India’s future with East Asia: Japan, South Korea and Taiwan
India’s future with East Asia: Japan, South Korea and Taiwan
WRITTEN BY GOKUL SAHNI
29 March 2020
East Asia is a region that India has traditionally associated with its giant neighbour, China. Despite India’s high levels of trade with the region, it is largely viewed as being out of India’s primary strategic area of interest. Yet some countries, namely the highly developed liberal democracies of Japan, South Korea, and Taiwan, have a number of strategic and economic convergences with India, and would find it in their interests to enable India’s rise as a great power.
New Delhi, in the eyes of Tokyo, Seoul and Taipei, has the potential to emerge as a robust defender of the rules-based international order, an instrumental ingredient for their success stories to thrive, along with playing the unique role of manufacturing base, a large market and a supplier of labour.
Converging strategically - and economically
Japan, South Korea and Taiwan share several similarities today. These highly developed economies are manufacturing powerhouses that embraced foreign trade and benefitted from a strategic partnership with the US (only military assistance in the case of Taiwan) to emerge as success stories of the essentially US-led international order. They have developed robust institutions with excellent standards of governance, and outrank most other countries in their economic competitiveness. Japan, South Korea and Taiwan rank globally as the 6th, 13th and 12th most competitive economies in the World Economic Forum’s Global Competitiveness Index 2019. Japan, South Korea and Taiwan have also transformed into liberal democracies, a feat many would have found difficult to achieve in the immediate aftermath of World War II, and are today ranked by the EIU’s 2019 Democracy Index as the 1st, 2nd and 4th most democratic countries in Asia.
More significantly for India, all three countries will want their hard-earned gains to be preserved, which translates into support for the continuation of the rules-based international order which remains necessary for them to thrive. None of these countries is keen to see a hegemonic China emerge and upend this order. While China has undoubtedly played a large part in their economic success, there is a strong case for these three countries to diversify their trade and investments links which continue to remain heavily concentrated in China. All three countries desire large consumer markets for their exports as well as opportunities for investments in relatively stable, yet high yielding, economies apart from China. Japan, South Korea and Taiwan are even home to some of the world’s largest corporates and rank 3rd, 7th and 11th respectively in the Fortune Global 500 for 2019.
Taiwan is keen to deepen its regional integration, a move that has been met quite favourably by Indian strategic analysts, some of whom see a natural complementarity between Taiwan’s New Southbound Policy and India’s ‘Act East’ strategy.
This is where India can step in. India provides these three countries with at least some of China’s attributes - as both a base for low-cost manufacturing and a market for increased sales - music to the ears of corporate giants like Toyota, Samsung and Foxconn, all which are deeply embedded within China. At the same time, India harbours no disputes with Japan, South Korea, or Taiwan, and is not a threatening rising power. Indeed, a democratic India can help strengthen the rules-based international order - a welcome sight to a region that is also subject to the revanchist and revisionist powers of China, Russia and North Korea.
India can cooperate with these countries on several shared interests. Take LNG imports, for example, where Japan, South Korea, India, and Taiwan were the 1st, 3rd, 4th and 5th largest importers in the world, with a combined import share of over 51%. Or issues of global governance, where India can work closely with fellow G20 members Japan and South Korea on common positions as Asia’s largest democracies. But in the absence of any multilateral arrangement bringing these four countries together, the most effective approach for India would be through stronger bilateral relations.
Japan - India’s best friend in Asia?
Japan is perhaps India’s most natural strategic partner. As Asia’s two largest democracies (by GDP), both countries will play a critical role in maintaining the rules-based international order and constrain, without looking to provoke, China. Delhi and Tokyo have strategic convergences across the board, not least a delicate balancing act to ensure that the US remains committed to the Indo-Pacific, without Washington’s competition with Beijing intensifying into confrontation and conflict.
India and Japan have already made rapid strides under Prime Ministers Modi and Abe. A marquee example of this is Japan International Cooperation Agency’s offer to fund $11bn for the Mumbai-Ahmedabad High Speed Rail (HSR) project through an a 50 year loan at an interest rate of 0.1%. Japan’s assistance is not simply financial, but also offers capacity development through skills development, with a training institute being set up. While India would ideally want Japan to take a larger role in global strategic affairs, it would also do well to partner with Japan in third-country projects given the high levels of trust and confidence that Japan enjoys, with ASEAN countries in particular viewing Japan as a responsible stakeholder that respects and champions international law.
India and Japan are also complementary powers, in terms of capacity. The Lowy Institute’s Asia Power Index 2019 ranks Japan and India as ‘major powers’, being the 3rd and 4th most powerful states in Asia after the US and China. Japan, seen as a ‘quintessential smart power’, is identified as being an overachiever in long-term decline, while India is regarded as an underachiever in relation to its size and potential. Both countries would clearly bring out the best in each other by partnering together. A successful India-Japan partnership genuinely could underwrite the continuation of the rules-based international order in Asia for decades to come.
South Korea & Taiwan - small in size, large in economic influence
South Korea and Taiwan have also increased their outreach to India under their New Southern Policy and New Southbound Policy respectively. The South Korean plan, outlined by current President Moon Jae-In in 2017, explicitly seeks to elevate South Korea’s relations with India (along with ASEAN member-states) across political, economic, social and cultural spheres to the same level it maintains with the four major powers of US, China, Japan, and Russia). Taiwan is keen to deepen its regional integration, a move that has been met quite favourably by Indian strategic analysts, some of who see a natural complementarity between Taiwan’s NSP and India’s ‘Act East’ strategy.
While there is little strategic benefit for India to alter its traditional ‘one-China’ policy, there is significant scope to increase economic engagement with Taiwan. Despite its small population of fewer than 24 million, Taiwan plays an outsized role in global financial markets. Taiwan’s life insurance industry, for example, has assets of US$850 billion, equivalent to 1.45 times its GDP. Taiwanese insurers hold about 14% of US longer-term corporate debt and have made Taiwan the second largest foreign owner of mortgage-backed securities. Indian investment funds can look to raise capital from this previously untapped source in Taipei, though connectivity between the two countries remains quite weak -- India had more air passenger traffic in 2018 with Sweden than with Taiwan. India’s economic engagement with South Korea is far stronger, as it is India’s 9th largest trading partner with significant Indian imports of consumer goods, but there continues to remain colossal opportunities for Korean chaebols from the world’s second most populous country.
Indian labour – silver bullet?
India’s closer engagement with these countries should not be limited to increased trade and investment, or high-level areas like climate change and maritime security, but should also be broad-based, with an increased role for people-to-people ties. India’s large diaspora, including millions of non-resident Indian (NRI) citizens working across the world who have made India the world’s largest recipient of remittances, are curiously absent in these countries. There are less than 43,000 NRIs in total across Japan, South Korea and Taiwan, almost 1/6th the number of NRIs in Australia. Indian labour, whether blue-collar or white-collar, has become ubiquitous around many developed economies globally, with the exception of East Asia. There is tremendous scope for Indian overseas workers, across the income spectrum, in these high-income countries, which have seen plunging birth rates. Indian students, scientists and technology professionals can benefit greatly from more collaboration, given these countries are globally recognized as leaders in scientific technology and innovation.
Overall, it is time for India to not confine its Indo-Pacific vision to only the Indian Ocean, but also to look towards the three East Asian democracies of Japan, South Korea, and Taiwan, where strong strategic and economic complementarities exist. Indian strategic thinkers often think of partnering with the West while desiring to lead the Global South. Perhaps partnering with countries of the Global North located in the East may prove to be the real game-changer.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Gokul Sahni is based in Singapore and writes on geopolitics and geoeconomics, with a particular focus on Indian foreign policy. He holds an MSc in International Relations from the S. Rajaratnam School of International Studies (RSIS) and an MBA from the Saïd Business School, University of Oxford. All views and opinions expressed are personal. Image credit: CC BY-NC 4.0/Republic of Korea/Flickr