Act East: Why Modi’s visit to Malaysia and Singapore matters

Prime Minister Narendra Modi is currently on his first substantive bilateral visit to Southeast Asia. In addition to participating in the 13th ASEAN-India Summit and 10th East Asia Summit (EAS) in Kuala Lumpur (KL) on November 21-22, he will also have bilateral visits to Malaysia and Singapore (Nov 23-24).

Although Modi visited Myanmar last November for the East Asia Summit and came to Singapore in March this year to participate in the funeral of Singapore’s iconic leader and statesman Lee Kuan Yew, his current travels are his first wide-ranging and substantial bilateral visits to the ASEAN region, signifying a new vigour in India’s Act East policy.

The ASEAN-India Strategic Partnership has acquired further momentum after enunciation of the Act East Policy by PM Modi last year at the 12thASEAN-India Summit in Myanmar. The policy conveyed a clear intent on India’s part to scale up its engagement with ASEAN countries in the wider Asia-Pacific Region. India and ASEAN today have 30 Dialogue mechanisms including a summit and seven Ministerial meetings: in External Affairs, Commerce, Tourism, Agriculture, Environment, Renewable Energy, and also Telecommunications.

The latest summit in Kuala Lumpur has renewed the commitment of both Asean and India to work closely in addressing terrorism, human and drug trafficking, cyber crime and piracy along the Malacca Straits.

The core of ASEAN-India Partnership is economic. ASEAN is India’s fourth largest trading partner today while India is at number six for ASEAN. Asean has a combined GDP of USD 2.57 trillion with a population of over 623 million and growth rate of 5%.

Bilateral trade was USD 76.52 billion in 2014-15, India’s exports being USD 31.8 billion and imports USD 44.7 billion.

Between 2007 and 2015, India invested USD 38.6 billion in ASEAN while ASEAN invested USD 32.4 billion in India. The economic integration process will get a further fillip with the entry into force of the ASEAN-India Agreement on Trade in Services and Investment in 2016.

India is focussed on enhancing connectivity with ASEAN in all its dimensions viz. physical, digital and people-to-people. In this context, the announcement by India of $1 billion soft loan package (lines of credit) for supporting physical and digital projects in ASEAN countries at the November 21 summit underlies India’s commitment to promoting connectivity and economic integration in the region.

Why Malaysia matters to India

On November 23, Malaysia will host PM Modi for a bilateral visit, which is expected to impart fresh momentum to New Delhi’s relations with Kuala Lumpur. Economic and commercial relations are the mainstay of bilateral relations with Malaysia. It is the third largest trading partner for India within ASEAN. India is the largest trading partner for Malaysia from among countries of the South, excluding China. Both countries implemented the Comprehensive Economic Cooperation Agreement (CECA) in 2011. CECA covers goods, services, investment and other areas of cooperation. An India-Malaysia CEOs Forum, comprising 18 CEOs from both sides, was set up in October 2010 to develop enhanced partnership and cooperation at the business level. This Forum meets regularly.

Bilateral trade between India and Malaysia in 2014 was US$ 13.84 billion (US$ 9.77 billion for Malaysian exports and US$ 4.07 billion for Indian exports). Trade remains significantly imbalanced in favour of Malaysia and below potential.

Malaysia is a key investor in India. It is estimated that, if the Mauritius route is also included, Malaysian investment could be US$ 7 billion. Malaysian FDI in India is primarily focused on Roads and Highways, Telecommunications, Oil & Gas, Power plants, Tourism and Human Resources. Notable among these are investments by Maxis Communications in Aircel, Axiata in IDEA, Khazanah in IDFC and Apollo Hospitals, AirAsia in civil aviation and several others. Malaysian construction companies’ largest presence outside Malaysia is in India.

As per Malaysian figures, Indian investment into Malaysia from 1980-2014 is US$ 2.31 billion. At present, there are more than 115 Indian companies including 61 Indian joint ventures, 7 Indian Public Sector Undertakings and 60 Indian IT companies operating in/from Malaysia. Their areas of operation are manufacture of textiles and yarn, drugs and pharmaceuticals, glass containers, automobile associated activities, specialty chemicals, steel furniture, rubber products, services in IT, education, biotechnology and healthcare. Major Indian companies like IRCON, Reliance, Kirloskar, Bajaj, TCS, Mahindra, L&T and Wipro are active in Malaysia.

Out of a total population of 30 million in Malaysia, 2.1 million are of Indian origin constituting the second largest PIO community abroad, next only to USA.

While economic and commercial engagement has increased, there is scope for improvement in security and defence cooperation. Potential in health and education sectors has also remained largely untapped.

A huge reception by the resident Indian community, which has become a standard feature of all Modi visits, will be organised on November 22.

Singapore Connect

It was expected that Modi will avail the first opportunity to visit Singapore because of the range, scope and breadth of our bilateral partnership. Singapore’s Prime Minister Lee Hsien Loong congratulated Prime Minister Narendra Modi immediately after his election victory in May 2014 and sent a letter inviting him to visit Singapore at the earliest opportunity.

Singapore’s Foreign and Law Minister K Shanmugam was the first Minister from any ASEAN nation to meet the new government in Delhi during his visit to India in June–July 2014. An active calendar of visits from both sides over the last year added momentum to bilateral relations – from India by External Affairs Minister Sushma Swaraj to inaugurate the celebrations of 50 years of establishment of diplomatic relations; chief Ministers of several States and Union Ministers; and visits to India by several senior Ministers from Singapore. The two Prime Ministers met on the sidelines of the East Asia Summit at Nay Pyi Taw on 12 November 2014. To mark the milestone 50 years of relations, Singapore’s President Tony Tan Keng Yam undertook a State Visit to India on February 8-11, 2015.

Modi’s visit to Singapore assumes an added significance due to celebrations of 50 years of diplomatic relations. The partnership will be upgraded to strategic relationship during Modi’s visit. In addition to dynamic and vibrant bilateral ties, Singapore has also been extremely supportive of India’s enhanced engagement with the institutional structure and framework of Asean.

Singapore occupies the 10th position overall and third position among Asean countries in terms of bilateral trade. The strength of Indian diaspora in the total population of Singapore of 5.5 million is about 350,000. Bilateral trade is about USD 17 billion. Since the early 1990s, Singaporean companies have been very active in India. Singapore has emerged as the second largest source of Foreign Direct Investment in India with about USD 35.9 billion (April 2000-June 2015) which is 13.9 % of total FDI into India. Indian investments in Singapore are about USD 37 billion.

Concluded in June 2005, the Comprehensive Economic Cooperation Agreement (CECA) with Singapore was the first such agreement to be signed by India with any country. It integrates agreements on trade in goods and services, investment protection, and economic cooperation in fields like education, intellectual property and science & technology. It also provides Mutual Recognition Agreements (MRAs) that eliminates duplicative testing and certification of products in sectors where there are mandatory technical requirements. CECA has been extremely effective in strengthening and deepening bilateral commercial and economic ties.

Singapore is located strategically. It enjoys an enviable status as a financial, aviation and maritime hub. The large two-way flow of investments, presence of a large Indian diaspora and its expertise in urban development and skills sector, make it a very valued partner for India. Singapore supports India’s permanent membership of UN Security Council and in all ASEAN led institutions.

5S mantra

Decision to further strengthen defence relationship and focus on the 5S plank will be adopted. The 5S plank consists of scaling up trade and investments, speeding up connectivity, smart cities, skills development, and State focus. Some other MoUs relating to cyber security, culture, training in urban management, etc. will be signed.

PM Modi will articulate his vision of the ”Act East Policy” at the Singapore Lecture to policy makers, think-tanks, academics and the diplomatic community where PM of Singapore is likely to be present.

PM will visit the Institute of Technical Education which is actively engaged in skills development, and also address the India-Singapore Economic Convention. Singapore has agreed to set up a Centre of Excellence in ITI in Udaipur in Rajasthan and another one in northeast India to train the trainers and in consultancy projects. An interaction with selected Singapore CEOs, and a gala cultural event with participation of 18,000 members of Indian diaspora are on the cards.

With the Chinese economy slowing down and India emerging as the fastest growing economy and likely to stay in that position for many years to come, Singapore, Malaysia and other Asean countries are looking to bolster economic and commercial bonds with India. The current international configuration offers several exciting opportunities to India to expand its ties with Asean. PM Modi’s visits to Malaysia and Singapore will provide a strong impetus to India’s relations with these countries as well as with Asean, and contribute significantly to the economic growth and prosperity of the region.

(Ashok Sajjanhar is a former ambassador of India and a commentator on foreign policy issues. This article has been written exclusively for India Writes Network)

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