This new decade could be a hostile era due to the forging of new political alliances and the emergence of several political conflicts across the world. For the individual countries, this transformation could be an ominous challenge to maintaining diplomatic equilibrium by conserving their national political interests without undermining business relations.
Unfortunately, economic retaliation has increasingly become the norm in diplomatic conflicts. Whether it is the US sanctions on Iran or the calls for action against Turkish and Malaysian companies in India, the pattern has proved detrimental to the economic well-being of the countries involved.
Then-Malaysian prime minister Mahathir Mohamad’s and Turkish President Recep Tayyip Erdogan’s remarks on Kashmir, Indian citizenship acts, and support for Pakistan on remaining on the gray list of the Financial Action Task Force (FATF) are more part of their ambitious imperialist plan to gain momentum across the Muslim world, rather than to target India purposely.
Moreover, Pakistan is an inevitable partner amid the recent tiff over leadership of the Muslim world between Saudi Arabia and its allies and the newly formed bloc led by Turkey and also consisting of Malaysia, Qatar and Iran. Nevertheless, India has legitimate reasons to discard these statements as unwanted interference in its sovereignty.
Despite diplomatic outrage, India officially refrained from imposing restrictions on the corporations and traders in Turkey and Malaysia. However, there has been some public support on social and mainstream media for boycotting tourism and commercial ties.
Such a netizen-driven campaign or possible government moves to punish offshore corporations could decelerate the volume of commercial engagement and hamper the flow of foreign investment. Previously, India lost a source of low-priced oil, Iran, because of economic sanctions. Now the demand is to reject the import of Malaysian palm oil.
Malaysia has an abundance of palm oil while India is a huge consumption base for edible oils. Trade of palm oil or any commodity is determined by the principles of demand and supply. Political interference can disrupt that equilibrium, whereby traders have to import it at a higher cost and Malaysian palm growers have to sell it at lower prices.
After a reduction in palm-oil import by Indian traders, China, Pakistan and Turkey intend to increase their import to cover the loss of the Indian trade. During the period August-December 2019, India’s share in total Malaysian palm-oil export increased from 18% in the same period a year earlier to 22%, but China had the larger growth, from 16% to 23%, and became the top importer by surpassing India.
Besides palm oil, Malaysia is also a major source for remittance inflows to India, which received US$287 million from around 130,000 Indian emigrants during 2017.
The call for a boycott of Turkey and Malaysia as tourism destinations and of their government-owned airlines is unable to make much impact because of the trivial size of India’s share in their overall business. During 2018, Indians made up only 0.37% of tourists to Turkey and 2.32% to Malaysia, while India had a similar share of Turkish and Malaysian tourists, at 0.32% and 3.02% respectively.
During the five months between August and December 2019, India’s overall trade declined 10% in comparison with the corresponding period in 2018, while Malaysia had 6.43% less trade with India and Turkey posted positive growth at 1.52%. Trade relations with Turkey had been thawing after Erdogan’s visit to New Delhi in May 2017, growing by 35% in 2019 over 2016. Turkey and India had also fixed an ambitious target to take this volume to $10 billion by 2020 from the volume of $7.59 billion in 2019.
External commercial relations flourish after extensive exercises of offshore companies based on their profit-making prospects in the long term. It is not prudent for countries to act against global corporations that are adding economic value by remaining impartial in political issues. Meddling in commercial relations may create negativity in a competitive environment. This is especially true in the case of India, whose economy is currently stumbling with a slow growth rate.
Besides Turkey and Malaysia, India’s stand on Kashmir and the citizenship law has been criticized by China, the Organization of Islamic Cooperation (OIC), the European Union and some US city councils. Is it wise to reciprocate through commercial punishment with such big trade partners on their criticisms? Moreover, what would be the consequences if those nations also retaliated to punish Indian companies operating in their jurisdictions?
As a mature democracy, India must consider the economic needs of the hour before any knee-jerk reactions and neutralize other standpoints through dialogue, as it has exhibited exemplary diplomatic skills for walking tightropes on political issues.
Shafeeq Rahman PhD is a New Delhi-based researcher. His data-driven articles are published in the Diplomat, Huffington Post, Middle East Monitor, DailyO, and many national and international publications. He has more than a decade and a half of research experience in data analysis.