Thursday, October 8, 2009

LOOK EAST POLICY

Look-east policy was launched in 1992 just after the end of the cold war, following the collapse of the Soviet Union. After the start of liberalization, it was a very strategic policy decision taken by the government in the foreign policy. The policy was given an initial thrust with the then Prime Minister Narasimha Rao visiting China, Japan, South Korea, Vietnam and Singapore and India becoming a important dialogue partner with ASEAN in 1992. Since the beginning of this century, India has given a big push to this policy by becoming a summit level partner of ASEAN (2002) and getting involved in some regional initiatives such as the BIMSTEC and the Ganga Mekong Cooperation and becoming a member of the East Asia Summit (EAS) in 2005.

It is only with the formulation of the Look-East policy in the last decade (1992), India had started giving this region due importance in the foreign policy. India became a sectoral dialogue partner with ASEAN in 1992, a full dialogue partner in 1995, a member of the ASEAN Regional Forum (ARF) in 1996, and a summit level partner (on par with China, Japan and Korea) in 2002.The first India-ASEAN Business Summit was held at New Delhi in October 2002.The first Indo ASEAN summit was held in 2002 at Phnom Penh (Cambodia).
Although it had traditionally supported Burma's pro-democracy movement for many years, India's policy changed in 1993, making friendly overtures to the military junta. India signed trade agreements and increased its investments in Burma; although private sector activity remains low, India's state corporations have landed lucrative contracts for industrial projects and the construction of major roads and highways, pipelines and upgrading of ports. India has also increased its competition with China over the harnessing of Burma's significant oil and natural gas reserves, seeking to establish a major and stable source of energy for its growing domestic needs, countering Chinese monopoly over Burmese resources and reducing dependence on oil-rich Middle Eastern nations. Although China remains Burma's largest military supplier, India has offered to train Burma's military personnel and has sought their cooperation in curbing separatist militants and the heavy drug trafficking affecting much of Northeast India.
India has also established strong commercial, cultural and military ties with the Philippines, Singapore, Vietnam and Cambodia.[2] India signed free trade agreements with Sri Lanka and Thailand and stepped up its military cooperation with them as well. It has forged numerous free trade agreements with East Asian economies, including a Comprehensive Economic Cooperation Agreement with Singapore and an Early Harvest Scheme with Thailand, while it is negotiating agreements with Japan, South Korea, and Association of Southeast Asian Nations (ASEAN) member states. Ties have been strengthened with Taiwan, Japan and South Korea over common emphasis on democracy, human rights and strategic interests. South Korea and Japan remain amongst the major sources of foreign investment in India.
While India has remained a staunch supporter of the "One China" policy and recognized the People's Republic of China on the mainland over the Republic of China authorities on Taiwan, it has, nevertheless, pursued a policy of increasing engagement with the island.India has stepped up engagement with East Asia fueled by its need for cooperation on counter-terrorism, humanitarian relief, anti-piracy, maritime and energy security, confidence-building and balancing the influence of other powers, notably China. Driven by the fact that more than 50% of India's trade passes through the Malacca Strait, the Indian navy has established a Far Eastern Naval Command off Port Blair on the Andaman and Nicobar Islands. India has also been conducting joint naval exercises with Singapore (SIMBEX) since 1993, with Vietnam in 2000 and has engaged in joint patrols with Indonesia in the Andaman Sea since 2002. Japan and India were also members of the tsunami relief regional core group in the Indian Ocean in 2004 along with Australia and the United States.


Advantages of the policy 

* 1991 was a turning point in India's economic relations due to its new Look east policy. Before 1990 India's main focus was on the Soviet Union because of which ties with the other major Asian powers like China and Japan were not strong. India's inward-looking orientation disconnected it from the neighborhood to the East, kept it apart from the economic growth of East Asia. By the turn of the 1990s, India had totally marginalized itself. The first phase of the Look East policy launched by the Narasimha Rao Government in the early 1990s focused on renewing contact with a region that India had drifted away from. 

* The Look-East policy has been given a significant thrust since the beginning of this century. Now India has entered into the phase two of this policy. The second phase in India's Look East policy has a new dimension — the development of India's remote northeast. India's search for a new economic relationship with South East Asia is no longer driven by considerations of globalization, but to facilitate development of the Northeast by increasing its connectivity to the outside world. Instead of trying to isolate the Northeast from external influences, as it had done in the past, New Delhi is now recognizing the importance of opening it up for commercial linkages with South East Asia. 

* Increased economic integration with Asia has helped India because the core competencies of these economies are different. So India can import the goods from other countries which can be produced by other countries at a lower cost then India. India can export those goods for which India has a competitive advantage. This arrangement is mutually beneficiation for India and East Asia countries .Due to this there is a Substantial potential of Asian Economic Integration in helping Asia resume a high growth path.

East Asia's Strengths                                                     India's Strengths 
1) Electronic equipment                                                Computer Software 
2) Heavy engineering                                             Light engineering and pharmaceuticals 
3) Product development and marketing                            Process development
4) Underutilized capacity in construction                    Huge potential demand

* Look east policy has helped India in strengthening its place in the global economy and gets a better deal in its interactions outside the region. America and European countries had entered into a lot of different mutual agreement which has further increased their reputation and bargaining power. India was in danger of isolation in the global economy. India was not getting its due importance. But due to its Look east policy India economy is getting integrated with the Asian economy, so India gets support from Asian countries which have increased India's importance at global level. 
Short comings in the policy

* The Look East policy did not find Japan on its radar and failed to improve India's economic ties with it. Trade with Japan actually declined dramatically dropping its share to one-third of its level of 7 per cent in 1993. One of the causes, of course, was the fact that the Japanese economy was stagnate during this period. But still it is difficult to explain the reason behind this dramatic drop. This was the biggest failure of Look east policy. Failure to involve Japan and a build economic relationship with it also resulted in closing the doors on Japanese foreign direct investment (FDI).

* India has entered into a number of pacts, agreements and FTAs but its record for implementation of such accords has been poor as can be seen from the follow up of the Indo-Thai FTA and CECA with Singapore. 
The reason for poor implementation of the pacts, agreements and FTAs

* The Indian industry's doubts about its competitive efficiency.
* Indian industry does not want competition at home 
* Indian industry scared of cheaper exports to India from these countries.

India should go ahead with proper implementation of the pacts, agreements and FTAs without bothering about the aforementioned factors. The Indian industry will ensure that India will always gain from these arrangements.


Suggested future framework

* The rise of China's economic potential and the resultant influence on this region should not deter India, as the region is looking for an alternative in India because of its fair practices and peace loving nature. India is preferred over China by many countries because India is democratic country.  However India has to set its house in order and go ahead with its economic reforms, liberalization process and infrastructure development to gain the confidence of this region, which at present is not all that high. Economic reforms and liberalization process is being negatively affected by the left parties which is supporting the government.

* Each nation has its own characteristics – some are supportive of India, some are predominantly Muslim, some are economically more developed then India, some are underdeveloped and one is a close neighbor influencing the security of India. Hence India should tailor the bilateral relations with every country in different way to suit the requirements of that particular country and that of India.

* ASEAN and EAS hold great promise for India. Adequate interaction with these groupings will result in better integration with this region and facilitate India economic development. Indian businesses which are looking to go global will get huge markets in other countries. They will be able to export their goods and get a market share because of low tariffs due to the pacts, agreements and FTAs. Although foreign companies will also get this advantage but Indian companies will be able to compete with these because of their competitiveness.

* CMI and emerging FTAs / RTAs between Asian countries provide foundations for a broader and more ambitious initiative to take the existing India-ASEAN relationship to a higher level, like an Asian Economic Community, which constitutes ASEAN, China, Japan, Korea and India as member countries. Such a community would be roughly the size of the European Union in terms of income, and bigger than NAFTA in terms of trade. It would account for half the world's population and it would hold foreign exchange reserves exceeding those of the EU and NAFTA put together. This can give a greater push to Indian growth.

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