Revitalising India’s ‘Look East’ Policy

It has been two decades since India launched its much-vaunted ‘Look East’ policy. The recent conclusion of free trade agreements with Malaysia and Japan, which follows in the footsteps of similar agreements with Singapore and South Korea, has reaffirmed New Delhi’s ability to move beyond the realm of an aspiring East Asian player by strengthening substantive linkages with the region that have traditionally been embedded in the rhetoric of shared cultural, religious and historical bonds.

However, India’s role in the region still remains superficial from a strategic perspective as it remains a mere participant rather than a pro-active shaper of Asian regionalism. Doing so will require India to develop a more clear vision of its role in East Asia, which will allow it to exploit shifts in the regional environment. It will also require that New Delhi recognise the implications of its ‘Look East’ policy on broader global interests, such as energy security, climate change, maritime security, anti-terrorism, nuclear non-proliferation, ‘Great Power’ relations and the emergence of a multi-polar international order.

Recent tensions in the region, including maritime territorial disputes in the East and South China Sea deserve an Indian voice, both as a means to raise India’s profile in East Asia and strengthen the Asian security architecture amid a gradual weakening of the US-led security umbrella in the region. From an economic standpoint, the global economic downturn has reaffirmed the eastward shift in the world’s productive and economic capacity, thus making the East Asia region of greater economic and strategic importance. This hasstrengthened the need for India to step up engagement with the region in order to meet its growth and development objectives.

Although the pace of India’s integration with East Asia will remain shackled to the informal process of regionalisation in East Asia, India can still take actions to strengthen its integration with the region. This includes making the country a more appealing investment and operating environment, improving infrastructure inter-linkages with East Asia, and accelerating economic and strategic integration within India’s own South Asian sub-region.

Economic and strategic interdependence….

While India’s engagement with East Asia is by no means new, the fact that India’s long-standing cultural and historical links are now complemented by growing interdependence forged by economic integration and shared transnational security concerns, serves to forge a stronger bond with the Asia-Pacific region.

The conclusion of free-trade agreements has been a crucial symbolic and substantive foundation of India’s ‘Look East’ policy. India’s road toward free trade with Southeast Asia began with the conclusion of an early harvest scheme with Thailand in 2004, which was followed by the more substantive Comprehensive Economic Cooperation Agreement (CECA) with Singapore in 2005. ¹The recent conclusion of the CECA with Malaysia inn February 2011 supplements the CECA that came into force with the Association of Southeast Asian Nations (ASEAN) (of which Malaysia is a member) in January 2010, as the former includes trade in both goods and services while the latter is presently limited to goods. ²This will facilitate the cross-border movement of skilled service sector professionals in such fields as financial services and information technology.

Alongside free-trade agreements, India’s economic interactions with the Southeast Asia region have become more frequent and institutionalised. New Delhi played host to the second India-ASEAN Business Council meeting in March, which came after a gap of six years. The meeting included discussions on agriculture, information technology, and education; sectors where both sides have a vested interest in making improvements to meet their development objectives. ³President Pratibha Patil visited Laos and Cambodia in September 2010, during which New Delhi extended credit lines for power and water development projects. ⁴ Cambodia is the country coordinator for India in ASEAN and is scheduled to assume the chair of the grouping in 2012, which will coincide with New Delhi hosting the first India-ASEAN commemorative summit.⁵

In Northeast Asia the conclusion of the India-Japan Comprehensive Economic Partnership Agreement (CEPA) in February 2011 will serve to deepen economic interdependence between both economies. Japan is currently India’s sixth largest source of foreign investment, which includes such high-profile projects as the Delhi-Mumbai industrial corridor (DMIC), which has received a third of its funding from Japan in the form of $100 billion in soft loans.⁶ The project received an added boost from the India-Japan Global Partnership Summit in September, which aimed to attract $1 trillion in investment to India.⁷ The pharmaceutical sector in both countries also stands to benefit from the CEPA given that Japan is the world’s second-largest pharmaceutical market while India is a leading producer of generic drugs, which will be granted accelerated registration under the CEPA. ⁸This follows in the footsteps of the CEPA with South Korea that was concluded in 2009, which has offered greater market access for Indian pharmaceutical and IT-enabled services.

India’s economic relations with the region have not been without controversy and consternation. Notably, India’s conclusion of a proposed civilian nuclear power agreement with Japan remains in limbo given the fallout from the damage to the Fukishima Daiichi nuclear facility following the earthquake and tsunami that struck the east coast of Japan in March 2011. On the one hand, the disaster has hardened the position of the Japanese government and public regarding the dangers of nuclear power and renewed concerns over the need for more stringent compliance with international norms and rules on the proliferation of civilian nuclear technology. This has led to the persistence of restrictions on the supply of enrichment technology to India, which coincides with the Nuclear Suppliers Group imposing more strict guidelines on the transfer of enrichment and reprocessing technology to states that are not signatories to nuclear non-proliferation treaty.⁹

At the same time however, Japan’s nuclear power companies are likely to face growing urgency to expand their overseas operations as domestic pressure prompts a slowdown of nuclear power development within Japan. This could offer opportunities for increased Japanese investment in India’s civilian nuclear power sector. The conclusion of a civil nuclear agreement with South Korea in July 2011 – bringing to nine the number of countries that have concluded such agreements with India – could also act as a catalyst for Japan to reassess its position amid concerns that it will left out of accessing India’s lucrative $150 billion nuclear power market. ¹⁰ This comes as India itself has also demonstrated the potential to emerge as a major exporter for civilian nuclear technology, most notably to Southeast Asia where several countries are seeking to employ nuclear power to achieve energy self-sufficiency. For instance, India and Vietnam have signed a Memorandum of Understanding (MOU) on civil nuclear cooperation, which could become the catalyst for the sale of Indian pressurised heavy water reactor technology to Vietnam. ¹¹India’s participation in the nuclear security initiative conference in South Korea in 2012 will further reaffirm the country’s transition from a pariah to a status quo nuclear power.

On the security front, the maritime domain has emerged as the main sphere of cooperation between India and Southeast Asia given a shared interest in maintaining the free flow of maritime trade and transport, the need for a joint approach in addressing humanitarian disasters, and mutual concerns in combatting the scourge of maritime piracy, illicit trafficking, and the latent threat of maritime terrorism. Several Southeast Asian countries have taken part in the biennial Milan naval exercises with India since they commenced in 1995, including Indonesia, Thailand, Malaysia and Singapore while India has also conducted joint naval exercises with Singapore (SIMBEX) since 1993 and with Malaysia, Singapore and Indonesia as part of the Search and Rescue Operations (SAREX) since 1997.

While India’s relations with Singapore was the catalyst of India’s re-engagement with Southeast Asia in the post-Cold War period, India-Indonesia relations is emerging as the cornerstone of India’s strategic role in Southeast Asia in the 21^st century. As major regional maritime powers both countries maintain a shared interest in protecting Sea Lines of Communication (SLOCs) in the South China Sea and Indian Ocean region, which has manifested in their signing of a strategic partnership and defence cooperation agreement in 2005 and 2006 respectively, joint naval exercises since 1996and coordinated patrols in the Andaman Sea since 2003. ¹²While there has been growing attention over the US rapprochement with Vietnam, no less significant are reports of India’s strategic cooperation with Vietnam. India has been conducting joint naval exercises with Vietnam since 2000. This has been supplemented by Vietnam reportedly offering Indian Navy vessels permanent berthing rights at Na Thrang port, which would play a significant role in India’s goal of establishing a “sustainable maritime presence” in the South China Sea. ¹³Confirming India’s deepening relations with both countries, Indonesia and Vietnam have expressed interest in procuring the joint India-Russia developed Brahmo supersonic cruise missile. ¹⁴

In Northeast Asia, India maintains a ‘strategic and global partnership’ with Japan. Both countries’ participation in the tsunami relief regional core group in the Indian Ocean in 2004 (along with Australia and the United States) emerged as a catalyst for wider strategic cooperation. This has generated significant goodwill between both countries fuelled by a wider convergence of interests and values though economic interdependence, people-to-people contacts, and military-to-military cooperation continues to grow slowly. 15India has also forged a strategic partnership with South Korea, which has contributed to bilateral cooperation in sensitive areas such as India launching South Korean satellites. ¹⁶India also maintains a Comprehensive Partnership with Mongolia, which culminated in the signing of a defence pact during the visit of Indian President Patil to Ulaanbaatar in July 2011.

…complement historical and cultural linkages

Rather than being a major reorientation of its foreign policy, India’s ‘Look East’ policy is merely the latest phase of India’s long-standing interaction with East Asia. The liberalization of India’s economy and emergence of shared strategic interests have cemented India’s engagement with East Asia, which has traditionally been driven by India’s soft power influence from its democratic credentials, popular culture, and status as the birthplace of numerous civilizations.

India’s trading links with East Asia stretch back two millennia to the Silk Road and Calicut emerging as a major trading port in South Asia while cultural and religious bonds date back to Emperor Asoka's spread of Buddhism beyond the sub-continent in the third century BC. Other notable periods of contact between pre-independence India and East Asia include the Kushan Empire, which built extensive trade networks with China, and the Chola Dynasty, which ruled over much of Southeast Asia. During the latter Rajendra I conducted a naval expedition to Srivijaya (present-day Indonesia) to protect trade with China and Rajendrachola Deva I (Parmeshwara) named the island of Singapore (Singapura) in the 10th century AD. The ancient ruins of Hindu and Buddhist kingdoms, including the Khmer empire that ruled over vast swathes of Indochina, the kingdom of Champa in Vietnam, and Sanjaya dynasty on the island of Java in Indonesia point to India’s long-standing cultural influence over Southeast Asian. ¹⁷ Cultural exchanges stretched as far as Northeast Asia, as noted by folklore of an Indian princess from the kingdom of Ayodhya (Ayuta) marrying a prince from the Korean confederate of Gaya in the first century.

The exchange of pilgrims, explorers, and traders continued until the onset of British rule over India in the 18th century, after which India ceased to be an independent actor on the international stage. India's contact with East Asia became subordinated to colonial rivalries as Indian opium and soldiers were used to gain markets and quash rebellions in other parts of Asia, including Chinaand Malaya. During the Second World War the Stilwell Road served as a vital transit route to shuttle supplies from India to the anti-Japanese forces in China, and Subhash Chandra Bose's short-lived Indian National Army formed an alliance with Imperial Japan.

Under India's first prime minister, Jawaharlal Nehru, India reengaged with East Asia under his grand vision of an “Asiatic Federation of Nations.” The Asian Relations Conference held in New Delhi on 2 April 1947 served as the earliest attempt by New Delhi to orient itself toward East Asia within the framework of the modern nation-state system. Nehru along with Indonesian President Sukarno and Chinese Prime Minister Zhou Enlai took the helm of the campaign to forge an Asian identity by combining Asia’s struggle against Western imperialism and decolonization with the principles of socialism, national sovereignty, equality, and a developing-world solidarity. This manifested in the “Bandung spirit” of 1955, which became the precursor for the Non-Aligned Movement and the Asia-Africa Summit.

This phase of ‘Asianism’ also found expression in Nehru’s offer to serve as mediator during the Korean War and French-Indochina War, support for communist China's claim to a seat at the United Nations, opposition to Dutch police action in Indonesia in 1948 and toward punishing Japan at the post-Second World War Tokyo trials, and expression of pride in Japan's victory in the Russo-Japanese War in 1905. The spirit of Asian brotherhood was most visibly manifested with the slogan of “Hindi-Chini bhai bhai” (“Indians and Chinese are brothers”), which attempted to forge a familial bond between Asia’s two oldest civilizations and “Panchsheel” or the Five Principles of Peaceful Coexistence, which formed the basis for Sino-Indian relations and China and India’s interactions with other states. However, this phase of the Asian solidarity perished as China and India went to war in 1962 and the regional security architecture fractured along the Cold War divide with the formation of organizations such as the US-led Southeast Asia Treaty Organization (SEATO).

Despite changes in the political and strategic environment, these historical and cultural links continue to hold relevance in India’s interaction with the East Asia region. This was manifested at India’s Republic Day parade in New Delhi in January 2011 where the chief guest was Indonesian President Susilo Bambang Yudhoyono, harking back to the cordiality of the Nehru-Sukarno relationship of the immediate post-colonial period. ¹⁸ The voyage of Indian Navy’s only sailing ship, the INS Tarangani, across the sea-lanes of Southeast Asia this year also served to reaffirm India’s long-standing maritime linkages with Asia. ¹⁹Similarly, the Pan-Asian Nalanda Initiative, which aims to revive the 3,000 year old educational institution, as well as the liberalisation of the visa regime for Buddhist scholars to visit India, aims to reassert India’s cultural bonds with the region. ²⁰

However, potential exists for further leveraging India’s historical linkages with East Asia for commercial and strategic advantage through deepening cultural, transport, tourism and religious exchanges. The fact that there are no direct flights between Delhi and several East Asian capitals, (including Jakarta, Manila, Hanoi and Taipei) is evidence of continued deficiencies in improving people-to-people contacts. The Archaeological Survey of India could also do more to uncover and reaffirm India’s ancient cultural and trade contacts with East Asia.

What distinguishes the present engagement with East Asia from previous ones is the fact that it is operating on multiple fronts; India's historical, cultural and ideological links are being complemented by growing economic interdependence and multilateral cooperation from the movement of capital and human resources and a growing number of free trade agreements and cooperative security dialogues.

This multi-level interaction between India and East Asia has been evidenced by the growing institutionalisation of India’s relations with the region. India became a sectoral dialogue partner with ASEAN in 1992, a full dialogue partner in 1995, a member of the ASEAN Regional Forum in 1996, and a summit level partner (on par with China, Japan and Korea) in 2002. India acceded to ASEAN’s Treaty of Amity and Cooperation in 2003, which was a precondition to the country being admitted as a founding member of the East Asia Summit in 2005. India has also appointed an ambassador to ASEAN while Indian External Affairs Minister SM Krishna has called for India-ASEAN ties to be upgraded to a “strategic partnership.” ²¹

India is also a member of a number of track-two (non-governmental) dialogues such as the Council for Security Cooperation in the Asia-Pacific and numerous sub-regional forums, including the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Ganga-Mekong Cooperation Project (GMCP) and the Kunming Initiative in the Indochina region. India is also a participant of several cross-regional forums, including the BRICS (Brazil-Russia-India-China-South Africa) forum and the New Asia-Africa Strategic Partnership (NAASP), which aims to forge a ‘united front’ by developing world, emerging powers. India has also participated in functional initiatives of regional integration such as the Asian Energy Ministerial Roundtable that held its first meeting in New Delhi in 2005. This forum, which held its fourth meeting in Kuwait in April 2011, brings together the Asia’s major oil-consuming countries and engages in a dialogue with major oil-producing countries with the aim of forging a coordinated approach toward shared energy security concerns. ²²

Prime Minister Manmohan Singh has described India’s ‘Look East’ policy as “not merely an external economic policy (but) also a strategic shift in India’s vision of the world and its place in the evolving global economy.” ²³ This emphasis on the economic drivers of the policy reflects the fact that it emerged in the aftermath of India’s liberalisation reforms that were triggered by a foreign exchange crisis in 1991. However, despite the underlying economic rationale, India’s ‘Look East’ also has far-reaching strategic dimensions that are tied to broader interests such as energy security and climate change, counter-terrorism, nuclear non-proliferation, maritime security, combating Islamic extremism, stabilizing India's periphery, ‘Great Power’ relations and the emergence of a multi-polar international system.

Rhetoric still exceeds reality

Despite the exuberance of India’s deepening interaction with East Asia, the rhetoric of India’s interdependence with the region should not be exaggerated and the possibility of its marginalisation cannot be underestimated given the low base from which economic integration and strategic interaction is proceeding. For instance, though the India-Malaysia CECA aims to boost bilateral trade to $15 billion by 2015, India is presently only Malaysia’s 13^th largest trading partner. In contrast, China is Malaysia’s leading trade partner. ²⁴More broadly, India-ASEAN trade stands at over $55 billion (with a target of $70 billion by 2012), making India the Southeast Asian bloc’s seventh largest trading partner. ²⁵ Thispales in comparison with ASEAN’s bilateral trade with China ($293 billion), Japan ($160 billion) and South Korea ($74 billion). ²⁶Similarly, while the India-Japan FTA aims to double bilateral trade to $25 billion by 2014, India presently accounts for less than 1 per cent of Japan’s total trade while Japan is only India’s 11th largest trading partner. ²⁷

Driving the slow pace and superficial level of interaction between India and East Asia is the fact that sectors in which India maintains a comparative advantage – including information technology, pharmaceuticals and retail – have traditionally oriented themselves towards western markets. However, this is not be sustainable given a loss of consumer demand and market access in the United States and Europe amid the on-going public debt crises and the possibility of growing protectionist tendencies. This has added to the urgency of deepening India’s economic integration with East Asia, which has emerged as the focal point of the world’s economic dynamism. The region presently accounts for only a third of India’s total trade, which has the potential for further growth given forecasts that Asia as a whole will account for almost half of world GDP, a third of global trade and a quarter of global military spending by the end of the decade. ²⁸

A similar lack of depth can be seen at the strategic level. The fragility of India’s strategic role in the region is illustrated by the fact that the rhetoric of India forging an “arc of democracies” in Asia along with Japan, the United States and Australia, which emerged under the administrations of George W. Bush in the United States and Shinzo Abe in Japan, has since lost momentum. ²⁹ The Barack Obama administration’s focus on reviving the US economy, which entails maintaining cordial relations with China as the dominant emerging economy and leading holder of US government debt, has led to any discussion of forging an “arc” against China to be downgraded as a foreign policy priority in Washington.

A shift of priorities of the other countries in the so-called “arc” – Japan and Australia – has led to its further decline; the victory of the Labour Party in Australia’s general elections in November 2007 leading to Sinophile Kevin Rudd assuming the premiership (until June 2010), coupled with Australia’s growing resource interdependence with China has led Canberra to abandon any realpolitik notions of containing China. Similarly, Japan, while retaining its concerns over China’s hegemonic ambitions, has been preoccupied with internal tensions amid a string of weak and short-lived governments and structural economic deficiencies. Instead, both countries have opted for more inclusive regional architecture, as highlighted by Rudd’s proposal for an Asia-Pacific Community and former Japanese Prime Minister Yukio Hatoyama’s pro¬posal for an East Asian Community. Both countries’ notable absence from the Malabar-2008 naval exercises between the United States and India, which included the navies of Australia, Japan and Singapore in 2007, has reaffirmed their attempt to tone down their anti-China rhetoric though Japan was part of subsequent exercises. ³⁰

To be sure, both Australia and Japan remain wedded to the need to hedge against the rise of a hegemonic China as noted by their latest defence white papers. ³¹Both Tokyo and Canberra have opted for a lower profile bilateral security arrangement with New Delhi rather than the multilateral process proposed by the former Quadrilateral Initiative. ³²Furthermore, the first planned US-Japan-India trilateral dialogue in October 2011 reaffirm that the essence of the so-called “arc of democracies” initiative remains alive despite the toned down rhetoric. ³³Nonetheless, these sudden shifts in policy toward India by Asian powers, which is often reflective of changes in governments, party ideology or knee-jerk reactions to perceived changes in the strategic environment, illustrate that India’s engagement with East Asia is still not sufficiently institutionalized to warrant claims of India’s well-entrenched role in East Asia.

Reinforcing India’s superficial engagement with the region is the fact that while India has got a seat at the table of several regional forums, it has yet to shape the rules of the regional architecture of which it is a member. Geoffrey Pyatt, principal deputy secretary for South and Central Asian affairs at the US State Department has called on India to move beyond ‘Look East’ and instead adopt a ‘Be East’ policy by playing a more proactive role in shaping the trajectory of economic, security and possible eventual political integration. ³⁴ US Secretary of State Hilary Clinton echoed these views during a recent speech in the South Indian city of Chennai where she called on India to “not just to look east but engage east and act east as well.” ³⁵

Underlying New Delhi’s inability to be a proactive shaper of regional security is the fact that it lacks a strategic vision of its role in the region. This has fuelled its inability to exploit shifts in the regional strategic environment. For instance, China has demonstrated a growing proclivity toward abandoning its self-professed mantra of maintaining a low profile by adopting increasingly confrontational and aggressive posturing with neighbours, including Japan, South Korea and several Southeast Asian countries on maritime territorial disputes. ³⁶ This could offer India an opportunity to expand its influence in the East Asia region by deepening relations with countries along China’s periphery through offering assistance in ensuring freedom of navigation along vital SLOCs. However, New Delhi has so far remained on the side-lines of maritime territorial disputes in East Asia despite the fact that it has both the interest and resources to play a role. This includes the fact that more than 50 per cent of India's trade passes through the Strait of Malacca, the country maintains the world’s fifth largest navy and a Far Eastern Naval Command off Port Blair on the Andaman Islands that straddles the South China Sea, and the Indian Navy has an established record of acting in the regions noted by its humanitarian assistance following the Asian tsunami of 2004and Cyclone Nargis that struck Myanmar in 2008.To be sure, such a role in the region is unlikely to go unchallenged as noted by reports in July that the INS Airavat received radio contact from someone claiming to be the ‘Chinese Navy’ that requested the vessel depart disputed waters in the South China Sea after completing a port call in Vietnam. ³⁷

Similarly, India maintains a vested interest in a peaceful and denuclearised Korean peninsula given the long-standing symbiotic relationship between Pakistan’s nuclear weapons program and North Korea’s ballistic missile program. A regional conflagration would also have implications for the US-China relationship by altering the power dynamics in the region. North Korea's nuclear brinkmanship could also further delay India’s transition from a pariah nuclear power status by demonstrating the "dark side" of nuclear proliferation, even though India has a strong record on nuclear non-proliferation. ³⁸ Nonetheless, despite a brief role that India played as mediator between China and the United States during the Korean War, New Delhi has played a marginal role in bringing peace to the Korean Peninsula.

On the economic front, China has been the main recipient of outbound investment by Japan, South Korea and the United States. However, underlying geopolitical and historical tensions in China’s relations with these countries, coupled long-term concerns over the sustainability of China’s economic model given its aging population and rule by a single party with shaky legitimacy may make India a safer bet for the future. ³⁹ New Delhi’s inability to fully exploit this advantage by offering a more attractive investment environment has facilitated China’s emergence as the hub of regional production networks and supply-chains(See: Look East starts at home).

More broadly, India’s ‘Look East’ policy remains subject to the constraints of regional integration in East Asia, which remains a generally ASEAN-led process with an emphasis on minimal institutionalisation and non-confrontation as manifested in the Five Principles of Peaceful Coexistence and the ‘ASEAN Way’. ⁴⁰ Furthermore, deficiencies in the process of regional integration have resulted in a messy “noodle-bowl” process of bilateral free-trade agreements rather than inclusive multilateral mechanisms. ⁴¹ It has also resulted in a preference for shallow free-trade agreements (providing limited market access for selected products) over deep, comprehensive economic agreements (providing full market access for goods, services and investments).

In some cases, the region’s trust deficit has acted as a catalyst to draw India into the regional architecture. For instance, the decision by several East Asian states to push for India’s inclusion in regional forums such as the ASEAN + 6, East Asia Summit and ASEAN Regional Forum has been fuelled by the desire to dilute the growing influence of China in the Asian economic and security architecture. However, India’s interaction with the region has also been complicated by the fact that definitions of the “Asian region” remain a point of contention. Some countries regard India as an outsider to the ‘East Asian Community,’ defined as the states comprising the ASEAN + 3 (China, Japan, South Korea) while others have favoured a broader Asian community-building process within the East Asia Summit framework, which includes India. ⁴² Further complicating India’s role in East Asia is the fact that it remains excluded from the main platform of broader multilateralism, the Asia Pacific Economic Cooperation (APEC) forum. ⁴³

Finally, an obvious strategic implication of India’s growing engagement with East Asia, which has not been sufficiently articulated by New Delhi, is the fact that it will lead the country to increasingly cross paths with China. Whether this interaction is cooperative or conflictual will dictate whether both countries’ engagement with the region is a facilitator of regional stability or instability. For instance, India’s role in securing SLOCs could be perceived as both a confidence-building measure aimed at protecting the global commons and also a means of containing China’s hegemonic ambitions. These perceptions will be contingent on both countries’ conceptions of regional security and their perceived role within the regional security architecture.

For instance, growing strategic interaction by New Delhi with China’s traditional rivals (Japan, Vietnam, United States) will be perceived as belligerent by Beijing, as will Beijing’s interaction with India’s rivals or countries with which it has traditionally maintained difficult relations (Pakistan, Nepal, Sri Lanka, Bangladesh).This will set the stage for a more conflictual regional security architecture. On the other hand, more inclusive multilateral interaction by both countries within the region will fuel a more cooperative order though there will remain grey areas where open multilateralism is perceived as inherently belligerent by both countries. This is noted in the case of the maritime territorial disputes in the East and South China Seas where China remains averse to a multilateral approach and internationalising territorial disputes through involvement by the United States and by extension other so-called extra-regional powers, such as India. Similarly, India remains averse to admitting China as a full member of the South Asian Association for Regional Cooperation (SAARC), which New Delhi regards as a means to dilute its influence within a region that it perceives as its ‘strategic backyard.’ ⁴⁴ In general, open multilateralism will ensure a non-conflictual process of engagement by both countries within the East Asia region except on issues of vital strategic importance to New Delhi or Beijing where multilateralism may be perceived as a means to dilute and ultimately undermine their position on an issue.

As China and India continue to rise their bilateral relationship will have more significant implications for the regional architecture, as both countries acquire more tools and platforms to compete with each other. This was manifested in 2009 when China sought to block an Asian Development Bank loan to India as it included a package for the Indian state of Arunachal Pradesh, which China claims as Southern Tibet. ⁴⁵ On the one hand, a climate of mistrust that continues to permeate the bilateral relationship rooted in their resource competition, unresolved territorial dispute and economic imbalance will act as an impediment to the emergence of an Asian Community of states. On the other hand, rhetoric persists of an emerging ‘Himalayan Consensus’ amid both countries seeing eye-to-eye on a number of global issues ranging from climate change, to poverty reduction, the elimination of agricultural subsidies in industrialised countries and the need for a multi-polar world order. This implies that despite latent mistrust and sporadic tensions, the Sino-Indian relationship appears to be more nuanced and multi-layered than the US-Soviet rivalry of the Cold War. In this context, growing economic interaction and political cooperation on international issues of mutual interest are likely to coexist with mutual mistrust regionally.

‘Look East’ starts at home

Perhaps the most significant impediment to India’s ‘Look East’ policy lies within India itself as bureaucratic and political bottlenecks continue to make the country a complex and difficult investment and operating environment. While the conclusion of free-trade agreements with several East Asian economies have facilitated equity investment opportunities in India, local laws have yet to be amended to facilitate such investments. Bureaucratic delays continue to act as an impediment for FDI in several key growth sectors in India. For instance, despite the conclusion of the India-South Korea CEPA, Seoul’s largest investment in India– a proposed integrated steel plant project in the Indian state of Orissa by POSCO (Pohang Iron and Steel Company)– continues to face delays amid inconsistencies in India’s mining policy. While the $12 billion project was given conditional environmental clearance in May 2011, the state government has yet to transfer land for the project six years after the inception of the project in 2005 while the MOU between POSCO and the state government lapsed in June 2011. ⁴⁶

Despite the appeal of India’s stellar growth, growing middle class, high savings rates and dynamic private sector, Asian companies will continue to adopt a cautious approach toward investing in India in the absence of further progress in the implementation of India’s second generation of reforms. These include accelerating the process of disinvestment (privatisation) of public-sector utilities (state-owned companies), raising FDI limits (in such sectors as retail, defence and insurance), improving transport, power and agricultural infrastructure, relaxing fuel and agricultural subsidies, dismantling the industrial licencing regime, addressing issues of corporate governance and corruption and other reforms aimed at improving the basic operating environment in India, including the development of a more flexible labour market, improving judicial efficiency, strengthening enforcement of intellectual property rights, and improving the provision of education.

Reaching the full potential of India’s ‘Look East’ ambitions would also entail exploiting trade and transport linkages through states that share contiguous land and maritime borders with Southeast Asia, namely Bangladesh and Myanmar (Burma). With respect to Bangladesh, despite an improving bilateral relationship under the Awami League government in Dhaka, Bangladesh’s potential to emerge as a transhipment hub between East Asia and India still remains under-exploited amid bureaucratic delays and an underlying trust deficit between both countries. This was evidenced during Prime Minister Manmohan Singh’s most recent visit to Dhaka in September during which both sides failed to reach an agreement on allowing Indian goods to be shipped through Chittagong and Mongla ports as a quid-pro-quo for a lack of progress on water-sharing along the Teesta and Feni Rivers. Furthermore, a swing back toward another Bangladesh National Party (BNP)-led government could fuel a renewed deterioration in the bilateral relationship. ⁴⁷

Similarly, despite New Delhi’s adoption of a more pragmatic approach toward Myanmar through engagement with the military junta regime since 1993, it has remained second fiddle to China. More broadly, India has been unable to exploit its geographic advantage and unique historical position as an ally of Myanmar’s three poles of influence (military junta regime, popular democratic forces and ethnic groups) to push for a ‘middle path’ approach toward political reconciliation and economic reform, which the United States is now attempting under its policy of ‘principled’ or ‘pragmatic engagement’. ⁴⁸ While New Delhi has initiated several high profile infrastructure and investment projects in the country, emerged as Myanmar’s fourth-largest source of foreign investment and is one of only eight countries to regularly supply Myanmar’s government with armaments, this has failed to translate into a policy of expanded influence in the form of direct overland access to the resources and markets of Southeast Asia. ⁴⁹ This has been fuelled by persistent security concerns in India’s northeast and precarious political relations with China.

The deficiencies in India’s policy toward Myanmar have been illustrated by the slow progressin reopening the famous 1,000km Stilwell Road (previously known as the Ledo Road) connecting India’s Assam state with China’s Yunnan Province through Myanmar’s Kachin state. ⁵⁰ Despite China making improvements to the road infrastructure on its side of the border and the new quasi-civilian government in Myanmar voicing support for reviving the road, the Indian side has been dragging its feet on the project. ⁵¹ Concerns over cheap Chinese-made products flooding Indian markets have acted as a deterrent to improving overland transport infrastructure across the Sino-Indian border despite claims that the revival of the road could reduce the cost of Sino-Indian trade by 30 per cent while making India’s underdeveloped northeast into a major regional production and transhipment hub. ⁵² The persistence of several separatist insurgencies – Kachin Independence Organisation exercises de facto control over large swathes of the road route in Myanmar – have acted as a further deterrent to the region’s emergence as the bridge between India and East Asia.

Finally, India’s ‘Look East’ policy cannot realise its full potential in the absence of greater integration and cooperation within the sub-region where India resides. In South Asia underlying mistrust, notably between India and Pakistan, has resulted in SAARC only playing a limited role in forging regional integration. While intra-regional trade has blossomed in East and South-east Asia, accounting for over 50 per cent and 25 per cent of total trade, respectively, in South Asia intra-sub-regional trade has been stagnant at a dismal 4per cent, even though the South Asia Preferential Trading Arrangement (SAPTA) has been in place since 1995 and the South Asia Free Trade Area (SAFTA) went into force in 2006.⁵³ Steps have been taken to overcome sub-regional barriers toward regional integration, most notably through the exclusion of Pakistan from cross-regional forums such as BIMSTEC and GMCP. However, this has coincided with the parallel development of China playing an increasingly prominent role in South Asia’s economic and strategic affairs, as noted by China emerging as a leading trade partner, source of foreign investment and provider of military hardware to several countries in the region.⁵⁴ This has prompted concerns that rather than becoming a leading player in East Asia, India threatens to be displaced by China within its own neighbourhood of South Asia.

Conclusion

East Asia is becoming an increasingly crowded strategic space for India. The admission of the United States and Russia to the East Asia Summit during its meeting in Indonesia in November 2011could make it increasingly difficult for India to make its voice heard in the region. This comes as Russia is reasserting its position as a provider of military hardware and energy assistance to the region. Meanwhile, the United States has reasserted its role of ‘strategic balancer’ and protector of the global commons by reaffirming its bilateral alliance relationships in the region, most notably with Japan, South Korea and the Philippines, which have all had recent tensions with China.⁵⁵

The ‘Great Power’ competition in East Asia is emerging as a possible harbinger for a new multi-polar international order in which the United States, while the dominant player, will increasingly be challenged in the economic, political and security arenas by a more assertive and confident China, a reinvigorated Russia, and more independently acting Japan and Europe along with smaller countries that will play the role of fulcrums of competition over strategically important resources, whether these be tangible items such as oil and gas, rare earths, iron ore and other minerals, or less tangible resources such as sea-lanes, airspace, and the environment. Given India’s burgeoning resource needs and the need to sustain its development and growth targets through attracting foreign investment and accessing the rapidly growing markets of East Asia, India must revitalise its ‘Look East’ policy to ensure that it remains a major player in this region of growing strategic importance. To do so New Delhi will need to take its engagement with East Asia beyond mere interaction and confidence-building toward integration, agenda-setting and conflict resolution.

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