Suman Bery: Engaging with Asia

SAARC matters even more to us than ASEAN.

In a previous column in these pages ("The Year of Asia?", March, 2006) I had commented on the attention being paid to emerging Asia in various events this year, and the economic and diplomatic choices, opening for India.

Events over the last week have prompted me to return to this theme. As extensively covered in this newspaper, the Annual Meetings of the Board of Governors of the Asian Development Bank were held in Hyderabad during May 3-6. Participating on the sidelines, as I did, provided a valuable perspective on issues and controversies in the region.

Particularly interesting were the remarks of Prime Minister Manmohan Singh in his opening address. They were lent additional piquancy by the subsequent revelation of the correspondence between the UPA Chairperson, Mrs Sonia Gandhi, and the Prime Minister on the issue of regional Free Trade Areas (FTAs) some weeks earlier. For reasons that will become clear below, also relevant were the remarks of Ambassador Shankar Bajpai, who delivered the Eleventh Prem Bhatia Memorial Lecture in New Delhi on May 8.

Under its new President, Haruhiko Kuroda (formerly of the Japanese Finance Ministry), the Asian Development Bank wishes to become a leading champion of the cause of accelerated Asian integration. Press reports of the meeting suggested a sharp division between regional and non-regional member countries on this new thrust by the ADB. While ostensibly the division is on issues of organisational mandate and competence, the subtext is of a potential challenge to the intellectual dominance of the Washington-based international financial institutions (the World Bank and the International Monetary Fund) and of the US itself.

As widely reported, in his speech Dr Manmohan Singh strongly signalled India's interest in active engagement in the process of Asian integration, and endorsed the ADB's role in this endeavour. Speaking of a possible pan-Asian FTA, he urged the ADB to study "the benefits of such an economic agglomeration" and asserted that "India is determined to carry forward the India-ASEAN partnership, to an enlarged domain for making the 21st century a truly Asian century".

Despite this ringing endorsement from our Prime Minister, and despite the fact that this meeting was taking place in Hyderabad, one got the distinct impression that India was still marginal to the central thrust of discussion and debate on the Asian future. Concurrent with the ADB's annual meetings are the meetings of the so-called ASEAN +3 Finance Ministers. This grouping was formed after the Asian financial crisis of 1997-98 and brings together the Finance Ministers of the ten ASEAN countries together with the East Asian big three: China, Japan and Korea. This consultative process has real political commitment behind it. It has been the motor behind such initiatives as the Chiang Mai Initiative of Central Bank swaps, the Asian Bond Market Initiative and the Asian currency unit. What is remarkable is that despite severe political problems currently bedevilling relations between Japan and China and Japan and Korea (described in my earlier column), economic cooperation does not seem to be affected.

Against this background, one could interpret the Prime Minister's speech in several ways. First, the reference to ASEAN at several points in his address could be seen as a clear (and correct) signal that India considers the ASEAN region as an important and legitimate sphere of commercial and diplomatic influence. Second, the backing of the ADB as a legitimate forum for "studying" such integration, and the discussion, later in the same speech, of the role of international financial institutions in providing prompt reaction to financial crisis also could be read as a signal that India wishes to shift the forum for discussion of Asian matters to some broader grouping. A similar intention was reflected in India's participation in the East Asian Summit in Kuala Lumpur last December.

It is at this point that the intervention by Mrs Gandhi becomes relevant. On the one hand, there can be no denying that liberalisation of agricultural trade is sensitive throughout the region, most notably in the case of Japan and Korea. However, it is also true that both in negotiations with Thailand and with ASEAN India has developed a reputation for being more concerned with the form rather than the substance of trade liberalisation.

It is also at this point that the remarks of Shankar Bajpai in his Prem Bhatia Memorial Lecture become pertinent. In that lecture, Bajpai, quoting Pandit Nehru, enjoins us to "look at the map". Bajpai notes that we have more neighbours than most countries. Yet, despite our common cultural background we are ignorant of most of them and have poor relations with many. It is useful in this regard to compare India with other large regional economic powers such as China and Brazil. Both those countries have worked seriously to strengthen their economic ties with their neighbours (often by offering market access), as an enduring basis for projecting economic and diplomatic power on a wider scale. For whatever reason, this we have singularly failed to do.

India's presence and acceptability in the wider Asian arena would be enormously enhanced if she could speak confidently on behalf of what, slightly surprisingly, has emerged one of the fastest-growing regions of the world. Yet this unfortunately we are not in a position to do. A telling example is in the consultations that take place at the Finance Minister level. While as the ASEAN +3 mechanism seems vibrant, in the SAARC region senior participation by the lead countries has been relatively erratic. The decoupling of economics from politics noted for East Asia is sadly absent in South Asia.

As Shankar Bajpai correctly observes, India is now looked upon by the world as one of the key players on the international stage. He laments that we have yet to develop a suitable awareness both of the nature of that role and of the capabilities required to play it. It is all very well for us to go chasing after ASEAN in order to safeguard our economic interests. Our hand would be so much stronger if we could carry a supportive South Asia with us.

The author is Director-General, National Council of Applied Economic Research, New Delhi. The views expressed here are personal.