping's reforms in the 1980s, these "bamboo networks" fuelled China's economy and vice versa, as Murray Weidenbaum and Samuel Hughes described in their 1996 study of overseas Chinese tycoons. While there are fairly well-established ethnic Indian business communities in Singapore, Malaysia and even in Thailand, they are nowhere as big, rich and powerful as the ethnic Chinese equivalents in those countries.

Looking at the future, Mr. Kumar refers to Indian Prime Minister Manmohan Singh's making a case for "an Asian Economic Community combining Japan, Asean countries, China, India and South Korea as an 'arc of advantage' across which there will be large-scale movement of people, capital, ideas and creativity." A grand plan, but wishful thinking, others would argue. India's economic miracle is real but it is also highly specialized in IT services, outsourcing and similar areas. Unlike China, India is not a major exporter of consumer goods, and the down-to-earth business networks are just not there.

That said, India is likely to become a major player in several Asean countries, but not in terms of the economic integration that the authors of this book envisage. Baladas Ghoshal, an Indian professor who has studied the same issues, argues that India's influence in Southeast Asia is more likely to be not in terms of trade but in the fields of culture and decision-making. Buddhism and even Islam were introduced to Southeast Asia from India, and most Southeast Asian languages are riddled with loanwords from Sanskrit and Pali. This could lead to increased Southeast Asian tourism to India and perhaps other cultural exchanges as well.

More important, however, is the fact that Indians form an extremely successful immigrant community in the United States. Most big American corporations, whether in computer technology, banking or general trade, are likely to have several ethnic Indian professionals in managerial positions, and many of them are returning to Asia as executives for American companies. Although their loyalties lie mainly with their new homeland, this trend still means that India, or Indians, will be a factor to be reckoned with in Southeast Asia. And for supporters of more democratic forms of governments and more modern business practices, that is not bad news.

Despite its shortcomings, this is an important book that looks at a completely new phenomenon in Asia. China is no longer the only economic superpower in the region. Watch India, and the Indians: Their influence may be needed to counterbalance economic, and perhaps also political, domination by China.

This review first appeared in the Far Eastern Economic Review, November, 2006

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