India must remember that it is only by exporting to Asia that it can transform its ‘Act East’ policy from being a tokenistic one into an influential one.
New Delhi’s defence engagements and co-operation with South East Asia has been incremental so far, as it manages Beijing’s sensitivities and grapples with its own capacity deficits. India’s endeavour to use defence diplomacy as a tool to further its foreign policy goals and advance its strategic interests, is not a new approach. The government is keen to improve the existing template of India’s defence cooperation in the region. New Delhi is slowly showing willingness to start exporting indigenously made defence equipment to “friendly” countries in Southeast Asia, at a time when it is trying to overcome deficits in the form of anti-submarine warfare helicopters and a dwindling submarine fleet.
In 2014 the Ministry of Defence released a document entitled ‘Strategy for Defence Exports’ (SDE) to standardise operating procedures for defence exports. According to the document, the commercial and diplomatic potential of defence exports would be harnessed by a Defence Export Steering Committee (DESC) and an Export Promotion Body (EPB). The initiative will use and expand lines of credit to foreign countries to facilitate military sales.
The USA accounts for nearly Rs 5000cr exports, with the European Union not far behind. In comparison, India has accorded much less attention to its own neighbourhood.
India’s defence exports have been encouraging and have doubled to nearly Rs 11,000 crores since 2001. There has been a steady annual increase: it exported arms worth Rs 1500cr in 2016-17, Rs 4500cr in 2017-18 and Rs 10,700cr in 2018-19. While such progressive numbers have been much-awaited, almost 50% of India’s exports reach only one nation: The United States of America. The USA accounts for nearly Rs 5000cr exports, with the European Union not far behind. In comparison, India has accorded much less attention to its own neighbourhood.
In the region, Vietnam has been the recipient of a $500 million line of credit (LoC) for four patrol vessels for its navy. There have been several back-and-forth negotiations on the possible sale of the supersonic cruise missile, BrahMos, and the Varunastra torpedoes. Regardless, the relationship with Vietnam has been a slow moving one. India's state-run Garden Reach Shipbuilders & Engineers (GRSE) Ltd had emerged as the winner of Philippine navy's big-ticket modernization program to supply two light frigates only to flounder in the post-qualification assessment. As for Malaysia, India has only but been trying to lure its navy into choosing ‘Tejas’, a Hindustan Aeronautics Limited (HAL) light fighter, instead of the jets being offered by Pakistan and South Korea. While India has gifted the ‘Dhruv’ utility helicopters to Ecuador, Mauritius and Nepal, countries like Bangladesh and Vietnam have been visibly wary of utilising the $500 million LoCs that India has extended to them.
However, while Myanmar and Mauritius are optimistic examples, they are too small and inaccurate a representation of India’s global foothold of defence.
The picture is rosier in Myanmar, where India exported ‘Shyena’ torpedoes in 2017, many of whom India produced indigenously, as part of a USD37.9 million deal. India is set to hand over its first ever submarine to Myanmar, with a Kilo class boat likely to be sent across this year after being refitted indigenously. India has also had a long history of exporting both ready-made equipment and sub-systems to Mauritius. India’s export of multiple Dornier Do-228 maritime patrol aircrafts since 1990 and the recent CGS Barracuda warship to Mauritius in 2017 have stood out. However, while Myanmar and Mauritius are optimistic examples, they are too small and inaccurate a representation of India’s global foothold of defence. The prompt hands-on approach India adopts with these countries must be multiplied across Asia, for there are several Asian countries that India has not initiated any concrete export discussions with.
India has seemingly comforted itself as an arms supplier to only a few ASEAN member nations, such as Myanmar, almost as if it is putting all its money on these few countries to become its gateway into ASEAN. As per an Exim Bank report, India is a major supplier to only one of the top six importing countries in South Asia. While India takes great pride in being a component exporter, the report analyses that defence components are in much less demand in Asia than finished equipment. These export fallacies come in direct contrast to India’s prestigious role as the ‘net security provider’ of the Indian Ocean region and to its ‘Act East’ policy of developing “strategic relationships with the countries in the Asia-Pacific region”.
To emerge as a chief defence exporter in Asia, India needs to adopt a dual focus: bring more countries under its radar and transform its reputation from a ‘component-only’ supplier to that of a wholesale exporter. Firstly, India must make Research and Development (R&D) a larger recipient of its annual defence budget to improve its manufacturing capabilities. Along with this, there must be a proper identification of the defence import needs of target countries. Indian defence attaches sent abroad should report data on the defence goods needed globally, which can then be produced by the Indian public and private manufacturing units. By producing what is actually needed, India can become a viable exporter to all kinds of countries.
There must not be complacency in executing encouraging reforms such as the Open General Export Licence (OGEL) scheme that would help private companies attain government permissions for defence exports much faster.<
Secondly, the Vietnamese case makes it clear that India cannot solely rely on diplomatic marketing and soft-skill development. Industrial partnerships are essential, for which India must push its private sector to the fore. There must not be complacency in executing encouraging reforms such as the Open General Export Licence (OGEL) scheme that would help private companies attain government permissions for defence exports much faster. Even the increased R&D budget would create ripples of increased Intellectual Property Rights and competitiveness in the defence arena, thus multiplying the incentives to create innovative goods.
With Chinese debt-traps soaring in the region, thanks to its Belt and Road Initiative (BRI), it is an opportune time for India to take bolder leaps to rise as a competent alternative. India must remember that while exports to the west may amplify its export figures, it is only by exporting to Asia that can it transform its ‘Act East’ policy from being a tokenistic one into a more comprehensive and influential one.
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