India and New Zealand: Engaging Each Other In Asia – Analysis

By Rajaram Panda

In recent years, New Zealand has deepened its engagement with Asia as it has realized that its future lies in Asia. Ever since its ties with the Mother Country became weak, New Zealand has assiduously built its economic ties with a number of Asian countries. While its economic ties with the ASEAN have deepened, its dependence on the Chinese market for its primary products is huge. Japan is also one of its closest partners. New Zealand-South Korea ties are also blossoming. It signed a FTA with China in 2008. The results have been dramatic. In the first year alone, New Zealand’s exports to China increased from NZ$1 billion to NZ$3.6 billion.

New Zealand has also signed FTA agreements with Singapore, Brunei and Thailand. It is also looking forward to signing a FTA with India and hopes that India will open its market for its agricultural products. Though a FTA with India would raise issues like market access, elimination of tariffs, quantitative restrictions etc., negotiations are likely to drag on for several rounds before an agreement is reached. New Zealand is aware of this as much as India is.

The role of Indian power in the Pacific in terms of shaping the political and economic future of the Pacific Islands is seen as important. New Zealand feels that India has a legitimate interest in the South Pacific where China is increasingly active but wonders why New Delhi has remained largely inactive in the region. Despite the large presence of Indian migrant population, India has refrained from intervening in the region to protect the interests of ethnic Indians. New Zealand is willing to help India establish its presence and influence in the South Pacific. As a dialogue partner of the South Pacific Forum, New Zealand is keen to partner with India in strengthening bilateral relations more deeply and expanding them on regional matters.

Recently, India has become cognizant of its responsibility as an emerging power and has started engaging in issues of the Pacific Islands. During the Post-Forum Dialogue Partners Meeting in Port Vila, Vanuata, in August 2010, the Minister of State of External Affairs, Preneet Kaur, stressed that India’s ‘Regional Assistance Initiative’ for the Pacific Island Forum was based on the priorities identified by the leaders of the Pacific Island Forum countries. She further announced an increase in India’s annual Grant-in-Aid to $125,000 to each of the Pacific Island Countries for their economic development in a clear demonstration of the Indian desire to develop closer engagement with the Pacific region.1

The assistance offered by India covers a wide spectrum of economic and social needs as felt by the Pacific countries. This includes supply of equipment and materials for social and economic programmes and for sustainable development initiatives, a capacity building course on Small and Medium Enterprise promotion, training courses for diplomats at the Foreign Service Institute of India, and scholarships for higher studies in different centres of academic excellence in India. In 2010, India provided assistance for computerization of ministries in Palau and a Tsunami Warning System to Tonga.

New Zealand is an active participant in the Pacific Island Forum. Both India and New Zealand have a great opportunity to work together for the economic wellbeing of the Pacific Island nations. India offers wide ranging technical expertise in non-conventional energy sources, especially wind and solar energy, software and telecommunications. India’s own experience with meeting its ever increasing energy demands has helped it to accumulate considerable expertise in the area of harnessing new and renewable energy sources. Both India and New Zealand can partner in sharing their experiences and expertise for the economic wellbeing of the Small Island Developing countries. If both India and New Zealand join together in this pursuit, it will give a momentum to the regional integration process. Indeed, the Pacific Island Forum is the right forum for both India and New Zealand to identify common areas of cooperation in different sectors of sustainable development. India’s credentials for extending support to developing countries at multinational forums such as the UN and the WTO are impeccable. In 2009, India extended assistance for setting up Learning stations in all the Pacific Island Forum countries and IT Centres of Excellence in Fiji and Papua New Guinea. Both India and New Zealand can, thus, be partners for the economic progress of the Pacific Island Nations.

The Pacific Island nations are rich in natural resources – fish, forests and minerals. The Pacific is home to some 20 sovereign states and irrespective of size and population, each is entitled to have a say in international forums. Their support can count on crucial votes, especially if they have a united approach. India benefited in October 2010 from these votes when it gained overwhelming support for a non-permanent seat in the UN Security Council. Also, the strategic angle must not be overlooked. India and New Zealand can cooperate in protecting sea routes, maintain a credible presence close to disputed atolls, deal with illegal fishing and other resource-depleting activities, and safeguard inner waters and outer limits of extended economic zones.

On New Zealand’s part, there is a concerted effort to develop a national strategy for India. The government is developing a plan that takes on board the private sector and the Indian diaspora, besides government agencies. It is heartening that for the first time the talk of a national strategy was announced in public at a Business Leaders’ India Forum in Auckland in October 2010 by John Allen, Secretary of Foreign Affairs and Trade. Indeed, the initiative on India is the first of a series of national strategies to be developed with New Zealand’s key trading partners and therefore a coordinated national strategy is expected to make a material difference. A platform that provides a mechanism to communicate across all stakeholders, both at private and governmental levels, will facilitate business opportunities between the two countries.2

According to Shayne Blake, a senior associate at trade, business and investment facilitation company India Horizonz, a national strategy would be especially useful if created as a bi-partisan arrangement rather than representing one particular government’s policy. The idea is to project the policy in a long-term horizon. The timing of the India Forum meeting was relevant, especially when both India and New Zealand were working towards the third round of negotiations on the proposed FTA. In the year up to August 2009, New Zealand’s exports to India totalled $709 million, an increase of almost 200 per cent from 2007. Total bilateral trade reached $1 billion in 2009.

New Zealand has noted that India’s share of global GDP is now 6.4 per cent. The US ranks first with 19 per cent and China comes second with 16 per cent. The resilience of the Indian economy can be gleaned from the fact that it is insulated against the global financial crisis as the drivers of growth in India are different from drivers in other parts of Asia. While India’s growth has been domestically driven with service industry and internal consumption acting as stimulants, East and Southeast Asian countries have mostly relied on exports or manufacturing, investment from abroad and on low-technology labour intensive industry.

Indeed, the future prospects for deepening New Zealand’s place in Asia look bright and India has a major role in this transformation. India’s tempestuous experiment of democracy has been largely successful and has sprung a large pool of entrepreneurs whose contribution to the economy has been remarkable. According to McKinsey research, there will be 590 million people in Indian cities by 2030, nearly twice the population of the US today. There will be a 270 million net increase in the number of working age people in India by 2030; 70 per cent of net new employment will be generated in cities; and 91 million urban households will be middle class, an increase of 22 million from today.3 The research further says that 68 cities will have a population of one million plus, up from 42 today. Europe has 42 today. This calls for capital investment of $1.2 trillion to meet the projected demand in Indian cities. Other interesting findings of the research say that about 700 to 900 square metres of commercial and residential space needs to be built or a new Chicago every year. Also 2.5 billion square metres of road will have to be paved, 20 times the capacity added in the past decade. Among other infrastructure development, it is projected that 7,400 kilometres of metros and subways will need to be constructed, 20 times the capacity added in the past decade.4

In the path to growth, New Zealand’s expertise will be of use to India. New Zealand has considerable expertise in areas such as clean energy, aviation training, food technology, agribusiness, recreation and sports technology, and India can tap them.

If in future India-New Zealand relations are to be expanded further, direct flight connections must be started at the earliest. At present, one can fly to New Zealand either via Sydney or Singapore, where the wait for the connecting plane to Auckland can be excruciating. If the service opportunities and enabling conditions for a greater number of New Zealand companies with market-led approach are to be encouraged in India, the huge lacuna in direct air connections between the two countries must be addressed at the earliest.

1. For Preneet Kaur’s statement, see http://www.mea.gov.in/mystart.php?id=550316296
2. “Engagement with India gathers momentum,” http://www.asianz.org.nz/our-work/action-asia-business/networking/india-business-seminar
3. See McKinsey Global Institute, India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth, April 2010, p. 8, http://www.mckinsey.com/mgi/reports/freepass_pdfs/india_urbanization/MGI_india_urbanization_fullreport.pdf
4. Ibid, p.9.
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Originally published by Institute for Defence Studies and Analyses (www.idsa.in) at http://www.idsa.in/idsacomments/IndiaandNewZealandEngagingeachotherinAsia_rpanda_251110


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