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Conference Reports

Conference Report


Report on
The Second India-Malaysia Strategic Dialogue
January 27-29, 2010
Kuala Lumpur, Malaysia


The Second India-Malaysia Strategic Dialogue was held in Kuala Lumpur, Malaysia, on 27-29 January 2010. The Dialogue was convened following the official visit by the Prime Minister of Malaysia, The Hon. Dato’ Sri Najib Tun Abdul Razak, to India on 19-23 January 2010. The event was organised by the Institute of Strategic and International Studies (ISIS) Malaysia in collaboration with the Indian Council of World Affairs (ICWA). Over 60 participants, including 12 from India, joined the two days of discussion that revolved around five main sessions: 1) Global Views of India and Malaysia; 2) Regional Security Outlook: Indian and Malaysian Perspectives; 3) Maritime Security in South and East Asia: Developments and Challenges; 4) Domestic Developments in India and Malaysia; and 5) Doing Business in India and Malaysia.

The Dialogue began with a keynote address by The Hon. Senator Kohilan Pillay, Deputy Minister of Foreign Affairs of Malaysia. Senator Kohilan said the recent visit by the Malaysian Prime Minister underscored the importance that the country ascribes to its relations with India. He outlined the trajectory of bilateral relations between the two countries in the economic and political domains. Malaysia, he said, views India’s engagement with East Asia positively. He expressed the hope that the two countries would collaborate closely on important issues at international forums. Senator Kohilan concluded by saying that Track Two events are important as a test-bed for new ideas on how to move bilateral relations forward.

Session 1 – Global Views of India and Malaysia

The first session began with a presentation by H.E. Ambassador Sudhir T. Devare, Director-General of the Indian Council of World Affairs (ICWA). According to Ambassador Devare, 2009 was marked by three developments with significant implications for India’s foreign policy. First, the inauguration of US President Barack Obama led to a shift in US foreign policy, with a new approach towards the relationship between Washington and New Delhi. Second, the re-election of the Congress Party-led government in India saw the continuation of a foreign policy centred on securing the country’s independence of action, maintaining close relations with neighbouring countries, and engaging other major powers. The third development was the growing attention given towards combating extremism in Afghanistan and Pakistan. Washington has closely consulted New Delhi on the situation in Afghanistan. Furthermore, New Delhi has given US$1.3 billion in aid to Kabul to enhance the latter’s ability to generate stability.

Ambassador Devare’s presentation also touched on India’s relations with China and the rest of East Asia. He expressed confidence in the ability of India and China to manage their bilateral relations, particularly in light of the political dialogue that the two countries have been engaged in over the past seven years. India views its border dispute with China as a matter that can only be resolved through dialogue. Moreover, in addition to bilateral matters, the two countries have begun to consult each other extensively on international issues of mutual interest. Nonetheless, Ambassador Devare asserted that India views China’s growing assertiveness on the international stage with concern. He added that New Delhi’s foreign policy towards East Asia continues to be guided by its Look East Policy. India’s engagement with ASEAN has been fairly strong, as shown by the coming into force on 1 January 2010 of the ASEAN-India FTA Trade in Goods Agreement (AIFTA TIG). New Delhi would like to further deepen that engagement and regards the East Asia Summit as providing a promising route towards community building.

Like many other countries, India was disappointed by the outcome of the 2009 United Nations Climate Change Conference in Copenhagen. Nonetheless, Ambassador Devare noted a silver lining. The Copenhagen Accord endorsed that climate change should be dealt in accordance with the principle of common but differentiated responsibilities and respective capabilities. India believes that it is important that this principle continues to guide climate-change negotiations. He concluded his presentation by saying that India and Malaysia have regularly consulted each other on international issues. The need to work closely, he said, could not be overemphasised.

A Malaysian perspective on international issues was provided by Dr Stephen Leong, Director of the Centre for International Studies at Tunku Abdul Rahman University and Visiting Fellow at ISIS Malaysia. He began by saying that among the Asian major powers, China is perhaps the most important to Malaysia. In the initial decades following Malaysia’s independence in 1957, the country perceived China as a security threat in view of the latter’s support for communist revolutions in Asia. However, Malaysian suspicions of China began to diminish in the 1970s. In 1971, Malaysia voted for Beijing to assume China’s seat in the United Nations. Three years later, Malaysia established diplomatic relations with China, making it the first country among the five original members of the Association of Southeast Asian Nations (ASEAN) to do so. Since then, Malaysia and China have continued to deepen their bilateral relations, notwithstanding their territorial dispute in the South China Sea. Malaysia does not view China’s military modernisation as presenting a security threat. Furthermore, Kuala Lumpur has been encouraged by Beijing’s support for multilateralism. Malaysia views China’s economic development as presenting significant opportunities as an export destination.

Malaysia also places significant importance in its relations with Japan and the United States. According to Dr Leong, Malaysians generally view Japan as an example of how a country can be developed in a short space of time, given its rise as an economic power in the decades following the Second World War. He noted, however, that this perception has been challenged by the continuing economic difficulties in Japan. Nonetheless, Malaysians still regard Japan as Asia’s leader in technological know-how and continue to view the country in a positive light. Similarly, Malaysian perceptions of the United States are generally positive. While the image of the United States suffered considerably during the presidency of George W. Bush, it has improved since the election of President Barack Obama.

Session 2 – Regional Security Outlook

Mr Mahendra Ved, President of the Commonwealth Journalists Association of India, began his presentation on India’s regional security outlook by giving a brief overview of the country’s immediate neighbourhood. India is in a unique position, being geographically surrounded by seven countries of different sizes. Added to its own size, population and natural resources, this makes India the centre of the South Asian region. India’s centrality means that it is important for New Delhi to actively engage all the countries in the region.

In this regard, India’s complex and often difficult relationship with Pakistan poses the greatest challenge. Relations between the two countries have remained tensed due to continuing suspicions of Islamabad’s complicity in terrorist activities in India. The terrorist attacks in Mumbai in 2008 continue to cast a pall over relations between the two countries. Mr Ved expressed the hope that India-Pakistan relations would not be held hostage to the investigations into the Mumbai attacks. However, it is important for New Delhi to be persuaded that Islamabad is serious about taking action against militant organisations. Unless that happens, he argued, relations between the two countries would be at risk of further deterioration, particularly in the event of another major terrorist attack. However, despite the strained relationship between the two governments, significant progress has been made in cultivating people-to-people relations. Mr Ved highlighted how there has been a growing awareness and appreciation of the cultural heritage shared by the two countries.

Adding to the points made by Ambassador Devare in the previous session, Mr Ved said that relations between China and India have generally developed in a positive direction. However, despite the deepening relationship between the two countries, there remained a strong element of competition, particularly in the race for energy supplies and for influence in South Asia. He said many Indian analysts believe that China has adopted a “String of Pearls” strategy, in which Beijing is suspected of attempting to compete for influence in South Asia by constructing major shipping facilities in neighbouring countries. In addition, Beijing’s attempt to block a waiver of restrictions by the Nuclear Suppliers Group (NSG) on the supply of nuclear materials to India has generated resentment among Indians. Even so, India and China are keenly aware and cautious of the risks of allowing competitive relations to intensify even further.

The session was then given a Malaysian perspective on regional security by Mr Rajayah Devudu, Deputy Undersecretary for Policy at the Ministry of Defence of Malaysia. At the outset of his presentation, Mr Rajayah noted that there is a complex mix of forces that have engendered both stability and instability in East Asia. Several countries in the region possess some of the world’s largest militaries. In addition, deep-seated animosities among key countries in the region continue to persist. Mr Rajayah identified the Taiwan Strait, the Korean Peninsula and the South China Sea as the major flashpoints in the region. The issues surrounding these areas of dispute have proved to be intractable and are unlikely to be resolved in the near future. Mr Rajayah added that the threat of terrorism in Southeast Asia has been significantly diminished following concerted efforts by regional security forces against the Jemaah Islamiyah network. However, several militant groups are still at large in the region. If the Taliban were to emerge victorious in Afghanistan, it could inspire and galvanise militant groups in Southeast Asia.

Mr Rajayah’s presentation also addressed efforts to enhance security cooperation in Southeast Asia. Significant progress, in particular, has been made in the maritime domain. He asserted that there is an absence of a clear nexus between terrorism and maritime piracy in Southeast Asia, despite lingering anxieties about the possibility that terrorists would seek to disrupt the safe passage of vessels in regional waters. Mr Rajayah reiterated Malaysia’s view that building the capacities of the security forces of littoral states represents the best way to secure the Malacca Strait. In this regard, the “Eye in the Sky” air patrol by Malaysia, Singapore and Indonesia is often cited as an example of the effectiveness of joint anti-piracy efforts by the littoral states. Rajayah added that Southeast Asian countries have intensified their security and defence cooperation, as manifested by the establishment of the ASEAN Defence Ministers’ Meeting (ADMM). The ASEAN defence ministers have also agreed to the establishment of an ADMM Plus, in which defence ministers from extra-regional countries would be invited to participate.

Session 3 – Maritime Security in South and East Asia

Colonel (Rtd) Ramli Haji Nik, Research Fellow of the Maritime Institute of Malaysia (MIMA), began by saying that Malaysia and India have made significant contributions towards enhancing global security. Both countries have regularly made their security forces available for peacekeeping operations under the auspices of the United Nations. In the past year, the two countries have deployed their maritime forces to the Gulf of Aden following the surge in piracy activities in that area. Colonel Ramli noted the common resolve by Malaysia and India in the struggle against terrorism. Among other initiatives, Malaysia has established the Southeast Asia Regional Centre for Counter-Terrorism (SEARCCT), which conducts courses for officials from regional law-enforcement and security services.

The participants were then presented with an Indian perspective of maritime security by Dr Vijay Sakhuja, Director of Research of the Indian Council of World Affairs. Dr Sakhuja posited that there appears to be a naval arms race in the Asia Pacific. Naval acquisitions are projected to rise from US$60 billion in 2010-2015 to US$173 billion by 2020-2030. In recent years, about 80 to 100 submarines have been added to the naval inventory of Asian countries. The rapid pace of submarine acquisitions has been driven by the need to bolster deterrence against littoral dominance by external powers. Dr Sakhuja noted that historically, colonialism in Asia has generally been preceded by maritime dominance. Asian countries are also seeking to exercise their jurisdiction in their respective exclusive economic zones (EEZ), protect their energy supply chains and confront the threat posed by pirates and terrorists.

India has a significant interest in the security of the Malacca Strait. According to Dr Sakhuja, about 55 per cent of Indian trade are transported through the Strait. That number is expected to rise following the coming into force of the AIFTA TIG. India is willing to contribute its maritime forces towards securing the Malacca Strait, though only if it were asked to do so by Southeast Asian countries. Thus far, India has provided technical support to Southeast Asian maritime forces by, for example, conducting hydrographical surveys in the Malacca Strait. India’s coastguards have also conducted courses for Southeast Asian maritime forces. Sakhuja suggested that Malaysia and India should explore ways to broaden their cooperation in the maritime domain. This could include, among others, conducting joint naval exercises in the South China Sea and joint piracy operations off the coast of Somalia. The two countries should also examine the possibility of establishing joint defence-technological enterprises to produce naval and aviation platforms. Dr Sakhuja also proposed the integration of the Malacca Strait Security Initiative (MSSI) and the India-Maldives-Sri Lanka (IMSL) initiative.

Session 4 – Domestic Developments in India and Malaysia

The session began with a presentation by Dato’ Dr Mahani Zainal Abidin, Chief Executive of ISIS Malaysia, who outlined the recent developments in Malaysia’s economy. According to Dato’ Mahani, Malaysia has made significant strides in economic development. It is an upper middle-income country that has scored major gains in eradicating poverty. Malaysia is also a leading exporter of electrical and electronic goods and has a sound physical infrastructure.

On the other hand, Malaysia has suffered its share of setbacks, culminating in the economic crises of 1985 and 1997-8. The former was caused by the decline in commodity prices and Malaysia’s large fiscal deficit, which in turn led to the economic liberalisation measures that spurred growth in the 1990s. Following the Asian Financial Crisis of 1997-8, however, Malaysia’s economy has grown at a slower pace. The crisis also revealed that Malaysia was caught in a middle-income trap, which it is still struggling to escape from.

Dato’ Mahani went on to describe the policy measures that have been undertaken by the Government. They include the liberalisation of the service sector and Bumiputera equity requirements, initiatives to attract human capital, and the abolishment of the Foreign Investment Committee guidelines. As a result, the Global Financial Crisis has had only a modest impact on Malaysia’s economy, but this does not detract from the need for a deeper restructuring of the economy to help it move past the middle-income trap.

Ms Rita Sim, Executive Director of Sin Chew Media Corporation, then delivered an update on political trends in Malaysia. Since achieving independence in 1957, Malaysia has been governed by coalition governments led by the United Malays National Organisation (UMNO). But the dominance of the ruling coalition, the Barisan Nasional (BN), has been challenged since the 2008 general elections, in which the BN lost its two-thirds majority in Parliament. The elections also uncovered the changing profile of the Malaysian electorate. Young voters, in particular, have emerged as an influential force in Malaysian politics.

Ms Sim then turned to the two main political coalitions, which some Malaysians hope would herald a two-party system in the country. While UMNO has attempted to consolidate its Malay base, it still faces considerable obstacles in winning back non-Malay support. Furthermore, its BN allies have been weakened considerably. On the other hand, the opposition coalition, the Pakatan Rakyat (PR), is confronted with its internal disputes, not only between its component parties but also within individual parties themselves. Ms Sim felt that the rise of conservatives in the Islamist PAS party would prove especially problematic for PR’s attempt to win power on a broad-based, multi-racial platform. On the other hand, PAS’ electoral machinery has proved to be critical for PR’s efforts to connect with the Malay grassroots. Malaysian politics is therefore very much at a crossroads.

Professor Y. Yagama Reddy, Director of the Centre for Southeast Asian and Pacific Studies at Sri Venkateswara University, then made his presentation, which focused on the need for symbiotic approaches to India-Malaysia relations. He began his presentation by describing the historical and cultural commonalities between India and Malaysia. Professor Reddy felt that it is time for India and Malaysia to embark on an enhanced partnership. Strong areas of cooperation already exist, such as the defence relationship between the two countries. He also spoke of the constructive diplomacy that has been used to handle sensitive issues such as the treatment of Indian workers in Malaysia. Professor Reddy concluded by saying that it is in Malaysia’s interest to engage India given its economic and strategic importance in international affairs.

Session 5 – Doing Business in India and Malaysia

The presentation by Dr Ram Upendra Das, Senior Fellow at the Research and Information System for Developing Countries (RIS), was centred on the implications of preferential trade agreements between India and ASEAN and, more specifically, between India and Malaysia. He examined the growth in the number of regional trade agreements (RTAs), the intra-regional trade of major RTAs, and the types of regional trade agreements. Dr Das suggested that investment cooperation agreements should be concluded as soon as possible. He added that opportunities should be seized to expand trade-facilitating mechanisms and technology cooperation.

The second speaker for this session was Datuk Bhupat Rai M. Premji, Deputy President of Malaysia-India Business Council. He began by suggesting that Malaysia should redouble its efforts in attracting investments by Indian enterprises. There are only about 200 companies from India in Malaysia, compared to some 3,000 in Singapore. On the other hand, Malaysian investors have faced cumbersome procedures in India. The business environment in India could be significantly improved by reducing bureaucratic delays, creating a more uniformed taxation system across states, and making significant investments in infrastructure. Datuk Rai suggested that Malaysian companies would benefit from identifying an appropriate and reliable partner in India before investing in the country. The opportunities for greater collaboration between Malaysian and Indian companies were enormous, particularly in infrastructure development. Datuk Rai noted that over the next five years, India intends to spend about US$50 billion in building roads, another $50 billion on property development, and US$15 billion on airports and power plants.

The next speaker was Mr Umang Sharma, Chairman of the Consortium of Indian Industries in Malaysia (CIIM). According to Mr Sharma, India’s economy is both domestic and services driven. By contrast, Malaysia’s economy is dependent on the manufacturing sector. In line with this, Mr Sharma listed several areas of opportunity for increased trade between the two countries. India excels in human capital development. It has an expanding infrastructure, a need for greater power supplies, and the requirement to educate an ever-increasing population. The country is also placing considerable emphasis on biotechnology and on service industries.

Mr Sharma pointed out that Indian investors faced many challenges in doing business in Malaysia. Even though Malaysia has a sizeable population, the country suffers from an acute shortage in qualified people in certain critical areas such as engineering. Moreover, certain types of infrastructure projects are restricted to local businesspeople. There are also considerable difficulties in interactions with Malaysian immigration authorities. Business visas are difficult to obtain and applicants are often granted social-visit visas instead. This creates uncertainties for the individuals concerned. Mr Sharma suggested that one of the best ways to identify business opportunities in India is to visit the country. He also urged Malaysians to look beyond Chennai for business opportunities.

Conclusion

The Prime Ministers of Malaysia and India have agreed that the two countries should establish a “strategic partnership”. Interpretations of what constitute a strategic partnership vary. Nonetheless, it is clear that the leaders of both countries have resolved to significantly elevate the status of bilateral ties and broaden the scope of cooperation across the full spectrum of relations.

Among the various proposals made during the Dialogue, there were three that merit the serious consideration and attention of the governments of Malaysia and India:

• First, the two countries should continue to regularly consult each other on international issues of mutual interest;

• Second, Malaysia and India should consider broadening their security cooperation in the maritime domain, while being sensitive towards the sovereignty and security concerns of both countries; and

• Third, both countries should work closely with industry groups to gain insights into the obstacles faced in doing business in India and Malaysia. Immigration policies, in particular, should facilitate the hiring of people with critically required expertise from both countries.