Comparative Analysis of Indian and Chinese economic engagement in ASEAN

Speaker: Dr. Dharish David

DISTINGUISHED LECTURE SERIES

Key Takeaways:

The Centre for East Asian Studies (CEAS) Department of International Studies, Political Science and History hosted a distinguished lecture series, titled ‘Comparative Analysis of Indian & Chinese Economic Engagement in ASEAN’ by Dr. Dharish David, associate faculty of SIM- Global Education Singapore, on 3rd August 2024. Dr. Dharish David provided a comprehensive introduction that set the stage for discussions. Dr. David began by outlining the ASEAN Economic Community (AEC) 2025 goals and emphasized the region's aspiration to become a highly integrated and cohesive economic area. He highlighted the significant role of ASEAN in providing a single integrated production base, facilitating seamless economic activities across member states. Dr. David underscored the importance of e-trade in this integration, marking it as a critical area of focus for future growth and cooperation.

Dr. David described ASEAN as a flexible organization characterized by a consensus-driven decision-making process, commonly known as the ASEAN Way. This approach allows for the ASEAN minus X formula, enabling member countries to proceed with initiatives even if not all members are ready to participate, thereby maintaining the organization's adaptability. He pointed out that while this consensus model fosters unity, it also poses challenges, such as adopting policies acceptable to all member states, even if they are not the most effective or efficient, which can lead to sub-optimal solutions.

The speaker also discussed the cooperation between India and China within ASEAN, noting that both countries increasingly focus on enhancing their regional economic ties. Overall, Dr. Dharish David's introduction provided a thorough overview of the opportunities and challenges faced by ASEAN in its quest for economic integration, highlighting the crucial roles of India and China in this dynamic regional landscape.

Business Overview of India-China Engagement in Investments and Trade Landscape

India and China play pivotal roles in shaping the trade landscape and investment climate within ASEAN, each employing distinctive strategies and fostering diverse economic relationships. India’s ‘Look East’ and ‘Act East’ policies have significantly enhanced dialogue mechanisms with ASEAN. Through forums such as the ASEAN-India Cooperation (AIC) and the ASEAN-India Free Trade Agreement (AIFTA), India has strengthened its trade and economic ties with the region. In contrast, China engages with ASEAN primarily through its ambitious Belt and Road Initiative (BRI), solidifying its position as ASEAN's largest trading partner. This engagement, however, is tempered by geopolitical tensions, notably the South China Sea issue.

China’s economic involvement in ASEAN is substantial, with trade valued at $722 billion. In comparison, ASEAN’s trade with the USA stands at $420 billion, and intra-ASEAN trade surpasses both, reflecting the region's robust internal economic integration. China’s investments in ASEAN, totaling $10.3 billion in public and private sectors, underscore its commitment to deepening economic ties. These investments are primarily channeled into manufacturing, real estate, and wholesale motorcycles with significant contributions from companies like CATL, GEDY, and Country Garden, particularly in Indonesia. Despite this, the USA remains a trusted investment partner, though China provides more capital.

ASEAN's economic growth is notable, with an average growth rate of 5.7%, and Indonesia leading with a GDP growth rate of 5.3%. Investment trends highlight Singapore as a key recipient, attracting $141 billion, followed by Indonesia and Vietnam. Japan and the European Union (EU) are major investors, with the EU investing heavily in Malaysia and Singapore. Investment from Japan focuses on transportation and logistics, while China dominates in manufacturing.

India’s trade with ASEAN is valued at $113 billion and India is benefiting significantly from this relationship. However, Indian companies, such as Tech Mahindra, have relatively modest investments in ASEAN, totaling $246 million. India's government does not lead business initiatives like China’s, reflecting a different economic strategy. India is cautiously deepening its engagement with ASEAN, indicating a gradual approach to monetary integration.

In summary, while China’s aggressive investment and trade strategies position it as a dominant player in ASEAN, India’s measured approach and policy-driven engagement highlight diverse paths to regional integration. The dynamic interplay between these two economic giants continues to shape ASEAN’s trade and investment landscape.

Conclusion

In conclusion, Dr. Dharish David's research highlighted India and China's complex yet pivotal roles in ASEAN's economic landscape. He emphasized the significant strides made through India's ‘Act East’ policy and China's Belt and Road Initiative, underscoring the region's substantial trade volumes and investment flows. Dr. David noted the challenges posed by ASEAN's consensus-based approach and India and China's varying degrees of engagement. His insights underscored the necessity for balanced cooperation and strategic partnerships to navigate ASEAN's path toward a cohesive and highly integrated regional economy.

Q  and A Session.

Q: How is ASEAN economically engaging with the African diaspora compared to China and India?

Answer: Dr. David focused on explaining how ASEAN is increasingly forging strong economic ties with the African diaspora through strategic initiatives, such as trade agreements, significant investments in infrastructure, technology, and agriculture, and enriching cultural exchanges. When compared with China and India, one observes distinct approaches. China has established a formidable presence with large-scale infrastructure projects and substantial financial aid. At the same time, India draws upon its deep historical ties and focuses on capacity-building and knowledge transfer. This nuanced approach supports balanced, sustainable growth and complements the more direct strategies of China and India, providing a comprehensive and diversified pathway for Africa’s economic development.

Q: How are India and China's political engagement and cooperation in ASEAN developing, given their personal internal conflicts?

Answer: Despite their conflicts, India and China navigate a pragmatic approach in ASEAN. Both nations recognize the strategic importance of ASEAN and engage in multilateral dialogues and economic partnerships within the region. Their cooperation focuses on shared interests like trade, infrastructure, and regional stability. This engagement shows a complex but practical collaboration where geopolitical rivalries are set aside in favor of mutual benefits within ASEAN's framework.

Q: How do conflicts at the bureaucratic level affect policies related to India's engagement in ASEAN, focusing on the government's role?

Answer: Dr. David maintained that bureaucratic conflicts can hinder India's ASEAN engagement by causing delays in policy implementation, misalignment of strategic priorities, and inefficiencies in decision-making. The government's role becomes crucial in ensuring coordination and resolving internal disputes to maintain adequate and cohesive engagement with ASEAN.

Q: How does India's attitude towards businesses impact India’s inward investment compared to China?

Answer: Multiple times, Dr. David discussed how India’s supportive yet cautious attitude towards businesses impacts inward investments by emphasizing regulatory reforms and strategic partnerships, particularly with ASEAN countries. In contrast, China’s more aggressive investment strategy and state-backed projects often attract more immediate capital. This difference means ASEAN investments in India are growing steadily but more conservatively than China’s extensive engagement. India is not ready for all kinds of open investments like China. All leading economies of East Asia, like Japan, Korea and China, the governments take major initiatives in pushing business growth forward with investments abroad, while in India, it's the businesses that lead first, paving the way for government intervention. This attitude makes the business growth more reactive than proactive in the Indian context, missing out on much needed opportunities with China in the ASEAN forum.