Singapore Leads India Charge; Southeast Asian Nations Hope To Avert Overreliance on China

SINGAPORE — India’s accelerating economy is providing Southeast Asian nations with a welcome business alternative to China, whose meteoric rise in recent years has threatened their economic foundations even while providing another market for their goods.

Governments across the region are talking trade deals with India and urging their companies to take advantage of the subcontinent’s growth — which was pegged at 10.4% in the quarter ended December compared with a year earlier, surpassing China to become Asia’s
fastest-growing country during that period. Leading the charge is Singapore, which is using its deep pockets and advanced economy to forge a bond that will help it grow along with an awakening India. Promoting India’s growth should also offset worries that
China’s fast expansion will leave the region overly reliant on its huge northern neighbor.

“We in Southeast Asia have no wish to become merely an adjunct to the Chinese economy,” Singapore Trade and Industry Minister George Yeo told members of the Confederation of Indian Industry during a trip to the country in February. “Hence, our decision to move
closer to all economies that want closer links to us.”

Southeast Asian countries initially worried that China’s growth threatened their status as low-cost manufacturing centers. Some of that fear has since dissipated, as China’s booming factories have fed on raw materials and components from Southeast Asia.
According to China’s figures, trade between China and the Association of Southeast Asian Nations, which includes Singapore, Thailand, Malaysia and Indonesia, amounted to $62 billion in 2003, up 40% from 2002. Asean’s trade with India was $12.3 billion in 2002,
accounting for only 2% of Asean’s total trade, the latest figures show.

Singapore and the rest of Southeast Asia are by no means ignoring China amid the pursuit of Indian business. Indeed, trade between Southeast Asia and China is expected to continue growing at a faster pace than trade with India for at least the medium term.

But growing ties to China have brought a new worry: that Southeast Asia’s success is becoming too closely tied to China’s. Singapore officials say multinational companies share those concerns. Last year’s outbreak of severe acute respiratory syndrome shut down
factories and slowed trade, sending shivers through foreign companies that are increasingly relying on their Chinese operations.

The deals between India and Singapore are flowing in both directions. While Singapore companies have been expanding into India and buying into Indian companies, some of the biggest Indian companies have been moving into Singapore. More than 1,400 Indian companies
have offices in the city-state; 19 of the top 20 Indian technology companies, including Infosys Technologies Ltd. and Wipro Ltd., have set up in Singapore. Some have regional or Asian headquarters in Singapore, while others use a “front office” there to approach
the thousands of multinationals with operations in the city-state.

India is increasingly looking to engage Southeast Asia “in a big way,” says Madhav Sharma, who heads the Southeast Asian efforts of the Confederation of Indian Industry out of his office in Singapore. “Things are really heating up.”

Deals are expected to accelerate with the completion of a free-trade agreement between Singapore and India in the next few months. Also in the works is an agreement between India and Asean, with a draft agreement signed last year. Meanwhile, Thailand is working
on a bilateral trade agreement. India is optimistic that the “great mass of people” in Southeast Asia will be a lucrative pool of customers for products such as generic drugs or motorcycles that its companies produce, says Mr. Sharma. India’s one billion population
is obviously a draw for Southeast Asian companies as well.

India’s success as an outsourcing destination — a sore point among many in the U.S. — has been more of a two-way street in Southeast Asia, which has been another boon to building ties. Philippine call centers have attracted investments from some of India’s
big outsourcing firms while one of the Philippines’ oldest outsourcing companies, SPI Technologies Inc., announced plans earlier in March to open three new offices in India.

And Malaysia’s construction sector has been profiting from India’s growth: “Malaysian companies are very involved in a number of infrastructure projects right now,” Mr. Sharma says, including a highway network connecting the country’s four biggest cities.

Singapore was quick to capitalize on India’s relaxation of trade and development restrictions in the early 1990s. India’s first — and biggest — technology park in Bangalore is a joint venture between the Singapore-government-owned developer Ascendas Pte.,
India’s Tata Industries Ltd. and the local state government.

Singapore’s companies have invested in everything from Indian ports to real-estate developments to communications. Government-owned Singapore Telecommunications Ltd. owns about 28% of Bharti Tele-Ventures Ltd., India’s second-largest privately run cellular
provider and a part of the New Delhi-based Bharti conglomerate. On March 22, another Bharti company, Bharti Enterprises Ltd., and Singapore’s government-owned Changi Airport said they would jointly bid for Bombay and New Delhi international airports, which
the government plans to sell off. The companies said their bid could be as much as US$1 billion.

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