By 2024, the world has changed yet again. The geopolitical scenario has altered radically, and there may yet be a need to finetune our Act East Policy. The changes were first triggered by the US China Trade War that President Donald Trump had started by imposing tariffs and other trade barriers on China in 2018. At the same time, China started showing increasing aggressiveness in dealing with neighbours.

Its increasing bellicosity towards Philippines, Japan and Vietnam in the South China Sea was bringing these countries closer to India which itself had locked horns with Beijing at Ladakh since 2019. The Covid pandemic then severely disrupted the global supply chain of which China was the most important link, and ever since Western multinationals, which had created huge manufacturing bases in China taking advantage of its infrastructure and cheap wages, have been trying to relocate their factories away from China, benefiting other emerging eco nomies of Asia. China has been a global manufacturing hub for MNCs for a long time.

Its stupendous growth during the last three decades was boosted by export of electronic goods. But Chinese labour was no longer that cheap ~ between 2013 and 2022, manufacturing wages have doubled to an average of $8.31 per hour. The trade war between US and China continues and is forcing the high-tech companies dependent on the use of semiconductors to rethink their reliance on China. Apple is in the vanguard of companies shifting their bases away from China to India, but there are many other giant tech and manufacturing companies which are relocating a substantial part of their manufacturing away from China, among them Samsung, Dell, Sony, etc.

But despite all these shifts, the Chinese economy still remains too strong and too large to be replaced by a single or a couple of Asian economies. That is why The Economist magazine came up with a term called ALTASIA, a network of 14 economies stretching in a crescent from Japan, through South Korea, Taiwan, Philippines, Indonesia, Singapore, Brunei, Malaysia, Cambodia, Thailand, Laos, Vietnam, and Bangladesh, and finally India, which can together counter and even outmatch China’s economic and manufacturing strengths. Altasian economies have distinct strengths, from Japan’s high skills and deep pockets to India’s low wages and are in a position ~if they can work together ~ to present themselves as a viable and reliable alternative to China if they can leverage their comparative advantages, so that some countries can manufacture sophisticated components while others can assemble them into finished gadgets.

This has the potential of changing the geo political and geo-economic equations between the existing global order dominated by China and the US. The Chinese mouthpiece Global Times dismisses it as a “far-fetced idea” that makes no economic sense, but in so reacting, it also recognised the underlying threat. As of 2024, the combined GDP of Altasian countries stands at $15.38 trillion compared to China’s $18.53 trillion. Altasia’s collective labour force of 1.4 billion of which 155 million have a college education dwarfs Chi na’s 950 million strong labour force and 145 million with a college education. In contrast to a fastageing China, the Altasian population is poised to expand yet for quite some time. They also enjoy a significant wage advantage over China.

Hourly manufacturing wages in India, Malaysia, the Philippines, Thailand and Vietnam are below $3, compared to China’s $8.3. The region is already an export powerhouse: its members sold $634 billion-worth of merchandise to America in the 12 months till September 2022, as compared to China’s $614 billion. Japanese companies have been engaged in building supply chains in South-East Asia for decades, and even its neighbour, South Korea, has done so. Altasian countries also enjoy formidable trading heft, being at the centre of global production of semiconductors.

They account for 25 per cent of global exports of integrated circuits, far exceeding China’s 18 per cent. The jewel in the crown is the Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest independent semiconductor producer with over 60 per cent global market share of microchips and 90 per cent share of advanced chips, which partners global tech giants like Apple, AMD, and Nvidia and produces chips for all of them. The numbers are convincing enough for an alternative Asian supply chain to look viable, as it has got many distinct advantages over China. Altasian countries have also obtained substantial economic integration among themselves.

India could not join the Regional Comprehensive Economic Partnership (RCEP) due to its own limitations, but all other Altasian countries save Bangladesh and Taiwan are already its members, as is China. RCEP has created a single market in intermediate products, easing regulatory barriers to complex supply chains that run through several countries. Most Altasian countries are also members of the Indo-Pacific Economic Framework, an American initiative. Five of them ~ Brunei, Japan, Malaysia, Singapore and Vietnam ~ belong to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is a reincarnation of the earlier Trans Pacific Partnership (TPP) from which the US under President Donald Trump had pulled out in 2017.

There are many hurdles too, because not all the Altasian countries are evenly poised in terms of infrastructure and manufacturing efficiency to replace China overnight. The World Bank’s latest logistics-performance index (2023), which measures countries on efficiency in areas like customs, transport infrastructure and logistics regulation, shows a wide range of variation: from 2.6 out of a total 5 for Bangladesh and 2.4 for Cambodia, to 3.9 for Japan and 4.3 for Singapore (China is ranked 19th with a score of 3.7 and India 34th with a score of 3.4). It will be difficult for such diverse economies to work as a single entity like China. Altasia’s future also hinges on India with its huge market, and India itself has to overcome several formidable roadblocks for better integration, as reflected in its shying away from the RCEP, for fear of China.

The only practicable way is to enter into more and more FTAs to ease trade and regulatory barriers gradually. But the opportunity is that many companies will explore options in Altasia in the years to come and Altasian countries must take advantage of it. Myanmar and Bangladesh might have to be kept out of calculations for quite some time. Bangladesh is fast turning into another Pakistan, if not Afghanistan, in our neighbourhood with its toxic policies towards minorities and India, with little chance of revival of its economy in the near future. India’s trade with it stood at $13 billion in 2022-23, of which $11 billion were exports. India’s FDI outflow into Bangladesh amounted to $748 billion during the last four years, which may eventually turn into a waste.

With Myanmar, India traded $ 1.7 billion in 2023-24, of which $1 billion were imports. India’s investments in Myanmar during the past four years amounted to $1.6 billion, which included investments in the Kaladan project. The political and security situation in both these countries will continue to be unstable for indefinite periods in future, making all these investments infructuous. The other group India must focus its attention on is the 23- member IORA. India’s trade with Indian Ocean Rim countries is significant due to the region’s strategic economic importance. As of 2024, India’s total trade with these countries amounted to $291 billion, reflecting both the potential and the scale of India’s active engagement in the Indian Ocean region.

India has to play a pivotal role in promoting economic growth and stability within this region, as nearly 90 per cent of India’s trade by volume, including a substantial portion of its oil imports, transit through the Indian Ocean routes. Strong economic integration can eventually lead to monetary and even political integration. Integration is a well-defined process that follows certain stages starting with FTAs between nations or within a group of nations when they agree to eliminate tariffs and non-tariff barriers. It then develops into a Customs Union with common external tariffs, then to a common market with free movement of labour, capital and products, to a common monetary union characterised by common fiscal and monetary policies and a common currency.

The last stage in the development is a political union when all national institutions and policies are subsumed into a supranational organisation representing a perfect unification of all national policies. It still remains an unattained ideal to pursue. The nearest achievement has been the European Union with a common market and a common currency. Even so, it took almost 50 years since 1950 for European nations to forge an Economic and Monetary Union with a single currency.

But given the current geopolitical realities and the urgency facing the world, it may not take as much time today if the countries driven by common mutual interests can harness their strengths and overcome their weaknesses displaying purpose, determination and willingness to accommodate each other including disadvantaged nations. Dag Hammarskjold, a former UN Secretary General once compared the UN with a weird Picasso abstraction. Surely, the UN has failed to unify the world or prevent wars, and perhaps it is now time for individual nations to come together in smaller groups and start redrawing the picture themselves to define their common destiny. “In union there is strength”, isn’t this what Aesop had said?

(The writer is a commentator, author and academic. Opinions expressed are personal)