Why ‘Act East’ will work when ‘Look East’ did not

By: |
New Delhi | February 3, 2018 3:41 AM

Act East will gather momentum because now there is greater connectivity, better prospect of trade, market and exchange of information. Export-oriented ASEAN will look at India because of India’s emerging market and quality services.

act east, india, economy, myanmar, narendra nodi governmentAct East will gather momentum because there is greater connectivity, prospect of trade, market and exchange of information.

For long years, India turned a blind eye to East Asia, Indo-Pacific or Asia-Pacific, howsoever the region may be called. Much of India’s east is marked by a visible Indic influence and a sizeable diaspora, that escaped attention, until PV Narasimha Rao.

In 1992, the then Prime Minister Rao initiated the breakthrough Look East Policy (LEP). Those were the days when India was just getting out of import-substitution days. The country was still a small trading power. Almost two decades after, Prime Minister Narendra Modi’s Act East Policy (AEP, 2014) has shaped. But why should ‘Act East’ work when ‘Look East’ did not?
Act East has a lot going for it, because several factors are coming together. In other words, it is not just the ‘China-factor’ as the glue in India-ASEAN relations (the Association of Southeast Asian Nations). There is more to it.

Back then, Rao’s powerful idea was a new beginning, but failed to take root because of domestic political factors, hiccups with liberalisation and the sore lack of connectivity. Since then, the ASEAN has changed and so has India, in the 20-odd years of economic reforms. In the 1990s, there was little that India could offer the ASEAN. Today, India offers an emerging market, there are better products, innovation, services and tourism is getting out of the boondocks.

In fact, in the mid 2000s, the then Prime Minister Atal Bihari Vajpayee addressed the lacunae: Vajpayee pushed the ‘open skies’ arrangement with the ASEAN and acceded (as did China) to the ASEAN Treaty of Amity and Cooperation (TAC of 1976)—both were game-changers. This author remembers the optimism with which Vajpayee was received by the Indian diaspora in Thailand.

Act East will gather momentum because there is greater connectivity, prospect of trade, market and exchange of information. Export-oriented ASEAN will look at India because of India’s emerging market and quality services.

In tandem, India has also embraced a proactive diplomacy, courting ASEAN members, Vietnam to Myanmar, stringing the Indic-arc in the ASEAN. India has pushed for the realisation of the 2,000-km-long India-Myanmar-Thailand Trilateral Highway (in 2020). Much of this, as Modi emphasised, has come without India’s ‘claims’ with respect to the ASEAN—economic or territorial. This, again, is a powerful message.

America, too, has re-jigged the earlier notion of American ‘pivot’ in Asia to ‘re-balance’ (2013) to a ‘free and open Indo-Pacific’ (2017). The notion of Indo-Pacific may be broad, not covering just East Asia and Australia, but also the Middle-East where, with respect to Pakistan and Afghanistan, India can be a bulwark.

The vision of Indo-Pacific may also have to do with China’s blue-water navy and supposedly breaching the ‘First Island Chain’ (beginning Japan archipelago through the Philippines archipelago), making friends across the ‘Second Island Chain’ (beginning Guam) with China sprouting Friendship stores as far as Suva (Fiji) and Apia (Samoa). Incidentally, Modi visited Fiji, the first visit by an Indian PM in 33 years, and Australia, the first in 28 years.

Act East is likely to benefit as India and ASEAN are on the same page—ASEAN members are aligned with India on the freedom of navigation and binding code of conduct for parties in the South China Sea.
In the recent past, several ASEAN members, notably the Philippines and Vietnam, have not taken well to historical claims and construction activities in the South China Sea, such as airports and runways. Much of the claims are contentious and debatable. This resulted in the Philippines taking the issue to The Hague, which ruled in favour of the Philippines.

The ASEAN works on consensus, but in the recent past this has seen a glitch or two. In the ASEAN, a single member has the power to veto a decision. Whether the group is being subject to ‘divide and rule’ is an open question being asked in the region.

Cambodia has been seen as on China’s side (China is a claimant in the South China Sea), as Cambodia blocked a statement in the ASEAN (2016) referring to the ruling by The Hague in the ASEAN platform, creating a deadlock. Laos and Cambodia, non-claimants in the South China Sea (but critical players in the Mekong), reached an agreement with China on how to settle claims in the South China Sea (2016), creating a furore.
Reports suggest that China is investing $24 billion in the Philippines (a major claimant in South China Sea) in the $77-billion infrastructure project, ‘Build, Build, Build’, and supporting President Rodrigo Duterte’s anti-drug war against ‘shabu’ (methamphetamine).

Then is the ‘China factor’. China has been out there in the ASEAN ahead of India in timing, tapping into a 30-billion-plus strong diaspora in the region. Many of the well-known tycoons in the ASEAN are of Chinese origin. In fact, the first ASEAN company that helped reform China’s rural sector (agribusiness and retail) was Thailand’s Charoen Pokphand Group (CP, since the 1970s). Other initial investors include Malaysia’s Shangri-La Hotel and Property Group.

For a fact, the ‘China circle’—China’s complementary production network with Hong Kong and Taiwan (in the 1970s) has become bigger to include the ASEAN, where China is the last point in the production chain.

China now identifies China-ASEAN as the core ‘concentric circle’ (China-ASEAN Free Trade Area since 2010) and is the ASEAN’s largest trading partner and fourth-largest export market. China-ASEAN trade was $452.2 billion with 19.8 million tourist arrivals from ASEAN in 2016.

This has its benefits as China’s boom augurs well for the region, but the reverse is also true because of the dependence. ASEAN members—many as export-oriented as China (for example Singapore, services; Thailand, manufactured goods; Indonesia, hand-made batik textiles)—also face competition from cheaper Chinese goods.

Here, India is better late than never. In the ASEAN-India Free Trade Area (AIFTA, operational since 2010) trade is pegged at $71.6 billion in 2016-17. Though India’s deficit with the ASEAN was $9.5 billion in 2016-17, it has decreased from $14.75 billion in 2015-16. This will underscore how India looks at RCEP (Regional Comprehensive Economic Partnership)
which includes the ASEAN, India, China, Japan, South Korea, Australia and New Zealand.

But the mathematics of all the above factors—the changed times, dynamics and timing coinciding with America’s ‘free and open Indo-Pacific’, ASEAN ‘Looking West’ to India as an emerging market and trade partner offers a coming together, rationalising why Act East will work. But as always, with or without the China-factor, is subject to India delivering and making good, beyond rosy-rhetoric.

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