INDIA’S TRADE DIPLOMACY WITH MALAYSIA, TURKEY
15, Feb 2020
Prelims level : International Policies & Schemes Mains level : GS-II Effect of Policies and Politics of developed and developing countries on India’s Interests, Indian Diaspora
- India is considering placing curbs on some imports from Turkey and Malaysia, in response to the decisions of Turkey and Malaysia to side with Pakistan on the matter of Article 370 and the Citizenship Amendment Act.
- According to a report, the Indian government is planning to restrict buying of petroleum, aluminium ingots, liquefied natural gas, computer parts and microprocessors from Malaysia
- The Indian government is also planning to cut imports of oil and steel products from Turkey.
What is the Issue?
- India has always claimed J&K to be an integral part of its territory, however, parts of it are illegally occupied by China and Pakistan.
- The Indian Government had withdrawn Article 370, which gave J&K a special status.
- This was quite a controversial move and was taken up at the United Nations General Assembly (UNGA) meeting in New York last year.
- Four countries- Pakistan, China, Malaysia, and Turkey had raised the Kashmir issue at the UN in different ways.
- Although it was expected from the other three countries, Malaysia raising the issue at the UNGA and almost calling India an invading force in Kashmir came as a definite surprise.
- The comments from the Malaysian Prime Minister were termed by India as irresponsible and ill-informed.
- Malaysian Prime Minister Mahathir has made several such historically inaccurate comments and has refused to take them back.
India – Malaysia Relations:
- India is the world’s biggest importer of palm oil. Malaysia is a relatively large trading partner of India in this respect.
- PM Modi had invested goodwill in Malaysia, by being the first foreign leader to drop in on the Malaysian PM after his re-election to congratulate him.
- However, after the Malaysian PM’s latest comments on the Kashmir issue and his criticism of India’s new Citizenship law, there is a shift in the relationship.
- Although the economic relationship between India and Malaysia is flourishing, their political and strategic relationships are not on the same page.
- Malaysia has been providing residency to controversial preacher Zakir Naik and ignoring India’s requests to extradite him.
- The statements by the Malaysian Prime Minister might result in a strained relationship with India which could adversely affect the Malaysian economy – as palm oil exports had contributed to about 2.8 percent of the nation’s GDP in 2018, and India has been one of the largest importers of palm oil. This could also affect the people involved in this sector, who are usually from rural areas.
- Malaysia is now looking to use diplomatic channels to try and resolve concerns over palm oil trade.
India and Turkey Relations:
- India runs a Trade Surplus with Turkey, i.e., it exports more to the country than it imports from the country.
- Key imports from Turkey are mineral fuels and oils, nuclear reactors and salt.
- Modi separately cancelled a planned visit to Ankara this year to show displeasure over Turkish President Recep Tayyip Erdogan’s comments over Kashmir at the United Nations General Assembly.
- Erdogan had urged India to hold talks with Pakistan following India’s decision to revoke autonomy in Kashmir.
- Turkey has also sided with Pakistan on issues such as its membership of the Nuclear Suppliers Group, which oversees the export of goods that can be used for nuclear weapons manufacturing.
- Turkey is also against the blacklisting of Pakistan by the world financial watchdog, the Financial Action Task Force, to curb its alleged financing of terror, something India has been lobbying for hard.
- In the recent past, the Turkish firm Anadolu Shipyard has been banned from doing defence-related business in India over its increased defence ties with Pakistan.
Possible Impacts on India:
- India’s move to restrict palm oil imports from Malaysia will create a huge challenge for the world’s second-biggest producer of the edible oil as India has been its top market for the past five years.
- There is enough refining capacity in India, so its consumers are not going to suffer from this event very much.
- India can buy the rest of palm oil from Indonesia which earlier was a big exporter of Palm oil to India.
- Indonesia traditionally corned around two-thirds of India’s palm oil imports, but a lower duty on refined palm oil helped Malaysia to overtake Indonesia as India’s biggest supplier in 2019.
- The decision to restrict all imports of refined palm oil is also likely to boost business for Indian refiners of vegetable oil.
- India has also made some friends in the West Asian chaos, resulting due to the emergence of power struggle in the regional arena with the US withdrawal.
- The countries such as Saudi Arabia and the Gulf states, with whom India has only had an inconsistent relationship so far are moving towards India.
- Over the past four years, PM Modi has built close bonds with young Gulf leaders, including with the crown princes of Abu Dhabi and Saudi Arabia.
- These efforts seem to be paying off as unlike Turkey and Malaysia, Saudi Arabia has taken a positive approach vis-a-vis India and the abrogation of Article 370. The country has also cautioned Pakistan against escalating the crisis.
- The UAE has also extradited three individuals wanted in India on corruption charges and Saudi Arabia also promised to share intelligence to boost counterterrorism cooperation with India.
- With Turkey, India is having a trade surplus, India has more to gain than lose from Turkey.
Can India react the same way towards China?
- China is one of the largest economies in the world. Hence, India would have to react differently with China.
- China has always tried to limit India’s influence to South Asia instead of allowing it to occupy the international space that it deserves.
- One of the reasons why India backed out of the RCEP deal is because of possible economic domination by China. So India cannot react in the same manner with China for supporting Pakistan and interfering with India’s internal affairs.
- India will have to exert diplomatic pressure and negotiate in order to make China understand India’s point of view.
- India has convinced most of the countries that the issue of Kashmir is a matter of Internal Affairs of India.
- India cutting its exports from Malaysia could affect the Malaysian economy drastically and hence, Malaysia might be forced to make a course correction. However, care must be taken by India to use this measure sparingly, in order to ensure that it does not escalate into a trade war.