ASEAN’s Cold Shoulder to PM Modi’s 2015 Offer on Line of Credit

Cold response by ASEAN countries on PM Modi’s line of credit offer is a blow for the government’s ‘Act East’ policy.

ASEAN countries have shown no interest for a $1 billion line of credit offered by Prime Minister Narendra Modi in 2015 at the 13th ASEAN India summit. The move was expected to expand trade, boost Indian exports, and counter the ever increasing influence of China by offering liberal loans for big projects.

In 2018, a year when New Delhi is hosting the commemorative summit to mark 25 years of ASEAN India partnership, even the Modi government, his ministers and government officials seem to have forgotten to mention this sop unlike other speeches by the prime minister, full of empty promises.

‘No Specific Request’ from ASEAN Nations

During a press briefing on ASEAN, Secretary (East), Ministry of External Affairs, Ms Preeti Saran accepted the fact that “we have not received any specific requests” from the ASEAN Nations to avail this offer of $1 billion line of credit offered by Prime Minister Modi at the ASEAN India Summit in Kuala Lumpur in 2015.

Putting the ball back in the court of ASEAN, in a press conference on 10 January 2018, Ms Preeti Saran said:

Lines of credit (LOC) are really intended for specific projects which are incumbent upon the host country to determine and decide, and that (it) takes a while to identify the project’s viability etc. We would look at them positively as and when we receive it.

Preeti Saran, Secretary (East), Ministry of External Affairs

Sources in the Ministry of External Affairs have pinned the blame on high interest rates, cumbersome procedures, stringent terms and conditions of EXIM (Export-Import Bank of India) – the evaluating, disbursing and implementing agency – behind the “no-show” by ASEAN countries.

No Mention of the Line of Credit

The Ministry of External Affairs now boasts of the Development Partnership Administration (DPA) division to manage India’s increasing number of development assistance programmes abroad.

These LOCs routed through the Exim Bank are important tools for implementing large-scale complex projects, boosting exports, and exerting influence in partner countries.

There is no mention of the $1 billion line of credit offered by Prime Minister Modi in a special publication by the EXIM Bank titled, “Strengthening ASEAN- India Partnership: Trends and Future Prospects” released by Suresh Prabhu, Commerce and Industry Minister, along with other trade ministers of ASEAN countries at the “ASEAN-India Business and Investment Meet” in New Delhi.

However the EXIM Bank’s “special publication for ASEAN” has a detailed list of 21 “operative LOCs”, totaling $915 million extended to the ASEAN countries – Cambodia, Lao PDR , Myanmar and Vietnam (CLMV) as on 31 December 2018.

These CLMV countries are also a part of the ASEAN, and these lines of credit are separate from the announcement made by Prime Minister Modi in Kuala Lumpur.

Has LOC been Approved by the Finance Ministry?

Answering a question on the announcement made by Prime Minister Modi, a high-level source in the EXIM Bank said, on conditions of anonymity:

$1 billion line of credit ...this was never sanctioned by the finance ministry, and there is no approval from the cabinet.

We (EXIM Bank) follow the procedure and guidelines laid down by the Ministry of Finance, and approved by the cabinet under the Indian Development and Economic Assistance Scheme (IDEAS) for the lines of credits to all the countries.

Source in EXIM Bank

Finance Minister Arun Jaitley, Trade Minister Suresh Prabhu and other ministers of India just forgot to say anything about the LOC worth $1 billion announced by Prime Minister Modi at the ASEAN-India Business and Investment Meet held in New Delhi between 22-23 January 2018. The meet was attended by all the trade ministers from different ASEAN countries.

Secretary General of ASEAN, Dato Lim Jock Hoi, the first recipient of the Indian Council for Cultural Relations Distinguished Alumni Award also failed to raise the issue at the business meet.

Better Offers from Other Countries

An ASEAN diplomat in New Delhi, who had tried to explore this opportunity, said:

Projects cannot be feasible on what India has offered ...there are better offers on the table.

ASEAN nations have better offers from various international and Asian financial institutions. China has been bidding for massive projects like the bullet train from Kuala Lumpur to Singapore, worth $14 billion, which is southeast Asia’s largest-ever infrastructure project. The financing and construction of the bullet train project, worth more than $5 billion, in Indonesia is on track.

Walking the Talk

India’s exports to ASEAN have increased to about $31 billion in 2016-17 from $25.15 billion in the previous fiscal. Although in 2016-17, imports have grown marginally to $40.61 billion from $40 billion in the previous year. There is a huge deficit of more than $10 billion which India needs to cover up.

One veteran diplomat attending the ASEAN-INDIA Commemorative Summit in New Delhi said:

Modi must walk the talk, implement what he says, otherwise foreign policy transformation from ‘Look East’ to ‘Act East’ will fail, and India will not be able to counter the increasing influence of China in the ASEAN region.

(The writer is a New Delhi-based freelance journalist. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same. )

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