Dialogue  July-September  2007, Volume 9  No. 1

India 'Look East' Policy

Pranab Mukherjee

It gives me great pleasure to be here in Shillong. Meghalaya – the abode of the clouds - has always been a source of inspiration to writers, poets, musicians and artists and I am confident it will also inspire us in our discussions today.

To me, the theme of this seminar - "geography as opportunity" - can as easily be - "geography is opportunity". There are enormous changes taking place on the domestic and external fronts, including the advent of globalization, regional economic cooperation, and new policy approaches for development. In these circumstances, all regions of India have the enormous potential to exploit their particular geographical contexts, and bring significant benefits to populations residing in those regions in a much more direct and participative manner than before. In days past, deliberations on a plan of action to address these opportunities would have been carried out through closed conferences and meetings, mostly in New Delhi. However, in order to create a greater sense of awareness and participation, I asked the Public Diplomacy Division of the Ministry of External Affairs to initiate a series of interactive conferences and meetings that would receive inputs from the regions concerned. Recognizing the pre-eminent role of our North-Eastern states in the economic and political development of India, I decided to launch the initiative from this beautiful city.

Today’s event, the first of its kind, is informed by the thinking that the North-East, in particular, is one region into whose progress and development we can dovetail India’s "Look East" policy. I am happy that in collaboration with ICRIER, and the Omeo Kumar Das Institute of Social Change and Development, a conference will soon be held in this region on the challenges that regional and sub-regional cooperation could pose and how to address them.

Before I go further, let me make a point about the newly created Public Diplomacy Division in the Ministry of External Affairs. Some of you have already met with representatives of this Division for a preliminary round of discussions and might be wondering what public diplomacy is. Most of us are familiar with traditional diplomacy where government negotiate with governments. Globalization, however, demands a paradigm shift in the manner in which we conduct our foreign policy. The information and communication technology revolutions have virtually shrunk the globe. Geography is no longer a buffer. Events taking place across borders, near and far, impact in a much more direct manner on us. In some cases, such developments affect our bilateral and regional relations; in other cases, they affect our economic and social fabric. To develop a robust foreign policy response, we have strongly felt the need to institute a mechanism through which the public- by which I mean civil society, NGOs, academia, business and industry, and the media – is constantly apprised of the implications of a particular foreign policy initiative and, more importantly, of the strategic rationale behind it. This is the remit of the Public Diplomacy Division. It is our hope that at the same time as it informs the public of the broader rationale behind foreign policy, it will also be able to glean from such interactions the much required inputs on public perceptions of a foreign policy decision or initiative.

More than half a century ago, Pandit Jawaharlal Nehru visualized India as being the pivot around which issues relating to economics and security in South East Asia would have to be considered. India’s "Look East" Policy, which began unfolding in the early nineties, is informed by this vision. As the then Prime Minister, the late PV Narasimha Rao, had said, the "Look East" policy was not merely an external economic policy; it was also a strategic shift in India’s vision of the world and India’s place in the evolving global economy. Most of all, it was about reaching out to our civilizational Asian neighbours in the region who, by emerging as regional economic powerhouses, also presented us with a model worthy of emulation.

Developing ties with the Association of South East Asian Nations (ASEAN) has been a major objective of our "Look East" policy. Since 1992, our relations with this grouping have grown steadily. Beginning from a sectoral dialogue partnership, we became full dialogue partners in 1995 and were invited as Summit level partners in 2002. In 1996, we became members of the ASEAN Regional Forum. We have also signed a framework agreement for entering into a Free Trade Agreement and intensive discussions on this are continuing. In fact, earlier this year, I participated in the ministerial meetings of ASEAN in Cebu, Philippines and saw first hand the long way that our multiple relationships with this region have come since the Look East policy was initiated. Trade with ASEAN countries, for example, has risen from $2.4 billion in 1990 to $23 billion in 2005. We firmly believe that the ASEAN region’s abundance of natural resources, significant levels of technological skills and robust economic performance provides the ideal platform for synergies and closer cooperation between India and ASEAN. Indeed, our relationship with ASEAN should be of particular interest to this gathering since more than one state in the North East borders Myanmar, the only ASEAN member that India shares a land border with.

India is also part of the Mekong Ganga Cooperation Project, which also includes Myanmar, Thailand, Laos, Cambodia and Vietnam. The Project is primarily aimed at the development of overland trade, tourism, communication and transport linkages. In fact, at the meetings in Cebu earlier this year, India took over the chairmanship of this forum. In 2005, we also gained membership of the East Asia Summit (EAS) and, earlier this year, Prime Minister participated in its meetings in Cebu. This gives us the opportunity of further deepening economic integration with East Asia in line with the Prime Minister’s vision of an Asian Economic Community that would be an integrated market, spanning the distance from the Himalayas to the Pacific Ocean, linked by efficient road, rail and shipping services.

Finally, as part of the same endeavour to strengthen our linkages with the region and reinforce our Look East policy, a sub-regional grouping, called BIST-EC, comprising Bangladesh, India, Sri Lanka and Thailand was established in 1997. With the addition of Myanmar and, in 2004, of Bhutan and Nepal, the grouping came to be known as BIMSTEC or the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. This forum has identified six sectors for focussed cooperation: trade and investment, technology, transport and communications, energy, tourism, and fisheries. A framework agreement with the aim of establishing a Free Trade Area has also been signed and India is to host the next Summit.

Less than three months ago, India also hosted the 14th SAARC Summit and assumed the SAARC Chairmanship. This is an honour, but with it also come enormous responsibilities. We are committed to taking forward the Declaration issued by the eight Heads of State and Government that commits the region to a whole range of developmental issues and cooperation in the field of education, trade and commerce, rural development, social issues, energy and food security, environment, etc. Of particular significance in this regard is the call by the leaders for the implementation of the recommendations of the SAARC Regional Multimodal Transport Study, which is key to realizing the objective of connectivity within the region and beyond it to other neighbouring regions.

How does all this impact on the North East region? With the paradigm shift from state centralism to interdependence and global and regional cooperation, India is aware of the geo-economic potential of the North-Eastern region as a gateway to East and South-East Asia. I am convinced that by gradually integrating this region through cross-border market access, the North Eastern states can become the bridge between the Indian economy and what is beyond doubt the fastest growing and dynamic region in the world. As I mentioned earlier, geography is opportunity and the very geographical location of the North East makes it the doorway to South East and East Asia and vice versa, a doorway for these economies into India.

Let us consider some basic facts. The North-Eastern region is cradled by five Asian countries - China, Nepal, Bhutan, Myanmar and Bangladesh. Arunachal Pradesh, Manipur, Mizoram and Nagaland share a 1643 km long border with Myanmar; Assam, Meghalaya, Tripura and Mizoram share a 1880 km border with Bangladesh; Arunachal Pradesh, Assam and Sikkim share a 468 km border with Bhutan; Arunachal Pradesh and Sikkim share a 1325 km border with the Tibet Autonomous Region of the People’s Republic of China. The region’s difficulties as a loss of connectivity and market access following Partition in 1947 are well known. Today, however, benefiting from the new dynamic of regional cooperation, this enormous geographical proximity, along with shared culture and customs, provides the basis for considerable synergies. Let me give some examples.

We are involved in a variety of cross border development projects with Myanmar in diverse fields such as roads, railways, telecommunications, IT, science and technology, power, etc. These initiatives are aimed at improving connectivity between North-Eastern India and Western Myanmar and are expected to give an impetus to the local economies as well as bilateral trade. Probably among the most important is the Kaladan Multi-Modal Transit Transport Facility, which envisages connectivity between Indian ports on the eastern seaboard and Sittwe Port in Myanmar and then through riverine transport and by road to Mizoram, thereby providing an alternate route for transport of goods to North-East India. In fact, given the importance that Government of India attaches to this project, we have decided to fund it completely on our own. The upgradation of the 160 km Tamu-Kalewa-Kalemyo Road in Myanmar across Manipur has already been completed. Discussions are also on to start work on the Trilateral Highway Project, which proposes to connect Moreh in Manipur to Mae Sot in Thailand via Bagan in Myanmar. Efforts are also underway to improve infrastructure, particularly road links, at the second India-Myanmar border trade point at Rhi-Zowkhathar in Mizoram sector by upgradation of the Rhi-Tidim and Rhi-Falam road segments in Myanmar. Apart from developing road links, efforts are underway to have a rail link from Jiribham in Assam to Hanoi in Vietnam passing through Myanmar. We are also working on enhancing digital connectivity with this region, in particular through an optical fibre cable link between Moreh in Manipur and Mandalay in Myanmar.

With Bangladesh, there is already an agreement to run a passenger train service from Sealdah to Joydebpur and it is hoped that the service will start in the next few months. Of course, the bus services between Kolkata and Dhaka and Agartala and Dhaka are already operational. Similarly, India’s excellent relations with Bhutan and its involvement in the development and growth of Bhutan’s economy also translate into direct benefits for the North-Eastern states. Recent increases in the export of raw material and agricultural produce from this region to Bhutan have meant better opportunities for agriculturists and industries in the North-East. In fact, Jaigaon has grown and become prosperous with its position as the nodal point for trade with Bhutan. Mutually beneficial development of water resources between India and Bhutan is another characteristic of this relationship and most of the hydro-electric power that is being generated as a result from projects like Chukha, Kurichu and Tala is for the use of the Eastern and North-Eastern states of India.

I hope these examples have given you a sense of the priority that the Government places on the development of the North-Eastern region, including by integrating our foreign policy ends into the process. Of course, innovative foreign policy is not enough to solve our problems of development and growth and a policy framework in the domestic context also has to be in place to fully exploit the opportunity presented by geography. The development of the North Eastern States has been a central concern of the UPA Government. Accordingly, modifications in the North East Industrial Policy 1997 with the objective of matching the aspiration levels of these States and to ensure their speedy industrial development were brought about through the North East Industrial and Investment Promotion Policy 2007 after detailed discussions in the Committee of Secretaries, Group of Ministers and in the CCEA. At every stage, the suggestions of State Governments, recognized chambers and federations and other interest groups were debated at length. The policy, which has come into effect from 1st April this year, recognizes the need for a boost in investment in the North-Eastern region and aims to provide higher incentives for industrial development and investment promotion.

In a substantive departure from the past, the distinction between ‘thrust’ and ‘non-thrust’ industries made in 1997 has been done away with. The capital investment subsidy has been "enhanced from 15% of the investment in plant and machinery to 30%, The maximum ceiling of Rs 30 lakh on the subsidy has been done away with. The maximum limit for automatic approval of subsidy has been enhanced from Rs. 30 lakhs to Rs. 1.5 crores. Claims of subsidy above Rs 1.5 crore and upto Rs 30 crore will be decided by an Empowered Committee chaired by the Secretary, Department of Industrial Policy and Promotion. Proposals of subsidy beyond Rs.30 crore will be placed before the Union Cabinet for consideration and approval.

Since the services industry is not very well-developed in the region, incentives have also been provided to some specified sectors like hotels, adventure and leisure sports, nursing homes, vocational training institutes, etc. Considering the rich biodiversity of the region, ‘biotechnology’ has been brought under purview of the new Policy. Many of the existing useful provisions of NEIP 1997 like transport subsidy scheme, income tax exemption, interest subsidy, etc., have also been retained. These are all significant steps to invite larger chunks of investment into this region and I expect many more large projects to come up in this part of the country.

When we look at all these steps taken on the foreign policy and the domestic fronts, it is clear that increased economic activity will lead to robust growth and the welfare of the local population. Naturally, challenges remain to be addressed and one of the major challenges is to ease trade among geographically contiguous economies by taking further steps to reduce and remove trade and transport barriers. We need to urgently reduce transaction costs through a series of measures, including simplification of border trade procedures and further improving physical connectivity and action on these fronts, including in cooperation with our neighbours, is underway.

At the same time, I am aware that many fear that accelerated cooperation could in fact pose serious challenges. These concerns or challenge need to be listed out; we need to dwell on how they may be addressed and today’s exercise is part of this effort. There is, however, considerable urgency in this. The process of regional cooperation has begun and I can only foresee acceleration in the process. It is important, therefore, that we gear up for this and not get swept aside or away in the process.

Before I end, let me say that I look forward to hearing from you what needs to be done to optimise the benefits of regional and sub-regional cooperation among our people.

Dialogue (A quarterly journal of Astha Bharati)

Astha Bharati