The terrorist strike in Mumbai has once again brought into focus India’s resolve and ability to deal with this continuing threat to its security and social cohesion. Whatever our immediate reaction, we must recognise that this threat is long-term. Also becoming clear is that while Pakistan remains the fountainhead of jehad, the jehadi network is now spreading across parts of South and Southeast Asia. Therefore, we would need our Asian neighbours’ help to contain Pakistan’s proclivity to proliferate terror in this and other parts of Asia. Our ability to muster that support would depend on our influence in Asia in general and South Asia in particular. In any case, this aim would have to be seen in the larger context of India’s desire to be a major player in the global arena and its quest for a permanent seat in the UN Security Council.
In the long run, the strategic influence of a country is determined only partly by its ability to coerce other nations. Military might is a key element of power and influence. But, no matter how desirable its use may appear in a particular context, it is just one of many ingredients that combine to form the complex mix of national power. Other ingredients that fuse to define a country’s ability to wield ‘soft power’ are just as important. Changing and shaping perceptions in other countries about your cause and the values you stand for is one element of this ‘soft power.’
The other, and perhaps more important, ingredient is the ability to create economic opportunities for other nations. The US is the world’s leading power and not only because of its arsenal. At one time, the erstwhile Soviet Union could match that arsenal. But the Russia of today, despite its formidable military capabilities, ranks poorly. The US, by being the world’s largest economy, has for decades created enormous economic opportunity for other countries. The success of the East Asian tigers was, to a great extent, based on the market for their exports offered by the US economy. Economic growth and integration into the global economy are vital for a country to make its presence felt in the global power play.
In this context, it is interesting to observe how China has, over the years, significantly enlarged its presence globally, particularly in Asia. On current reckoning, China is on its way to racing past the US in terms of its influence in Asia, and this it has been able to do primarily because of the reach and spread of its economy. China’s large and growing trade surpluses with the US and the European Union have been the subject of much discussion. What has not been as closely observed are its growing trade deficits with the economies of Southeast and East Asia.
In 2003, China had a trade surplus of $55 billion with the US and $18bn with the EU. But this was largely offset by its trade deficit of $14 bn with Japan, $21 bn with Korea, $37 bn with Taiwan and $15 bn with Asean during the same period. China now absorbs over 20% of Korea’s exports, nearly 15% of Japan’s and over 10% of Asean’s. Over the past two years, these Asian countries in China’s neighbourhood have got even more economically integrated with the Chinese economy. China’s low tariffs and its vigorous trade expansion have created production specialisation in this part of Asia.
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| • Military might is only one of many ingredients of national power
• More important is the creation of economic opportunity for other nations
• Emulate what China’s done; become a regional hub for manufacturing |
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China has now emerged as a processing and assembling platform for a large number of products exported by East Asian and Asean countries to the US and European markets. To add icing to the cake, its galloping economy now offers a lucrative market to businesses in these nations. What is more, China is now rapidly expanding its aid to many of these small countries, including Cambodia, Laos and Myanmar.
Despite our encouraging economic performance of recent years, we have not emerged as the growth pole in South Asia. Our trade figures with South Asian countries are a sorry contrast to China’s trade profile with its neighbours. In 2004-05, India had suffered an overall deficit of $28bn in its trade with all countries. However, it had a trade surplus with all countries of South Asia. We had a trade surplus of $426 million with Pakistan, $1,035m with Sri Lanka, $1,572m with Bangladesh, $397m with Nepal, and $13.6m with Bhutan. Barring Nepal, India is not the largest importer of goods going out of other South Asian countries. These are factual observations: there may be genuine reasons for the prevailing trade structure in South Asia. However, barring Pakistan, with whom it is difficult to talk trade, the reasons for our existing trade profile with other countries need to be addressed.
One reason for India’s inability to create more economic opportunity for its neighbours is the weakness of our industrial sector and the fact that unlike China, we are not the world’s hub for manufacturing. We have obviously many issues to address to develop confidence in our competitive ability in manufacturing, and till that happens, the range of our soft power would remain limited. But, make no mistake: till we strengthen our manufacturing capability, our military muscle will remain weak and dependent on outside support.
Our strength in services such as IT gives us leverage in advanced countries. But for spreading our influence in our neighbourhood, we need to create economic opportunities for others by emerging as a regional manufacturing hub. This has to be a key ingredient of our soft power in the region. Creation of more jobs and opportunities for the poor in South Asia would be a bonus, helping to contain the spread of terror in the long run. India must create rings of prosperity around it to fight this scourge.
—The writer is advisor, Ficci
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