Why India's financial stake is getting bigger in S-E Asia

India’s growing association with ASEAN, in which Singapore is a member, has been fruitful for all sides

See Chak Mun | September 1, 2014


Singapore prime minister Lee Kuan Yew and his Indian counterpart Indira Gandhi during his first official visit to India in 1966.
Singapore prime minister Lee Kuan Yew and his Indian counterpart Indira Gandhi during his first official visit to India in 1966.

The Association of Southeast Asian Nations (ASEAN) was formed on August 8, 1967, comprising Indonesia, Malaysia, the Philippines, Singapore and Thailand. There were several factors that led to the establishment of ASEAN as a social and economic regional organisation. The chief among them was Thailand’s concern about the spill-over effects of the escalating war in Vietnam, and the need to bolster the strategic environment and confidence in the rest of southeast Asia. For Malaysia and Indonesia, ASEAN membership formally signalled the end of confrontation and provided a regional framework to institutionalise their bilateral relations. For newly independent Singapore, the regional grouping meant an expansion of its economic space for new investment and trade opportunities which were important for Singapore’s economic growth particularly in the light of the British intention to withdraw from its base facilities in Singapore and from the east of Suez by 1971.

India’s interest in ASEAN
India’s interest in contemporary southeast Asia dates back to the time when it sought to play an active diplomatic role during the 1954 Geneva talks to settle the first Indochinese war between France and the Viet Minh. It subsequently accepted the chairmanship of the International Control Commission (ICC) on Indochina. Prime minister Jawaharlal Nehru was concerned about war breaking out in Indochina due to possible intervention by China and the United States, as the US had accused China and the Soviet Union of assisting the Viet Minh.

The formation of ASEAN without the participation of the Indochinese states was a disappointment for India which had hoped for a larger regional grouping that would include all the southeast Asian countries despite their ideological divisions. In fact, several months before the establishment of ASEAN, Indian envoys had been sounding out the attitude of countries in the region towards India’s involvement in a southeast Asian regional grouping. During his visit to Singapore and Malaysia in May 1967, India’s external affairs minister MC Chagla said that India was ready to support a larger economic grouping, as the Indian government firmly believed that an economically viable southeast Asia was the surest guarantee of peace in the region and an effective answer to the possibility of any export of revolution. Chagla suggested the formation of an Asian Council, but there appeared to be no follow-up to this proposal.

During her tour of Singapore, Malaysia, Australia and New Zealand in May 1968, prime minister Indira Gandhi proposed a plan which would include ‘regional economic cooperation; free exchange of ideas, resources and know-how among the developing and developed countries; and, an international guarantee by the big powers that neutrality and independence of aspiring nations would be preserved to help them develop their nationalism through popular governments.’ The suggestion of an Asian Council of economic ministers under the auspices of the regional UN Economic and Social Commission for Asia and the Far East (ECAFE)  was later raised by president VV Giri during his visit to Singapore in September 1971. However, the proposal did not find wide appeal as ECAFE was not seen as an effective organisation. Moreover, by that time, discussions on ASEAN regional cooperation were already well underway. At the first ASEAN summit held in Bali in February 1976, the grouping decided to set up an ASEAN preferential trading arrangement (PTA) to facilitate the expansion of trade among the member states.

On Singapore’s part, it had been advocating an active Indian role in the region. During his first official visit to India in September 1966 as the then prime minister of Singapore, Lee Kuan Yew, had suggested to his Indian counterpart Indira Gandhi that since India had historical goodwill with its smaller neighbours and friendly relations with China despite the 1962 Sino-Indian border war, India should take the leadership role in southeast Asia and start some form of regional economic cooperation alongwith Japan.

India-ASEAN cooperation
When ASEAN started a series of dialogue partnership with countries like Japan, the US and Australia, India revived its interest in ASEAN and sought a sectoral dialogue partnership with it. While the initial response from ASEAN was positive, it decided to put on hold India’s request in view of New Delhi’s neutral attitude at the Non-Aligned Movement co-ordinating bureau meeting in Colombo in June 1979 on the Kampuchean issue. ASEAN was greatly disappointed when the Indira Gandhi government decided to extend diplomatic recognition to the Vietnam-backed Heng Samrin regime in July 1980. It was seen as an untimely decision as it undermined the search and weakened the initiative by ASEAN for a durable political solution to the Kampuchean problem.

Under India’s new Look East policy, the PV Narasimha Rao government actively sought to build economic relations with the ASEAN countries. These countries also began to reach out to India, and saw a greater role of India in southeast Asia in view of regional political uncertainties as the US withdrew its bases from the Philippines in 1992. Singapore actively canvassed support among its ASEAN partners for India to join as a dialogue partner. In 1992, India became a sectoral dialogue partner of ASEAN, a full ASEAN dialogue partner in 1995, and a member of the ASEAN regional forum (ARF) in 1996.

After that, India-ASEAN relations progressed rapidly during the AB Vajpayee and the Manmohan Singh governments. By April 1999, all the three Indochinese states and Myanmar had become members of ASEAN. The initial framework for the ASEAN-India free trade agreement (AIFTA) was signed on October 8, 2003 in Bali, Indonesia. Subsequently, the AIFTA trade in goods agreement was signed on August 13, 2009. The AIFTA trade in services and investment agreements are likely to be signed by the end of 2014.

The conclusion of the services and investment agreements of the AIFTA has also paved the way for India to participate in the regional comprehensive economic partnership (RCEP) negotiations. India’s services sector, for example, is particularly likely to benefit from the successful conclusion of the RCEP, from outsourcing of knowledge and business processes to skilled services such as banking. India will host the sixth round of the RCEP negotiations in December 2014. 

India was ASEAN’s sixth largest trading partner in 2012. Total trade between ASEAN and India rose from $2.9 billion in 1993 to $71.6 billion in 2012. Foreign direct investment flows from India to ASEAN totalled $2.6 billion in 2012. A new trade target of $100 billion to be achieved by 2015 was set during the ASEAN-India commemorative summit (AICS) in December 2012.

India has also been positive about offering assistance in the implementation of ASEAN’s information and communication technology (ICT) master plan and the creation of an e-network in ASEAN, as well as the implementation of the master plan on ASEAN connectivity, primarily through the development of an India-Myanmar-Thailand-Laos-Vietnam-Cambodia highway and the trilateral India-Myanmar-Thailand highway with an extension to Laos and Cambodia. 

ASEAN-India commemorative summit

An ASEAN-India commemorative summit (AICS) was convened in New Delhi in December 2012. The leaders endorsed the ASEAN-India vision statement (AIVS) to chart the future direction of relations, including elevating ASEAN-India relations to the level of a “strategic partnership”.

New areas of cooperation have been proposed under the plan of action (2010 to 2015) to implement the ASEAN-India partnership for peace, progress and shared prosperity, namely, in space, energy, biodiversity and food security. On June 21, 2013, an ASEAN-India centre (AIC) was established in New Delhi to promote trade, cultural exchanges and tourism cooperation. The Indian government appointed its first dedicated ambassador to ASEAN, Suresh Reddy, in April 2014.

In December 2005, India was admitted to the inaugural East Asian Summit (EAS) held at Kuala Lumpur, Malaysia. This gave India a stake and a voice in shaping the regional security architecture. Singapore has strongly argued in favour of India’s admission as a founding member as India would provide both political depth and diversity to the EAS.

India has expressed support for ASEAN centrality and the need for the regional architecture to stay open, inclusive and transparent. In a concept paper recently circulated among EAS senior officials, India has indicated that a dialogue-based approach to security cooperation in the post-Cold War world has served Asia-Pacific states well, given the diversity of security perspectives and responses in the Asia Pacific.

See is former high commissioner of Singapore to India. He is currently adjunct associate research professor of the Institute of South Asian Studies (ISAS), National University of Singapore. He served as the Singapore permanent representative to the United Nations and the GATT/WTO in Geneva from 1986-1999 and from 1997 to 2001.

The story appeared in the August 16-31, 2014 issue of the magazine.

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