The emergence of trans-regional economic corridors is drawing considerable attention among academia and policy makers. The potential to harness economic growth by creating these corridors is an area where India is showing interest. While looking at the progress of these corridors in the context of South and Southeast Asia, there is a growing awareness of the benefits of such economic measures which will link regions together to promote trade and economic activity along regions that can complement the movement of goods and people, with economic development and growth along specific sectors. The focus on trans-regional economic corridors between South and Southeast Asia brings to attention the changing regional geo-politics and geo-economics within an area that is being seen as the wider Indo-Pacific. Impacted by the rise of China and India as economic powers and also influenced by the US pivot to Asia or rebalancing which keeps the economic focus of the United States on the wider Indo-Pacific region, this region is witnessing profound changes both politically and economically. With the `engine of global economic growth shifting eastwards’, the potential to harness the integration of economic ties across the region is becoming more crucial.<1>
Among the various trans-regional economic corridors in the region, the Indo-Pacific Economic Corridor is still at a very nascent stage. The very conception of the Indo-Pacific Economic Corridor can be traced to the US-India Strategic Dialogue of 2013, where Secretary of State John Kerry referred to the potential of the Indo-Pacific Economic Corridor, in transforming the prospects for development and investments as well as for trade and transit between the economies of South and Southeast Asia.<2>
With regard to the specific case of the Indo-Pacific Economic Corridor, its origins lie in the increasing recognition of the Indian and Pacific Oceans as one single maritime entity. The Indo-Pacific Economic Corridor is a vision that is clearly embedded in the `US rebalancing’ and `pivot to Asia’ strategy – which began by late 2011/early 2012.<3> One of the core objectives of the `pivot to Asia’ strategy has been to intensify the US role in the wider Asia-Pacific region, with an emphasis on three critical areas – military planning, foreign policy and economic and trade policies. The core focus of the US rebalance strategy is to ensure that within the context of the wider Asia-Pacific, the United States would continue to engage and play both `a larger and long-term’ role.<4> This larger and long-term role was primarily conditioned upon three tenets – first, that international law and norms were to be respected; second, issues relating to free passage and the freedom of navigation were not hindered or blocked. Third, where emerging powers and their neighbours conflicted over unresolved territorial claims, the US began to emphasize the need to approach resolution through peaceful negotiation.<5> As part of this strategic turn towards Asia there are clearly four areas where the US is increasing its activities and engagement – first, in the area of military deployment, the US strategy in the rebalancing aims to deploy in the Pacific and Atlantic sectors military presence to the tune of 60/40 percent respectively. Second, while there is an overall reduction in the US’ global defence expenditure, in the case of East Asia its defence spending would be increased. Third, the increased interaction and focus on East Asia will be critical and remains very much in tune with the rise of China in this region. This shift eastwards is clearly founded on the fact that the global economic growth has actually shifted eastwards and the rise of China has resulted in altering the regional balance making it imperative for the US to seek a role in the larger dynamics of change.<6> Fourth, in the arena of economic integration the emphasis on the recently concluded Trans-Pacific Partnership will remain very relevant.<7>
While these are the efforts from the side of the US in terms of their own interests within the wider region, there are simultaneously developments that are shaping the Asia-Pacific which critically impact this strategic shift by the US. First, the engine of global economic growth has shifted eastwards, particularly with the economic rise of China. Both India’s economic growth and the role played by Japan as a considerable economic power, necessitates a new approach to this region. For the first time all the three leading economic players in the globe are within the Asia-Pacific region. For the US this compels an engagement that will be very crucial to sustaining US economic interest in this region itself. Second, with respect to the growing military capabilities of China, there is some degree of trepidation in the region. Particularly regarding the claims of the Chinese over the territorial disputes in the South China Sea, the US has also been very clear about the issues relating to the `rights of passage’ and `freedom of navigation’. Much of the conflict also relates to the different interpretations of the United Nations Convention on the Law of the Seas (UNCLOS) and the normative shifts that result from such interpretations. Much of the US focus in this context is to engage China into accepting the existing normative positions which is in consonance with other regional players, particularly the members of the ASEAN group, some of whom are claimants to the South China Sea dispute. The recent ruling by the Permanent Court of Arbitration (PCA) on a complaint filed by the Philippines has rejected the right of Chinese historical claims to the South China Sea. This ruling was rejected by China stating that there was no provision for the implementation and that China does not accept the ruling or the veracity of the UNCLOS. The role of states in the region and the US and other players has been to reassert the significance of the UNCLOS and the normative role it played.
From the standpoint of the United States the logic of extending the `Pacific pivot’ to include the coastal areas of South Asia is a critical shift because this links the Indian Ocean, the Bay of Bengal and the Straits of Malacca, Sundah and Lombok into single strategic unit.<8> This linking of the two oceanic extents is actually a clear shift in conventional thinking which mostly tended to view South, Southeast and East Asia as three distinct sub-units of the Asian continent.<9> However, the Indo-Pacific context becomes more relevant while looking at the region as a singular unit given that nearly 55% of the world’s container trade travels through this region. Added to this nearly 70% of ship borne energy transport moves through these waters, which necessitates the perceptional change in how the region is currently being viewed.<10> The recent approach to linking the Indian and Pacific oceans is clearly driven with a focus on the geo-political shifts that are influencing the region.
It is within this context that the Indo-Pacific Economic Corridor becomes relevant – the objective of the United States to link South and Southeast Asia, through a linking of the maritime extents, also opens up the possibility of linking trade and economics among these two regions. If the vision of the Indo-Pacific Economic Corridor gains momentum it will need to be enhanced by building greater physical infrastructure, more regulatory trade architecture as well as human and digital connectivity.<11>
While the concept of the Indo-Pacific Economic Corridor is relatively new there are several opportunities that can be explored to further this idea into reality. First, the growth of the economies of both South and Southeast Asia are crucial in pushing forward the concept of the Indo-Pacific Economic Corridor. Undoubtedly as the global economic growth has shifted eastwards, there is also a significant change that is visible in these regions. Both South and Southeast Asia play a very significant role in linking the largest economic player in the region, which is China. China’s investments in Southeast Asia stand as the highest while in the case of South Asia it is growing rapidly.<12> Simultaneously there are steps towards establishing greater economic integration in the wider Asia-Pacific through two initiatives – the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). With this growing focus on economic integration, there is a significant opportunity to link the Indo-Pacific Economic Corridor into the larger web of regional economic integration initiatives that are already taking shape.
Second, the logic of the Indo-Pacific Economic Corridor is also driven by certain political changes that will be credible. In this context, one that will remain significant in the years to come are the developments shaping Myanmar which lies at the pivot of both South and Southeast Asia, thereby acting as a critical link between these two regions. Myanmar remains as the land connectivity between India and Southeast Asia which was one of the factors that impacted the India Myanmar ties when the Look East Policy was initiated. As the connectivity issue relating to South and Southeast Asia becomes imperative Myanmar’s political transition will be important.<13> Added to this there is also the question of extending the existing Greater Mekong Sub-region, to link up to Myanmar through the expansion of the East West Corridor – this in effect will link the entire Southeast Asian mainland regions together – from the port of Da Nang in Vietnam through Laos and Thailand to the port of Mawlamyine in Myanmar. Once this corridor is realized the 1,320 kilometer link will be a critical one since it will in essence link two points in the Indian and the Pacific oceans – Mawlamyine lies on the Western coast of Myanmar on the Andaman sea (Indian Ocean) while Da Nang lies in the Eastern coast of Vietnam on the South China Sea (Pacific Ocean).<14>
Third, issue which is likely to have a positive impact on the furtherance of the Indo-Pacific Economic Corridor is the move towards establishing the ASEAN Economic Community which came into existence in December 2015. While there are still hurdles in the actual implementation of the ASEAN Economic Community, once recognized it will be able to provide a larger and more integrated market which will also address the issues relating to economies of scale.<15> If this takes more concrete shape then the Southeast Asian integration will be on firmer ground and it can actually act as a catalyst for pushing integration within the South Asian states too. India is already a core economic partner for Southeast Asia. Also in terms of looking at some of the sub-regional initiatives that are in place such as BIMSTEC and Mekong Ganga Cooperation, there are already efforts to link the two regions together through these and this can be expanded to cover the scope of the Indo-Pacific Economic Corridor.
Fourth, while the trade between South and Southeast Asia has grown in the last two decades, there is still a huge potential that needs to be explored. Both in terms of trade and investments these two regions can be better integrated if the full potential is tapped. The evolution of the Indo-Pacific Economic Corridor will enhance this potential and is capable of creating crucial trade and investment links along this region. One of the key areas is the trade in energy, where the current focus is more on the conventional sources of energy. With the recent initiatives taken on matters relating to climate change, the scope for exploring possibilities of trade in alternate energy sources is bound to increase in the future. One such area is hydro-electric power trade that can be explored.<16> In the context of energy trade too Myanmar is emerging as a potential hub that can link the regions of South and Southeast Asia together – both in the conventional and the alternate energy resources Myanmar is likely to play a critical role on three accounts – it is showing an increasing hydro-electric power capacity which can be better integrated to the regional demands and traded, there are huge reserves of natural gas and given that it lies at the mouth of the Malacca Straits and links the regions of South and Southeast Asia through the land route the potential for linking the region through pipelines can also be examined.<17>
While the above section of the paper looks at the opportunities, there are however, several challenges to realizing the Indo-Pacific Economic Corridor. Some of these challenges have been enumerated in the following section of the paper.
In terms of understanding the potential for an Indo-Pacific Economic Corridor, it is imperative to highlight the challenges that are inherent to the idea of this corridor. Understanding these challenges will be vital to the formulation of strategies and policies that regional and national stakeholders will consider in the move towards the establishment of such a corridor. Given the enormous diversity in both South and Southeast Asia, the move towards linking the regions closer through trade and investment integration is fraught with challenges.
First, relates to the often mentioned question of establishing the linkages for connectivity. This issue is not new in the context of creating greater economic linkages. For nearly two decades it has remained as the key factor for promotion of trade and economic integration. A recent ADB report has indicated that the overall cost of establishing connectivity through roads, railways, maritime port connectivity and energy trading for linking South and Southeast Asia stands at US $ 73 billion.<18> Achieving this target itself is a huge challenge since it requires US $ 18 billion for roads, US $ 34 billion for railways, US $ 11 billion for port projects and US $ 10 billion for energy trading.<19> The current allocation of funds to address connectivity issues on a priority basis in linking the two regions remains far below the expected amount – of the US $ 8 billion that has been earmarked for this purpose, US $ 1 billion is for roads, US $ 5 billion is for railways and US $ 2 billion will cater to development of ports.<20>
Second, crucial challenge is the role that the northeastern region of India will play. The development of this region will remain a vital challenge in envisioning the links between South and Southeast Asia. When the Look East policy was initiated it was understood that India’s northeast would be important in the overall approach to connecting with Southeast Asia. Though initiatives like the BCIM have been started, these have not been able to achieve much impact in the region. The old debate where development is pitted against security challenges still remains within the mindset of the Indian government when looking at the possibility of establishing such economic corridors. There is a complex relation in this regards - as long as the northeast remains politically sensitive, the promotion of development is hindered and development projects are held back as a result of the political context. This approach needs to be thoroughly reviewed in light of the changes that are shaping the wider region. Moreover, when it comes to the question of the northeast fitting into the Look East Policy (LEP), the approach has been a top down method where the centre has been focused on the implications of the LEP on the northeast.<21> As a result of this all the initiatives are orchestrated from the centre which leaves a gap between the way the centre and state respond to the policies that link the northeast to the LEP. Even organizations like the North Eastern Council/ Ministry for the Development of the Northeast Region (DONER) are seen as initiatives that are driven from the centre.<22> It is essential for the regional state governments and stakeholders within the northeastern region to be invested in the policies initiated in the LEP. Understanding the benefits and links in the LEP and its impact on the region must be a locally driven bottom up approach which will bring the benefits of economic integration closer to local expectations.<23>
Third, issue that will be important to address is the issue of intra-ASEAN connectivity itself. While connectivity across regions will in itself be a challenge, even intra-regional connectivity is far below optimal levels. As early as 2009 the Masterplan for ASEAN Connectivity was conceived. This was to address two crucial areas in the context of evolving a level playing field for all ten ASEAN member countries. The plan conceived to reduce two vital gaps among the member states – one was the developmental gap and the other was the connectivity gap between the members.<24> It also gave credible focus on the need to link the smaller sub-regions together in order to create the linkages necessary for overall connectivity. However, this initiative has made little headway. With the ASEAN Economic Community (AEC) now in place, there seems to be some possibility of linking the issue of connectivity to the overall AEC plans. This will have to be implemented if the AEC is to be effectively realized. Within the AEC itself the question of connectivity remains a key pillar which has to be addressed through the adoption and implementation of the Masterplan.<25>
While trying to understand the rationale behind conceiving the Indo-Pacific Economic Corridor, it would be worthwhile to look at some of the strategies that have been initiated in order to further the possibility of its realization. Under the current government Prime Minister Modi has emphasised a Look East and Link East policy whereby the question of addressing connectivity challenges seem to be of critical interest. As early as November 2014, Prime Minister Modi during his visit to Myanmar for the India-ASEAN Summit and the East Asia Summit, reflected on the nuanced change to the Look East Policy by calling it the Act East Policy. In this context the emphasis was to be given to the completion of key projects. The Prime Minister also highlighted that there would be an effective role for three C’s – culture, commerce and connectivity. The primacy given to the need to bolster India-ASEAN Connectivity was one of the key prerogatives of the current government.<26> For the Indo-Pacific Economic Corridor to be effective the impetus to complete pending projects must be instituted from both the Indian and the ASEAN sides.
Significant among these are first, the trilateral highway which will link India’s northeast through Myanmar to Thailand. This will be the first key implementation on the connectivity side whereby the land link through Myanmar into Southeast Asia will be established. Interestingly in the India-ASEAN Comprehensive Economic Partnership Agreement the emphasis given to the infrastructural component clearly outlines the importance of the move towards infrastructural connectivity. Second area that will be given due attention is the Kaladan Multimodal Transit and Transport project which aims to link Kolkata to Sittwe through both sea and the river ports to further link India’s Northeast by road. There is one concern however, that the project runs through the Arakan region which remains politically volatile and as a result the effective implementation of this project is a cause for concern.<27> Third strategy is the development of the India-Mekong Corridor which will seek to explore two possible options – connecting the ports of India and Myanmar and then linking this to the roads into the Mekong sub-region. Additionally this project also seeks to explore the potential of linking the Chennai-Dawei corridor which will also increase connectivity to the southern parts of the country.
The third strategy which will be a significant departure is the issue of connectivity through the transit rights which India has acquired from Bangladesh. This has been a very vital step forward in gaining easier access to India’s northeast and in the development of the region.<28> Additionally in November 2015 India signed a proposal for vehicular movement with Bangladesh, Bhutan and Nepal (BBIN). Once this is operational there will be a 3200 km road link from Moreh (Manipur) to Mae Sot (Thailand), making it one of the first sub-regional connectivity projects that will link South Asia to Southeast Asia.<29> Along with other sub-regional initiatives such as the BIMSTEC and the Ganga Mekong Cooperation (GMC) the BBIN will also complement the existing sub-regional frameworks that will eventually link up to the Indo-Pacific Economic Corridor. Finally there is also a plan to construct a road between Kolkata and Ho Chih Minh city which will cover a land route of nearly 4430 kilometers which if completed will give access to all the mainland countries in Southeast Asia.
Some of the options and strategies from the ASEAN side will also remain critical. There is a growing focus on the sub-regional development initiatives within the Southeast Asian region among which three are very important initiatives from the ASEAN side – first is the Greater Mekong Sub-region which was started in 1992 under the Asian Development Bank. This seeks to improve the trade facility among countries that are connected through the Mekong River by opening up borders and integrating on developmental projects.<30> This has been one of the most successful initiatives. The next target for the GMS is to open up the East-West Corridor which will link Da Nang in Vietnam to the port of Mawlamyine in Myanmar. A second initiative that is vital is the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) which was started in 1994. Third is the grouping of Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) which links these three countries together. Fourth, is the latest initiative by President Joko Widodo in which Indonesia seeks to transform itself into the `poros maritim dunia’ or the global maritime fulcrum. As part of this vision Indonesia is now looking at a two ocean strategy where it will look at linking its eastern and western maritime extents. This has a dual strategy of developing both the internal connectivity between the islands and also external linkages to promote better connectivity and integration with the region. While many of these options and strategies still remain at the nascent stage and it is difficult to pronounce its effectiveness currently, there is little doubt that this approach to trans-regional integration can create tremendous economic integration in the wider Indo-Pacific region.
This article was originally published in GP-ORF’s Emerging Trans-Regional corridors: South and Southeast Asia.
<1> Speech by Foreign Minister Marty Natalegawa, An Indonesian Perspective of the Indo-Pacific, CSIS Washington DC, May 2013 at the website http://csis.org/files/attachments/130516_MartyNatalegawa_Speech.pdf
<2> Tridivesh Singh Maini, Indo-Pacific Economic Corridor: Opportunities and Challenges, East Asia Research Programme, 24 June, 2016, at the website http://earp.in/en/indo-pacific-economic-corridor-opportunities-and-challenges/
<3> Mark E Manyin et al, Pivot to the Pacific? The Obama Administration’s “Rebalancing” Toward Asia, March 28, 2012, Congressional Research Service (CRS) 7-5700, R42448, p. 1 , at the website www.crs.gov
<4> Ibid.,
<5> Ibid.,
<6> Ibid., See also Catharin E. Dalpino, New Power Dynamics in Southeast Asia: A Report of a Stanley Foundation Project on Examining US Relations with Southeast Asia, 2008, pp. 2-21, at the website http://www.stanleyfoundation.org/publications/report/NPDinSEA908.pdf
<7> Ibid.,
<8> This was highlighted in the Speech by Hillary Clinton in 2011 at the East West Centre. For details see Hillary Clinton, America’s Pacific Century, Foreign Policy, 11 October, 2011 at the website
http://foreignpolicy.com/2011/10/11/americas-pacific-century
<9> Ibid.,
<10> The United Stated and India: A Shared Strategic Future, Council on Foreign Relations, September 2011, citied in Mark E Manyin et al, Pivot to the Pacific? The Obama Administration’s “Rebalancing” Toward Asia, March 28, 2012, Congressional Research Service (CRS) 7-5700, R42448, p. 5, at the website www.crs.gov
<11> Logistics development study of the GMS North-South economic corridor: summary, Asian Development Bank (ADB) 2008, ADB: Manila, Philippines, pp.
<12> China ASEAN Trade to hit 500 Billion USD, Xinhua News, 23 July, 2013, at the website http://news.xinhuanet.com/english/china/2013-07/23/c_132566755.htm. See also ASEAN-China Dialgoue Relations at the website http://www.asean.org/news/item/asean-china-dialogue-relations
<13> Hector Florento and Maria Isabela Corpus, Myanmar: The Key Link Between South and Southeast Asia, Asian Development Bank Working Paper Series, No. 506, December 2014, (Asian Development Bank Institute, pp. 3-9, accessed from the website https://papers.ssrn.com/sol3/Data_Integrity_Notice.cfm?abid=2538991 on 14 May 2016.
<14> Strategy and Action Plan for the Greater Mekong Subregion East-West Economic Corridor, ADB, Manila, Philippines, 2010, pp. 6-10.
<15> Peter A. Petri, Michael G. Plummer and Fan Zhai, The Economics of the ASEAN Economic Community, at the website http://www.brandeis.edu/departments/economics/RePEc/brd/doc/Brandeis_WP13.pdf , pp. 14.
<16> Accelerating Energy Access for all in Myanmar, UNDP Myanmar Report, May 2013 at the website http://www.mm.undp.org/content/dam/myanmar/docs/Accelerating%20energy %20access%20for%20all%20in%20Myanmar.pdf
<17> n. 6, pp. 6-10
<18> Connecting South and Southeast Asia: A Joint Study of the Asian Development Bank and the Asian Development Bank Institute, 2015, pp. xx-xxi.
<19> Ibid.,
<20> Ibid.,
<21> Suba Chandran, The Indo-Pacific: India’s Look East 3.0, IPCS, No. 3843, 14 March 2013, at the website http://www.ipcs.org/article/india/the-indo-pacific-indias-look-east-30-3843.html
<22> For details see Look East Policy and the Northeastern States, Government of India Ministry of Development of North Eastern Region, 15 February, 2011.
<23> n,24. Ibid.,
<24> Joycee A Teodoro, ASEAN’s Connectivity Challenge, The Diplomat, 27 June 2015, at the website http://thediplomat.com/2015/06/aseans-connectivity-challenge
<25> Ibid.,
<26> For details on India-ASEAN Connectivity see Ted Osius and C. Raja Mohan, Enhancing India-ASEAN Connectivity, CSIS, June 2013, pp. 54-66.
<27> Sinderpal Singh, Debating Physical Connectivity Between India and ASEAN: Economics versus Security, in Namrata Goswami (ed.), India’s Approach to Asia: Strategy, Geopolitics and Responsibility, Pentagon Press, New Delhi, 2016, pp. 164-182.
<28> For details see Anasua Basu Ray Chaudhury and Pratnashree Basu, India-Bangladesh Connectivity: Possibilities and Challenges, Part I, Proximity to Connectivity: India and its Eastern and Southeastern Neighbours, Observer Research Foundation, p. 16.
<29> Sharmishta Mukherjee, New Economic Corridors: India On Road to Redefine trade Ties with South Asian Neighbours, Indian Express, 15 November 2015 at the website http://indianexpress.com/article/business/business-others/new-economic-corridors-india-on-road-to-redefine-trade-ties-with-south-asian-neighbours
<30> Trishia P. Octaviano, Economic Corridors Boost Markets and Living Conditions, Business World Research, 24 March, 2014, Manila, Philippines, at the website http://research.bworldonline.com/popular-economics/story.php?id=350&title=Economic-corridors-boost-markets,-living-conditions
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