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AseanAffairs Magazine July - August 2010

New Philippines President Benigno “Noynoy” Aquino wins in a landslide election and promises to end poverty and fight corruption.

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     As the dust settles following the near collapse of the
world’s economic system, new parameters are developing within that system.

   Countries that suffered the greatest setbacks, the United States, Spain, Greece, to name only a few, are re-entrenching under austerity rules that cut social programs and new financial rules limiting some of the financial practices that triggered the crisis.

   Emerging from the post-crisis dust are those countries that came through the economic storm in better shape than the more advanced economies -India and China. This issue of Asean Affairs focuses on India because of its geographical proximity to Asean countries and the growing India-Asean trade and investment linkages. With the start of the Asean Economic Community in 2015, these linkages surely will increase in number and scope. There are early indications this is already happening.

   As early as November 2002 during the Eighth Asean Summit in Cambodia, Singapore’s Prime Minister Goh Chok Tong portrayed India as one wing of Asean’s jumbo jet, with the People’s Republic of China and Japan as the other wings.

   The Malaysian Industrial Development Authority is currently in talks with two Indian companies involved in pharmaceuticals and biotechnology to establish plants that will be their hub for Southeast Asia. Completion of the agreements could be finalized before Indian Prime Minister Manmohan Singh’s visit to Malaysia at the year-end.

   To date, there are 95 manufacturing projects with a total investment of US$1.11 billion with Indian participation,
creating 13,032 jobs in Malaysia, according to the Malaysian government.

    India’s trade deficit with Asean countries has increased substantially in recent years and its trade pact signed in 2009 with Asean is in many ways a reaction to China’s aggressive advance into the region. Another disadvantage is that a services agreement between India and Asean has not yet been concluded, leaving India at a disadvantage as it is strong
in that sector.

    As India Inc plans to move into Asean, there are also Asean companies that may wish to open facilities within India due to its large and youthful labor force and large market. Delta Electronics-Thailand is one Asean firm that is ahead of the curve with facilities in existence there for several years. Executive director Anusorn Muttaraid provides a first-hand report on Delta’s experience in locating its facilities within the subcontinent.

   Other experienced India hands contribute with their experiences as telecoms executive Carla Cico says, “I think that India has not yet shown to the world its real potential and value: they should look to the Chinese to learn how to advertise themselves.”

   As foreign companies seek to gain a foothold in India’s economy, global Indian companies are the real drivers of the Indian economy.

   These companies will continue to seek expansion abroad, as Rana Kapoor says, “Indian companies in search of size will continue to seek targets overseas.” With many western companies still feeling the pangs of misfortune from the near-global meltdown, Indian companies might be blessed with a wider than normal range of takeover possibilities.

   Beneath the global Indian giants, India’s small and medium enterprises (SMEs) are fixing their sights on entering the Asean as the possibility of exponential growth in the large Asean market is a great attraction.

   These SMEs can draw on the experience of such giants as Tata, as it recently began producing trucks in Thailand. However, adopting global management practices and making cultural adjustments may be part of the necessary learning curve in these companies going global.

    A roundtable featuring three of India’s top industry leaders display a decisive split on expanding beyond the domestic market. ........

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