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Saturday, December 22, 2007

Dec 19, 2007 Rise of India and China

Dec 19, 2007
A tale of two aspiring nations
By Lee Kuan Yew

NOT ON A PAR YET: Until India gets its social infrastructure up to First World standards and further liberalises its economy, it is unlikely to pose the challenge that China's economic ambitions does to the US, the EU and Japan. -- PHOTO: BLOOMBERG

EVEN though the Indian economy's annual growth rate has been 8 per cent to 9 per cent for the last five years, the country's peaceful rise hasn't led to unease over its future.
Instead, Americans, Japanese and western Europeans are keen to invest in India, ride on its growth and help develop another heavyweight country.

I recently had the opportunity to visit New Delhi twice. Last month, JPMorgan Chase brought its international advisory board, its European board and its principal officers from many parts of the world to the Indian capital for a two-day meeting. And earlier this month, Citigroup invited me to speak along with the bank's top leaders at an Asia-Pacific Business Leaders' Summit there.

Two of the largest US banks consider India to be a growth story and are eager to service American and Indian companies. I did not detect any anxiety over India becoming a problem to the present world order.

But why has China's peaceful rise raised apprehensions? Is it because India is a democracy in which numerous political forces are constantly at work, making for an internal system of checks and balances? Most probably, yes - especially as India's governments have tended to be made up of large coalitions of 10 to 20 parties.

One example of India's 'checks and balances' at work was the suspension of its talks on a US nuclear power deal. Although this deal is manifestly in India's interests, 60 communist Members of Parliament - part of the Congress Party-led coalition government - opposed the deal. Subsequently, the Communists allowed negotiations to resume, reserving their position on the outcome. India's development will, from time to time, run into domestic obstruction.

The US, the EU and Japan root for India because they want a better-balanced world, in which India approximates China's weight.
Contrast this with the singleness of purpose in policy and its execution displayed by China's Communist government.

India's navy has an aircraft carrier force; its air force has the latest Sukhoi and MiG aircraft; its army is among the best trained and equipped in Asia. India can project power across its borders farther and better than China can, yet there is no fear that India has aggressive intentions.

Could this be because India is surrounded by states in turmoil? Pakistan is in crisis; a bad outcome there will increase the terrorist threat to India. As Mr Pervez Musharraf is now an elected civilian President, he won't have the same command over the army he has had as army chief. And any other elected president will have even less sway over the military.

Nepal is a deeply divided and troubled country. Sri Lanka is embroiled in an unending civil war, with the Tamil Tigers carrying out endless suicide bombings. India obviously has preoccupations enough to keep its focus fixed on its border regions.

Suppose China were also a democracy with multiple parties and political power bases? Would a multiparty China with a yearly economic growth rate of 9 per cent to 12 per cent be viewed with the same equanimity as India is? Such a China would probably continue to make big strides on the economic, social and military fronts, with more sophisticated capabilities on the ground and sea and in the air and space, and would eventually become a peer competitor, if not an adversary, of the US.

The speed of China's change and the thoroughness, energy and drive with which the Chinese have built up their infrastructure and pursued their goals spring from their culture, one that is shared by the Koreans, Japanese and Vietnamese, who adopted the Chinese written script and absorbed Confucian culture.

The Chinese are determined to catch up with the United States, the European Union and Japan. Fast-forward 20 to 30 years and the world will have to accommodate a more technologically advanced and economically more sophisticated China, whether under a single- or multiparty system.

India does not pose such a challenge - and won't until it gets its social infrastructure up to First World standards and further liberalises its economy. Indeed, the US, the EU and Japan root for India because they want a better-balanced world, in which India approximates China's weight.

The Indian elite also speak, write and publish in English. They hold a wide range of diverse views - and to the degree that Mr Amartya Sen, a Nobel winner in economics, entitled one of his books The Argumentative Indian. Few Chinese, on the other hand, speak - let alone write in - English, and what they publish in Chinese doesn't always disclose their innermost thoughts.

What if India were well ahead of China? Would the Americans and Europeans be rooting for China? I doubt it. They still have a phobia of the 'yellow peril', one reinforced by memories of the outrages of the Cultural Revolution and the massacres in Tiananmen Square, not to mention their strong feelings against Chinese government censorship.

China will have to live with these hang-ups. To reinforce the idea that theirs will be a peaceful path going forward, the Chinese have rephrased the term 'peaceful rise' to 'peaceful development'. Greater openness and transparency in Chinese society would also help.

Singapore and South-east Asia (Asean), sandwiched between these two behemoths, need China and India to achieve a balanced relationship, one that allows both to grow and prosper, pulling up the rest of Asia - East, South-east and South - with them.

The writer is Minister Mentor of Singapore. This article appears in the Dec 24 issue of Forbes Asia magazine.

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