United States Economic Interest in South Asia

After the Cold War, US emerged as the sole super power in the world. It started establishing military bases in all regions around the world. Central Asia, South Asia, Middle East and East Asia are the regions which have their own peculiarities. South Asia due to its presence along Indian Ocean, proximity to oil rich Central Asian States, nuclear rivalry between India and Pakistan and its neighbourhood with Afghanistan; has peculiarities and strategic importance which US could not ignore. Resultantly, especially after 9/11, US entered this region in the garb of war on terrorism and engaged both Pakistan and India in strong strategic relationship.

Emergence of China and India in the region as economic powers has attracted the world powers. This paper will endeavour to highlight US economic interest in this region to gain hegemony in the Indian Ocean, maintain presence in oil rich central Asia, check Chinese influence in South and Central Asia and Indian Ocean, continue its war on terrorism in Afghanistan and bring political stability, control flow of oil from Persian Gulf, and gain control of Sea Line of Communications in the Indian Ocean. After identifying and analysing US economic interests in particular, certain recommendations would be proffered for South Asian countries so that we should not fall prey to the great game of the super power.

Problem Statement

Economic affairs have assumed a greater importance under the prevalent environments of uni-polar world, where major powers are looking for new markets. South Asia is one of the biggest and most lucrative consumer markets. Emerging economies of India and China has given special status to this region. Resultantly, US economic interests in the region have increased its manifold.

Foregoing in view, carry out an in depth study of US economic interest in South Asia, its implications for the region and suggest recommendations for regional nations to safe guard their economic interests.

Background

Economic globalization involves arguably the most fundamental redesign and centralization of the planet’s political and economic arrangements since the Industrial Revolution. Despite the scale of the global reordering, neither our educational institutions nor the mass media have made credible effort to describe what is being formulated, to explain its root philosophies or to explore the multidimensionality of its effect on out society and economy.

The occasional descriptions or predictions about the global economy and scarcely the US interests highlighted have found place in the media. Hissing sound is heard from corporate leaders, their allies in high levels of government and newly powerful centralized global trade bureaucracy. The vision they offer us area unfailingly positive, even utopian. Globalization i.e by increasing US ingress in our economy will remain to be a panacea for all our ills.

Sri Lanka like the other third world countries confronts a major dilemma today regarding its deplorable economic conditions internally and trying to keep her relevance in the charging economic climate of South Asia. Growing US interest in the region is in fact the food for thought for Sri Lankan think tanks.

Purpose of Study

The growing US interest in India is to be viewed deliberately and at the same time its effect. Thus clear shift from Geo political/ strategic to Geo economic is visible on the map of South Asia. Study thus seeks to analyze the affect of growing US interests in the region and Sri Lankan stance being relevant to the changing US economic interests in South Asia.

chapter two

Significance of the Study

In today’s world, power is not only depending on a country’s might in her Military. The economic stability and sustainability also plays a magnificent role. It’s vitally important not only for the countries’ who are big in population or in geographical area, but in those countries who are small in size of land in terms of population. The geographic location where the country lies does play no lesser degree.

The research topic revolves around the poorest regions in the world and has millions of middle-class citizens. Plagued by low levels of literacy, it’s nonetheless produces distinguished scientists, artists and professionals. Contains an awesome and bewildering diversity of languages, religions and ethnicities, but is remarkably cohesive in terms of physical environment and natural resources. The countries share rivers, mountains systems, oceans and ecological cycles such as the life-sustaining monsoon rains. The states of the region have their share of disputes, along with deeply shared cultures and history. The prospect of a new departure in South Asia – US relations must be set against a past often burdened by mistrust and sharply different objectives. During most of the post – World War II period, US ties with India and Pakistan, the region’s two powers, vacillated between close embrace and uneasy distance. The US interest in the region has risen and fallen; same has been viewed with a new dimension i.e the economic dimension of the US in the South Asian region.

Before taking any further into the methodology and the problem statement it is worth mentioning the US economic interest in South Asian Countries specific.

Afghanistan

Present Aims Of US. In Afghanistan effort to transform what had become one of the world’s principal sources of instability into a secure and prosperous country. Steps which full fill the Geo Political aims of US are:-

“Rebuilding of the country and the society.

Loya Jirga has been institutionalized.

Rebuilding the country’s infrastructure, education, health systems and security forces.

Forward-looking economic policies.

US has already provided over $2 billion in assistance to Afghanistan and will be providing an additional $2.2 billion more during this year.

Training Afghan army, police forces; US and other allies are also building a network of Provincial Reconstruction Teams to help provide local security and coordinate development and reconstruction while easing the transition to civilian rule.

Efforts to disarm and demobilize militias [1] .

Bangladesh

Back Ground. US and Bangladesh have been close friends and partners since 1971. Today the stakes are great; experts estimate that by the year 2025, there will be over 200 million people in Bangladesh and over 25 million people in Dhaka alone. Thus demographic challenges are of a great concern to a developing nation.

US Investment and Concerns. At $1.3 billion, the US is Bangladesh’s biggest foreign investor. The concerns of US while investing are:-

Privatization, export diversification, deregulation, financial sector reform, and major infrastructure investments are essential to reverse the declining foreign investment trends and achieve steady economic growth.

Corruption and poor governance.

US has increased its assistance to Bangladesh for promoting democracy and good governance and combating corruption to over $8 million in Fiscal Year 2006.

The hub of Population remains an attraction with availability of cheap and technical labor.

As per Vishal, USA “Bangladesh can seek a lot tech help from bigger partner USA and in turn send technical man power to the Statesâ€? [2] .

“Bangladesh is sitting virtually on oilâ€? [3] .

Bangladesh Interests. Few of the analysts believe the US Presidents one day visit to the country is extremely important with the oil and gas reserves likely to be tapped. Bangladesh interests remain with US as:-

“Aid oriented with investment in basic infrastructure.

Human resource development�.

China [4] . China’s entry into the WTO, makes the deal sound like a sure-fire winner for US workers. In particular, the deal’s supporters argue that expanded trade relations with China will lead solely to more exports to China. A closer look at the US government’s own data reveals following:-

China trade agreement under WTO and with US will be of greater capital mobility into China.

US multinationals eager to deliver goods and services to the Chinese market as 1.1 Billion population market.

Produce goods cheaply that can then be exported to the US and other markets.

Results

Growing US trade deficit with China.

Growth of US multinationals and direct foreign investment i.e 10% increase in US direct investment in China.

7.3% increase in the volume of imports from China and a 2.1% decline of US exports to China.

Surge of investment by US firms in China and the US trade deficit with China.

Import competition from China involves different industries than in the past.

Job losses seen by analysts in US markets; thus a technological shift to the populous pole of the world.

India

Indo-US Relations Since 1991. “India and the US have multi faceted relations ranging from political, strategic to economic and commercial. India-US economic relations in the form of bilateral investments and trade constitute important elements in India-US bilateral relations particularly because India is now the second fastest growing economy in the world and USA is the world’s largest economy. Economic Reforms introduced since 1991 have radically changed the course of the Indian economy and led to its gradual integration with the global economy. Benefits of the reform process are:-

Better growth rates, higher investment and trade flows and accelerated decline in income poverty.

USA is the largest investing country in India in terms of FDI approvals, actual inflows and portfolio investment.

US investments cover almost every sector in India, which is open for private participants.

India’s investments in USA are picking up. USA is also India’s largest trading partner.

By 2003, India became the 24th largest export destination for the US.

Since 2000, the two countries have been making efforts to strengthen institutional structure of bilateral economic relations by means of the “India-US Economic Dialogueâ€? that aims at deepening the Indo-American partnership through regular dialogue and engagementâ€? [5] .

The Strategic Economic Dimension of the US-India Relationship. India-US relations have seen a remarkable transformation over the last decade. The recent bilateral visit of Prime Minister to Washington from November 22-26, 2009 as the first State Guest of President Barack Obama has reaffirmed the global strategic partnership between India and the United States. The two leaders have reaffirmed that the common ideals and complementary strengths of India and the United States provide a foundation for addressing the global challenges of the 21st century and resolved to build on these to expand the U.S.-India global partnership for mutual benefit.

It emanates from reformed and global Indian economy. Key contributors so as the US takes full advantage are [6] :-

Economy. US and India are expanding cooperation to enhance job creation and economic growth; support economic reforms and liberalization; develop a bilateral business climate supportive of trade and investment; and improve market access for goods and services.

Trade. Over the last five years, US exports to India have more than doubled, helping to create better-paying jobs in the US. The US and India agree that trade is essential to promoting global economic growth, development, freedom, and prosperity. Both countries are committed to completing the WTO Doha Development Agenda before the end of 2006.

Investment. The US and India have agreed to hold a high-level public-private investment summit in 2006 and are continuing the dialogue on further liberalization of investment restrictions, regulatory transparency, dispute settlement, reducing tariff and non-tariff barriers to trade.

Agriculture. The US and India have launched the Knowledge Initiative on agriculture to link universities, technical institutions, businesses to support high-priority joint agriculture education, research, capacity-building projects and biotechnology. The joint declaration made in New Delhi during President Clinton’s visit i.e. “India-US Relations: A Vision for the 21st century” incorporates two important statements- ‘Natural partnership of shared endeavours’ and more importantly that “In many ways the character of the 21st century will depend on the success of our cooperation for peace, prosperity and democracy and freedom”. Peace, prosperity, democracy and freedom cannot be secured by rhetoric, as has been the Indian experience. These can only be secured by rhetoric, as has been the Indian experience. These can only be achieved through politico-strategic initiatives with the strategic predominating. The “Vision” of India-US relations, jointly seen, should therefore, logically incorporate the development of a strategic partnership, prompted by the imperatives discussed about. President Clinton’s visit to India, it is hoped heralds the advent of the inevitable. [7] .

Importance of Indian American Joint Venture. “Today, Indian-American and Indian investors enjoy a very influential presence in Washington, key areas being:-

Wall Street/Media. Some 2 million people of Indian origin are in the US wall street/media business.

Indian Students In US. There are over 85,000 Indian students in the US more than from China.

Benefits To Indian Populous. US trade and investment with India is only 10 percent of what it is with China, this is changing – to the benefit of Americans and Indians — through increased opportunities in India for American trade and investment. Polls in India show a notable 75 percent favorable view of the US.

Out Sourcing. While outsourcing has become a controversial issue, the US actually enjoys a healthy surplus in trade in services with India. In 2004, US exported $4.6 billion worth of services to India, a surplus of $1.8 billion.

Trade Growth. $16 billion in two-way trade in 1998, US-India trade has grown to $26 billion in 2005 US exports, now at approximately $8 billion, grew almost 30 percent last year and is expected to continue further.

Strategic Sale Agreements. Boeing has sold almost $15 billion in new aircraft to India and two US airlines have opened non-stop routes to India. Airport privatization is underway and the air transport market has grown by close to 40 percent in the past year.

India’s Energy Needs. India is a nation of 1.1 billion people. With its rapid economic expansion, it has a massive and rapidly growing appetite for energy and is already the world’s sixth largest consumer of energy. US-India Energy Dialogue, aimed at strengthening energy security and promoting the development of stable and efficient markets in India. US – India Civil Nuclear Cooperation Initiative. Civil nuclear cooperation with India will elevate the US-India relationship to new heights [8] .

The IT Sector Of India. This sector has its following linkage with the growing US interests:-

Compounded Growth. 50 percent since 1991.

Soft Ware Requirements. Today, nearly two in five of the fortune 500 companies outsource their IT requirements to India.

IT Sector Collaboration. Especially, in areas like:-

“Communication infrastructure.

Optic fiber cable and gateways.

Satellite-based communication wireless.

IT-enabled services and IT enable education.

Data centers, server farms and software developmentâ€? [9] .

Future Prospects in Economic Investment. “There are several areas where economic cooperation between India and the US can progress further. These include :-

Infrastructure.

Telecom sector.

Energy, knowledge based industries such as pharmaceuticals and biotechnology.

Investor friendly environment in sectors such as roads, ports and airports.

Private sector participation in management, Build operate and Transfer (BOT) projects, green-field airports, terminals, shipping berths and capacity augmentation have been initiated.

Security & Science Related Economic Interests. The US and India are building the foundation of a durable defence relationship to support their common strategic and security interests which include:-

Maritime Security Cooperation. The US and India are committed to a comprehensive cooperative effort to ensure a secure maritime domain.

Counterterrorism. The US and India are jointly expanding the scope of counterterrorism cooperation, including work on bioterrorism and cyber security.

Military Logistics Support. The US and India will soon sign an agreement to facilitate mutual logistic support during combined training, exercises, and disaster relief operations.

Defence Trade. The US reaffirmed its goal to help meet India’s defence needs and to provide the important technologies and capabilities that India seeks.

Non-Proliferation. Both countries support efforts to limit the spread of enrichment and reprocessing technologies.

Intellectual Property Rights (IPR). The US is funding IPR training programs to strengthen enforcement and patent examination, as a vibrant IPR regime is critical to the promotion of a creative, technologically advanced economy.

Science. The US and India established and co-fund the $30 million Bi-National Science and Technology Commission to generate collaborative partnerships in science and technology.

Space. The US and India have agreed to continue exploring further cooperation in civil space, including areas such as space exploration, satellite navigation, and earth scienceâ€? [10] .

US Presidents George W. Bush Visit To India

“We have an ambitious agenda with India. Our agenda is practical. It builds on a relationship that has never been better. India is a global leader, as well as a good friend. … My trip will remind everybody about the strengthening of an important strategic partnership. We’ll work together in practical ways to promote a hopeful future for citizens in both our nationsâ€? [11] .

President George W. Bush, February 22, 2006

“The Evolution of U.S.-Indian Ties: Missile Defense in an Emerging Strategic Relationship,” [12] 

Maldives and Bhutan

21. Maldives is an Islamic Island nation where US have a close eye on its location being on the mouth of the Indian Ocean. East of Nepal between India and China is a small country Bhutan. US interest being to democratize the state. US is also involved in settling the problems of refugees between the two states i.e Nepal and Bhutan. Over all the US involvement remains more of humanitarian assistance [13] .

Nepal

22. Back Gr. US enjoys warm relationship with Nepal for over 50 years. During this period, Nepal has evolved from a closed, monarchy-dominated society into an emerging democracy with growing economic opportunity. US has contributed $1 billion to improve the lives of the Nepalese people. Nepal also happens to have a key place in the eyes of the west with the likely interests emerging as under:-

Peace and stability in South Asia.

Nepal’s independence and territorial integrity.

US also has significant strategic interest in the country because of her location.

Washington supports economic and technical assistance to Nepal�.

23. US Investment Areas in Nepal. Mainly being:-

Assistance programs for democracy, governance and conflict mitigation.

US assistance to strengthen the Election Commission, Peace Secretariat, National Human Rights Commission and corruption ombudsman.

Broaden participation in political parties and make them internally more democratic.

Technical assistance and equipment to the Parliament / aid to a constitutional reform process.

Assisting reintegration of internally displaced persons and funding election monitors.

Promote economic recovery; especially in rural areas.

Pakistan

Pakistan and India Concern’s US. Indeed the most common concern for an investment friendly climate stems out of the security concerns of the region as stated:-

US ex Secretary Powell calls a “triangle of conflict resolution.” He says “We do not seek to impose ourselves as a mediator. Instead, we try to use the trust we have established with both sides to urge them toward reconciliation by peaceful means the leaders of both countries deserve enormous credit for the statesmanship they are demonstrating and for their determination to turn their historic confrontation into opportunities for all of their people. Although the road ahead is certainly challenging, we are optimistic that both sides want to keep up the momentum generated by their recent more open interaction and sound climate for over all peace in the region [14] .

The Latest Perception Of US. Recent visit of US President defines US interests as under:-

“Five years ago, Pakistan was one of only three nations that recognized the Taliban regime in Afghanistan. That all changed after September the 11th, 2001. President Parvez Musharraf understood that he had to make a fundamental choice for his people. He could turn a blind eye and leave his people hostage to terrorists, or he could join the free world in fighting the terrorists. President Musharraf made the right choice, and the United States of America is grateful for his leadership. … Pakistan now has the opportunity to write a new chapter in its history, and the United States want to build a broad and lasting strategic partnership with the people of Pakistan” [15] .

President George W. Bush, February 22, 2006

Pakistan US Collaboration. The areas of collaboration are:-

War On Terror

Fight Terrorism. “The US and Pakistan have cooperated closely in the common fight against terrorism, including along the Afghanistan-Pakistan border.

Al Qaeda Hunt. Pakistan has captured more than 700 al-Qaeda operatives, facilitators and associates since September 11, 2001.

Pakistan’s Military Role. Playing an important role by providing intelligence and support to Coalition forces operating along Afghanistan.

Security /Military Hard Ware

Largest Security Assistance. Pakistan is one of the largest recipients of US security assistance.

Foreign Investment. The United States has pledged $1.5 billion of Foreign Military financing to Pakistan from 2005-2009.

Sale Of Advanced Systems. The United States supports Pakistan’s defence needs through sales of advanced systems.

Sale Of F-16 Air Craft. Move forward with the possible sale of F-16 fighter aircraft to Pakistan.

Non Nato Ally. In June 2004, President Bush designated Pakistan as a Major Non-NATO Ally, making Pakistan one of a select group of nations outside of NATO that have the benefit of a variety of military and financial advantages.

Trade And Investment

US Encourages Economic Prosperity. By supporting increased trade and investment linkages with the US, the region and the global economy.

Bilateral Investment Treaty. Has sent a strong signal about Pakistan’s improving investment climate.

Institute Reconstruction Opportunity Zones (IROZs). That would assist desperately poor border regions of Pakistan and Afghanistan to grow and diversify economically.

Private Sector Involvement. Enhancing our capacity-building assistance to strengthen private sector competitiveness .

Education

Educational Assistance. US has provided more than $130 million to strengthen education programs for young people and adults over the last four years.

Bilateral Educational Dialogue. US and Pakistan will establish a bilateral education dialogue to enhance US-Pakistan educational cooperationâ€? [16] .

Influence Of Regional Countries On Pakistan US Ties. Pakistan’s ties to other nations in the region are steadily growing with likely US investment, with rail, bus, and energy pipeline connections to several nations. Same will act as an antidote towards extremismâ€? [17] .

China’s Influence. “If China gets stronger than it already is, it will be a problem for the US,â€? said Bordonaro, adding that the Chinese could use Gwadar, the port city in the Pakistani province of Baluchistan which is being developed with China’s help, to counter India’s efforts to dominate the Indian Ocean and the Arabian Seaâ€? [18] .

US commitment since 2003. At the June 2003 meeting at Camp David, President Bush made a commitment to develop with Pakistan with a long-term, broad-based partnership worth 3 billion dollar .The areas of interest include:-

Shared interests in promoting prosperity, peace, security, mutual understanding and tolerance in the region / across the globe.

Strengthen cooperation on counter-terrorism and security including striking at the conditions that give rise to extremism and terrorism.

Address poverty and hopelessness root cause for terrorism

Cooperation aimed at fostering expanded commerce within the region including with Afghanistan and Central Asia.

Booming Market. “Most of the American companies in Pakistan currently have plans to expand their operations in the near future;a booming market of 160 million people and also as a potential hub for regional trade and transportation� .

Sri Lanka

29. Present Environment. Since 2009, May 19 Sri Lanka has rid off from the war, which was waging for 3 decades with Sri Lankan armed forces and Tamil minority. The present President has been elected for the second term of 6 years. Country’s development and re-settlement of internally displaced people is the key issues and challenges the government facing. At present the world looking at Sri Lanka with lots of allegations on humanitarian grounds and violation of humanitarian law. Some pointing the finger at the government while others are pointing it to the armed forces of the country. “Rajapaksa must give aid organizations access to hundreds of thousands of uprooted Tamils in the island’s northeast. Overwhelmed doctors in overcrowded camps are amputating limbs without sufficient drugs and medical supplies. The people in those camps desperately need medical care, food, and water. And they should be allowed to return to their homes as soon as possible.

30. Ultimately, the only way for Sri Lanka to avoid another Tamil rebellion is to grant the Tamils some form of local autonomy in their region. Now that the Tigers have been crushed, the Sinhalese majority of Sri Lanka has no excuse for not addressing the legitimate grievances of the Tamil minorityâ€? [19] .

a. Internal Problems And Tsunami Relief. Sri Lanka with a broader range of governments to focus on the Tiger’s financing and arms procurement. US Government is providing assistance totaling $134.6 million for tsunami-related relief and reconstruction in Sri Lanka.

Methodology

31. The study will be carried out in reviewing the data sources which are available in the internet and the few resources available in the libraries.

Chapter three

Literature Review

32. Since this topic is very hypothetical, its data and material review is mainly based on internet. The author, in the course of research, has made an endeavour to find relevant data through various sources including books, periodicals, lectures by professors of Different Universities of Management and Sciences. The detailed guideline provided through sponsors Directing Staff of the Defence Services Command and Staff College. The author is extremely grateful for all those who spared their valuable time to contribute on this work. As mentioned earlier the new found aid is of immense help in formulating the paper i.e “The Internet�.

Chapter four

IMPLICATIONS OF US INTERESTS IN THE REGION

Following areas of interest emerge quite pronounced:-

Diversify Energy Supplies. Persian Gulf oil resources have remained a major source of energy supplies. US consider it of vital interest to secure access to the Central Asian region’s energy corridors in order to reduce dependence on Persian Gulf [20] .

Oil/Gas Reserves in Caspian Basin. The Caspian Basin has an estimated US$5 trillion of oil and gas resources. Transporting it through Russia or Azerbaijan would greatly enhance Russia’s political and economic control over the central Asian republics, which is precisely what the west has spent 10 years trying to prevent. Piping it through Iran would enrich a regime, which the US has been seeking to isolate. Thus, Afghanistan’s significance stems from its geographic position as a potential transit route, from Central Asia, through Pakistan (Gwadar port), into the Indian Ocean and further to the Arabian Sea [21] .

Penetrate World’s Most Lucrative Markets. Pipelines through Afghanistan would allow the US both to pursue its aim of “diversifying energy supply” and to penetrate the world’s most lucrative markets. In south Asia, by contrast, demand is booming with immense population graph and competitors are scarce. Therefore, pumping oil south and selling it in Pakistan and India, is far more profitable than pumping it west and selling it in Europe [22] .

Domination over the Transit Routes/Crucial Sea-Lanes. With the increased importance of Central Asian oil reserves, moving through the Indian Ocean, importance of securing the SLOCs in the Indian Ocean have increased manifold. US intend to maintain a strong security presence in the South Asian region in cooperation with India as bigger role is expected by her in the region [23] .

India – A Strategic Partner. As the second most powerful military nation in Asia, US perceive India as an ideal strategic partner. During official visit to Washington, Prime Minister Vajpayee described India and the US as “natural allies” and significantly stressed that an “Indo-US partnership was important for Asia both economically and militarilyâ€? [24] .

China – “A Competitor, Not A Strategic Partnerâ€?. President Bush has described China as “a competitor, not a strategic partnerâ€?. Therefore, his administration is sympathetic to India’s ambition to play a big power role in Asia. He also said that we must deal with China without ill-will but without illusions [25] .

Regional Power Through US Collaboration. Recent developments suggest that India is actually inviting the superpower to its doorstep. India is among the few countries to endorse unconditionally the controversial US national missile defense (NMD) program [26] .

Indian Ocean or India’s Ocean. Sixty-seven percent of China’s trade with the European Union is carried by sea across the Malacc