Area Studies October 2014

AREA STUDIES A Journal of International Studies and Analyses

seaps

Centre for Southeast Asian & Pacific Studies AREA STUDIES A Journal of International Studies and Analyses

Volume 7 Number 2 July - December 2013 CONTENTS Segyehwa to Global Korea: Globalization and the Shaping of 1 South Korean Foreign Policy Jojin V. John

General Vo Nguyen Giap : The National Hero Par Excellence 29 M. Prayaga

India-Singapore Bilateral Relationship : Past, Present and 48 Future S. Manivasakan & Sripathi Narayanan Published by Centre for Southeast Asian & Pacific Studies (CSEAPS) Public Expenditures in India and its impact on the Deficits 67 Jasneet Kaur Wadhwa

Educational Status of India and China: A Silver Line for 93 © 2013 Centre for Southeast Asian & Pacific Studies Development ISSN 0975 - 6035 (Print) Shamshad & Md. Naiyer Zaidy Area Studies: A Journal of International Studies and Analyses Palestinian Politics and the Arab Spring: Some Critical Issues 118 Santhosh Mathew & Prasad M.V Reprint permission may be obtained from: The Editor The Behavior of Individual Investors in Transition Economies: 126 Email: [email protected] The Case of Kyrgyzstan Ebru Çağlayan & Raziiakhan Abdieva The responsibilities for facts and opinions presented in the articles rests exclusively with the individual authors. Their interpretations do not The Economic Impact of Agricultural And Clothing, Textile: 144 necessarily reflect the view or the policy of the Editorial Committee, An Input- Output Analysis National and International Advisory boards of Area Studies: A Journal of International Studies and Analyses. Nguyen Van Chung

Layout & Printed at: D&Dee - Designing and Creative Production, Nallakunta, Hyderabad - 500 044. Ph No: +91 9440 726 907, 040 - 2764 3862.

ii iii AREA STUDIES A Journal of International Studies and Analyses

Volume 7 Number 2 July - December 2013 CONTENTS Segyehwa to Global Korea: Globalization and the Shaping of 1 South Korean Foreign Policy Jojin V. John

General Vo Nguyen Giap : The National Hero Par Excellence 29 M. Prayaga

Layout & Printed at: D&Dee - Designing and Creative Production, Nallakunta, Hyderabad - 500 044. Ph No: +91 9440 726 907, 040 - 2764 3862.

ii iii Guidelines To Paper Writers Figures, Graphs, Charts and Tables need to be consecutively numbered. Area Studies: A Journal of International Studies and Analyses, a bi-annual, is the flagship publication of the Centre for Southeast Brief captions find place at the top of the illustration and Asian and Pacific Studies. The Journal encompasses research explanatory notes may be given at the bottom of the illustration. papers on various aspects of International affairs including References cited should contain name of the author, year of economic, political, security and strategic issues, besides publication, title of the paper and the title of the journal followed commentaries, book reviews and major events of the Area Studies by volume, number and page number. Ex: Centres in India. It aims at broadening the frontiers of knowledge 1) Sunilkumar Singh (2003), “Bangladesh Education System”, of developments in various areas of the world. Being analytical in Education Watch of India, Vol.1, Pp.19-25. nature the Journal enthralls policy planners, administrators, members of Parliament, students and research communities 2) With two or more authors besides the general reading public. As a rule the Journal does not a) Robert O Keohane and Lisa L. Martin (1995), “The entertain manuscripts which have already been published or are promise of International Institutions”, International in the process of publication elsewhere. Uniformity and Security, Vol.20, No.1, Pp.40-52. consistency in the style and format demand the observance of the b) K. Raja Reddy (2013), “India-Vietnam Relations: below mentioned guidelines by the paper writers: Enhanced Cooperation in IT, Science and Technology”, Written in English, manuscripts should be double spaced, In Rajiv K. Bhatia, Vijay Shakuja & Vikash Ranjan (eds.), Full-length paper limiting to 3000 - 4,500 words and Abstracts India-Vietnam: Agenda for Strengthening Partnership, restricted to 250-300 words should be e-mailed. In case of CD SHIRPA Publications, New Delhi, Pp.165-176. a hard copy needs to be sent. It is desirable that manuscript file size is limited to 1 MB

The font size of the full length paper is 12 and that of the title of ...Editor the paper is 14. Address for contributors and Correspondence:

Key words or phrases not exceeding 6 may be provided. The Director Notes should be numbered consecutively, superscribed in the Centre for Southeast Asian & Pacific Studies text and attached at the end of the research paper. Sri Venkateswara University, Tirupati 517 502 Andhra Pradesh, India. The manuscript should contain: Title, name/names of [email protected] Author/Authors; Address/addresses of the author/authors; [email protected] Abstract; Introduction, Main body with subdivisions and subheadings; conclusions; Acknowledgements if any and references in alphabetical order.

iv v Guidelines To Paper Writers Figures, Graphs, Charts and Tables need to be consecutively numbered. Area Studies: A Journal of International Studies and Analyses, a bi-annual, is the flagship publication of the Centre for Southeast Brief captions find place at the top of the illustration and Asian and Pacific Studies. The Journal encompasses research explanatory notes may be given at the bottom of the illustration. papers on various aspects of International affairs including References cited should contain name of the author, year of economic, political, security and strategic issues, besides publication, title of the paper and the title of the journal followed commentaries, book reviews and major events of the Area Studies by volume, number and page number. Ex: Centres in India. It aims at broadening the frontiers of knowledge 1) Sunilkumar Singh (2003), “Bangladesh Education System”, of developments in various areas of the world. Being analytical in Education Watch of India, Vol.1, Pp.19-25. nature the Journal enthralls policy planners, administrators, members of Parliament, students and research communities 2) With two or more authors besides the general reading public. As a rule the Journal does not a) Robert O Keohane and Lisa L. Martin (1995), “The entertain manuscripts which have already been published or are promise of International Institutions”, International in the process of publication elsewhere. Uniformity and Security, Vol.20, No.1, Pp.40-52. consistency in the style and format demand the observance of the b) K. Raja Reddy (2013), “India-Vietnam Relations: below mentioned guidelines by the paper writers: Enhanced Cooperation in IT, Science and Technology”, Written in English, manuscripts should be double spaced, In Rajiv K. Bhatia, Vijay Shakuja & Vikash Ranjan (eds.), Full-length paper limiting to 3000 - 4,500 words and Abstracts India-Vietnam: Agenda for Strengthening Partnership, restricted to 250-300 words should be e-mailed. In case of CD SHIRPA Publications, New Delhi, Pp.165-176. a hard copy needs to be sent. It is desirable that manuscript file size is limited to 1 MB

The font size of the full length paper is 12 and that of the title of ...Editor the paper is 14. Address for contributors and Correspondence:

iv v Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

Jojin V. John *

Abstract Since the mid 1990s the most important theme captured in South Korean foreign policy is globalization. Korea's increasing global referencing in its foreign policy framing is encouraged by an intense desire for influence and leadership at the global level. The latest form is embedded in the 'Global Korea' strategy projecting Korea's role as a middle power. This paper shows how the globalization theme has been influential in the framing of Korean foreign policy, through an examination of various diplomatic globalization strategies which subsequently evolved to become current middle power diplomacy. The central argument is that while Korean foreign policy has been profoundly affected by the process of globalization, this has not translated into a substantial erosion of the capacity of the state to act on the international stage. In fact, by challenging traditional symbols of power in the international system, globalization has created new possibilities for Korea to promote its core values and interests externally. Key Words: South Korea, Globalization, South Korean Foreign Policy, Foreign Policy Analysis, Diplomatic Globalisation

1. Introduction Globalization is arguably the most important concept that has shaped and continued to influence Korean society since the end of Cold War. Impact of globalization can be observed not only in Korea's domestic affairs but also in international relations. Until the end of Cold War Korean diplomatic affairs were limited to the issues of Korean peninsula and were mostly directed to managing bilateral alliance with United States. The post Cold War era, particularly in the new millennia witnessed a paradigm shift in Korean foreign policy thinking by expanding spatial level of engagement from the peninsular to the regional then to the global

* Dr. Jojin V. John, Visiting Associate Fellow, Institute of Chinese Studies. E-mail:[email protected].

Area Studies, Vol.7(2), July - December 2013, pp. 1-28 1 Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

Jojin V. John *

* Dr. Jojin V. John, Visiting Associate Fellow, Institute of Chinese Studies. E-mail:[email protected].

Area Studies, Vol.7(2), July - December 2013, pp. 1-28 1 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy and from managing bilateral alliance to shaping institutional the framing of Korean foreign policy, by focusing on how the structures for global governance. One of the most striking aspects promises and perils of globalization are actually conceived for of the contemporary Korean foreign policy is an intense desire for Korean foreign policy. The fifth section traces the evolution of influence and leadership at the global level, which has been well Korea's diplomatic globalization and the various strategies articulated in Global Korea strategy adopted by President Lee adapted from the days of Segyehwa to Global Korea. The final Myung-Bak. Towards achieving the goal of Global Korea, Seoul section concludes by summarizing main observations and has projected its role as a middle power in the international pointing out significant features of Korea's diplomatic community. This paper argues that the middle power diplomacy globalization. is the latest version of Korea's diplomatic globalization, which has 2. Globalization and Foreign Policy been the major theme in the general farming of the Korean foreign Globalization has been the most important phenomenon that has policy since the mid 1990s. defined political life on earth since the last decade of twentieth The task undertaken in this paper is to show how Korean foreign century. As in other spheres of political action; the increasing policy has been challenged and influenced by the process of scope, depth and impact of globalization offered a major globalization. The main argument put forth in this paper is that, contextual change for the conduct of foreign policy. However, in while Korean foreign policy has been profoundly affected by the the analysis of foreign policy, the impact of globalization on process of globalization, this has not translated into a substantial foreign policy has been not given much attention. This is not erosion of the capacity of the state to act on the international stage. surprising given the complex nature of globalization and the In fact, by challenging traditional symbols of power in the conceptual difficulty in linking globalization in foreign policy international system, globalization has created new possibilities analysis. This section aims to provide a theoretical understanding for Korea to promote its core values and interests externally. This of foreign policy as an exercise of agency under the conditions of paper observes that Korea's recent self promotion as a 'middle globalization, which could offer an analytical framework to power' in international affairs through President Lee Myung- explicate the shaping of Korean foreign policy under the Bak's Global Korea strategy as the continuation of two decades of influence of globalization. globalizing strategy, initiated by President Kim Yong-Sam's 1 The term globalization in the most cases used as an analytical segyehwa drive evolved through President Kim Dae-Jung's category, however “in fact poorly conceptualized” (Giddens informatization and President Roh Moo-Hyun' Dynamic Korea. 1996, quoted in Scholte 2005: 52; Rossi 2008). Multiple definitions The paper is organized into six thematic sections. The following of globalization co-exist, often emphasizing the complexity and section presents a theoretical discussion on the linkages between different aspects of the phenomenon. Held et al. (1999: 16) globalization and foreign policy, which provides an analytical provides the most widely used and comprehensive definition of tool kit for explicating Korean foreign policy under the influence globalization, which describes it as a “process (or set of processes) of globalization. The third section provides a brief discussion of which embodies a transformation in the spatial organization of Korea's engagement with globalization, with a focus on Korea's social relations and transactions - assessed in terms of their globalization policy. The fourth section provides a contextual extensity, intensity, velocity and impact - generating narrative of the conditions under which globalization influenced transcontinental or inter-regional flows and networks of

2 Area Studies Area Studies 3 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy and from managing bilateral alliance to shaping institutional the framing of Korean foreign policy, by focusing on how the structures for global governance. One of the most striking aspects promises and perils of globalization are actually conceived for of the contemporary Korean foreign policy is an intense desire for Korean foreign policy. The fifth section traces the evolution of influence and leadership at the global level, which has been well Korea's diplomatic globalization and the various strategies articulated in Global Korea strategy adopted by President Lee adapted from the days of Segyehwa to Global Korea. The final Myung-Bak. Towards achieving the goal of Global Korea, Seoul section concludes by summarizing main observations and has projected its role as a middle power in the international pointing out significant features of Korea's diplomatic community. This paper argues that the middle power diplomacy globalization. is the latest version of Korea's diplomatic globalization, which has 2. Globalization and Foreign Policy been the major theme in the general farming of the Korean foreign Globalization has been the most important phenomenon that has policy since the mid 1990s. defined political life on earth since the last decade of twentieth The task undertaken in this paper is to show how Korean foreign century. As in other spheres of political action; the increasing policy has been challenged and influenced by the process of scope, depth and impact of globalization offered a major globalization. The main argument put forth in this paper is that, contextual change for the conduct of foreign policy. However, in while Korean foreign policy has been profoundly affected by the the analysis of foreign policy, the impact of globalization on process of globalization, this has not translated into a substantial foreign policy has been not given much attention. This is not erosion of the capacity of the state to act on the international stage. surprising given the complex nature of globalization and the In fact, by challenging traditional symbols of power in the conceptual difficulty in linking globalization in foreign policy international system, globalization has created new possibilities analysis. This section aims to provide a theoretical understanding for Korea to promote its core values and interests externally. This of foreign policy as an exercise of agency under the conditions of paper observes that Korea's recent self promotion as a 'middle globalization, which could offer an analytical framework to power' in international affairs through President Lee Myung- explicate the shaping of Korean foreign policy under the Bak's Global Korea strategy as the continuation of two decades of influence of globalization. globalizing strategy, initiated by President Kim Yong-Sam's 1 The term globalization in the most cases used as an analytical segyehwa drive evolved through President Kim Dae-Jung's category, however “in fact poorly conceptualized” (Giddens informatization and President Roh Moo-Hyun' Dynamic Korea. 1996, quoted in Scholte 2005: 52; Rossi 2008). Multiple definitions The paper is organized into six thematic sections. The following of globalization co-exist, often emphasizing the complexity and section presents a theoretical discussion on the linkages between different aspects of the phenomenon. Held et al. (1999: 16) globalization and foreign policy, which provides an analytical provides the most widely used and comprehensive definition of tool kit for explicating Korean foreign policy under the influence globalization, which describes it as a “process (or set of processes) of globalization. The third section provides a brief discussion of which embodies a transformation in the spatial organization of Korea's engagement with globalization, with a focus on Korea's social relations and transactions - assessed in terms of their globalization policy. The fourth section provides a contextual extensity, intensity, velocity and impact - generating narrative of the conditions under which globalization influenced transcontinental or inter-regional flows and networks of

2 Area Studies Area Studies 3 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy activity”. Globalization, in short the “widening, deepening and Rodrik 1997:1). Taking on Friedman, Hill (2003:16) probes what speeding up of global interconnectedness” (Held et al. 1999: 14) globalization means for the making and conduct of foreign policy, and has effects on just about every aspect of social life (Scholte “whether foreign policy remains a key site of agency in 2005). international relations or whether it is being steadily emptied of In the academic debate of globalization, there exist three major content”. From a hyperglobalist perspective answer would be schools of thoughts. First one is known as the hyperglobalist negative, arguing that globalization has “rendered foreign policy approach, which argues that the growing interconnectedness of redundant” (Hill 2003: 13). For skeptics, foreign policy doesn't national economies through globalization negates significance of vanish with globalization; rather the 21st century foreign policy territorial boundaries and paves the way for the demise of the can play in shaping and politically containing the processes of sovereign nation-states.2 The underlying thesis here is that the rise globalization. From the perspectives of the moderate of multinational corporations (MNCs) as international actors and traformationalists, it's not so much about foreign policy as such the emergence of new mechanisms for global governance are but rather certain dimensions of it, like classical diplomacy, which symptomatic of a new world order in which the sovereign state is globalization places on the “endangered list” (Cox 1997, cited in becoming marginalized (Held and McGrew 1999:6). The second Jonsson 2002). school of thought has been called the skeptics,3 who believe that Under the conditions of globalization the very essence of foreign little has changed in the international arena, rejecting the policy has been challenged by rendering distances increasingly hyperglobalist position as politically naïve, arguing the impact of meaningless and altering importance of frontiers, it blurs the globalization on the sovereign state is much exaggerated. distinction between inside and outside that is central to According to this school, state is not the victim of the globalization determination of “foreign” in foreign policy. However there are process rather the chief architect by emphasizing the central role little evidences to show that globalization leads to the of nation states in the regulation and active promotion of cross disappearance of all differences. Hence, even in an increasingly border economic links (Held and McGrew 1999:8). The third de-territorialized world order, the distinction between “we” and school called traformationalist,4 who maintains a middle ground “the other(s)” will persist as long as there are cultural, linguistic between hyperglobalists and the skeptics. It rejects the tendency and other differences (Petras and Veltmeyer 2001; Scholte 2005). It to juxtapose state sovereignty and globalization. According to is also important to note that, in an era of transformation that this perspective, the state is neither automatically diminished by produces winners and losers, where political structures are globalization nor unaffected by it. Rather, the role of the sovereign changing, and where, hence, solutions have to be found to new state in the international system is being redefined by types of social problems, the demand for foreign policy, a political globalization because states themselves recognize that the power, activity directed at influencing others (whoever they may be) to authority, and functions of government must be transformed in defend one's aims and assure that one's own vision of the world response to the growing interconnectedness of the world (Held becomes part of existing and new structures is bound to increase and McGrew 1999:11). rather than decrease (Keukeleire and Schunz 2008). In the late 1990s, Thomas Friedman argued that globalization Based on the transformationalist view of globalization there is would become “the next great foreign policy debate” (quoted in indeed a need for an appraisal on the way in which we think about

4 Area Studies Area Studies 5 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy activity”. Globalization, in short the “widening, deepening and Rodrik 1997:1). Taking on Friedman, Hill (2003:16) probes what speeding up of global interconnectedness” (Held et al. 1999: 14) globalization means for the making and conduct of foreign policy, and has effects on just about every aspect of social life (Scholte “whether foreign policy remains a key site of agency in 2005). international relations or whether it is being steadily emptied of In the academic debate of globalization, there exist three major content”. From a hyperglobalist perspective answer would be schools of thoughts. First one is known as the hyperglobalist negative, arguing that globalization has “rendered foreign policy approach, which argues that the growing interconnectedness of redundant” (Hill 2003: 13). For skeptics, foreign policy doesn't national economies through globalization negates significance of vanish with globalization; rather the 21st century foreign policy territorial boundaries and paves the way for the demise of the can play in shaping and politically containing the processes of sovereign nation-states.2 The underlying thesis here is that the rise globalization. From the perspectives of the moderate of multinational corporations (MNCs) as international actors and traformationalists, it's not so much about foreign policy as such the emergence of new mechanisms for global governance are but rather certain dimensions of it, like classical diplomacy, which symptomatic of a new world order in which the sovereign state is globalization places on the “endangered list” (Cox 1997, cited in becoming marginalized (Held and McGrew 1999:6). The second Jonsson 2002). school of thought has been called the skeptics,3 who believe that Under the conditions of globalization the very essence of foreign little has changed in the international arena, rejecting the policy has been challenged by rendering distances increasingly hyperglobalist position as politically naïve, arguing the impact of meaningless and altering importance of frontiers, it blurs the globalization on the sovereign state is much exaggerated. distinction between inside and outside that is central to According to this school, state is not the victim of the globalization determination of “foreign” in foreign policy. However there are process rather the chief architect by emphasizing the central role little evidences to show that globalization leads to the of nation states in the regulation and active promotion of cross disappearance of all differences. Hence, even in an increasingly border economic links (Held and McGrew 1999:8). The third de-territorialized world order, the distinction between “we” and school called traformationalist,4 who maintains a middle ground “the other(s)” will persist as long as there are cultural, linguistic between hyperglobalists and the skeptics. It rejects the tendency and other differences (Petras and Veltmeyer 2001; Scholte 2005). It to juxtapose state sovereignty and globalization. According to is also important to note that, in an era of transformation that this perspective, the state is neither automatically diminished by produces winners and losers, where political structures are globalization nor unaffected by it. Rather, the role of the sovereign changing, and where, hence, solutions have to be found to new state in the international system is being redefined by types of social problems, the demand for foreign policy, a political globalization because states themselves recognize that the power, activity directed at influencing others (whoever they may be) to authority, and functions of government must be transformed in defend one's aims and assure that one's own vision of the world response to the growing interconnectedness of the world (Held becomes part of existing and new structures is bound to increase and McGrew 1999:11). rather than decrease (Keukeleire and Schunz 2008). In the late 1990s, Thomas Friedman argued that globalization Based on the transformationalist view of globalization there is would become “the next great foreign policy debate” (quoted in indeed a need for an appraisal on the way in which we think about

4 Area Studies Area Studies 5 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy the conduct and the analysis of foreign policy to take into account undermine the foreign policy achievements at other levels and the challenges posed by globalization and post-Cold War structures. The efficacy of structural foreign policy depends on instability. Keukeleire introduced the concept of structural how they are being perceived as legitimate and are compatible to foreign policy as an analytical framework to study foreign policy mindset, the belief systems or the mental structures of the people in the context of globalization by distinguishing it from the concerned, as these factors are important in the sustainability of conventional foreign policy Keukeleire (2003; 2008). He defines the structure. Conventional foreign policy is orientated towards states, military 3. Korea's Globalization security, crises and conflicts. According to Keukeleire Structural Globalization is a complex and multifaceted phenomenon, which foreign policy refers to “a foreign policy which, conducted over the had brought about a paradigm shift in national policy making in long-term, seeks to influence or shape sustain-able political, legal, the post-Cold period. Korea is no exception; in fact is an socio-economic, security and mental structures. These structures interesting case in its globalization engagement. Samuel Kim characterize not only states and interstate relations, but also (2000) observes that no country in the post-Cold War period cast societies, the position of individuals, relations between states and its lots with globalization as decisively and as publically as Korea. societies, and the international system as a whole” (Keukeleire Successive Korean governments since the early 1990s have and MacNaughtan 2008: 25-26).5 Being effective in the changed devised and implemented programs and policies to grapple with 21st century context the conventional foreign policy, an 'actor', globalization and have initiated major organizational moves. The 'conflict' and 'event-oriented' foreign policy has to be critical aspect that commonly runs through different Korean complemented by a 'process', 'structure' and 'context-oriented' administrations is that they have to a large extent adopted and foreign policy. Comparing a conventional understanding of pursued a bandwagoning strategy, trying to make domestic foreign policy with a structural foreign policy concept is a useful institutions, programs, policies, and practices more amenable to lens through which to analyze past as well as current foreign globalization (Kim 2000). policy. Structural foreign policy and conventional foreign policy are not mutually contradictory and can even be complementary Globalization first emerged as an important national issue during and mutually dependent (Keukeleire and MacNaughtan 2008). the Kim Young-Sam government (199398). The newly elected Korean government under the first civilian President inherited a The objective of a structural foreign policy is to influence, shape or waning economy with two burdens; the past success legacies and create structures that are not only viable in the short term, but that the futuristic high expectations. Korean economy was in a are equally sustainable in the long term, including when external difficult transition from an export oriented newly industrialized pressure or support has disappeared. A structural foreign policy economy to an advanced economy and its successful can generally only be effective and sustainable if it is developmental state model has been challenged under the new comprehensive and if it simultaneously focuses on the various political economy context (Kang 2000). At the global level the neo- relevant interrelated structures (political, legal, socio-economic liberal trend was at its peak with the popularisation of and security) and levels (individual, state, societal, relations globalization discourses. Under the new circumstances, the call between states and societies, interregional and global). for “upgrade Korea” to effectively meet the global challenge was Neglecting one or more relevant levels or structures can on the rise based on successful achievements of modernization,

6 Area Studies Area Studies 7 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy the conduct and the analysis of foreign policy to take into account undermine the foreign policy achievements at other levels and the challenges posed by globalization and post-Cold War structures. The efficacy of structural foreign policy depends on instability. Keukeleire introduced the concept of structural how they are being perceived as legitimate and are compatible to foreign policy as an analytical framework to study foreign policy mindset, the belief systems or the mental structures of the people in the context of globalization by distinguishing it from the concerned, as these factors are important in the sustainability of conventional foreign policy Keukeleire (2003; 2008). He defines the structure. Conventional foreign policy is orientated towards states, military 3. Korea's Globalization security, crises and conflicts. According to Keukeleire Structural Globalization is a complex and multifaceted phenomenon, which foreign policy refers to “a foreign policy which, conducted over the had brought about a paradigm shift in national policy making in long-term, seeks to influence or shape sustain-able political, legal, the post-Cold period. Korea is no exception; in fact is an socio-economic, security and mental structures. These structures interesting case in its globalization engagement. Samuel Kim characterize not only states and interstate relations, but also (2000) observes that no country in the post-Cold War period cast societies, the position of individuals, relations between states and its lots with globalization as decisively and as publically as Korea. societies, and the international system as a whole” (Keukeleire Successive Korean governments since the early 1990s have and MacNaughtan 2008: 25-26).5 Being effective in the changed devised and implemented programs and policies to grapple with 21st century context the conventional foreign policy, an 'actor', globalization and have initiated major organizational moves. The 'conflict' and 'event-oriented' foreign policy has to be critical aspect that commonly runs through different Korean complemented by a 'process', 'structure' and 'context-oriented' administrations is that they have to a large extent adopted and foreign policy. Comparing a conventional understanding of pursued a bandwagoning strategy, trying to make domestic foreign policy with a structural foreign policy concept is a useful institutions, programs, policies, and practices more amenable to lens through which to analyze past as well as current foreign globalization (Kim 2000). policy. Structural foreign policy and conventional foreign policy are not mutually contradictory and can even be complementary Globalization first emerged as an important national issue during and mutually dependent (Keukeleire and MacNaughtan 2008). the Kim Young-Sam government (199398). The newly elected Korean government under the first civilian President inherited a The objective of a structural foreign policy is to influence, shape or waning economy with two burdens; the past success legacies and create structures that are not only viable in the short term, but that the futuristic high expectations. Korean economy was in a are equally sustainable in the long term, including when external difficult transition from an export oriented newly industrialized pressure or support has disappeared. A structural foreign policy economy to an advanced economy and its successful can generally only be effective and sustainable if it is developmental state model has been challenged under the new comprehensive and if it simultaneously focuses on the various political economy context (Kang 2000). At the global level the neo- relevant interrelated structures (political, legal, socio-economic liberal trend was at its peak with the popularisation of and security) and levels (individual, state, societal, relations globalization discourses. Under the new circumstances, the call between states and societies, interregional and global). for “upgrade Korea” to effectively meet the global challenge was Neglecting one or more relevant levels or structures can on the rise based on successful achievements of modernization,

6 Area Studies Area Studies 7 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy industrialization and democratization. In this respect the and financial sector which has been widely regarded as the culprit nationalist discourse of economic development began to take for 1997 currency crisis. global bearing. As for the economic sphere, for instance, the Kim Dae-Jung (1998-2003) accepted globalization as a fait argument for a need for meeting the “global standard” became accompli, characterizing the 21st century as a “century of stronger. In his inaugural address, Kim stated: “If we do not globalization”8 and underscoring the need to strengthen Korea's effectively cope with a rapidly changing world, we will surely fail national capacity through globalization and informatization.9 to become an advanced country. We need to be squarely ready to 6 Under the slogan “Parallel Development of Democracy and build and develop a 'new Korea'.” Market Economy” Kim Dae-Jung used the IMF as a cover to Towards transforming, Korea amiable to the new administration pursue many of the reforms Kim Young-Sam envisioned under adopted segyehwa as the official globalization strategy. The segyehwa policy, but government had failed in getting segyehwa policy was announced publicaly by President Kim implemented due to wide spread resistance within the Young-Sam at the Sidney APEC summit meeting in November bureaucracy and the business world.10 Although abolished the 1994. The grand declaration followed a major administrative government run Committee to Promote Globalization, the new reform to bring globalization home by eliminating and government under Kim Dae-Jung did not abandon the segyehwa reshuffling about thousands of civil servants and by constituting policy, as it embraced further financial liberalization and a Presidential Segyehwa Promotion Committee (PSPC) and globalization as the only way for Korea to escape the crisis, and for declared that his cabinet was in fact a “globalization cabinet”.7 that he saw a need for FDI in achieving long-term financial PSPC was mandated to give shape and substance to the stability.11 President's globalization vision. The main job of PSPC was to Throughout his administration he continued to promote and work out policies and programs in six priority areas; education, expand on the necessity of opening up Korea to the world. This legal and economic system, politics and mass media, national and was to be achieved through a “Second Nation Building” where he local administration, the environment, and culture and invited all citizens to “become active agents of national reform” consciousness. by striving to “become a global citizen” (Kim 1999). He saw The segyehwa was unique as it set out to globalize the country globalization as in no way restricted to the economy, but as through a state-enhancing, top-down strategic plan with the happening everywhere in every area, and he argued that the only purpose of meeting the challenge of globalization as defined by way for Korea to move forward, would be to fully participate in the government at that time (KOIS 1995). The ultimate goals of the the current trend of globalization, and to “embrace the challenges policy were (1) creation of a first rate nation; (2) rationalization of of the new millennium” (Kim 1999). Just as his predecessor, Kim all aspects of life; (3) the maintenance of national unity by rising Young-Sam, Kim Dae-Jung also saw globalization as an above class, regional, and generational differences; (4) a opportunity for Korea to “join the ranks of first-rate societies”12 strengthening of Korea's national identity as the basis for The civil society centered administration of President Roh Moo- successful globalization; and (5) the enhancement of a sense of Hyun (2003-08) appeared to veer away from globalization community with all humanity. However the administration has oriented reforms. The focus of the government was to balance failed to implement the segyehwa plans, particularly in corporate between the winners and loosers in the Korean society with the

8 Area Studies Area Studies 9 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy industrialization and democratization. In this respect the and financial sector which has been widely regarded as the culprit nationalist discourse of economic development began to take for 1997 currency crisis. global bearing. As for the economic sphere, for instance, the Kim Dae-Jung (1998-2003) accepted globalization as a fait argument for a need for meeting the “global standard” became accompli, characterizing the 21st century as a “century of stronger. In his inaugural address, Kim stated: “If we do not globalization”8 and underscoring the need to strengthen Korea's effectively cope with a rapidly changing world, we will surely fail national capacity through globalization and informatization.9 to become an advanced country. We need to be squarely ready to 6 Under the slogan “Parallel Development of Democracy and build and develop a 'new Korea'.” Market Economy” Kim Dae-Jung used the IMF as a cover to Towards transforming, Korea amiable to the new administration pursue many of the reforms Kim Young-Sam envisioned under adopted segyehwa as the official globalization strategy. The segyehwa policy, but government had failed in getting segyehwa policy was announced publicaly by President Kim implemented due to wide spread resistance within the Young-Sam at the Sidney APEC summit meeting in November bureaucracy and the business world.10 Although abolished the 1994. The grand declaration followed a major administrative government run Committee to Promote Globalization, the new reform to bring globalization home by eliminating and government under Kim Dae-Jung did not abandon the segyehwa reshuffling about thousands of civil servants and by constituting policy, as it embraced further financial liberalization and a Presidential Segyehwa Promotion Committee (PSPC) and globalization as the only way for Korea to escape the crisis, and for declared that his cabinet was in fact a “globalization cabinet”.7 that he saw a need for FDI in achieving long-term financial PSPC was mandated to give shape and substance to the stability.11 President's globalization vision. The main job of PSPC was to Throughout his administration he continued to promote and work out policies and programs in six priority areas; education, expand on the necessity of opening up Korea to the world. This legal and economic system, politics and mass media, national and was to be achieved through a “Second Nation Building” where he local administration, the environment, and culture and invited all citizens to “become active agents of national reform” consciousness. by striving to “become a global citizen” (Kim 1999). He saw The segyehwa was unique as it set out to globalize the country globalization as in no way restricted to the economy, but as through a state-enhancing, top-down strategic plan with the happening everywhere in every area, and he argued that the only purpose of meeting the challenge of globalization as defined by way for Korea to move forward, would be to fully participate in the government at that time (KOIS 1995). The ultimate goals of the the current trend of globalization, and to “embrace the challenges policy were (1) creation of a first rate nation; (2) rationalization of of the new millennium” (Kim 1999). Just as his predecessor, Kim all aspects of life; (3) the maintenance of national unity by rising Young-Sam, Kim Dae-Jung also saw globalization as an above class, regional, and generational differences; (4) a opportunity for Korea to “join the ranks of first-rate societies”12 strengthening of Korea's national identity as the basis for The civil society centered administration of President Roh Moo- successful globalization; and (5) the enhancement of a sense of Hyun (2003-08) appeared to veer away from globalization community with all humanity. However the administration has oriented reforms. The focus of the government was to balance failed to implement the segyehwa plans, particularly in corporate between the winners and loosers in the Korean society with the

8 Area Studies Area Studies 9 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy intensification of globalization, through new governance which Korea would be more active in international arena; paradigm. However President Roh's accomplishments in terms of “ .. with the advent of the era of globalism, Korea's participation and decentralization were not impressive. Rather diplomacy needs to pay more attention to such the globalization reforms that had been introduced earlier in the universal values as freedom, justice, peace and Kim government were institutionalized, strengthened, welfare.. we will take an active part in international expanded, and deepened during the Roh administration. efforts to tackle global issues such as international The Lee Myung-Bak government (20082013) has continued the peace and security, disarmament and arms control, strategy of the previous three governments, i.e., a strategy of eradication of poverty, protection of environment, and bandwagoning neoliberal globalization. Adhering closely to the efficient utilisation of natural resources. Through such globalization paradigm of the Kim Dae-Jung and Roh Moo-Hyun agreements, we will play our due part in making a governments, the Lee government has revived the discourse on more just, safe and prosperous world” (quoted in Gills “advancement” of the Kim Young-Sam government. Lee in his and Gills 2000: 77). inaugural address made public his ambitious plan to make Korea The nationalistic arguments, which strike at the heart of Korean's an “advanced country.” Pronouncing 2008 as the year in which patriotism and their willingness to sacrifice for the national good, Korea would become an advanced country for the first time in its became the basis for improving Korea's global reputation. history, he pledged to make Korea “a first-class, advanced Enhancing Korea's international standing was a key element of country that would be able to create and emit a set of new values Korea's foreign policy since the mid 1990s and globalization was 13 to the entire world.” In many respects, there exist a strong the primary means to achieve this goal. As Samuel Kim points commonality between -Young Sam's segyehwa drive and Lee out, it is the highly status conscious and hierarchical Korean Myung Bak's Global Korea strategy regardless of their contextual society, where ranking is often used as a way to locate group differences. within the pecking order, the competition to raise ranking 4. Globalization and Framing of Korean Foreign Policy mapped very well on to Korea's fears about losing out in a global race (Kim 2000: 259). Understanding of segyehwa for Korea public policy was not just about making necessary domestic changes to be more In 1997, the Korean Foreign Ministry in its Diplomatic white competitive in the global economy, but it was considered as an paper renewed its pledge to work towards “globalization integral part of Korea's place in the global stage and the beginning diplomacy” so that the government could respond more of a new era in Korean foreign policy. Han Sung-Joo, foreign effectively to the fluctuating international situation and make minister under Kim Young-Sam administration has articulated Korea a “first-rate advanced nation” (MFA 1997: 108). Another segyehwa as a key component of Korea's “New Diplomacy” (Sin important aspect of Korea's globalization diplomacy was Korea's Oegyo) in May 1993, identifying globalization as the first five basic active participation in the UN and other international themes relevant for Korean foreign policy outlook; globalism, organizations. Korean foreign Ministry emphasized the growing diversification, multi-dimensionalism, regional cooperation and importance of UN stating; future orientation (Gills and Gills 2000: 95). Han's vision embraced a more traditional definition of globalization, one in

10 Area Studies Area Studies 11 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy intensification of globalization, through new governance which Korea would be more active in international arena; paradigm. However President Roh's accomplishments in terms of “ .. with the advent of the era of globalism, Korea's participation and decentralization were not impressive. Rather diplomacy needs to pay more attention to such the globalization reforms that had been introduced earlier in the universal values as freedom, justice, peace and Kim government were institutionalized, strengthened, welfare.. we will take an active part in international expanded, and deepened during the Roh administration. efforts to tackle global issues such as international The Lee Myung-Bak government (20082013) has continued the peace and security, disarmament and arms control, strategy of the previous three governments, i.e., a strategy of eradication of poverty, protection of environment, and bandwagoning neoliberal globalization. Adhering closely to the efficient utilisation of natural resources. Through such globalization paradigm of the Kim Dae-Jung and Roh Moo-Hyun agreements, we will play our due part in making a governments, the Lee government has revived the discourse on more just, safe and prosperous world” (quoted in Gills “advancement” of the Kim Young-Sam government. Lee in his and Gills 2000: 77). inaugural address made public his ambitious plan to make Korea The nationalistic arguments, which strike at the heart of Korean's an “advanced country.” Pronouncing 2008 as the year in which patriotism and their willingness to sacrifice for the national good, Korea would become an advanced country for the first time in its became the basis for improving Korea's global reputation. history, he pledged to make Korea “a first-class, advanced Enhancing Korea's international standing was a key element of country that would be able to create and emit a set of new values Korea's foreign policy since the mid 1990s and globalization was 13 to the entire world.” In many respects, there exist a strong the primary means to achieve this goal. As Samuel Kim points commonality between -Young Sam's segyehwa drive and Lee out, it is the highly status conscious and hierarchical Korean Myung Bak's Global Korea strategy regardless of their contextual society, where ranking is often used as a way to locate group differences. within the pecking order, the competition to raise ranking 4. Globalization and Framing of Korean Foreign Policy mapped very well on to Korea's fears about losing out in a global race (Kim 2000: 259). Understanding of segyehwa for Korea public policy was not just about making necessary domestic changes to be more In 1997, the Korean Foreign Ministry in its Diplomatic white competitive in the global economy, but it was considered as an paper renewed its pledge to work towards “globalization integral part of Korea's place in the global stage and the beginning diplomacy” so that the government could respond more of a new era in Korean foreign policy. Han Sung-Joo, foreign effectively to the fluctuating international situation and make minister under Kim Young-Sam administration has articulated Korea a “first-rate advanced nation” (MFA 1997: 108). Another segyehwa as a key component of Korea's “New Diplomacy” (Sin important aspect of Korea's globalization diplomacy was Korea's Oegyo) in May 1993, identifying globalization as the first five basic active participation in the UN and other international themes relevant for Korean foreign policy outlook; globalism, organizations. Korean foreign Ministry emphasized the growing diversification, multi-dimensionalism, regional cooperation and importance of UN stating; future orientation (Gills and Gills 2000: 95). Han's vision embraced a more traditional definition of globalization, one in

10 Area Studies Area Studies 11 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

“as the UN expected to play a greater role in dealing image that of a vibrant, competent and efficient modern advanced with such global issues disarmament, environment, state and its leaders developed confidence in their ability to human rights and narcotics in the post cold-war period, manage domestic and foreign affairs (Lee 2000: 177). our nation should pursue an active UN diplomacy to A year later, all five fundamentals of the New Diplomacy were secure the maximum level of our national interests and collapsed in to an all out campaign for globalization. According to to assume a role commensurate with our position in the Han (1995: 532); international community” (MOFAT 1997: 108). “The reason why Korean is striving for globalization, Chae Jin-Lee (Lee 2000: 117) points out that the UN oriented trying to induce foreign investment, liberalizing its global diplomacy enjoyed broad popular support in Korea, as did financial market and preparing to join the OECD is to Korea's drive to gain membership in prestigious international successfully meet the challenges of post-UR (Uruguay organizations including the Organization for Economic Round of GATT) international order. Korea has to face Cooperation and development (OECD) and The World Trade a n d o v e r c o m e n e w c h a l l e n g e s s u c h h a s Organization (WTO). And Samuel Kim observes that segyehwa interdependence and globalization of issues and the was seen by many Koreans as the necessary passport into the best means is to enhance competitiveness. This means OECD and the UN Security Council and the goal of making (that) Korea's economy has a primary role to play. Yet “Korea a Central Player on the world stage” became the standard as this endeavor has much to do with (the) changes in justification for Kim Young-Sams' segyehwa drive (Kim 2000: 244). (the) international arena, foreign policy also has an Lofty ambitions to make Korea an important world player were important role to play. Precisely, here resides the task of not born of a vacuum during the Kim Young-Sam's foreign policy in this post-UR international order”. administration, but were rather a natural and progressive Regardless of the differing motives behind the support for outcome of the immensely successful Olympics Games in 1988 Korea's globalization, the domestic audience largely viewed the and the subsequent Nordpolitik inherited from the previous Roh nation's increased participation in international organizations as Tae-Woo administration. Lee contends that if linking a state a process that could be managed and internalized to benefit public policy with international community is in fact an particular groups, as well as serving the overall national goal of important part of globalization process, then Korea had been elevating Korea's status in the world community. laying the foundation for diplomatic globalization a decade 5. Globalization Strategy in Korean Foreign Policy earlier with its ambition to host Olympics games (Lee 2000). The interpretation of globalization as a means to enhance Korea's Thus the Seoul Olympics was Korea's “international coming out international standing has been a key element of ROK foreign party” and as opportunity to show the world that Korea was no policy in the 1990s (Gill and Gill 2000b).The diplomatic longer a poverty-stricken Asian war victim but a strong modern, globalization in its strategic goal was aimed at liberating Korea increasingly prosperous country with a vibrant society. The from the US-Korea bilateral strait jacket up on which Korean success of the Seoul Olympics inculcated the populace with a foreign policy was defined during the Cold War period. It also sense of national pride and the heightened awareness of aimed at Korea playing greater role in peace making by assuming internationalism. In particular, Korea set forth a new national

12 Area Studies Area Studies 13 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

12 Area Studies Area Studies 13 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy intermediately role between developed and developing countries rights in the UN. Since its inception in UN Korea began in the multilateral forums. This also meant Seoul's aspiration of contributing to UN peace keeping operations. Since 1996 Korean moving away from its one dimensional preoccupation with began its foreign AID program, albeit rather modestly both in national security issues in the changed post-Cold war scale and scope, bolstering Korea's successful transformation international political environment. Segyehwa diplomacy also from an aid receiver to a donor and showcasing the world to do so exemplifies Korea's enthusiasm to deal with the North Korean as the first country in the post-war period. issues and the aspiration for national unification possibilities Accompanying his aspirations for economic modernization, Kim through diplomatic and multilateral means. From a national Dae-Jung took a rationalist cosmopolitan view of international identity perspective it aimed at transcending the tragic historical politics and advocated universal values of freedom, human legacies of Korean War. A strong, healthy and competitive rights, justice, peace, and efficiency in the era which he observed economy has been identified as central to Korean national to be characterized by “universal globalism”.14 Korean identity as “world class nation” and as both a means and end of government under Kim Dae-Jung strongly pursued it diplomatic the segyehwa diplomacy (Gill and Gill 2000b). globalization through UN. The Kim Dae-Jung government Since the late 1980s Seoul has triumphed in its efforts to expansion continued ROK's financial support to UN even when the country and diversification of its diplomatic engagements following the was going through the worst of Asian financial crisis of 1997 and success story of Nordpolitik. The number of countries having has generously contributed to collective security action. formal diplomatic relations with Korea steadily increased from Under Kim Dae-Jung, Seoul shifted the focus of foreign policy 126 in 1985 to 146 in 1990 to 186 by the end of 1998. Korea's away from security issues to such universal human values as membership in intergovernmental organizations (IGO) increased democracy, liberty, freedom, welfare, human rights and the like. from thirty six in 1985 to fifty two in 1998. Seoul's membership in It also allowed the Korean Government to capitalize on the rise of international intergovernmental organizations (INGOs) pluralism in terms of international actors, such as individuals, increased from 686 to 1250 in the same period. Samuel Kim (2000: NGOs, international and governmental organizations, reviving 265) argues that practically the global reach of Korean foreign the importance of once forgotten civilian diplomacy. policy began to accomplish since the 1990s, through Korea-Russia Furthermore, with a dramatic rise in the number of interregional normalization (1990), Korea's UN membership (1991), Korea- and intraregional organizations, Kim's Government, convinced China normalization (1992), OECS membership (1996) and the of their potential contribution to peace and stability on the UN Security Council membership (1996-97). peninsula, proactively participated in such organizations as Diplomatic segyehwa envisaged Korea's increased participation in APEC, ARF, Uruguay Round Negotiations and others. At the international arena especially through Seoul's greater same time, it also sought ways to induce North Korea's participation and active role in United Nations. Korea participation. emphasized the increasing importance of UN in the post-Cold Having understood the extent of Asian economies' War international order and in the peace and security prospects in interdependence and the vulnerabilities exposed by lack of Korean peninsula. Korea focused on the issues of nuclear non- cooperative institutions and regional mechanisms, the period proliferation, development, trade, environment and human following the 1997 Asian financial crisis called for strong regional

14 Area Studies Area Studies 15 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy intermediately role between developed and developing countries rights in the UN. Since its inception in UN Korea began in the multilateral forums. This also meant Seoul's aspiration of contributing to UN peace keeping operations. Since 1996 Korean moving away from its one dimensional preoccupation with began its foreign AID program, albeit rather modestly both in national security issues in the changed post-Cold war scale and scope, bolstering Korea's successful transformation international political environment. Segyehwa diplomacy also from an aid receiver to a donor and showcasing the world to do so exemplifies Korea's enthusiasm to deal with the North Korean as the first country in the post-war period. issues and the aspiration for national unification possibilities Accompanying his aspirations for economic modernization, Kim through diplomatic and multilateral means. From a national Dae-Jung took a rationalist cosmopolitan view of international identity perspective it aimed at transcending the tragic historical politics and advocated universal values of freedom, human legacies of Korean War. A strong, healthy and competitive rights, justice, peace, and efficiency in the era which he observed economy has been identified as central to Korean national to be characterized by “universal globalism”.14 Korean identity as “world class nation” and as both a means and end of government under Kim Dae-Jung strongly pursued it diplomatic the segyehwa diplomacy (Gill and Gill 2000b). globalization through UN. The Kim Dae-Jung government Since the late 1980s Seoul has triumphed in its efforts to expansion continued ROK's financial support to UN even when the country and diversification of its diplomatic engagements following the was going through the worst of Asian financial crisis of 1997 and success story of Nordpolitik. The number of countries having has generously contributed to collective security action. formal diplomatic relations with Korea steadily increased from Under Kim Dae-Jung, Seoul shifted the focus of foreign policy 126 in 1985 to 146 in 1990 to 186 by the end of 1998. Korea's away from security issues to such universal human values as membership in intergovernmental organizations (IGO) increased democracy, liberty, freedom, welfare, human rights and the like. from thirty six in 1985 to fifty two in 1998. Seoul's membership in It also allowed the Korean Government to capitalize on the rise of international intergovernmental organizations (INGOs) pluralism in terms of international actors, such as individuals, increased from 686 to 1250 in the same period. Samuel Kim (2000: NGOs, international and governmental organizations, reviving 265) argues that practically the global reach of Korean foreign the importance of once forgotten civilian diplomacy. policy began to accomplish since the 1990s, through Korea-Russia Furthermore, with a dramatic rise in the number of interregional normalization (1990), Korea's UN membership (1991), Korea- and intraregional organizations, Kim's Government, convinced China normalization (1992), OECS membership (1996) and the of their potential contribution to peace and stability on the UN Security Council membership (1996-97). peninsula, proactively participated in such organizations as Diplomatic segyehwa envisaged Korea's increased participation in APEC, ARF, Uruguay Round Negotiations and others. At the international arena especially through Seoul's greater same time, it also sought ways to induce North Korea's participation and active role in United Nations. Korea participation. emphasized the increasing importance of UN in the post-Cold Having understood the extent of Asian economies' War international order and in the peace and security prospects in interdependence and the vulnerabilities exposed by lack of Korean peninsula. Korea focused on the issues of nuclear non- cooperative institutions and regional mechanisms, the period proliferation, development, trade, environment and human following the 1997 Asian financial crisis called for strong regional

14 Area Studies Area Studies 15 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy focus from the policy makers in Seoul. Under the circumstances, Dynamic Korea: North East Asian Balancer the Kim Dae-Jung government has became proactive and Continuing the previous administrations diplomatic vigorous in pursuit of regionalism as one of the viable measures to globalization, President Roh Moo-Hyun began to target consolidate, if not create, peace and stability in East Asia. This Northeast Asia for better maneuvering of Korean foreign policy vision was reinforced by the guidelines in the mission statement goals. Seoul had no contradiction between regionalization and of the East Asian Vision Group (EAVG) in 1999. The Group made globalization and has visioned a strong regionalism in East Asia breathtaking progress with subsequent meetings in the next four as an important step towards successful globalization for Korea years, during which the working group level meeting of East (Kim 2005). Since the inauguration of the Roh Moo-Hyun Asian Studies Group (EASG) was held in 2000. Complemented by government in 2003, one could observe a cumulative change in the Studies Group's findings, the EAVG was able to put forward Korea's foreign policy posture, which involves nothing less than a some action plans and feasible policy guidelines in an effort to lay vision of building a new order in the Northeast Asian region. In a the foundation for regionalism. Korea's regional initiates were series of speeches in February and March 2005, President Roh also explicated at ASEAN+3 Manila Summit in 1999, where Kim outlined his vision of Korea's new role in Northeast Asia Dae-Jung endorsed the vision of the formation a giant free-trade (Cheongwadae 2005a; 2005b; 2005c, 2005d). He disclosed a new zone among East Asian countries in order to engage members of strategy, emphasizing the need for Korea to act as a balancer the European Union and the North American Free Trade which must take the lead in promoting peace and stability in the Agreement in cooperation as well as in competition. region. This meant establishing the country not only as a mediator A further example of how Seoul's diplomatic leverage has or facilitator and qualities which are regarded as the influenced regional security affairs is the policy of reconciliation characteristics of a classical middle-power (Touval and Zartman and integration in relation to the North Korean state during the 1985), but also as a “balancing factor” in Northeast Asia to prevent Kim Dae-Jung administration (19982003). The so-called possible friction and conflict in the region (Cheongwadae 2005c). “Sunshine Policy” aimed to break down the Cold War structure He has also envisaged Korea to be hub nation under the slogan of on the Korean Peninsula into a more cooperative mode of inter- a “Northeast Asian Era of Peace and Prosperity” (Lee 2008). This action. The first ever summit between Korean president Kim Dae- precocious move under the vision of the Roh administration's Jung and North Korean leader Kim Jong-Il in June 2000 not only pursuit of an autonomous foreign policy backfired as it resulted marked an unprecedented rapprochement between current and in a loss of trust and cooperation from Washington. Accordingly, former wartime enemies, but also reflected the Korean capacity to the Roh administration changed the focus from a peace broker in set the region's security agenda. In that year Kim Dae-Jung was Northeast Asia to a networked trader across all the major regions awarded the Nobel Peace Prize in recognition of his efforts to of the world. Although the Roh administration introduced the foster reconciliation and reunification between the two Koreas. concepts of middle power roles and established important free As De Ceuster (2004: 9) observes, the presidency of Kim Dae-Jung trade networks, it did not set middle power diplomacy as an represented “a turning point in Korea's international umbrella policy vision. positioning” because Dae-Jung was able to gain support from In his addresses at the Air Force and Military Academy in March outside powers for his Sunshine Policy. 2005, President Roh underlined his aim to play a leading role in Northeast Asian politics and provided insight into his

16 Area Studies Area Studies 17 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy focus from the policy makers in Seoul. Under the circumstances, Dynamic Korea: North East Asian Balancer the Kim Dae-Jung government has became proactive and Continuing the previous administrations diplomatic vigorous in pursuit of regionalism as one of the viable measures to globalization, President Roh Moo-Hyun began to target consolidate, if not create, peace and stability in East Asia. This Northeast Asia for better maneuvering of Korean foreign policy vision was reinforced by the guidelines in the mission statement goals. Seoul had no contradiction between regionalization and of the East Asian Vision Group (EAVG) in 1999. The Group made globalization and has visioned a strong regionalism in East Asia breathtaking progress with subsequent meetings in the next four as an important step towards successful globalization for Korea years, during which the working group level meeting of East (Kim 2005). Since the inauguration of the Roh Moo-Hyun Asian Studies Group (EASG) was held in 2000. Complemented by government in 2003, one could observe a cumulative change in the Studies Group's findings, the EAVG was able to put forward Korea's foreign policy posture, which involves nothing less than a some action plans and feasible policy guidelines in an effort to lay vision of building a new order in the Northeast Asian region. In a the foundation for regionalism. Korea's regional initiates were series of speeches in February and March 2005, President Roh also explicated at ASEAN+3 Manila Summit in 1999, where Kim outlined his vision of Korea's new role in Northeast Asia Dae-Jung endorsed the vision of the formation a giant free-trade (Cheongwadae 2005a; 2005b; 2005c, 2005d). He disclosed a new zone among East Asian countries in order to engage members of strategy, emphasizing the need for Korea to act as a balancer the European Union and the North American Free Trade which must take the lead in promoting peace and stability in the Agreement in cooperation as well as in competition. region. This meant establishing the country not only as a mediator A further example of how Seoul's diplomatic leverage has or facilitator and qualities which are regarded as the influenced regional security affairs is the policy of reconciliation characteristics of a classical middle-power (Touval and Zartman and integration in relation to the North Korean state during the 1985), but also as a “balancing factor” in Northeast Asia to prevent Kim Dae-Jung administration (19982003). The so-called possible friction and conflict in the region (Cheongwadae 2005c). “Sunshine Policy” aimed to break down the Cold War structure He has also envisaged Korea to be hub nation under the slogan of on the Korean Peninsula into a more cooperative mode of inter- a “Northeast Asian Era of Peace and Prosperity” (Lee 2008). This action. The first ever summit between Korean president Kim Dae- precocious move under the vision of the Roh administration's Jung and North Korean leader Kim Jong-Il in June 2000 not only pursuit of an autonomous foreign policy backfired as it resulted marked an unprecedented rapprochement between current and in a loss of trust and cooperation from Washington. Accordingly, former wartime enemies, but also reflected the Korean capacity to the Roh administration changed the focus from a peace broker in set the region's security agenda. In that year Kim Dae-Jung was Northeast Asia to a networked trader across all the major regions awarded the Nobel Peace Prize in recognition of his efforts to of the world. Although the Roh administration introduced the foster reconciliation and reunification between the two Koreas. concepts of middle power roles and established important free As De Ceuster (2004: 9) observes, the presidency of Kim Dae-Jung trade networks, it did not set middle power diplomacy as an represented “a turning point in Korea's international umbrella policy vision. positioning” because Dae-Jung was able to gain support from In his addresses at the Air Force and Military Academy in March outside powers for his Sunshine Policy. 2005, President Roh underlined his aim to play a leading role in Northeast Asian politics and provided insight into his

16 Area Studies Area Studies 17 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy understanding of the strategic significance of Korea when he intergovernmental meetings, Seoul has tried to take the lead in declared: “The power equation in Northeast Asia will change promoting environmental protection and collaboration. For depending on the choices we [South Korea] make” instance, Seoul was crucial in establishing the region's first (Cheongwadae 2005d). In this regard Seoul also proved capable intergovernmental environmental initiative the North East Asian of playing a crucial role in fostering interregional cooperation. Sub-regional Programme of Environmental Cooperation After contributing to the formation of the Asia-Pacific Economic (NEASPEC) and in the development of the Tripartite Cooperation (APEC) in 1989, it took the initiative in formulating Environmental Ministers Meeting (TEMM) between China, the so-called Seoul APEC Declaration two years later. This Japan, and Korea. declaration allowed China, Hong Kong and Taiwan to participate One can also find the growing influence of Korea in international as economies (and not as states) in the organization. As the chair governance, as its accession to the Organization of Economic nation of the APEC forum in 2005, Korea established the Anti- Cooperation and Development (OECD) in 1996 and the Corruption and Transparency Task Force and drew up a International Monetary Fund's (IMF) 2006 decision to increase roadmap for implementing the so-called Bogor Declaration, Seoul's voting stakes in the financial organization have shown intended to set up a free trade and investment area in the APEC (Lee 2006b). The upgrading of Korea's quota which is based region. In addition, the Korean administration announced the among other things on the gross domestic product, foreign contribution of US$2 million to the APEC Support Fund from currency reserves and the openness of an economy has ensured a 2007 to 2009 to promote capacity-building projects in developing bigger role in the decision-making processes of one of the world's countries (Cheongwadae 2007). most important financial institutions. Hence reflects Seoul's In addition to its efforts to shape and coordinate multilateral growing standing and influence in international affairs. activities in a broader geo-graphical context, Seoul also Moreover, in the run-up to the elections of then UN Secretary emphasized its commitment to further institutionalization General Kofi Annan's successor, Seoul was able to rally enough processes in the Northeast Asian region. Various initiatives and support to push its candidate Ban Ki-Moon with no objections propositions, such as the Six-Party Talks, the North East Asian from the major powers of the UN Security Council (Korea Times Cooperation Dialogue (NEACD), the North East Asia Security 2006). Dialogue (NEASED), the North East Asian Cooperation Initiative Global Korea: Middle Power Diplomacy (NACI), and the Korean Energy Development Organization Following the 2008 financial crisis, under the new Lee Myung-Bak (KEDO), outline Korea's resolve to establish an institutionalized administration, Seoul unveiled the “going global” foreign policy regional order with a focus on Northeast Asia. vision. The middle power diplomacy has been adopted Besides its focus on founding regional economic and security strategically to enhance the country's national status under the mechanisms, Seoul has also focused on non-traditional security new vision. Policymakers viewed “middle power” as a useful issues such as the environment, in coordinating regional regime- term in positioning Korea as a significant country between a few building activities (Lee 2006a; Yoon 2006). By concluding several great powers and the other weak countries. With the aspiration of environmental cooperation agreements with China, Japan, playing a bigger role, middle power diplomacy has been Mongolia, and Russia, as well as through multilateral popularized. Discourses on soft power, network power, and

18 Area Studies Area Studies 19 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy understanding of the strategic significance of Korea when he intergovernmental meetings, Seoul has tried to take the lead in declared: “The power equation in Northeast Asia will change promoting environmental protection and collaboration. For depending on the choices we [South Korea] make” instance, Seoul was crucial in establishing the region's first (Cheongwadae 2005d). In this regard Seoul also proved capable intergovernmental environmental initiative the North East Asian of playing a crucial role in fostering interregional cooperation. Sub-regional Programme of Environmental Cooperation After contributing to the formation of the Asia-Pacific Economic (NEASPEC) and in the development of the Tripartite Cooperation (APEC) in 1989, it took the initiative in formulating Environmental Ministers Meeting (TEMM) between China, the so-called Seoul APEC Declaration two years later. This Japan, and Korea. declaration allowed China, Hong Kong and Taiwan to participate One can also find the growing influence of Korea in international as economies (and not as states) in the organization. As the chair governance, as its accession to the Organization of Economic nation of the APEC forum in 2005, Korea established the Anti- Cooperation and Development (OECD) in 1996 and the Corruption and Transparency Task Force and drew up a International Monetary Fund's (IMF) 2006 decision to increase roadmap for implementing the so-called Bogor Declaration, Seoul's voting stakes in the financial organization have shown intended to set up a free trade and investment area in the APEC (Lee 2006b). The upgrading of Korea's quota which is based region. In addition, the Korean administration announced the among other things on the gross domestic product, foreign contribution of US$2 million to the APEC Support Fund from currency reserves and the openness of an economy has ensured a 2007 to 2009 to promote capacity-building projects in developing bigger role in the decision-making processes of one of the world's countries (Cheongwadae 2007). most important financial institutions. Hence reflects Seoul's In addition to its efforts to shape and coordinate multilateral growing standing and influence in international affairs. activities in a broader geo-graphical context, Seoul also Moreover, in the run-up to the elections of then UN Secretary emphasized its commitment to further institutionalization General Kofi Annan's successor, Seoul was able to rally enough processes in the Northeast Asian region. Various initiatives and support to push its candidate Ban Ki-Moon with no objections propositions, such as the Six-Party Talks, the North East Asian from the major powers of the UN Security Council (Korea Times Cooperation Dialogue (NEACD), the North East Asia Security 2006). Dialogue (NEASED), the North East Asian Cooperation Initiative Global Korea: Middle Power Diplomacy (NACI), and the Korean Energy Development Organization Following the 2008 financial crisis, under the new Lee Myung-Bak (KEDO), outline Korea's resolve to establish an institutionalized administration, Seoul unveiled the “going global” foreign policy regional order with a focus on Northeast Asia. vision. The middle power diplomacy has been adopted Besides its focus on founding regional economic and security strategically to enhance the country's national status under the mechanisms, Seoul has also focused on non-traditional security new vision. Policymakers viewed “middle power” as a useful issues such as the environment, in coordinating regional regime- term in positioning Korea as a significant country between a few building activities (Lee 2006a; Yoon 2006). By concluding several great powers and the other weak countries. With the aspiration of environmental cooperation agreements with China, Japan, playing a bigger role, middle power diplomacy has been Mongolia, and Russia, as well as through multilateral popularized. Discourses on soft power, network power, and

18 Area Studies Area Studies 19 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy public diplomacy have been employed as useful ingredients in developmentalism. In contributing to international peaces and assisting Korea's middle power diplomatic strategy to obtain security, Korea is focusing on Peace Keeping Operations (PKO). domestic support and international legitimacy. After passing a law regarding participation in UN peacekeeping The Global Korea strategy declares: “Our contributions abroad operations in late 2009, Korea has been dispatching its military and international peace-keeping activities should not be pursued overseas under the framework of the UN or other multilateral merely as instruments of assistance. They should rather be peacekeeping operations. Another imprint left by Korea on the approached from a comprehensive perspective of improving assumption of leadership role of the global security issues is by Korea's international standing and potential to serve overseas” hoisting the second Nuclear Security summit, the largest summit (CheongWaDae 2009: 27). Increasing the country's reputation in the security field that discusses international cooperative does not constitute an end in itself, from the perspective of the measures to protect nuclear materials and facilities from terrorist government in Seoul, rather it contributes to cultivating groups, with participation from more than 53 heads of state and international relations according to its own ideas. Active international organizations. The choice of Korea as the host of the participation in solving global problems serves not only to Nuclear Security Summit clearly represents the international improve Korea's image, but also to exert influence on the appreciation of our use of civil nuclear energy in faithful and international system (CheongWaDae 2009: 23). With the new exemplary compliance with the Non-Proliferation Treaty and middle power diplomacy, Korea derives its claim to a leading other non-proliferation norms. global role in the creation of the emerging world order, an On the developmental front, Korea has been undertaking a assertion which opens a new chapter in the history of Korean unique role as model country that once was an aid receiver now foreign policy. transformed into an aid donor. Korea aims to play a critical role by Korea's foreign policy discourse specifically mentions “middle sharing its developmental experiences and also a bridge role power” or junggyun-guk diplomacy both in government and between the developing and the developed countries. The shift to among policy experts. This trend began to widely circulate development assistance activism came with Korea's entry into the following the inauguration of the Lee Myung-Bak administration Development Assistance Committee of the OECD in November in 2008. Under the slogan of “Global Korea,” the Lee government 2009. In late 2011, Korea hosted the 4th High-Level Forum on Aid has hosted many international events such as the G20 Seoul Effectiveness at Busan and tried to bridge Western donors and Summit, the Fourth High-level Forum for Development developing countries by inserting the development agenda in the Effectiveness, and the 2012 Nuclear Security Summit. The global conventional aid effectiveness agenda. In the summit, Korea agendas, such as developmental assistance, peacekeeping transformed the aid-centered paradigm to a more effective operations, and climate change have been highlighted to a greater system focused on development cooperation. With the Busan degree than under the previous governments. The related declaration Korea was instrumental in shifting the paradigm budgets have been increased and new concepts such as “green from aid to development effectiveness by recognizing the role of growth” have been developed under the 'Global Korea' agenda. aid as a catalyst for development and emphasizing the results that The main focuses of Korea's middle power diplomatic activities make development happen on the ground. Korea has also sought have been focused on issues related to international security and South-South cooperation and the incorporation of new donors

20 Area Studies Area Studies 21 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy public diplomacy have been employed as useful ingredients in developmentalism. In contributing to international peaces and assisting Korea's middle power diplomatic strategy to obtain security, Korea is focusing on Peace Keeping Operations (PKO). domestic support and international legitimacy. After passing a law regarding participation in UN peacekeeping The Global Korea strategy declares: “Our contributions abroad operations in late 2009, Korea has been dispatching its military and international peace-keeping activities should not be pursued overseas under the framework of the UN or other multilateral merely as instruments of assistance. They should rather be peacekeeping operations. Another imprint left by Korea on the approached from a comprehensive perspective of improving assumption of leadership role of the global security issues is by Korea's international standing and potential to serve overseas” hoisting the second Nuclear Security summit, the largest summit (CheongWaDae 2009: 27). Increasing the country's reputation in the security field that discusses international cooperative does not constitute an end in itself, from the perspective of the measures to protect nuclear materials and facilities from terrorist government in Seoul, rather it contributes to cultivating groups, with participation from more than 53 heads of state and international relations according to its own ideas. Active international organizations. The choice of Korea as the host of the participation in solving global problems serves not only to Nuclear Security Summit clearly represents the international improve Korea's image, but also to exert influence on the appreciation of our use of civil nuclear energy in faithful and international system (CheongWaDae 2009: 23). With the new exemplary compliance with the Non-Proliferation Treaty and middle power diplomacy, Korea derives its claim to a leading other non-proliferation norms. global role in the creation of the emerging world order, an On the developmental front, Korea has been undertaking a assertion which opens a new chapter in the history of Korean unique role as model country that once was an aid receiver now foreign policy. transformed into an aid donor. Korea aims to play a critical role by Korea's foreign policy discourse specifically mentions “middle sharing its developmental experiences and also a bridge role power” or junggyun-guk diplomacy both in government and between the developing and the developed countries. The shift to among policy experts. This trend began to widely circulate development assistance activism came with Korea's entry into the following the inauguration of the Lee Myung-Bak administration Development Assistance Committee of the OECD in November in 2008. Under the slogan of “Global Korea,” the Lee government 2009. In late 2011, Korea hosted the 4th High-Level Forum on Aid has hosted many international events such as the G20 Seoul Effectiveness at Busan and tried to bridge Western donors and Summit, the Fourth High-level Forum for Development developing countries by inserting the development agenda in the Effectiveness, and the 2012 Nuclear Security Summit. The global conventional aid effectiveness agenda. In the summit, Korea agendas, such as developmental assistance, peacekeeping transformed the aid-centered paradigm to a more effective operations, and climate change have been highlighted to a greater system focused on development cooperation. With the Busan degree than under the previous governments. The related declaration Korea was instrumental in shifting the paradigm budgets have been increased and new concepts such as “green from aid to development effectiveness by recognizing the role of growth” have been developed under the 'Global Korea' agenda. aid as a catalyst for development and emphasizing the results that The main focuses of Korea's middle power diplomatic activities make development happen on the ground. Korea has also sought have been focused on issues related to international security and South-South cooperation and the incorporation of new donors

20 Area Studies Area Studies 21 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy like China to the international aid system. diplomacy, through which Seoul has begun to actively engage The G20 Seoul Summit in November 2010 laid a solid foundation itself in global level issues. An important aspect of Korean foreign for Seoul's leadership role in the areas of international economic policy under the middle power diplomacy has been an increasing and financial cooperation. By concurrently serving in 2010 as the emphasis on promoting Korea's own ideas and its vision for host and chair country of the G20, the world's most influential global order, through actively engaging in norm setting and forum, the ROK played a leading role throughout the entire institutional building. This strategy has been identified as the best process of the G20 Seoul summit, from setting the agenda and way to increase Korea's influence on global affairs. International organizing discussions to drawing out conclusions. The G20 has security and peace, developmental issues and climate change are been gradually taking the place of the G8, to become the premier the key issues that Korea has identified to play a leadership role. forum for discussing various global issues. Another area in which The new foreign policy thinking has been a clear departure from Korea has been projecting its global leadership relates to the the conventional Korean foreign policy of the Cold War period to a issues of global warming and climate change. Korea in 2008 set structure oriented foreign policy under the conditions of "green growth" as a 60-year national vision and since then has globalization. This new paradigm of foreign policy is appealed to the international community for the development of characterized by its comprehensiveness, sustainability and long environmentally friendly economic development. When the term approach. This paper has mainly focused on the “new world is finding it hard to find a solution for the climate change dimensions” of Korean foreign policy, which is structural in issues, Korea's contribution in making the concept green growth nature. This is not to argue that the conventional dimensions of at the global level was highly appreciated and recognized Korean foreign policy is irrelevant or insignificant realm for internationally. In setting norms of green growth at the global analysis; rather was an attempt to show changed paradigm in level and spreading Korea's vision for dealing with climate Korean foreign policy approach under the conditions of change issues has been further taken on by instituting Global globalization. Our submission here is that we need fresh Green Growth Institute with Seoul as its headquarters. conceptual and analytical tools in order to fully comprehend the nature and characteristics of twenty first century Korean foreign 6. Conclusion policy. The impact of globalization on Korean foreign policy has been far- reaching. The idea of incorporating the concept, globalization for Korean foreign policy meant an active engagement of Korea in international affairs and enhancement of Korea's influence in global affairs. In the early phases of Korea's diplomatic globalization, the strategy was to join international organizations and enhance Korea's diplomatic presence around the globe. In the due course of time diplomatic globalization was identified with active participation in regionalism, projecting Korea's leadership role as regional balancer in the East Asian region. In its latest form diplomatic globalization is strategized in the middle power

22 Area Studies Area Studies 23 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy like China to the international aid system. diplomacy, through which Seoul has begun to actively engage The G20 Seoul Summit in November 2010 laid a solid foundation itself in global level issues. An important aspect of Korean foreign for Seoul's leadership role in the areas of international economic policy under the middle power diplomacy has been an increasing and financial cooperation. By concurrently serving in 2010 as the emphasis on promoting Korea's own ideas and its vision for host and chair country of the G20, the world's most influential global order, through actively engaging in norm setting and forum, the ROK played a leading role throughout the entire institutional building. This strategy has been identified as the best process of the G20 Seoul summit, from setting the agenda and way to increase Korea's influence on global affairs. International organizing discussions to drawing out conclusions. The G20 has security and peace, developmental issues and climate change are been gradually taking the place of the G8, to become the premier the key issues that Korea has identified to play a leadership role. forum for discussing various global issues. Another area in which The new foreign policy thinking has been a clear departure from Korea has been projecting its global leadership relates to the the conventional Korean foreign policy of the Cold War period to a issues of global warming and climate change. Korea in 2008 set structure oriented foreign policy under the conditions of "green growth" as a 60-year national vision and since then has globalization. This new paradigm of foreign policy is appealed to the international community for the development of characterized by its comprehensiveness, sustainability and long environmentally friendly economic development. When the term approach. This paper has mainly focused on the “new world is finding it hard to find a solution for the climate change dimensions” of Korean foreign policy, which is structural in issues, Korea's contribution in making the concept green growth nature. This is not to argue that the conventional dimensions of at the global level was highly appreciated and recognized Korean foreign policy is irrelevant or insignificant realm for internationally. In setting norms of green growth at the global analysis; rather was an attempt to show changed paradigm in level and spreading Korea's vision for dealing with climate Korean foreign policy approach under the conditions of change issues has been further taken on by instituting Global globalization. Our submission here is that we need fresh Green Growth Institute with Seoul as its headquarters. conceptual and analytical tools in order to fully comprehend the nature and characteristics of twenty first century Korean foreign 6. Conclusion policy. The impact of globalization on Korean foreign policy has been far- reaching. The idea of incorporating the concept, globalization for Korean foreign policy meant an active engagement of Korea in international affairs and enhancement of Korea's influence in global affairs. In the early phases of Korea's diplomatic globalization, the strategy was to join international organizations and enhance Korea's diplomatic presence around the globe. In the due course of time diplomatic globalization was identified with active participation in regionalism, projecting Korea's leadership role as regional balancer in the East Asian region. In its latest form diplomatic globalization is strategized in the middle power

22 Area Studies Area Studies 23 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

References : 12. Kim Dae-Jung. “To Open a New Millennium of Hope and Prosperity” Speech on the 54th Anniversary of National Liberation, Seoul 15 August 1. Segyehwa is the Korean word used by the Kim Young-Sam 1999. administration for its globalisation policy. The Kim Young-Sam announced that it would keep the Korean word “segyehwa” in its 13. Inaugural Presidential Speech of Lee Myung-bak, February 25, 2008. romanised form and not to translate the Korean word as the official Accessed on May 23, 2013. http://english.hani.co.kr/arti/ name for its globalisation policy, in order to maintain the primary english_edition/e_national/271850.html element of Korean national identity. See Samuel Kim 2000. 14. President Kim Dae-Jung's inaugural address, Korea Herald (Seoul), 2. This school of thought represented by Kenichi Ohmae (1995), Susan February 26, 1998 Strange (1996), Martin Albrow (1996) etc.. For a critical review See; Held and McGrew (1994) 3. Sceptics school represented by Paul Hirst and Grahame Thompson References : (1996), Stephen Krasner (1995), Robert Gilpin (1987) etc.. Albrow, Martin. 1996. The Global Age. Cambridge: Polity Press. 4. Scholarly exponents of this position include Anthony Giddens (1990), CheongWaDae . 2009. Global Korea: The National Security Strategy of the James Rosenau (1997) and John Ruggie (1996) Republic of Korea. Seoul: CheongWaDae. 5. Structures in structural foreign policy composed of relatively Cheongwadae. 2005a. Address on the 86th March First Independence Movement permanent organizing principles and rules of the game that shape and D a y . M a r c h 1 . A c c e s s e d o n J u l y 2 1 , 2 0 1 2 . order the political, legal, socio-economic and security fields. Structures http://english.president.go.kr/. are made operational through a complex organizational and/or institutional set-up that can vary from country to country, from society Cheongwadae. 2005b. Address on the State Affairs Marking the Second to society, and from region to region (Keu-keleire and MacNaughtan Anniversairy of His Inauguration, February 25. Accessed on July 21, 2012. 2008). http://english.president.go.kr/. 6. Presidential Speech, December 24, 1994 Cheongwadae. 2005c. Address at the 53rd Commencement and Commissioning Ceremony of the Korea Air Force Academy, March 8. Accessed on July 21, 7. Presidential Speech, December 24, 1994 2012. http://english.president.go.kr/. 8. Presidential Speeches, July 23, 2001, and February 4, 2001 Cheongwadae. 2005d. Address at the 40th Commencement and Commissioning 9. Presidential Speech, March 4, 1998 Ceremony of the Korea Third Military Academy, March 22. Accessed on July 10. Kim Dae-jung had in his Daejung kyŏngjeron [Mass-participatory 21, 2012. http://english.president.go.kr/. Economy] (Seoul: Ch'eongsa, 1986) revealed many of his populist ideas Cheongwadae. 2007. Korea and APEC. Accessed on July 21, 2012. for reform of the South Korean economy. Ministry of Finance and http://english.president.go.kr/. Economy and the Korea Development Institute. 1998. Djnomics: Dani Rodrik.1997. “Sense and nonsense in the globalization debate”. Foreign kungminhwa hamgge naeil ul yŏnda [Djnomics: Open Tomorrow with the Policy. Summer 107. People].Seoul. De Ceuster, Koen. 2004. “South Korea speaks for itself”. IIAS Newsletter. 34 11. It is significant that Kim Dae-Jung mentioned both segyehwa and the (July). need for inducing FDI in his inauguration speech. See Kim (1998)

24 Area Studies Area Studies 25 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

Gill, Barry and Dong-Sook, Gill. 2000a. “Globalization and strategic choice in Keukeleire, Stephan and Simon Schunz .2008. Foreign policy, globalization South Korea”. In Korea's Globalisation. edited by, Samuel Kim. and global governance -The European Union's structural foreign policy, Cambridge: Cambridge University Press ECPR Standing Group on the European Union Fourth Pan-European Conference on EU Politics. Riga, September, 25-27. Accessed on June 10, Gill, Barry and Dong-Sook, Gill. 2000b. “South Korea and Globalisation: The 2013. http://www.jhubc.it/ecpr-riga/virtualpaperroom/102.pdf Rise of Globalism”. East Asia and Globalisation. edited by, Samuel Kim. Oxford: Rowman and Littlefield Publishers. Kim Dae-Jung. 1999. ” Democracy and Market Economy, the Two Wheels of a Cart”. The International Conference on Democracy and Market Economy. Han,Sung-Joo. 1995. Korean Diplomacy in an Era of Globalization:Speaches of Seoul. February 26. Foreign Minister Han Sung-Joo, March 1993- December 1994. Seoul: Chisik Saniopsa. Kim, Dae-Jung. 2005. “Regionalism in the Age of Asia”. Global Asia 1(1) Held, D., A. McGrew, D. Goldblatt, and J. Perraton. 1999. Global Kim, Dae-Jung. 1998. “Let Us Open a New Era: Overcoming National Crisis Transformations, Politics, Economics and Culture. Cambrige: Polity Press. and Taking a New Leap Forward”. Korea Observer. XXIX (1): 223- 233. Held, D., and A. McGrew. eds. 2002. Governing Globalization, Power, Authority Kim, Samuel. 2000. Korea's Globalisation. Cambridge: Cambridge University and Global Governance. Cambridge: Polity Press. Press Hill, C. 2003. The Changing Politics of Foreign Policy. London: Palgrave Kim, Young-Sam. 1997. Korea's Quest for Reform and Globalization. Seoul : Macmillan. Office of the President. The Republic of Korea Hill, C., and M. Smith. 2005. “Acting for Europe: Reassessing the European KOIS . 1995. “Explanatory Notes on President Kim Young-Sam' Blueprint for Union's Place in International Relations”. In International Relations and the Segyehwa Policy”. in The Segyehwa Policy of Korea under President Kim the European Union, edited by C. Hill, and M. Smith. 388-406. Oxford: Young-Sam. 7-16. Seoul: Korean Overseas Information Service. Oxford University Press. Lee, Chae-Jin. 2000. “South Korea's Foreign Relations”. In Korea's Jonsson, C. 2002. “Diplomacy, Bargaining and Negotiation”. In Handbook of Globalisation. edited by, Samuel Kim. Cambridge: Cambridge University International Relations, edited by. W. Carlsnaes, T. Risse, and B.A. Press Simmons. 212-234. London: Sage. Lee, Hyo-Sik. 2006 b. “IMF Upgrades Korea to 19th.” The Korea Times, June 9. Kang, Eliot. 2000. “Segyehwa Reform of the South Korean Developmental Lee, Shin-Hwa. 2006a “Environmental Regime-Building in Northeast Asia: State”. In Korea's Globalisation. edited by, Samuel Kim. Cambridge: Korea's Pursuit of Leadership”. In Korea at the Center, Dynamics of Cambridge University Press Regionalism in Northeast Asia. Ediated by Armstrong, Charles et.al . Keukeleire, S. 2002. Reconceptualizing (European) Foreign Policy: Structural Armonk, New York: M.E. Sharpe. Foreign Policy. Paper presented at ECPR 1st Pan-European Conference Lee, Sook-Jong. 2008. “Korean Perspective on East Asian Regionalism.” In East on European Union Politics, 26-28 Sept., in Bordeaux. Asian Multilateralism: Prospects for Regional Stability. edited by Kent E. Keukeleire, S. 2003. The European Union as a Diplomatic Actor: Internal, Calder and Francis Fukuyama. 198-213. Baltimore: Johns Hopkins Traditional and Structural Diplomacy. Diplomacy and Statecraft 14 (3): 31- University. 56. Ministry of Foreign Affairs and Trade (MOFT). 1997. Diplomatic White Paper. Keukeleire, S., and J. MacNaughtan. 2008. The Foreign Policy of the European Seoul: MOFT. Union. Basingstoke: Palgrave Macmillan. Ohmae, Kenichi.1995. The End of the Nation State. New York: Collins

26 Area Studies Area Studies 27 Jojin V. John Segyehwa to Global Korea: Globalization and the Shaping of South Korean Foreign Policy

26 Area Studies Area Studies 27 Jojin V. John General Vo Nguyen Giap : Petras, J., and H. Veltmeyer. 2001. Globalization Unmasked: Imperialism in the The National Hero Par Excellence 21st Century. London: Zed. M. Prayaga * Rossi, I. ed. 2008. Frontiers of Globalization Research. Theoretical and Methodological Approaches. New York: Springer. Scholte, J.A. 2005. Globalization - a critical introduction. 2nd ed. Houndmills: Palgrave Macmillan. General Vo Nguyen Giap, one of the eminent generals to Susan Strange.1996. The Retreat of the State: The Diffusion of Power in the World champion the national cause in Twentieth century, left an Economy. Cambridge: Cambridge University Press. indelible mark in the country's history, thanks to his immense The Korea Times.2006. “Ban Nominated as Next UN Leader.” The Korea battlefield accomplishments in Vietnam. Gen. Giap's name looms Times, October 9. large in Vietnam's political and military milieu as he dedicated Yoon, Esook. 2006. “South Korean Environmental Foreign Policy.” Asia- himself to the achievement of independence and reunification of Pacific Review. 13( 2): 74-96. the country. Giap's military genius was acclaimed especially after the victories against the vastly superior forces of the French and the United States and his name became uppermost in Vietnamese peoples' mind, evidently next to the Vietnamese legendary, Ho Chi Minh. Giap showed deep respect for Ho Chi Minh, who, having inspired the very liberation movement, took it to fruitful heights in Vietnam and encouraged Giap to take up the military task in fulfilling the long-cherished national goals. Giap, the most trusted lieutenant of Ho Chi Minh, discharged entrusted duties to him with at most devotion and dedication. His unparalleled successes, inspired the western authors to name him as 'Red Napoleon' and to place him in the galaxy of military generals par excellence of Twentieth century. During his supremacy spanning five decades (1940-1990), Giap held powerful positions. Having become a centenarian who registered memorable victories, Giap passed away on 4 October 2013 in a military hospital in Hanoi. Giap, a born revolutionary, was a master architect of guerrilla war

* Dr. M. Prayaga, Assistant Professor, Centre for Southeast Asian & Pacific Studies, Sri Venkateswara University, Tirupati, 517502, E-mail: [email protected] Acknowledgments : The author would like to thank Prof. A. Lakshmana Chetty and Prof. K. Raja Reddy, Former Directors and most beloved teachers, Centre for Southeast Asian & Pacific Studies, S.V. University, Tirupati, for their contributory inputs in this article.

28 Area Studies Area Studies, Vol.7(2), July - December 2013, pp. 29-47 29 Jojin V. John General Vo Nguyen Giap : Petras, J., and H. Veltmeyer. 2001. Globalization Unmasked: Imperialism in the The National Hero Par Excellence 21st Century. London: Zed. M. Prayaga * Rossi, I. ed. 2008. Frontiers of Globalization Research. Theoretical and Methodological Approaches. New York: Springer. Scholte, J.A. 2005. Globalization - a critical introduction. 2nd ed. Houndmills: Palgrave Macmillan. General Vo Nguyen Giap, one of the eminent generals to Susan Strange.1996. The Retreat of the State: The Diffusion of Power in the World champion the national cause in Twentieth century, left an Economy. Cambridge: Cambridge University Press. indelible mark in the country's history, thanks to his immense The Korea Times.2006. “Ban Nominated as Next UN Leader.” The Korea battlefield accomplishments in Vietnam. Gen. Giap's name looms Times, October 9. large in Vietnam's political and military milieu as he dedicated Yoon, Esook. 2006. “South Korean Environmental Foreign Policy.” Asia- himself to the achievement of independence and reunification of Pacific Review. 13( 2): 74-96. the country. Giap's military genius was acclaimed especially after the victories against the vastly superior forces of the French and the United States and his name became uppermost in Vietnamese peoples' mind, evidently next to the Vietnamese legendary, Ho Chi Minh. Giap showed deep respect for Ho Chi Minh, who, having inspired the very liberation movement, took it to fruitful heights in Vietnam and encouraged Giap to take up the military task in fulfilling the long-cherished national goals. Giap, the most trusted lieutenant of Ho Chi Minh, discharged entrusted duties to him with at most devotion and dedication. His unparalleled successes, inspired the western authors to name him as 'Red Napoleon' and to place him in the galaxy of military generals par excellence of Twentieth century. During his supremacy spanning five decades (1940-1990), Giap held powerful positions. Having become a centenarian who registered memorable victories, Giap passed away on 4 October 2013 in a military hospital in Hanoi. Giap, a born revolutionary, was a master architect of guerrilla war

28 Area Studies Area Studies, Vol.7(2), July - December 2013, pp. 29-47 29 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence and an impassioned writer. He showed his moral courage and Giap's determination to fight for national cause made him a uprightness in being critical of his own governmental errors and member of Indochina Communist Party (ICP) which was human lapses. founded by Ho Chi Minh, the renowned leader of Vietnam. While On the occasion of his demise, it is appropriate to recall the valid ICP was outlawed by the French for its revolutionary activities, 3 contributions made by Giap to the national cause of Vietnamese Giap along with another revolutionary Pham Van Dong jointly independence and reunification. formed the Indochinese Democratic Front to sustain the revolutionary activities in the country. With the fall of popular Early Life government in France in 1939, the police repression was Vo Nguyen Giap was born on 25 August 1911 in a peasant family intensified against the revolutionaries in Vietnam and thus forced in An Xa, a village in Quang Binh province. He had a good grasp many revolutionaries to flee the country in the name of self-exile. of heroic Vietnamese history and the Chinese classics. He also Giap, his wife Nguyen Thi Minh Giang, and his sister Minh Khai drew excellent training from his father, Vo Quang Nghiem, who being members of ICP became targets of the French police. In had vehemently opposed the French regime in Vietnam. After 1940, Giap and Pham Van Dong fled to Kunming, China, to meritorious schooling Giap joined the Quoc Hoc, or Lycee Nation continue the struggle against the French colonial rule. While in Hue, a French-language school (founded by Ngo Dinh Kha, a Giap was in exile, his wife and his sister were arrested and high court official and father of Ngo Dinh Diem, former President guillotined by the French police. Despite these ghastly tragedies of South Vietnam). Some of the alumni of Lycee Quoc Hoc such in the domestic front, he showed his fortitude and went ahead to as Ho Chi Minh, Pham Van Dong and Ngo Dinh Diem later work with other nationalist revolutionaries. At the outbreak of became prominent figures in Vietnamese national history. While the Second World War, Vietnam came under the sway of Japan. studying at Quoc Hoc, Giap came under the influence of a famous The exiled life of Giap in China brought far reaching changes in revolutionary nationalist, Phan Boi Chau and thereupon resolved his career as well as in the Vietnam's national resistance firmly to work for the liberation of the Vietnamese from foreign movement. Ho Chi Minh, who had emerged from his hibernation domination. At young age he joined Tan Viet, one of the secret launched the Vietnam Independence League (Viet Nam Doc Lap societies fighting for the independence of Vietnam.1 Being a Dong Minh Hoi), popularly known as Viet Minh in May 1941.4 member of the society, he actively participated in student political When the Viet Minh was established, it had aimed at two goals, agitations that led to his expulsion from the school. In 1930, Giap first to liberate the country from Franco-Japanese authority and organized student protests in Hue that led to his arrest and he was second, to get hold of the power to administer the country. sentenced to hard labour. After a brief period, he was released. Engrossed in Ho Chi Minh's revolutionary policies of On his release, he took up the teaching of history for livelihood independence struggle, Giap took part in the movements against and also worked as journalist for several newspapers. In order to the exploitative policies of the French and Japan. Giap helped get his zeal for higher education gratified, Giap joined the School organize resistance to Japanese occupation in Vietnam during the of Law, University of Hanoi, studied earnestly for his degree and Second World War. On 22 December 1944, Viet Minh started its received a Degree in Law in 1937 and Doctorate in Political military organ called the "Armed Propaganda Brigade for the economics in 1938. 2 Liberation" the forerunner of the present Vietnam People's Army

30 Area Studies Area Studies 31 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence and an impassioned writer. He showed his moral courage and Giap's determination to fight for national cause made him a uprightness in being critical of his own governmental errors and member of Indochina Communist Party (ICP) which was human lapses. founded by Ho Chi Minh, the renowned leader of Vietnam. While On the occasion of his demise, it is appropriate to recall the valid ICP was outlawed by the French for its revolutionary activities, 3 contributions made by Giap to the national cause of Vietnamese Giap along with another revolutionary Pham Van Dong jointly independence and reunification. formed the Indochinese Democratic Front to sustain the revolutionary activities in the country. With the fall of popular Early Life government in France in 1939, the police repression was Vo Nguyen Giap was born on 25 August 1911 in a peasant family intensified against the revolutionaries in Vietnam and thus forced in An Xa, a village in Quang Binh province. He had a good grasp many revolutionaries to flee the country in the name of self-exile. of heroic Vietnamese history and the Chinese classics. He also Giap, his wife Nguyen Thi Minh Giang, and his sister Minh Khai drew excellent training from his father, Vo Quang Nghiem, who being members of ICP became targets of the French police. In had vehemently opposed the French regime in Vietnam. After 1940, Giap and Pham Van Dong fled to Kunming, China, to meritorious schooling Giap joined the Quoc Hoc, or Lycee Nation continue the struggle against the French colonial rule. While in Hue, a French-language school (founded by Ngo Dinh Kha, a Giap was in exile, his wife and his sister were arrested and high court official and father of Ngo Dinh Diem, former President guillotined by the French police. Despite these ghastly tragedies of South Vietnam). Some of the alumni of Lycee Quoc Hoc such in the domestic front, he showed his fortitude and went ahead to as Ho Chi Minh, Pham Van Dong and Ngo Dinh Diem later work with other nationalist revolutionaries. At the outbreak of became prominent figures in Vietnamese national history. While the Second World War, Vietnam came under the sway of Japan. studying at Quoc Hoc, Giap came under the influence of a famous The exiled life of Giap in China brought far reaching changes in revolutionary nationalist, Phan Boi Chau and thereupon resolved his career as well as in the Vietnam's national resistance firmly to work for the liberation of the Vietnamese from foreign movement. Ho Chi Minh, who had emerged from his hibernation domination. At young age he joined Tan Viet, one of the secret launched the Vietnam Independence League (Viet Nam Doc Lap societies fighting for the independence of Vietnam.1 Being a Dong Minh Hoi), popularly known as Viet Minh in May 1941.4 member of the society, he actively participated in student political When the Viet Minh was established, it had aimed at two goals, agitations that led to his expulsion from the school. In 1930, Giap first to liberate the country from Franco-Japanese authority and organized student protests in Hue that led to his arrest and he was second, to get hold of the power to administer the country. sentenced to hard labour. After a brief period, he was released. Engrossed in Ho Chi Minh's revolutionary policies of On his release, he took up the teaching of history for livelihood independence struggle, Giap took part in the movements against and also worked as journalist for several newspapers. In order to the exploitative policies of the French and Japan. Giap helped get his zeal for higher education gratified, Giap joined the School organize resistance to Japanese occupation in Vietnam during the of Law, University of Hanoi, studied earnestly for his degree and Second World War. On 22 December 1944, Viet Minh started its received a Degree in Law in 1937 and Doctorate in Political military organ called the "Armed Propaganda Brigade for the economics in 1938. 2 Liberation" the forerunner of the present Vietnam People's Army

30 Area Studies Area Studies 31 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

(VPA) in Cao Bang under the command of Vo Nguyen Giap. He DRVN. 7 But, the French divergence led to an impasse. After the began training an army of revolutionary peasant soldiers on Dalat conference, the Viet Minh started a broader front called Lien guerilla tactics. He built and led the first Armed Propaganda Viet (Popular National Front) in May 1946 to embrace as many Brigade of 33 men and three women armed with one machine organizations as possible in the country to fight against the gun, 31 rifles and 2 revolvers. Their primary task was to mobilize French re-entry. However, some groups turned hostile towards the people of various hamlets against the Japanese and French the enviably growing popularity of Viet Minh and the relations imperialism through propaganda in terms of plays, skits, music, with several nationalist groups deteriorated. 8 At that juncture, dance and by allowing the news of the struggle to reach remote Ho Chi Minh left to Fontainebleau in France to continue the areas. Further, they had been severely trained to attack the consultations, without resorting to war for independence. In the enemy. Steadily, hundreds of men and women had joined the Viet absence of Ho Chi Minh, Giap was acting president of the DRVN Minh army.5 in Hanoi. In order to make Viet Minh unopposed, Giap showed Following the Japanese surrender on 13 August 1945 to the allied his mettle by cracking down on the newspapers, which published powers, the Viet Minh attempted to fill the political vacuum in the the vilifying news on DRVN government. He even went ahead in country. Thus the way was paved for the National Liberation eliminating non-communist organizations like: Viet Nam Quoc Committee of Vietnam, headed by Ho Chi Minh, to call for a Dan Dang; Dai Viets, a pro-Japanese nationalist group; general insurrection on 16 August 1945.6 On 2 September 1945, Ho Trotskyites, who were scattered throughout Viet Nam; 9 Chi Minh proclaimed the founding of the Democratic Republic of Francophobic nationalists; and militant Roman Catholics. Vietnam (DRVN). He was named Chairman of the Provisional Meanwhile, a serious issue of contention came to surface when Government while Giap became the Minister of the Interior and the French soldiers opened fire on the Vietnamese workers at Commander-in-Chief of the VPA. But the international scenario Haiphong harbor port in August 1946 which culminated in the after the end of Second World War complicated the political declaration of war on France on 19 December 1946. situation in the country. The French, fortified with the American Against the French control of North Vietnam, Giap continued the arms, started reoccupying Vietnam which led to the "First guerrilla warfare which was waged against the Japanese on Indochina War". The Vietnamese resistance turned into a full earlier occasion during their occupation of Vietnam. After the scale war between the French and the Vietnamese supporting the proclamation of DRVN and on assuming the charge of Interior DRVN. Minister, Giap organized guerrilla war by mobilizing thousands Vietnamese resistance for independence of rural men and shaped VPA as a potent fighting force. His guerrilla force sustained the resistance by launching a 'hit-and- The leadership of Viet Minh started concentrating on exploring run campaign' against French military and its commercial the means of getting the problem solved through negotiations installations during 1946-1949. The skirmishes and all with France rather than waging a long war. To maintain engagements were negligibly small in nature because of dearth Vietnam's independence, Ho Chi Minh and Giap entered into of heavy fire power. With the establishment of communist talks with the French. In a Franco-Vietnamese conference held at government known as the Peoples' Republic of China on 1 Dalat in April 1946, Giap as Deputy Chief of the delegation, October 1949, Vietnam was able to receive help and assistance discussed the issue of Cochinchina (Nam Bo) as an integral part of

32 Area Studies Area Studies 33 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

32 Area Studies Area Studies 33 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence from China 10 and the Soviet Union in the form of advice, supply of filled with national fervor and striving for independence was war material and armaments. ready to endure any kind of privation and wore sandals made of Dien Bien Phu: An Incredible Battle car tyres to drag heavy artillery piece by piece over to the mountains.12 They mustered support from thousands of local As the First Indochina War got escalated, VPA's influence and peasants, including many women as even bicycles and bamboo activities further spread to the neighbouring Indochina states, rafts were used to carry the sections of dismantled heavy guns. particularly, Laos. French generals and commanders tried by The entire operation of shifting of war material, mobilization of various tactics to eradicate Giap's forces but in vain. To come out VPA force and its thousands of supporting force went thoroughly of the dire situation, the French sought the United States (US) unnoticed by the French force at Dien Bien Phu. Giap's forces support besides strengthening their fortifications. In order to halt made tunnels or dug kilometes of trenches at required places. In the spreading of insurrections at the Vietnam-Laos border, in the extraordinarily difficult conditions, Giap moved his men who 1953, the French General Henri Navarre established a major dragged the heavy howitzers placed on the top of the peaks and military base near the small town of Dien Bien Phu, few miles tactically encircled the French with two pronged policies of away from the northwest border of Vietnam. By the end of 1953, ambush and cut off the resupply lines for the French at Dien Bien Dien Bien Phu had been transformed into a major military Phu. Thus, despite want of formal military training, Giap could garrison with 13,000 Vietnamese and North African colonial engineer strategically superior plan. The VPA, headed by the troops, the French Army's top troops as well as its elite Foreign epic hero Vo Nguyen Giap, launched a major offensive at Dien Legion. Bien Phu on 13 March 1954 and occupied two of the hilltop The geophysical location of Dien Bien Phu surrounded by positions in a week. In the next two months, Giap continued mountains with a Japanese built airstrip nearby for resupply of massive attacks which culminated in the assault launched on 1 goods, convinced Gen. Navarre as invulnerable, seemingly May 1954. The battle lasted for 55 days. Giap's strategy proved impregnable and unassailable fortress to enemies. Gen. Navarre superior, as the Vietnamese won an unassailable victory on 7 May was of the opinion that the French fire power significantly 1954 by overrunning the last outposts of the French and the overweighs the Vietminh's artillery and firepower. He further "world watched a colonial power defeated on the field of battle," 13 thought, it was hard to transport heavy artillery to the top of the putting an end to nearly a century long French colonial mountains to take a position against the French garrison from top. occupation. Bernard B. Fall praised the incident lavishly as 'one Besides, the French felt that it could interdict the VPA of the truly decisive battles of the 20th Century.' advancement at the Vietnam-Laos border. 11 Giap planned the crushing defeat of the elite of French Army. Against the strong fortifications and the French General's Giap's extraordinary logistical buildup and scrupulous use of his determination, Giap displayed remarkable ingenuity in the able fighting force brought victory and historical reputation at course of the eight-week long battle waged during March-May Dien Bien Phu in May 1954. The successful battle history of Dien 1954 at the Dien Bien Phu. He never left any stone unturned in Bien Phu was narrated by Giap himself as follows: exploring the possibilities of standing the French army. At the The battle lasted 55 nights and days and resulted in the beginning of 1954, Giap had mobilized around 50,000 troops and total erasure of the dug in camp and in our final victory. led them to the hilltops around Dien Bien Phu. His militia being

34 Area Studies Area Studies 35 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence from China 10 and the Soviet Union in the form of advice, supply of filled with national fervor and striving for independence was war material and armaments. ready to endure any kind of privation and wore sandals made of Dien Bien Phu: An Incredible Battle car tyres to drag heavy artillery piece by piece over to the mountains.12 They mustered support from thousands of local As the First Indochina War got escalated, VPA's influence and peasants, including many women as even bicycles and bamboo activities further spread to the neighbouring Indochina states, rafts were used to carry the sections of dismantled heavy guns. particularly, Laos. French generals and commanders tried by The entire operation of shifting of war material, mobilization of various tactics to eradicate Giap's forces but in vain. To come out VPA force and its thousands of supporting force went thoroughly of the dire situation, the French sought the United States (US) unnoticed by the French force at Dien Bien Phu. Giap's forces support besides strengthening their fortifications. In order to halt made tunnels or dug kilometes of trenches at required places. In the spreading of insurrections at the Vietnam-Laos border, in the extraordinarily difficult conditions, Giap moved his men who 1953, the French General Henri Navarre established a major dragged the heavy howitzers placed on the top of the peaks and military base near the small town of Dien Bien Phu, few miles tactically encircled the French with two pronged policies of away from the northwest border of Vietnam. By the end of 1953, ambush and cut off the resupply lines for the French at Dien Bien Dien Bien Phu had been transformed into a major military Phu. Thus, despite want of formal military training, Giap could garrison with 13,000 Vietnamese and North African colonial engineer strategically superior plan. The VPA, headed by the troops, the French Army's top troops as well as its elite Foreign epic hero Vo Nguyen Giap, launched a major offensive at Dien Legion. Bien Phu on 13 March 1954 and occupied two of the hilltop The geophysical location of Dien Bien Phu surrounded by positions in a week. In the next two months, Giap continued mountains with a Japanese built airstrip nearby for resupply of massive attacks which culminated in the assault launched on 1 goods, convinced Gen. Navarre as invulnerable, seemingly May 1954. The battle lasted for 55 days. Giap's strategy proved impregnable and unassailable fortress to enemies. Gen. Navarre superior, as the Vietnamese won an unassailable victory on 7 May was of the opinion that the French fire power significantly 1954 by overrunning the last outposts of the French and the overweighs the Vietminh's artillery and firepower. He further "world watched a colonial power defeated on the field of battle," 13 thought, it was hard to transport heavy artillery to the top of the putting an end to nearly a century long French colonial mountains to take a position against the French garrison from top. occupation. Bernard B. Fall praised the incident lavishly as 'one Besides, the French felt that it could interdict the VPA of the truly decisive battles of the 20th Century.' advancement at the Vietnam-Laos border. 11 Giap planned the crushing defeat of the elite of French Army. Against the strong fortifications and the French General's Giap's extraordinary logistical buildup and scrupulous use of his determination, Giap displayed remarkable ingenuity in the able fighting force brought victory and historical reputation at course of the eight-week long battle waged during March-May Dien Bien Phu in May 1954. The successful battle history of Dien 1954 at the Dien Bien Phu. He never left any stone unturned in Bien Phu was narrated by Giap himself as follows: exploring the possibilities of standing the French army. At the The battle lasted 55 nights and days and resulted in the beginning of 1954, Giap had mobilized around 50,000 troops and total erasure of the dug in camp and in our final victory. led them to the hilltops around Dien Bien Phu. His militia being

34 Area Studies Area Studies 35 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

Dien Bien Phu is the greatest victory by our people and miscalculation', because the battle “sounded the death knell of our army during the long war of resistance against the French colonial presence in Indochina.”18 On the whole, Dien French Expeditionary Forces. I want to say that it is also Bien Phu victory has been creating an intellectual curiosity and the greatest victory, a brilliant victory of the solidarity interest among military strategists and academics till today. The in struggle between our people, the people of Vietnam, War has become “one of the battles that are the object of close and the people of sister countries, the people of Laos study by students at military academies around the world right and the people of Cambodia. It means that this victory up there with Hannibal's victory over the Romans at Cannae, has a historical significance for our country. But it also Isoroku Yamamoto's surprise attack on the American navy at has an international impact. 14 Pearl Harbour, and Napoleon's campaigns across Europe.” 19 Giap also said, “This was the first victory for a national liberation The immediate result of Dien Bien Phu battle was the conclusion war in a colonial country. It proves that in our era, a small nation of Geneva Agreements of 1954. As per the agreements, Vietnam with no vast territory and no large population and no developed was divided into two, North Vietnam and South Vietnam. During economy, is quite capable of waging a revolutionary war to defeat the post-Geneva period Vietnam experienced migration of an old-type colonialist war of aggression.” 15 Vietnam population from North to South and from South to The Daily Telegraph reported Giap's winning feat as : North. When Vietnamese from the North migrated to the South Vietnam they played a crucial role in regrouping the communist Such was his morale-boosting determination and genius cadre from North in the parts of South Vietnam for future for the feint and swoop that he was often described as a insurrection taking it for granted that Vietnam would never be guerrilla leader equalled only by Mao Tse Tung and Che unified peacefully. Guevara; and Giap was certainly adept at utilising terrain and highly mobile troops to outwit stronger and Following the tremendous victory, Giap had to concentrate on better equipped enemies perhaps particularly his strengthening the VPA so that the problems at the domestic front opponents-suggested that he merited a place in the could easily be solved. After the division, North Vietnam pantheon of great military leaders of modern times, government pursued the policy of 'socialist transformation' and alongside such figures as Wellington and Rommel.16 carried out 'land reform programme'. Land was confiscated and redistributed among the landless peasants. The land reform Derek Frisby, the historian, who described Giap as 'the master of programme had turned out to be a fiasco. In the process, doing the unexpected', also felt that “Giap was able to marshal nearly15,000 innocent people lost their lives because of not only the material resources of a rather non-industrialized 'misclassification' and use of wrong labels such as 'landlords' and society to fashion a military machine capable of challenging the 'rich peasants'.20 The programme had damaged the image of the superpowers, but was able to tap into the political will of his party. Both Ho Chi Minh and Giap denounced the excesses and people to fuel it. He doesn't so much stand out from other generals decided to end the problem. As part of the damage control, the 17 in history as he stands tall among them.” communist party launched a 'rectification of errors campaign'. The result was humiliation for the French after the surrender. The While addressing the protesting peasants in Hanoi, Giap openly French rightly felt that Dien Bien Phu was 'a monumental admitted the grave errors of the party and started a campaign of

36 Area Studies Area Studies 37 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

36 Area Studies Area Studies 37 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence restoring land to those who had lost their lands unjustly. Once Offensive. Giap's goals were both military and political. In this again, the extraordinary skill of Giap in tackling of the grave issue campaign Giap's regular forces along with Viet Cong confronted was acknowledged by Ho Chi Minh who chose Giap to go and the soldiers of South Vietnam who were supported by the US, campaign around the country to alleviate the agitated situation. 21 South Korea, Australia, New Zealand and Thailand. Having During the same time, the US willfully entrenched South Vietnam grown steadily stronger Giap's military struck the devastating by solemnly promising and strongly supporting it with arms and and surprise attacks in number of places like provincial capitals equipment to fight against the communists. The latter established and district towns in South Vietnam during Tet, (Lunar New an organization called the National Liberation Front of South Year) a sacred religious festival in Vietnam in early 1968. They Vietnam (NLF) in 1960 to fight against the US hegemony over the raided many military bases and airfields including tactically key South Vietnam. The US launched an air campaign against the places like the US fortress at Khe Sanh and the US Embassy and North and targeted bridges, airfields, railway yards, oil storage the Presidential Palace in Saigon. The campaign inflicted heavy sites and even power plants. On the countryside, the American losses on both sides and exposed vulnerability of the US power. troops outrageously ravaged the rice fields and ruthlessly used However, the Tet Offensive was politically a strategic success for the toxic chemicals and saw to it that many houses and North Vietnam. Giap, clearly explained his objective in carrying communication systems were ravaged.22 out Tet offensive as follows: We wanted to show the Americans that we were not Tet Offensive exhausted, that we could attack their arsenals, In view of the growing hostilities with the United States, Giap as communications, elite units, even their headquarters, the Minister of Defense and Commander-in-chief of the VPA, led brains behind the war….We wanted to project the war North Vietnam's strategy and command and was joined by Viet into the homes of America's families, because we knew Cong, which was fighting against the US hegemony for national that most of them had nothing against us. unification in South Vietnam. On the inevitability of waging a war with the US, the following is what he said in an interview: He also said, “Until Tet, they thought they could win the war, but now they knew that they could not.” 24 Tet episode contributed to Our country has been at war for over 20 years. Our a significant change in American perception of the conflict. After people deeply desire peace. But as our President Ho Chi watching the televised shows of inhuman scenes of war within Minh has said, 'There is no true peace without true America, the public organized numerous demonstrations against independence.' We will fight until final victory against the prolongation of the war. Following the Tet, President Lyndon the American aggressors, to safeguard the independence B. Johnson decided not to contest in the then ensuing Presidential of our country, to realize the profound aspirations of our elections and thus, peace talks began for the US withdrawal. Sam people for liberty and reunification, to contribute to the Noumoff, former director, Centre for East Asian Studies, McGill maintenance of peace in Asia and throughout the world. University, Canada, precisely said that: “Tet did for the US what We will win.23 Dien Bien Phu did for the French; it precipitated the decision to Thus, Giap commanded yet another tactical campaign, which withdraw.” 25 was famously known as the 1968 Tet Offensive or General

38 Area Studies Area Studies 39 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence restoring land to those who had lost their lands unjustly. Once Offensive. Giap's goals were both military and political. In this again, the extraordinary skill of Giap in tackling of the grave issue campaign Giap's regular forces along with Viet Cong confronted was acknowledged by Ho Chi Minh who chose Giap to go and the soldiers of South Vietnam who were supported by the US, campaign around the country to alleviate the agitated situation. 21 South Korea, Australia, New Zealand and Thailand. Having During the same time, the US willfully entrenched South Vietnam grown steadily stronger Giap's military struck the devastating by solemnly promising and strongly supporting it with arms and and surprise attacks in number of places like provincial capitals equipment to fight against the communists. The latter established and district towns in South Vietnam during Tet, (Lunar New an organization called the National Liberation Front of South Year) a sacred religious festival in Vietnam in early 1968. They Vietnam (NLF) in 1960 to fight against the US hegemony over the raided many military bases and airfields including tactically key South Vietnam. The US launched an air campaign against the places like the US fortress at Khe Sanh and the US Embassy and North and targeted bridges, airfields, railway yards, oil storage the Presidential Palace in Saigon. The campaign inflicted heavy sites and even power plants. On the countryside, the American losses on both sides and exposed vulnerability of the US power. troops outrageously ravaged the rice fields and ruthlessly used However, the Tet Offensive was politically a strategic success for the toxic chemicals and saw to it that many houses and North Vietnam. Giap, clearly explained his objective in carrying communication systems were ravaged.22 out Tet offensive as follows: We wanted to show the Americans that we were not Tet Offensive exhausted, that we could attack their arsenals, In view of the growing hostilities with the United States, Giap as communications, elite units, even their headquarters, the Minister of Defense and Commander-in-chief of the VPA, led brains behind the war….We wanted to project the war North Vietnam's strategy and command and was joined by Viet into the homes of America's families, because we knew Cong, which was fighting against the US hegemony for national that most of them had nothing against us. unification in South Vietnam. On the inevitability of waging a war with the US, the following is what he said in an interview: He also said, “Until Tet, they thought they could win the war, but now they knew that they could not.” 24 Tet episode contributed to Our country has been at war for over 20 years. Our a significant change in American perception of the conflict. After people deeply desire peace. But as our President Ho Chi watching the televised shows of inhuman scenes of war within Minh has said, 'There is no true peace without true America, the public organized numerous demonstrations against independence.' We will fight until final victory against the prolongation of the war. Following the Tet, President Lyndon the American aggressors, to safeguard the independence B. Johnson decided not to contest in the then ensuing Presidential of our country, to realize the profound aspirations of our elections and thus, peace talks began for the US withdrawal. Sam people for liberty and reunification, to contribute to the Noumoff, former director, Centre for East Asian Studies, McGill maintenance of peace in Asia and throughout the world. University, Canada, precisely said that: “Tet did for the US what We will win.23 Dien Bien Phu did for the French; it precipitated the decision to Thus, Giap commanded yet another tactical campaign, which withdraw.” 25 was famously known as the 1968 Tet Offensive or General

38 Area Studies Area Studies 39 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

The US intervention in Vietnam faced mounting opposition both was launched in 1986 with a focus on economic transformation, internally and internationally. The result was that the Paris decentralization of administration and openness to the global Agreements which concluded in January 1973, paved the way for markets, Giap welcomed the changes in the economic front as the American troop withdrawal from Vietnam by March 1973. well as Vietnam's efforts of economic integration with Giap, who remained the commander of the North Vietnamese international organizations. He also praised the process of forces carried on the armed struggle and ultimately liberated normalization of diplomatic relations with the US in July 1995. Saigon on 30 April 1975. On the undiluted fighting spirit of his Though Giap had unparalleled successes in the wars waged for people and nation, Giap has remarked that, “As regards numbers, independence and national unification, he had cherished a great ours is a small nation, but in view of its fighting spirit against vision on the issue of preserving of the world peace and its 26 foreign invaders and its ability to win, it is a great nation.” On importance in the political, economic and social fields of all Giap's accomplishments The Economist noted: nations in the world. Giap rightly said, 'Today and in the future From the start, in 1944, he had drilled his tiny musket- too, the peoples of nations in the world should unite with each and-flintlock resistance army in the ideology of the other to struggle for lasting peace on our planet, to fight against struggle, setting up propaganda units to indoctrinate the danger of nuclear war and to fight against other schemes of peasants in their villages. The result was a guerrilla war.' He further declared that, “I am the General of peace, peace force that could live off the land, … It took the general in honour, peace in independence and freedom,” 28 Giap's long 30 years, from Vietnam's declaration of independence tenure displayed intelligence, decisiveness, pragmatic approach from France in 1945 to the fall of Saigon, the southern and longing for the welfare of his nation. That made him raise his capital, in 1975, to make his vision reality.27 voice on several burning issues like corruption and draconian Thus, Giap fulfilled his mentor Ho Chi Minh's desire for complete administrate policies of the government. Prompted by warmth independence and set the stage for the unification of Vietnam. On and sensibility to the environmental stability of the country, Giap 2 July 1976, the emergence of reunified Vietnam was formally wrote open letters to the government on the bauxite mining proclaimed. granted to China in the central highlands. Many environmentalists, local residents, scientists, economists, social Giap in the post-war Vietnam scientists, retired military officials, intellectuals and media joined In the reunified Vietnam, Giap remained Minister of defense and Giap in 2009 to oppose bauxite mining which could cause has become Vice-Chairman of the Council of Ministers (Deputy environmental disaster besides posing security threat to the Prime Minister) in 1976. Apart from remarkable achievements to country. This led the National Assembly to adopt conciliatory and his credit, in the post-war reconstruction Giap made efforts for the transparent policies towards mining. 29 development of science and technology in the country and also Giap wrote good number of books on the theory and practice of worked as Director of Family Planning. During his tenure, he also Vietnamese guerilla warfare and victories over aggressors. His witnessed the Sino-Vietnam border conflict in 1979. In 1980 Giap books like, The South Vietnam People Will Win, People's War People's relinquished the portfolio of Minister of Defence. Since 1980s he Army: The Viet Cong Insurrection Manual for Underdeveloped had not visibly been as active in the communist party as he used to Countries, Military Art of People's War: Selected Writings, be, during the war years. When Doi Moi (Renovation) programme

40 Area Studies Area Studies 41 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

Unforgettable Days and How we won the war have won due Lieutenant General, Khiupenhen Anatoli Ivanovich described recognition. His works are included in the curriculum of military Giap as “the pride of the Vietnamese nation, calling him the right- academic institutions in many countries. He has given hand man of President Ho Chi Minh.” And the Government of innumerable interviews to the world media during the war time Laos said “the General had played an active, significant role in and post-war period on the issues of people's participation, fostering the friendship and comprehensive co-operation execution of war strategies and their achievements in the struggle between Viet Nam and Laos.” 31 for independence. Several international dignitaries, who visited India and Giap Vietnam felt honoured to meet the legendary Gen. Giap in Hanoi. By all means historically, India and Vietnam relations can be Among number of honours and awards, in 1992, the government traced back to antiquity. During the struggle for independence, awarded Gold Star Order, the highest decorative honour in mutual admiration brought both leaders together around a Vietnam, to Giap. shared set of ideals and objectives. Throughout the war, India On hearing the news of his death on 4 October 2013, hundreds of condemned the US involvement and vociferously demanded thousands of Vietnamese poured into the streets to pay their last complete withdrawal of the US forces from Vietnam. India also respects to the legendary Giap, who died at the ripe age of 102. In supported the cause of reunification of Vietnam and established the capital, people from all walks of life paid their homage. On its diplomatic relations in 1972 even before the unification of the death of Giap, a retired army colonel Nguyen Van Hieu Vietnam in 1975. Indian people have immense respect and regard exclaimed “I never saw many people come to pay their respects for Ho Chi Minh and great admiration to Giap. On the invitation after the death of (Vietnam's founding father) Ho Chi Minh in of the then Prime Minister Rajiv Gandhi, Giap visited India in 30 1969.” Many lauded Giap's illustrious career, and singled out for 1989 and had spoken extensively to the media on reminiscences of praise the untiring genius of guerrilla tactics and rich legacy of his battlefield achievements. On hearing the death news of a great winning the wars against the French and the US. The general man like Giap, many Indians sent condolences. Defence Minister was honored with two days of national mourning. At the funeral of India, A. K. Antony who visited the Vietnam Embassy in New of Giap, the Vietnamese President Truong Tan Sang, praised that Delhi to pay homage to the departed Vietnamese leader, said, he was 'second only to late President Ho Chi Minh in the “Gen Giap's leadership of Vietnam's national liberation had affections of Vietnamese.' On the request of his family, Giap's evoked the admiration of the Indian people. He shall remain an body was interred in his native Quang Binh province. inspiration to people all over the world.” 32 Giap with his versatile Many governments from throughout the world sent their qualities succeeded in winning the respect from his countrymen condolence messages. The Uruguayan President, Jose Mujica, and also from the people throughout the world. stated that, “General Giap was the one who fostered Vietnamese Conclusion independence due to his position as an exceptional strategist, an Vo Nguyen Giap, a brilliant Vietnamese general scripted the inspirer of freedom worldwide and a man who said the human battlefield victories against far superior forces, the French and the factor is the key to victory.” French Foreign Minister Laurent US. Giap along with Ho Chi Minh made a big impact on the Fabius lauded General Giap as a "great patriot and a great soldier course of independence and reunification of Vietnam. In all his of Viet Nam," as well as an "extraordinary person." Russian Senior endeavours Giap was never deterred by the defence strength of

42 Area Studies Area Studies 43 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

42 Area Studies Area Studies 43 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence the opponents. On the other hand, he had engineered his strategic References : plans to match up to theirs and to build peoples' capabilities by 1. Cecil B. Currey, Victory at Any Cost: The Genius of Vietnam's General Vo training. To a considerable extent, his hopes rested on the idea of Nguyen Giap, Brassey's, New York, 1996. involving as many people as possible to champion the national 2. Cited in Archimedes L.A. Patti, Why Vietnam? : Prelude to America's cause as well as the use of ingenious guerrilla tactics to overcome Albatross, University of California Press, Berkeley, 1980, pp. 483-484. adversaries and odds. In the course of wars, he showed adequate equipment even for standing long wars, beyond the imagination 3. Pham Van Dong served as Prime Minister of Democratic Republic of of the French and the US and spared men and material meant for Vietnam from 1955 through 1976, and was Prime Minister of a unified Vietnam from 1976 to 1987. long duration in the distant lands. His strategy, infinite patience, his eminently individual mode of harrying the enemy and his 4. K. Raja Reddy, Vietnam Struggle for Unification, 1954-1975, Centre for motivation for national cause, made the opponents conclude that Studies on Indochina and South Pacific, Sri Venkateswara University, 'quick victories' over and defeating Giap, were unattainable. His Tirupati, 1999, pp.16-18 opponents realized that armed struggles for national cause were 5. Jack A. Smith, “General Vo Nguyen Giap: Defeated French Imperialism, 'unwinnable wars' and therefore, humiliated by shattering Drove the U.S. out of Vietnam,” Global Research, 15 October 2013, defeats, they withdrew from Vietnam. Thus, Giap emerged as an http://www.globalresearch.ca/ general-vo-nguyen-giap-defeated- astute leader and a sagacious military general acknowledged by french-imperialism-drove-the-u-s-out-of-vietnam/5354326) even his opponents as the 'Red Napoleon'. Giap's victories 6. 50 Years of Activities of the Communist Party of Vietnam, Foreign inspired other liberation movements in Asia, Africa and Latin Languages Publishing House, Hanoi, 1978, pp.77-81. America to resort to guerrilla tactics against their colonial or 7. Vo Nguyen Giap, Unforgettable Days, Foreign Languages Publishing imperialist powers. House, Hanoi, 1975, pp.252-258. Arthur J. Dommen, The Indochinese Regardless of innumerable fellow political achievers in Vietnam, Experience of the French and the Americans: Nationalism and Communism in Cambodia, Laos, and Vietnam (Indiana University Press, Bloomington, Vo Nguyen Giap made a niche for himself in the world history for 2001), p.155. his relentless fight for the noble cause of national liberation as well as for the national reunification of the country. If Ho Chi 8. William J. Duiker, The Communist Road to Power in Vietnam, Westview Minh had successfully led Vietnam in its struggle for press, Colorado, 1981, pp.120-121. independence from France and continued the fight for a unified 9. Cecil B. Currey, n.1, p.38. Vietnam achieved only after his death by the valiant warrior 10. Kennedy Hickman, “Vietnam War: Vo Nguyen Giap,” Giap, who thus takes all credit by all means for completing the http://militaryhistory.about.com/ od /army/p/giap.htm holy mission of Ho Chi Minh, one may venture a conclusion that 11. David Pennington, “Dien Bien Phu: A Battle Assessment,” the name of Vo Nugyen Giap is entitled to form a twin-peak with h t t p : / / w w w . m i l i t a r y i s t o r y o n l i n e . c o m i e t n a m / a r t i c l e s that of Ho Chi Minh in the annals of Vietnam. Giap was not only /dienbienphu.aspx# a successful general for his prowess, but also a venerable person 12. http://www.theguardian.com/world/2013/oct/04/vietnam- for cosmopolitan outlook. He remains a born leader and his name general-giap-dies. shall be cherished and revered both at home and abroad.

44 Area Studies Area Studies 45 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence the opponents. On the other hand, he had engineered his strategic References : plans to match up to theirs and to build peoples' capabilities by 1. Cecil B. Currey, Victory at Any Cost: The Genius of Vietnam's General Vo training. To a considerable extent, his hopes rested on the idea of Nguyen Giap, Brassey's, New York, 1996. involving as many people as possible to champion the national 2. Cited in Archimedes L.A. Patti, Why Vietnam? : Prelude to America's cause as well as the use of ingenious guerrilla tactics to overcome Albatross, University of California Press, Berkeley, 1980, pp. 483-484. adversaries and odds. In the course of wars, he showed adequate equipment even for standing long wars, beyond the imagination 3. Pham Van Dong served as Prime Minister of Democratic Republic of of the French and the US and spared men and material meant for Vietnam from 1955 through 1976, and was Prime Minister of a unified Vietnam from 1976 to 1987. long duration in the distant lands. His strategy, infinite patience, his eminently individual mode of harrying the enemy and his 4. K. Raja Reddy, Vietnam Struggle for Unification, 1954-1975, Centre for motivation for national cause, made the opponents conclude that Studies on Indochina and South Pacific, Sri Venkateswara University, 'quick victories' over and defeating Giap, were unattainable. His Tirupati, 1999, pp.16-18 opponents realized that armed struggles for national cause were 5. Jack A. Smith, “General Vo Nguyen Giap: Defeated French Imperialism, 'unwinnable wars' and therefore, humiliated by shattering Drove the U.S. out of Vietnam,” Global Research, 15 October 2013, defeats, they withdrew from Vietnam. Thus, Giap emerged as an http://www.globalresearch.ca/ general-vo-nguyen-giap-defeated- astute leader and a sagacious military general acknowledged by french-imperialism-drove-the-u-s-out-of-vietnam/5354326) even his opponents as the 'Red Napoleon'. Giap's victories 6. 50 Years of Activities of the Communist Party of Vietnam, Foreign inspired other liberation movements in Asia, Africa and Latin Languages Publishing House, Hanoi, 1978, pp.77-81. America to resort to guerrilla tactics against their colonial or 7. Vo Nguyen Giap, Unforgettable Days, Foreign Languages Publishing imperialist powers. House, Hanoi, 1975, pp.252-258. Arthur J. Dommen, The Indochinese Regardless of innumerable fellow political achievers in Vietnam, Experience of the French and the Americans: Nationalism and Communism in Cambodia, Laos, and Vietnam (Indiana University Press, Bloomington, Vo Nguyen Giap made a niche for himself in the world history for 2001), p.155. his relentless fight for the noble cause of national liberation as well as for the national reunification of the country. If Ho Chi 8. William J. Duiker, The Communist Road to Power in Vietnam, Westview Minh had successfully led Vietnam in its struggle for press, Colorado, 1981, pp.120-121. independence from France and continued the fight for a unified 9. Cecil B. Currey, n.1, p.38. Vietnam achieved only after his death by the valiant warrior 10. Kennedy Hickman, “Vietnam War: Vo Nguyen Giap,” Giap, who thus takes all credit by all means for completing the http://militaryhistory.about.com/ od /army/p/giap.htm holy mission of Ho Chi Minh, one may venture a conclusion that 11. David Pennington, “Dien Bien Phu: A Battle Assessment,” the name of Vo Nugyen Giap is entitled to form a twin-peak with h t t p : / / w w w . m i l i t a r y i s t o r y o n l i n e . c o m i e t n a m / a r t i c l e s that of Ho Chi Minh in the annals of Vietnam. Giap was not only /dienbienphu.aspx# a successful general for his prowess, but also a venerable person 12. http://www.theguardian.com/world/2013/oct/04/vietnam- for cosmopolitan outlook. He remains a born leader and his name general-giap-dies. shall be cherished and revered both at home and abroad.

44 Area Studies Area Studies 45 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

13. Roy Jumper and Marjorie Weiner Normand, “Vietnam,” in George 21. “General Vo Nguyen Giap (1911-2013): Military hero, revolutionary McTurnan Kahin (ed.), Government and Politics of Southeast Asia, Cornell intellectual, environmentalist,” http://links.org.au/node/3565 University, New York, 1964, p.397. 22. During 1969-70, the United States dropped 5 million tons of bombs on 14. http://openvault.wgbh.org/catalog/vietnam-b1661a-interview-with- Indochina, the great bulk of them on the countryside of South Vietnam. vo-nguyen-giap. This was more than twice the tonnage dropped on all fronts during the World War II. 15. Vo Nguyen Giap, Selected Writings, Hanoi, 1977, pp. 406-411. 23. Wilfred G. Burchett, Vietnam North: First-Hand Report, London, 1966, 16. T i m o f e i M i k h a i l o v , “ V o N g u y e n G i a p , ” p.125. http://www.spartacus.schoolnet.co.uk/ VNgiap.htm 24. A. Smith, n.5. 17. “Vo Nguyen Giap 'A master of revolutionary war',” http://www.dw.de/vo-nguyen-giap-a-master-of-revolutionary- 25. Sam Noumoff, “ The Death of a Hero and the Birth of a Revolution,” war/a-17141733. On his successful accomplishment, Amando Doronila, Economic and Political Weekly, Vol. XLVIII, No. 42, 19 October 2013. Philipino columnist, stated that, “In that battle, the guerrilla army of the 26. Vo Nguyen Giap, n.15, p.215. Democratic Republic of Vietnam annihilated the French garrison at Dien Bien Phu …, ending 90 years of French colonial rule in Indochina. After 27. “General Giap,” The Economist, 12 October 2013. 55 days of siege, the French stronghold, defended by between 13,000 and 28. Sumit Chakravarty, “Vo Nguyen Giap: 'General of peace,' Mainstream, 16,000 troops, mainly of the legendary French Foreign Legion, was Vol.LI, No.43, 12 October 2013. overrun by 70,000 Vietnamese soldiers, who encircled it in a set-piece battle, marking the defeat of a modern Western army at the hands of an 29. Hunter Marston, “Bauxite Mining in Vietnam's Central Highlands: An Asian guerrilla army.” Amando Doronila, “Vo Nguyen Giap, the 'Red Arena for Expanding Civil Society?,” Contemporary Southeast Asia, Napoleon',” Philippine Daily Inquirer, 18 October 2013. Vol.34, No.2, August 2012, pp.182-185. http://opinion.inquirer.net/63537/vo-nguyen-giap-the-red- 30. “Thousands pay respects to Vietnam's General Giap,” napoleon. And Shankar Roychowdhury, former Indian Chief of Army, http://www.thestar.com.my/News/ Regional/2013/10/07/vietnam- wrote, “Gen. Giap was an iconic home-grown, self-taught military top-general-dies.aspx/ genius whose epochal victory against French forces in the war of Liberation in Indochina signaled the beginning of the end for the 31. “World governments honour a great man,” http://vietnamnews.vn/ European colonial presence in the East.” “From Gen. Giap, doctrine for politics-laws/245939/world-governments-honour-a-great-man.html India,” Deccan Chronicle, 29 October 2013. 32. “AK Antony visits Vietnamese Embassy to pay homage to war hero 18. Nikki Cooper, “Dien Bien Phu Fifty Years On”, Modern & Contemporary Giap,” The Economic Times, 15 October 2013. France, Vol.12, No.4, 2004, p.447. 19. J Brooks Spector, “General Giap: the man who beat France, then A m e r i c a , f i n a l l y s u c c u m b s a t 1 0 2 , ” http://www.dailymaverick.co.za/article/2013-10-07-general-giap- the-man-who-beat-france-then-america-finally-succumbs-at- 102/#.UsFidtIW3p8) 20. D.R. Sardesai, Southeast Asia: Past and Present, New Delhi, 1981, p.403.

46 Area Studies Area Studies 47 M. Prayaga General Vo Nguyen Giap : The National Hero Par Excellence

46 Area Studies Area Studies 47 India-Singapore Bilateral Relationship : Past, Present and Future India-Singapore Bilateral Relationship : Past, Present and Future The historic ties between India and Singapore have not only been limited to the trade that Singapore facilitated during the colonial S. Manivasakan * and Sripathi Narayanan ** era but have also spilled over to other spheres. For instance, the penal code of Singapore has been based on the British Indian penal code.2 Furthermore, the economic prospects of Singapore Abstract had attracted a number of people of Indian origin, including a significant portion of indentured labourers brought in by the This article aims to analyse the nature and evolution of bilateral relationship between India and Singapore since the early nineteenth century. Singapore's British. evolution from a small time trading hub two centuries ago into a major centre for Since 1819, Singapore was a part of the British Colonial Empire till commerce and international trade is also highlighted in his paper. The bilateral it declared its independence in 1963, when it merged with relationship with India, in terms of the recent past as well as the evolution of the Malaysia, another former colony of the British. However, in 1965, same over the past few decades is also touched upon. Issues of divergence and Singapore demerged with Malaysia and became a Republic. India convergences are covered in this paper. This article also throws light on what the future holds for the two nations with respect to their bilateral relationship. was among the first countries to establish diplomatic ties with the Republic of Singapore.3 And since then the two nations have had Introduction cordial relationship with each other. However, it was only since 1991, when India introduced a new economic policy that the India's relationship with the modern day city state of Singapore bilateral relationship gained significant momentum to reach new can be traced back to the early eighteenth century. It was in the highs. year 1819 that Sir Stamford Raffles of the British East India Company established a trading post with the permission of the Early days then Sultan of Johor and the backing of Lord Hasting, the then Singapore, during the colonial era was a significant trading post Governor-General of British India, as a lucrative centre to service for the British in Southeast Asia. Singapore along with Hong the India-China trade route.1 Kong played a pivotal role in enhancing the ability to enhance the This trading post soon became a part of the British Empire in 1824 Royal Navy's connectivity with the proverbial seven seas. and subsequently a potential source of colonial dispute with This city state along with its northern neighbour, Malaysia, was another European colonial power, the Dutch. The Anglo-Dutch also exploited for their natural resources and agriculture produce, rivalry for colonies in the region, in and around Singapore was mainly rubber. The rubber plantations were primarily manned by resolved through the Straits Settlements in 1826 which indenture labourers brought from British India. The descendants demarcated colonies of interests between Britain and the of these indenture labours along with immigrants from present Netherlands. day India constitute a significant portion of Singapore's population.

* Dr. S. Manivasakan Director, Centre for South and Southeast Asian Studies, However, the nature of relationship between the two colonies University of Madras, Chennai, [email protected] was governed by their colonial masters, thus limited the depth ** Mr. Sripathi Narayanan, Research Scholar, Centre for South and Southeast Asian and nature of bilateral ties between the two colonies. It was only Stories, University of Madras, Chennai.

48 Area Studies, Vol.7(2), July - December 2013, pp. 48-66 Area Studies 49 India-Singapore Bilateral Relationship : Past, Present and Future India-Singapore Bilateral Relationship : Past, Present and Future The historic ties between India and Singapore have not only been limited to the trade that Singapore facilitated during the colonial S. Manivasakan * and Sripathi Narayanan ** era but have also spilled over to other spheres. For instance, the penal code of Singapore has been based on the British Indian penal code.2 Furthermore, the economic prospects of Singapore Abstract had attracted a number of people of Indian origin, including a significant portion of indentured labourers brought in by the This article aims to analyse the nature and evolution of bilateral relationship between India and Singapore since the early nineteenth century. Singapore's British. evolution from a small time trading hub two centuries ago into a major centre for Since 1819, Singapore was a part of the British Colonial Empire till commerce and international trade is also highlighted in his paper. The bilateral it declared its independence in 1963, when it merged with relationship with India, in terms of the recent past as well as the evolution of the Malaysia, another former colony of the British. However, in 1965, same over the past few decades is also touched upon. Issues of divergence and Singapore demerged with Malaysia and became a Republic. India convergences are covered in this paper. This article also throws light on what the future holds for the two nations with respect to their bilateral relationship. was among the first countries to establish diplomatic ties with the Republic of Singapore.3 And since then the two nations have had Introduction cordial relationship with each other. However, it was only since 1991, when India introduced a new economic policy that the India's relationship with the modern day city state of Singapore bilateral relationship gained significant momentum to reach new can be traced back to the early eighteenth century. It was in the highs. year 1819 that Sir Stamford Raffles of the British East India Company established a trading post with the permission of the Early days then Sultan of Johor and the backing of Lord Hasting, the then Singapore, during the colonial era was a significant trading post Governor-General of British India, as a lucrative centre to service for the British in Southeast Asia. Singapore along with Hong the India-China trade route.1 Kong played a pivotal role in enhancing the ability to enhance the This trading post soon became a part of the British Empire in 1824 Royal Navy's connectivity with the proverbial seven seas. and subsequently a potential source of colonial dispute with This city state along with its northern neighbour, Malaysia, was another European colonial power, the Dutch. The Anglo-Dutch also exploited for their natural resources and agriculture produce, rivalry for colonies in the region, in and around Singapore was mainly rubber. The rubber plantations were primarily manned by resolved through the Straits Settlements in 1826 which indenture labourers brought from British India. The descendants demarcated colonies of interests between Britain and the of these indenture labours along with immigrants from present Netherlands. day India constitute a significant portion of Singapore's population.

48 Area Studies, Vol.7(2), July - December 2013, pp. 48-66 Area Studies 49 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future after the withdrawal of imperial Britain, that the two former swath of giants around it, security became a paramount concern. colonies started to initiate any meaningful engagement with one Its limited capabilities to ward off adventurous and ambitious another. neighbours forced the city state to look out for a security India's relationship with independent Singapore began on a guarantor, a regional godfather. Singapore was wary of spread of cordial note, which in the subsequent years failed to maintains its communism as well. Given this circumstance, Singapore looked initial momentum. This was primarily a result of the divergent upon socialist India but New Delhi policies were not in tune with views of the two countries on key issues that were clouding the the expectations of this city state. world politics of the Cold War that was already influencing the It was for this very same reason that Singapore merged with the nature of events that were unfolding across the world. India's Malaysia. However Singapore was expelled by Malaysia in 1965, position and stated principles of foreign policy during the sixties which was attributed to the racial riots of July 1964 in Malaysia. was based on non-alignment, a policy of New Delhi since The riots were predominantly between the people of Chinese independence in 1947, a policy stand which was not descent and ethnic Malays. The ethnic riots resulted in an internal wholeheartedly welcomed by Singapore. debate wherein sections of the Singapore leadership were in Another reason for the two nations to drift apart was their favour of a pluralistic society, as it is today. divergent views on the security architecture of Asia. Singapore's Lee Kuan Yew in his memoirs said that he admired the then foreign policy was based on addressing its security concerns and, Indian Prime Minister Jawaharlal Nehru's objective of a secular therefore, Singapore's security arrangements with other nations, and multiracial society 4 that Malaysia was not to be, for Malaysia was not liked by India. It was the question of security, which was to be plagued with another bout of racial violence in May modelled Singapore's relationship with the nations in its 1969. The 1969 riots spilled over into Singapore too. In the periphery as well as its desire to forge a healthy relationship with subsequent years after the riots, Singapore's security concerns, other nations, including India. though short lived, included both Indonesia and Malaysia, its two To understand the situation that Singapore was faced, a revisit to giant neighbours, partially owing to their policies. the developments in Asia in the 1960's will elucidate the However, in the days that followed after Singapore became a complexities that the two nations faced. The merger in 1963 and Republic in 1965, India's assistance was sought in 'gaining the subsequent demerger in 1965 with Malaysia was a product of acceptance into the Afro-Asian organisations'5 and subsequently the security concerns of Singapore. At the time of the British in other international forums like the United Nations, Non- withdrawal from the region, i.e. Singapore and Malaysia, the Aligned Movement and others, as an independent sovereign region had already been absorbed into the then prevailing global state. The Indian support on this count played an important role, security discourse of, the Cold War. The concerns of Singapore at since Singapore in the latter half of the 1960's was dubbed as a that time were two fold, the first being the need to secure its colonial outpost of the British by the then President of Indonesia, independence and sovereignty and the second being its fears over Sukarno.6 In fact, Indonesia was against the independence being the rise and spread of Communism, and therefore China. granted to Malaysia by the British, and shared similar sentiments 7 It was in this context, that India gained prominence in the eyes of about Singapore also. Indonesia's opposition to Malaysia and this island state. For Singapore, a small nation surrounded by a Singapore stems from the apprehension that they would be

50 Area Studies Area Studies 51 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future after the withdrawal of imperial Britain, that the two former swath of giants around it, security became a paramount concern. colonies started to initiate any meaningful engagement with one Its limited capabilities to ward off adventurous and ambitious another. neighbours forced the city state to look out for a security India's relationship with independent Singapore began on a guarantor, a regional godfather. Singapore was wary of spread of cordial note, which in the subsequent years failed to maintains its communism as well. Given this circumstance, Singapore looked initial momentum. This was primarily a result of the divergent upon socialist India but New Delhi policies were not in tune with views of the two countries on key issues that were clouding the the expectations of this city state. world politics of the Cold War that was already influencing the It was for this very same reason that Singapore merged with the nature of events that were unfolding across the world. India's Malaysia. However Singapore was expelled by Malaysia in 1965, position and stated principles of foreign policy during the sixties which was attributed to the racial riots of July 1964 in Malaysia. was based on non-alignment, a policy of New Delhi since The riots were predominantly between the people of Chinese independence in 1947, a policy stand which was not descent and ethnic Malays. The ethnic riots resulted in an internal wholeheartedly welcomed by Singapore. debate wherein sections of the Singapore leadership were in Another reason for the two nations to drift apart was their favour of a pluralistic society, as it is today. divergent views on the security architecture of Asia. Singapore's Lee Kuan Yew in his memoirs said that he admired the then foreign policy was based on addressing its security concerns and, Indian Prime Minister Jawaharlal Nehru's objective of a secular therefore, Singapore's security arrangements with other nations, and multiracial society 4 that Malaysia was not to be, for Malaysia was not liked by India. It was the question of security, which was to be plagued with another bout of racial violence in May modelled Singapore's relationship with the nations in its 1969. The 1969 riots spilled over into Singapore too. In the periphery as well as its desire to forge a healthy relationship with subsequent years after the riots, Singapore's security concerns, other nations, including India. though short lived, included both Indonesia and Malaysia, its two To understand the situation that Singapore was faced, a revisit to giant neighbours, partially owing to their policies. the developments in Asia in the 1960's will elucidate the However, in the days that followed after Singapore became a complexities that the two nations faced. The merger in 1963 and Republic in 1965, India's assistance was sought in 'gaining the subsequent demerger in 1965 with Malaysia was a product of acceptance into the Afro-Asian organisations'5 and subsequently the security concerns of Singapore. At the time of the British in other international forums like the United Nations, Non- withdrawal from the region, i.e. Singapore and Malaysia, the Aligned Movement and others, as an independent sovereign region had already been absorbed into the then prevailing global state. The Indian support on this count played an important role, security discourse of, the Cold War. The concerns of Singapore at since Singapore in the latter half of the 1960's was dubbed as a that time were two fold, the first being the need to secure its colonial outpost of the British by the then President of Indonesia, independence and sovereignty and the second being its fears over Sukarno.6 In fact, Indonesia was against the independence being the rise and spread of Communism, and therefore China. granted to Malaysia by the British, and shared similar sentiments 7 It was in this context, that India gained prominence in the eyes of about Singapore also. Indonesia's opposition to Malaysia and this island state. For Singapore, a small nation surrounded by a Singapore stems from the apprehension that they would be

50 Area Studies Area Studies 51 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

British puppets.8 And this position was a cause for concern for the Vietnam. This apprehension was reflected in the formation of city state. Association of South East Asian Nations (ASEAN) in 1967 which It was in this light that Prime Minister Lee Kaun Yew made his excluded nations from Indochina region including Vietnam, first official visit to India in September 1966. The visit was in the fearing the spread communism. In fact, the ASEAN in its early back drop Singapore being accepted as a member of the days was regional grouping of nations that adopted an economic international forums and as an equal member of the international policy which was closely akin to free market capitalism; and this community. Apart from diplomatic assistance, Singapore has also was yet another policy principle over which socialist India requested India for military assistance, especially in training. differed with city state of Singapore. This, however, did not gain momentum, for India at that time did Bilateral ties took another nose dive owing to the Vietnam War, not give much importance to military diplomacy, and was avers wherein India extended both moral and diplomatic support to the to any prospects of military alliance. Viet Cong, whereas Singapore was deeply entrenched in the anti- Apart from this, India's military attention was focused on its communist camp of the Cold War, led by the United States. These immediate neighbours and security concerns that stemmed out of events to a significant extent cemented the drift between the two the 1965 war with Pakistan and the one with China in 1962. These nations and dictated the course of relationship till the end of the concerns limited any significant Indian involvement even though Cold War. Despite these differences, the two nations did not share Singapore wholeheartedly supported New Delhi's position in any ill will against one another for there was no real enmity 1965 war and shared similar apprehension about Beijing.9 New between the two nations but only diverging policies. Delhi at that point in time was pinned down by the need to Owing to both diverging policies and regional dynamics, India address its immediate security concerns and was also faced other and Singapore did not forge a lasting relationship during the Cold constraints, like a weak economy that did not allow the luxury of War era. The stated India's position on both security and global extending a helping hand to other nations like Singapore. politics was inward looking whereas Singapore's was outward When the Indian option of military assistance was not forth looking on the same note. This rift in the context of Southeast Asia coming, Singapore approached Egypt and Israel for assistance in went a step ahead. Singapore was not only averse to Communism training. However, in the second half of 1967, India opened up its but also feared the spread of the same in its neighbourhood. New 10 Delhi on the other hand enjoyed close ties with communist naval academy to Singapore for its cadets for training. Vietnam and New Delhi not only anticipated the formation of Nonetheless the bonhomie between India and Singapore was ASEAN in 1967, it also hoped to see Vietnam as a member of this short lived and were overtaken by the geostrategic realityof the regional grouping.12 Cold War era and India's stand on non-aligned overtures in the region minimised the possibility of transforming bilateral ties However, India-Singapore bilateral ties were frozen till the early 11 1990's but underwent significant a process of metamorphosis into a strategic partnership. which coincided both with the changing international Another limiting factor was India's relationship with Vietnam, environment as well as a policy shift by New Delhi on a few key which was central to the then existing situation in Southeast Asia. issues. Nations in the region, including Singapore, were apprehensive of

52 Area Studies Area Studies 53 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

The 1990's and a New Economic Outlook Other factors that contributed towards the rapprochement of The collapse of the Soviet Union and the end of the Cold War India-Singapore ties were the changing nature of the world order rivalry brought about significant changes in India-Singapore and its impact. The end of the Cold War resulted in a unipolar relationship. The collapse of the Soviet Union resulted in world with the United States in the driver's seat. India woke up to significant hardships for India, which depended on Moscow's this reality and started to mend its bridges with Washington that goodwill in many respects. Owing to the end of the Soviet Union was otherwise non-existent during the era of bipolarity. and the goody bags of the Communist state, New Delhi had to This can be elucidated from the fact that tacit support that New formulate a new economic policy that embraced free market Delhi extended to the United States in its efforts during the first capitalism as a replacement to the socialist economic model that Gulf War. The then government under Prime Minister Chandra India had adopted since independence. This new economic policy Shekhar granted refuelling facilities for the United States in was a major policy shift in India that did away with the socialistic, favour of Washington facilitating a loan of US$ 1.8 billion from the closed and controlled economy in favour of liberalisation, International Monetary Fund (IMF).13 This move was criticised privatisation and globalisation. domestically since it was a departure from India's then stated India's new economic policies were also accompanied by another policy stand of non-alignment. policy shift, the 'Look East Policy', that aimed at reaching out to the In India's rapprochement with the United States, Singapore acted nations of South East Asia, including Singapore. By the time, as a catalyst, since Singapore, though not an ally but was a close India unveiled its look east policy, Singapore was already security partner of the United States. The depth of US-Singapore clubbed along with Taiwan, Honk Kong and South Korea as the security relationship dates back to the Cold War days when the 'Asian Tigers' for their impressive growth rates that they clocked latter supported Washington during its war in Vietnam by year after year. The high economic growth of the Asian Tigers had providing 'rest and recreation' to US troops, as well as providing transformed these nations into beacons of the 'first world' in this maintenance and resupply of US Navy.14 This relationship part of Asia, where most of the nations were either developing or embraced other spheres as well like bilateral naval exercises and underdeveloped. transfer of military equipments. The economic progress of Singapore was one key attraction for The reset of India-US ties also came at a time when India was India when it opened up its economy. Apart from the Asian shedding its inward looking attitude. It is important to note in this Tigers, other South East Asian nations like Malaysia and context, that the tacit rapprochement in ties between New Delhi Indonesia too were clocking imperative growth rates. Thus, New and Washington found resonances in India-Singapore bilateral Delhi's outreach in some part was also a result of its desire to relationship. Singapore was one of the first nations that welcomed engage Singapore and other South East Asian nations in the new economic policy of India and facilitated New Delhi's economic terms. This initiative was not only welcomed by inclusion into the economic power house that South East Asia had Singapore but the island nation also extended a helping hand to transformed into. India that facilitated the latter becoming a member of a number of The new economic policy that India adopted in 1991 was not only regional arrangements including forums affiliated to ASEAN. welcomed by Singapore but the city state was also keen in taking

54 Area Studies Area Studies 55 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

54 Area Studies Area Studies 55 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future the early bird advantage of the same, in a bid to enhance its But then the initial momentum in the bilateral relationship lost relationship with New Delhi. These changes also provided the steam in the latter half of the 1990's because of two significant much needed impetus for the two nations to widen their factors. The first was the Asian Economic Crisis in 1997 and the relationship on a host of issues. second was Operation Shakti, Pokhran-II, when India tested a The first and foremost development that was an outcome of this series of nuclear devices in May 1998. Because of the former, change was the fact that Singapore was the first country to Singapore and other nations of East Asia faced significant respond enthusiastically to India's Look East Policy15 as well as economic hardships that limited not only their economic supported New Delhi in engaging with both the ASEAN and its engagement with other nations like India but also made their member states. As a result of this India became a sectorial economies unattractive for the time being. The Indian nuclear test dialogue partner in 1992 which was upgraded to full dialogue invited a series of political and economic sanctions by a number of partnership in 1996 with ASEAN.16 Since 2002, there is an annual nations; and thus isolating India. However, the better part of these 17 sanctions were revised within a few years which also coincided Summit between India and ASEAN. In December 2012 on the with South East Asia recovering from its economic upheavals. side lines of a Commemorative Summit with the ten South East Asian states, the relationship was elevated to a 'Strategic Thus, by the time the two nations inked the Comprehensive Partnership' between India and ASEAN.18 Economic Cooperation Agreement (CECA) in June 2005, both nations were had overcome the difficulties of the past. Since then, The inroads that India has made with respect to ASEAN was due the bilateral economic relationship has grown by leaps and in part by the role that Singapore played. In reflection, this bounds. With the conclusion of CECA economic and commercial support can also be viewed as a measure by Singapore in repaying ties have expanded significantly. Bilateral trade between India India for the assistance that New Delhi extended to the city state and Singapore grew from US$2.2 billion in 2001 to US$ 8.8 billion in its early days of existence. in 2005-06 to US$ 21.3 billion in 2012-13.21 The near tenfold rise in On the bilateral level, most, if not all, publications on India- just little over a decade can be attributed to the success of the 19 Singapore ties talk about relationship since 1990 and in the CECA and thus making Singapore the significant trading partner context of the Look East Policy. It was on this same note that a few of India. significant developments took place at a bilateral level. The then According to the Indian Ministry of Commerce & Industry, Minister for Information, Arts and the Second Minister for Singapore's share in the Indian export pie stands at US$ 13.61 Foreign Affairs of Singapore, George Yeo led a business billion for 2012-13 and accounts for 4.53 per cent of total India delegation to India in February 1993. This delegation was to exports.22 In terms of Indian imports, the volume of trade stands a explore opportunities for bilateral cooperation in areas like 20 US$ 7.48 billion and amounts to a miserly figure of 1.52 per cent of tourism, civil aviation, telecommunication, shipping and others. total India imports.23 The following year, Prime Minister Goh was the chief guest for the Republic Day parade, symbolising the growing warmth Apart from trade, there are as many as 4500 registered Indian between the two nations, since the guest nation is chosen after a companies operating in Singapore. Corporate India prefers deliberating the strategic, economic and political interests of India Singapore as an offshore logistics and financial hub for their with the said nation. operations in the Asia-Pacific region.24 Whereas, as a many as 81

56 Area Studies Area Studies 57 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future the early bird advantage of the same, in a bid to enhance its But then the initial momentum in the bilateral relationship lost relationship with New Delhi. These changes also provided the steam in the latter half of the 1990's because of two significant much needed impetus for the two nations to widen their factors. The first was the Asian Economic Crisis in 1997 and the relationship on a host of issues. second was Operation Shakti, Pokhran-II, when India tested a The first and foremost development that was an outcome of this series of nuclear devices in May 1998. Because of the former, change was the fact that Singapore was the first country to Singapore and other nations of East Asia faced significant respond enthusiastically to India's Look East Policy15 as well as economic hardships that limited not only their economic supported New Delhi in engaging with both the ASEAN and its engagement with other nations like India but also made their member states. As a result of this India became a sectorial economies unattractive for the time being. The Indian nuclear test dialogue partner in 1992 which was upgraded to full dialogue invited a series of political and economic sanctions by a number of partnership in 1996 with ASEAN.16 Since 2002, there is an annual nations; and thus isolating India. However, the better part of these 17 sanctions were revised within a few years which also coincided Summit between India and ASEAN. In December 2012 on the with South East Asia recovering from its economic upheavals. side lines of a Commemorative Summit with the ten South East Asian states, the relationship was elevated to a 'Strategic Thus, by the time the two nations inked the Comprehensive Partnership' between India and ASEAN.18 Economic Cooperation Agreement (CECA) in June 2005, both nations were had overcome the difficulties of the past. Since then, The inroads that India has made with respect to ASEAN was due the bilateral economic relationship has grown by leaps and in part by the role that Singapore played. In reflection, this bounds. With the conclusion of CECA economic and commercial support can also be viewed as a measure by Singapore in repaying ties have expanded significantly. Bilateral trade between India India for the assistance that New Delhi extended to the city state and Singapore grew from US$2.2 billion in 2001 to US$ 8.8 billion in its early days of existence. in 2005-06 to US$ 21.3 billion in 2012-13.21 The near tenfold rise in On the bilateral level, most, if not all, publications on India- just little over a decade can be attributed to the success of the 19 Singapore ties talk about relationship since 1990 and in the CECA and thus making Singapore the significant trading partner context of the Look East Policy. It was on this same note that a few of India. significant developments took place at a bilateral level. The then According to the Indian Ministry of Commerce & Industry, Minister for Information, Arts and the Second Minister for Singapore's share in the Indian export pie stands at US$ 13.61 Foreign Affairs of Singapore, George Yeo led a business billion for 2012-13 and accounts for 4.53 per cent of total India delegation to India in February 1993. This delegation was to exports.22 In terms of Indian imports, the volume of trade stands a explore opportunities for bilateral cooperation in areas like 20 US$ 7.48 billion and amounts to a miserly figure of 1.52 per cent of tourism, civil aviation, telecommunication, shipping and others. total India imports.23 The following year, Prime Minister Goh was the chief guest for the Republic Day parade, symbolising the growing warmth Apart from trade, there are as many as 4500 registered Indian between the two nations, since the guest nation is chosen after a companies operating in Singapore. Corporate India prefers deliberating the strategic, economic and political interests of India Singapore as an offshore logistics and financial hub for their with the said nation. operations in the Asia-Pacific region.24 Whereas, as a many as 81

56 Area Studies Area Studies 57 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

Singaporean foreign institutional investors (FII's) have registered The security concern of this city state was aggravated when the with the Securities and Exchange Board of India (SEBI) and United Kingdom withdrew its military commitments east of the operate in the Indian financial market. Suez in 1967. As a result of this decision the United Kingdom, For the period of April 2000 to October 2013 foreign direct Australia, New Zealand, entered into a security arrangement investment (FDI) from Singapore into India stood at US $ 22.33 with both Singapore and Malaysia in 1971 called the Five Power billion, accounting for 11% of total FDI inflows, second only to Defence Agreement (FPDA). This defence agreement provided Mauritius. However, the cumulative outward Indian FDI into security architecture for the two Southrast Asian nations that 27 Singapore, was US$ 23.42 billion.25 This notwithstanding, most of were solely dependent upon London for the same. In fact the Singapore's exports to India consist of re-exports, which origins of the FPDA can be traced to the Anglo-Malayan Defence constitute lightly over 50% of Singapore's exports to India.26 Agreement (AMDA) of 1957. In fact the FPDA formally entered into force only the day after theAMDA ceased to exist on October The New Millennium: Military and Security ties 31, 1971.28 The security, military and strategic aspects of the bilateral ties The purpose of the FPDA was to operate as a loose structure that between India and Singapore have always been a factor that can address issues of concern, both traditional and non- figured in since the earliest days of the relationship between these traditional security threats for the Southeast Asian nations. It also two nations. However, this issue came to the forefront and has served in a limited manner as a psychological deterrent against now become an integral part of the ties only after the end of the Indonesia, which had an assertive policy, especially against Cold War. Post the end of the fall of the Soviet Union, the Malaysia.29 relationship on this note gained momentum, whereas in the past this was one of the sticky issues where the countries shared During the initial days of the FPDA, Singapore had a diverging points of view. The bilateral relationship between the considerable military presence of Australia, New Zealand and the 30 two nations drifted for a considerable period of time owing to the United Kingdom. And it was in this backdrop that India viewed diverging points of view on matters of security and military ties. the prospects of a military-to-military relationship with Singapore. The stated position of India, both as a part of non- Singapore, immediately after its independence was in the lookout alignment of the Cold War days and as a result of the security for friendly nations that can assist it in not only raising and architecture of FPDA did not favour any form of security military training it's military but was also in a looking out for security ties. partners who would help the city state in the event of any untowardly crisis. It was in this light that Singapore's reaching New Delhi was averse to the idea of any form of security and out to India in the late 1960's looked at. military-to-military ties or alliances and declined the advances of Singapore. On the same note it is also noteworthy to state that For the city state the memories of the Second World War that India, despite its affinity towards the Soviet Union in the latter witnessed the Japanese occupation and the retreat of the British half of the Cold War and dependence on Moscow for its military were still fresh. This history has played its part in post- hardware, did not engage the Soviet Union in any form of military independent Singapore, where the young nations favoured a diplomacy. The reluctance of India to engage other nations in any diversified security partnership. form of military-to-military diplomacy was a policy position that

58 Area Studies Area Studies 59 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

58 Area Studies Area Studies 59 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future was not reversed till the end of the Cold War. Defence Policy Dialogue between the two sides. The two nations For New Delhi, all forms of military engagement amounted to a met for the first time in March 2004 to discuss issues pertaining to security alliance, which India opposed in principle. The defence cooperation and regional issues as well. apprehensions that Singapore had about Indonesia, clubbed with The next breakthrough within the sphere of defence and security the fears of communism and diverging points of view between ties was between the two Armies in 2005. The two armies held India and Singapore on Vietnam and Cambodia only went on to joint armoured exercise codenamed Ex Bold Kurukshetra in seal the difference. Deolali, India and an artillery exercise codenamed Ex Agni It was only with the introduction of the new economic policy by Warrior in Babina, again in India. In 2007, the Joint Military New Delhi in 1991 that was also accompanied by a tectonic shift in Exercises agreement was signed, which allowed for the India's foreign and strategic policy resulted in any meaningful Singaporean Air Force to train in the IAF base in Kalikunda, 32 engagement between India and Singapore on issues of security. PaschimBangal (West Bengal) for an initial period of five years. As stated earlier, the first significant shift New Delhi's policy was This arrangement has been extended twice, the latest being in 33 witnessed on the side-lines of the first Gulf War, when US June 2013. The importance of this agreement is that, this is the aircrafts were given the permission of refuelling in India. This first time that India has allowed a foreign nation to station its 34 also marked a radical shift in military diplomacy. India's troops in India territory and Singapore thus far is the only 35 military-to-military engagement in this period was with the US in country to be extended such a privilege. the maritime domain in 1992. In 2008, a similar training arrangement was worked out for 36 India's military engagement with the US helped New Delhi to Singaporean Army. With this all three services of Singapore break free of its Socialist ear constraints and also opened the door could station their troops in India and utilise Indian facilities for for other nations. At the same time, the situation in South East training in the absence of any security alliance. A development Asia was undergoing a significant shift. The inclusion of Vietnam such as this has been made possible, because of the level of trust into the ASEAN fold in 1997 was welcomed by India, since the and comfort that the two nations share with one another. two nations shared close ties, thus diluting past inhibitions that Apart from direct military-to-military ties both India and held India-Singapore relations hostage. Singapore have intensified their cooperation in the defence In February 1993, the Indian Navy (IN) and the Republic of technology sector. Since October 2006 there are regular meetings Singapore Navy (RSN) held their first joint naval exercise in the between India's Defence Research and Development Bay of Bengal.31 And since then, both the IN and the RSN have Organisation (DRDO) and Singapore's Defence Science and 37 engaged with one another at a bilateral level, annually. This apart, Technology Agency (DSTA) that cover issues of mutual interest. the RSN, since 1995 has been a regular participant of the According to Jane's Defence Weekly, one of the areas of multinational naval exercise, MILAN, organised by India. cooperation could involve the Light Combat Aircraft (LCA), Tejas 38 However, 2003 was the watershed year that resulted in a major and its engine, Kaveri engine. In addition to this, the Indian breakthrough in the bilateral military ties. It was in October of Army also considered the ultra-light howitzer that was 39 that year that the two nations signed the Defence Cooperation developed by Singapore. Agreement that led to an institutional arrangement for an annual

60 Area Studies Area Studies 61 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future was not reversed till the end of the Cold War. Defence Policy Dialogue between the two sides. The two nations For New Delhi, all forms of military engagement amounted to a met for the first time in March 2004 to discuss issues pertaining to security alliance, which India opposed in principle. The defence cooperation and regional issues as well. apprehensions that Singapore had about Indonesia, clubbed with The next breakthrough within the sphere of defence and security the fears of communism and diverging points of view between ties was between the two Armies in 2005. The two armies held India and Singapore on Vietnam and Cambodia only went on to joint armoured exercise codenamed Ex Bold Kurukshetra in seal the difference. Deolali, India and an artillery exercise codenamed Ex Agni It was only with the introduction of the new economic policy by Warrior in Babina, again in India. In 2007, the Joint Military New Delhi in 1991 that was also accompanied by a tectonic shift in Exercises agreement was signed, which allowed for the India's foreign and strategic policy resulted in any meaningful Singaporean Air Force to train in the IAF base in Kalikunda, 32 engagement between India and Singapore on issues of security. PaschimBangal (West Bengal) for an initial period of five years. As stated earlier, the first significant shift New Delhi's policy was This arrangement has been extended twice, the latest being in 33 witnessed on the side-lines of the first Gulf War, when US June 2013. The importance of this agreement is that, this is the aircrafts were given the permission of refuelling in India. This first time that India has allowed a foreign nation to station its 34 also marked a radical shift in military diplomacy. India's troops in India territory and Singapore thus far is the only 35 military-to-military engagement in this period was with the US in country to be extended such a privilege. the maritime domain in 1992. In 2008, a similar training arrangement was worked out for 36 India's military engagement with the US helped New Delhi to Singaporean Army. With this all three services of Singapore break free of its Socialist ear constraints and also opened the door could station their troops in India and utilise Indian facilities for for other nations. At the same time, the situation in South East training in the absence of any security alliance. A development Asia was undergoing a significant shift. The inclusion of Vietnam such as this has been made possible, because of the level of trust into the ASEAN fold in 1997 was welcomed by India, since the and comfort that the two nations share with one another. two nations shared close ties, thus diluting past inhibitions that Apart from direct military-to-military ties both India and held India-Singapore relations hostage. Singapore have intensified their cooperation in the defence In February 1993, the Indian Navy (IN) and the Republic of technology sector. Since October 2006 there are regular meetings Singapore Navy (RSN) held their first joint naval exercise in the between India's Defence Research and Development Bay of Bengal.31 And since then, both the IN and the RSN have Organisation (DRDO) and Singapore's Defence Science and 37 engaged with one another at a bilateral level, annually. This apart, Technology Agency (DSTA) that cover issues of mutual interest. the RSN, since 1995 has been a regular participant of the According to Jane's Defence Weekly, one of the areas of multinational naval exercise, MILAN, organised by India. cooperation could involve the Light Combat Aircraft (LCA), Tejas 38 However, 2003 was the watershed year that resulted in a major and its engine, Kaveri engine. In addition to this, the Indian breakthrough in the bilateral military ties. It was in October of Army also considered the ultra-light howitzer that was 39 that year that the two nations signed the Defence Cooperation developed by Singapore. Agreement that led to an institutional arrangement for an annual

60 Area Studies Area Studies 61 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

The Strategic Future: India and most other nations in South East and East Asia The up and down in the bilateral ties of the past five decades has including Singapore do not want to see the rise of China as a not been a result of any direct issues between India and dominating force in the region. It is in this light that the bilateral Singapore. The varying policies born out of nations interest has ties between India-Singapore gains traction, since neither of them and will play its part in the future. However the factors that could share hegemonic intentions nor fancy other with such interests. In limit bilateral ties could be in issues of bilateral trade and the this light the territorial disputes in the South China Sea and the evolving security situation in Asia. possibility of disruption to the sea lanes of communication gains importance. On the economic front, the nature of bilateral trade and investment is going to be a decisive factor. At present Singapore Another issue that is of importance is that Singapore along with enjoys a favourable balance of trade with India, even though the other South East Asians Nations does not favour ASEAN gaining better part of Singapore's exports to India are re-exports. Thus any political and military connotations. This is because any such bringing out a weakness, since this trade ties is revisable. And if Cold War security construct will have an adverse impact upon the reversed, its impact will be felt on the future course of economic region and ASEAN including in economic terms, since the ties between the two nations. economic relations have been the kernel of this regional grouping. The nature of relationship in terms of security and strategic Last but not the least, Singapore's relations with India has been on relations, the two nations understand and appreciate each other's a consistent upward trend with many a pitfall. The city state has concerns. Singapore recognises India's greater geostrategic also facilitated greater Indian involvement in the region. With presence in the ASEAN region.40 Whereas Singapore is hamstrung strong foundations in the relationship between the two nations, by small physical capacity and could not plausibly handle, single- bilateral ties can only move ahead. The optimism in the bilateral handedly, the multitude of security challenges.41And thus has ties can be determined by the year 2015, when they celebrate their always been at the lookout for friendly nations both in its Golden Jubilee of establishing diplomatic ties. immediate periphery and beyond, who could assist and may even The Golden Jubilee will not only mark the depth in bilateral ties guarantee its security and sovereignty. but could and will also go on to strengthen India's engagement In the current context, the changing security dynamics of the with South East Asian nations and ASEAN and there is in place a world and the unveiling of the Asian Pivot by the United States series of elaborate celebrations to commemorate this occasion in are developments that would influence and even dictate the both countries. future course of India-Singapore relations. China's rise has had a significant impact in Asia and there lies a hidden apprehension of a possibility of China becoming a hegemonic power in the not too distant future. This, in the long run, could become a uniting factor for India and Southeast Asian countries as Singapore remains wary of Chinese intentions on territorial matters in the South China Sea as well on Taiwan issue.42

62 Area Studies Area Studies 63 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

Notes : 13. “Singapore and the US: Security Partners, Not Allies,” International Relations and Security Network (ISN), 27 August 2013, 1. Ming Hwa Ting, “Singapore-India Relations: A Return to History, “ http://isn.ethz.ch/Digital-Library/Articles/Detail/?lng= Austrian Journal of South- East Asian ( ASEAS), Vienna 2009/, p. 123, en&id=168339 http://www.seas.at/aseas/2_2/ASEAS_2_2_A7.pdf 14. Vibhanshu Shekhar, n.11. 2. Ibid 15. “India- ASEAN Relations,” Ministry of External Affairs, Government of 3. Rupali Karekar, “Singapore-India to celebrate 50 years of ties in 2015,” I n d i a , A p r i l 2 0 1 3 , h t t p : / / w w w . m e a . g o v . i n / P o r t a l / Straits Times, October 25, 2013 http://www.straitstimes.com/breaking- F o r e i g n R e l a t i o n / I n d i a - A S E A N _ R e l a t i o n s . p d f ; news/singapore/story/singapore-india-celebrate-50-years-ties-2015- Also see: Ministry of External Affairs, Government of India, March 2012 20131025. Also see: Ministry of Foreign Affairs, Government of http://www.mea.gov.in/foriegn-relation.htm?ForeignRelation_212, Singapore, March 2012 http://www.mfa.gov.sg/content/mfa/media_centre/singapore_hea 16. Ibid. dlines/2013/201310/news_20131 025.html 17. Ibid. 4. Lee Kuan Yew, From Third World to First, Singapore Press Holdings, Singapore, 2000. 18. “India-Singapore Relations, Ministry of External Affairs,” Government of India, January 2014, http://www.mea.gov.in/Portal/Foreign 5. Chak Mun, India's Strategic Interest's in Southeast Asia and Singapore, Relation/Singapore_January_2014.pdf Institute of South Asian Studies, Macmillan Publishers India Ltd, New Delhi, 2009, p. 100. 19. Chak Mun, n. 5, pp. 104-105. 6. Ralf Emmers, “The Five Power Defence Arrangements and Defence 20. Ministry of External Affairs, Government of India, January 2014, Diplomacy in Southeast Asia,” Asian Security, 8:3, October 2012, p. 274. http://www.mea.gov.in/Portal/ForeignRelation/Singapore_January _2014.pdf 7. Aleksius Jemadu, “End Indonesia's Aimless Spat With Singapore,” Jakarta Globe, February 20,2014, http://www.thejakartaglobe.com/ 21. Department of Commerce, Ministry of Commerce and Industry, opinion/end-indonesias-aimless- spat- with-singapore/ Government of India http://commerce.nic.in/eidb/ecnt.asp, as of March 26, 2014 8. Satish Cheney, “Ship's name ignites Singapore-Indonesia spat,” February 18,2014 Aljazeera, http://www.aljazeera.com/indepth/ 22. Department of Commerce, Ministry of Commerce and Industry, features/2014/02/ship-name-ignites-singapore-indonesia-spat- Government of India http://commerce.nic.in/eidb/icnt.asp, as of 201421710114344164.html March 26, 2014 9. Vibhanshu Shekhar, India Singapore Relations -An Overview, Special 23. Ibid. Report No. 41, Institute of Peace and Conflict Studies, Page 1, June 2007, 24. Ibid. http://www.ipcs.org/pdf_file/issue/ 1218405219IPCS-Special- Report-41.pdf 25. India - Singapore Economic and Commercial Relations, FICCI, http://web.archive.org/web/20080611085728/http://www.ficci.com 10. ChakMun, n. 5, p. 101. / i n t e r n a t i o n a l / c o u n t r i e s / s i n g a p o r e / s i n g a p o r e - 11. Vibhanshu Shekhar, n.9. Chak Mun, n.5, p.102. commercialrelations.htm 12. Ibid, p. 41 26. Ralf Emmers, n.6, p. 272.

64 Area Studies Area Studies 65 S. Manivasakan and Sripathi Narayanan India-Singapore Bilateral Relationship : Past, Present and Future

64 Area Studies Area Studies 65 S. Manivasakan and Sripathi Narayanan Public Expenditures in India and its impact 27. Ibid, p. 273. on the Deficits 28. Ibid, p. 274. Jasneet Kaur Wadhwa* 29. Ibid, p. 273. 30. Ajaya Kumar Das, “India's Naval Exercises With ASEAN States Since 1991: A Time Line,” Volume 12, Issue 3, 2013, India Review, (Routledge, Abstract Taylor and Francis Group), p. 123. Before independence, the British government in India was interested primarily 31. “India, Singapore sign fresh pact on Army training,” The Hindu, June 5, in the civil administration and defence of the country. Therefore, a large part of 2013 the expenditures of the government was incurred on these services. Things have 32. Ibid. changed since independence. The Total Expenditures have increased rapidly because of increasing participation of the government in economic activities. The 33. Ming Hwa Ting, n.1, p. 136. structure of the government Expenditures since the Eighties has been mainly 34. India, n.32. influenced by a change in the role of the government in the growth process, financing pattern of the deficits and the need for fiscal consolidation. Increasing 35. Ibid. expenditures of the government have led to an increase in the deficits of the 36. Vibhanshu Shekhar, n.9. government. Immediate response to economic crisis in 1991 was that of Expenditures compression because it was not easy to mobilize revenues. Fiscal 37. “India to enhance Singapore partnership, “ Aero News: A Weekly consolidation was brought about by reducing the public expenditures and since Newsletter, Vol. 14 No. 6 February-March 2009http://www.icast.org.in then there has been a shift away from Plan Expenditures accompanied by a /news/bulletin/bulletin14_6.pdf reduction in development and Capital Expenditures. 38. Nirmala George, India, Singapore review Defence Cooperation, Indian S t r a t e g i c , O c t o b e r 2 0 0 8 , http://www.indiastrategic.in/topstories185.htm Introduction Public Expenditures refer to Government Expenditures incurred 39. Vibhanshu Shekhar, n.9. by Central, State and Local governments of a country for the 40. KohSwee Lean Collin, “ASEAN Perspective on Naval Cooperation With maintenance of the government, internal and external security India: Singapore and Vietnam,” Vol. 12, Issue 3, 2013, India Review, p. and for the promotion of socio-economic welfare of the people. 189. Governments all over the world assume certain responsibilities 41. Rahul Mishra, “Locating Singapore in India's Strategic Radar,” April 1, for the people of their country, the performance of which requires 2 0 1 0 , h t t p : / / w w w . i d s a . i n / i d s a c o m m e n t s / L o c a t i n g public Expenditures. The government Expenditures mainly SingaporeinIndiasStrategicRadar_rmishra_010410 consist of Expenditures on general, social and economic services. Classification of Public Expenditures: Every year, Government prepares estimates of Expenditures it is projecting to incur or has incurred in the past and then puts it for a

* Jasneet Kaur Wadhwa, Assistant Professor, Department of Economics, SGTB Khalsa College, University of Delhi, Email:[email protected]

66 Area Studies Area Studies, Vol.7(2), July - December 2013, pp. 67-92 67 S. Manivasakan and Sripathi Narayanan Public Expenditures in India and its impact 27. Ibid, p. 273. on the Deficits 28. Ibid, p. 274. Jasneet Kaur Wadhwa* 29. Ibid, p. 273. 30. Ajaya Kumar Das, “India's Naval Exercises With ASEAN States Since 1991: A Time Line,” Volume 12, Issue 3, 2013, India Review, (Routledge, Abstract Taylor and Francis Group), p. 123. Before independence, the British government in India was interested primarily 31. “India, Singapore sign fresh pact on Army training,” The Hindu, June 5, in the civil administration and defence of the country. Therefore, a large part of 2013 the expenditures of the government was incurred on these services. Things have 32. Ibid. changed since independence. The Total Expenditures have increased rapidly because of increasing participation of the government in economic activities. The 33. Ming Hwa Ting, n.1, p. 136. structure of the government Expenditures since the Eighties has been mainly 34. India, n.32. influenced by a change in the role of the government in the growth process, financing pattern of the deficits and the need for fiscal consolidation. Increasing 35. Ibid. expenditures of the government have led to an increase in the deficits of the 36. Vibhanshu Shekhar, n.9. government. Immediate response to economic crisis in 1991 was that of Expenditures compression because it was not easy to mobilize revenues. Fiscal 37. “India to enhance Singapore partnership, “ Aero News: A Weekly consolidation was brought about by reducing the public expenditures and since Newsletter, Vol. 14 No. 6 February-March 2009http://www.icast.org.in then there has been a shift away from Plan Expenditures accompanied by a /news/bulletin/bulletin14_6.pdf reduction in development and Capital Expenditures. 38. Nirmala George, India, Singapore review Defence Cooperation, Indian S t r a t e g i c , O c t o b e r 2 0 0 8 , http://www.indiastrategic.in/topstories185.htm Introduction Public Expenditures refer to Government Expenditures incurred 39. Vibhanshu Shekhar, n.9. by Central, State and Local governments of a country for the 40. KohSwee Lean Collin, “ASEAN Perspective on Naval Cooperation With maintenance of the government, internal and external security India: Singapore and Vietnam,” Vol. 12, Issue 3, 2013, India Review, p. and for the promotion of socio-economic welfare of the people. 189. Governments all over the world assume certain responsibilities 41. Rahul Mishra, “Locating Singapore in India's Strategic Radar,” April 1, for the people of their country, the performance of which requires 2 0 1 0 , h t t p : / / w w w . i d s a . i n / i d s a c o m m e n t s / L o c a t i n g public Expenditures. The government Expenditures mainly SingaporeinIndiasStrategicRadar_rmishra_010410 consist of Expenditures on general, social and economic services. Classification of Public Expenditures: Every year, Government prepares estimates of Expenditures it is projecting to incur or has incurred in the past and then puts it for a

* Jasneet Kaur Wadhwa, Assistant Professor, Department of Economics, SGTB Khalsa College, University of Delhi, Email:[email protected]

66 Area Studies Area Studies, Vol.7(2), July - December 2013, pp. 67-92 67 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits parliamentary approval (Article 112 Indian Constitution) in the environment) and social services (education, health, form of the budget document. This budget document classifies employment, nutrition, housing and others). Non-Development various expenses under various categories for better reporting, Expenditures include Expenditures pertaining to the general accounting and financial management purposes. The Central services rendered by the Government such as preservation of law government had adopted a new classification of public and order, defence of the country and the maintenance of the Expenditures from 1987-88 budget. Under this new classification general organs of the Government. Expenditures by the all public Expenditures are classified into: government on social and economic services are a crucial 1. Plan Expenditures which comprise all the expenditures of the necessity for fulfilling the basic needs of people in developing government which are included in the central plan. The countries. However, the share of the Centre's expenditures on expenditures related to new projects and programmes become social services is low. Given the division of responsibilities Plan Expenditures during the period of a five year plan. Plan between the Centre and the States in India, on an average about 85 Expenditures are divided into revenue and Capital Expenditures. percent of the spending in social services in India is undertaken by the State governments. It is the responsibility of the States, 2. Non-Plan Expenditures are committed Expenditures on rather than the Centre, to provide social services that matters completed schemes of earlier plans and the interest on more for human development. Further, States are responsible for borrowings to finance capital. Non-Plan Expenditures are further most of the infrastructure facilities (except telecommunications, divided into Revenue Expenditures and Capital Expenditures. civil aviation, railways and major ports), and law and order. Revenue Expenditures relate to the day to day running Expenditures of the government. It includes Interest payments, In this paper I will study the trends and structure of the defence Revenue Expenditures, subsidies (food, fertilizers and expenditures of the Union government of India since 1980s. Then Export promotion, others), debt relief to farmers, postal deficit, I will discuss various fiscal reform measures undertaken during police, pensions, other general services (organs of state, tax the period of study and their impact on the overall structure of the collection, external affairs, etc.). Capital Expenditures are those expenditures and deficits. It seems important to analyse and Expenditures that lead to the creation of financial or physical assess the usefulness of the reforms on the Expenditures front in assets or reduction in recurring financial liabilities. They include, reducing fiscal imbalance of the central government of India. The capital outlays and Loans to states and union territories for entire period of study, i.e. 1980-81 to 2011-12 will be divided in financing plan projects, and loans to foreign governments and two parts i.e. pre-reform and post-reform period. Further, this Loans to public enterprises. paper will present the overall macroeconomic factors that have affected the Expenditures decisions in the periods under study. There is another classification of government expenditures i.e., Finally an attempt is made to bring out a forward looking view on Development Expenditures and Non-Development Expenditure reforms that shall be useful to plan a sustainable Expenditures. Development Expenditures are broadly defined to fiscal consolidation. The study is on primary data collected from include all items of Expenditures that are designed directly to the various issues of Reserve Bank of India Bulletin, Reports on promote economic development and social welfare. It mainly Currency and Finance, Economic Survey and various reports of the includes spending on economic services (agriculture, industry, Ministry of Finance, etc. While collecting data on Expenditures, I energy, communication, transport, science, technology and have primarily focused on the functional classification of the

68 Area Studies Area Studies 69 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits parliamentary approval (Article 112 Indian Constitution) in the environment) and social services (education, health, form of the budget document. This budget document classifies employment, nutrition, housing and others). Non-Development various expenses under various categories for better reporting, Expenditures include Expenditures pertaining to the general accounting and financial management purposes. The Central services rendered by the Government such as preservation of law government had adopted a new classification of public and order, defence of the country and the maintenance of the Expenditures from 1987-88 budget. Under this new classification general organs of the Government. Expenditures by the all public Expenditures are classified into: government on social and economic services are a crucial 1. Plan Expenditures which comprise all the expenditures of the necessity for fulfilling the basic needs of people in developing government which are included in the central plan. The countries. However, the share of the Centre's expenditures on expenditures related to new projects and programmes become social services is low. Given the division of responsibilities Plan Expenditures during the period of a five year plan. Plan between the Centre and the States in India, on an average about 85 Expenditures are divided into revenue and Capital Expenditures. percent of the spending in social services in India is undertaken by the State governments. It is the responsibility of the States, 2. Non-Plan Expenditures are committed Expenditures on rather than the Centre, to provide social services that matters completed schemes of earlier plans and the interest on more for human development. Further, States are responsible for borrowings to finance capital. Non-Plan Expenditures are further most of the infrastructure facilities (except telecommunications, divided into Revenue Expenditures and Capital Expenditures. civil aviation, railways and major ports), and law and order. Revenue Expenditures relate to the day to day running Expenditures of the government. It includes Interest payments, In this paper I will study the trends and structure of the defence Revenue Expenditures, subsidies (food, fertilizers and expenditures of the Union government of India since 1980s. Then Export promotion, others), debt relief to farmers, postal deficit, I will discuss various fiscal reform measures undertaken during police, pensions, other general services (organs of state, tax the period of study and their impact on the overall structure of the collection, external affairs, etc.). Capital Expenditures are those expenditures and deficits. It seems important to analyse and Expenditures that lead to the creation of financial or physical assess the usefulness of the reforms on the Expenditures front in assets or reduction in recurring financial liabilities. They include, reducing fiscal imbalance of the central government of India. The capital outlays and Loans to states and union territories for entire period of study, i.e. 1980-81 to 2011-12 will be divided in financing plan projects, and loans to foreign governments and two parts i.e. pre-reform and post-reform period. Further, this Loans to public enterprises. paper will present the overall macroeconomic factors that have affected the Expenditures decisions in the periods under study. There is another classification of government expenditures i.e., Finally an attempt is made to bring out a forward looking view on Development Expenditures and Non-Development Expenditure reforms that shall be useful to plan a sustainable Expenditures. Development Expenditures are broadly defined to fiscal consolidation. The study is on primary data collected from include all items of Expenditures that are designed directly to the various issues of Reserve Bank of India Bulletin, Reports on promote economic development and social welfare. It mainly Currency and Finance, Economic Survey and various reports of the includes spending on economic services (agriculture, industry, Ministry of Finance, etc. While collecting data on Expenditures, I energy, communication, transport, science, technology and have primarily focused on the functional classification of the

68 Area Studies Area Studies 69 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits expenditures of the government. The functional classification is a reversed significantly in the nineties and continued in 2000s. An detailed classification of the functions that government aims to important factor that has been constraining the growth of achieve through various kinds of outlays. The use of this Development Expenditures is the rising share of Non classification permits a study of inter-temporal trends in Development Expenditures. Non-Development Expenditures government outlays on particular functions. The relevant continue to be a large proportion of the Total Expenditures. statistical tools like averages and compound growth rates shall be Defense, debt services and administrative expenses are so large used. Compound growth rates have been calculated by using the and so significant that they are responsible for keeping non- semi-log method i.e., Y=abⁿ where Y is the revenue from the Development Expenditures at a high level. The share of non- source, 'n' is the time period and 'a' is a constant. The growth rate developmental Expenditures in Total Expenditures of the Centre is equal to b-1. grew from 42.54 percent in 1980-81 to 45.70 percent in 1990-91 and Trends and Structure of the Union Government 58.62 percent in 2000-01. Then in 2000s, post FRBMA the trend reversed and it fell to 47.21 percent in 2011-12 (Table 2). Expenditures Table I shows that the total public Expenditures have increased Pre-reform period: from Rs 231.94 billion in 1980-81 to Rs 13474.70 billion in 2011-12. During the eighties, the main focus of the government was The Total Expenditures grew at a very rapid pace in early eighties improvement in infrastructure. Therefore the expenditures on and after reaching a peak of 20.00 percent of GDP (at current development activities like rural electrification, irrigation and prices) in 1986-87 showed a sharp decline thereafter and falling to flood control and rural upliftment was high. Table 2 reveals that 14.54 percent in 1996-97. Then it went up to 16.87 percent in 2002- the Development Expenditures as a percentage of Total 03. Post FRBMA it declined steadily to 13.90 percent in 2006-07. Expenditures remained more than the Non Development Once again it climbed up to 15.98 percent in 2008-09 due to global Expenditures in 1980-81. Development Expenditures were 57.46 financial crisis. In the next year, it went up further to 16.14 percent percent and increased to 61.16 percent in 1985-86 then it was at because of the expansionary fiscal policy adopted by the 56.92 percent in 1989-90. As a percentage of GDP it increased from government plus the high expenditures on subsidies. Since then 8.91 percent in 1980-81 to 10.80 percent in 1989-90. During 1984-85 the economy has been on the path of recovery. Total Expenditures greater expenditures on social services were incurred and the as a percentage of GDP has started showing a downward trend. In expenditures on social services as a percent of GDP increased to 2011-12 the ratio was 15.22 percent (Table 2). 0.84 percent from 0.67 percent in 1980-81. Crop insurance schemes, social security schemes and anti poverty programmes Development and Non Development Expenditures were launched. Many employment generation schemes and other Levels of Development Expenditures followed a trend similar to rural development programmes were launched in 1987-88. Apart that of the total public Expenditures. The share of Development from these, there was an increased expenditure on energy, Expenditures in the GDP rose after 1981-82 and reached its peak transportation, railways, communication, health services and values in the mid 1980s. In the 1990s and 2000s, the share of rural water supply, housing etc. The Expenditures on economic Development Expenditures in GDP fell sharply. Thus, while there services increased from 3.77 percent of GDP in 1980-81 to 5.10 was a rise in the share of public Expenditures and Development percent in 1989-90. Expenditures in the GDP until the mid-eighties, the trend had

70 Area Studies Area Studies 71 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits expenditures of the government. The functional classification is a reversed significantly in the nineties and continued in 2000s. An detailed classification of the functions that government aims to important factor that has been constraining the growth of achieve through various kinds of outlays. The use of this Development Expenditures is the rising share of Non classification permits a study of inter-temporal trends in Development Expenditures. Non-Development Expenditures government outlays on particular functions. The relevant continue to be a large proportion of the Total Expenditures. statistical tools like averages and compound growth rates shall be Defense, debt services and administrative expenses are so large used. Compound growth rates have been calculated by using the and so significant that they are responsible for keeping non- semi-log method i.e., Y=abⁿ where Y is the revenue from the Development Expenditures at a high level. The share of non- source, 'n' is the time period and 'a' is a constant. The growth rate developmental Expenditures in Total Expenditures of the Centre is equal to b-1. grew from 42.54 percent in 1980-81 to 45.70 percent in 1990-91 and Trends and Structure of the Union Government 58.62 percent in 2000-01. Then in 2000s, post FRBMA the trend reversed and it fell to 47.21 percent in 2011-12 (Table 2). Expenditures Table I shows that the total public Expenditures have increased Pre-reform period: from Rs 231.94 billion in 1980-81 to Rs 13474.70 billion in 2011-12. During the eighties, the main focus of the government was The Total Expenditures grew at a very rapid pace in early eighties improvement in infrastructure. Therefore the expenditures on and after reaching a peak of 20.00 percent of GDP (at current development activities like rural electrification, irrigation and prices) in 1986-87 showed a sharp decline thereafter and falling to flood control and rural upliftment was high. Table 2 reveals that 14.54 percent in 1996-97. Then it went up to 16.87 percent in 2002- the Development Expenditures as a percentage of Total 03. Post FRBMA it declined steadily to 13.90 percent in 2006-07. Expenditures remained more than the Non Development Once again it climbed up to 15.98 percent in 2008-09 due to global Expenditures in 1980-81. Development Expenditures were 57.46 financial crisis. In the next year, it went up further to 16.14 percent percent and increased to 61.16 percent in 1985-86 then it was at because of the expansionary fiscal policy adopted by the 56.92 percent in 1989-90. As a percentage of GDP it increased from government plus the high expenditures on subsidies. Since then 8.91 percent in 1980-81 to 10.80 percent in 1989-90. During 1984-85 the economy has been on the path of recovery. Total Expenditures greater expenditures on social services were incurred and the as a percentage of GDP has started showing a downward trend. In expenditures on social services as a percent of GDP increased to 2011-12 the ratio was 15.22 percent (Table 2). 0.84 percent from 0.67 percent in 1980-81. Crop insurance schemes, social security schemes and anti poverty programmes Development and Non Development Expenditures were launched. Many employment generation schemes and other Levels of Development Expenditures followed a trend similar to rural development programmes were launched in 1987-88. Apart that of the total public Expenditures. The share of Development from these, there was an increased expenditure on energy, Expenditures in the GDP rose after 1981-82 and reached its peak transportation, railways, communication, health services and values in the mid 1980s. In the 1990s and 2000s, the share of rural water supply, housing etc. The Expenditures on economic Development Expenditures in GDP fell sharply. Thus, while there services increased from 3.77 percent of GDP in 1980-81 to 5.10 was a rise in the share of public Expenditures and Development percent in 1989-90. Expenditures in the GDP until the mid-eighties, the trend had

70 Area Studies Area Studies 71 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

Non Development Expenditures increased during this period to 5.95 percent in 2006-07 and rose to 8.37 percent in 2008-09. On owing to increased interest rates and defence expenditures. As a account of the increased Development Expenditures due to percentage of GDP, Non Development Expenditures increased expansionary fiscal stance followed by the government post from 6.59 percent in 1980-81 to 8.17 percent in 1989-90. External global financial and economic crisis in 2008-09, the Development debts were increasing and large portion of the borrowed funds Expenditures have remained in that range with 8.03 percent in was loaned to weaker sections of the society at subsidized rates. 2011-12. As a percentage of Total Expenditures the share of Non The share of Non Development Expenditures during the nineties Development Expenditures remained almost stable. It was 42.54 remained stable with a marginal increase from 8.42 percent in percent in 1980-81, dipped slightly in 1984-85 to 40.36 percent and 1990-91 to 8.84 percent in 1999-2000. Non Development rose back to 43.08 percent in 1989-90. Expenditures as a percentage of GDP continued to fall The average compound growth rate of Development throughout in the next decade. It was 9.11 percent in 2000-01 and Expenditures remained high at 15.06 percent during this period. came down to 7.60 percent in 2008-09. It has been recorded at 7.18 The average compound growth rate of the Non Development percent in 2011-12. As a percentage of Total Expenditures, Non Expenditures and Total Expenditures were around 15.31 percent Development Expenditures fell from 58.62 percent in 2000-01 to and 15.17 percent during the same time period (Table 4). 47.21 percent in 2011-12 showing a reversal of the situation from Post-reform period: 1990s. In the 1990s the Development Expenditures started declining. The compound growth rate of Development Expenditures had With the introduction of the reforms the composition of declined to 8.21 percent in the nineties as compared to 15.66 expenditures started changing towards Non Development percent in the eighties. Then it rose once again to 14.25 percent in Expenditures. Development Expenditures as a percentage of 2000-10. On the other hand, the compound growth rate of Non Total Expenditures in 1990-91 were 54.30 percent. It came down to Development Expenditures has decreased from 15.31 percent in 42.06 percent in 1999-2000. On the other hand the share of Non the eighties to 13.68 percent in the nineties. It continued to fall Development Expenditures in Total Expenditures increased from gradually keeping up with the earlier trend and was 10.04 percent 45.70 percent in 1990-91 to 57.94 percent in 1999-2000 (Table 2). As in 2000s (Table 4). a percentage of GDP the rate of Development Expenditures came The share of Social Services Expenditures by the Centre in the down from 10.00 percent in 1990-91 to 6.42 percent in 1999-2000. GDP which was rising in the early 1980s started falling thereafter In 2000s, the Development Expenditures as a percentage of Total till 1992-93 where it was 0.52 percent of GDP. Then the ratio Expenditures started rising again. As a share of Total started rising and reached at 0.86 percent in 1999-2000. Then the Expenditures Development Expenditures have risen from 41.38 ratio fell for some time and went op to 0.87 percent in 2002-03. This percent in 2000-01 to 52.79 percent in 2011-12. This was on account rising trend continued for long. The ratio was recorded at 1.59 of slowdown of reforms since 1996-97, the drought of 2002-03 and percent in 2008-09 and has been able to sustain those levels. As a the growth objectives of FRBMA. Development Expenditures as a share of the Total Expenditures, Social Services Expenditures percentage of GDP rose from 6.43 percent in 2000-01 to 7.28 show similar trends. The share of Social Services Expenditures in percent in 2002-03. Then it started declining again and came down Total Expenditures rose significantly in early 1980s then in 1985-

72 Area Studies Area Studies 73 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

86 it fell down to 2.78 percent. Till 1994-95 the ratio remained Plan and Non-Plan Expenditures stable and then it rose again in later half of nineties. In 2000-01 it Table 3 shows that the Plan Expenditures share in the Total was 5.25 percent and 2002-03 onwards the ratio has been Expenditures declined in 1980s and through 1990s. It was 39.50 consistently rising and was 10.27 percent in 2010-11. Economic percent in 1980-81 and declined to 26.94 percent in 1989-90. Then services after having increased in the eighties fell down gradually it started rising and went up to a peak of 30.78 percent in 1993-94. in nineties. It was 2.62 percent in 1996-97. Thereafter, it hovered Once again the trend reversed and in 2000-01 the Plan around 3-4 percent throughout the 2000s. It increased to 4.85 Expenditures was 25.39 percent. Though the share of Plan percent in 2008-09 and has further increased to 5.27 percent in Expenditures improved to 29.29 percent in 2007-08, it continued 2010-11. As a percentage of Total Expenditures the economic to be low in relation to previous decades. Then after the global services have remained in the range of 23-25 percent throughout financial crisis and the adoption of expansionary fiscal policy by the period of study except a fall in late nineties. In 2008-09 the ratio the government to deal with the crisis the ratio started rising increased to 30.37 percent and has gone up further to 33.43 again and went up to 32.35 percent. In the year 2011-12 the Plan percent in 2011-12. Bharat Nirman, a time-bound plan for rural Expenditures have increased from Rs 89.94 billion in 1980-81 to Rs infrastructure by the Government of India in partnership with 4266.04 billion in 2011-12 showing an absolute increase of about State Governments and Panchayati Raj Institutions, remained the 45 times. The Non-Plan Expenditures increased by about 65 times cornerstone of the Government's policy in late 2000s. The eight from 137.74 billion to Rs 8921.16 billion during the same period. flagship programmes of the Government continued to receive As a percentage of Total Expenditures the share of Non-Plan high priority and significant increase in allocations were made in Expenditures increased from 60.50 percent in 1980-81 to 74.61 Mid-day Meal Scheme, National Rural Employment, Rajiv percent in 2000-01. Then it remained stable for some time and Gandhi Drinking Water Mission, Total Sanitation Campaign, came down to 68.86 percent in 2008-09. It increased to 70.39 National Rural Health Mission, Integrated Child Development percent in 2009-10 and was at 67.65 percent in 2011-12. Interest Programme, Sarva Siksha Abhiyan, Guarantee Scheme and payments, defense Expenditures, subsidies and general services, Jawaharlal Nehru National Urban Renewal Mission. together form more than 90 percent of the Non plan Expenditures Thus, we see that during the eighties the Development which are difficult to control with ever-growing public debt and Expenditures as a percent of GDP have been more than Non other liabilities. Development Expenditures because of the development Pre-reform period: programmes launched by the government and expenditures on social services. Then in nineties, Non Development Expenditures The emphasis of economic policies in eighties was on as a percent of GDP have been more than Development strengthening the productive potential of the economy on one Expenditures and have continued to increase with an exception in hand and on expanding the programmes directly benefiting the 2002-03. Post FRBMA Non Development Expenditures as a weaker, poor and underprivileged sections of the society on the percent of GDP have continued to fall. In 2008-09 the other hand. As a result, the Plan Expenditures as a percentage of Development Expenditures as a percent of GDP increased and GDP increased from 6.01 percent in 1980-81 to 7.10 percent in became more than Non Development Expenditures thus putting 1986-87. Non-Plan Expenditures also went up from 9.20 percent the economy on the path of recovery. to 12.32 percent during the same period (Table 3) because of

74 Area Studies Area Studies 75 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

74 Area Studies Area Studies 75 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits increased borrowings to meet the deficits and thus over mounting percent in 1996-97 to 11.00 percent and 11.78 percent in the next interest payments and increasing subsidies along with high two years. The Plan Expenditures reduced from 4.84 percent in defense Expenditures. In the second half of the 1980s, Long Term 1990-91 to 3.79 percent in 1999-2000. Fiscal Policy (LTFP) was announced for the first time where the In the beginning of the decade 2000-10 the Plan Expenditures need for moderation in the growth of Non-Plan Expenditures was increased on account of step up in levels of investment in different emphasized. However, the Non-Plan Expenditures remained sectors. Non-Plan Expenditures rose because of increase in food high during this period. The main reasons for high growth in and fertilizers subsidies and relief measures taken to contain the Non-Plan Expenditures during this period were draught faced by effects of draught faced by the nation. 2003-04 onwards, i.e. post- the major parts of the country during the years 1985-88 and FRBMA there was a moderation in the growth of Non-Plan implementations of 4th pay commission recommendations. In the Expenditures and as a percentage of GDP it fell from 12.30 percent later half of eighties, the Plan Expenditures started to decline. As a in 2003-04 to 10.18 percent in 2007-08. The reversal of the trend of percentage of GDP the Plan Expenditures reduced from 6.86 fiscal consolidation was marked in 2008-09 and 2009-10 due to the percent in 1985-86 to 5.48 percent in 1989-90. expansionary fiscal stance undertaken during global financial The Non-Plan Expenditures were increasing at a greater pace as crisis. Plan Expenditures was at 4.89 percent of the GDP in 2008-09 compared to Plan Expenditures and the compound rate of growth and has remained about the same with 4.82 percent recorded in in the Non-Plan Expenditures was 16.85 percent during this 2011-12. Non-Plan Expenditures as a percentage of GDP after decade as compared to the Plan Expenditures which grew at a going up to 10.81 percent and 11.17 percent in 2008-09 and 2009-10 compounded rate of 11.83 percent (Table 4). declined to 10.07 percent in 2011-12 due to significant reform Post-reform period: initiatives in Expenditures. To achieve fiscal consolidation it was important to contain the As a proportion of Total Expenditures the share of Plan Non-Plan Expenditures. For this effect, the government Expenditure decreased from 26.94 percent in 1990-91 to 25.39 decontrolled the phosphoric and potassium fertilizers in 1992 and percent in 2000-01. However, it increased to 31.66 percent in 2010- also announced the increase in the petroleum product prices, thus 11. Non plan expenditure on the other hand increased from 73.06 reducing the petroleum subsidy. So the trend of eighties reversed percent in 1990-91 to 74.61 percent in 2000-01 and then decreased and Non Plan Expenditures started to show a declining trend. As to 67.65 percent in 2010-11 confirming to the falling trend of Non a percentage of GDP, the Non-Plan Expenditures which was 13.12 Plan Expenditures measured against GDP. percent in 1990-91 reduced to 11.03 percent in 1999-2000. Another The front loading of Plan Expenditures is evident from the levels reason for a fall in Non-Plan Expenditures during this period was of compound growth of 13.88 percent as against 10.38 percent in reduction of posts at various levels. the nineties. On the other hand the compound rate of growth of The falling trend of Non-Plan Expenditures continued during the Non-Plan Expenditures was 11.49 percent as against 11.17 nineties except a setback of 1997-98 when there was a sharp percent in the nineties (Table 4). escalation in its salary bill due to the implementation of the recommendations of the Fifth Central Pay Commission. Non- Plan Expenditures as a percentage of GDP increased from 10.39

76 Area Studies Area Studies 77 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits increased borrowings to meet the deficits and thus over mounting percent in 1996-97 to 11.00 percent and 11.78 percent in the next interest payments and increasing subsidies along with high two years. The Plan Expenditures reduced from 4.84 percent in defense Expenditures. In the second half of the 1980s, Long Term 1990-91 to 3.79 percent in 1999-2000. Fiscal Policy (LTFP) was announced for the first time where the In the beginning of the decade 2000-10 the Plan Expenditures need for moderation in the growth of Non-Plan Expenditures was increased on account of step up in levels of investment in different emphasized. However, the Non-Plan Expenditures remained sectors. Non-Plan Expenditures rose because of increase in food high during this period. The main reasons for high growth in and fertilizers subsidies and relief measures taken to contain the Non-Plan Expenditures during this period were draught faced by effects of draught faced by the nation. 2003-04 onwards, i.e. post- the major parts of the country during the years 1985-88 and FRBMA there was a moderation in the growth of Non-Plan implementations of 4th pay commission recommendations. In the Expenditures and as a percentage of GDP it fell from 12.30 percent later half of eighties, the Plan Expenditures started to decline. As a in 2003-04 to 10.18 percent in 2007-08. The reversal of the trend of percentage of GDP the Plan Expenditures reduced from 6.86 fiscal consolidation was marked in 2008-09 and 2009-10 due to the percent in 1985-86 to 5.48 percent in 1989-90. expansionary fiscal stance undertaken during global financial The Non-Plan Expenditures were increasing at a greater pace as crisis. Plan Expenditures was at 4.89 percent of the GDP in 2008-09 compared to Plan Expenditures and the compound rate of growth and has remained about the same with 4.82 percent recorded in in the Non-Plan Expenditures was 16.85 percent during this 2011-12. Non-Plan Expenditures as a percentage of GDP after decade as compared to the Plan Expenditures which grew at a going up to 10.81 percent and 11.17 percent in 2008-09 and 2009-10 compounded rate of 11.83 percent (Table 4). declined to 10.07 percent in 2011-12 due to significant reform Post-reform period: initiatives in Expenditures. To achieve fiscal consolidation it was important to contain the As a proportion of Total Expenditures the share of Plan Non-Plan Expenditures. For this effect, the government Expenditure decreased from 26.94 percent in 1990-91 to 25.39 decontrolled the phosphoric and potassium fertilizers in 1992 and percent in 2000-01. However, it increased to 31.66 percent in 2010- also announced the increase in the petroleum product prices, thus 11. Non plan expenditure on the other hand increased from 73.06 reducing the petroleum subsidy. So the trend of eighties reversed percent in 1990-91 to 74.61 percent in 2000-01 and then decreased and Non Plan Expenditures started to show a declining trend. As to 67.65 percent in 2010-11 confirming to the falling trend of Non a percentage of GDP, the Non-Plan Expenditures which was 13.12 Plan Expenditures measured against GDP. percent in 1990-91 reduced to 11.03 percent in 1999-2000. Another The front loading of Plan Expenditures is evident from the levels reason for a fall in Non-Plan Expenditures during this period was of compound growth of 13.88 percent as against 10.38 percent in reduction of posts at various levels. the nineties. On the other hand the compound rate of growth of The falling trend of Non-Plan Expenditures continued during the Non-Plan Expenditures was 11.49 percent as against 11.17 nineties except a setback of 1997-98 when there was a sharp percent in the nineties (Table 4). escalation in its salary bill due to the implementation of the recommendations of the Fifth Central Pay Commission. Non- Plan Expenditures as a percentage of GDP increased from 10.39

76 Area Studies Area Studies 77 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

Revenue and Capital Expenditures: periods afterwards. The components of capital expenditures are The first major trend in public Expenditures which we observe in seen in table 6 and it reveals that the Loans and advances as a India is the growing Revenue Expenditures of the government percent of GDP was 3.53 percent in 1980-81 and remained more from Rs.144.10 billion in 1980-81 to Rs. 11619.40 billion in 2011-12 than 3 percent during this decade and the capital outlays was which is an 80 fold increase. Increased defense commitments, more than 2 percent throughout. The compound increase in expansion of administration, the working of democratic Capital Expenditure for this decade was 13.13 percent as institutions like the parliament, the government's international compared to 4.42 percent in the 1990s. The compound rate of commitments, increase in government's participation in nation growth of Revenue Expenditures was 16.12 percent (Table-8) building activities like education and public health, rise in prices, Thus, in 1980-81, Revenue Expenditures averaged 63.29 percent etc. are responsible for the increased Revenue Expenditures of the of Total Expenditures and increased to 69.11 percent in 1989-90 central government. Capital Expenditures during the same with the bulk of the expansion coming under the heads of defense, period increased about 20 times, from Rs. 83.58 billion in 1980-81 interest payments, higher salaries (Fourth Pay Commission) and to Rs. 1567.80 billion in 2011-12. subsidies. The Capital Expenditures share in Total Expenditures Pre-reform period: declined from 36.71 percent to 30.89 percent during the same In 1980s the major thrust of the government was improved period (Table 5). Within Revenue Expenditures, in 1980-81, infrastructure and rural development, the investments to GDP defence expenditures had the highest share of 22.75 percent; ratio were high. Capital Expenditures were very high during this interest component was 18.07 percent while subsidies were 14.07 period. Table 6 shows that the interest payments grew from 1.74 percent. However, by 1990-91, the largest component was the percent of the GDP in 1980-81 to 3.67 percent in 1990-91, interest share of 29.24 percent with subsidies constituting 16.54 accounting for a large portion of governments Revenue percent and defence only 14.79 percent (Table 7). Therefore, we Expenditures and creating a debt trap in the 1980s. Subsidies observe that besides the burden of servicing the public debt, the increased from 1.36 percent in 1980-81 to 2.07 percent in 1990-91. subsidy burden was also quite great. Defense Expenditures during this period were high staying above Post-reform period: 2 percent of GDP throughout (Table 6). In 1986-87 the Revenue Finances of the government had reached a critical stage in 1990- Expenditures as a percentage of GDP increased by almost 1 91. The government Expenditures stood at 17.96 percent of GDP percent, from 11.72 percent in 1985-86 to 12.61 percent in 1986-87 in the 1990-91. The share started falling in the 1990s after the due to implementation of the fourth pay commission. Revenue reforms. It fell to 14.81 percent in 1999-2000. Compression in Total Expenditures as a percentage of GDP shows an increase of almost Expenditures was mainly sought on account of reduction in 3 percent in this decade, from 9.63 percent in 1980-81 to 12.79 Capital Expenditures as a percentage of GDP. As a percentage of percent in 1989-90. The Capital Expenditures on the other hand GDP, Capital Expenditures fell from 5.42 percent in 1990-91 to increased from 5.59 percent in 1980-81 to 5.72 percent in 1989-90 2.20 percent in 2000-01, indicating that such Expenditures had (Table-5). The increase in Revenue Expenditures was much more borne the major burden of fiscal adjustment (Table 5). Table 6 than Capital Expenditures. However, increase in Capital reveals that loans and advances as a percent of GDP reduced to Expenditures was maximum in this decade as compared to the 1.06 percent in 2000-01 and capital outlays came down to 1.14

78 Area Studies Area Studies 79 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

78 Area Studies Area Studies 79 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits percent in 2000-01. Revenue Expenditures continued to stay high The composition of Total Expenditures was skewed in favour of in the range of around 12 percent in 1990s mainly because of Revenue Expenditures during the nineties and the ratio of increase in interest Expenditures from 3.67 percent in 1990-91 to Revenue Expenditures in Total Expenditures increased from 4.49 percent in 1999-2000. However, a sharp rise in salaries and 69.82 percent in 1990-91 to 85.33 percent in 2000-01. Capital pensions following the acceptance of the Fifth Pay Commission Expenditures as a percentage of Total Expenditures reduced from report in 199697 pushed the Revenue Expenditures as a 30.18 percent to 14.67 percent here. In 2000-01, of the central percentage of GDP from 11.20 percent to 12.00 percent in 1998-99 government's Revenue Expenditures, 9.66 percent went to and 12.84 percent in 2001-02. It continued to rise till 2003-04, until subsidies, 13.40 percent to defence and 35.75 percent to interest. the FRBM Act was announced where it stood at 13.38 percent As a component of aggregate disbursements of the central (Table 6). Capital Expenditures rose till 2003-04 on account of step government, the interest component continued to rise till around up of investments in different sectors and were recorded at 3.85 2002-03 and then started to decline. Capital disbursements percent during that year. After the FRBM was passed, central showed just the opposite trend falling till around 2002-03 and government's Total Expenditures fell from 16.60 percent in 2003- then rising till 2007-08. Year 2003-04 witnessed an improvement 04 to 14.29 percent in 2007-08. In 2008-09, the Revenue in composition of Expenditures with Revenue Expenditures Expenditures jumped up to 14.10 percent from 11.92 percent in declining to 77.14 percent in 2004-05 and Capital Expenditures 2007-08. During this year the capital expenditures once again increasing to 22.86 percent (Table 7). This was facilitated by a suffered a blow. The capital outlays as a percent of GDP came decline in major subsidies, lower growth in Interest Expenditures down to 1.35 percent in 2008-09 from 2.14 percent in 2007-08. In and in Non-Plan Expenditures and pension reforms. 2008-09 the government had an expansionary fiscal stance in the The compound rate of growth of Capital Expenditures was much form of a rural farm loan waiver scheme, the expansion of social higher in the decade 2000-10 at 8.96 percent as compared to 4.42 security schemes under the National Rural Employment percent in the previous decade. On the other hand the compound Guarantee Act (NREGA) and the implementation of revised rate of growth of revenue account stayed almost in the same salaries and compensations for the central public servants as per range, falling slightly from 12.98 percent in the nineties to 12.62 the recommendations of the Sixth Pay Commission when the percent in the 2000s. global financial crisis erupted. Furthermore, the parliamentary elections of 2008 also resulted in further government Expenditures reforms and deficits: Expenditures (Kumar and Soumya, 2010). To meet the crisis, the The sharp increase in Expenditures in the eighties as compared to government activated a series of stimulus packages in December the modest increase in tax and non tax revenues resulted in high 2008, January 2009 and February 2009. Subsequently with the revenue and fiscal deficits by the end of the decade. Table 8 shows partial withdrawal of the stimulus packages and cutting down of that in eighties the Total Expenditures and revenue expenditure petroleum subsidies the Total Expenditures has started a were increasing and so the revenue deficit climbed from 1.36 downtrend and have fallen to 14.89 percent in 2011-12 and percent of GDP in 1980-81 to 3.17 percent of GDP in 1990-91 and Revenue Expenditures falling down to 13.12 percent in 2011-12 gross fiscal deficit climbed from 5.55 percent to 7.61 percent of marking the recovery of the economy. GDP. To maintain the momentum of development the government during this period set a high target for Expenditures

80 Area Studies Area Studies 81 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits percent in 2000-01. Revenue Expenditures continued to stay high The composition of Total Expenditures was skewed in favour of in the range of around 12 percent in 1990s mainly because of Revenue Expenditures during the nineties and the ratio of increase in interest Expenditures from 3.67 percent in 1990-91 to Revenue Expenditures in Total Expenditures increased from 4.49 percent in 1999-2000. However, a sharp rise in salaries and 69.82 percent in 1990-91 to 85.33 percent in 2000-01. Capital pensions following the acceptance of the Fifth Pay Commission Expenditures as a percentage of Total Expenditures reduced from report in 199697 pushed the Revenue Expenditures as a 30.18 percent to 14.67 percent here. In 2000-01, of the central percentage of GDP from 11.20 percent to 12.00 percent in 1998-99 government's Revenue Expenditures, 9.66 percent went to and 12.84 percent in 2001-02. It continued to rise till 2003-04, until subsidies, 13.40 percent to defence and 35.75 percent to interest. the FRBM Act was announced where it stood at 13.38 percent As a component of aggregate disbursements of the central (Table 6). Capital Expenditures rose till 2003-04 on account of step government, the interest component continued to rise till around up of investments in different sectors and were recorded at 3.85 2002-03 and then started to decline. Capital disbursements percent during that year. After the FRBM was passed, central showed just the opposite trend falling till around 2002-03 and government's Total Expenditures fell from 16.60 percent in 2003- then rising till 2007-08. Year 2003-04 witnessed an improvement 04 to 14.29 percent in 2007-08. In 2008-09, the Revenue in composition of Expenditures with Revenue Expenditures Expenditures jumped up to 14.10 percent from 11.92 percent in declining to 77.14 percent in 2004-05 and Capital Expenditures 2007-08. During this year the capital expenditures once again increasing to 22.86 percent (Table 7). This was facilitated by a suffered a blow. The capital outlays as a percent of GDP came decline in major subsidies, lower growth in Interest Expenditures down to 1.35 percent in 2008-09 from 2.14 percent in 2007-08. In and in Non-Plan Expenditures and pension reforms. 2008-09 the government had an expansionary fiscal stance in the The compound rate of growth of Capital Expenditures was much form of a rural farm loan waiver scheme, the expansion of social higher in the decade 2000-10 at 8.96 percent as compared to 4.42 security schemes under the National Rural Employment percent in the previous decade. On the other hand the compound Guarantee Act (NREGA) and the implementation of revised rate of growth of revenue account stayed almost in the same salaries and compensations for the central public servants as per range, falling slightly from 12.98 percent in the nineties to 12.62 the recommendations of the Sixth Pay Commission when the percent in the 2000s. global financial crisis erupted. Furthermore, the parliamentary elections of 2008 also resulted in further government Expenditures reforms and deficits: Expenditures (Kumar and Soumya, 2010). To meet the crisis, the The sharp increase in Expenditures in the eighties as compared to government activated a series of stimulus packages in December the modest increase in tax and non tax revenues resulted in high 2008, January 2009 and February 2009. Subsequently with the revenue and fiscal deficits by the end of the decade. Table 8 shows partial withdrawal of the stimulus packages and cutting down of that in eighties the Total Expenditures and revenue expenditure petroleum subsidies the Total Expenditures has started a were increasing and so the revenue deficit climbed from 1.36 downtrend and have fallen to 14.89 percent in 2011-12 and percent of GDP in 1980-81 to 3.17 percent of GDP in 1990-91 and Revenue Expenditures falling down to 13.12 percent in 2011-12 gross fiscal deficit climbed from 5.55 percent to 7.61 percent of marking the recovery of the economy. GDP. To maintain the momentum of development the government during this period set a high target for Expenditures

80 Area Studies Area Studies 81 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits and stuck to it despite increasing deficits. Fiscal discipline again seemed to give way in the early 2000s. The The immediate response to economic crisis in 1991 was to central government's revenue deficit climbed up to 4.4 percent of compress expenditures, mainly focusing on reducing subsidies. GDP in 2002-03 while the gross fiscal deficit was at 5.91 percent of Simultaneously, the softer options of reducing public investment the GDP. To control this new fiscal discipline framework, FRBMA Expenditures and reducing public Expenditures on social welfare was adopted in 2003. This Act gave a medium term target for services were also resorted to. In the nineties, the government balancing current revenues and expenditures and set overall decided to subject all plan and Non-plan schemes to Zero Based limits to the fiscal deficit at 3 percent of GDP to be achieved Budgeting (ZBB). ZBB implies constructing a budget without according to a phased deficit reduction roadmap. These fiscal reference to past Expenditures, based on a fundamental discipline legislations seemed to have had a good impact. The reappraisal of purposes, methods and resources. While the year before the global financial crisis in 2007-08, the central programme of privatization or disinvestment in central PSUs government's revenue expenditure was 11.92 percent and total remained low key through the 1990s, it started to gather expenditure was 14.29 percent of GDP. Accordingly, the revenue momentum from 2001-02. To give a greater thrust to the process deficit came down to 1.05 percent of GDP while the GFD was 2.54 of disinvestments, a separate department was set up. 2002-03 percent. In 2008-09 the economy was hit by multiple shocks. The onwards, fresh recruitments were restricted to one percent of the growth of Revenue Expenditures in 2008-09 was notable due to total civilian staff strength of the government. A decision to the fiscal stimulus packages provided by the government to reform the pension system for government employees by revive the economy. It went up 14.10 percent in 2008-09. All this introducing a pay as you go as opposed to existing fully funded caused the overall fiscal deficit to widen from less than 3 percent system was also taken. An Expenditures Reforms Commission in 2007-2008 to 5.99 percent in 2008-09. was constituted in February, 2000, to carry the process of reducing Following two years of purposeful fiscal expansion, the Budget the growth in non-developmental Expenditures. It submitted for 2010-11 resumed fiscal consolidation with a partial rollback of several reports covering aspects like buffer stock operation and the stimulus. The expenditures declined and so did the fiscal rationalization of fertilizer subsidies, optimizing government deficit which declined to 4.87 per cent of GDP in 2010-11 from 6.48 staff strength with a ban on the creation of new posts for two per cent in 2009-10. Once again fiscal balance had deteriorated in years, introduction of VRS and redeployment of surplus staff in 2011-12 even though the expenditures were declining. This was various government departments and autonomous institutions due to high Global crude petroleum prices and lower tax receipts. funded by government budgetary support. It pushed the fiscal deficit to 5.89 per cent of GDP in 2011-12. The These measures did help reduce the Total Expenditures and fiscal revenue deficit increased to 4.46 percent as compared to 3.29 deficit of the central government in the nineties. The gross fiscal percent in the previous year. deficit as a percentage of GDP came down to 5.48 percent in 2000- Conclusion 01 from 7.61 percent in 1990-91.The central governments revenue An analysis of central government Expenditures shows that deficit however did not show a declining trend and stood at 3.93 increase in the Non-Plan Expenditures has been almost 65 times percent of GDP. This was because the revenue expenditure had from Rs. 137.74 billion in 1980-81 to Rs. 8921.16 billion in 2011-12. increased during this period from 12.54 percent in 1990-91 to 12.81 Whereas the Plan Expenditures have increased by 47 times from percent in 2000-01 (Table-8).

82 Area Studies Area Studies 83 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits and stuck to it despite increasing deficits. Fiscal discipline again seemed to give way in the early 2000s. The The immediate response to economic crisis in 1991 was to central government's revenue deficit climbed up to 4.4 percent of compress expenditures, mainly focusing on reducing subsidies. GDP in 2002-03 while the gross fiscal deficit was at 5.91 percent of Simultaneously, the softer options of reducing public investment the GDP. To control this new fiscal discipline framework, FRBMA Expenditures and reducing public Expenditures on social welfare was adopted in 2003. This Act gave a medium term target for services were also resorted to. In the nineties, the government balancing current revenues and expenditures and set overall decided to subject all plan and Non-plan schemes to Zero Based limits to the fiscal deficit at 3 percent of GDP to be achieved Budgeting (ZBB). ZBB implies constructing a budget without according to a phased deficit reduction roadmap. These fiscal reference to past Expenditures, based on a fundamental discipline legislations seemed to have had a good impact. The reappraisal of purposes, methods and resources. While the year before the global financial crisis in 2007-08, the central programme of privatization or disinvestment in central PSUs government's revenue expenditure was 11.92 percent and total remained low key through the 1990s, it started to gather expenditure was 14.29 percent of GDP. Accordingly, the revenue momentum from 2001-02. To give a greater thrust to the process deficit came down to 1.05 percent of GDP while the GFD was 2.54 of disinvestments, a separate department was set up. 2002-03 percent. In 2008-09 the economy was hit by multiple shocks. The onwards, fresh recruitments were restricted to one percent of the growth of Revenue Expenditures in 2008-09 was notable due to total civilian staff strength of the government. A decision to the fiscal stimulus packages provided by the government to reform the pension system for government employees by revive the economy. It went up 14.10 percent in 2008-09. All this introducing a pay as you go as opposed to existing fully funded caused the overall fiscal deficit to widen from less than 3 percent system was also taken. An Expenditures Reforms Commission in 2007-2008 to 5.99 percent in 2008-09. was constituted in February, 2000, to carry the process of reducing Following two years of purposeful fiscal expansion, the Budget the growth in non-developmental Expenditures. It submitted for 2010-11 resumed fiscal consolidation with a partial rollback of several reports covering aspects like buffer stock operation and the stimulus. The expenditures declined and so did the fiscal rationalization of fertilizer subsidies, optimizing government deficit which declined to 4.87 per cent of GDP in 2010-11 from 6.48 staff strength with a ban on the creation of new posts for two per cent in 2009-10. Once again fiscal balance had deteriorated in years, introduction of VRS and redeployment of surplus staff in 2011-12 even though the expenditures were declining. This was various government departments and autonomous institutions due to high Global crude petroleum prices and lower tax receipts. funded by government budgetary support. It pushed the fiscal deficit to 5.89 per cent of GDP in 2011-12. The These measures did help reduce the Total Expenditures and fiscal revenue deficit increased to 4.46 percent as compared to 3.29 deficit of the central government in the nineties. The gross fiscal percent in the previous year. deficit as a percentage of GDP came down to 5.48 percent in 2000- Conclusion 01 from 7.61 percent in 1990-91.The central governments revenue An analysis of central government Expenditures shows that deficit however did not show a declining trend and stood at 3.93 increase in the Non-Plan Expenditures has been almost 65 times percent of GDP. This was because the revenue expenditure had from Rs. 137.74 billion in 1980-81 to Rs. 8921.16 billion in 2011-12. increased during this period from 12.54 percent in 1990-91 to 12.81 Whereas the Plan Expenditures have increased by 47 times from percent in 2000-01 (Table-8).

82 Area Studies Area Studies 83 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

Rs. 89.94 billion to Rs. 4266.04 billion in 2011-12. The Total Notes : Expenditures of the central government have been rapidly 1. M. Govinda Rao, “The fiscal situation and a reform agenda for the new increasing since 1980s. The Total Expenditures were Rs. 227.68 government,” Economic and Political Weekly, Vol 44, no.25, June 20, 2009. billion in 1980-81 and increased by almost 60 times to Rs. 13187.20 2. Ranjit Kumar Pattnaik, Dhritidyuti Bose, Indranil Bhattacharyya and Jai billion in 2011-12. The increase is mainly attributed to an increase Chander, Public Expenditures and Emerging Fiscal Policy Scenario in India. in Revenue Expenditures at the cost of Capital Expenditures. The fiscal and revenue deficits were increasing in the eighties. To 3. Nirvikar Singh T. N. Srinivasan “Fiscal Policy in India: Lessons and bring down the deficits Capital Expenditures were suppressed Priorities,” February 17, 2004. NIPFP-IMF conference paper on Fiscal Policy in India January, 2004. post reforms as the government was unable to contain the Revenue Expenditures. This state of affairs raises extreme 4. Rajiv Kumar and Alamuru Soumya 'Fiscal Policy Issues for India after concern about the future growth prospects of the economy. the Global Financial Crisis (20082010)', ADBI Working Paper, No. 249. Suggestions: 5. India: Fiscal reforms and public Expenditures management, JBIC Research Paper, No. 11, Japan Bank for International Cooperation (JBIC), The government needs to focus on the reduction of the Revenue March 2001. Expenditures and increase in the growth rate of Capital Expenditures. The focus is required on better targeting of social 6. Web resources: expenditures to achieve fiscal consolidation while maintaining -www.rbi.org.in. the process of growth. Expenditures reorientation had to be - Report of planning commission, 2011. made so as to contain the deficits as well as provide adequate - Indian public finance statistics, GOI, Ministry of Finance, 2011-12. outlays for essential social sectors like education, health etc. The government needs to strengthen the public distribution system for better targeting of subsidies and bring in efficiencies and to make the system more transparent. Energy subsidies are high and need to be brought down. Downsizing of staff is required as the productivity is low in government departments which again lead to inefficiencies. There is a need to focus on transparency in fiscal operations. Wide ranging reforms are required to remove the structural bottlenecks and increase the growth rate. To ensure a 100 percent utility of funds a special committee is required to monitor expenditures. The reform of accounting and budgeting process, improved management and control of government Expenditures was required.

84 Area Studies Area Studies 85 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

84 Area Studies Area Studies 85 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits Table -1: Development and Non Development Expenditures of the central Government Table -2: Plan and Non Plan Expenditures Year Development Of which Non- DE Of which NDE Year Plan Non Plan Total Plan Non Plan Expenditures Development (as a (as a Expenditures Expenditures Expenditures Expenditures Expenditures Economic Social Expenditures percent Economic Social percent (Rs billion) services services (Rs billion) of GDP) services services of GDP) (Rs. Billion) (Rs. Billion) (Rs. Billion) (Rs. Billion) (Rs. Billion) 1980-81 133.27(57.46) 56.44(24.33) 10.08(4.35) 98.67(42.54) 8.91 3.77 0.67 6.59 1980-81 89.94(39.50) 137.74(60.50) 227.68 6.01 9.20 1981-82 137.91(52.17) 67.37(25.49) 12.44(4.71) 126.44(47.83) 7.84 3.83 0.71 7.19 1985-86 198.54(37.70) 328.12(62.30) 526.66 6.86 11.33 1982-83 163.33(50.68) 76.53(23.74) 15.09(4.68) 158.97(49.32) 8.31 3.89 0.77 8.08 1986-87 229.96(36.55) 399.20(63.45) 629.16 7.10 12.32 1983-84 194.07(51.38) 90.43(23.94) 16.89(4.47) 183.64(48.62) 8.47 3.95 0.74 8.02 1987-88 242.09(35.47) 440.52(64.53) 682.61 6.57 11.96 1984-85 273.75(59.64) 120.21(26.19) 21.46(4.68) 185.25(40.36) 10.67 4.68 0.84 7.22 1988-89 259.51(32.80) 531.60(67.20) 791.11 5.94 12.17 1985-86 329.09(61.16) 140.14(26.04) 14.96(2.78) 208.99(38.84) 11.37 4.84 0.52 7.22 1989-90 275.20(29.62) 653.88(70.38) 929.08 5.48 13.03 1986-87 354.98(54.80) 162.75(25.12) 21.61(3.34) 260.60(40.23) 10.96 5.02 0.67 8.04 1987-88 365.73(51.91) 157.22(22.31) 23.69(3.36) 302.61(42.95) 9.93 4.27 0.64 8.22 1990-91 283.65(26.94) 769.33(73.06) 1052.98 4.84 13.12 1988-89 415.36(50.95) 180.22(22.11) 27.69(3.40) 355.19(43.97) 9.51 4.13 0.63 8.13 1991-92 309.61(27.79) 804.53(72.21) 1114.14 4.59 11.94 1989-90 542.04(56.92) 256.02(26.89 ) 30.61(3.21) 410.20(43.08) 10.80 5.10 0.61 8.17 1992-93 366.61(29.90) 859.57(70.10) 1226.18 4.73 11.10 1990-91 586.45(54.30) 245.88(22.77) 32.74(3.03) 493.49(45.70) 10.00 4.19 0.56 8.42 1993-94 436.62(30.78) 981.91(69.22) 1418.53 4.90 11.02 593.13(51.81) 236.81(20.69) 35.69(3.12) 551.70(48.19) 1991-92 8.80 3.51 0.53 8.19 1994-95 473.78(29.48) 1133.61(70.52) 1607.39 4.53 10.84 1992-93 654.79(51.94) 262.48(20.82) 40.09(3.18) 605.84(48.06) 8.45 3.39 0.52 7.82 1995-96 463.74(26.01) 1319.01(73.99) 1782.75 3.78 10.75 1993-94 724.64(49.62) 275.71(18.88) 48.30(3.31) 735.86(50.38) 8.13 3.09 0.54 8.26 1996-97 535.34(26.63) 1474.73(73.37) 2010.07 3.77 10.39 1994-95 828.03(50.12) 338.97(20.52) 58.73(3.55) 824.02(49.88) 7.92 3.24 0.56 7.88 1997-98 590.77(25.46) 1729.76(74.54) 2320.53 3.76 11.00 1995-96 844.27(46.12) 350.29(19.14) 76.55(4.18) 986.32(53.88) 6.88 2.86 0.62 8.04 668.18(23.92) 2125.22(76.08) 1996-97 941.97(45.63) 372.53(18.05) 96.72(4.69) 1122.17(54.37) 6.64 2.62 0.68 7.91 1998-99 2793.40 3.71 11.78 1997-98 1109.94(46.48) 442.46(18.53) 118.45(4.96) 1278.20(53.52) 7.06 2.81 0.75 8.13 1999-00 761.82(25.56) 2218.71(74.44) 2980.53 3.79 11.03 1998-99 1372.57(47.73) 543.75(18.91) 146.56(5.10) 1502.98(52.27) 7.61 3.02 0.81 8.33 2000-01 826.69(25.39) 2429.23(74.61) 3255.92 3.81 11.20 1999-00 1291.51(42.06) 609.56(19.85) 172.21(5.61) 1779.28(57.94) 6.42 3.03 0.86 8.84 2001-02 1011.94(27.93) 2611.16(72.07) 3623.10 4.31 11.12 2000-01 1393.86(41.38) 717.31(21.29) 176.79(5.25) 1974.70(58.62) 6.43 3.31 0.82 9.11 2002-03 1114.70(26.97) 3017.78(73.03) 4132.48 4.40 11.92 2001-02 1593.64(42.52) 808.68(21.58) 151.30(4.04) 2154.56(57.48) 6.79 3.44 0.64 9.17 2003-04 1222.80(25.95) 3489.23(74.05) 4712.03 4.31 12.30 2002-03 1841.97(43.14) 1038.20(24.32) 220.07(5.15 2427.49(56.86) 7.28 4.10 0.87 9.59 2004-05 1322.92(26.55) 3659.60(73.45) 4982.52 4.08 11.29 2003-04 1954.28(44.54) 1080.71(24.63) 238.59(5.44) 2432.98(55.46) 6.89 3.81 0.84 8.57 2005-06 1406.38(27.81) 3651.00(72.12) 5057.38 3.81 9.89 2004-05 2149.55(44.98) 1150.30(24.07) 299.06(6.26) 2629.04(55.02) 6.63 3.55 0.92 8.11 1698.60(29.12) 4135.27(70.88) 2005-06 2290.60(44.07) 1330.53(25.60) 382.64(7.36) 2906.77(55.93) 6.20 3.60 1.04 7.87 2006-07 5833.87 3.96 9.63 2006-07 2557.18(42.83) 1427.72(23.92) 437.62(7.33) 3412.78(57.17) 5.95 3.32 1.02 7.95 2007-08 2102.83(29.29) 5075.89(70.71) 7178.72 4.22 10.18 2007-08 3256.70(44.83) 1729.55(23.81) 616.48(8.49) 4007.28(55.17) 6.53 3.47 1.24 8.04 2008-09 2752.35(31.14) 6087.21(68.86) 8839.56 4.89 10.81 2008-09 4713.99(52.40) 2732.22(30.37) 897.97(9.98) 4281.45(47.60) 8.37 4.85 1.59 7.60 2009-10 3033.91(29.61) 7210.96(70.39) 10244.87 4.70 11.17 2009-10 5282.42(50.68) 3044.40(29.21) 1026.28(9.85) 5141.01(49.32) 8.18 4.71 1.59 7.96 2010-11 3790.39(31.66) 8182.89(68.34) 11973.28 4.94 10.66 2010-11 6660.69(54.71) 4043.12(33.21) 1249.90(10.27) 5514.71(45.29) 8.68 5.27 1.63 7.19 2011-12 4266.04(32.35) 8921.16(67.65) 13187.20 4.82 10.07 2011-12 7112.76(52.79) 4504.12(33.43) 1077.56(8.00) 6361.94(47.21) 8.03 5.09 1.22 7.18 *Figures for 2011-12 are revised estimates. *Figures for 2011-12 are revised estimates. Figures in brackets are a percentage of total expenditures Figures in brackets are a percentage of total development and non development expenditures. Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12 Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12.

86 Area Studies Area Studies 87 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits Table -1: Development and Non Development Expenditures of the central Government Table -2: Plan and Non Plan Expenditures Year Development Of which Non- DE Of which NDE Year Plan Non Plan Total Plan Non Plan Expenditures Development (as a (as a Expenditures Expenditures Expenditures Expenditures Expenditures Economic Social Expenditures percent Economic Social percent (Rs billion) services services (Rs billion) of GDP) services services of GDP) (Rs. Billion) (Rs. Billion) (Rs. Billion) (Rs. Billion) (Rs. Billion) 1980-81 133.27(57.46) 56.44(24.33) 10.08(4.35) 98.67(42.54) 8.91 3.77 0.67 6.59 1980-81 89.94(39.50) 137.74(60.50) 227.68 6.01 9.20 1981-82 137.91(52.17) 67.37(25.49) 12.44(4.71) 126.44(47.83) 7.84 3.83 0.71 7.19 1985-86 198.54(37.70) 328.12(62.30) 526.66 6.86 11.33 1982-83 163.33(50.68) 76.53(23.74) 15.09(4.68) 158.97(49.32) 8.31 3.89 0.77 8.08 1986-87 229.96(36.55) 399.20(63.45) 629.16 7.10 12.32 1983-84 194.07(51.38) 90.43(23.94) 16.89(4.47) 183.64(48.62) 8.47 3.95 0.74 8.02 1987-88 242.09(35.47) 440.52(64.53) 682.61 6.57 11.96 1984-85 273.75(59.64) 120.21(26.19) 21.46(4.68) 185.25(40.36) 10.67 4.68 0.84 7.22 1988-89 259.51(32.80) 531.60(67.20) 791.11 5.94 12.17 1985-86 329.09(61.16) 140.14(26.04) 14.96(2.78) 208.99(38.84) 11.37 4.84 0.52 7.22 1989-90 275.20(29.62) 653.88(70.38) 929.08 5.48 13.03 1986-87 354.98(54.80) 162.75(25.12) 21.61(3.34) 260.60(40.23) 10.96 5.02 0.67 8.04 1987-88 365.73(51.91) 157.22(22.31) 23.69(3.36) 302.61(42.95) 9.93 4.27 0.64 8.22 1990-91 283.65(26.94) 769.33(73.06) 1052.98 4.84 13.12 1988-89 415.36(50.95) 180.22(22.11) 27.69(3.40) 355.19(43.97) 9.51 4.13 0.63 8.13 1991-92 309.61(27.79) 804.53(72.21) 1114.14 4.59 11.94 1989-90 542.04(56.92) 256.02(26.89 ) 30.61(3.21) 410.20(43.08) 10.80 5.10 0.61 8.17 1992-93 366.61(29.90) 859.57(70.10) 1226.18 4.73 11.10 1990-91 586.45(54.30) 245.88(22.77) 32.74(3.03) 493.49(45.70) 10.00 4.19 0.56 8.42 1993-94 436.62(30.78) 981.91(69.22) 1418.53 4.90 11.02 593.13(51.81) 236.81(20.69) 35.69(3.12) 551.70(48.19) 1991-92 8.80 3.51 0.53 8.19 1994-95 473.78(29.48) 1133.61(70.52) 1607.39 4.53 10.84 1992-93 654.79(51.94) 262.48(20.82) 40.09(3.18) 605.84(48.06) 8.45 3.39 0.52 7.82 1995-96 463.74(26.01) 1319.01(73.99) 1782.75 3.78 10.75 1993-94 724.64(49.62) 275.71(18.88) 48.30(3.31) 735.86(50.38) 8.13 3.09 0.54 8.26 1996-97 535.34(26.63) 1474.73(73.37) 2010.07 3.77 10.39 1994-95 828.03(50.12) 338.97(20.52) 58.73(3.55) 824.02(49.88) 7.92 3.24 0.56 7.88 1997-98 590.77(25.46) 1729.76(74.54) 2320.53 3.76 11.00 1995-96 844.27(46.12) 350.29(19.14) 76.55(4.18) 986.32(53.88) 6.88 2.86 0.62 8.04 668.18(23.92) 2125.22(76.08) 1996-97 941.97(45.63) 372.53(18.05) 96.72(4.69) 1122.17(54.37) 6.64 2.62 0.68 7.91 1998-99 2793.40 3.71 11.78 1997-98 1109.94(46.48) 442.46(18.53) 118.45(4.96) 1278.20(53.52) 7.06 2.81 0.75 8.13 1999-00 761.82(25.56) 2218.71(74.44) 2980.53 3.79 11.03 1998-99 1372.57(47.73) 543.75(18.91) 146.56(5.10) 1502.98(52.27) 7.61 3.02 0.81 8.33 2000-01 826.69(25.39) 2429.23(74.61) 3255.92 3.81 11.20 1999-00 1291.51(42.06) 609.56(19.85) 172.21(5.61) 1779.28(57.94) 6.42 3.03 0.86 8.84 2001-02 1011.94(27.93) 2611.16(72.07) 3623.10 4.31 11.12 2000-01 1393.86(41.38) 717.31(21.29) 176.79(5.25) 1974.70(58.62) 6.43 3.31 0.82 9.11 2002-03 1114.70(26.97) 3017.78(73.03) 4132.48 4.40 11.92 2001-02 1593.64(42.52) 808.68(21.58) 151.30(4.04) 2154.56(57.48) 6.79 3.44 0.64 9.17 2003-04 1222.80(25.95) 3489.23(74.05) 4712.03 4.31 12.30 2002-03 1841.97(43.14) 1038.20(24.32) 220.07(5.15 2427.49(56.86) 7.28 4.10 0.87 9.59 2004-05 1322.92(26.55) 3659.60(73.45) 4982.52 4.08 11.29 2003-04 1954.28(44.54) 1080.71(24.63) 238.59(5.44) 2432.98(55.46) 6.89 3.81 0.84 8.57 2005-06 1406.38(27.81) 3651.00(72.12) 5057.38 3.81 9.89 2004-05 2149.55(44.98) 1150.30(24.07) 299.06(6.26) 2629.04(55.02) 6.63 3.55 0.92 8.11 1698.60(29.12) 4135.27(70.88) 2005-06 2290.60(44.07) 1330.53(25.60) 382.64(7.36) 2906.77(55.93) 6.20 3.60 1.04 7.87 2006-07 5833.87 3.96 9.63 2006-07 2557.18(42.83) 1427.72(23.92) 437.62(7.33) 3412.78(57.17) 5.95 3.32 1.02 7.95 2007-08 2102.83(29.29) 5075.89(70.71) 7178.72 4.22 10.18 2007-08 3256.70(44.83) 1729.55(23.81) 616.48(8.49) 4007.28(55.17) 6.53 3.47 1.24 8.04 2008-09 2752.35(31.14) 6087.21(68.86) 8839.56 4.89 10.81 2008-09 4713.99(52.40) 2732.22(30.37) 897.97(9.98) 4281.45(47.60) 8.37 4.85 1.59 7.60 2009-10 3033.91(29.61) 7210.96(70.39) 10244.87 4.70 11.17 2009-10 5282.42(50.68) 3044.40(29.21) 1026.28(9.85) 5141.01(49.32) 8.18 4.71 1.59 7.96 2010-11 3790.39(31.66) 8182.89(68.34) 11973.28 4.94 10.66 2010-11 6660.69(54.71) 4043.12(33.21) 1249.90(10.27) 5514.71(45.29) 8.68 5.27 1.63 7.19 2011-12 4266.04(32.35) 8921.16(67.65) 13187.20 4.82 10.07 2011-12 7112.76(52.79) 4504.12(33.43) 1077.56(8.00) 6361.94(47.21) 8.03 5.09 1.22 7.18 *Figures for 2011-12 are revised estimates. *Figures for 2011-12 are revised estimates. Figures in brackets are a percentage of total expenditures Figures in brackets are a percentage of total development and non development expenditures. Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12 Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12.

86 Area Studies Area Studies 87 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

Table -3: Compound rates of growth of the Expenditures of central government 1995-96 1398.61(78.45) 384.14(21.55) 1782.75 11.40 3.13 14.53 Decade Development Non Plan Non Plan 1996-97 1589.33(79.07) 420.74(20.93) 2010.07 11.20 2.96 14.16 Expenditures Development Expenditures Expenditures Expenditures 1997-98 1803.35(77.71) 517.18(22.29) 2320.53 11.47 3.29 14.76 1980-89 15.06 15.31 11.83 16.85 1998-99 2164.61(77.49) 628.78(22.51) 2793.40 12.00 3.49 15.49 1990-99 8.21 13.68 10.38 11.17 1999-00 2490.78(83.57) 489.75(16.43) 2980.53 12.38 2.43 14.81 2000-01 2778.39(85.33) 477.53(14.67) 3255.92 12.81 2.20 15.01 2000-09 14.25 10.04 13.88 11.49 *self calculations on the basis of data compiled from Indian public finance statistics, 2011-12. 2001-02 3014.68(83.21) 608.42(16.79) 3623.10 12.84 2.59 15.43 2002-03 3387.13(81.96) 745.35(18.04) 4132.48 13.38 2.95 16.33 Table -4: Compound rates of growth of various components of revenue and Capital Expenditures: 2003-04 3620.74(76.84) 1091.29(23.16) 4712.03 12.76 3.85 16.60 Decade RE Defence Interest Subsidies KE Capital Loans TE 2004-05 3843.29(77.14) 1139.23(22.86) 4982.52 11.85 3.51 15.37 outlay and advances 2005-06 4393.76(86.88) 663.62(13.12) 5057.38 11.90 1.80 13.69 1980-89 16.12 12.01 21.16 17.84 13.13 14.41 12.32 15.10 2006-07 5146.09(88.21) 687.78(11.79) 5833.87 11.98 1.60 13.58 1990-99 12.98 12.47 15.43 7.25 4.42 7.08 2.41 10.97 2007-08 5944.33(83.41) 1182.38(16.59) 7126.71 11.92 2.37 14.29 2000-09 12.62 9.31 7.93 18.07 8.96 14.64 -3.78 12.15 2008-09 7937.98(89.80) 901.58(10.20) 8839.56 14.10 1.60 15.70 *self calculations on the basis of data compiled from Indian public finance statistics, 2011-12. 2009-10 9118.09(89.00) 1126.78(11.00) 10244.87 14.12 1.74 15.87 2010-11 10407.23(86.92) 1566.05(13.08) 11973.28 13.56 2.04 15.60 Table - 5: Revenue and Capital Expenditures of the central government 2011-12 11619.40(88.11) 1567.80(11.89) 13187.20 13.12 1.77 14.89 As a percent of GDP Year Revenue Capital Total *Figures for 2011-12 are revised estimates. Revenue Capital Total Expenditures Expenditures Expenditures Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12. (Rs. Billion) (Rs. Billion) (Rs. Billion) Expenditures Expenditures Expenditures 1980-81 144.10(63.29) 83.58(36.71) 227.68 9.63 5.59 15.21 Table -6: Components of Revenue and Capital Expenditures as a percentage of GDP 1981-82 154.08(60.99) 98.57(39.01) 252.65 8.76 5.61 14.37 Year Defence Interest subsidies Loans and Capital 1982-83 187.42(60.87) 120.49(39.13) 307.91 9.53 6.13 15.66 Expenditures payments advances outlay 1983-84 222.51(62.62) 132.83(37.38) 355.34 9.72 5.80 15.52 1980-81 2.19 1.74 1.36 3.53 2.05 1984-85 276.91(63.46) 159.41(36.54) 436.32 10.79 6.21 17.00 1981-82 2.19 1.82 1.10 3.22 2.39 1985-86 339.24(64.41) 187.42(35.59) 526.66 11.72 6.47 18.19 1982-83 2.29 2.00 1.15 3.76 2.37 1986-87 408.60(64.94) 220.56(35.06) 629.16 12.61 6.81 19.42 1983-84 2.27 2.09 1.27 3.52 2.28 1987-88 461.74(67.64) 220.87(32.36) 682.61 12.54 6.00 18.54 1984-85 2.46 2.33 1.57 3.58 2.63 1988-89 541.06(68.39) 250.05(31.61) 791.11 12.38 5.72 18.11 1985-86 2.43 2.59 1.66 3.83 2.64 1989-90 642.10(69.11) 286.98(30.89) 929.08 12.79 5.72 18.51 1986-87 2.83 2.85 1.68 3.95 2.86 1990-91 735.16(69.82) 317.82(30.18) 1052.98 12.54 5.42 17.96 1987-88 2.41 3.06 1.62 3.47 2.52 1991-92 822.92(73.86) 291.22(26.14) 1114.14 12.21 4.32 16.53 1988-89 2.19 3.27 1.77 3.38 2.35 1992-93 927.02(75.50) 299.16(24.40) 1226.18 11.97 3.86 15.83 1989-90 2.03 3.54 2.09 3.37 2.35 1993-94 1081.69(76.25) 336.84(23.75) 1418.53 12.14 3.78 15.91 1990-91 1.85 3.67 2.07 3.35 2.07 1994-95 1221.12(75.97) 386.27(24.03) 1607.39 11.68 3.69 15.37

88 Area Studies Area Studies 89 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits

88 Area Studies Area Studies 89 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits Table -7: Components of Revenue Expenditures Table -6: Components of Revenue and Capital Expenditures as a percentage of GDP Rs. billion As a percent of Revenue Expenditures Year Defence Interest subsidies Loans and Capital Year Defence Interest Defence Interest subsidies subsidies Expenditures payments advances outlay Expenditures payments Expenditures payments

1991-92 1.70 3.95 1.82 2.63 1.64 1980-81 32.78 26.04 20.28 22.75 18.07 14.07 1992-93 1.56 4.01 1.40 2.10 1.73 1981-82 38.44 31.95 19.41 24.95 20.74 12.60 1982-83 44.94 39.38 22.62 23.98 21.01 12.07 1993-94 1.68 4.12 1.30 2.29 1.47 1983-84 51.89 47.95 29.02 23.32 21.55 13.04 1994-95 1.57 4.21 1.13 2.27 1.42 1984-85 63.24 59.74 40.38 22.84 21.57 14.58 1995-96 1.54 4.08 1.03 1.98 1.15 1985-86 70.21 75.12 47.96 20.70 22.14 14.14 1.48 4.19 1996-97 1.09 1.96 1.00 1986-87 91.79 92.46 54.51 22.46 22.63 13.34 1997-98 1.66 4.17 1.18 2.17 1.11 1987-88 88.61 112.51 59.80 19.19 24.37 12.95 1998-99 1.66 4.32 1.31 2.44 1.04 1988-89 95.58 142.78 77.32 17.67 26.39 14.29 1999-00 1.75 4.49 1.22 1.24 1.19 1989-90 101.94 177.57 104.74 15.88 27.65 16.31 2000-01 1.72 4.58 1.24 1.06 1.14 1990-91 108.74 214.98 121.58 14.79 29.24 16.54 1991-92 2001-02 1.62 4.58 1.33 1.46 1.13 114.42 265.96 122.53 13.90 32.32 14.89 1992-93 121.09 310.75 108.24 13.06 33.52 11.68 2002-03 1.61 4.66 1.72 1.25 1.15 1993-94 149.78 367.41 116.05 13.85 33.97 10.73 2003-04 1.52 4.37 1.56 1.01 1.20 1994-95 164.26 440.60 118.54 13.45 36.08 9.71 2004-05 1.35 3.92 1.42 0.89 1.61 1995-96 188.41 500.45 126.66 13.47 35.78 9.06 2005-06 1.31 3.59 1.29 0.31 1.49 1996-97 209.97 594.78 154.99 13.21 37.42 9.75 2006-07 1.20 3.50 1.33 0.20 1.40 1997-98 261.74 656.37 185.40 14.51 36.40 10.28 2007-08 1.09 3.43 1.42 0.23 2.14 1998-99 298.61 778.82 235.93 13.80 35.98 10.90 2008-09 1.30 3.41 2.30 0.25 1.35 1999-00 352.16 902.49 244.87 14.14 36.23 9.83 2009-10 1.40 3.30 2.19 0.24 1.50 2000-01 372.38 993.14 268.38 13.40 35.75 9.66 2001-02 380.59 1074.60 312.10 12.62 35.65 10.35 2010-11 1.20 3.05 2.26 0.52 1.52 2002-03 407.09 1178.04 435.33 12.02 34.78 12.85 2011-12 1.18 3.11 2.44 0.24 1.53 2003-04 432.03 1240.88 443.23 11.93 34.27 12.24 *Figures for 2011-12 are revised estimates. 2004-05 438.62 1269.34 459.57 11.41 33.03 11.96 Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12. 2005-06 482.11 1326.30 475.22 10.97 30.19 10.82 2006-07 516.82 1502.72 571.25 10.04 29.20 11.10 2007-08 542.19 1710.30 709.26 9.12 28.77 11.93 2008-09 733.05 1922.04 1297.08 9.23 24.21 16.34 2009-10 906.69 2130.93 1413.51 9.94 23.37 15.50 2010-11 920.61 2340.22 1734.20 8.85 22.49 16.66 2011-12 1047.93 2756.18 2162.97 9.02 23.72 18.62 *Figures for 2011-12 are revised estimates. Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12.

90 Area Studies Area Studies 91 Jasneet Kaur Wadhwa Public Expenditures in India and its impact on the Deficits Table -7: Components of Revenue Expenditures Table -6: Components of Revenue and Capital Expenditures as a percentage of GDP Rs. billion As a percent of Revenue Expenditures Year Defence Interest subsidies Loans and Capital Year Defence Interest Defence Interest subsidies subsidies Expenditures payments advances outlay Expenditures payments Expenditures payments

90 Area Studies Area Studies 91 Jasneet Kaur Wadhwa Table - 8: Expenditures and the Deficits of the Central Government. Educational Status of India and China: Rs. billion As a percent of GDP A Silver Line for Development Year Gross Fiscal Revenue Revenue Total Gross Fiscal Revenue Deficit Deficit Expenditures Expenditures Deficit Deficit Shamshad and Md. Naiyer Zaidy*

1980-81 82.99 20.37 9.63 15.21 5.55 1.36 1981-82 86.66 3.84 8.76 14.37 4.93 0.22 1982-83 106.27 13.08 9.53 15.66 5.40 0.67 Abstract 1983-84 130.30 25.40 9.72 15.52 5.69 1.11 In the present research work, a comparative analysis has been made between 1984-85 174.16 42.25 10.79 17.00 6.79 1.65 India and China regarding their population growth & distribution and their 1985-86 218.58 58.89 11.72 18.19 7.55 2.03 trends, patterns of literacy status & levels of education. This study is based on 1986-87 263.42 77.77 12.61 19.42 8.13 2.40 secondary sources of data, collected from Census of India, 2011, New Delhi and 1987-88 270.44 91.37 12.54 18.54 7.34 2.48 Census of China, 2010, Beijing. The present study reveals that the decadal 1988-89 309.23 105.15 12.38 18.11 7.08 2.41 population growth rate of India has been always higher than China barring 1989-90 356.32 119.14 12.79 18.51 7.10 2.37 exceptional Census year 1982. The population of India is highly unevenly 1990-91 446.32 185.62 12.54 17.96 7.61 3.17 distributed while population of China is very much evenly distributed because 1991-92 363.25 162.62 12.21 16.53 5.39 2.41 excluding the four provinces of China (Guangdong, Sichuan, Shandong and Henan) no one single province witnessed the high and medium proportional 1992-93 401.73 185.74 11.97 15.83 5.19 2.40 share of population rather than low share in population of the country. The 1993-94 602.57 327.16 12.14 15.91 6.76 3.67 general literacy rate among Indian population since 1981 Census has been 1994-95 577.03 310.29 11.68 15.37 5.52 2.97 continuously increasing more or less at the rate of ten percent per Indian Census 1995-96 602.43 297.31 11.40 14.53 4.91 2.42 and recorded 73.00 percent in the 2011 Census while in China since 1982 1996-97 667.33 326.54 11.20 14.16 4.70 2.30 Census it has increased at the rate of twelve to thirteen percent in the subsequent 1997-98 889.37 464.49 11.47 14.76 5.66 2.95 Censuses and reached nearly saturation point in 2010 Census (94.27 percent). 1998-99 1133.49 669.76 12.00 15.49 6.29 3.71 Among the literate population, the primary literate population of India (55.6 1999-00 1047.16 675.96 12.38 14.81 5.20 3.36 percent) is nearly double than primary literate population of China (30.2 percent) and reverse situation is observed in the senior secondary education and 2000-01 1188.16 852.34 12.81 15.01 5.48 3.93 higher education. 2001-02 1409.55 1001.62 12.84 15.43 6.00 4.27 Population, Literacy Rate, Education, Region, India, China. 2002-03 1450.72 1078.79 13.38 16.33 5.73 4.26 Key Words: 2003-04 1232.73 982.61 12.76 16.60 4.34 3.46 2004-05 1257.94 783.38 11.85 15.37 3.88 2.42 Introduction 2005-06 1464.35 922.99 11.90 13.69 3.96 2.50 India and China have been engaged in the pursuit of scientific and 2006-07 1425.73 802.22 11.98 13.58 3.32 1.87 technological achievements and innovations, both individually 2007-08 1269.12 525.69 11.92 14.29 2.54 1.05 as well as bilaterally and multilaterally, as witnessed from the 2008-09 3369.92 2535.39 14.10 15.70 5.99 4.50 written records date back to at least 2nd century B.C., and the base 2009-10 4184.82 3389.98 14.12 15.87 6.48 5.25 of all these scientific and technological achievements always has 2010-11 3735.91 2522.52 13.56 15.60 4.87 3.29 been paved and mounted by the education. With the increasing 2011-12 5219.80 3949.51 13.12 14.89 5.89 4.46 *Figures for 2011-12 are revised estimates. * Shamshad and Md. Naiyer Zaidy, Research Scholars, Department of Geography, Source: Government of India, ministry of finance, Indian public finance statistics, 2011-12. Aligarh Muslim University, Aligarh, Email: [email protected]

92 Area Studies Area StudiesStudies, Vol.7(2), July - December 2013, pp. 93-117 93 Jasneet Kaur Wadhwa Table - 8: Expenditures and the Deficits of the Central Government. Educational Status of India and China: Rs. billion As a percent of GDP A Silver Line for Development Year Gross Fiscal Revenue Revenue Total Gross Fiscal Revenue Deficit Deficit Expenditures Expenditures Deficit Deficit Shamshad and Md. Naiyer Zaidy*

92 Area Studies Area StudiesStudies, Vol.7(2), July - December 2013, pp. 93-117 93 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development socio-economic disparities and global crises over food, water, Millennium Development Goals, as it reduces poverty, energy, etc. the literacy often has been considered a survival tool inequality, mental isolation, friendly relations and lays a in a fiercely competitive world, because it is an essential foundation for sustained economic growth (United Nations 2009, requirement for life-long learning, a vital means of human Chandna & Sidhu, 1980: 98). development and of achieving the Millennium Development Literacy encompasses a complex set of skills. At its simplest, it is a Goals (MDGs). Therefore, one of the important indicators of combination of word-reading skills and knowledge-based social development is the level of literacy and educational literacy competencies. Word-reading skills, such as decoding and attainment; a high level of which is considered to be an important letter-sound awareness, are more procedural in nature and are indicator in the process of modernisation. The Constitution of necessary for reading written text. Knowledge-based literacy India has given the Fundamental Right to get the education in the competencies include vocabulary knowledge, background Article 29 (a) and (b) and Article 30. To achieve the objective of knowledge related to the words included in the text, and the 'Education for All', Indian Parliament passed 'The Right of ability to integrate these two features with contextual information Children to Free and Compulsory Education Act or Right to to make sense of a given text. Knowledge-based competencies Education Act (RTE)' on 4 August 2009 under Article 21A in the also draw on comprehension skills, which enable the reader to constitution and came into force since 1 April 2010 to provide free draw inferences and conclusions from complex texts, to compare and compulsory education to children between 6 to 14 years of and evaluate the effectiveness of texts, and to interpret and age, because education is considered as fairly reliable index of integrate ideas and information, particularly information from socio-cultural and economic advancement of any country. discrepant sources (Nonie, 2012: 73-88). Hence, the concept of Universal Declaration of Human Rights (1948) also stated that: literacy, which varies from country to country, generally, refers to “Everyone has the right to education. Education shall be free, at least in the minimum level of literacy skill. This minimum level of skill the elementary and fundamental stages. Elementary education shall be varies from ability to communicate orally, to make a check of a compulsory. Technical and professional education shall be made variety of difficult arithmetical computations. The United generally available and higher education shall be equally accessible to all Nations has defined literacy as the 'ability of a person (who is 10 on the basis of merit. …” (Article 26). years of age) to read and write with understanding a simple Dufera in his keynote address expressed that education is the statement on his everyday life.' The Census of India (2011) defines bedrock of all forms of development like social, economic, literacy as a ratio between literate population and total technological and political. Development means much more than population excluding seven years of children. In other words, a just an improvement in the economic well-being or condition of person aged 7 years and above who can both read and write with community members. Development includes the fulfilment of understanding in any language has been taken as literate, while, each person's material, spiritual and societal needs. It is defined in China, literate population refers to population aged 15 and as: process for enlarging people's choices. These choices primarily above who can read and write. Shamshad and Shakir (2011) reflect the desire to lead a long and healthy life; acquire basic defined literacy qualitatively as, 'persons aged 5 years and above who knowledge; and have an access to resources essential for a decent can read and write simple messages, sine-boards, news, posters, and standard of living (p. 4). Thus, education is one of the most official documents, etc. and able to compute his domestic calculations by important indicators of development and a key to attaining the knowing all alphabets of any regional language with understanding may

94 Area Studies Area Studies 95 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development socio-economic disparities and global crises over food, water, Millennium Development Goals, as it reduces poverty, energy, etc. the literacy often has been considered a survival tool inequality, mental isolation, friendly relations and lays a in a fiercely competitive world, because it is an essential foundation for sustained economic growth (United Nations 2009, requirement for life-long learning, a vital means of human Chandna & Sidhu, 1980: 98). development and of achieving the Millennium Development Literacy encompasses a complex set of skills. At its simplest, it is a Goals (MDGs). Therefore, one of the important indicators of combination of word-reading skills and knowledge-based social development is the level of literacy and educational literacy competencies. Word-reading skills, such as decoding and attainment; a high level of which is considered to be an important letter-sound awareness, are more procedural in nature and are indicator in the process of modernisation. The Constitution of necessary for reading written text. Knowledge-based literacy India has given the Fundamental Right to get the education in the competencies include vocabulary knowledge, background Article 29 (a) and (b) and Article 30. To achieve the objective of knowledge related to the words included in the text, and the 'Education for All', Indian Parliament passed 'The Right of ability to integrate these two features with contextual information Children to Free and Compulsory Education Act or Right to to make sense of a given text. Knowledge-based competencies Education Act (RTE)' on 4 August 2009 under Article 21A in the also draw on comprehension skills, which enable the reader to constitution and came into force since 1 April 2010 to provide free draw inferences and conclusions from complex texts, to compare and compulsory education to children between 6 to 14 years of and evaluate the effectiveness of texts, and to interpret and age, because education is considered as fairly reliable index of integrate ideas and information, particularly information from socio-cultural and economic advancement of any country. discrepant sources (Nonie, 2012: 73-88). Hence, the concept of Universal Declaration of Human Rights (1948) also stated that: literacy, which varies from country to country, generally, refers to “Everyone has the right to education. Education shall be free, at least in the minimum level of literacy skill. This minimum level of skill the elementary and fundamental stages. Elementary education shall be varies from ability to communicate orally, to make a check of a compulsory. Technical and professional education shall be made variety of difficult arithmetical computations. The United generally available and higher education shall be equally accessible to all Nations has defined literacy as the 'ability of a person (who is 10 on the basis of merit. …” (Article 26). years of age) to read and write with understanding a simple Dufera in his keynote address expressed that education is the statement on his everyday life.' The Census of India (2011) defines bedrock of all forms of development like social, economic, literacy as a ratio between literate population and total technological and political. Development means much more than population excluding seven years of children. In other words, a just an improvement in the economic well-being or condition of person aged 7 years and above who can both read and write with community members. Development includes the fulfilment of understanding in any language has been taken as literate, while, each person's material, spiritual and societal needs. It is defined in China, literate population refers to population aged 15 and as: process for enlarging people's choices. These choices primarily above who can read and write. Shamshad and Shakir (2011) reflect the desire to lead a long and healthy life; acquire basic defined literacy qualitatively as, 'persons aged 5 years and above who knowledge; and have an access to resources essential for a decent can read and write simple messages, sine-boards, news, posters, and standard of living (p. 4). Thus, education is one of the most official documents, etc. and able to compute his domestic calculations by important indicators of development and a key to attaining the knowing all alphabets of any regional language with understanding may

94 Area Studies Area Studies 95 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development be termed as literates', instead of quantitative definition of literacy. literacy, of course, is not exclusively or even primarily related to Comparisons between India and China have often been made in its role in promoting participatory economic growth (Dreze and the development literature. For the similar challenges faced by Loh, 1995: 2868). However, a comparison of India's and China's these countries since 1940s, the different routes they have taken to experiences in the field of basic education may be of some interest. address these challenges. Right now, economic growth tends to Indeed, the expansion of basic education at an early stage is an be the most common focus of comparison, and there is indeed essential feature of China's development experience, just as the much to learn from China's achievements in this field during the persistence of widespread illiteracy is one of India's most serious 1980s and 1990s. Since the start of the reforms in 1978, China has social failures. Therefore, a comparative study of India and China experienced unprecedented economic growth, which has led to in terms of their population and education has been made in the spectacular reductions in income poverty (Fan, Zhang and present research paper. Zhang, 2002; World Bank, 2000). However, this growth has been Objectives accompanied by dramatic increases in inequality, especially in The present study attempts to cover the following main the 1990s. In recent years, the policy debate in China has begun to objectives: reflect strong concern with this increasing inequality (CASS, 2005; i. to analyse the growth rate and spatial distribution of UNDP, 2000). Growing disparities along different dimensions population of India and China, (male-female, ruralurban, inlandcoastal, etc.) are cited as reasons for growing social unrest, not to mention the fact the poverty ii. to examine the trends and patterns of literacy rate in India and reduction would have been even more spectacular has the growth China, and not been accompanied by sharp increase in inequality. Most of the iii. to inspect the educational attainment of the literate literature on inequality in China is about income inequality population of India and China. (Aaberge and Li, 1997: 335-355; Chen and Martin, 1996: 23-56; De'murger et al., 2002: 146-197; Hussain, Lanjouw, and Stern, Study Area 1994: 1947-1957; Kanbur and Zhang, 1999: 686-701, 2005: 87-106; Geographic Profile of India Khan, Riskin, and Zhao, 1993: 19-35; Lyons, 1991: 471-506; Tsui, India as a whole has been chosen as study area for the present 1991: 1-21; Yang, 1999: 306-310). Relatively little analysis is research work and the boundary of a state/UT has been available on inequality in other dimensions of human considered as the smallest unit of study. The country is comprised development, social conditions, etc (Kanbur and Zhang, 2005: of twenty eight states and seven union territories. It lies entirely in 189-190). In assessing that success, however, it is important to take the Northern Hemisphere. The mainland extends between 8˚ 4΄ note of the social conditions that have formed the basis of rapid and 37˚ 6΄ North latitudes, and 68˚ 7΄ to 97˚ 25΄ East longitudes (Fig.1). It and participatory economic growth in China over that period. takes up a geographical area of about 3,287,240 square kilometers (2.4 One of these social conditions, which, is solidly rooted in the 'pre- percent of world's geographical area) bounded by the Himalayas 1 reform' period, is widespread literacy. The importance of in the north and Indian Ocean in the south, surrounded by

1 Pakistan and Afghanistan in the north-west, China, Bhutan and On other aspects of the relationship between rapid economic growth in the post- reform period and the social achievements of the pre-reform period, see Dreze and Nepal in the north, Bangladesh and Myanmar in the east. The Sen, 1995. Chapter 41.

96 Area Studies Area Studies 97 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development be termed as literates', instead of quantitative definition of literacy. literacy, of course, is not exclusively or even primarily related to Comparisons between India and China have often been made in its role in promoting participatory economic growth (Dreze and the development literature. For the similar challenges faced by Loh, 1995: 2868). However, a comparison of India's and China's these countries since 1940s, the different routes they have taken to experiences in the field of basic education may be of some interest. address these challenges. Right now, economic growth tends to Indeed, the expansion of basic education at an early stage is an be the most common focus of comparison, and there is indeed essential feature of China's development experience, just as the much to learn from China's achievements in this field during the persistence of widespread illiteracy is one of India's most serious 1980s and 1990s. Since the start of the reforms in 1978, China has social failures. Therefore, a comparative study of India and China experienced unprecedented economic growth, which has led to in terms of their population and education has been made in the spectacular reductions in income poverty (Fan, Zhang and present research paper. Zhang, 2002; World Bank, 2000). However, this growth has been Objectives accompanied by dramatic increases in inequality, especially in The present study attempts to cover the following main the 1990s. In recent years, the policy debate in China has begun to objectives: reflect strong concern with this increasing inequality (CASS, 2005; i. to analyse the growth rate and spatial distribution of UNDP, 2000). Growing disparities along different dimensions population of India and China, (male-female, ruralurban, inlandcoastal, etc.) are cited as reasons for growing social unrest, not to mention the fact the poverty ii. to examine the trends and patterns of literacy rate in India and reduction would have been even more spectacular has the growth China, and not been accompanied by sharp increase in inequality. Most of the iii. to inspect the educational attainment of the literate literature on inequality in China is about income inequality population of India and China. (Aaberge and Li, 1997: 335-355; Chen and Martin, 1996: 23-56; De'murger et al., 2002: 146-197; Hussain, Lanjouw, and Stern, Study Area 1994: 1947-1957; Kanbur and Zhang, 1999: 686-701, 2005: 87-106; Geographic Profile of India Khan, Riskin, and Zhao, 1993: 19-35; Lyons, 1991: 471-506; Tsui, India as a whole has been chosen as study area for the present 1991: 1-21; Yang, 1999: 306-310). Relatively little analysis is research work and the boundary of a state/UT has been available on inequality in other dimensions of human considered as the smallest unit of study. The country is comprised development, social conditions, etc (Kanbur and Zhang, 2005: of twenty eight states and seven union territories. It lies entirely in 189-190). In assessing that success, however, it is important to take the Northern Hemisphere. The mainland extends between 8˚ 4΄ note of the social conditions that have formed the basis of rapid and 37˚ 6΄ North latitudes, and 68˚ 7΄ to 97˚ 25΄ East longitudes (Fig.1). It and participatory economic growth in China over that period. takes up a geographical area of about 3,287,240 square kilometers (2.4 One of these social conditions, which, is solidly rooted in the 'pre- percent of world's geographical area) bounded by the Himalayas 1 reform' period, is widespread literacy. The importance of in the north and Indian Ocean in the south, surrounded by

96 Area Studies Area Studies 97 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

north-south extension of the country is 3,214 kilometers and east- west expansion is 2,933 kilometers, the total land frontier is 15,200 kilometers and coast line is 7,516.5 kilometers. India is the second most populous country in the world. According to the 2011 Indian Census, the total population of India was 1210 million (17.5 per cent of world's population) of which 68.84 per cent was rural and remaining 31.16 per cent was classified as urban. The general density of population was 382 persons per square kilometer. The general sex ratio, that is the number of females per thousand males, was 943 while in rural areas it was 949 and in urban areas 929. The literacy rate was 73.0 per cent. The percentage of literacy in rural and urban population was 67.8 per cent and 84.1 per cent respectively. In the country, 39.8 per cent population was employed. The employment rate among males was 53.3 per cent and among females it was only 25.5 per cent. Geographic Profile of China China as a whole also has been chosen as study area for the present research work and the boundary of a province has been considered as the smallest unit of study. The country is comprised of thirty one provinces. It also lies entirely in the Northern Hemisphere (Fig.1). The mainland extends between 18˚ 15΄ and 53˚ 30΄ North latitudes, and 74˚ to 134˚ 30΄ East longitudes. It takes up a geographical area of about 9,598,0942 square kilometers (6.4 percent of world's geographical area) surrounded by Mongolia in the north, Russian Federation in north-east, Kazakhstan in northwest, Kyrgyzstan, Tajikistan, Pakistan and Afghanistan in west, and India, Nepal, Bhutan, Myanmar and Laos in south-western parts, bounded by Pacific Ocean in the south-east and eastern parts and neighbouring countries in this side are North Korea, South Korea, Japan, the Philippines, Brunei, Indonesia, Malaysia and Vietnam. The north-south extension of the country is 5,500

2 Total of separate UN figures for Mainland China is 9,596,961 km2 including Hong Kong SAR (1,104 km²) and Macau (29 km²) and Excludes all disputed territories. Encyclopaedia Britannica (EB): 9,572,900 km2.

98 Area Studies Area Studies 99 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

98 Area Studies Area Studies 99 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development kilometers and east-west expansion is 5,200 kilometers, the total Table 1. Analysis of the data given in Table 1 shows that decadal land frontier is 22,117 kilometers and coast line is 14,500 population growth of India in 1951 was recorded below the fifteen kilometers. China is the first most populous country in the world. percent (13.3%), and then it has continuously registered above According to the 2010 Chinese Census, the total population of twenty percent in Indian Censuses 1961, 1971, 1981, 1991 and China was 1332 million (19.1 per cent of world's population) of 2001. But it is the first time throughout the demographic history which 48.9 per cent was rural and remaining 51.1 per cent was of India that India has observed a decline in its decadal classified as urban. The general density of population was 141 population growth rate (17.7 percent) in 2011 Indian Census with persons per square kilometer. The general sex ratio, that is the the exception 1921 Census. However, there is marked difference number of males per hundred females, was 105 while the sex ratio between Censuses of 1921 and 2011 regarding the declining at birth (SRB) in rural areas was 120 and in urban areas 122. The population growth, because the decline in growth rate of literacy rate was 94.27 per cent. The percentage of literacy in male population (even negative population growth rate i.e. - 0.31 and female population was 95.7 per cent and 87.6 per cent percent) during 1921 Indian Census was due to prevalence of respectively. In the country, 81.9 per cent population was epidemic of influenza, plague, small pox, and famine but the employed. decline of population growth rate in recent Indian Census 2011 is Database Methodology due to growth and development of the country. The entire present research work is based on the secondary sources of data collected from Census of India (2011), New Delhi and Census of China, 2010, Beijing. The boundary of the state in India and province in China has been taken as a unit of the study. The data about the trends of population growth, patterns of population distribution, trends and patterns of literacy, and educational attainment have been converted into percentage and processed in tabular form. On the basis of tables and processed data, different maps and diagrams have been prepared with the As far as population growth rate of China is concerned, China has application of GIS-Arc view programme (version 3.2) and Origin been continuously witnessing very instability in its decadal programme (version 6.1) respectively to show their patterns of population growth rate from Census 1952 to 2010, as 19.2 percent inter-state/province variations in India and China. Besides, the decadal population growth rate was accounted in 1964 Census, spatial distribution of the population and literacy rates in the which increased tremendously to 45.1 percent in 1982 Chinese union territories of India have not been shown on the figures but Census, while, it has terrifically fallen down upto 12.4 percent in their average value has been given in Tables 2 and 4. subsequent Census 1990 (result of the one-child policy, officially Results and Discussion the family planning policy, 1979) and 11.7 percent in 2000 Census. Trends of Population Growth in India and China The current Chinese Census 2010 recorded 5.8 percent decadal The data about decadal growth of population of India from 1951 population growth (see Diagram 1). The point to be noted here is to 2011 and of China from 1953 to 2010 have been presented in that the decrease in population growth rate since 1953 Census to

100 Area Studies Area Studies 101 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development kilometers and east-west expansion is 5,200 kilometers, the total Table 1. Analysis of the data given in Table 1 shows that decadal land frontier is 22,117 kilometers and coast line is 14,500 population growth of India in 1951 was recorded below the fifteen kilometers. China is the first most populous country in the world. percent (13.3%), and then it has continuously registered above According to the 2010 Chinese Census, the total population of twenty percent in Indian Censuses 1961, 1971, 1981, 1991 and China was 1332 million (19.1 per cent of world's population) of 2001. But it is the first time throughout the demographic history which 48.9 per cent was rural and remaining 51.1 per cent was of India that India has observed a decline in its decadal classified as urban. The general density of population was 141 population growth rate (17.7 percent) in 2011 Indian Census with persons per square kilometer. The general sex ratio, that is the the exception 1921 Census. However, there is marked difference number of males per hundred females, was 105 while the sex ratio between Censuses of 1921 and 2011 regarding the declining at birth (SRB) in rural areas was 120 and in urban areas 122. The population growth, because the decline in growth rate of literacy rate was 94.27 per cent. The percentage of literacy in male population (even negative population growth rate i.e. - 0.31 and female population was 95.7 per cent and 87.6 per cent percent) during 1921 Indian Census was due to prevalence of respectively. In the country, 81.9 per cent population was epidemic of influenza, plague, small pox, and famine but the employed. decline of population growth rate in recent Indian Census 2011 is Database Methodology due to growth and development of the country. The entire present research work is based on the secondary sources of data collected from Census of India (2011), New Delhi and Census of China, 2010, Beijing. The boundary of the state in India and province in China has been taken as a unit of the study. The data about the trends of population growth, patterns of population distribution, trends and patterns of literacy, and educational attainment have been converted into percentage and processed in tabular form. On the basis of tables and processed data, different maps and diagrams have been prepared with the As far as population growth rate of China is concerned, China has application of GIS-Arc view programme (version 3.2) and Origin been continuously witnessing very instability in its decadal programme (version 6.1) respectively to show their patterns of population growth rate from Census 1952 to 2010, as 19.2 percent inter-state/province variations in India and China. Besides, the decadal population growth rate was accounted in 1964 Census, spatial distribution of the population and literacy rates in the which increased tremendously to 45.1 percent in 1982 Chinese union territories of India have not been shown on the figures but Census, while, it has terrifically fallen down upto 12.4 percent in their average value has been given in Tables 2 and 4. subsequent Census 1990 (result of the one-child policy, officially Results and Discussion the family planning policy, 1979) and 11.7 percent in 2000 Census. Trends of Population Growth in India and China The current Chinese Census 2010 recorded 5.8 percent decadal The data about decadal growth of population of India from 1951 population growth (see Diagram 1). The point to be noted here is to 2011 and of China from 1953 to 2010 have been presented in that the decrease in population growth rate since 1953 Census to

100 Area Studies Area Studies 101 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

2010 Census has been due to development and changes in family planning rather than any epidemic and famine.

Population Distribution of India and China Table 2 visualizes the state or province wise population distribution in India and China. There is a large range of variations in the percentage distribution of population among the states of India and provinces of China. The distribution of population in India varies from the lowest 0.05 percent in the state of Sikkim to the highest 16.51 percent in the state of Uttar Pradesh while in China it ranges from the highest 7.83 percent in Guangdong province to the lowest 0.23 percent in Tibet province. The whole ranges of spatial variations of population distribution may be arranged into three categories such as, high (above 11.02 percent), medium (11.02 to 5.54 percent) and low (below 5.54 percent).

102 Area Studies Area Studies 103 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

2010 Census has been due to development and changes in family planning rather than any epidemic and famine.

102 Area Studies Area Studies 103 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Figure 2 exhibits that Uttar Pradesh is the only state which represents highest share (above 11.02 percent) of population of India, while seven states namely West Bengal, Bihar, Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh and Tamil Nadu constitute the medium proportion (11.02 to 5.54 percent) of population of India. Among them, West Bengal and Bihar in the east and Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh and Tamil Nadu in west, north-central to south-eastern parts form two separate distinct regions in the country. Remaining twenty states of India fall under the low level (below 5.54 percent) of share of population composition and make four identifiable regions in the country. The First region in the north- eastern part is created by the states of Arunachal Pradesh, Nagaland, Mizoram Manipur, Tripura, Meghalaya and Assam. Second region in the northern part is composed by the five states i.e. Jammu and Kashmir, Himachal Pradesh, Punjab, Uttarakhand and Haryana. The three states namely Jharkhand, Chhattisgarh and Odhisha form the third region in the eastern part of the country. The last fourth region in the south-western part is comprised by Karnataka Goa and Kerala. The states of Gujarat and Sikkim are widely scattered while union territories are not shown through the map due to limitation of figural representation in the study area. The spatial analysis the Figure 3 reveals that barring the state of Uttar Pradesh, the percentage share of population distribution in the states of India steadily decreases from medium level in central states to low percentage share of population in the far peripheral states of the country. The Figure 3 depicts that the four provinces of China share medium proportion (11.02 to 5.54 percent) of population and they also form three small distinct regions i.e. Guangdong in the extreme southern part, Sichuan in the central part and Shandong and Henan in the eastern part of the study area. However, all remaining provinces such as Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi, Hubei, Hunan, Guangxi,

104 Area Studies Area Studies 105 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Hainan, Chongqing, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, general literacy rate, as in 1981 Census, male literacy rate was Qinghai, Ningxia and Xinjiang compose the share of population 56.38 percent and it was accounted 80.90 percent in 2011 Census, of China below 5.54 percent. Thus, excluding the provinces of but it should be near to 86.00 percent. On the other hand, the rise Guangdong, Sichuan, Shandong and Henan, no one single in female literacy rate is quite satisfactory than males' because the province witnessed the high and medium proportional share of female literacy rate in 1981 Indian Census was 29.76 percent, it population of China and all the provinces have low share in increased to 39.29 percent in 1991 (nearly ten percent increase like population of the country. general literacy rate), further, it reached 53.67 percent in 2001 (more than fourteen percent increase) and registered 64.60 percent in current Indian Census 2011. Nonetheless, the gender gap in literacy rate is reasonably still large and a lot of efforts have to be done (see Diagram 2).

The general literacy rate in China during the 1982 Census was 65.51 percent that has increased twelve to thirteen percent in the Censuses of 1990 (77.79 percent) and 2000 (90.92 percent), and finally got almost saturated in 2010 (94.27 percent). Whereas, gender wise analysis of literacy shows that the male literacy has been observed very slow rise e.g. nearly eight percent rise in 1990 Trends of Literacy in India and China Census (87.02 percent) and 2000 Census (95.14 percent) and Table 3 exhibits the literacy rate of population in India and China. ended with only two percent rise in 2010 Census (97.07 percent). The literacy rate among Indian population during the 1981 Moreover, the female literacy rate in China also recorded very fast Census was 43.57 percent, since then the literacy rate, one percent increase from 51.14 percent in 1982 Census to subsequent Chinese more or less, has been continuously increasing at the rate of ten Censuses like 68.07 percent in 1990, 86.53 percent 2000 and 91.33 percent per decade or per Indian Census i.e. 52.21 percent in 1991, percent in 2010. Thus, there is no much gender gap in literacy rate 64.84 percent in 2001 and 73.00 percent in 2011. While, increase in in China because the general, male and female literacy rate in 2010 male-female literacy rates over the period are not sequential or Chinese Census was registered above ninety percent (see proportional because male literacy rate has not recorded ten Diagram 2). percent increase in each subsequent Indian Censuses like the

106 Area Studies Area Studies 107 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Literacy Distribution in India and China Table 4 shows the state or province wise literacy distribution in India and China. The range of literacy distribution in India varies from the lowest 61.8 percent in Bihar state to the highest 94.0 percent in Kerala state while in China it ranges from the highest 98.3 percent in Beijing province to the lowest 62.2 percent in Tibet province. The whole ranges of spatial variations of literacy distribution may be arranged into three groups such as, high (above 86.13 percent), medium (86.13 to 73.97 percent) and low (below 73.97 percent). Figure 4 depicts that there are only four states of India namely Goa, Kerala, Mizoram and Tripura which experienced high level (above 86.12 percent) of literacy rate whereas merely two states (Mizoram and Tripura) make a very small region in the extreme north-eastern part of the country. Thirteen states fall under the medium level (86.13 to 73.97 percent) of literacy rate and form four remarkable regions in the country. The first region is constituted by the states of Himachal Pradesh, Uttarakhand, Punjab and Haryana in the northern part of the country.

108 Area Studies Area Studies 109 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Chhattisgarh, Madhya Pradesh and Andhra Pradesh constitute an outstanding region in the central part, while, Jammu and Kashmir in the extreme north and Arunachal Pradesh and Assam in the far north-east make two small regions in the Regional

analysis of the Figure 4 exhibits that excluding few states lying on the flanks of far south-west as well as north-east, all the states of India experienced medium and low level of literacy rate. The Figure 5 shows that barring Tibet province of China which has medium level (86.13 to 73.97 percent) of literacy rate, all the The second big and long contiguous region also is composed by provinces namely Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, four states i.e. Gujarat, Maharashtra, Karnataka and Tamil Nadu Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, in the south-western fringe part. The states of Sikkim and West Fujian, Jiangxi, Shandong, Henan Hubei, Hunan, Guangdong, Bengal in the eastern part and states of Mizoram and Tripura in Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan, the north-east formed third and fourth regions in the study area Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang, witnessed the respectively. The eleven states come under the low level (below high level (above 86.13 percent) of literacy rate in the country. 73.97 percent) of literacy rate, wherein eight states namely Rajasthan, Uttar Pradesh, Bihar, Jharkhand, Odhisha,

110 Area Studies Area Studies 111 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Diagram 3: Levels of Education in India, 2011 and China, 2010 Levels of Education in India and China The Table 5 shows educational attainment of literate population of India and China. The general literacy rate in India, according to 2011 Census, was recorded 73.00 percent of which more than fifty percent (55.6 %) literate population of the country achieved the education only up to the primary level, more than one-fourth (30.2 percent) literate population has the secondary education while the categories of senior secondary education and higher education accounted 7.5 and 6.7 percent literate population of India respectively (see Diagram 3).

Source: Based on Table 5.

Analysis of Diagram 3 reveals that literate population of India, who has primary education (55.6 percent), is nearly double than literate population of China at primary education (30.2 percent). As far as educational attainment of literate population of China is On the contrary, the literate population of China at senior concerned, more than one-forth (30.2 percent) literate population secondary education (15.9 percent) and higher education (10.1 has the education upto primary level. The significant proportion percent) is almost double than literate population of India at of literate population (43.8 percent) has the secondary level of senior secondary education (7.5 percent) and higher education education. Moreover, the categories of senior secondary (6.7 percent) respectively. education and higher education observed 15.9 and 10.1 percent literate population of China respectively (see Diagram 3). Conclusions The overall analysis of both countries i.e. India and China reveals that the decadal population growth rate of India has been always higher than China barring exceptional Census year 1982. The decline in population growth rate of India (negative population growth rate 1921 Indian Census i.e.) was iinitially due to prevalence of epidemic and famine and later on it has been in response to growth and development strategies in the country. However, the decrease in population growth rate in China has

112 Area Studies Area Studies 113 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Source: Based on Table 5.

112 Area Studies Area Studies 113 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development been mainly due to growth & development and changes in family The spatial analysis of the literacy distribution in India and China planning rather than any epidemic and famine. The population of depicts that excluding four states of India lying on the flanks of far India is highly unevenly distributed in the country because south-west (Kerala and Goa) as well as north-east (Mizoram and barring the state of Uttar Pradesh which composes the highest Tripura), all the states of India experienced medium and low level share of population of the country, the percentage share of of literacy rate. On the other hand, in China, barring Tibet population distribution in the states of India steadily decreases province which has medium level of literacy rate, all the from medium level in central states to low percentage share of provinces witnessed the high level of literacy rate in the country. population in the far peripheral states of the country. While, Among the literate population of India, the primary literate population distribution in China is very much even because population (55.6 percent) is nearly double than primary literate excluding the four provinces of China i.e. Guangdong, Sichuan, population of China (30.2 percent). On the contrary, the senior Shandong and Henan which have moderate share in population secondary and higher education literate population of China is composition of the country, no single province witnessed the almost double than literate population of India at senior high and medium proportional share of population of China and secondary education and higher education respectively. all the provinces have low share in population of the country. The general literacy rate among Indian population since 1981 Census, more or less, has been continuously increasing at the rate of ten percent per Indian Census and recorded 73.00 percent in Reference : current 2011 Census while the general literacy rate in China since 1982 Census has increased at the rate of twelve to thirteen percent Aaberge, R., and Li, X. (1997) 'The Trend in Urban Income Inequality in Two Chinese Provinces, 1986-90', Review of Income and Wealth, vol. 43 no. 3, pp. in the subsequent Censuses and reach nearly saturation point in 335-355. 2010 Census (i.e. 94.27 percent). The gender wise analysis of literacy shows that the male literacy registered very slow rise in CASS (Chinese Academy of Social Sciences). (2005) Blue Report on Social comparison to female literacy in both the countries in each Development in China, China Social Science Literature Publishing House, Beijing. Census. This may be due to that male literacy rate was already higher than female literacy rate, but point of difference to be noted Census of India. (2011) Primary Census Abstract for Total Population and here is that within India, the gender gap in literacy rate has been Houseless Population, Office of the Registrar General & Census reasonably larger, as Census of India 2011 recorded 80.90 and Commissioner Govt. of India, New Delhi. 64.60 percent male and female literacy rates respectively while Chandna, R.C. & Sidhu, M.S. (1980) Introduction to Population Geography, there is no much gender gap in literacy rate in China because the Kalyani Publishers, New Delhi, p. 98. general, male and female literacy rate in 2010 Chinese Census was Chen, S., & Martin, R. (1996) 'Data in transition: Assessing Rural Living registered above ninety percent viz., 94.27, 97.07 and 91.33 Standards in Southern China', China Economic Review, vol. 7, no. 1, pp. 23- percent respectively. Therefore, a lot of efforts still have to be 56. made in India to minimise the gender gap in the access of De'murger, S., Sachs, J., Woo, W., Bao, S., Chang, G., & Millinger, A. (2002) education. 'Geography, Economic Policy and Regional Development in China', Asian Economic Papers, vol. 1, no. 1, pp. 146-197.

114 Area Studies Area Studies 115 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development been mainly due to growth & development and changes in family The spatial analysis of the literacy distribution in India and China planning rather than any epidemic and famine. The population of depicts that excluding four states of India lying on the flanks of far India is highly unevenly distributed in the country because south-west (Kerala and Goa) as well as north-east (Mizoram and barring the state of Uttar Pradesh which composes the highest Tripura), all the states of India experienced medium and low level share of population of the country, the percentage share of of literacy rate. On the other hand, in China, barring Tibet population distribution in the states of India steadily decreases province which has medium level of literacy rate, all the from medium level in central states to low percentage share of provinces witnessed the high level of literacy rate in the country. population in the far peripheral states of the country. While, Among the literate population of India, the primary literate population distribution in China is very much even because population (55.6 percent) is nearly double than primary literate excluding the four provinces of China i.e. Guangdong, Sichuan, population of China (30.2 percent). On the contrary, the senior Shandong and Henan which have moderate share in population secondary and higher education literate population of China is composition of the country, no single province witnessed the almost double than literate population of India at senior high and medium proportional share of population of China and secondary education and higher education respectively. all the provinces have low share in population of the country. The general literacy rate among Indian population since 1981 Census, more or less, has been continuously increasing at the rate of ten percent per Indian Census and recorded 73.00 percent in Reference : current 2011 Census while the general literacy rate in China since 1982 Census has increased at the rate of twelve to thirteen percent Aaberge, R., and Li, X. (1997) 'The Trend in Urban Income Inequality in Two Chinese Provinces, 1986-90', Review of Income and Wealth, vol. 43 no. 3, pp. in the subsequent Censuses and reach nearly saturation point in 335-355. 2010 Census (i.e. 94.27 percent). The gender wise analysis of literacy shows that the male literacy registered very slow rise in CASS (Chinese Academy of Social Sciences). (2005) Blue Report on Social comparison to female literacy in both the countries in each Development in China, China Social Science Literature Publishing House, Beijing. Census. This may be due to that male literacy rate was already higher than female literacy rate, but point of difference to be noted Census of India. (2011) Primary Census Abstract for Total Population and here is that within India, the gender gap in literacy rate has been Houseless Population, Office of the Registrar General & Census reasonably larger, as Census of India 2011 recorded 80.90 and Commissioner Govt. of India, New Delhi. 64.60 percent male and female literacy rates respectively while Chandna, R.C. & Sidhu, M.S. (1980) Introduction to Population Geography, there is no much gender gap in literacy rate in China because the Kalyani Publishers, New Delhi, p. 98. general, male and female literacy rate in 2010 Chinese Census was Chen, S., & Martin, R. (1996) 'Data in transition: Assessing Rural Living registered above ninety percent viz., 94.27, 97.07 and 91.33 Standards in Southern China', China Economic Review, vol. 7, no. 1, pp. 23- percent respectively. Therefore, a lot of efforts still have to be 56. made in India to minimise the gender gap in the access of De'murger, S., Sachs, J., Woo, W., Bao, S., Chang, G., & Millinger, A. (2002) education. 'Geography, Economic Policy and Regional Development in China', Asian Economic Papers, vol. 1, no. 1, pp. 146-197.

114 Area Studies Area Studies 115 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

Dreze, J. and Loh, J. (1995) 'Literacy in India and China', Economic and Political Shamshad and Shakir, M. (2011) 'Analysis of Literacy in Indian Census', Weekly, vol. 30, no. 45, pp. 2868-2878. Education Today: An International Journal of Education and Humanities, vol. 2, no. 1, pp. 76.79. Dreze, J. and Sen, A.K. (1995) India, Economic Development and Social Opportunity, Oxford University Press, Delhi, pp. 312. Tsui, K. (1991) 'China's Regional Inequality, 19521985', Journal of Comparative Economics, vol. 15, no. 1, pp. 1-21. Dufera, D. Keynote Address in Proceedings of the National Symposium on 'Establishing, Enhancing & Sustaining Quality Practices in Education', United Nations (2009) Millennium Development Goals Report, Retrieved on pp. 4-14. Available and accessed from http://www.starjournal.org/ April 17, 2011 from URL http://www.ungei.org/whatisungei uploads/starjournalnew/06.pdf /index_734.html Fan, S., Zhang, L., Zhang, X. (2002) Growth, Inequality, and Poverty in Rural United Nations Development Programme (UNDP). (2000) China Human China: The Role Of Public Investments, International Food Policy Research Development Report 1999: Transition and the State, Oxford University Institute (IFPRI) Research Report, Washington, DC, p. 125. Press, Oxford. Hussain, A., Lanjouw, P., & Stern, N. (1994) 'Income Inequalities in China: World Bank. (2000). China: Overcoming Rural Poverty, World Bank, Evidence from Household Survey Data', World Development, vol. 22, no. Washington, DC. 12, pp. 1947-1957. Yang, D. T. (1999) 'Urban-Biased Policies and Rising Income Inequality in Kanbur, R. and Zhang, X. (2005) 'Spatial Inequality in Education and Health China', American Economic Review (Paper and Proceedings), vol. 89, no. 2, Care in China', China Economic Review, vol.16, pp. 189-204. pp. 306-310. Kanbur, R., & Zhang, X. (1999) 'Which Regional Inequality: The Evolution of RuralUrban And CoastInland Inequality in China', Journal of Comparative Economics, vol. 27, pp. 686-701. Kanbur, R., & Zhang, X. (2005) 'Fifty Years of Regional Inequality in China: A Journey through Revolution, Reform and Openness', Review of Development Economics, vol. 9, no. 1, pp. 87-106. Khan, A. R., K.G., Riskin, C., & Zhao, R. (1993) 'Sources of Income Inequality in Post-Reform China', China Economics Review, vol. 4, no. 1, pp. 19-35. Lyons, T.P. (1991) 'Interprovincial Disparities in China: Output and Consumption, 19521987', Economic Development and Cultural Change, vol. 39, no. 3, pp. 471-506. Nonie, K.L., (2012) 'Reading and Reading Instruction for Children from Low- Income and Non-English- Speaking Households', Future of Children, vol. 22, no. 2, pp. 73-88. Reardon, S.F., Valentino, R.A. and Shores, K.A. (2012) 'Patterns of Literacy among U.S. Students', The Future of Children, vol. 22, no. 2, pp. 17-37.

116 Area Studies Area Studies 117 Shamshad and Md. Naiyer Zaidy Educational Status of India and China: A Silver Line for Development

116 Area Studies Area Studies 117 Palestinian Politics and the Arab Spring: Some Critical Issues Palestinian Politics and the Arab Spring: Some Critical Issues vital region of the world to suit Western and Israeli interests.

Santhosh Mathew * and Prasad M.V. ** The Arab Spring has also touched the Palestinian domestic politics in several ways. The massive protest held by the Palestinian people in March 2011 once again highlighted the Palestinian demand for political reunification of the divided Gaza Strip (ruled by a Fatah-led government) and West Bank (Hamas- Introduction led government) and national reconciliation of the two Great churning has occurred, and major political changes have Palestinian movements for the greater cause of Palestine. Two taken place in the West Asia/North Africa (WANA) region in the major events directly impacted the Palestine issue. First, Fatah wake of the popular uprising, generally known as Arab Spring. and Hamas met in Cairo in May 2011 and decided to shed their Starting in Tunisia, this civilian non-violent uprising spread to differences to form a national unity government; but pressure by Egypt, Libya and later to Syria and elsewhere in West Asia. The the US on Fatah ensured that this attempt failed. The Fatah-led PA Arab Spring has deeply impacted the regional politics and the leadership in collaboration with Hamas then launched an global perception of the region and its people. It has, in addition, international campaign as “Palestinian Spring” or “Palestine 194” impacted the power relations between the state and citizens and to achieve UN recognition for the Palestinian state. They people's aspiration for better and effective participation in the succeeded partially, with the Palestinians getting the status of a governance of their state. It has unseated the tyrant rulers in “full member observer state” in the international body in the Tunisia, Egypt and Yemen. This wave of mass protests, when it subsequent year notwithstanding US-Israel opposition. This has reached Libya, acquired a new dimension, with wider strengthened the role of Hamas in Gaza. Many academics have implications to reorder the region not only to meet the genuine been arguing that the Arab Spring has reduced Arab support to aspirations of the native people but also the interests of Western the Palestinian cause. The Palestinians argue otherwise. This countries, particularly the US. paper seeks to find an objective perspective on the issues concerned. There was considerable apprehension about the impact of the Arab Spring on the Palestine issue and the Arab-Israel peace Arab Spring process. Subsequent developments and outbreak of civilian The Arab Spring started with the self-immolation of a Tunisian conflicts against the Libyan and Syrian regimes have vindicated greengrocer, Mohammed Bouazizi, on 17 December 2010 in Sidi the argument that the Arab Spring has an external dimension to Bouzid town to protest the failure of the state to meet the basic reorder the region to safeguard US-Israeli interests. The people's needs of the citizens, such as generating adequate employment genuine demand for change in domestic politics gave an opportunities. His act triggered a series of popular protests, unexpected opportunity for external intervention to redesign this particularly in the major cities and towns of Tunisia, which ultimately resulted in the ouster of the Ben Ali regime. France and * Santhosh Mathew, Asst. Professor, Centre for South Asian Studies, Pondicherry Saudi Arabia offered help Ben Ali to quell the uprising, but in University. vain. Ben Ali fled to Saudi Arabia a few weeks after the protests ** Prasad M.V, Asst. Professor, Department of Politics, Sree Krishna College, Guruvayur, Kerala. began.

118 Area Studies, Vol.7(2), July - December 2013, pp. 118-125 Area Studies 119 Palestinian Politics and the Arab Spring: Some Critical Issues Palestinian Politics and the Arab Spring: Some Critical Issues vital region of the world to suit Western and Israeli interests.

118 Area Studies, Vol.7(2), July - December 2013, pp. 118-125 Area Studies 119 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues

Protests started in Egypt on 25 January 2011 at the Tahrir Square Arab Spring to Israel's security and the ongoing peace talks with against the tyrant regime of Hosni Mubarak. Protests also started Palestinians. But some sections in Israel were of the view that this in Morocco, Lebanon, Oman, Yemen and Syria. The wildfire would open an opportunity to resume negotiations and to accept protests in Egypt eased out President Mubarak. Since the signing the new realities in the region. President Shimon Peres and the of the Camp David Accord in 1978, the Arab world had generally Jewish agency Natan Sharansky are in this group (ibid.). perceived the Egyptian regime as a traitor to the Palestinian Impact of the regional uprising on Palestinian politics cause. However, this perception shifted slightly with the Oslo In the course of the Arab Spring the Palestinians protested Accord in 1993 and President Mubarak became a key figure and massively in West Bank and Gaza Strip against the deadlock in mediator between the PLO-US and PLO-Israel. the peace process, the non-reconciliatory positions of Fatah and When the mass protests spread to Libya against the Gaddafi Hamas, and increasing unemployment and economic hardship. regime, Western interests started giving the protesters political, Demonstrations, which started in February 2011 in solidarity diplomatic and military support. The hope and enthusiasm with the Egyptian uprising, demanded an immediate end to the generated by the Arab Spring also came under critical scrutiny political schism of Fatah and Hamas and a concerted effort in with the failure to establish an alternative and stable government fighting the Zionist state. in Egypt and the inability to thwart US-Israeli interests in the The protestors also demanded governmental reforms, new region, who made a vain bid attempt to isolate the Palestine issue elections to the Palestinian Legislative Council, and participation and delink the problem from the core of the West Asian region. of all political forces in the PLO. Both the governments (led by The Palestinian Spring has now strengthened the Palestinian Fatah and Hamas) responded immediately by launching a demand for a state of their own. Hanan Ashrawi notes: dialogue between themselves. This was a rare opportunity for Palestine has never been absent from the contemporary their national reconciliation. discourse in the Arab Spring. It remains vocal and Regional developments, which resulted in the weakening of emotive, even though many people say that the regimes political support by the beleaguered government in Syria to exploited the issue of Palestine for their own sake. Yet Hamas, and the end of the Mubarak regime in Egypt which the people have a very emotive, visceral relationship to supported Fatah, increased the momentum in this mood of Palestine, much more so than people thought. And they national reconciliation. On 5 May 2011 (officially on 6 May) the held their regimes accountable for being unable to do two sides signed a compact in Cairo agreeing to political reforms anything about it (Palestine). (Ashrawe 2011) and formation of a new government within a year with the Will the Arab Spring support the peace process or will it impact inclusion of technocrats and professionals outside of the negatively on the Palestinian movement? The Israelis feared that Palestinian factions. the emergence of Islamic forces like the Brotherhood in Egypt The agreement also outlined reforms in the PLO. In order to would destabilize the region and it would also seriously threaten implement these, the PA postponed the local elections to October their national security (Elie Podeh and Nimrod Goren 2013). 2011. The US and Israel reacted negatively to this political unity, Prime Minister Benjamin Netanyahu and other right-wing declaring that participation by Hamas in the government would leaders expressed serious concern about the implications of the

120 Area Studies Area Studies 121 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues

120 Area Studies Area Studies 121 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues overturn all the previous commitments made by them to the President Abbas made an earnest appeal to the world community Palestinians. With this external pressure, the reconciliation to have a concern for the plight of Palestinians who were being became unworkable. Meanwhile, the Palestinian leadership denied all basic rights. He tried to point out the contrasting stands decided to challenge the US-Israeli position by launching a of the Western states on similar issues in the same region. “My diplomatic move seeking UN recognition of a state in Palestine. people desire to exercise their right to enjoy a normal life like the 'Palestine 194' rest of humanity”, he said. The Palestinians, however, failed to get Security Council support to their demand because of US The focus of the Arab Spring is freedom, dignity, democracy and opposition. self-respect. All these are being denied to the Palestinians by the governments ruling the Palestinian territory, the occupier and its Charles O. Cecil, a former US diplomat, points out that the collaborator. When the region was undergoing significant energies let loose by the Arab Spring would “continue to be changes in the realm of politics and value systems due to the Arab devoted to their own domestic affairs rather than being diverted Spring, the Palestinian leaders made use of this opportunity to to condemning the United States. We (the US) are hypocrites launch a bid, which they called “Palestinian Spring”, for UN when we claim to want justice for the Palestinians but we do recognition. They argued that this move was closely connected nothing meaningful to help them achieve this” (WAFA, 29 with the political transition of the region. September 2011). He said: The PA already had a scheduled programme since 2009 to declare Netanyahu's office has issued a statement, saying a state by September, 2011; the latest developments enhanced the “peace will be achieved only through direct momentum to seek UN recognition. This demand was supported negotiations with Israel.” You know, and I know, that by 139 countries. Palestinians argued that full membership in the Mr. Netanyahu has no intention of concluding a just international body would be a realisation of previous UN and fair peace with the Palestinian Authority. His only commitments to them, besides respecting international law to concern is to continue the inexorable construction of end the injustice inflicted upon them by the UN itself. President more settlements, creating more “facts on the ground” Mahmoud Abbas in his General Assembly address on 23 until the idea of an independent Palestinian state September 2011 said: becomes a mere memory of a bygone era. When Israel declared its independence in 1948 it did not do so after The time has come to end the suffering and the plight of direct negotiations with Palestine. If Israel really wants millions of Palestine refugees in the homeland and the to negotiate with the Palestinians, why would Diaspora, to end their displacement and to realize their negotiating with an independent Palestinian rights, some of them forced to take refuge more than government, on an equal footing, deter it from once in different places of the world. At a time when the engaging in these negotiations? (Ibid.) Arab peoples affirm their quest for democracy the Arab Spring the time is now for the Palestinian Spring, the In November 2012, the Palestinian leadership took a General time for independence. Assembly route for their status at the UN as an “observer non- member state” after their success in achieving full membership in UNESCO. This was a real political victory for the Palestinians and

122 Area Studies Area Studies 123 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues overturn all the previous commitments made by them to the President Abbas made an earnest appeal to the world community Palestinians. With this external pressure, the reconciliation to have a concern for the plight of Palestinians who were being became unworkable. Meanwhile, the Palestinian leadership denied all basic rights. He tried to point out the contrasting stands decided to challenge the US-Israeli position by launching a of the Western states on similar issues in the same region. “My diplomatic move seeking UN recognition of a state in Palestine. people desire to exercise their right to enjoy a normal life like the 'Palestine 194' rest of humanity”, he said. The Palestinians, however, failed to get Security Council support to their demand because of US The focus of the Arab Spring is freedom, dignity, democracy and opposition. self-respect. All these are being denied to the Palestinians by the governments ruling the Palestinian territory, the occupier and its Charles O. Cecil, a former US diplomat, points out that the collaborator. When the region was undergoing significant energies let loose by the Arab Spring would “continue to be changes in the realm of politics and value systems due to the Arab devoted to their own domestic affairs rather than being diverted Spring, the Palestinian leaders made use of this opportunity to to condemning the United States. We (the US) are hypocrites launch a bid, which they called “Palestinian Spring”, for UN when we claim to want justice for the Palestinians but we do recognition. They argued that this move was closely connected nothing meaningful to help them achieve this” (WAFA, 29 with the political transition of the region. September 2011). He said: The PA already had a scheduled programme since 2009 to declare Netanyahu's office has issued a statement, saying a state by September, 2011; the latest developments enhanced the “peace will be achieved only through direct momentum to seek UN recognition. This demand was supported negotiations with Israel.” You know, and I know, that by 139 countries. Palestinians argued that full membership in the Mr. Netanyahu has no intention of concluding a just international body would be a realisation of previous UN and fair peace with the Palestinian Authority. His only commitments to them, besides respecting international law to concern is to continue the inexorable construction of end the injustice inflicted upon them by the UN itself. President more settlements, creating more “facts on the ground” Mahmoud Abbas in his General Assembly address on 23 until the idea of an independent Palestinian state September 2011 said: becomes a mere memory of a bygone era. When Israel declared its independence in 1948 it did not do so after The time has come to end the suffering and the plight of direct negotiations with Palestine. If Israel really wants millions of Palestine refugees in the homeland and the to negotiate with the Palestinians, why would Diaspora, to end their displacement and to realize their negotiating with an independent Palestinian rights, some of them forced to take refuge more than government, on an equal footing, deter it from once in different places of the world. At a time when the engaging in these negotiations? (Ibid.) Arab peoples affirm their quest for democracy the Arab Spring the time is now for the Palestinian Spring, the In November 2012, the Palestinian leadership took a General time for independence. Assembly route for their status at the UN as an “observer non- member state” after their success in achieving full membership in UNESCO. This was a real political victory for the Palestinians and

122 Area Studies Area Studies 123 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues the post-Arab Spring regional environment that lent support for Palestinian Strategic Report (2011-2012, 2013), “Palestinian Strategic international mobilization to this demand. Report”, Beirut: Al-Zaytouna Centre for Studies and Consultations. Conclusion PLO-NAD (2012), References to Palestine in the UN General Debate 67 sessions ,September 2012, First Day, September 25, 2012. The Arab Spring has drastically changed the political discourse in the region and about the Arab people's ability to reclaim power Podeh, Elie and Nimrod Goren, (2013), Israel in the Wake of the Arab Spring: for political change. The West misread the future, that the Seizing Opportunities, Overcoming Challenges, The Israeli Institute for Palestine question would become marginalized in the context of Regional Foreign Policies. the Arab Spring. The Fatah-Hamas reconciliation efforts Prat, Nicolas(2012), “The implications of the 'Arab spring' for the Israel- demonstrated the two movements' ability to make concessions in Palestine conflict: or 'Things Fall Apart' ”, the interests of the Palestinian cause. The Palestinian bid for UN _____ (2013), “The 'Arab Spring' and the Israel-Palestine Conflict: Settler membership derived energy and enthusiasm from the Arab Colonialism and Resistance in the Midst of Geopolitical Upheavals”, Spring. The Palestinians also succeeded in mobilizing Ortadoğu Etütleri, 5(1), July 2013, pp. 9-40. international support to their genuine demand for a state in WAFA (2011), “Change in US policy is best way to influence Palestinian Palestine. public opinion”, WAFA News Agency, 17 November 2011.

1 Initially, the West cautiously endorsed the Arab Spring, but later expressed some apprehension over the entry of Islamic forces to fill the political vacuum. Israel called it Arab Winter or Arab Chill (see Elie Podeh and Nimrod Goren 2013: 7)

Reference : Abdulhadi, Izzat (2012), “The implications of Arab Spring on the Israeli- Palestinian Conflict”, University of Canberra, 8 August 2012. Ashrawe, Hanan (2011), “The Palestine and the Arab Spring”, Carnegie Endowment for Dessì, Andrea (2012), “Israel and the Palestinians after the Arab Spring: No Time for Peace”, IAI Working Papers, 12, 16 May 2012. International Crisis Group (2012), “Light at the end of Their Tunnels? Hamas and the Arab Uprisings”, Middle East Report, 2012. NOREF Report (2012), “Palestinian Youth and the Arab Spring”, Norwegian Peace Building Centre.

124 Area Studies Area Studies 125 Santhosh Mathew and Prasad M.V. Palestinian Politics and the Arab Spring: Some Critical Issues the post-Arab Spring regional environment that lent support for Palestinian Strategic Report (2011-2012, 2013), “Palestinian Strategic international mobilization to this demand. Report”, Beirut: Al-Zaytouna Centre for Studies and Consultations. Conclusion PLO-NAD (2012), References to Palestine in the UN General Debate 67 sessions ,September 2012, First Day, September 25, 2012. The Arab Spring has drastically changed the political discourse in the region and about the Arab people's ability to reclaim power Podeh, Elie and Nimrod Goren, (2013), Israel in the Wake of the Arab Spring: for political change. The West misread the future, that the Seizing Opportunities, Overcoming Challenges, The Israeli Institute for Palestine question would become marginalized in the context of Regional Foreign Policies. the Arab Spring. The Fatah-Hamas reconciliation efforts Prat, Nicolas(2012), “The implications of the 'Arab spring' for the Israel- demonstrated the two movements' ability to make concessions in Palestine conflict: or 'Things Fall Apart' ”, the interests of the Palestinian cause. The Palestinian bid for UN _____ (2013), “The 'Arab Spring' and the Israel-Palestine Conflict: Settler membership derived energy and enthusiasm from the Arab Colonialism and Resistance in the Midst of Geopolitical Upheavals”, Spring. The Palestinians also succeeded in mobilizing Ortadoğu Etütleri, 5(1), July 2013, pp. 9-40. international support to their genuine demand for a state in WAFA (2011), “Change in US policy is best way to influence Palestinian Palestine. public opinion”, WAFA News Agency, 17 November 2011.

124 Area Studies Area Studies 125 The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan Investment is the nucleus of an economy. It plays a crucial role in the models of economic growth. It is an essential component of Ebru Çağlayan* and Raziiakhan Abdieva ** aggregate demand and fluctuations in investment have considerable effect on economic activity and long term economic growth (Salahuddin and Islam, 2008). In the initial stages of development, relatively high rates of investment are needed to Abstract ensure sustained and high rates of economic growth. Bulk of the In this article an attempt is made to analyze the behavior of individual investors investment resources must be domestically generated. It is not in Kyrgyzstan analyzed. As the individual investors are one of the significant generally possible to observe countries with sustained high rates components of the financial sector of the country, their behavior has an of economic growth without the accompanying trend of high important effect on the development of the economy. rates of domestic savings. There are major advantages from high Mostly preferred investment instruments of Kyrgyz people are cash, foreign domestic savings. They include the freedom an economy enjoys currency, land, real estate and bank deposits. According to multinominal logit in economic management and the power to invest elsewhere model estimations as income, investment rate and age increases people prefer (Rao, 2001: 1123). more to invest in real estate than other investment instruments. People with lower income generally invest more in cash and foreign currency, while people In Kyrgyzstan, although, during 2006-2011 the ratio of domestic with higher income invest more in gold, land and real estate. savings in GDP increased from 9,3% to 23,2 %, the level of savings are still lower than investments. The reason of this is budget 1. Introduction deficit and shortage of domestic savings (National Bank of Kyrgyz Republic, 2012: 7). Individual investment is supply of savings to financial markets by delaying nowadays consumption with the aim to gain more This study is aimed to identify investment instrument preference income in future (in short or long term). Individual investment behavior of individuals in Kyrgyzstan and factors affecting their instruments are all financial market instruments used by behaviors. For this purpose, a questionnaire was prepared that individuals. Thus, resources which remained idle earlier with the will determine individuals' investment behavior. The individuals who are involved in the financial system, needed to econometric and statistical analyses were done using the data be activated and brought into the mainstream of economy. These obtained from the survey. The most important feature of this resources are considered to mediate for justice distribution of study is, to our knowledge, it is one of the first comprehensive income. But in order to realize these individuals must be aware of statistical and econometric researches about the individual all financial market instruments and must form expectations with investors in Kyrgyzstan. In our study, commonly used this information, in other words they need to be rational with full individual investment instruments in Kyrgyzstan such information. instruments as money, gold, real estate, foreign currency options will be discussed. Less preferred individual investment * Dr. Ebru Çağlayan, Associate Professor, Marmara University, Department of instruments will be included in the other part. Econometrics, [email protected]. ** Dr. Raziiakhan Abdieva, Kyrgyz-Turkish Manas University, Department of Public In the second part of the study multinominal logit models are Finance, [email protected], [email protected] undertaken which we will estimate while factors affecting

126 Area Studies, Vol.7(2), July - December 2013, pp. 126-143 Area Studies 127 The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan Investment is the nucleus of an economy. It plays a crucial role in the models of economic growth. It is an essential component of Ebru Çağlayan* and Raziiakhan Abdieva ** aggregate demand and fluctuations in investment have considerable effect on economic activity and long term economic growth (Salahuddin and Islam, 2008). In the initial stages of development, relatively high rates of investment are needed to Abstract ensure sustained and high rates of economic growth. Bulk of the In this article an attempt is made to analyze the behavior of individual investors investment resources must be domestically generated. It is not in Kyrgyzstan analyzed. As the individual investors are one of the significant generally possible to observe countries with sustained high rates components of the financial sector of the country, their behavior has an of economic growth without the accompanying trend of high important effect on the development of the economy. rates of domestic savings. There are major advantages from high Mostly preferred investment instruments of Kyrgyz people are cash, foreign domestic savings. They include the freedom an economy enjoys currency, land, real estate and bank deposits. According to multinominal logit in economic management and the power to invest elsewhere model estimations as income, investment rate and age increases people prefer (Rao, 2001: 1123). more to invest in real estate than other investment instruments. People with lower income generally invest more in cash and foreign currency, while people In Kyrgyzstan, although, during 2006-2011 the ratio of domestic with higher income invest more in gold, land and real estate. savings in GDP increased from 9,3% to 23,2 %, the level of savings are still lower than investments. The reason of this is budget 1. Introduction deficit and shortage of domestic savings (National Bank of Kyrgyz Republic, 2012: 7). Individual investment is supply of savings to financial markets by delaying nowadays consumption with the aim to gain more This study is aimed to identify investment instrument preference income in future (in short or long term). Individual investment behavior of individuals in Kyrgyzstan and factors affecting their instruments are all financial market instruments used by behaviors. For this purpose, a questionnaire was prepared that individuals. Thus, resources which remained idle earlier with the will determine individuals' investment behavior. The individuals who are involved in the financial system, needed to econometric and statistical analyses were done using the data be activated and brought into the mainstream of economy. These obtained from the survey. The most important feature of this resources are considered to mediate for justice distribution of study is, to our knowledge, it is one of the first comprehensive income. But in order to realize these individuals must be aware of statistical and econometric researches about the individual all financial market instruments and must form expectations with investors in Kyrgyzstan. In our study, commonly used this information, in other words they need to be rational with full individual investment instruments in Kyrgyzstan such information. instruments as money, gold, real estate, foreign currency options will be discussed. Less preferred individual investment * Dr. Ebru Çağlayan, Associate Professor, Marmara University, Department of instruments will be included in the other part. Econometrics, [email protected]. ** Dr. Raziiakhan Abdieva, Kyrgyz-Turkish Manas University, Department of Public In the second part of the study multinominal logit models are Finance, [email protected], [email protected] undertaken which we will estimate while factors affecting

126 Area Studies, Vol.7(2), July - December 2013, pp. 126-143 Area Studies 127 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan individual investment instrument preferences identified. In third also historical and touristic city and preferred city for education and fourth part statistic information related data and respondents and developed business and commercial centre as well. In are given. The results of the econometric model estimation are addition, in Bishkek there are people from different regions of the stated in the sixth section and in the last section conclusions are country with different socio-economic and socio-cultural given. characteristics and with different economic purposes. Therefore, 2. Multinominal Logit Model this city has strong representative power in revealing different financial behaviour of Kyrgyz people. Multinominal Logit model is used in order to predict one's choice when the information about person's behavior and choices exists. The population of Bishkek in 2012 was 1,420,783 In these models the probability of a particular choice of the (Zakonodatelstvo Kyrgyzskoy Respubliki, 2013). There are more individual could be estimated and dependent variable is than 90 nationalities are living in this city (Ivasenko, 2008). undertaken unordered according to choices. Multinominal Logit According to the data published by the National Statistic models are generalized form of binary logit models. In these Committee of the Kyrgyz Republic, in 2010 the number of models dependent variable is worth more than M, instead of two. migrants from other parts of Kyrgyzstan to Bishkek city was 9469 people. For example from Talas region immigrated 582 person The probability of the choice m from alternative options M is and from Osh region 1 678 person to Bishkek in 2010 estimates as below: (Demographic Yearbook of Kyrgyz Republic, 2006-2010: 343). In this study confidence interval for population ratio (P) is estimated with this formula: Multinomial logit models are estimate with the maximum Optimum size of population ratio is determined with likelihood method (Long, 1997; Borooah, 2002). The predicted coefficients of the multinominal models are interpret by formula. Here is confidence coefficient, d is margin estimating the Relative Risk Ratio (RRR). In these models in order of error and P is ratio of population. There was made control to identify whether the identification of the model corresponds according to n/N ratio after the calculation of the formula. with the data the independence hypothesis ( Irrelational Sample size calculated according to the significance level 0,05. As Independence of Alternatives, IIA) between choices must be provided. In order to analyze this hypothesis Hausman- the share of the investors in total population of Bishkek is not McFadden (1984) Test can be used (Green, 1997; Cramer, 1991). known, different ratios were determined for the size of sample 3. Data (Zakonodatelstvo Kyrgyzskoy Respubliki, 2013). According to + This study which aims to determine the investment behaviour of 0,05 margin of error for P=0,5; P=0,4 and P=0,3 sample size is individuals, target audience is the individuals who have invested calculated as n1=384, n2=368, n3=323 respectively. at least once time. The survey was conducted in the capital city of In this research only individuals who have financial behaviour Kyrgyzstan, Bishkek, to 384 individual on average. The reason for were analysed. Their answers to the questionnaire show factors choosing this city for conducting this survey is being the capital that they pay attention when they are investing. Thus, were city of Kyrgyzstan; Bishkek with a population of 819,900 in 2008 is

128 Area Studies Area Studies 129 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan individual investment instrument preferences identified. In third also historical and touristic city and preferred city for education and fourth part statistic information related data and respondents and developed business and commercial centre as well. In are given. The results of the econometric model estimation are addition, in Bishkek there are people from different regions of the stated in the sixth section and in the last section conclusions are country with different socio-economic and socio-cultural given. characteristics and with different economic purposes. Therefore, 2. Multinominal Logit Model this city has strong representative power in revealing different financial behaviour of Kyrgyz people. Multinominal Logit model is used in order to predict one's choice when the information about person's behavior and choices exists. The population of Bishkek in 2012 was 1,420,783 In these models the probability of a particular choice of the (Zakonodatelstvo Kyrgyzskoy Respubliki, 2013). There are more individual could be estimated and dependent variable is than 90 nationalities are living in this city (Ivasenko, 2008). undertaken unordered according to choices. Multinominal Logit According to the data published by the National Statistic models are generalized form of binary logit models. In these Committee of the Kyrgyz Republic, in 2010 the number of models dependent variable is worth more than M, instead of two. migrants from other parts of Kyrgyzstan to Bishkek city was 9469 people. For example from Talas region immigrated 582 person The probability of the choice m from alternative options M is and from Osh region 1 678 person to Bishkek in 2010 estimates as below: (Demographic Yearbook of Kyrgyz Republic, 2006-2010: 343). In this study confidence interval for population ratio (P) is estimated with this formula: Multinomial logit models are estimate with the maximum Optimum size of population ratio is determined with likelihood method (Long, 1997; Borooah, 2002). The predicted coefficients of the multinominal models are interpret by formula. Here is confidence coefficient, d is margin estimating the Relative Risk Ratio (RRR). In these models in order of error and P is ratio of population. There was made control to identify whether the identification of the model corresponds according to n/N ratio after the calculation of the formula. with the data the independence hypothesis ( Irrelational Sample size calculated according to the significance level 0,05. As Independence of Alternatives, IIA) between choices must be provided. In order to analyze this hypothesis Hausman- the share of the investors in total population of Bishkek is not McFadden (1984) Test can be used (Green, 1997; Cramer, 1991). known, different ratios were determined for the size of sample 3. Data (Zakonodatelstvo Kyrgyzskoy Respubliki, 2013). According to + This study which aims to determine the investment behaviour of 0,05 margin of error for P=0,5; P=0,4 and P=0,3 sample size is individuals, target audience is the individuals who have invested calculated as n1=384, n2=368, n3=323 respectively. at least once time. The survey was conducted in the capital city of In this research only individuals who have financial behaviour Kyrgyzstan, Bishkek, to 384 individual on average. The reason for were analysed. Their answers to the questionnaire show factors choosing this city for conducting this survey is being the capital that they pay attention when they are investing. Thus, were city of Kyrgyzstan; Bishkek with a population of 819,900 in 2008 is

128 Area Studies Area Studies 129 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan analysed the attitudes and behaviours of individuals when they between 40,001 - 50,000 soms, 7.3% (29 person) the average are choosing an investment instrument. The questionnaire monthly personal income is 50001som and more. This shows that includes in total 25 questions, 13 of them are related to the approximately 2/3 percent (66.3%) of the participants' average investment behaviour of individuals. monthly income is lower than 20 000 soms. In addition, 43.7% (174 4. Descriptive Statistics Related to Participants of the people) of the participants has non-wage income, 56.3% (224 people) have not such kind of income. Survey In this section demographic characteristics and statistical findings In order to determine the fortunes of the participants they were of 384 respondents' behavior related choices of investment also asked questions about their place of residence and assets. instruments will be given. According to the answers to these questions 60,1 % of respondents live in their own houses, 16.1 % live in parents' 4.1.Demographic Analyze of Respondents house, 22.6 % in leasehold house and 1.3 % of respondents are Analysis of the age ranges of the participants of the survey shows living in other places. Moreover, it was identified that in 47.5 % of that, 41% of them (163 person) are 29 years old and under, 43.7% respondents have a car and 52.5 % have not. The number of per cent (174 person) are between the ages of 30-45, 12.3% (12 employees in the family was asked with the consideration that the person) between the ages of 46 - 55 and 3% (12 person) were 55 number of employees in the family could have an effect on years and older. As we saw, 84% (337 person) of the participants' investment instrument preferences. According to the answers the ages are 45 years and under. 52.3% (208 person) of the participants number of employees in the family of 51.3 % respondents is 1, in are male, 47.7% (190) are female and 70.1% (279 person) are 28,9 % are 2, in 19.3 % are 3 and in the family of 0.5% of married, 24.4% are (97 person) single, 1.3% are (5 person) respondents, the number of working persons is 4. divorced, and 4% are (17 person) widows. 4.2. Statistical Findings on Respondents' Individual Considering the level of education of the respondents, 16.3% (65 Investments person) are secondary school graduates, 11.6% (46 person) are Respondents were asked to define themselves what type of vocational high school graduates, 58% (231 person) are university investors they are. Only 20.6 % of respondents answered that they graduates, 8.5% (34 person) have masters degree and 5.5 % (22 love risk very much, 20.9% answered that they love risk, 18,6 % of person) had graduated other doctoral (Ph.D.) and upper degrees. respondents answered that they don't think about (don't know) a It shows that in our survey had participated people with all levels risk, 26.9 % declared that they don't love risk and 23.1 % of of education. respondents declared that they don't love risk at all. In general, it The average monthly personal income of individuals was observed that 31.5 % of respondents love risk, 50% do not participating in the survey shows that 28,6% ( 114 person) of the love risk and 18.6% of respondents don't think about the risk. participants' average monthly personal income is less than 10 000 There was a question to respondents about frequency of som, 37.7 % (150 person) the average monthly personal income is investing. According to the answers 20.1% of respondents invest between 10 001-20 000 soms, 13.6% (54 person) the average in long term, 19.6 % once a month, 16.3% once a year, 14.3% once a monthly personal income is between 20001 30000 soms, 6.5% (26 week, 9.3% once in a quarter, 9.8 % once a 6 month and 10,6% in person) is between 30 001 - 40,000 soms, 6.3% (25 person) other frequencies. To the question whether they conduct

130 Area Studies Area Studies 131 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan analysed the attitudes and behaviours of individuals when they between 40,001 - 50,000 soms, 7.3% (29 person) the average are choosing an investment instrument. The questionnaire monthly personal income is 50001som and more. This shows that includes in total 25 questions, 13 of them are related to the approximately 2/3 percent (66.3%) of the participants' average investment behaviour of individuals. monthly income is lower than 20 000 soms. In addition, 43.7% (174 4. Descriptive Statistics Related to Participants of the people) of the participants has non-wage income, 56.3% (224 people) have not such kind of income. Survey In this section demographic characteristics and statistical findings In order to determine the fortunes of the participants they were of 384 respondents' behavior related choices of investment also asked questions about their place of residence and assets. instruments will be given. According to the answers to these questions 60,1 % of respondents live in their own houses, 16.1 % live in parents' 4.1.Demographic Analyze of Respondents house, 22.6 % in leasehold house and 1.3 % of respondents are Analysis of the age ranges of the participants of the survey shows living in other places. Moreover, it was identified that in 47.5 % of that, 41% of them (163 person) are 29 years old and under, 43.7% respondents have a car and 52.5 % have not. The number of per cent (174 person) are between the ages of 30-45, 12.3% (12 employees in the family was asked with the consideration that the person) between the ages of 46 - 55 and 3% (12 person) were 55 number of employees in the family could have an effect on years and older. As we saw, 84% (337 person) of the participants' investment instrument preferences. According to the answers the ages are 45 years and under. 52.3% (208 person) of the participants number of employees in the family of 51.3 % respondents is 1, in are male, 47.7% (190) are female and 70.1% (279 person) are 28,9 % are 2, in 19.3 % are 3 and in the family of 0.5% of married, 24.4% are (97 person) single, 1.3% are (5 person) respondents, the number of working persons is 4. divorced, and 4% are (17 person) widows. 4.2. Statistical Findings on Respondents' Individual Considering the level of education of the respondents, 16.3% (65 Investments person) are secondary school graduates, 11.6% (46 person) are Respondents were asked to define themselves what type of vocational high school graduates, 58% (231 person) are university investors they are. Only 20.6 % of respondents answered that they graduates, 8.5% (34 person) have masters degree and 5.5 % (22 love risk very much, 20.9% answered that they love risk, 18,6 % of person) had graduated other doctoral (Ph.D.) and upper degrees. respondents answered that they don't think about (don't know) a It shows that in our survey had participated people with all levels risk, 26.9 % declared that they don't love risk and 23.1 % of of education. respondents declared that they don't love risk at all. In general, it The average monthly personal income of individuals was observed that 31.5 % of respondents love risk, 50% do not participating in the survey shows that 28,6% ( 114 person) of the love risk and 18.6% of respondents don't think about the risk. participants' average monthly personal income is less than 10 000 There was a question to respondents about frequency of som, 37.7 % (150 person) the average monthly personal income is investing. According to the answers 20.1% of respondents invest between 10 001-20 000 soms, 13.6% (54 person) the average in long term, 19.6 % once a month, 16.3% once a year, 14.3% once a monthly personal income is between 20001 30000 soms, 6.5% (26 week, 9.3% once in a quarter, 9.8 % once a 6 month and 10,6% in person) is between 30 001 - 40,000 soms, 6.3% (25 person) other frequencies. To the question whether they conduct

130 Area Studies Area Studies 131 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan preliminary research before investing, 82.9 % of respondents Table 1: Factors Affecting on the Choice of the Investment Instrument answered that they conducted and 17.1% declared that they do not conduct preliminary research before investing. According to the answers for the question whether they consult the professional consultant before investing, 45.7 % of respondents answered that they consulted and 54.3% answered that they do not consult to the professional consultant before investing. There were showed the proportional distribution and averages of the answers of respondents about factors that affect the choice of the investment instruments below in the Table 1. Also, respondents were asked about the level of influence of some According to the table: 1, on the 36.7 % of respondents', choice of factors on investment instruments decisions. According to the investment instrument influences the recommendation of answers of the 25.6 % of respondents presentiments effects on the acquaintance, on 13.6 % influences advise of investment investment instrument choice very much, 50.5 % of the consultant, on 12.6 % liquidity power of investment instrument, respondents declared that presentiments affects the investment on 8.8 % the popularity of the investment instrument, on 7.3 % instrument choice, 15.3% of the respondents are uncertain about information from TV and radio, on 6.5 % of respondents' decision the effect of presentiments on the investment instrument decision about investment instrument information from newspaper and and finally 8.5 % of the respondents stated that presentiments magazines has an effect. does not affect the investment instrument decision. Furthermore, 30.4 % of respondents stated that general situation of the country's If all answers to the question placed in the questionnaire generally economy influences their decision about investment instrument analyzed, factors affecting the choice of analyzed investment very much, 51.8 % respondents declared that affects, when 10.1 % instruments of respondents were as following: first of all of respondents were uncertain about the effect of this factor and respondents had chosen the investment instrument because of its 7.8 % answered that general situation of the country's economy confidence (69.1 %), then out of easy and fully availability the does not influence their choice of investment instrument. At the information about the investment instrument (61.5 %), in the same time 12.6 % of respondents reported that the general third, the profitability of the investment instrument in the long situation of world economy affects very much their decision on term (60 %), and finally the profitability of the investment investment instrument, also this factor has an influence on 44.5 % instrument in the short term is affected. of respondents' investment decision, but 27.1 % of respondents were uncertain about the affect this factor and totally 16 % declared that general situation of world economy does not affect their decision about investment instrument. Investment comments in the media too have an effect on individual investors choices, when 7.0 % of respondents stated that this factor affects their decision on investment instrument very much and 40.5 % of respondents stated that affects, 32.7% of them were uncertain and

132 Area Studies Area Studies 133 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan preliminary research before investing, 82.9 % of respondents Table 1: Factors Affecting on the Choice of the Investment Instrument answered that they conducted and 17.1% declared that they do not conduct preliminary research before investing. According to the answers for the question whether they consult the professional consultant before investing, 45.7 % of respondents answered that they consulted and 54.3% answered that they do not consult to the professional consultant before investing. There were showed the proportional distribution and averages of the answers of respondents about factors that affect the choice of the investment instruments below in the Table 1. Also, respondents were asked about the level of influence of some According to the table: 1, on the 36.7 % of respondents', choice of factors on investment instruments decisions. According to the investment instrument influences the recommendation of answers of the 25.6 % of respondents presentiments effects on the acquaintance, on 13.6 % influences advise of investment investment instrument choice very much, 50.5 % of the consultant, on 12.6 % liquidity power of investment instrument, respondents declared that presentiments affects the investment on 8.8 % the popularity of the investment instrument, on 7.3 % instrument choice, 15.3% of the respondents are uncertain about information from TV and radio, on 6.5 % of respondents' decision the effect of presentiments on the investment instrument decision about investment instrument information from newspaper and and finally 8.5 % of the respondents stated that presentiments magazines has an effect. does not affect the investment instrument decision. Furthermore, 30.4 % of respondents stated that general situation of the country's If all answers to the question placed in the questionnaire generally economy influences their decision about investment instrument analyzed, factors affecting the choice of analyzed investment very much, 51.8 % respondents declared that affects, when 10.1 % instruments of respondents were as following: first of all of respondents were uncertain about the effect of this factor and respondents had chosen the investment instrument because of its 7.8 % answered that general situation of the country's economy confidence (69.1 %), then out of easy and fully availability the does not influence their choice of investment instrument. At the information about the investment instrument (61.5 %), in the same time 12.6 % of respondents reported that the general third, the profitability of the investment instrument in the long situation of world economy affects very much their decision on term (60 %), and finally the profitability of the investment investment instrument, also this factor has an influence on 44.5 % instrument in the short term is affected. of respondents' investment decision, but 27.1 % of respondents were uncertain about the affect this factor and totally 16 % declared that general situation of world economy does not affect their decision about investment instrument. Investment comments in the media too have an effect on individual investors choices, when 7.0 % of respondents stated that this factor affects their decision on investment instrument very much and 40.5 % of respondents stated that affects, 32.7% of them were uncertain and

132 Area Studies Area Studies 133 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

20 % of the respondents declared that this factor does not Explanatory variables used in the estimates are described in Table 2. influence the choice of investment instrument. One of the important factors that affect the investment decision can be Table 2: Definition of Explanatory Variables counted the opinions of environment, friends and acquaintances. For instance, 12.8 % of respondents stated that opinions of environment, friends and acquaintances affects very much and 42 % of them said that opinions of environment, friends and acquaintances affects their decision about the investment vehicle. At the same time 21.4 % declared that uncertain about the effect of opinions of environment, friends and acquaintances on their investment decision and 24 % stated that this factor does not influence the choice of investment instrument. Generally speaking, of the 76 % of respondents' decision about investment vehicle affects presentiments, of 82% of them affects general situation of the economy in the country, of 57 % affects general situation of the world economy, on 47.5 % of respondents affects the investment comments on the media and on the investment instrument choice of 55 % respondents affects recommendations of environment, friends and acquaintances. When the respondents were asked a question about how they will use the income gained from the investment instrument, 42,2 % of them answered that they will reinvest, 32,2 stated that they will use it for consumption and 18,8 % declared that they will save and 6,8 % answered that they will use it in other forms. 5. Estimation Results of the Econometric Model The estimated model in order to identify the factors affected the investment instrument preferences is multinominal logit model. According to the results of LR test there are six important factors In this model dependent variable (INV) is formed as below, of the investment instrument preference of individual investors identified. They are income, education, number of employee, rate INV=1 if investment instrument is foreign currency of investment, age and consultant. When these factors are INV=2 if investment instrument is Som (national currency) analyzed according to the options obtained, the results are shown INV=3 if investment instrument is real estate (land) in the Table 3. INV=4 if investment instrument is other investment instrument

134 Area Studies Area Studies 135 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

Table 3: The Results of the Individual Investment Instrument Variable Coefficients Hausman Preference Model coefficients Other Income 0.1681 0.1418 Hausman Variable Coefficients (0.1968) (0.1908) coefficients Secondary school 0.7691** 0.7611** Foreing Income 0.0837 0.1103 (0.3405) (0.3442) currency (0.1942) (0.1966) Number of employee -0.2207 0.2453 Secondary school 0.6942** 0.6988** (0.1452) (0.1542) (0.3471) (0.3494) Rate of investment -0.0038 0.0034 Number of employee 0.0572 0.0763 (0.0059) (0.0058) (0.1223) (0,1328) Consultant 0.1192 0.1027 Rate of investment -0.0115** -0.0113** (0.4148) (0.4192) (0.0059) (0.0058) Age -0.2454*** -0.2394 Consultant 0.2843 0.2929 (0.0907) (0.0895) (0.3856) (0.3878) The square of the age 0.0030*** 0.0029 Age -0.1181 -0.1137 (0.0012) (0.0012) (0.0903) (0.0888) Fixed 2.1481 2.3663 The square of the age 0.0016 0.0015 (2.1767) (2.1925) (0.0012) (0.0011) LR Test Chi2(21)= 40.53 prob>chi2=0.0064 0.2869 -0.1086 Fixed Pseudo R2 0.0408 (2.1772) (2.2705) Log-likelihood -476.6948 Som Income 0.4989*** Hausman Test Chi2 (14)=0.26 prob>chi2=1.0000 (0.1827) N 397 Secondary school 0.4610 Notes: (i) Comparision Group: Real estate (land) (0.4032) (ii) Figures in parenthesis are standard errors Number of employee -0.3071** (iii)*,**,*** indicate significance at the level %10,%5 and %1, respectively. (0.1532) Rate of investment -0.0113* The Hausman test was examined in order to identify the (0.0062) independence between individual investment instrument Consultant 0.7191** (0.3655) preferences and the results of this test that are shown in Table 3. Age -0.0749 According to Hausman test statistic assumption of independence (0.1012) among the choices are provided. The square of the age 0.0011 The results of the Hausman test showed that multinominal logit (0.0013) model can be used. In order to interpret coefficients of the model, Fixed -4.1192* (2.3279) relative risk ratios are estimated and these results are given in Table 4

136 Area Studies Area Studies 137 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

Table 4: Relative Risk Ratios for the Choice Model of the Individual According to the table 4, first choices is foreign currency Investment Instruments investment instrument. There was not observed any significant Variables Coefficients RRR effect on the choice of foreign currency investment instrument of Foreing Income 0.0837 1.0873 such factors as income, number of employee, age and consultant. currency Secondary school 0.6942 2.0021** There were observed that those who have graduated from Number of employee 0.0572 1.0589 secondary school chose the foreign currency investment Rate of investment -0.0115 0.9884** instrument twice more (RRR=2.00) compared to others. When Consultant 0.2843 1.3288 investment rate increases for 1 %, individuals choose the foreign Age -0.1181 0.8886 currency investment instrument in 0.98 less than real estate. There The square of the age 0.0016 1.0016 was obtained information that the increase in age has a reducing Fixed 0.2869 effect on the choice of the foreign currency. According to this, Som Income 0.4989 1.6469*** people with age tend to choose a real estate more than currency. Secondary school 0.4610 1.5856 Analysis of the som (national currency) choice showed that Number of employee -0.3071 0.7355** factors such as income, the number of employees, investment rate Rate of investment -0.0113 0.9887* and investment consultant has a significant effect on the choice of Consultant 0.7191 2.0526** this investment instrument. Increases in income impact the Age -0.0749 0.9277 investment in som more than investment in real estate for 1.64 The square of the age 0.0011 1.0011 times. As the number of employees in the family increases, Fixed -4.1192 preference to the investment instrument som decreases relatively Other Income 0.1681 1.1831 to the preference of real estate. The increase of investment rate Secondary school 0.7691 2.1578** leads to decline of the preference of som and foreign currency as Number of employee -0.2207 0.8018 well. Individuals prefer this investment instrument less than real Rate of investment -0.0038 0.9961 estate. Consultant 0.1192 1.1266 Looking at the choice of investment instruments in the last option, Age -0.2454 0.7823*** it was found that only being graduated from secondary school The square of the age 0.0030 1.0030*** and age has significant effect. These obtained results are not Fixed 2.1481 surprising when we think about the variety of the investment LR Test Chi2(21) 40.53 prob>chi2=0.0064 instrument in Kyrgyzstan. According to the results increase of the Pseudo R2 0.0408 age has a reducing effect to other investment instruments choices Log- likelihood -476.6948 compared to real estate. N 397 Notes: (i) Comparision Group: Real estate (land) 6. Conclusion (ii) Figures in parenthesis are standard errors There are observed deviations from rational behavior while (iii)*,**,*** indicate significance at the level %10,%5 and %1, respectively. individuals investing, especially while deciding at risk. The main reason for this is that some biases of individuals have an impact

138 Area Studies Area Studies 139 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

138 Area Studies Area Studies 139 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan on their investment decisions. findings are itemized below: With these biases that effect an individual's investment decisions, Individuals are affected by presentiments when deciding on willingness to live under the best of circumstances and to obtain investment instruments; more income in the future forcing them to invest. In general, Individuals are affected by the general situation of the willingness of individuals to invest effect such personal factors as country's economy when deciding on investment instrument; individual's investment information, age, health status, income, value judgment, such financial factors as to provide an increase in Individuals in the selection of the investment instrument are value and desire to earn a continuous income, and finally such affected by the general situation of the world economy. environmental factors as family, social and cultural conditions. The majority of individuals in choosing the investment In this study, individuals living in Bhishek, the capital of instrument affected by the comments of the media about Kyrgyzstan, in Bishkek were undertaken and aimed to find out investment but at the same time other part of respondents which investment instruments choose Kyrgyz people when they were hesitant about the impact of this factor. invest their individual savings and which personal, financial, and Individuals indicated that the views of their environment, environmental factors effects their investment decision. For this friends and acquaintances influence the choice of the purpose, was prepared a questionnaire with questions that will investment instrument. reveal judgments and factors which may impact on the In general, it was observed very small differences between investment decisions of individuals under the concept of decisions on investment instrument of men and women. Women behavioral finance. prefer more than men to keep their savings in the form of foreign The results of the this study showed that Kyrgyz people mostly currency, while prefer to keep their savings in cash (som) more invest in cash (som), other most used investment instruments are than women. The most significant difference among them is in the respectively foreign currency, real estate and land. choice of the bank as investment instrument. Here among the Considering the financial sector of Kyrgyzstan there was not individuals who want to invest in bank, ratio of women to men is surprise that these investment instruments are prominent. more than two times. In summary, the women prefer to invest in Looking at the factors affecting the selection of investment banks, stock market and foreign exchange more than men, and instruments, there were obtained that individuals, while the men prefer to invest in money (som) and in other investment choosing investment vehicles pay attention first in the confidence instruments more than women. of the investment instrument, the second, to the accessibility to It was observed that in the selection of the investment instrument information about the investment instrument fully and easily, in the recommendation of the acquaintance, the popularity and the third, to the profitability of the investment instrument in the highly liquidness of the investment instrument is more effective long-term and finally to the profitability of the investment on the decision of men than women relatively, the instrument in the short-term recommendation of the investment consultant and information There was identified the levels of the influence of different factors from TV and radio is more influential on the investment decision on the investment decisions chosen by individuals. These of women than men.

140 Area Studies Area Studies 141 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan on their investment decisions. findings are itemized below: With these biases that effect an individual's investment decisions, Individuals are affected by presentiments when deciding on willingness to live under the best of circumstances and to obtain investment instruments; more income in the future forcing them to invest. In general, Individuals are affected by the general situation of the willingness of individuals to invest effect such personal factors as country's economy when deciding on investment instrument; individual's investment information, age, health status, income, value judgment, such financial factors as to provide an increase in Individuals in the selection of the investment instrument are value and desire to earn a continuous income, and finally such affected by the general situation of the world economy. environmental factors as family, social and cultural conditions. The majority of individuals in choosing the investment In this study, individuals living in Bhishek, the capital of instrument affected by the comments of the media about Kyrgyzstan, in Bishkek were undertaken and aimed to find out investment but at the same time other part of respondents which investment instruments choose Kyrgyz people when they were hesitant about the impact of this factor. invest their individual savings and which personal, financial, and Individuals indicated that the views of their environment, environmental factors effects their investment decision. For this friends and acquaintances influence the choice of the purpose, was prepared a questionnaire with questions that will investment instrument. reveal judgments and factors which may impact on the In general, it was observed very small differences between investment decisions of individuals under the concept of decisions on investment instrument of men and women. Women behavioral finance. prefer more than men to keep their savings in the form of foreign The results of the this study showed that Kyrgyz people mostly currency, while prefer to keep their savings in cash (som) more invest in cash (som), other most used investment instruments are than women. The most significant difference among them is in the respectively foreign currency, real estate and land. choice of the bank as investment instrument. Here among the Considering the financial sector of Kyrgyzstan there was not individuals who want to invest in bank, ratio of women to men is surprise that these investment instruments are prominent. more than two times. In summary, the women prefer to invest in Looking at the factors affecting the selection of investment banks, stock market and foreign exchange more than men, and instruments, there were obtained that individuals, while the men prefer to invest in money (som) and in other investment choosing investment vehicles pay attention first in the confidence instruments more than women. of the investment instrument, the second, to the accessibility to It was observed that in the selection of the investment instrument information about the investment instrument fully and easily, in the recommendation of the acquaintance, the popularity and the third, to the profitability of the investment instrument in the highly liquidness of the investment instrument is more effective long-term and finally to the profitability of the investment on the decision of men than women relatively, the instrument in the short-term recommendation of the investment consultant and information There was identified the levels of the influence of different factors from TV and radio is more influential on the investment decision on the investment decisions chosen by individuals. These of women than men.

140 Area Studies Area Studies 141 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

Nowadays, Kyrgyz people mostly prefer such investment Reference : instruments as cash, foreign currency, land, real estate and bank Borooah V.K., 2002, Logitand Probit Ordered and Multinomial Models, Sage deposits. People with lower income generally invest more in cash Publications,California. and foreign currency, while people with higher income invest Cramer, J.S., 1991, The Logit Model, Edward Arnold, New York. more in gold, land and real estate. People prefer to keep on hand most of the part of their savings. The most significant reason for Green W.H, 1997, Econometric Analysis, Prentice-Hall International, New this is the lack of the confidence and information. Owing to lack of Jersey. confidence in financial organizations as banks and stock Long J.S., 1997, Regression Models for Categorical and Limited Dependent exchange, and also because of lack of sufficiently accessibility of Variables, Sage publications, California. the information related this investment instruments, these Mohammad Salahuddin and Md. Rabiul Islam, 2008, 'Factors Affecting investment instruments not popular among people. This Investment inDeveloping Countries: A Panel Data Study', The Journal of situation requires careful analysis and focus. Such behavior as to Developing Areas, Vol. 42, No. 1, Fall, 2008, pp. 21-37 hold in hand savings couldn't be seen as a problem from National Bank of Kyrgyz Republic, 2012, The Financial Sector Stability Report individual perspective, when taken into account whole the of the Kyrgyz Republic, H1 2012, December, Bishkek 'İzdatelskiy Dom economy, in the economy where there is a shortage of financial Pozitiv' LLC Print House resources, keeping accumulation idle can lead to troubles. Rao, Bhanoji, 2001, 'East Asian Economies Trends in Saving and Investment', Most of investors choose investment instruments based on the Economic andPolitical Weekly, Vol. 36, No. 13, pp. 1123-1133 recommendations of friends, acquaintance and relatives. Ivasenko, L., 2008. Bishkek, http://www.allkyrgyzstan.com/kyrgyzstan Therefore, confidence, popularity and attractiveness of the /population/sities-and-villages/bishkek.htm investment instruments should be provided and transparency Zakonodatelstvo Kirgizskoy Respubliki, 2013. http://www.kg.spinform.ru must stand in the forefront. In addition, general situation of the /capital.html. economy is very important for investors. Political and economic crises held in recent years, can result in a further reduction of National Statistic Committee of the Kyrgyz Republic, Demographic Yearbook investors' confidence. Therefore, the government should take of Kyrgyz Republic, 2006-2010. care of the general stability of the country's economy.

1 “Choice of Investment Instruments of Kyrgyz People and Investigation of Investment Behavior of Kyrgyz People Under the Behavioral Finance T h e o r y , “ P r o j e c t N o : 2 0 1 2 . S O B . 0 1 , K y r g y z s t a n - Turkey University of Manas, 2012.

142 Area Studies Area Studies 143 Ebru Çağlayan* and Raziiakhan Abdieva ** The Behavior of Individual Investors in Transition Economies: The Case of Kyrgyzstan

142 Area Studies Area Studies 143 The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis hour it remains one of the lowest cost labor markets in the region. Since 2000, the industry has achieved an annual growth rate of Nguyen Van Chung* 20% and generated 2 million jobs, contributing 17% to the country's total export turn over. Vietnam shipped just over $9 billion in garments and textiles in 2009 primarily to the United States and Europe, only a 1.3% decline year-on-year during a Abstract period when many industrialized economies were in recession. The paper presents an Input-Output Analysis for Vietnam from 1996 to 2007, By using the phases of the economic transition of Vietnam (1996- an important source of information for the investigation of the inter-relations 2007), exploring the three national input-output tables (1996, 2000 existing among different industries. The Input-Output Analysis is used to and 2007)to determine the role and importance of different determine the role and importance of different economic value added, incomes economic value added, incomes and employment and it analyses and employment and it analyses the existing connection in an economy. This paper is focused on clothing and Textile industry and the input-output analysis the existing connection in Vietnam economy as well as the role of is finished for the Agricultural, clothing and textiles Sector. Our result show clothing and textiles Sector and agricultural in Vietnam economy. that the total output multiplier of agriculture is decrease from 1996 to 2007 The input-output analysis is the standard method for measuring where as the total output multiplier of clothing and textile is increasing during the spread effects of changes in the final demand for the product the period of time. However the earning multiplier as well as the value adds of an industry or sector. The main applications of input-output multiplier of the textile and clothing are lower and look like decrease compare with agriculture sector. analysis have been discussed in Leontief (1984), Miller and Blair (1985), Fleissner (1993), Holub and Schnabl (1994), United Key Words: Input Output, clothing and textile, agriculture, Vietnam Nations (1996), Kurz, Dietzenbacher and Lager (1998), Thijs ten Raa (2006), Eurostat (2008). 1. Introduction In Vietnam the applications of input-output analysis have been The textile and garment industry employs currently a large labor discussed in Bui Trinh, Kiyoshi Kobayashi (2011), Ngoc Quang force of 2.5 million people has made a remarkable contribution to Pham (2007), Bui trinh, Kiyoshi Kobayashi (2012). the economic development of Vietnam. East Asia Textile Business Review 2009, from 2000 Export value of textiles and apparel from Figure1: Economic Growth in Vietnam, 1977-2003 Vietnam is 1.9 billion US dollars to 2007 is 7.75 billion US dollars. Despite Vietnam's burgeoning population of 87 million and the government reporting of working age population of 44 million, labor supply continues to pose a challenge to the textile and apparel industry. Locals believe working in the industry means hard work and low income. Wages have improved from 2006 to 2009 due to worker strikes, but at US$0.30 to $0.60 per operator

* Nguyen Van Chung, CYCU University, Chung Pei Road, Chung-Li, Taiwan. E-mail: [email protected]

144 Area Studies, Vol.7(2), July - December 2013, pp. 144-164 Area Studies 145 The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis hour it remains one of the lowest cost labor markets in the region. Since 2000, the industry has achieved an annual growth rate of Nguyen Van Chung* 20% and generated 2 million jobs, contributing 17% to the country's total export turn over. Vietnam shipped just over $9 billion in garments and textiles in 2009 primarily to the United States and Europe, only a 1.3% decline year-on-year during a Abstract period when many industrialized economies were in recession. The paper presents an Input-Output Analysis for Vietnam from 1996 to 2007, By using the phases of the economic transition of Vietnam (1996- an important source of information for the investigation of the inter-relations 2007), exploring the three national input-output tables (1996, 2000 existing among different industries. The Input-Output Analysis is used to and 2007)to determine the role and importance of different determine the role and importance of different economic value added, incomes economic value added, incomes and employment and it analyses and employment and it analyses the existing connection in an economy. This paper is focused on clothing and Textile industry and the input-output analysis the existing connection in Vietnam economy as well as the role of is finished for the Agricultural, clothing and textiles Sector. Our result show clothing and textiles Sector and agricultural in Vietnam economy. that the total output multiplier of agriculture is decrease from 1996 to 2007 The input-output analysis is the standard method for measuring where as the total output multiplier of clothing and textile is increasing during the spread effects of changes in the final demand for the product the period of time. However the earning multiplier as well as the value adds of an industry or sector. The main applications of input-output multiplier of the textile and clothing are lower and look like decrease compare with agriculture sector. analysis have been discussed in Leontief (1984), Miller and Blair (1985), Fleissner (1993), Holub and Schnabl (1994), United Key Words: Input Output, clothing and textile, agriculture, Vietnam Nations (1996), Kurz, Dietzenbacher and Lager (1998), Thijs ten Raa (2006), Eurostat (2008). 1. Introduction In Vietnam the applications of input-output analysis have been The textile and garment industry employs currently a large labor discussed in Bui Trinh, Kiyoshi Kobayashi (2011), Ngoc Quang force of 2.5 million people has made a remarkable contribution to Pham (2007), Bui trinh, Kiyoshi Kobayashi (2012). the economic development of Vietnam. East Asia Textile Business Review 2009, from 2000 Export value of textiles and apparel from Figure1: Economic Growth in Vietnam, 1977-2003 Vietnam is 1.9 billion US dollars to 2007 is 7.75 billion US dollars. Despite Vietnam's burgeoning population of 87 million and the government reporting of working age population of 44 million, labor supply continues to pose a challenge to the textile and apparel industry. Locals believe working in the industry means hard work and low income. Wages have improved from 2006 to 2009 due to worker strikes, but at US$0.30 to $0.60 per operator

* Nguyen Van Chung, CYCU University, Chung Pei Road, Chung-Li, Taiwan. E-mail: [email protected]

144 Area Studies, Vol.7(2), July - December 2013, pp. 144-164 Area Studies 145 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

Vietnam's market oriented reforms known as “Doi Moi” were largest rice exporter. Other cash crops are coffee, cotton, peanuts, launched after the Sixth Party Congress in December 1986 with rubber, sugarcane, and tea. the broad aims of reducing macroeconomic instability as well as 2.Research Method and Database accelerating growth. Since the Doi Moi implementation, there has been significant transformation of Vietnam's economy with 2.2 Input-output models remarkable achievements in GDP growth, inflation control, and The input-output table is a tool to give a comprehensive picture of expansion of exports, FDI attraction and poverty reduction. a country's economy in aspects of production technology applied Economic structure continued the positive shift, GDP share of to create products (shown by input coefficients), use of output agriculture-forestry-fishery reduced to 20.25% from 20.36% in produced domestically (reflected by the structure of gross capital 2006 while industry and construction share increased to 41.61% formation, final consumption and exports) and production from 41.56% in 2006, and share of the service sector increased to income (described by the structure of compensation of 38.14% from 38.08% in 2006 employees, consumption of fixed capital, other net taxes on production and operating surplus). Moreover, the table is an Table1: Structure of employed population by industrial sector in 2000- 2011 economic tool or model for very useful analysis and forecast, which help economic managers make decisions, social-economic solutions benefiting national development. By looking into I/O tables for some periods, economic managers, researchers and other users notice how productive technology changes, quality of economic growth during each period, the role of economic industries in the sense of increasing industries 'growth by the means of their backward and forward linkages

Figure 2: A general view of an input-output table Source: 2000-2010: The Statistics Yearbook; 2011: The 2011 Labour Force Survey

Between 1994 and 2004, the sector grew at an annual rate of 4.1 percent. Agriculture's share of economic output has declined in recent years, falling as a share of GDP from 42% in 1989 to 26% in 1999, as production in other sectors of the economy has risen. However, agricultural employment was much higher than agriculture's share of GDP. In 2005, approximately 60 percent of the employed labor force was engaged in agriculture, forestry, and fishing. Agricultural products accounted for 30 percent of exports in 2005.The relaxation of the state monopoly on rice exports transformed the country into the world's second or third In which: Total output = intermediate demand + final demand

146 Area Studies Area Studies 147 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

Figure 2: A general view of an input-output table Source: 2000-2010: The Statistics Yearbook; 2011: The 2011 Labour Force Survey

146 Area Studies Area Studies 147 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

X1 = Z11 + Z12 + … + Z1n + Y1 (1) 1) Outputs of the sectors in the economy

Xn = Zn1 + Zn2 + … + Znn + Yn ( 2) 2) Income earned by households in each sector because of the new output 3) Employments (Jobs, in physical term) 4) The value adds that is created by each sector in the economy because of the new output. The Input-Output Analysis is used to determine the role and The technical coefficients are calculated from the values taken importance of different economic value added, incomes and from the matrix of transactions divided by total input employment and it analyses the existing connection in an

aij = xij/Xj (3) economy. This paper focuses on Agricultural, clothing and textiles Sector and the input-output analysis is furnished for the The equation (1) can be written as follow: Agricultural, clothing and textiles Sector.

xij = aij * Xj (4) 2.3 Linkages in Input-Output Models The Input-Output analysis offers two distinctive results for each analyses sector, namely backward linkages and forward linkages. First, the backward linkage used to present the internal transactions, showing that the increase in the total production of sector j increases the demand of sector j for inputs from the rest of the economic sectors. Because of their property, backward

x = Anxn X+Y (5) linkages are also reported in the bibliography as multipliers. I-O tables generate various types of multipliers. The forward linkage presents the intersectoral transactions, showing that an increase (I-A) x=Y (6) in total production of sector j increases its total supply to the rest -1 of the Multipliers are mean of estimating the overall change in the x= (I-A) Y (7) economy due to changes in final demand. Among all the information provided by input-output, multipliers are one of the The final demand changes due to changes in industry output as most frequently used. The Output Multiplier (OM): Output bellow: Multiplier predicts how much increased economic activity in other industries is caused by every additional dollar increase in x= (I-A)-1 Y (8) one specified industry. The output multipliers allow us to estimate the amount of economic activity that is generated from 2.2 General Structure of Multiplier Analysis an increase in the value of real estate activity (White, 2002). The Most of frequently used types of multipliers are those that sum of each column shows the total increase in national output estimate the effect of exogenous changes on: resulting from 1 VND increase in final demand for the column

148 Area Studies Area Studies 149 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

X1 = Z11 + Z12 + … + Z1n + Y1 (1) 1) Outputs of the sectors in the economy

148 Area Studies Area Studies 149 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis heading sector. The Earnings Multiplier (EM): Earnings linkages are also reported in the bibliography as multipliers. I-O multipliers for a given industry in a region show the earnings that tables generate various types of multipliers. a given industry pays, both directly and indirectly, to households The forward linkage presents the intersectoral transactions, employed in regional industries to deliver an additional dollar of showing that an increase in total production of sector j increases output (White, 2002). EM is obtained using the total requirements its total supply to the rest of the economic sectors that are using table and direct earnings coefficients as: the product of sector j as an input in their production process (Bonfiglio et al., 2006). C =E* (I-A)-1 (9) The forward linkage coefficients (FL) are computed as:

-1 Where: C is the earnings multiplier matrix, E is n×n matrix T =V* (I-A) (11) containing the ith sector's earnings coefficient in its ith diagonal and zeros elsewhere. Where: bij are the corresponding element of the total -1 I is the identity matrix and matrix (I-A) is the so-called Leontief requirements matrix. inverse or the interdependence coefficients or total requirements For earnings, table. The last equation indicates that a change in total output is -1. the product of a change in total final demand multiplied by (I-A) Table 2: The forward linkage coefficients for output The Leontief matrix is the result of a matrix transformation through which multiplier coefficients can be calculated. These coefficients summarise all indirect effects. The value-added multiplier (VAM) represents a change in total value-added for every VND change in final demand for a given sector. VAM are obtained using the total requirements table and direct VA coefficients as:

-1 T =V* (I-A) (10) Where: T is the VA multiplier matrix; V is n×n matrix containing the ith sector's VA coefficient in its ith diagonal and zeros elsewhere. The Input-Output analysis offers two distinctive results for each analyzed sector, namely backward linkages and forward -1 T =V*EFL (I-A) (12) linkages. First, the backward linkage used to present the internal transactions, showing that the increase in the total production of sector j increases the demand of sector j for inputs from the rest of Where: cij are the corresponding element of the earning multiplier the economic sectors. Because of their property, backward matrix.

150 Area Studies Area Studies 151 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis heading sector. The Earnings Multiplier (EM): Earnings linkages are also reported in the bibliography as multipliers. I-O multipliers for a given industry in a region show the earnings that tables generate various types of multipliers. a given industry pays, both directly and indirectly, to households The forward linkage presents the intersectoral transactions, employed in regional industries to deliver an additional dollar of showing that an increase in total production of sector j increases output (White, 2002). EM is obtained using the total requirements its total supply to the rest of the economic sectors that are using table and direct earnings coefficients as: the product of sector j as an input in their production process (Bonfiglio et al., 2006). C =E* (I-A)-1 (9) The forward linkage coefficients (FL) are computed as:

150 Area Studies Area Studies 151 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

Table 3: The forward linkage coefficients for earning Table 4: Vietnam Input Output table 14 sectors

3.1 Technical coefficient In 2007 Textile and clothing industry purchasing from Retail and wholesale trade, tourism and private service 0.0750 VND, 0.0962VND from Chemicals and 0.0073 from Agriculture where Forward linkages depict changes in output, employment and as Agriculture purchase from Textile and clothing industry just income of the whole economy as a consequence of a change in only 0.0011VND, 0.0565 from Retail and wholesale trade, tourism added value within the chosen sector. and private service and 0.1732 VND from chemical. Furthermore, The economic structural shift towards industrialization and in 2007 Textile and clothing industry supplied 0.0067 VND to modernization is the major policy of the Party and Government. produce every 1 RON of Machinery and 0.0098 VND to Other This process inevitably will increase the proportion of labor in manufacturing as well as 0.0023 to government. industry, construction and services, and reduce the proportion of In 2000 Textile and clothing industry purchasing from Retail and the labor force in agriculture. Table 1 indicates a shift in the labor wholesale trade, tourism and private service 0.153VND, structure between the three main industrial sectors over the past 0.0375VND from Chemicals and 0.0112 from Agriculture where 10 years: “Agriculture, forestry, fishing”, “Industry and as Agriculture purchasing from Textile and clothing industry construction” and "Services". Until now, “Agriculture, forestry, 0.00027VND, 0.03 from Retail and wholesale trade, tourism and fishing” accounted for 48.4% of labor (a decline of 13.8 percentage private service and 0.118VND from chemical. Furthermore, in points compared to 2000), “Industry and construction” accounts 2000 Textile and clothing industry supplied 0.009 VND to for 21.3% and "Services" for 30.3%. produce every 1 RON of construction, 0.003 to government and 3. Empirical Result just only 0.001 VND to Other manufacturing 0.0008 VND By using the original Vietnam Input Output table 138 sectors machinery. publishing in 2007, 112 sectors in 2000, and 96 sectors in 1996 we In 1996 Textile and clothing industry purchasing from Retail and integrated in to 14 sectors for three tables as follow: wholesale trade, tourism and private service 0.1677VND, 0.0556VND from Chemicals and 0.0290 from Agriculture where

152 Area Studies Area Studies 153 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

Table 3: The forward linkage coefficients for earning Table 4: Vietnam Input Output table 14 sectors

152 Area Studies Area Studies 153 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis as Agriculture purchasing from Textile and clothing industry 0.0002VND, 0.1112 from Retail and wholesale trade, tourism and private service and 0.1547VND from chemicals. Furthermore, in 1996 Textile and clothing industry supplied 0.0103 VND to produce every 1 VND of wood and paper, 0.0031 to government and 0.0162 VND to Other manufacturing 0.017 VND machinery. Via technical coefficient 2007, 2000, 1996 we can see in 1996 to produce 1 VND Textile and clothing industry purchasing from Retail and wholesale trade, tourism and private service 0.1677VND, but in 2000 to produce 1 VND Textile and clothing industry purchasing from Retail and wholesale trade, tourism and private service just only need 0.153 VND and 0.0750VND in 2007. Similarly, in 1996 to produce 1 VND Textile and clothing industry purchasing from Agriculture 0.1677VND, , but in 2007 to produce 1 VND Textile and clothing industry purchasing from Agriculture just only need 0.153 VND. 7 0 0 2

d n a

0 0 0 2

, 6 9 9 1

, M A N T E I V

r o f

r e i l p i t l u M

: 5

e l b a T

154 Area Studies Area Studies 155 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis as Agriculture purchasing from Textile and clothing industry 0.0002VND, 0.1112 from Retail and wholesale trade, tourism and private service and 0.1547VND from chemicals. Furthermore, in 1996 Textile and clothing industry supplied 0.0103 VND to produce every 1 VND of wood and paper, 0.0031 to government and 0.0162 VND to Other manufacturing 0.017 VND machinery. Via technical coefficient 2007, 2000, 1996 we can see in 1996 to produce 1 VND Textile and clothing industry purchasing from Retail and wholesale trade, tourism and private service 0.1677VND, but in 2000 to produce 1 VND Textile and clothing industry purchasing from Retail and wholesale trade, tourism and private service just only need 0.153 VND and 0.0750VND in 2007. Similarly, in 1996 to produce 1 VND Textile and clothing industry purchasing from Agriculture 0.1677VND, , but in 2007 to produce 1 VND Textile and clothing industry purchasing from Agriculture just only need 0.153 VND. 7 0 0 2

d n a

0 0 0 2

, 6 9 9 1

, M A N T E I V

r o f

r e i l p i t l u M

: 5

e l b a T

154 Area Studies Area Studies 155 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

In this section we will analyse the Textile and clothing and 10th position in 2007 Agricultural sector in the output, earnings, value added and In general, during 1996-2000 the Vietnam economy slowed dow. employment multiplier. The results are presented in Table 5. However, the rank of the clothing and Textile still increased from In 2007, the total increase of 2.4243 VND in the Vietnam economy 6in 1996 to 9 in 2000 and 10 in 2007 when the Vietnamese output resulted from 1 VND increase in final demand for textile economy seemed to return to its track of high economic growth. and clothing rank number 10th position. In other words, the The EM'' for Textile and clothing underlines that 1 VND increase 2.4243 VND (OM'') is composed of 1.00 VND of direct materials in the final demand of this sector would increase the earnings in and labor, plus additional 0.4243 VND of increased output in the economy by 0.0338VND rank 5th position. This amount is other related industries where as increase of 2.3247 VND in the paid for wages to people directly and indirectly involved in the Vietnam economy output resulted from 1 VND increase in final creation of each additional VND of output. Higher EM was demand for agriculture rank number 7th position . In other registered in 2000 when 0.0273 VND rank 3rd positions was paid words, the 2.3247 VND (OM'') is composed of 1.00 RON of direct in wages due to 1 VND increase in final demand for Textile and materials and labor, plus additional 0.3247 VND of increased clothing. In 1996, the EM'' for Textile and clothing underlines that output in other related industries. Thus, the rank of Textile and 1 VND increase in the final demand of this sector would increase clothing is higher than Agricultural sector in year 2007. the earnings in the economy by 0.0248VND rank 3rd position the In 2000, the total increase of 2.1221 VND in the Vietnam economy same with year 2000 where as the EM'' for agriculture with higher output resulted from 1 VND increase in final demand for textile rank in 2007 with the rank 13th position, 11th position in 2000 and and clothing rank number 9th position where as increase of 1.7760 10th position in 1996. . This amount of agriculture is paid for VND in the Vietnam economy output resulted from 1 VND wages to people directly and indirectly involved in the creation of increase in final demand for agriculture rank number 6th each additional VND of output. Higher EM was registered in position. Thus, the rank of Textile and clothing is also higher than 2007, 2000, 1996 with 0.1346 VND 0.1067 VND 0.1173, Agricultural sector in year 2000. respectively for textile and clothing. It means that the earning of However, in 1996 the total increase of 1.7994 VND in the Vietnam agriculture were still higher than Textile and clothing during economy output resulted from 1 VND increase in final demand 1996-2007. Similarly, the result in table 9 shows that the VA of for textile and clothing rank number 6th position where as agriculture still higher when compared with textile and clothing. increase of 2.2951 VND in the Vietnam economy output resulted Thus during 1996-2007, Vietnam government tried to change from 1 VND increase in final demand for agriculture rank number economic structure from the economy depending on Agricultural 9th position. Thus the rank of Textile and clothing is lower than into industrialized economy. However, with the higher output of Agricultural sector in 2000. industries like machinery, other manufacturing …, especially textile and clothing industry, the income of employee still did not Comparison the position of Textile and clothing and Agricultural improve than before. sector we can see that the rank of Agricultural sector decreasing from 9th position in 1996 to 6th position in 2000 and 7th position in 2007. However, the position of Textile and clothing sector increased from 6th position in 1996 to 9th position in 2000 and

156 Area Studies Area Studies 157 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

The term forward linkage is used to indicate this kind of interconnection of a particular sector with those sectors to which it sells its output. In table 6 the forward linkages for the output, earnings and employment were estimated for the years 1996, 2000 and 2007, respectively. For 2007, the high dependence in other sectors in terms of output is characteristic for agriculture (3.30616), mining (3.44573), woods and paper (3.245). The textile and clothing with lower interdependence (2.6818), constructions (2.265) and the 7 0

0 lowest one is others agriculture (1.61087). However, the forward 2

n linkage of the textile and clothing in 1996 and 2000 with 3.35173 a

0 and 2.8217, respctively is larger than the forward linkage of the 0 0 2

agriculture with 1.950 and 2.018. It means that a VND's worth of , 6

9 expansion of the output of the textile and clothing sector is more 9 1 essential to the Vietnam economy than a similar expansion in the , M

A output of agriculture sector, from the point of view of the overall N

T productive activity that it could support. E I V

r The earnings forward linkage coefficients of the textile and o f

s clothing sector is very high 0.21299 in 1996 rank 14th póition, e g

a 0.1793 rank 14th psition and 0.1704 rank 13th position in 2007 k n i l

compare with earnings forward linkage coefficients of the d r

a agriculture í lower with forward linkage coefficients 0.0419 rank w r

o 5th position in 1996, 0.0443 rank 5th position in 2000 and a litttle F

: bit high in 2007 with forward linkage coefficients 0.1704 rank 10th 6

e l position. Generally, the earnings forward linkage coefficients of b a

T the textile and clothing sector is higher when compared with Argriculture during 1996-2007.

158 Area Studies Area Studies 159 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

0 lowest one is others agriculture (1.61087). However, the forward 2 d

n linkage of the textile and clothing in 1996 and 2000 with 3.35173 a

0 and 2.8217, respctively is larger than the forward linkage of the 0 0 2

agriculture with 1.950 and 2.018. It means that a VND's worth of , 6

9 expansion of the output of the textile and clothing sector is more 9 1 essential to the Vietnam economy than a similar expansion in the , M

A output of agriculture sector, from the point of view of the overall N

T productive activity that it could support. E I V r The earnings forward linkage coefficients of the textile and o f

s clothing sector is very high 0.21299 in 1996 rank 14th póition, e g a 0.1793 rank 14th psition and 0.1704 rank 13th position in 2007 k n i l

compare with earnings forward linkage coefficients of the d r

a agriculture í lower with forward linkage coefficients 0.0419 rank w r

o 5th position in 1996, 0.0443 rank 5th position in 2000 and a litttle F

: bit high in 2007 with forward linkage coefficients 0.1704 rank 10th 6 e l position. Generally, the earnings forward linkage coefficients of b a

T the textile and clothing sector is higher when compared with Argriculture during 1996-2007.

158 Area Studies Area Studies 159 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis d n a d m n e a d

l m a e n d i

f l

r a o n t i f c

e r s o

t g c n e i s

h t e o r l u c t

l d u n c i a r

g e l A i

t n x i

e T e

g n i n

a e h g c

a h % c 0

% d 0 n 1 a

d % n 1 a

o t %

1 e

u o t d

e 7 u 0 d 0

2 7

0 d 0 n 2 a

d m n e a d

l m a e n d i

f l

a e n h i t f

f e o

h t n

f o i o t

a n i r o i a t V a

i : r 7 a

V e

l : b 8

a T e l b a T

160 Area Studies Area Studies 161 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis d n a d m n e a d

l m a e n d i

f l

r a o n t i f c

e r s o t g c n e i s

h t e o r l u c t l d u n c i a r g e l A i

t n x i

e T e g n i n a e h g c

a h % c 0

% d 0 n 1 a

d % n 1 a

o t %

1 e u o t d

e 7 u 0 d 0

2 7

0 d 0 n 2 a

d m n e a d l m a e n d i f l

a e n h i t f

f e o

h t n

f o i o t a n i r o i a t V a

i : r 7 a

V e l : b 8 a T e l b a T

160 Area Studies Area Studies 161 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

In the table 11 and table 12, a 10% increase in demand for Textile earning multiplier as well as the value adds multiplier of the and clothing leads to an increase in output in the sector by 20%. textile and clothing are lower and looked like decreasing when However, a 10% increase in demand for agriculture leads to an compared with agriculture sector. This study also helps the policy increase in output in the sector just only 12%. Futher more, an makers to gain an insight into Vietnam's economy. increase of 1% in demand for Textile and clothing leads to an increase in output in the sector by 2%, where as demand for agriculture just increased in output 1.2%, the construction sector also increase higher with 0.28% when we increase 10% Textile and clothing sector compare with 0.18% when we increase 10% in demand for agriculture. The business and other service increase 0.18% when we increase 10% in demand for textile and clothing where as increase in output in the business and other service Reference : sector just only 0.1% when we we increase 10%in demand for Bui Trinh, Kiyoshi Kobayashi, 2011, 'An Economic Structural Change agriculture. In generally the impact of textile sector to total Comparison of Interactions Analysis between Manufacturing and REST Vietnam economy is more higher compare with agriculture. of Economic Activity: Application to Vietnam Economy Based on Input- 4. Conclusions Output Tables', Journal of Contemporary Management. This paper presents an Input-Output Analysis for Vietnam Ngoc Quang Pham, 2007, 'Economic performance of Vietnam, 1976-2000: during 1996-2007, an important source of information for the New evidence from input-output model', Development and Policies investigation of the inter-relations existing among different Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi industries. The Input-Output Analysis is used to determine the Vietnam. role and importance of different economic value added, incomes Bui trinh, Kiyoshi Kobayashi, 2012, 'Vietnam Economic Structure Change and employment and it analyses the existing connection in an Based on Input-Output Table (2000-2007)', Asian Economic and Financial economy. This paper not only focused on clothing and Textile Review, Vol.2, No.1, pp.224-232. industry and furnished input-output analysis for the Bonfiglio, 2006, 'Rural Balkans and EU Integration, An Input-Output Agricultural, clothing and textiles Sector but also showed the Approach', Milano, Italy. transformation of the Textile Industry after the Vietnam White, D., 2002, 'The Impact of Real Estate on the Florida Economy: Update government try to change structure of economy from the for 2002', Shimberg Center for Affordable Housing, M. E.Rinker, Sr. agricultural economy into industrial economy. Furthermore, This School of Building Construction, College of Design, Construction and paper also show that during 1996-2007 Vietnam government try Planning, University of Florida. to change economic structure from the economy depend on Agricultural in to industrialize economy. However, with the IMF (International Monetary Fund). 2009. International Financial Statistics: Vietnam,International Monetary Fund, Washington D.C. (Available at higher output of industries like machinery, other manufacturing www. www.gso.gov.vn last accessed February 2009). …, especially textile and clothing industry, the income of employee still did not improve than before. Furthermore, the GSO (General Statistics Office), Result of the Vietnam Household Living Standards Survey 2006, Government of Vietnam, Hanoi.

162 Area Studies Area Studies 163 Nguyen Van Chung* The economic impact of Agricultural and Clothing, Textile: an Input- Output Analysis

162 Area Studies Area Studies 163 Nguyen Van Chung*

RonaldE.Miller and Peter d.blair, 2009, Input-Output Analysis, Cambridge University, New York.

Vietnam GSO, report on the 2011 Vietnam labour force survey

Camelia Surugiu, 2010, 'The Economic Impact of Tourism. An Input-Output Analysis' National Institute for Research and Development in Tourism,

South East Asia Textile Business, Vietnam National Textile and Garment Group, Review 2009 (1stedition).

Vietnam GSO, Vietnam input output table, 1996, Vietnam Statistics Publishing House

Vietnam GSO, Vietnam input output table, 2000, Vietnam Statistics Publishing House.

Vietnam GSO, Vietnam input output table, 2007, Vietnam Statistics Publishing House.

164 Area Studies Nguyen Van Chung*

RonaldE.Miller and Peter d.blair, 2009, Input-Output Analysis, Cambridge University, New York.

Vietnam GSO, report on the 2011 Vietnam labour force survey

Camelia Surugiu, 2010, 'The Economic Impact of Tourism. An Input-Output Analysis' National Institute for Research and Development in Tourism,

South East Asia Textile Business, Vietnam National Textile and Garment Group, Review 2009 (1stedition).

Vietnam GSO, Vietnam input output table, 1996, Vietnam Statistics Publishing House

Vietnam GSO, Vietnam input output table, 2000, Vietnam Statistics Publishing House.

Vietnam GSO, Vietnam input output table, 2007, Vietnam Statistics Publishing House.

164 Area Studies