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This chapter examines the political economy of selected individual reform measures to provide a flavour of the interplay of specific domestic and international economic interest groups in influencing their time path of reforms. Two procedural and two institutional reforms are selected to bring out the strengths and limitations of coalition politics: liberalization of domestic and international private investment, liberalization of international trade in goods and services, privatization of government-owned commercial enterprises, and organized labour market reforms. The chapter analyses how the central government has been in the driver’s seat in steering the overall pace and direction of reforms.

This chapter reviews the academic work on the changing nature of foreign capital flows to India in the post-liberalization period. The discussion shows that India has almost moved full circle in its approach towards capital flows. During the early phases of planning, foreign capital was deemed important. But gradually India developed a cautious approach about it since the 1960s. India opened up in 1991 and since then the government has gradually moved towards a more open and accommodating policy regime regarding foreign capital. The review of literature indicates that there has been significant increase in capital flows to India over the last two decades and India no longer faces a major foreign exchange constraint. While the literature is divided about the extent of benefits brought about by the inflow of foreign capital, it clearly establishes the policy constraints and threat increased inflow of foreign capital has introduced in the Indian economy.

Chapter 1 reviews relevant Chinese government policies and trends in FDI. In doing so, this chapter identifies key sectoral and regional patterns of FDI and describes key changes in the competitive dynamics between local and foreign firms, laying the groundwork for the future empirical chapters. In short, as part of its economic reform strategy, the Chinese government initially allowed foreign multinationals to enter the market through joint ventures but gradually shifted to allow wholly owned subsidiaries in non-strategic industries, while removing the privileges they enjoyed in the past. The trends suggest that the driving force of multinational firms’ competitive advantages shifted from preferential government treatment, which encouraged FDI in labor-intensive industries in the earlier period of reform, to the possession of intangible resources like technology and brands, which led to a boost of FDI in technology or capital-intensive industries over the last decade.

This chapter introduces ASEAN and the “ASEAN Way” of taking actions based on consensus as well as both the theoretical and practical difficulties that presents for successful collective action by the members of the organization. Emphasizing the theoretical insights of Ruggie and other scholars concerning multilateralism as well as theories of collective action, the chapter provides insight into the factors that inhibit a common ASEAN response to the disputes in the South China Sea. The chapter further highlights the diversity among ASEAN member states, including geographic, cultural, political, and economic differences, as well as their own territorial disputes both in and outside of the South China Sea, that further inhibit collective action. Finally, the chapter provides data on China’s foreign direct investment (FDI) into the region, which, the book argues, provides China with increased influence over some ASEAN members.

This chapter first surveys the close historical ties between the governments of China and Cambodia, as well as between the Chinese Communist Party (CCP) and the Cambodian People’s Party (CPP). It then presents data on Cambodia’s dependence on Chinese “aid” and other forms of capital, including foreign direct investment (FDI). It argues that both the relatively high levels of Chinese funding as well as the “no strings attached” nature of that funding, which lacks the conditions for political and economic reforms often attached to foreign aid by other governments and multilateral institutions, provide additional leverage for China over Hun Sen’s government. The chapter shows how China uses this leverage both to help its state-owned enterprises (SOEs) overcome the high risk in Cambodia’s investment environment for their very specific (immobile) assets and to gain the support of the Cambodian government on issues vital to the legitimacy of the Chinese Communist Party, including its territorial claims in the South China Sea. The chapter specifically analyses cases of Chinese investments in Cambodian hydropower projects and shows how Chinese influence over the Cambodian government helps overcome domestic opposition to these projects and secures long-term guarantees for the profitability of investments in this sector.

In the context of the comprehensive preferential trade agreements (PTAs) signed by India since the mid-2000s, which include liberalization commitments in agriculture, services, and investments, in addition to trade in goods, this chapter provides a critical survey of the available literature and methodologies for analysing trade agreements. The nature of most current analyses prevents an understanding of the economy-wide implications of this shift in India’s trade policy of engaging in multiple PTAs with overlapping commitments. Therefore, going beyond the analysis of tariff liberalization, the chapter attempts to provide an analytical framework for examining the systemic and developmental implications of PTAs. It is argued that the legally binding policy commitments in India’s recent PTAs can have serious repercussions on financial stability, food security, and industrial development.

The purpose of this chapter is to examine the pace and pattern of development of China's new industries, as they may bear on the regional production networks in East Asia. Two new industries are selected for the study, and they are the electronics and information technology (IT) industry and the automobile industry respectively. This chapter thereby tries to trace the development of the two Chinese industries, focusing on the role of Foreign Direct Investment (FDI) and their exports records or export potentials. The relative strengths of the Chinese electronics and IT industry as an exporter are estimated in detail, specifically vis-à-vis that of neighbouring economies. It also looks into how the smaller neighbouring economies cope with the impact from China and exploit the niches offered by the emerging new regional production networks.

Internationalization plays a key role in promoting the growth of firms and building their competitiveness. Although key decision-makers at the firm and national level often misunderstand the nature of internationalization, it is clear that internationalization plays a critical role in business operations, as demonstrated by how companies that efficiently coordinate their global value chain gain greater competitive advantage. The impact of internationalization on both home and host countries is demonstrated by the implementation of foreign direct investment (FDI) in terms of capital transfer, trade promotion, industry growth and cluster effects, and technology development and innovation. The ABCD model then provides guidelines for effectively implementing internationalization policies at the firm level.

Although entwined with other motivations, the primary objective of the Look East Policy was and remains economic. Indian policy makers felt the need to bridge the gap caused by China’s twelve years year head start in liberalizing its economy or risk being marginalized in Asia. The two countries choose, however, radically different strategies:, China becoming became in the process a massive exporter of manufactured goods while India while India specializedspecialized in high-skill service exports, alongside manufactures but failing failed to expand the latter as much as expected. Foreign direct investment played a key role in the strategies of both countries, leading to substantial differences in export output. Because it was meant to develop an export strategy, FDI gave China a decisive advantage in the region. In India, FDI essentially targeted the domestic market and its contribution to manufactured product exports remained limited. China rapidly emerged as the pivot of the Asian export platform, a position that also enhanced its political influence across Asia.

This chapter examines the role of export-led growth in the Indian context, placing it in context of overall industrialization strategy and trade policy, as it underscores key elements affecting India’s export performance in the pre- and post-reform periods. It reviews a large body of literature and identifies the key aspects of trade and industrial policy that have affected growth and employment creation in the manufacturing sector and in this context analyses India’s performance with respect to exports of manufactures, highlighting some of the problems faced by Indian exports and the ways these can be addressed by policymakers. Alongside it discusses conceptual issues related to export-led growth, outlines analytical frameworks that may be used to study its implications and reviews evidence on the empirical validity of the ‘export-led growth hypothesis’, in the Indian context.

In the last two decades, new multinational enterprises from emerging, upper middle-income or oil-rich countries have defied traditional internationalization patterns followed by developed country multinationals. Not only have they been successful, but some have even managed to oust the long-established leaders in their respective industries. The outstanding rise of these new multinationals poses three main questions. First, do these firms share some common distinctive features that distinguish them from traditional multinationals? Second, what advantages have allowed them to operate and compete not only in host countries at the same or lower level of economic development but also in the richest economies? Third, how come they have been able to expand abroad at dizzying speed, in defiance of the conventional wisdom about the virtues of a staged, incremental approach to internationalization? In this chapter we answer these questions in order to get a more comprehensive picture of the new multinationals phenomenon.

This chapter examines the recent pattern of India’s merchandise trade and tries to understand whether, and to what extent, the surge in trade, in particular exports, in the recent period can be seen as ‘success’ either in general or of reform policies. A related issue that is considered is whether there are enough reasons to believe that the expansion in exports witnessed thus far can be expected to be sustained over a longer period of time. An analysis of the product categories that have been the major drivers of merchandise exports in the 2000s and the conditions, including domestic ones, that have made this possible, give reasons to believe that the increase in India’s exports is a reflection of the success of the reform policies might be too hasty.