2.7 Why Southeast Asia Needed an Asian Solution

Look at a political map of the world. The countries of Southeast Asia — Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Lao PDR, Myanmar (Burma) and Cambodia — sit at the meeting point of the Indian and the Pacific oceans. Before and during the Second World War, this region of Asia suffered the economic and political consequences of repeated colonialisms — first European, then Japanese during 1942–45. At the end of the war it confronted the problems of nation-building, the ravages of poverty and economic backwardness, and great-power pressure to align with one bloc or the other in the unfolding Cold War.

This combination was a recipe for endless conflict. Earlier efforts at Asian and Third World unity — the Bandung Conference of 1955 and the Non-Aligned Movement — had been generous in rhetoric but ineffective in establishing the day-to-day conventions of cooperation. So the Southeast Asian states reached for an Asian alternative of their own. They agreed that the region's small and medium-sized countries had to find a way to talk to each other before the great powers decided their future for them. That Asian alternative is the Association of South East Asian Nations — ASEAN.

2.8 ASEAN — Origin and Membership

ASEAN was established in 1967 by five founding members of Southeast Asia — Indonesia, Malaysia, the Philippines, Singapore and Thailand — through the signing of the Bangkok Declaration^? in the Thai capital. The Declaration set two clear goals. The primary objective was to accelerate economic growth and through that "social progress and cultural development". The secondary objective was to promote regional peace and stability based on the rule of law and the principles of the United Nations Charter.

Over the next three decades, ASEAN's tent grew to ten poles. Brunei Darussalam joined in 1984 (immediately after independence), Vietnam in 1995, Lao PDR and Myanmar (Burma) in 1997, and Cambodia in 1999. With Cambodia, ASEAN's membership reached ten — covering virtually every state in Southeast Asia, with the small exception of Timor-Leste which has applied to join.

2.9 The "ASEAN Way" — A New Style of Diplomacy

Unlike the European Union, ASEAN has shown little desire for supranational structures and institutions. There is no ASEAN Parliament with binding powers, no common ASEAN currency, no ASEAN court that can override national law. Decisions are taken by consensus, almost always behind closed doors, and only after long informal consultation. This trademark style is celebrated in the region as the ASEAN Way^? — a form of interaction that is informal, non-confrontational and cooperative. The respect for national sovereignty is critical to the functioning of ASEAN.

This style has its critics. They argue that the ASEAN Way is too slow, too quiet and too willing to overlook violations of human rights. Defenders reply that it is precisely the slowness and the silence that have allowed countries with very different political systems — communist Vietnam, monarchic Thailand, Muslim-majority Indonesia, the city-state Singapore — to sit at the same table and to keep on talking. ASEAN's first job, on this view, is not to fix the region, but to keep the region from breaking apart.

2.10 ASEAN Vision 2020 and the ASEAN Community

ASEAN has rapidly grown into a very important regional organisation. Its Vision 2020 set an outward-looking role for the bloc in the international community. The Vision built on the existing ASEAN policy of encouraging negotiation over conflicts in the region. ASEAN had already mediated an end to the Cambodian conflict, helped resolve the East Timor crisis, and was meeting annually to discuss East Asian cooperation.

In 2003, ASEAN moved a long way down the path the EU had pioneered. It agreed to establish an ASEAN Community^? based on three pillars.

ASEAN remains principally an economic association. While the ASEAN region as a whole is a much smaller economy compared to the United States, the European Union and Japan, its economy is growing far faster than all of these. This faster growth accounts for ASEAN's expanding influence both within the region and beyond. Both the United States and China have moved fast to negotiate FTAs with ASEAN, recognising it as the "swing region" of Asian trade.

2.11 India and ASEAN — From "Look East" to "Act East"

During the Cold War years, Indian foreign policy did not pay adequate attention to ASEAN. India was preoccupied with its rivalry with Pakistan and with the close partnership with the Soviet Union, while most of ASEAN was clearly aligned with the United States. With the end of the Cold War, that distance became expensive. India therefore made amends.

2.11.1 The Look East Policy (1992)

India's Look East Policy was launched in the early 1990s under Prime Minister P. V. Narasimha Rao. The policy aimed to reorient Indian diplomacy and trade towards the fast-growing economies of East and Southeast Asia. India became a Sectoral Dialogue Partner of ASEAN in 1992, a Full Dialogue Partner in 1996, a Summit-level Partner in 2002, and a Strategic Partner in 2012. India signed bilateral trade agreements with three ASEAN members — Malaysia, Singapore and Thailand. The ASEAN–India FTA (Free Trade Area for goods) came into effect in 2010.

2.11.2 The Act East Policy (2014)

In 2014, the Government of India under Prime Minister Narendra Modi upgraded "Look East" into "Act East". The new label signalled a shift from passive observation to active engagement: connectivity projects (the India–Myanmar–Thailand trilateral highway, the Kaladan multimodal corridor), strategic partnerships in maritime security, defence equipment exports to Vietnam and the Philippines, and disaster-relief operations in the Indian Ocean. In January 2018, India hosted the leaders of all ten ASEAN states as Chief Guests at India's Republic Day parade — the first time in the country's history that one event hosted ten Chief Guests together. A commemorative postage stamp was released to mark the silver jubilee of the India–ASEAN partnership.

2.12 ASEAN+3 and the Wider East Asian Architecture

ASEAN's "+3" arrangement adds three large East Asian economies — Japan, China and South Korea — to the ASEAN dialogue table. ASEAN+3 meets annually, while a wider East Asia Summit also includes India, Australia, New Zealand, the United States and Russia. India's Look East and Act East policies have led to greater economic interaction with all the East Asian nations — ASEAN, China, Japan and South Korea — making this a powerful network at the heart of Indo-Pacific economic diplomacy.

2.13 The Rise of the Chinese Economy

Let us now turn to the third major alternative centre of power — and India's immediate neighbour — China. China's economic success since 1978 has been linked to its rise as a great power. China has been the fastest growing major economy since the reforms first began. It is projected to overtake the United States as the world's largest economy by 2040. Its economic integration into the region makes it the driver of East Asian growth, giving it enormous influence not only in Asia but globally.

2.13.1 The Maoist Command Economy (1949–78)

The People's Republic of China was inaugurated in 1949 after the communist revolution under the leadership of Mao Zedong. The new China's economy was modelled on the Soviet Union — a state-owned heavy-industries sector built up from the surplus of agriculture. The economically backward, communist China chose to sever its links with the capitalist world. It had little choice but to fall back on its own resources and, for a brief period, on Soviet aid and advice. Because foreign exchange was scarce, China decided to substitute imports by domestic goods.

This model allowed China to lay the foundations of an industrial economy on a scale that did not exist before. Employment and basic social welfare were assured to all citizens, and China moved ahead of most developing countries in educating its citizens and providing better health care. The economy grew at a respectable 5–6% annually. But population growth of 2–3% per year ate into per-capita gains, agriculture failed to produce enough surplus to fund industry, and international trade remained minimal. By the early 1970s, China's industrial production was not growing fast enough; per-capita income was very low.

2.13.2 Zhou Enlai's Four Modernisations and the Opening to the US (1972–73)

In 1972, China ended its long political and economic isolation by establishing diplomatic relations with the United States. President Richard Nixon's secret visit to Beijing — arranged by his National Security Adviser Henry Kissinger — broke the freeze of more than two decades. In 1973, Premier Zhou Enlai proposed the "Four Modernisations" — agriculture, industry, science and technology, and military — as the new national programme.

2.13.3 Deng Xiaoping and the "Open Door" Reforms (1978)

In 1978, the new leader Deng Xiaoping^? announced the Open Door Policy^? and economic reforms in China. The policy was to generate higher productivity by attracting investments of capital and technology from abroad. China followed its own path in introducing a market economy. The Chinese did not go for "shock therapy" — the all-at-once liberalisation tried later by Russia under Yeltsin — but opened their economy step by step.

The state played — and continues to play — a central role in setting up China's market economy. Chinese leaders describe the system as "socialism with Chinese characteristics"^?: a market mechanism on the surface, but with the Communist Party of China firmly in command of strategic decisions, key state-owned banks, energy companies, and the entire framework of land ownership.

2.14 The Effects of the Reforms — The Great Leap Outward

The new economic policies broke the economy out of stagnation. Privatisation of agriculture led to a remarkable rise in agricultural production and rural incomes. High personal savings in the rural economy fuelled an exponential rise in rural industry. The Chinese economy — both industry and agriculture — began to grow at a faster rate. New trading laws and the creation of Special Economic Zones led to a phenomenal rise in foreign trade. China became the most important destination for Foreign Direct Investment (FDI) anywhere in the world. It built up large foreign-exchange reserves, which now allow it to make big investments in other countries. China's accession to the WTO in 2001 was a further step in opening its economy to the outside world.

From 1980 until around 2010, China grew at an extraordinary average of 9–10% per year. Hundreds of millions were lifted out of poverty — the largest reduction of poverty in human history. Today the city of Shanghai — once a sleepy port — is one of the global symbols of Chinese economic power. Yet not everyone has benefited equally.

2.14.1 The Costs of the Reform — A Mixed Balance Sheet

While the Chinese economy has improved dramatically, not everyone in China has received the benefits of the reforms. The downside has been heavy.

• Unemployment. Has risen sharply, with nearly 100 million people looking for jobs at any given time.
• Female employment and conditions of work. Female labour conditions in many factories are reported to be as bad as in Europe of the 18th and 19th centuries.
• Environmental degradation. Air, water and soil pollution have become severe; China is now the world's largest emitter of carbon dioxide.
• Corruption. Official corruption has increased alongside the new wealth, prompting recurring anti-corruption campaigns.
• Inequality. Growing gap between rural and urban residents, and between the prosperous coastal provinces and poorer inland provinces.

2.15 India–China Relations

India and China were the two great powers in Asia before the advent of Western imperialism. China had considerable influence on the periphery of its borders through its unique tributary system; at different points in China's long dynastic history, Mongolia, Korea, parts of Indo-China and Tibet acknowledged Chinese authority. Various kingdoms and empires in India also extended their influence beyond their own borders. In both cases, this influence was political, economic and cultural. However, the regions where India and China exercised influence rarely overlapped. The result was that there was limited political and cultural interaction between the two — and neither country was very familiar with the other when, in the twentieth century, they confronted each other for the first time as nation states.

2.15.1 Hindi-Chini bhai-bhai and the 1962 War

After India regained independence in 1947 and China expelled the foreign powers in 1949, there was hope that the two would come together to shape the future of Asia and the developing world. For a brief period, the slogan "Hindi-Chini bhai-bhai" ("Indians and Chinese are brothers") was popular. But two unresolved issues poisoned the relationship from the start: the Chinese takeover of Tibet in 1950, and the unsettled Sino-Indian border. In 1959 the Dalai Lama fled to India after a failed Tibetan uprising, and the two countries began to clash on the high Himalayan frontier.

In 1962, the relationship erupted into a full border war over competing territorial claims, principally in Arunachal Pradesh in the eastern sector and the Aksai Chin region of Ladakh in the western sector. India suffered military reverses. The conflict had long-term implications: diplomatic relations were downgraded until 1976, and Indian foreign policy was forced to abandon its earlier romantic view of China.

2.15.2 Cautious Reopening (1976–1988)

After the change in China's political leadership from the mid- to late-1970s, Beijing's policy became more pragmatic and less ideological. China was prepared to put off the settlement of contentious issues while improving relations with India. A series of talks to resolve the border issue was initiated in 1981. Rajiv Gandhi's visit to Beijing in December 1988 provided the real impetus for a new chapter in India–China relations.

2.15.3 Strategic Plus Economic Engagement (1988–present)

Since the end of the Cold War, there have been significant changes in India–China relations. The relationship now has both a strategic and an economic dimension. Both countries view themselves as rising powers in global politics and both want to play a major role in the Asian economy and politics. Both governments have taken measures to contain conflict and maintain "peace and tranquility" on the border. They have signed agreements on cultural exchanges, cooperation in science and technology, and have opened four border posts for trade.

India–China trade has surged. From just $338 million in 1992, bilateral trade crossed $84 billion in 2017 and continues to grow. Both countries have agreed to cooperate in areas that could otherwise create conflict, such as joint bidding for energy deals abroad. At the global level, India and China have adopted similar policies in international economic institutions like the WTO. India's 1998 nuclear tests, justified on the grounds of a threat from China, did not stop the growth of interaction.

2.15.4 Wuhan, Galwan and the Recent Downturn

High-level visits have continued. Prime Minister Narendra Modi's 2018 informal summit with President Xi Jinping at Wuhan, and Xi Jinping's return visit to India at Mamallapuram in 2019, were intended to put the relationship back on a positive track. But the more recent period has seen sharp friction.

• Border disputes: Standoffs along the Line of Actual Control, including the deadly Galwan Valley clash of June 2020 in eastern Ladakh.
• China–Pakistan Economic Corridor (CPEC): Indian objections that the corridor passes through Pakistan-occupied territory claimed by India.
• Counter-terrorism: China's repeated holds at the UN on India's moves to designate Pakistan-based terrorists.
• Trade asymmetry: A persistent trade deficit in China's favour, as Chinese manufactured goods flood Indian markets.

None of these issues, however, is likely to lead to outright war between the two. Talks to resolve the boundary question have continued without interruption, and military-to-military confidence-building measures are increasing. Indian and Chinese leaders and officials visit Beijing and New Delhi with greater frequency than ever before. Increasing transportation and communication links, common economic interests, and common global concerns — climate, multipolarity, reform of international financial institutions — should help establish a more positive and sound relationship between the two most populous countries of the world.