Economic Highlights

New Delhi, 25 October 2007

Building Bridges With South-East

MULTI-LAYERED STRATEGY NEEDING

By Dr. Vinod Mehta

(Former Research Director, ICSSR)

One of the features of the Narasimha Rao Government’s liberal economic policies was to look towards the East, i.e., South-East Asia and later East Asia and Pacific countries for business, trade and investments.  This is being steadily pursued by all the Governments in power since 1991.

According to all available data and projections for the future, the Asian region is growing faster than the European or the American region, notwithstanding the melt down of South-East Asian economies a few years ago. This means that there are more business opportunities in the Asian region for Indian business as well as for the Asian business in India.

In the past more than one-and-a-half decade India’s trade ties with the South-East Asian and East Asian countries have increased significantly. Yet there is always a room for still more growth in trade ties. 

The Indian economy is already growing at the rate of nine per cent and the Eleventh Plan has put the target figure above nine per cent.  As against this, the individual Asian economies like Thailand, South Korea, Malaysia, Singapore, Indonesia and Taiwan are experiencing growth rates ranging between 8 per cent to 10 per cent. This indicates indirectly how the markets in these countries are growing and if India can develop comprehensive and an appropriate investment and trade strategy it can capture a part of this market.

It is, however, not going to be an easy task.  India will have to work hard, indeed very hard, to penetrate these markets as it has ignored this region for a very long time. In the meantime Japan, South Korea, Taiwan and other countries made huge investments and captured a big slice of these markets. Therefore, the strategy to come closer to the Asian countries will have to be a multi-layered strategy functioning simultaneously at various levels. 

The relationships established with the Asian countries in the past one-and-a-half decade needs to be vigorously followed up by Government to Government relationship like setting up of inter-governmental councils in the fields of economic affairs, education, science and technology, tourism and so on.

The regular exchange of parliamentary delegations as well as bureaucrats needs to be institutionalized.  This may be seen as confidence building measures to remove the pointless mutual suspicion that has crept into each others’ mind.

While building these measures we must also open our defence training colleges to military officers from the Asian countries. This is one way of underscoring the point that India has no territorial designs whatsoever and that it has the stability of the region uppermost in its mind. 

Already a few military officers from Thailand have been trained in Indian military colleges.  This defence link needs to be strengthened and institutionalized with almost all the South East Asian countries.  The most recent pact has been with the Singapore Government.

At the same time the Government needs to provide scholarships for higher education and research in India to students from these Asian countries.  This is one way of creating long term interest in India among the Asian countries.  Over a period of time India would have created an India lobby in these countries.

The last thing, which the Government needs to do in this direction, is to strengthen all types of communication infrastructure including air and shipping services.  India’s air connections with the capitals of Asian countries are less when compared with European countries or America.  India needs to be linked to almost all the Asian capitals by at least a daily air service. 

At the moment we have no direct air links with Indonesia, Philippines, Brunei, Cambodia, Vietnam, Laos and Myanmar. This comes in the way of fully exploiting the business opportunities that may exist between India and other Asian countries.

Apart from strengthening the communication infrastructure between India and capitals of the Asian countries, there is also a need to strengthen relationship in the financial sector including insurance. Till now either the American or the European banks have ensured their presence in India.

The presence of Asian banks has been negligible.  Some years ago the Bangkok Bank from Thailand and the Development Bank of Singapore (DBS Bank) have been permitted to open their offices in India and that is that. 

A clear cut policy needs to be developed here so that at least one bank from each of the Asian country has significant presence in India and one Indian bank present in almost all the Asian capitals. 

It may also be a good idea to start joint ventures with Asian insurance companies in the field of general and maritime insurance. This will make the financing of joint ventures in India and other Asian countries much easier.

While developing economic relations with the Asian countries, the role of the medium and small scale sector should not be ignored.  There are many medium and small enterprises in some of these Asian countries which have the latest technologies and may be willing to enter into technical collaboration with their Indian counterparts.  The field is very vast ranging from the manufacture of pencil sharpeners to plastic goods and auto parts. 

Unlike the large industrial houses which have the resources to strike deals on their own strength, the medium and small sector may need the support of some institutions like various chambers of commerce and industry.

Finally, to find a foothold in the Asian markets, Indian business will have to do a thorough research of the markets, consumer preferences and trading practices in each of the Asian countries.  The Japanese, European and American brand names are well established in these countries.

Moreover, the consumer in Asian country has become very price and quality conscious.  Therefore, to succeed in such a market, the Indian exporter and manufacturer will have to sell quality products at competitive prices.  This would also hold true for a large number of other commodities and services, which we may be thinking of exporting to these countries. 

What is needed is a collective effort on the part of Indian business to create a favourable image of themselves among both the individual and institutional consumers in Asian countries. 

Besides, the idea of free trade area between India and South-East Asian countries needs to be pursued vigorously.  From here we can then move to Latin American countries for increased trade as we are now presently doing. ---- INFA

(Copyright India News & Feature Alliance)