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Manmohan Singh with Thein Sein, May 28, 2012 |
The importance of India pursuing a Look East policy should be carried forward with a new strategic regionalism where India will help to unite most of South Asia with Southeast Asia. We need not start afresh since it merely requires integrating the not fully functioning Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation with the Association of Southeast Asian Nations, leading to the formation of a southern Asian economic community. Such realignment is essential, if India is serious about its emergence as a major global player.
Attempts at a viable South Asian Association for Regional Cooperation have been thwarted by the lack of cooperation from Pakistan. Pakistan still restricts free movement of Indian goods and services in spite of recent initiatives at bilateral rapprochement. Hence India needs to cut its losses in the Saarc and move forward with the remaining South Asian countries in forming a strong southern Asian regional grouping which should include the adjoining ASEAN countries. In some sense, it is just a mere extension of BIMSTEC which already includes Myanmar and Thailand. Southern Asia has historically seen India play a major role in its economy, polity and culture. Starting in the 1990s, India’s Look East policy led to proactive engagement with the Southeast Asian region, especially on the trade front. India has comprehensive economic agreements covering trade in goods, services, and investments with Singapore and Malayasia. It is negotiating similar comprehensive agreements with Indonesia and Thailand. It also has free trade agreements in goods with the bloc as a whole (India-ASEAN free trade area), the services component of which is currently under negotiation.
In the BIMSTEC, India leads a forum that provides an existing bridge between major South Asian countries minus Pakistan with Southeast Asia (Thailand and Myanmar). While the BIMSTEC has largely been stagnant in terms of tangible policy achievements, it has an ambitious agenda on regionalism that goes beyond just trade in goods, services and investments. It has working groups dealing with issues of trans-regional transportation and trade facilitation, energy cooperation and education among other key areas.
While the concept of the SAEC may sound idealistic, there are good strategic and economic reasons for India to take the lead in this initiative and for the other countries in the southern Asian region to consider such a proposal. Let us take an overview of factors that make the SAEC a good alternative for both.
Markets and competitiveness: The proposed SAEC member states have a combined gross domestic product of almost $7 trillion (PPP) in 2011, accounting for 10.2 per cent of the global economy. As a region, southern Asia is one of the world’s fastest growing. Southern Asian GDP increased by 88 per cent between 2001 and 2011, while world GDP grew by just 41 per cent in the same period. If current trends continue, southern Asia would account for 18 per cent of global GDP by 2020.
Household consumption in southern Asia has grown by 207 per cent between 2001 and 2011, much faster than the overall global figure of 85.9 per cent. A rising middle-class and rapid urbanization are fast changing the region into a major engine of consumption. In 2001, the region as a whole had 180 million urban citizens; today it has over 240 million.
With a population of over two trillion, it is home to almost 30 per cent of humanity, and would account for almost 40 per cent of the world’s working population in 2020. With the right investments in skills and integrated markets that allow it to leverage its economies of scale, southern Asia would be a global economic powerhouse, and one of the most important engines of global growth.
The region’s high savings culture and demographic dividend would also ensure that it emerges as a major source of global capital, and Indian and ASEAN entrepreneurship combined would allow the region to take the lead in innovation and investment worldwide.
The first steps towards economic integration of India with the ASEAN have already taken place with the several bilateral agreements already mentioned earlier. The next steps would need to deepen this process, and extend these agreements to include regulatory harmonization, and greater integration in areas such as services trade, bilateral investment regimes, trade facilitation, and the movement of people.
Energy: India has been struggling with its energy security policy. India spends more than $400 million each day on oil imports which account for 70 per cent of its oil consumption. For a country with such high dependence on outside sources so early in its growth trajectory, securing reliable and long-term supplies would be expected to be at the forefront of the development and foreign policy agenda. As India looks for alternative oil, gas and other energy resources, southern Asia offers a great opportunity. Myanmar is emerging as a major natural gas producer. Bangladesh has significant resources, and new resources have come to light in recent times. Indonesia can emerge as one of the richest sources of gas globally in the coming years. Malayasia, Vietnam and the Philippines all have ambitious on-shore and off-shore oil and gas field development plans. The trans-ASEAN energy pipeline being developed in partnership by ASEAN member states envisages a grid of pipelines connecting the region. The visit of the prime minister, Manmohan Singh, seemed to indicate that India is considering pipeline connectivity with Myanmar in the near future. Thus, the prospect for a trans-southern Asian pipeline grid appears promising.
But it is not just about pipeline connectivity and trade in oil and gas across southern Asia. An ambitious electricity grid-linking regime can facilitate trade in electricity across several countries. This would allow electricity surplus countries like Nepal, Bhutan, and Laos to export to southern Asian countries with electricity deficits. It would also allow countries with significant oil, gas, and coal resources to jointly develop large-scale power plants and then distribute that production across the greater southern Asian region.
Strategic interests: In spite of some irritants, such as low-intensity conflicts between Cambodia and Thailand, Thailand and Myanmar, and some minor disagreements between India and Bangladesh, the strategic interests of the countries in the region are essentially in harmony. Together, these nations can counter radicalism and separatism in their countries, ensure the safety of sea and overland routes, and combat common challenges of narcotics and terrorism.
Further steps: A southern Asian regional forum should be immediately set up with the goal of complete economic integration of southern Asian countries by 2020. This forum should have two specific focus areas. The first should focus on mechanisms to turn the India-ASEAN FTA and comprehensive agreements with major ASEAN member economies into a single comprehensive agreement between India and the ASEAN by 2015. Simultaneously, the focus should be to integrate the other South Asian economies (Bangladesh, Nepal, Sri Lanka, and Bhutan) with India and the ASEAN through a series of agreements.
The critical step in this process is connectivity. The prime minister set the ball rolling in the right direction in his recent Myanmar visit by announcing major projects in road sector development that would connect India to Thailand via Myanmar. India also needs to strengthen its participation in railways, ports, and other logistics sector development with the overall goal of trans-southern Asian connectivity in mind.
The SAEC is all the more important given that Northeast Asia, that is, Japan, Korea, and China, are now at an advanced stage of a trilateral FTA in spite of their deep-rooted political differences. Essentially, these three countries are working towards creating the sub-regional bloc that will eventually lead to the Asian economic community. Given the reluctance of China towards India’s inclusion in any larger Asia-wide forum, and its dominance over the ASEAN countries, it becomes even more important for India to take the initiative to play the lead role in creating the equally powerful southern Asian sub-regional bloc of the future Asian economic community.
The time for southern Asian integration has indeed arrived.
The author is a well-known trade economist |
