Implementing Canada’s Indo-Pacific economic strategy

Canada’s Indo-Pacific Strategy defines key directions for a comprehensive foreign policy for the leading growth region in the global economy. This includes a focus on the Association of Southeast Asian Nations (ASEAN), and strengthening bilateral interactions with India and Japan. Substantive economic objectives include support for sustainable infrastructure and for resilient supply chains in the region. To help implement these economic priorities—aligned with developments in the region—Japan can be an effective region-wide partner, and Thailand and Bangladesh can serve as gateway economies for business linkages with ASEAN and South Asia, respectively. David Abonyi, left, is based in Bangkok, and George Abonyi is a resident of Ottawa. Photographs courtesy of David and George Abonyi Japan, the world’s third-largest economy, plays an essential role in the Indo-Pacific, particularly in Southeast Asia and increasingly in South Asia. Its key regional priorities focus on investment in high-quality infrastructure and resilient supply chains. These reflect the transformation of Japan’s economy. This has included the regionalization of its industries, particularly in ASEAN. Japanese firms have also repositioned as critical suppliers in global value chains, focusing on higher value-added and higher technology materials such as fine chemicals instead of more visible lower value-added consumer end products such as LCD panels, which use chemicals like critical inputs. Japan is the largest source of infrastructure finance in Southeast Asia, worth around US$330-billion in 2022, compared with China’s approximately US$100-billion. The Partnership for Quality Infrastructure, initiated in 2015, followed in 2020 by the Japan-ASEAN Connectivity Initiative, strengthen regional connectivity in ASEAN, and increase links to South Asia. Japan’s priorities align well with Canada’s Indo-Pacific Strategy (IPS), providing significant opportunities for new types of regional partnerships for Canadian enterprises. A Canada-Japan regional co-operation agreement could provide a framework for such collaboration. The IPS’s proposed “Canadian Trade Gateway in Southeast Asia” and Canada-ASEAN Free Trade Agreement currently in negotiation are important steps towards more extensive regional engagement. But ultimately it is national economies that provide practical entry points for firms to a region. Thailand is well positioned in a number of ways to fill that role. It is the second-largest economy in Southeast Asia, with a diversified business sector, regionally leading enterprises, and generally efficient and well-regarded institutions. Thailand also plays a central role in sub-regional economic co-operation programs such as the Greater Mekong Subregion, which includes Cambodia, Southern China, Laos, Myanmar, and Vietnam, and the Indonesia-Malaysia-Thailand Growth Triangle. It also links to South Asia through the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), which includes Bangladesh, Bhutan, India, Myanmar, Nepal, and Sri Lanka. The multi-sectoral Eastern Economic Corridor program, focusing on advanced infrastructure and innovation, is intended to strengthen Thailand as a base for regional business operations. A new generation of young Thai innovative technology entrepreneurs offer ready potential collaborators for Canadian enterprises and investors. Thailand thus provides considerable opportunities for Canada domestically, and as a gateway to ASEAN. Building on its position as Canada’s second-largest trading partner in ASEAN, a Canada-Thailand economic co-operation agreement would provide a framework for business linkages, including for Thailand to serve as a regional base. The South Asia focus of the Canadian IPS is understandably on India, given its central role in the Indo-Pacific, and its economy’s size and importance. It may be useful and productive to take a wider “India-plus” approach to South Asia, also positioning enterprises with respect to the region’s deepening connectivity with Southeast Asia. Bangladesh, with a population of around 170 million people, transformed itself from one of the world’s poorest countries at independence in 1971, to one of the fastest growing economies in recent years. It is located on the Bay of Bengal in the centre of the Indo-Pacific region. With India to its west, China to the north, and Southeast Asia to the east, Bangladesh can serve as a gateway to South Asia, a region with significant growth potential that is only just beginning to follow the development path of East Asia. Bangladesh can also help deepen economic linkages between South and Southeast Asia, as reflected in a recent World Bank study on the significant potential for such economic integration. Membership in BIMSTEC—which, as noted, also includes Thailand—further strengthens the potential regional role of Bangladesh. Economic performance is a fundamental priority of Indo-Pacific countries, especially the emerging economies of Southeast and South Asia. Effective economic engagement then serves not only Canada’s and the region’s interests, it is also an essential element of a more comprehensive foreign policy, supporting Canada’s wider strategic goals. David Abonyi, based in Bangkok, is senior associate with the Global Enterprise Initiative, Schulich School of Business, York University, Toronto, and project director for the “Strengthening Thai-Canada Business Linkages” initiative at the Fiscal Policy Research Institute associated with Thailand's ministry of finance. George Abonyi, resident of Ottawa, is senior research fellow and visiting professor at the Sasin School of Management of Chulalongkorn University, and senior adviser to the Fiscal Policy Research Institute. The Hill Times