Challenges of globalization: Malaysia and India engagement.

• Author: Yahya, Faizal

Introduction

India is not a major player in the global trading system because its share of total global trade is less than 1 per cent. Nonetheless, India's population base of over 1.07 billion and an expanding middle class of around 300 million to 340 million and as the third largest economy in Asia, ensures that it receives attention from its major trading partners in Europe and North America (United States and Canada). One of the facets of globalization has been trends towards increasing economic linkages between countries and between regions, while the other was strategic security in a post-Cold War world. India's own involvement in the South Asian Association for Regional Cooperation (SAARC) has not resulted in greater trade and security. The level of intra-regional trade among SAARC members was low because their economies lacked comparative advantage. Moreover, the smaller economies feared that Indian capital and lower-priced goods will flood their markets if they were to liberalize their economies. SAARC countries have resorted to non-tariff policy barriers such as anti-dumping measures to limit trade with India (Financial Express, 2005). Contrary to the principles of SAARC, bilateral disputes between India and Pakistan such as over the disputed territory of Kashmir had also stalled trade in SAARC. India has become increasingly concerned that it will be marginalized with the formation of regional trade blocs. Table 1 indicated that India's total trade share with the major trade blocs has decreased.

The objective of this article is to examine the challenges of globalization (1) facing India and Malaysia and their responses to these challenges. From the Indian perspective it needs to diversify trade away from the European Union and the United States and counter China's influence in the Asian region. From the perspective of the Association of Southeast Asian Nations (ASEAN) members, India has the potential to be an alternative market, a source of capital, and technology to rival China. At the bilateral level, India has strong historical, social, and cultural linkages with individual ASEAN members such as Malaysia. Malaysia also hosts the largest ethnic Indian community of two million people among all the ASEAN members and is one of India's largest trading partners in ASEAN. As a trade-dependent economy, Malaysia was exploring the bilateral trade route as alternative paths to forging closer economic linkages with its major trading partners (Hew and Sen 2005). Furthermore, Malaysia also made an interesting case study due to its Islamic identity and Islam being the official religion. Malaysia's projection of its Islamic identity on the international stage is mainly through its membership in the Organization of Islamic Conference (OIC) and support for other Islamic countries and issues. In this context, Malaysia has close links with Pakistan, India's rival in South Asia. This is likely to impede Malaysia's efforts to strengthen ties with India.

Islamic Ties

Malaysia's vision of neutrality in its foreign policy was interlinked with its vision for fostering closer linkages with other Islamic states. In the 1960s, during the regime of Malaysia's first Prime Minister Tunku Abdul Rahman, it was accepted that although Malaysia is a Muslim country, its international relations had to be placed above other considerations. In this context, Malaysia extended its support for India in the second Indo-Pakistani war. Subsequently, Malaysia also severed diplomatic ties with Pakistan in October 1965 following Malaysian support for India in its dispute with Pakistan over Kashmir (Nair 1997, p. 57). The turning point for Malaysia's foreign policy occurred during the Confrontation with Indonesia from 1961 to 1966. Malaysia realized that although it managed to secure the aid of British and Commonwealth countries, Indonesia on the other hand managed to gain support from fellow Muslim countries (Nair 1997, p. 57).

Learning from this incident, in the 1980s, then Malaysian Prime Minister Mahathir encouraged his own "Look East" policy aimed at enhancing trade ties with dynamic Asian economies such as Japan but at the same time calling for Islamic unity. Malaysia also realized that its relations with the Western powers must not be pursued at the expense of losing international support from fellow Muslim countries. In this context, Malaysia cultivated ties with Pakistan as a fellow moderate Muslim country. Prime Minister Mahathir also had close rapport with then Pakistan's Head of State, General Zia Ul-Haq. For example, Prime Minister Mahathir and his predecessor, Tun Hussein Onn, were also conferred special awards by Pakistan. Mahathir's need to symbolize Malaysia's support for the Muslim world also had a domestic dimension. Before the Malaysian General Elections in 2004, the opposition political party in Malaysia, PAS (Parti Islam SeMalaysia) was gaining political ground and was critical of the ruling National Front for its lack of support for the Muslim world. The new Prime Minister of Malaysia Abdullah Badawi has stronger Islamic credentials but the Malaysian government is still concerned over the rise of Islamic extremism in its domestic arena. While Malaysia has deliberately kept on a moderate Islamic path (Nasr 2001, pp. 110-11), this changed in the 1990s when Malaysia casts its diplomatic net wider to foster closer relations with the Muslim world and the OIC.

In the early 1990s, Malaysia used every opportunity to lobby for the interests of Muslim countries. The main thrust of Malaysia's economic growth and development in foreign policy again became secondary. For example, Malaysia galvanized international support for the Bosnian Muslims during the Balkan wars, even at the expense of straining its ties within the ASEAN grouping. Furthermore, Malaysia highlighted the issue of the destruction of the Babri Mosque in Ayodha, India (Baruah 2001a). In this light, Malaysia opposed the proposal to have a separate India-ASEAN summit despite the strong support that this proposal had received among the other ASEAN members (Baruah 2001a).

In contrast, Malaysia was keen to have Pakistan admitted into the ARF but was disappointed by India's opposition (Baruah 2001c). When India received greater support among ASEAN members for an India-ASEAN summit meeting, Malaysia softened its opposition and agreed with the consensus. Malaysian support for Pakistan's eventual membership into the ARF (July 2004) was manifested in its instrumental role in lifting the ASEAN moratorium on new membership (Rahman 2003). At the Senior Officials Meeting (SOM) in Vientianne, Laos, the Malaysian request to admit Pakistan into the ARF was rejected. However, the follow-on ASEAN Foreign Ministers meeting at the same venue eventually concluded with the lifting of the moratorium and the decision to admit Pakistan into the ARF.

Islam in Malaysian domestic politics remains a very sensitive but influential issue, as can be seen in the March 2004 General Elections (Taipei Times, 2005). The ruling National Front won nearly 90 per cent of parliamentary seats, which indicates that the government can function without being beholden to religious political parties (Ressa 2004). Prime Minister Badawi's ruling National Front coalition had also recaptured the state of Terengganu from PAS and nearly captured the PAS stronghold state of Kelantan, which PAS managed to retain after a recount and won by only a few hundred votes. Badawi had campaigned hard in the northern states, the heartland for ethnic Malay Muslims and has called for a modern and progressive Islamic rule (BBC News, 2004). In this regard, Malaysia is also in tune with the concept of moderate Islam that is adhered to by Pakistan's President Musharraf.

Religion too had played a key role in India's partition in 1947 that sowed the seeds of dispute between India and Pakistan over Kashmir. Lack of progress in SAARC has been mainly attributed to disputes between its two largest economies of India and Pakistan. While disappointed at SAARC's lack of economic progress, India has been impressed at the economic progress made by ASEAN and its objective of achieving economic integration for all its members (Green 1994, p. 120). India is drawn to the dynamic of economic regionalism, (2) evidenced by the ASEAN grouping. The close geographical proximity of India and the ASEAN region would foster trade ties because it will reduce the costs of transportation and storage.

India's "Look East" Policy

India's "Look East" policy was initiated in 1991 after the Cold War when India faced a number of successive strategic and economic challenges which threatened its political survival (Rao 1996, p. 763). The breakup of the Soviet Union deprived India of its main trading partner and source of low-cost imported oil. India was forced to purchase oil at market prices which were inflated because of the First Gulf War in 1990. The Gulf War also caused an exodus of Indian expatriate labour in the Gulf region back to India and this meant a loss for India in terms of remittances from its Gulf workers worth billions of US dollars. In 1991, faced with dwindling foreign reserves of only around US$240 million, which was sufficient for approximately two weeks' worth of imports, India had to realign its foreign trade and economic policies. Enhancing ties with the Southeast Asian region represented a springboard for India to lobby for entry into the Asia Pacific Economic Cooperation (APEC) grouping and Asia Europe Meeting (ASEM) for its eventual leap into the global marketplace (Rao 1996, p. 766; Chirathivat 1996, p. 755). Phase one of India's Look East policy was implemented to refocus its economic relations with Southeast Asia because it will help to diversify trade away from its main trading partners in North America and Europe. From the perspective of the Ministry of External Affairs (MEA), engagement with the Southeast Asian region was in line...