Eastern comfort, go for it

There are very sound reasons for developing greater economic integration with our Southeast Asian neighbours. Although India and the ASEAN member states were roughly at the same economic level five decades ago, our ASEAN partners like Malaysia, Singapore, Indonesia and Thailand have rapidly overtaken us. Unlike India, whose share in world trade has declined after independence, these countries have opened their economies to foreign trade and investment and developed their ports, roads, telecommunications and airports to standards that make our infrastructure look comparable only to African backwaters like Rwanda and Burundi.

Promoting free trade and investment with these countries has several advantages. It forces Indian industry to become more competitive. It provides Indians with better quality consumer goods at cheaper rates. It also compels our populist state governments to refrain from measures like free power, largely for the rural rich, by adopting sound economic policies like making electricity available to Indian industry at internationally competitive rates. When Malaysian Prime Minister Abdullah Badawi was queried about the dangers Malaysian industry would face from free trade agreements with huge countries like China and India, he did not seek to raise protectionist walls. He stated: “We can find a niche for ourselves by providing quality goods using high technology. We need to be competitive.”

Shortly before Manmohan Singh left for Thailand for the first BIMSTEC Summit, a concerted media campaign was initiated by interested parties and anonymous babus in Udyog Bhavan, asserting that the proposed Free Trade Agreement with Thailand and indeed all other free trade agreements initiated or signed by the NDA government should be “reviewed” and indeed discarded. It was even alleged that the Free Trade Agreement with Sri Lanka should be reviewed as it was hurting the domestic tea industry. Oddly enough, when I met planters in the Nilgiris last week, they stated that while there were fears about Sri Lankan tea imports a few years ago they were now confident that they could compete with imported tea.

There has been concern in friendly countries like Singapore and Thailand that the UPA government is more protectionist minded than its predecessor. Singapore’s concern was evident during the visit of its prime minister, Goh Chok Tong, who has for years been one of India’s best friends in ASEAN. New Delhi did nothing to address such concerns. It is apparent that within the UPA government there was opposition to moving ahead on the course charted by the NDA. Demands to “review” free trade agreements concluded earlier raise several issues. Should democratically elected governments refuse to honour commitments made by their duly elected predecessors? If India is to “review” earlier commitments, how could it object to demands by General Musharraf to “review” provisions of the Simla Agreement? If we cannot compete with tea imported from Sri Lanka, do we have any credibility in pretending to be a major power that merits representation in the UN Security Council?

China is all set to move ahead in implementing a Free Trade Agreement with ASEAN. While our annual trade turnover with ASEAN has risen to $12 billion, China’s turnover has reached $61 billion. We are finding it difficult to compete internationally with China even on a level playing field. How can we compete with China if its exports have duty free access to the rapidly growing ASEAN markets, while we are disadvantaged because of fears over signing free trade agreements with much smaller neighbours? We have long advocated a vision of an economically integrated Asia, constituting an Asian Economic Community. What will happen to this vision if the government succumbs to protectionist lobbies?

Manmohan Singh established that he is not only an economic visionary, but a mature statesman, when he overruled domestic opposition and concluded a free trade deal with Thailand. India should now move ahead in implementing free trade agreements concluded in SAARC and with ASEAN. His visit to Thailand established that under Singh’s leadership, India is willing to avail of the opportunities and meet the challenges posed by economic integration with the dynamic Asia-Pacific region. His main problems in restructuring the economy while moving in this direction will, however, arise from those addicted to populism and Marxist dogma. All those who wish to see an economically resurgent India wish Manmohan Singh well, as he strives to further reform and restructure the country’s economy.