Pakistans Vision East Asia

Published Date: 02 Nov 2017

Introduction

As regards foreign policy, Vision East Asia is a rather new component in Pakistan’s strategy. Long-term financial aims, national interest, strategic and security issues specifically in post 9/11 scenario necessitate it. Though it is not a fresh concept, but it has emerged lately as such. It can be termed as an overdue reciprocation of Indian influence, establishing coalitions and stakes in the region.

Pakistan has been found lacking in formulation of policies and implementation of plans to accrue economic benefits despite the fact that its associations with South East Asian states have remained on a good note in the past. In contrast, our adversary did not enjoy warm relations with the states in the past, as a result of its undesirable influence in Cambodia. But USSR’s disintegration and Indian financial aspirations forced a shift in Indian economic policies. Thus, it focused on the region’s markets with certain reforms opening up its economic potential in the international arena. India also improved diplomatic ties with the region as a means to improve trade aiming at massive inward movement of capital to India. In addition, such arrangements were implied to enhance bilateral diplomatic ties as well. Pakistan however, is better placed as far as measures to improve its relations with South East Asia are concerned, as it correlates with it being a muslim country, as well as absence of any territorial issues.

Due to its alliance with America, Pakistan has always benefited economically, with suitable growth rate, however, its exports have not been up to the mark. Furthermore, post September 11, Pakistan was forced to consider other options should the US discontinue its economic help; hence, the need to explore East Asian market for bi-lateral trade.

Since independence, Pakistan and most of the East Asian region faced similar problems, although countries such as Malaysia, Indonesia, and Singapore had resolved their political differences by the mid-1960s. Pakistan still suffers from political instability, worsened by sectarian vehemence. Security considerations, economic co-operation, and geographical proximity led to Pakistan joining the South East Asian Treaty Organization (SEATO) in late 1954. This later came to be known as the Manila Pact, which was a bloc against the Communist threat to the Asia-Pacific region during the 1950s and 1960s. SEATO became a political group, focusing on security. Pakistan, however, became disillusioned with it, especially during the Indo-Pakistan war of 1965. The treaty eventually became defunct in 1977.

More recently, Pakistan has begun to focus on the ASEAN region in economic and trade terms, attempting to become reacquainted with the region. In 1993, the Pak-ASEAN Sectoral Partnership was formed on the insistence of Malaysia, Indonesia, and Brunei. Thereafter, Pakistan made active efforts to raise its profile in the region through increased diplomatic and official interactions as well as through trade and investment linkages.

Aim. To carry out an in-depth study of relations of Indonesia and Malaysia with Pakistan; keeping Indian and US factor under consideration, identifying challenges and opportunities for Pakistan, suggesting policy guidelines.

PART I

Pakistan’s Vision East Asia

Pakistan’s Vision East Asia strategy, developed in 2003 was designed to replicate the good practices that were used to drive the East Asian miracle economies, on the premise that Pakistan continues to have good diplomatic relationships in the area, particularly avoiding political and ideological confrontations, while maintaining its commitment to the war on global terrorism and revising its trade policy. The key reasons behind Pakistan’s strategy are its desire to learn from the economic development of Japan, especially during the 1950s and 1960s, and in the post-Cold War scenario; the building of modern mega projects and accelerating economic growth; the reassertion of the power of the East; and global economic changes wrought by the WTO.3 Japan is an important focal point in the vision, for the purpose of emulating its example in terms of economic and social development; moreover, it has been central to Pakistan’s economic interests in the whole East Asian region for the past six decades. Pakistan played a crucial role in the economic recovery of Japan in the late 1940s into the early 1950s, emerging as a major trading partner with Japan, with the latter signing its first post-war trade agreements with Pakistan in 1948.  Although it was believed that Pakistan would emerge as a second generation Asian tiger, it failed to live up to this expectation and has now become one of the slowest growing economies in the region. 

Rationale for Vision East Asia

There are a number of reasons and factors that have pushed Pakistan to adopt Vision East Asia. Some of notable factors are:-

Changes brought up by the end of Cold War.

Building modern mega projects and accelerate rapid economic growth.

Ascendancy sentiments of Pan-Asianism.

Re-asserting the East.

Global economic changes under the World Trade Organization (WTO).

Therefore, it is understandable as to why Pakistan needs to look toward the developed economies of East Asia. Nobuaki Tanaka, Japanese Ambassador in Pakistan, dealt with this subject and gave rationale for Pakistan to pursue a Look East policy toward the region of East Asia. One of the reasons he mentioned was that Pakistan must pursue this policy to rapidly transform its economy from an elitist economy to pro-poor centred economic growth and progress. Pakistan is the worst case of inequitable economic growth and development if its comparison was made with the rest of East Asia countries. Tanaka said that instead of a passive policy toward East Asia, Pakistan must develop an active policy toward this region.4 So Pakistan could learn a great deal of lessons for an equitable economic development from the countries of East Asia.

Furthermore, the doctrine of Pan-Asianism is well articulated in the ideals of the creation of Pakistan. However, this has not been well reflected in country’s foreign policy over the last 57 years. Japan is an important country in East Asia. East Asians believe that Pakistan’s Asian identity was not well established. They think that Pakistanis mainly perceive of their relationship with the Middle East and are confined to their problems in South Asia. In spite of these contradictions, Pan-Asianism, as incorporated in Pakistan’s ideals, and Japan’s move to create prosperous and peaceful Asian identities is identical in nature. Pan-Asianism surpasses regionalism, which makes it more global in nature. Pan-Asianism may overtake regionalization of Asia5 in the age of increasing globalization with a leading role-play of Japan, which in turn, keeps security alliance with the United States. Nevertheless, the possible re-assertion of Pan-Asianism must be viewed in the context of the San Francisco Peace Treaty of 1952, which means that Japan must remain militarily ineffective and keeps a low political profile, while at the same it should be more assertive economically and wherein Pakistan pursues solely an economic policy in the region of East Asia. After achieving high growth level by Japan, South Korea, Singapore, and Malaysia, for instance, there are strong feelings of recurrence of Pan-Asianism among these countries.6 Pakistan must add this new dimension in its foreign policy from its traditional interest that mainly lies in South Asia and the Middle East, to East Asia in this fast changing global order. An assertive policy and greater involvement of Pakistan toward East Asia would fully realize the ideals of Pan-Asianism; further enhancing Pakistan’s desire for a pro-poor economic growth, development and progress in the post Cold War rapidly changing world.

It must be recalled here that Pakistan’s Vision East Asia has not been a new idea or realization altogether. In fact, the idea is as old as the Japanese economic and social development. Since the Meiji Restoration in Japan in 1868 that ensured industrial modernization of Japan under a constitutional monarchy, Japan made tremendous headways in the field of industry and technology and by the turn of the Twentieth Century, Japan emerged as one of the industrialized countries challenging the Western economic, military, and political supremacy. Asian people greatly admired Japan and wished to emulate Japan’s modernization. For instance, Rabindra Nath Tagore, Allama Muhammad Iqbal and Mahatama Gandhi greatly appreciated Japan’s modernization and industrialization and wished that the people of the Indian Sub-continent should also emulate the example of Japan to modernize their system.

PART II

Pakistan’s Relations with Malaysia and Indonesia

Pakistan Relations with Malaysia

Malaysia is an ideal role model for many developing countries today. Although there are many reasons behind this success story, perhaps the most important sustaining feature has been the ability of the state and private sector to work in cohesion towards common goals. Interestingly, soon after the Second World War, both Pakistan and Malaysia emerged with similar features: a predominately rural and enclave economy and a highly hierarchical and custom-bound society;7 both countries also enjoyed rapid rates of economic growth, especially in the 1960s. Malaysia, however, was able to sustain this in the long term (although it did face problems during the East Asian financial crisis of 1997), while Pakistan failed to do so.

Diplomatic relations

High-profile visits between the countries were initiated in the early 1960s and laid the foundations of strong diplomatic and political ties as well as the promotion of trade and commercial relations. Although Pakistan remained neutral role during 1963-66 Malaysian-Indonesia confrontation, Malaysia failed to reciprocate the gesture during Pakistan’s war with India in 1965, where it was an active Indian supporter. Consequently, Pakistan severed ties with Malaysia. However, these ties were restored the following year due to the friendly intervention of the Shah of Iran.

From 1966 to 1979 there were no high level exchanges. Later, during an official visit by the Malaysian Prime Minister, Dato Hussein bin Onn, to Pakistan, a "Cultural Agreement", the "Avoidance of Double Taxation Agreement", and the "Economic and Technical Co-operation Agreement" were signed, thereby strengthening the economic ties between the countries. During the 1980s, this relationship matured with a need identified for greater mutual co-operation and boosting of economic ties, and a Joint Economic Committee was set up. In 1993, when Dr Mahathir visited Pakistan, he discussed bilateral matters, which included the promotion of trade and the export of Pakistani manpower to Malaysia. It was at this point that Pakistan expressed an interest in learning from the Malaysian development experience. More recently, visits between the two countries have taken a visibly proactive turn, with regular visits from both sides, in particular since the establishment of the Organization of Islamic Countries (OIC) and the World Islamic Economic Forum (WIEF). It was at the latter that the free trade agreement was finalized in November 2006. 

Regional Co-operation. Statistics show that nearly sixty per cent of trade is carried out on the basis of bilateral and regional trading agreements.8 Pakistan and Malaysia are bound by several regional organizations, such as the OIC and ASEAN, and, more recently, have shared a common platform–the WIEF–to cooperate on good practices for both government ministers and the corporate world. In compliance with Vision East Asia, Pakistan is now establishing or strengthening its existing ties with East Asian countries. At the annual ASEAN Summit in 2003, the leaders decided to establish the ASEAN Economic Community (AEC) by 2020. This entity will function as a single market and production base with free flow of goods, services, investment, skilled labour, and capital.9 Pakistan needs to play an active role in this region, as alluded to many times by the President and Prime Minister on their visits to the region. Pakistan has been a sectoral partner of ASEAN since 1996, but not a full dialogue partner because economic relations failed to reach required levels. Interestingly, Pakistan became a member of the Asian Regional Forum (ARF) in 2004 only at India’s insistence.

Economic growth. Post independence, both countries have experienced similar overall rates of economic growth, with Malaysia growing at an annual average rate of 6.6%, compared with Pakistan’s 5.3%. Interestingly, Pakistan experienced faster rates of economic growth during the 1960s and 1980s whereas the Malaysia’s economy overtook Pakistan’s during the 1970s and 1990s. Through these high rates of economic growth, there has been a deep and quick structural transformation of the Malaysian economy and society, something that Pakistan has not achieved. This is because, throughout its history, Pakistan’s high economic growth rates have led to inequitable income distribution and further distortion in the society, with adverse effects on the level of poverty. There is also a significant gap in human development between the two countries, with Malaysia clearly leading the way with its government undertaking an interventionist role in its public policy to achieve its twin objectives of economic growth and poverty reduction. Pakistan’s policies, on the other hand, have been inconsistent. Since independence, the Malaysian economy has greatly benefited from political stability, with the exception of the 1969 ethnic riots.

Some of the key lessons10 from the Malaysian experience are as follows:- 

A steady political climate as a well as flexible policy regime have been the key driving factors enabling Malaysia to fully utilize the opportunities reaped from integrating into the global economy.

The impressive economic growth since the 1970s has been greatly facilitated by the Malaysian government’s institutional support, through the encouragement of high levels of savings and investment; prudent fiscal and monetary policies; and investment in physical infrastructure, education, training, and basic health care.

The openness of the Malaysian economy to trade and foreign investment and flexible domestic markets has also facilitated the impressive growth trajectory.  

In comparison, Pakistan has failed to sustain its periods of high economic growth and translate them into improvements at the macro and micro levels of the economy because of following:-

The inability of successive governments to stabilize and improve the political climate and the lack of willingness to continue and deepen economic policies and reforms, thus leading to unstable macroeconomic conditions.

The government’s inability to encourage high levels of domestic savings and investment; and to invest substantially in physical and social infrastructure.

The high levels of protection to domestic industries and discrimination against primary production and exports have impeded the opening up of the economy to global competition.

Trade

Malaysia’s trading regime has traditionally focused on the international arena. It remains an example of a dynamic transformation from a primary producing economy into a rapidly industrializing one. During the past three decades, Malaysia has taken concrete steps to enhance the openness of the economy, and is to date one of the most open economies of the world. This outward-looking approach has certainly paid dividends in terms of rapid economic growth and development, but is has also made the economy somewhat vulnerable to external fluctuations.

Malaysia is the leading exporter of several primary commodities, which include rubber, tin, and palm oil, as well as electrical and electronic goods. Export diversification has considerably strengthened the export base, leading to the emergence of palm oil and tin to the export range, which have since become the principal export commodities. There is considerable concentration of trading partners with the major import sources acting as the main export destinations: Singapore, Japan, the United States, and the European community accounting for nearly 73 per cent of the Malaysian export market.11 This trend is changing, with trade with the European Community declining. Since 1998,12 Pakistan has moved away from a strong protectionist inward-oriented import substitution trade regime to a more liberalized one, through tariff cuts and rationalization. Moreover, it has taken concrete steps to remove import quotas, import surcharges and regulatory duties. The state has curbed the ability of its enterprises to control the import and export of certain products. Extensive improvement has been made in simplifying the tariff structure as well as in compressing tariffs, thus reducing the anti-export bias of the trade regime considerably.

The two countries have signed both commercial and economic pacts, in order to simplify co-operation in these spheres. Such efforts were set in motion when both countries signed a trade agreement in 1987. In 1995, treaties were signed to protect investment, technical, scientific, and cultural agreements. Interestingly, earlier than these, an Air Agreement was signed in 1973. Pakistan signed the Agreement on Promotion and Protection of Investment in 1995 and the Avoidance of Double Taxation Agreement as early as 1982. This reflects Pakistan’s keenness to nurture its economic relationship with Malaysia.

 

Bilateral trade with Malaysia13               (US $ millions)

Year

Exports

Imports

Total trade  volume

Trade balance

2000-2001

50.706

429.220

479.926

378.514

2001-2002

51.759

456.320

508.079

404.561

2002-2003

78.457

567.074

645.531

488.617 

2003-2004

83.480 

602.525

686.005

519.045

2004-2005

59.77 

 621.31

681.093 

561.535

As it is evident from the above table, Pakistan’s trade balance has steadily deteriorated; this is mainly due to Pakistan’s dependency on Malaysia for palm oil and for machinery for its industrial sector. At present, the only alternative for palm oil is Indonesia. As far as edible oils are concerned, there seems to be no alternative to Malaysia in the near future.

Equally important, Malaysia has a natural advantage in rubber and timber exports over Pakistan. Pakistan’s exports to Malaysia include rice, surgical goods, leather, and textiles. This is a limited range of exports and is further worsened by its low level of elasticity. The lower the level of elasticity, the less the level of exports are unaffected by price changes. To fully reap benefits from trade, Pakistan needs to broaden and deepen its exports to Malaysia. However, this is clearly insufficient to match the export capacity of Malaysia and correct the trade balance.  Interestingly, Pakistan is Malaysia’s fourth largest trading partner in the OIC, yet the total trade between Malaysia and Pakistan stood at US $755.5 million in 2004, accounting for a mere 0.3 per cent of Malaysia’s global trade for that year.  Although the private sectors of the two countries have played a pivotal role in increasing the level of trade, the trade base is limited and largely confined to commodities.14  

Major items of export to Malaysia 

Rice.

Made-up articles of textile material.

Synthetic fabrics.

Wheat.

Cotton yarn.

Fish and fish preparations.

Arms and ammunition.

Hosiery.

Sports goods.

Hides, skins and fur skins.

Major items of imports from Malaysia 

Fixed vegetable oil and fats.

Machinery and parts.

Chemical elements and compounds.

Animal and vegetable oils and fats.

Chemical materials and products.

Crude rubber.

Yarn and thread of synthetic fibres.

Cork and wood.

Manufactures of non-ferrous metals.

Articles of rubber.

Early Harvest Programme. Pakistan negotiated an Early Harvest Programme (EHP) with Malaysia, activated on 1 January 2006, alongwith the implementation of a Free Trade Agreement. Through the EHP, Malaysia reduced tariffs on 114 Pakistani products, whilst Pakistan will reduce tariffs on 125 Malaysian items. Through the EHP, Pakistan sought to gain a foothold in the ASEAN countries, by opening up a large market; more specifically and to realign its trade balance with Malaysia. This enabled Pakistan to secure market access on all items of the current export range. Under the Programme, both countries cut down duties to zero level on certain terms, thus boosting bilateral trade.

In late 2006, Pakistan and Malaysia finalized talks over a proposed Free Trade Agreement (FTA), with most of the draft agreement chapters having been agreed upon. Under the agreement, Malaysia agreed to provide market access to Pakistan’s traditional items of export, including mangoes, textile, leather, surgical instruments, and other agricultural and manufactured goods. Since 1 January 2006, perishables such as oranges, lemons, and potatoes are exportable to Malaysia at zero duty. A chapter on promotion and protection of investment is also included in the FTA. Through the FTA, Pakistan can gain a strategic advantage in Malaysia’s growing high-technology, telecommunications, and financial services sectors. The FTA is the critical link in Pakistan’s supply chain and has enabled Pakistan to diversify its product base in Asia and lower its costs to compete effectively.

 

Total FDI in Pakistan US $ (millions)

Year

Total FDI in Pakistan

Malaysian FDI in Pakistan level

Malaysian FDI in Pakistan (%)

2001-2002

484.7

0.885

0.18

2002-2003

798

2.286

0.29

2003-2004

949.4

1.207

0.13

2004-2005

1524

22.1

1.45

2005-2006

3521

2.9

0.08

  Source:    Brief on Malaysia, Board of Investment, Government of Pakistan

A number of key Malaysian companies including Tenaga National (power sector) Telekom Malaysia (IT sector) have invested in the telecom sector, housing, and land development projects, as well as infrastructure and construction projects. The Malaysian national company, PETRONAS, is involved in numerous projects in Pakistan, including the exploration and drilling of gas and oil.15 The Malaysian construction industry has shown an interest in working with Pakistan in infrastructure development such as roads, highways, and housing. There exist possible joint investment opportunities for both Pakistan and Malaysia, in particular in the information and communication technology sector, with the Malaysian Multimedia Development Corporation and the Pakistan Software Houses Association very much in focus. A Memorandum of Understanding on the establishment of the Pakistan–Malaysia Joint Business and Investment Council was signed in May 2005.

 In return for Malaysia’s preferential treatment of Pakistan in the investment field, it has sought the same from Pakistan, through the status of the Most Favoured Nation (MFN) and National Treatment (NT) for continued investment in Pakistan; this new dimension will initiate new schemes and strengthen existing trade links.  Through the MNF accord, a range of incentives and benefits can be given exclusively to Malaysian investor and business community.16

Labour. Pakistan and Malaysia signed a Memorandum of Understanding in 21 October 2003; this enabled Pakistan to send semi-skilled and unskilled workers to Malaysia, thereby providing employment opportunities for nearly 200,000 people in the very first year. The signing of the Memorandum came after the lifting of the ban on the import of manpower from Pakistan, which lasted for eleven years. Malaysia has now designated Pakistan as a source country for import of manpower. However, previously the role of Pakistani labour in Malaysian economy was very little.

Pakistani Labour in Malaysia’s Economy, 1992-1997 17

Sector

Pakistani

Labour

Total Foreign

Labour

Percentage of Pakistani Labour

Domestic Help

53

148,936

0.036

Agriculture

183

195,200

0.094

Construction

1,356

186,195

0.728

Services

435

14,545

2.991

Manufacturing

1,694

111,159

1.524

Other sectors

3

3,248

0.092

Total

3,724

659,283

0.565

Pakistan’s Relations with Indonesia

Pakistan has been enjoying warm relations with Indonesia over the last six decades. When Pakistan came into being, it was the largest Islamic country followed by Indonesia, which was then the second largest Islamic country. In December 1948, when the Dutch took military action against the Indonesian people, Pakistanis demonstrated their genuine concern in various ways. Pakistan’s Foreign Minister Zafrullah Khan called it ‘an affront to the soul of Asia’ and Pakistan immediately suspended the license of the Dutch airline, KLM, whose aircraft were being used to aid the Dutch military action in Indonesia. Pakistan gave full support to the cause of Indonesia independence and Pakistan celebrated the independence of Indonesia by making a public holiday on that day.18 It seems that Islam and the principles of Bandung laid down the foundation on which the future course of relationship between Pakistan-Indonesia was built.

The Bandung Spirit. Initially, secular and non-aligned considerations departed a bit the two countries particularly as a result of Pakistan’s joining of SEATO and CENTO (Central Treaty) - two interlocking anti-Communist bulwarks in Asia where Pakistan played a vital role. But Pakistan’s later assurances that its joining of SEATO had nothing to do with its ideological affiliations, was a tactical move on the part of Pakistan that helped improving the path of relations between Pakistan and Indonesia. Nevertheless, ideological factor that was prevailing in Pakistan’s foreign policy right from the very beginning of its independence, continuously pushed Pakistan to cultivate close ties with Indonesia. During the Colombo Conference held in April 1954, Prime Minister Mohammad Ali Bogra and Indonesian Prime Minister Dr Ali Sastroamid-jojo jointly proposed a large conference of Afro-Asian countries. It was on this initiative that the historic 23-member Afro-Asian Conference, representing over half of world mankind with all shades of opinion, was convened at the Indonesian city of Bandung in April 1955. Pakistan, as one of the sponsors of this conference, was one of three countries (Thailand and the Philippines) at the conference, which militarily aligned with the West in matters related to security in the Asia-Pacific region. Pakistan seemed satisfied with the outcome of the Bandung Conference that forged unity against colonialism, imperialism, and Western hegemony. The conference also provided good opportunity to Pakistan to explain its viewpoint to China and nullify its objection concerning Pakistan’s military alignment with the West.

The first high-level visits were exchanged between Pakistan and Indonesia in November 1956, when Sastroamid-jojo made an official visit to Pakistan at the invitation of Prime Minister Suhrawardy to discuss political, economic, and cultural relations between the two countries and matter related to the Colombo countries19 (namely Burma (now Myanmar), Ceylon (now Sri Lanka), India, Indonesia, and Pakistan). The Indonesian side also initiated the second high-level contact, when Indonesian President Dr. Soekarno made a visit to Pakistan in January 1958 at the invitation of President Major-General Iskander Mirza. The two leaders agreed to expand commercial and cultural relations in view of the Bandung resolutions.20 The same was reflected when Indonesian Foreign Minister Dr Soebandrio, visited Pakistan in November 1960.21 Although Pakistan warmly welcomed friendly exchanges initiated by Indonesia, Pakistan could not reciprocate an official or state exchange until President Ayub made an eight-day State visit to Jakarta, Bogor, Bandung, and Bali on 4-11 December 1960 at the invitation of Soekarno. On this occasion, both leaders agreed to promote economic relations between the two countries. To this end, it was decided that trade delegations should be exchanged between the two countries. They also agreed to hold an Afro-Asian Conference, so that they should divert to the economic well being of the majority of mankind. Moreover, following the visit, a Cultural Agreement was signed on 30 December 1960.22

Pakistan’s disenchantment with the Western alliances brought it much closer to anti-Western countries. Dr Soekarno’s historic visit to Pakistan in June 1963 affirmed the principles of the Bandung Conference to strengthen the Afro-Asian and intra-Asian solidarity. Pakistan participated at the Indonesian-sponsored 51- countries Games of the New Emerging Forces (GANEFO) in November 1963 at Jakarta. To participate at the meeting of foreign ministers of the Afro-Asian Conference, Pakistan’s Foreign Minister Bhutto, visited Jakarta on 10-15 April 1964.23 At the invitation of President Ayub, Dr Soekarno paid a second visit to Pakistan on 19-20 September 1964. Pakistan was also at the forefront of holding the second Afro-Asian Conference, a combined effort of Pakistan, Indonesia, and China. These countries worked hard to convene the proposed second conference to be held at Algeria but the blast at the proposed site, postponed the conference to be held in June 1965. Second, the failure of a pro-Communist coup in Indonesia damaged the Sino-Indonesian ties and China’s Cultural Revolution got no room for such a conference. Moreover, India’s Bandung spirit cooled down as Indonesia started endorsing Pakistan’s stand on Kashmir. Nevertheless, the Bandung spirit helped revive ties between Pakistan and Indonesia at both bilateral and larger multilateral level.

A second Pakistani-Indonesian conference that was held at Jakarta in August 1965 on bilateral economic and cultural cooperation, resulted in the signing of the Indonesia-Pakistan Economic and Cultural cooperation (IPECC) on lines with the RCD (Regional Cooperation for Development working between Pakistan, Iran, and Turkey) to undertake joint project to promote bilateral technical cooperation for mutual benefit. The Sino-Indian border clash further intensified tension between Indonesia and India and the former took side of China in the conflict, thus brining China, Pakistan, and Indonesia onto one platform against India. Further, Indonesian differences with India over the question of the Malaysian Federation in September 1963, also embittered ties between the two countries and naturally consolidated ties between Pakistan and Indonesia. Indonesia began to view as a favourable nation in the summer of 1962 when Indonesia agreed to accept a battalion of Pakistani troops to safeguard the security of West Irian for a few months during the UN administration as preparatory measure to transfer the territory to Indonesia from the Dutch colonists. Pakistan ‘noted with satisfaction the vindication of Indonesia’s position with regard to Irian Barat with the relevant international agreements’.24 Pakistan decided to assist in the peaceful transfer of administration of Irian Barat to Indonesia.25 Indonesian reaction against the Indian attack on Pakistan in September 1965 war was generous and vociferous. Several public demonstrations took place in Jakarata against Indian aggression in one of which the Indian Embassy was ransacked, vehicles were put on fire, the Indian flag was snatched away, and the Office of the Indian Information Service was occupied. Dr Soekarno assured that Indonesian army, navy, and air force were available for Pakistan.26 Pakistan thanked Indonesia for its support in September 1965 war against India.27 Although India improved its ties with Indonesia after the fall of Dr Seokarno by the end of 1965, Indonesia’s relations with Pakistan remained warm and Indonesia kept endorsing Pakistan’s stand on Kashmir that peoples’ aspiration must be ascertain to settle the dispute.

Sustenance of Diplomacy

Dr Soekarno undertook his third state visit to Pakistan on 28 November-1 December 1980, which injected a new impetus to the development of bilateral relations between the two countries. On this occasion, Pakistan affirmed its support for the ASEAN proposal, which was in consonance with the efforts being made by Pakistan to promote peace in South Asia as embodied in Pakistan’s proposal for the establishment of a Nuclear Weapons Free Zone in South Asia and its support for the creation of Zone of Peace in the Indian Ocean region.28 Regarding situations in Afghanistan and Kampuchea, Pakistan and Indonesia stressed upon the need to abide by the principle of non-interference of the internal affairs of sovereign States in accordance with UN resolutions.29 Zia reciprocated by undertaking a state visit to Indonesia on 2-6 November 1982, which was a second visit by a Pakistani top leader to Indonesia in 22 years. Nevertheless, exchanges at foreign ministers’ level continued throughout this period along with two high-level state visits undertaken by Dr Soekarno to Pakistan in 1963 and 1964 respectively. Zia’s visit once again helped renewed ties between the two countries with regard to situation in the Middle East, Afghanistan, and Indo-China where both courtiers took identical stances.30

Pakistan’s Chief Executive General Musharraf undertook a visit to Indonesia on 30-31 March 2000. A Consultative Forum was set up between the two Governments on this occasion. Similarly, President Abdurrahman Wahid visited Pakistan on 5-7 June the same year. Indonesian President Megawati Soekarnoputri paid a state visit to Pakistan on 14-16 December 2003. Both countries comprehensively reviewed bilateral relations from trade, industry, communications, energy, banking, education, culture, combating terrorism and sharing of intelligence and defense cooperation. Both countries agreed to sign PTA in order to work toward the signing of the FTA. They also agreed to set up a joint commission for bilateral trade, together with the signing of the Memorandum of Understanding (MoU), to combat terrorism. Each year Pakistan offers technical courses in railway and banking to Indonesian trainees. Some cooperation was also extended in the field of education for Indonesian students in medical colleges in Pakistan.

Musharraf attended the Asian-African Summit held on 21-24 April 2005 at Jakarta to mark the Golden Jubilee of the 1955 Summit, which was attended by over 106 leaders the world over. He expressed his wish that the Summit would set up a level playing ground for cooperation, particularly in trade and commerce, between countries in the South and North. ‘Pakistan believes in enhancement of South-South cooperation. Pakistan believes that South-South cooperation ought to be honest, to deal with South-North issues,’ he said in an interview. He was also optimistic that Pakistan would benefit greatly from the Summit in enhancing relations with other participating countries. ‘Specifically, the greatest benefit will be in trade and commerce, in equal relationship... Other than that, there are other areas -- social-cultural areas, political issues and political relationships, which could be enhanced between the countries. These are areas which we need to look into, which are beneficial to all countries who participate.’ At the invitation of Musharraf, Indonesian President Dr Susilo Bambang Yudhoyono undertook a two-day official visit to Pakistan on 24-25 November 2005. Talks, between the two leaders, were centred on anti-terrorist cooperation. To achieve this end, both leaders agreed on the establishment of a Joint Working Group on Combating Terrorism. Trade and the promotion of other economic objectives were other areas of interest between the two countries during Yudhoyono’s visit.31

The Tsunami Disaster. On 26 December 2004, Tsunami earthquake devastated huge area of South and South East Asia. Indonesia was severely affected particularly its North Sumatra and Ache provinces. The number of total deaths in Indonesia was over 300,000. Over 500,000 people were injured and an unprecedented number of people were dislocated. Economic losses were estimated at billions of dollars. On 31 December 2004, in his capacity as Chairman of SAARC, Aziz called on for evolving a mechanism for putting in place an Asia-wide Early Warning and Disaster Response system to respond to such situations in future.32 Pakistan immediately responded to the crisis, which made it perhaps the first Muslim and a developing country that offered assistance to Indonesia at this grave honour of need. Six to seven sorties of C-130 aircraft from Pakistan were sent to Indonesia that commenced on 3 January 2004 to deploy one composite engineering task force of 300 personnel and a field hospital and relief supplies. Pakistan also decided to join the international task force to coordinate worldwide relief efforts.33 As early as on 4 January 2005, Pakistan’s State Minister for Foreign Affairs, Makhdum Khusro Bakhtyar, made an emergency visit to Jakarta to beef up Pakistan’s effort for relief activities for the victims of the disaster and to convey the sympathies of the Government and the people of Pakistan. The Governor of North Sumatra province, T. Rizal Nurdin, appreciated Pakistan’s timely effort by saying that’ Pakistan’s relief assistance was ‘quite significant and the biggest aid dispatched so far by the Islamic countries for the Muslims of Ache province.34 At the time of the earthquake, two of Pakistan’s naval ships that were around Maldives Island on a goodwill visit, rendered instantaneous emergency rescue and relief efforts. These ships, with the help of the helicopter units, rescued 367 people from 17 nationalities. Pakistan ships also set up a medical relief centre at the main jetty to provide medical assistance. On 28 December 2004, these ships left for the eastern and western zones of the Maldives Islands for assistance and aerial survey damage assessment. On December 31 2004, a C-130 aircraft, carrying relief goods, was dispatched to Maldives as well.

Bilateral Trade. There had been a heavy emphasis on increased trade between the two countries from the very beginning of their bilateral interaction and this desire had been on the core of bilateral agenda and high-level talks. Pakistan offered an export credit of US$ 30 million to Indonesia in 1966 to buy essential goods from Pakistan.35 Trade increased four-fold by 1966. Now Indonesia is the 4th largest trading partner of Pakistan in South East Asia after Thailand, Singapore, and Malaysia. During 1995-2004, trade between the two countries remained somewhat inconsistent. Over the past five years, Pakistan’s imports from Indonesia have been increasing from US$ 168 million in 2000 to US$ 353 million in 2004. Corporate sector should take steps to help enhance trade and economic cooperation in contributing toward increased flow of trade and investment. The atmosphere for investment and joint ventures seemed to have greatly improved. Under the fast emerging liberalization, both countries have realized the importance of enhancing trade ties and the process of negotiations is under way to the signing of a Framework Agreement on Comprehensive Economic Partnership (FACEP) for the mutual benefit of both countries’ people in the near future.

Pakistan’s Bilateral Trade with Indonesia and Malaysia 36

Ser

Year

Exports to Indonesia USD

Exports to Malaysia

USD

a.

2008

61,722,581

138,004,623

b.

2009

70,765,453

156,090,882

c.

2010

78,976,847

142,062,073

d.

2011

96,481,623

145,516,421

PART III

India's Expanding Role in South East Asia

As the world is increasingly acknowledging India's rising power status, India is adapting its foreign policy to meet the international challenges of the 21st century and to increase its global influence and status. For many years, India took pride in its role as leader of the Non-Aligned Movement and viewed itself as the primary defender of the rights of the less developed countries. In the past few years, New Delhi has expanded its strategic vision, most noticeably in South East Asia, and has broadened the definition of its security interests. While India has focused special attention on cultivating ties to the United States since 2000, the overall thrust of its foreign policy has been to seek geopolitical partnerships in multiple directions to serve its national interests. It has pursued special relationships with the US, Russia, China, and key European countries.

In June 2006, Indian Defense Minister Pranab Mukherjee described India's foreign policy: "Premised on the twin policies of no extra-territorial ambition and no export of ideology, India seeks the peaceful resolution of all disputes." He went on to say that "simultaneous improvement in ties with the US, EU, and Russia and Southeast Asia, Japan, Korea, and China demonstrates that for the first time in its diplomatic history, India is forging significant strategic ties with both West and East Asia".37 India has also established strong commercial, cultural and military ties with the Philippines, Singapore, Vietnam and Cambodia. India signed free trade agreements with Sri Lanka and Thailand and stepped up its military cooperation with them as well.38 It has forged numerous free trade agreements with East Asian economies, including a Comprehensive Economic Cooperation Agreement with Singapore and an Early Harvest Scheme with Thailand, while it is negotiating agreements with Japan, South Korea, and Association of Southeast Asian Nations (ASEAN) member states. Ties have been strengthened with Taiwan, Japan and South Korea over common emphasis on democracy, human rights and strategic interests. South Korea and Japan remain amongst the major sources of foreign investment in India.

Broadening Indian engagement across the globe, especially in South East Asia, is in the US interest. Washington's and New Delhi's strategic perceptions are increasingly converging, and tremendous opportunity is being seen by the two countries, to cooperate and coordinate in this dynamic region. Indian increased economic and political involvement in Asia will help to further overall US goals in the region. India's involvement in South East Asia will help both to take center stage in the region in the 21st century.

The Expanding US-India Relationship

The extent to which India will associate itself with US power and global policies is still a subject of debate within the Indian strategic community. A majority within India's policy elites envision India becoming a major pole in a multipolar world.39 They are skeptical of perceived American unilateralism and therefore believe that India must maintain its strategic autonomy through an extended strategic neighborhood, including East and South East Asia and, to some extent, the Middle East. The leftist parties are particularly skeptical of close US-India ties and believe that India should prioritize relationships with Third World countries, in part to create solidarity against perceived US unilateralism.

At the same time, an emerging generation of Indian foreign policy thinkers view a strong relationship with the US as essential for India to achieve major power status and want to develop a new framework for cooperation with the US.40 The US views the trilateral China-India-Russia arrangement as a potential irritant to relations. Such a tripartite axis could undermine US objectives in Asia to support democracy, free trade, economic prosperity, and nuclear nonproliferation, given China's and Russia's uneven records on promoting these key principles in their foreign relations.

India's rapidly growing energy requirements have become one of the primary drivers of its foreign policy in Asia. The US views India as a close partner in enhancing security in the Indian Ocean and has prioritized the improvement of maritime cooperation. In January 2002, the two countries signed the Generalized Security of Military Information Agreement (GSOMIA), which guarantees the protection of classified information and technology shared between them and facilitates cooperation in anti-piracy, drug interdiction, search and rescue, and joint patrolling efforts.

Another important part of India's effort to expand its influence in Asia is building political and economic ties with the states of Southeast Asia. India's involvement in Southeast Asia is aimed to check the inroads that China is making in the region. Most countries in the region that are wary of China do not have the same apprehensions toward India.41 For example, leaders in Singapore and Thailand have lamented their growing dependence on the Chinese market and have expressed an interest in developing closer economic ties to India. India's success in engaging the region is due in large part to the absence of any border or territorial disputes with these countries and to the widely held perception that it poses no security threat to the region.

India and ASEAN. India and the Association of Southeast Asian Nations (ASEAN) signed a Partnership for Peace, Progress and Shared Prosperity agreement on November 11, 2004, marking a significant step in the development of relations between India and the countries of Southeast Asia. India became a full dialogue partner of ASEAN in 1995; joined the ASEAN Regional Forum (ARF) in 1996; became a summit partner of ASEAN (called ASEAN plus One) in 2002; and became a member of the East Asia Summit in December 2005. Salient of Indian ventures in this regard are:-

India's trade with ASEAN countries has risen from $2.4 billion in 1990 to $41 billion in 2010.

India and ASEAN are signatories to a free trade agreement. The initial framework agreement was signed on 9 October 2003 in Indonesia.42 and the final agreement was on 13 August 2009.43 The free trade area came into effect on 1 January 2010.44

India has enhanced its naval profile in Southeast Asia to strengthen its Look East policy and to disrupt the flow of arms across the Bay of Bengal to insurgents in India's northeast.45

In June 1997, the littoral states of the Bay of Bengal (Bangladesh, Burma, India, Sri Lanka, and Thailand) established the Bay of Bengal Initiative for Multi Sector Technical Cooperation (BIMSTEC) to enhance economic cooperation.

India’s Balance of Trade with ASEAN Countries, 1995-2008

1995

2002

2005

2007

2008

Singapore

45.5

46.7

2268.1

-511.5

549.1

Indonesia

200.3

-493.6

-1628.9

-2962.2

-3772.0

Thailand

302.2

376.1

-137.3

-519.0

-659.5

Malaysia

-504.9

-587.7

-1292.2

-3875.3

-4427.0

Viet Nam

108.5

276.4

506.1

1088.3

1441.0

ASEAN

151.7

-382.2

-284.2

-6779.7

-6868.4

Philippines

122.4

334.5

278.9

397.9

527.4

Myanmar

-131.9

-278.9

-371.9

-646.3

-668.9

Cambodia

1.8

16.3

20.9

43.6

49.6

Brunei Darussalam

7.2

4.3

3.6

-225.3

-308.7

Other ASEAN

-0.6

76.2

-68.5

-430.1

-400.7

In addition to integrating with the multilateral institutional structures of Southeast Asia, India has focused on building stronger bilateral relationships in the region, especially with Malaysia, Singapore, Vietnam, Thailand, Burma, and Indonesia.46 India holds periodic naval exercises with these countries and participates in a biannual gathering of regional navies, called the Milan. India has also entered into bilateral defense cooperation agreements with Malaysia, Vietnam, Singapore, Laos, and Indonesia and has assisted the armed forces of Burma and Thailand. India is concerned about growing links between China and Burma, with which it shares land and maritime borders, and has in recent years deemphasized its support for democracy there in order to build ties to the military junta, a policy that causes friction between New Delhi and Washington.