Bilateral relations with India

It is significant to note that India has recently been visited by the leaders of the United States, China, France and Russia. In July, the Prime Minister of the United Kingdom was also a visitor. A former foreign minister of India calls the diplomatic rush to New Delhi a reflection of the importance world powers attach to India. A foreign diplomat commented that they did not come as tourists to visit the majestic Taj Mahal. Parenthetically, I was told by my tourist guide last November that the US secret service did not allow the American President to visit the Taj Mahal. 

Economics is clearly a strong motivation for these recent visits. India is now the second fastest growing economy after China and the third largest economy in terms of purchasing power. By 2035, India is projected to become the world’s third largest economy after China and the US. These recent visitors certainly came with a lot at stake. China-India bilateral trade is nearing the $60 billion mark. I am told that India’s service exports to the US have reached $10 billion. Indian companies are the second fastest growing investor and they support 57,000 American jobs. Bilateral trade with France rose by 21 percent (amounting to 3.5 billion euros) as of June 2010.

President Obama’s recent visit is particularly noteworthy considering his posture towards India when he was a presidential candidate. He questioned India’s control of Kashmir. US Undersecretary of State William Burns statement prior to the visit reassured New Delhi of the importance of bilateral relations: “The simple truth is that India’s rise and its strength and progress on the global stage is deeply in the strategic interest of the US”. India was further reassured during his November visit when he said: “”I can say today — in years ahead, I look forward to a reformed UN Security Council that includes India as a permanent member”. Clearly, America’s new posture is indicative of their desire to balance their relations between the second largest economic power, China and India, the other rising power in Asia. Many believe that India should take a more active role in East Asia to balance China’s growing influence.  

Now let us look at India from a Philippine perspective. The numbers may not be impressive but the potential is certainly there. Bilateral trade amounted to $987 million last year according to Indian statistics, accounting for less than two percent of India’s total trade with ASEAN which reached $60 billion. Still that made India our 21st largest trading partner. In 2008, 35,000 Indian tourists and businessmen visited us, while 60,000 Indians reside in the Philippines. Potential areas of cooperation include construction, road and transport management, steel, machinery, information technology, pharmaceuticals and biotechnology. 

The highlight of our business relationship are the 20 plus Indian BPO companies operating in our country. This is a curious but beneficial case of an outsourcer outsourcing. This may foretell of a powerful alliance between the major BPO and customer service providers of the world. I will cover this in greater detail in another column.

As I have stated before in this column, we must enhance our relationship with India at an accelerated pace. Our ASEAN neighbors have been aggressively pursuing their economic ties with India. India is ASEAN’s seventh largest trading partner and sixth largest investor. Our share of that pie is just a sliver at the moment. Singapore and Thailand have economic partnership agreements with India and Malaysia is soon to follow suit. To date, we have advanced with glacial speed. It is my understanding that the equivalent of a Joint Bilateral Commission is still in the process of being set up. Regrettably, the Indian side has postponed the planned meeting several times at the eleventh hour.

I would suggest that the Aquino government can accelerate this bilateral relationship. A visit preceded by an exchange of senior officials would be helpful. The ASEAN-India Dialogue should certainly be taken advantage of as an opportunity to engage the Indian political and economic leadership. It is interesting to note that 36 Indian citizens have received the Ramon Magsaysay award. They may provide a useful conduit for strengthening bilateral relations, as are the 60,000 Indians residing in the country.

Recent China activities

A China-ASEAN fund recently financed, through equity investments, the acquisition of the dominant inter-island shipping company, Aboitiz Transport. It will be managed by Negros Navigation, of which a significant portion will now be owned by the China-ASEAN Marine, BV, a wholly owned subsidiary of the China-ASEAN fund and KGL, a Kuwait Fund. This is a significant move by a Chinese sovereign wealth fund or indeed Chinese investments in the Philippines. Considering the fallout from the ZTE case as well as several aborted investment plans including in the agriculture sector, this may signal renewed confidence in the Philippine economy by China.

From the Philippine perspective, this may likewise represent a vote of confidence in China’s so-called “peaceful rising”. In the past, Chinese acquisitions were often viewed with suspicion because of concerns about “national security”. The Aboitiz deal – which will now control the majority of inter-island navigation – hardly caused a ripple even amidst reports that a lighthouse has just been built by the Chinese in the disputed area of the Spratley’s. It will be recalled that in previous years, China’s attempt to acquire major assets abroad like UNOCAL in the US and Noranda in Canada, were met with opposition. It seems that this no longer is the case as China embarks on an acquisition spree worldwide.

As they say in Pilipino: Abangan.