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POLICY ANALYSIS

India's Look East Policy
Analytical perspectives from the political, economic and military lenses

Post-Cold War, India has an improved interest in South East Asia. India has to compete against a formidable rival, China, on many fronts. ERIC KOO PENG KUAN analyses what factors make the Look East Policy important to India, the response of South East Asia towards India’s new economic engagement, and what advantages India can gain over China in competing for the attention of South East Asia in economic co-operation

With the collapse of the Soviet Union at the end of the Cold War, and with the onset of globalization, nations are beginning to realize that the means to making wealth is by the securing of international trade and encouragement of foreign investments. Free market rules following the proven philosophy of mass capitalization dominate the international political scene over governing ideology. The 1990s was a period seeing rapid economic development and growth of Asian countries, especially in South East Asia. South East Asia is a region with vast economic potential.

And India, a vast sub-continent in South Asia, is a fast emerging economic and political force to be reckoned with. Thus it is, that the Indian leadership came up with a concept of ideas called the “Look East Policy” of India, an active economic policy of engagement with South East Asia to be implemented as an official initiative in achieving two objectives, the encouragement of trade links with individual partners and to provide foreign employment for India’s own expanding work force.

India has an improved interest in South East Asia (SEA). The economy of South East Asia is a virtually untapped market which is up for grabs by major regional economic entities such as India, China, Europe or the USA.

Why was there a shift in policy towards South East Asia? Formerly, India, as a nominal ally of the Soviet Union, became isolated from Asian mainstream affairs. The military-strategic alliance of Pakistan and China also served as a repressive policy against India’s national and economic interests, limiting its options in seeking trading partners in other states.

The only SEA states which had serious ties with India were from the communist bloc – Vietnam, Laos and Cambodia. During the Cold War, these states were also impoverished because of years of war and social upheaval. India’s multi-lateral relations in South East Asia during the Cold War brought little benefits through serious trade links.

In the meantime, other ASEAN[1] states had gone forward from ex-colonial backwaters in the Pacific oceanic region, to becoming rapidly developing societies and eventually, towards the goal of modern, industrialized states with well developed and sophisticated economies based on the twin pillars of national prosperity – trade and industry.

India has missed the bandwagon of opportunity once during the Cold War, by placing its stakes on the wrong superpower, the Soviet Union, which collapsed abruptly and unexpectedly in 1991. As a result, India’s economic ties with South East Asia are loose and the level of inter-state trade remains relatively low in revenue, such as engaging in relatively insignificant import-export trade of local Indian consumer products regulated by demand from local Indian communities in SEA countries.

Deprived of a strong allied nation, it is imperative that India seeks new markets with which to fuel its own economic growth alongside its own burgeoning population.

India depends largely on itself on promoting its Look East Policy, having the need to compete against a great regional rival, China. Having less attractive pre-set conditions in contrast to China, India’s revenue from Foreign Direct Investment (FDI), is minuscule compared with China’s FDI. An analysis of what factors make the Look East Policy important to India, the response of South East Asia towards India’s economic engagement and of what advantages it can gain as an edge over China in competing for the attention of South East Asia in economic co-operation, will be discussed in detail.

Historical background – origins of policy

From the 16th to 20th centuries, Indian migrants had voyaged across the Indian Ocean to the Malay Archipelago as labourers seeking work on the vast colonial plantations or as traders.

The origin of the “Look East” policy arose from political consciousness, focusing primarily on forging mutually beneficial ties between India with South East Asia and Japan. At the end of World War 2, Prime Minister Jawaharlal Nehru tried to engage Asia by supporting anti-colonial struggles, advocating pan-Asianism, and a a new international order based on not choosing sides during the Cold War.[2] It can also be said that the “Look East Policy” for India is an indirect expression of wishing to return to a continuation of India’s historical behaviour.

However, India’s border defeat by China in 1962 became a setback for India’s foreign policies and was also seen as an unimpressive military and diplomatic performance record from the South East Asian perspective. Moreover, India’s pro-Soviet stand alienated it from SEA, culminating in the Indo-Soviet Treaty of 1971, which earned India even more distrust.

India also had asymmetry of trade in Japan and bilateral relations were only at the eliminatory stage. However, until the 1990s, India was perceived unfavourably by ASEAN and Japan in general, with negative impressions of a corruption-rife government with a population yielding generally poor work ethics and sloth, resulting in low quality products and services. It is a perception which India is determined to change.

The “Look East” policy has achieved positive results with improved Indo-Japan relations, transparency measures to demonstrate non-corruption, and most importantly, India’s inclusion in the ASEAN Regional Forum (ARF). In fact, this policy becomes increasingly attractive for a variety of reasons as stated in section 3.

Developing international events also altered the strategic calculus. The break up of the Soviet Union after the Cold War made possible the improvement of US-Indo ties, thereby also leading to favourable conditions to initiate economic encroachment into South East Asia. Political stabilization of war-torn Afghanistan and Cambodia also introduced changes in the prioritizing of national interests which was incidentally, towards India’s favour. As India’s strained ties with the South East Asian were considered to be with the region as a whole, rather than with each individual country, the vanishing of Cold-War tensions in the South East Asian region also made it possible to easily identify and pursue common goals towards mutual inter-state interest.

India also accelerated its efforts in controlling the diplomatic damage done shortly after the nuclear tests in 1998, seeking to re-engage with other Asian countries. India was eventually seen as not truly posing a security threat to the Asia –Pacific region, and moreover, has the potential in developing as a serious counter balance against China’s growing influence in the region.[3]

Factors driving the policy

Pragmatism remains the central key driving India’s Look East Policy. Several factors determine India’s interest in looking at the South East Asian region.

Need to counter China economically

The open door policies of China, India’s regional neighbour, during the 1980s had seen the meteoric rise of an emerging economic giant in Asia, in contrast with India’s own Fabian socialist policies in India under Nehru’s rule.[4] China competes with India in the political, economic and military sphere and most importantly, for economic influence in the region of South East Asia. In short, India must adopt an economically aggressive stance to compete well with international market forces at work in the region.

Indian Prime Minister Manmohan Singh said that he welcomed Foreign Direct Investment (FDI) into India, which rakes in only a current US$3 billion as compared to US$53 billion in FDI to China annually.[5] India’s FDI barely measures up to 6% of its main rival’s.

Obviously, there is a need to seek new markets in order for India to grow economically and to seek a significant way of countering China’s own economic policies.

An emerging middle class

The Americans invented the concept of outsourcing, essentially the exploitation of foreign labour with minimal amount of control, but nevertheless, governed by  motivation for profit. A US software engineer earns US$75,000 per year as compared to his Indian counterpart, who earns US$20,000 per year in India. 60% of India’s one billion population is below the age of 30, meaning that a vast number of educated and talented people formed a huge manpower pool waiting to be tapped. Globalization and the Western media have also brought about influences in Western tastes and a materialistic lifestyle in a growing middle class in India. A world wealth report in June 2004 by US brokerage firm Merill Lynch, revealed that India has 61,000 millionaires, in US dollars.[6] However, the average Indian earns just US$1.60 per day. Materialism has led to a disturbing trend in mercenary pursuit of wealth at the expense of traditional, conservative social values. In a local crackdown in New Delphi, nearly 300 women from middle class background were arrested for prostitution.[7]

Thus, India seeks new markets to export its restless workforce. An ignoring of changing trends however, could well lead to serious social problems for the government of India.

Containment from West and Central Asia

India’s long dispute with Pakistan over the Jammu and Kashmir region has caused long standing hostile bilateral ties between these two states. China, as Pakistan’s ally and a potential economic rival, would sensibly pursue policies that either not promote or even hinder India’s economic progress and interests.

Although India also possesses business interests and provides foreign labour to the Middle East, geo-political instability and the constant threat of terrorism meant that there can be no serious undertaking of worthwhile financial investment in Middle Eastern countries. As a consequence, India remains hemmed in and severed from mainstream Asian affairs on either the western or northern direction. The only remaining alternative of potential development is to look eastwards towards the South East Asian region.

Despite having periodic irritants and economic disruptions such as occasional terrorist or militant attacks, as in the case of the Philippines, Indonesia and Thailand, the threat level remains well contained and pose no danger of regime change to SEA state governments. Moreover, such attacks are usually restricted to only localised areas, such as Mindanao Province in the Philippines, Aceh Province in Indonesia, and the southern border region in Thailand and Malaysia. South East Asian (SEA) state governments also take an active interest in combating terrorism as well as welcoming foreign expertise in augmenting their own local work forces.

In contrast to the Middle East, the economies of SEA countries have also been progressing by leaps and bounds. SEA countries remain an attractive option for India in seeking greener pastures overseas.

Response of South East Asia and how it regards India

In a speech made at Harvard University, Indian External Affairs Minister Yashwant Sinha pointed out that formerly, India’s engagement with SEA was based on an idealistic perception of Asian brotherhood, a shared colonial history and cultural ties.[8]

However, modern regional dynamics dictate that the progress of SEA is also motivated just as much by trade, investment and production.

The truth is that Asia’s other large regional player, China, has much better pre-set conditions conducive for economic investments and developments attractive to SEA investors. This includes a larger, educated work force in quantitative terms, cheaper material resources in abundance and a relatively stable governance free from any significant external or internal security threat. The simple fact of consumer behaviour gravitating towards a better choice in terms of cost and quality ensures that SEA turns first to China for trade and investment rather than other countries.

However, one major weakness exists for China. Its long history of socialist rule results in a tightly controlled state with little room for political maneuvering or reform. This meant that China is a state that plays by its own rules and is not answerable to non-state players like foreign investors. Foreign investors must adapt to local conditions instead of expecting adherence to international law and trade conduct. 

India, in contrast, having less to offer in tangible terms like manpower costs and resource abundance, however, enjoys the reputation of being a democracy which respects consumer rights and international law governing trade and foreign investments. Also, India’s long standing recognition of English as the official language breaks down language and cultural barriers in trade communications, and in theory, accelerates business procedures. This is the advantage that India’s Look East Policy has over China, and should be exploited to the full to gain an edge.

China has, in truth, a less than savory reputation in its foreign relations with its neighbours with regards in pursuing its own economic interests. It deals from a position of strength with regional partners, and usually ends with the latter having to compromise with a lesser share of the cake. Two clear examples were its past records of the Suzhou Project with Singapore, and the occupation of the Spratly Islands. India, however, starts with a clean slate in terms of economic co-operation with regional partners, putting it in a favourable position to win and maintain trust with its partners.

Thus it is very much up to India’s present leaders how they wish to promote the “Look East” policy and market the virtues and advantages of having bi-lateral economic ties with their nation.

Fear in a growing regional hegemony: the race to project naval power in South East Asian waters

The present status quo, with USA as the recognized unilateral superpower ensures relatively little foreign military activity for both India and China. China’s sole security concerns are the re-taking and political integration of Taiwan with its historical claim as being part of its traditional territory. India’s dispute over the Jammu and Kashmir dictates that much military manpower and resources must be dedicated to this troubled province. Significant ground forces are also currently deployed to guard its twin frontiers against Pakistan and China.

In naval projection of power, once again China is assessed as holding an upper hand. China has been building up its naval capabilities for decades in anticipation of a naval crisis in the Taiwan Straits. It has three fleets – North Sea Fleet, East Sea Fleet, and South Sea Fleet, comprising a total of 888 ships by 2005 that can be easily brought to bear anywhere in the Pacific oceanic region.[9] Aside from its own coastal naval bases, the People’s Liberation Navy also occupies and have naval facilities in several convenient and strategic island bases in SEA waters, such as Hainan Island and the Spratly Islands which may act as springboards to easily dominate and control sea lanes from South East Asia to the coasts of China, should the Chinese leadership chooses to adopt such a policy.

In contrast, India’s navy of 145 ships of various classes is designed to mainly
balance against Pakistan’s naval assets.[10] Its awkward proximity of its naval bases on both east and west coasts of the Indian sub-continent meant that attempts to control sea lanes in South East Asia is difficult at best, with the Straits of Malacca making only one possible strategic zone. [11] However, ships may still bypass this narrow sea zone easily on voyages from the Middle East and beyond to South East Asia. In conceiving a strategy for possible Indian naval projection of power, it is necessary that India secures an ally such as Indonesia, Singapore or Australia for assess to naval bases in the region for convenient deployment of naval ships.

Moreover, states in SEA react poorly to other international players interfering in what they view as internal SEA regional politics. For example, the Straits of Malacca waterway, an important SEA sea-lane, is constantly patrolled by a cumbersome arrangement of naval assets from three regional navies – Singapore, Malaysia, and Indonesia. Media makes the most of what apparently is an optimistic arrangement without a past precedent – a naval co-operation of three states in the operational sense. But in practice, joint patrolling may give rise to unexpected contingencies and problems as compared to if the sea lane is under direct control of a single powerful entity.


Onus with new leaders

The onus of driving the “Look East Policy” of India, of course, lies in the new generation of India’s leaders, since Prime Minister Manmohan Singh took office in 2004.

Domestic developments, such as an emerging middle class, dictates pragmatism in getting India to play the game of international trade and economics with free market rules. Unlike China, which enjoys a number of economic and military advantages over India in tangible and quantitative terms, India cannot rely on FDIs as a springboard toward achieving a well developed economy thriving on service sectors and tertiary industries. As such, it is necessary it looks to other intangible factors to form a niche for itself to offset the regional competition. Its main advantage over China, its regional rival, lies in its official recognition and use of English , the language of international trade and technology and its relatively clean slate of records in economic co-operation with South East Asia.

Currently, SEA’s attention remains focused on China for potential economic development. Relatively free trade and large-scale investments are still currently taking place, bringing mutual benefits for both investors and China itself. Historical experience, however, has shown that China will eventually wish to take its historical place of dominance in Asia, and also the full control of its economic destiny in the manner of a huge empire-like state. Simultaneously, China will wish to restore bilateral relations with other Asian states in mutually beneficial but unequal trade and economic status just like the historical tributary states in pre-modern times.   

Already, China’s open intentions of preventing Taiwan from declaring independence were obviously backed by threats of use of force if necessary. Frequent saber rattling across the Taiwan Straits are putting unnecessary strains on the region’s interstate trade dynamics and causing fluctuations in the regional stock markets.

India’s advantage over China lies in the fact of its abstinence from exhibiting ambitions toward a regional hegemony, making it less threatening to states in the SEA region. Should other nations in SEA discover that, in a future scenario, options of trade and investments with China become unfeasible, countries in SEA naturally will then turn towards the next obvious and available option --- India.

It is thus sensible that India prepares its own local economic infrastructure toward supporting the “Look East Policy” in anticipation for such a potential development in future.

REFERENCES

Books consulted:

 Adams, Jad, Whitehead, Phillip, The Dynasty ---- The Nehru-Gandhi Story (England: Penguin Books, 1997)

Alam, Aftab, ed., Pakistan’s Fourth Military Coup (India: Raj Publications, 2001)

Chari, P.R. e.d. India – Towards Millennium (New Delhi: Replika Press Pvt. Ltd, 1998)

Hoffmann, Steven A., India and the China Crisis (United States of America: University of California Press, 1990)

Kamra, Sukeshi, Bearing witness – Partition, independence, End of the Raj (Canada: University of Calgary Press, 2002)

Khilnani, Sunil, The Idea of India (USA: Hmiah Hamilton Ltd., 1999)

Lintner, Bertil, Blood Brothers – Crime, Business and Politics in Asia (Australia: South Wind Production, 2002)

Ludden, David, ed., Reading Subaltern Studies – Critical History, Contested meaning and the Globilisation of South Asia (London: Anthem Press, 2002)

Metcalf, Barbara., Metcalf, Thomas. R., A concise history of India (United Kingdom:Cambridge University Press, 2002)

Mehta, Ved, Rajiv Gandhi and Rama’s Kingdom (United States of America: Yale University Press, 1994)

Raza, Maroof, e.d. Generals and governments in India and Pakistan (India: Har-anand Publications Pte. Ltd., 2001)

Sarda, Har Bilas, Hindu Superiority (India: Gopsus Papers Ltd., 2003)

Shekhar, Chandra, Lt. Gen, Arming the Defence Forces, procurement and production policies (India: Manas Publications, 2004)

Singh.K.R., Navies of South Asia (India: Institute for Defence Studies and Analysis, 2002)

Stern, Robert. W., Changing India (Great Britain: Cambridge University Press, 1993)

Watson, Francis, India – A Concise History (United Kingdom: Thames and Hudson Ltd., 1974)

Varma, Pavan, K., Being Indian – The truth about why the twenty first century will be India’s (Naida:Saurabh Printers Pvt. Ltd, 2004)

Documents consulted:

India’s “Look East” Policy – Changing the Asian Strategic perspective.

Newspapers / News websites consulted:

 The Straits Times, Asia Times Online

  



[1] ASEAN stands for Association of South East Asian States, with the original members being Malaysia, Indonesia, Singapore, Thailand and the Philippines.

[2] “India’s “Look East” Policy: Changing the Asian Strategic Landscape.” AsiaInt Special Reports p.1.

 [3] Information sourced and summarized from “India’s “Look East” Policy: Changing the Asian Strategic Landscape.” AsiaInt Special Reports Avail. at http//www.AsiaInt.com

[4] Pranay Gupte, “Rhetoric of ideology or job creation?” The Straits Times 23/09/04

[5] Ibid.

[6] “India’s rich buying into whole new lifestyle concept.” The Straits Times 24/09/04

[7] “Young, educated , middle class and a call girl.” The Straits Times 28/08/04

[8] Sultan Shahin, “India’s ‘Look East’ policy pays off.” Asia Times Online Avail. at http://www.asiatimesonline.com

[9] “Chinese Warships.” Global Security.org http://www.globalsecurity.org/military/world/china/navy.htm

[10] “Indian Navy” Global Security.org http://www.globalsecurity.org/military/world/india/navy.htm

[11] Analysis based on consulting Singh.K.R., Navies of South Asia  (India: Institute for Defence Studies and Analysis, 2002)

 

The writer is a freelance writer who holds a Master of Science in Strategic Studies from the Institute of Defense and Strategic Studies (IDSS). He currently writes commentaries and analysis articles on international affairs, security issues and terrorism for newspapers.

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