India Central to Future Economic Community - Expert
By Tim Shorrock
WASHINGTON (IPS) — A surge of investment from nearby countries is transforming India into a major player in an emerging Asian economic community that could rival the European Union (EU) and North America in size and scope.
That trend was illustrated by the signing in June of a 12-billion-U.S. dollar investment deal between South Korea's Pohang Iron and Steel Company (Posco) and the Indian State of Orissa.
The proposed economic community, known to Indian technocrats by the acronym JACIK, would combine the economic might of Japan, ASEAN (the Association of South-east Asian nations), China, India and Korea, creating an enormous market of more than three billion people and a total gross national product (GNP) of over seven trillion dollars.
To some Indian economists, in fact, JACIK is the foundation upon which the nation's future growth depends.
"Out of this regional economy, a virtual community is emerging," said Nagesh Kumar, the director general of the Research and Information System for Developing Countries (RIS), a prominent think tank in New Delhi financed by the Indian government. "Regional economic integration could provide the engine of growth" for India well into the future, he said.
Kumar noted that trade between India and its Asian neighbours is growing rapidly. In particular, trade with China grew 79 percent in 2004. In 2002, bilateral India-China trade was five billion dollars. Over the next two years, it reached 7.6 billion dollars and then 13.6 billion dollars.
Trade with Korea has also grown substantially, and Korean firms are beginning to invest significantly in Indian technology, Kumar said.?? The RIS chief, who is a consultant to the World Bank and the Asian Development Bank, spoke earlier in June at a Washington forum on India and Asian regionalism organised by the Sasakawa Peace Foundation.
The concept of JACIK as a building block for a broad East Asian economic community is spelled out in detail in the New Asia Forum, a website sponsored by RIS. In a recent column, Kumar argued that India fits logically into Asia's economic division of labour.
"A number of these (Asian) economies, such as Japan and Korea, are facing increasing shortages of working-age, trained manpower due to the ongoing demographic transition," he wrote. "India, with its vast pool of trained work force, will be well placed to take advantage of the opportunity."
"At the same time," added Kumar, "India could bring its own synergies and dynamism to the grouping. A number of (the region's nations) also want India to play an active role in formation of an (East Asian community) and make it more balanced rather than the one dominated by China."
Elsewhere on its website, RIS argues that formation of JACIK would allow Asia to approach economic integration in a "phased manner." It concludes: "This is the approach that has been adopted by the successful regional blocs of today, for example the EU and NAFTA (the North American Free Trade Agreement) that started with an effective skeleton comprised of a core group of countries before expanding the membership later to others."
But India should not focus on Asian trade at the expense of its trade with the United States, argued Catherine Mann, a specialist on electronics and other high-tech industries at the Institute for International Economics in Washington. "The notion that Asian regionalism stands on its own does not hold true at this time," she said.
"It would be a potential mistake to believe that economic activity within Asia is sufficient to maintain high growth. There isn't sufficient internal demand to buy all they produce," added Mann.
She added that countries providing export platforms for high-technology products are at a disadvantage in the global economy. "It's much better (for development) to be a user of technology," she said. Diffusing a technology throughout an economy provides greater gains than exporting that technology for short-term economic gain, she added.
Kumar responded by saying "the United States doesn't have to be a member of every regional arrangement. The U.S. is not part of the EU, but that doesn't mean the Europeans are against the United States."
U.S. trade with India totalled 22 billion dollars last year, compared to U.S.-China trade of 231 billion dollars. Officials in Washington are eager to boost those numbers.
"Let me say that the United States is eager to collaborate with India to increase the level of trade to a level closer to the volume of trade we currently have with China," Deputy Commerce Secretary David Sampson said at a conference in Washington last week.
Kumar said India is reaping huge benefits from the technology developed by foreign investors. He noted that a Samsung plant in India has developed a mobile phone that can be adapted for the CDMA standard used in North America as well as the GSM standard commonly used in Europe and Asia. "High-value, critical parts of the production chain are taking place in India," he added.
At the same time, India is beginning to incorporate advanced technology throughout its economy. For example, the country is experiencing "huge advances" in the use of electronic forms for government, according to Kumar. "People used to take days to get the right forms, and now they're available on-line."?? Under a memorandum of understanding to be signed Jun. 22, Posco will build four blast furnaces in Orissa that will be capable of producing 12 million tons of steel by 2020. The deal will also provide Posco, the world's fifth largest steel producer, with access to Orissa's huge stockpile of iron ore supplies.
The pact provide a welcome boost to India, where steel demand is growing by six percent a year due in part to huge investments in infrastructure and the rapid growth of manufacturing industries, particularly automobiles. In recent weeks, global automakers GM, Toyota and Honda have all announced plans to increase their capacity in the fast-growing Indian market. (Inter Press Service)
