India’s ‘Act East’ policy rests on forging closer links with ASEAN

Given its seemingly-intractable problems with neighbours Pakistan and China, India has been reaching out to friendlier countries beyond the region, both to its West and the East. 

In the East, its key partners are Japan and the Association of South East Asian Nations (ASEAN), comprising Indonesia, Malaysia, Philippines, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam. 

While ties with Japan have a long history, those with ASEAN are relatively new, having begun only in 1992 with the opening up of the Indian economy. It’s been 25 years since India’s association with ASEAN began, but there are miles to go before the fruits are reaped in their fullness.

But India has set its sights on the goal. India’s growing contradictions with Pakistan and China will only drive it further towards the East to countries which are also increasingly in contradiction with an assertive China. 

It is in recognition of ASEAN’s importance to India now, and in the future, that the Indian Government is reportedly inviting the Heads of Government or State of all ASEAN countries to be Chief Guests at the Republic Day celebrations in New Delhi on 26 January 2018. 

In 1996, India became a full dialogue partner of ASEAN. Later it joined the ASEAN Regional Forum (ARF), East Asia Summit (EAS), ASEAN Defence Ministers Meeting Plus (ADMM Plus), the Expanded ASEAN Maritime Forum (EAMF), and several other ASEAN platforms. In the meantime, India was proactive in articulating its Look East Policy through the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC) and Mekong Ganga Cooperation (MGC) in the late 1990s. 

In combination with India, ASEAN would have a GDP of $ 3.8 trillion, become the third largest economy in the world, and a major platform for cooperation on a wide range of economic and strategic fields. 

India-ASEAN two-way trade presently amounts to $76 billion. At the July 2017 ‘Delhi Dialogue’ held to mark the 25th anniversary of India-ASEAN ties, speakers focused on the potential of the Small and Medium Size Enterprises (SMEs) for boosting economic cooperation. In ASEAN countries like Vietnam and the Philippines, SMEs play a major role in the economy as they do in India. 

India’s External Affairs Minister Sushma Swaraj emphasised the importance of the “3 Cs” — Connectivity, Commerce, and Culture, and the Thai Minister of Foreign Affairs, Virasakdi Futrakul, propounded the concept of “Panchadhara” to include five river systems from India and ASEAN countries, namely, the Ganga, Brahmaputra, Irrawaddy, Chao Phraya, and Mekong. 

Recent developments in the India-Myanmar-Thailand (IMT) Trilateral Highway and the Kaladan Multimodal Transit and Transport Projects came up for discussion. There had been hiccups in executing the IMT highway project in Myanmar, as the new Government in the country has been revisiting the agreements and MoUs signed by the previous Government. 

Prof. Prabir De, Coordinator, ASEAN-India Centre, Research and Information System for Developing Countries, has pointed out that while grand declarations are made, implementation has been tardy. The Indian Prime Minister has offered $ 1 billion to improve connectivity but the mechanism to spend such a fund is still to be created. 

Dr. J.B. Santarita, Dean of Asian Centre, University of the Philippines, wants India to play a bigger role in its engagement with region’s blue economy and suggests that India take the assistance of the Philippines in sea-bed mapping and mining. 

Vietnam has become most crucial for India in the latter’s bid to extend to South East Asia. It is to be noted that Vietnam has supported India’s claim to a permanent seat in an expanded United Nations Security Council (UNSC) in the face of Chinas opposition. 

To enhance connectivity with the East, India has been looking to use Bangladesh and Myanmar. But these two countries are not guaranteed to be safe for India all the time. Bangladesh could have a hostile regime at any time, and Myanmar could be politically troubled with a young democracy to nurture and a Muslim and tribal problem to settle.

It is in this context that India’s bid to acquire the unused and loss making international airport at Mattala in the far south of Sri Lanka, assumes significance. Mattala airport could be a staging post on the India-ASEAN route. 

As of now, India is the only comprehensive (and credible) bidder for the airport. India’s chances of swinging the deal are high, heightened by the fact that Sri Lanka needs to balance China with India for strategic reasons. China had been given the nearby port at Hambantota, on a 99-year lease. 

The existing initiatives to connect India with Southeast Asia include the India-Myanmar Friendship Road link part of the greater India–Myanmar–Thailand Trilateral Highway, the Kaladan Multimodal Transit Transport Project and the Mekong-India Corridor. 

Since 2012, India has been a Strategic Partner of ASEAN. ASEAN and India are working towards a Comprehensive Free Trade Area through the Regional Comprehensive Economic Partnership (RCEP). But talks on it need to be speeded up.

Due to the ASEAN-India Free Trade Agreement (AIFTA), total trade between ASEAN and India has significantly increased. But the high potential still remains largely unlocked. IT services, health, tourism, education and financial services need institutional support. 

The Philippines has witnessed a steep rise in services trade, particularly in the IT-BPO services. Several Indian companies have opened offices at Manila in the last few years. The services trade between India and ASEAN may rise sharply if ASEAN and India sign the Services Trade Agreement and implement Mutual Recognition Agreement (MRA) in several service sectors between the two partners. 

Higher investment in infrastructure covering the logistics and telecommunications sectors is also needed. It is recommended that ASEAN-India Services and Investment Agreement may be signed and the protocols may be ratified by the member countries.

ASEAN and India have to provide greater openness to FDIs and movements of natural persons, especially through the ASEAN-India Trade in Services and Investment Agreement. It is recommended that India should support the efficient mobility of professionals between ASEAN and India under the Mode 4 of GATS. 

The proposed Regional Comprehensive Economic Partnership (RCEP) Agreement with ASEAN Plus 6 countries, could be started by agreeing on less sensitive issues such as the simplification and uniformity of Rules of Origin (ROOs. There is a crying need for the simplification of trade rules and regulations.

As of now, India is not directly engaging with ASEAN through a Regional Value Chain (RVC). But RCEP will generate a stronger value chain between ASEAN and India. Some of the areas where the value chain between ASEAN and India may be developed are: mining and quarrying, textile and apparel, leather and footwear, basic chemicals, pharmaceuticals, metals, auto components, and jewellery. Strict Rules of Origin (ROO) have been negatively affecting trade flow and prohibiting regional value chains to grow between ASEAN and India.

The ASEAN India Transit Transport Agreement (AITTA) has to be negotiated and finalised before completion of the Trilateral Highway. In the meanwhile, countries involved now in the Trilateral Highway (India, Myanmar and Thailand), should negotiate a separate transit and transport agreement for seamless movement of vehicles. 

ASEAN and India should also negotiate a separate multi-modal transport agreement to facilitate border connectivity and development of economic corridor. 

It is recommended that India and ASEAN should step up capital mobilisation by establishing a fund through banks or specific financial institutes, to develop physical and soft infrastructure.