economics

As I write this in 2025, I find myself increasingly concerned about India’s manufacturing trajectory. While India celebrates digital prowess and service sector dominance, a stark reality confronts my country: our manufacturing exports as a percentage of global trade have remained stubbornly stagnant at around 1.7%, even as China commands over 15% and Vietnam has surged to capture significant market share in textiles, electronics, and manufacturing.

The time for incremental reforms has passed.

India needs a comprehensive overhaul of its export and entrepreneurship policies, strategically aligned with foreign policy objectives, to prevent what I believe could be a permanent relegation to service sector dependency while manufacturing opportunities slip away to more agile competitors.

The Manufacturing Imperative

The numbers paint a sobering picture. China’s manufacturing value-added reached $4.9 trillion in 2023, accounting for roughly 30% of global manufacturing output.

Vietnam, with a population less than 7% of India’s, achieved manufacturing exports of $370 billion in 2023, compared to India’s $450 billion total merchandise exports across all sectors.

More critically, India’s share in global manufacturing exports has declined from 1.8% in 2019 to 1.7% in 2024, while Vietnam’s share grew from 2.1% to 3.4% in the same period.

This isn’t just about absolute numbers; it’s about momentum and trajectory.

Countries like Bangladesh, Mexico, and Turkey are all gaining ground in manufacturing exports while India debates policy frameworks.

The demographic dividend we often celebrate is actually a ticking time bomb. With 12 million Indians entering the workforce annually, service sector jobs alone cannot provide sufficient employment. Manufacturing historically creates 3-4 jobs for every direct job, compared to 1.5-2 jobs in services. Without a manufacturing renaissance, we risk social instability and economic stagnation.

The Export-Foreign Policy Nexus: Learning from Successful Models

My analysis of successful export economies reveals a crucial insight: export policies cannot operate in isolation from foreign policy. China’s Belt and Road Initiative isn’t just infrastructure investment; it’s export market creation. Vietnam’s export success stems partly from its strategic positioning between US-China tensions, attracting supply chain diversification.

India needs to reimagine its foreign policy through an export lens. Our current approach treats trade and diplomacy as separate domains, resulting in missed opportunities. For instance, our Act East Policy has yielded modest results in manufacturing exports to ASEAN, partly because we haven’t aligned trade facilitation with diplomatic priorities.

Consider this data point: India’s bilateral trade with Africa was $98 billion in 2023, but only 25% consisted of manufactured goods exports. China’s Africa trade was $282 billion, with 45% being manufactured exports. This disparity isn’t just about market access; it reflects China’s systematic alignment of diplomatic engagement with export promotion.

The Compliance Raj: Quantifying the Regulatory Stranglehold

Our current export promotion architecture suffers from what I call “scheme fatigue,” but the deeper malady is what recent analysis terms the “Compliance Raj”—a” systematic regulatory stranglehold that makes Vietnam and China look like libertarian paradises by comparison.

The numbers are staggering: India experienced 9,420 compliance updates in 2024 alone, averaging 36 daily regulatory changes. To put this in perspective, Vietnamese manufacturers face approximately 12 major regulatory updates annually, while Chinese exporters operate under relatively stable regulatory frameworks with predictable annual changes.

The India Business Corruption Survey 2024 reveals that 66% of businesses admitted to paying bribes, with 54% coerced for permits, licenses, or approvals. This isn’t just about corruption; it’s about competitive disadvantage. While Indian exporters navigate bribery demands and regulatory uncertainty, Vietnamese competitors focus on production efficiency and market expansion.

The Production Linked Incentive (PLI) scheme, while well-intentioned, allocated $26 billion across 14 sectors over five years. China spends more than this amount annually on manufacturing subsidies and export promotion. Vietnam’s foreign direct investment in manufacturing reached $22 billion in 2023 alone, compared to India’s $15 billion across all sectors.

The bureaucratic maze compounds these challenges beyond previous estimates. Businesses are required to manage 23 different identity numbers, including PAN, GSTIN, and CIN, resulting in excessive paperwork and frequent renewals.

A recent study by the Confederation of Indian Industry found that compliance costs for Indian exporters are 23% higher than Chinese competitors and 31% higher than Vietnamese exporters. But when we factor in time lost to regulatory uncertainty and bribery, the real competitive disadvantage reaches 45-50%.

Our export infrastructure remains fragmented. While China has 34 ports handling over 10 million TEU annually, India has only 12 major ports with combined capacity struggling to match Shanghai alone. Logistics costs consume 13-14% of GDP compared to 8-9% in developed economies, directly impacting export competitiveness.

The Libertarian Imperative

The evidence is overwhelming: countries that have embraced more libertarian approaches to business regulation consistently outperform India in manufacturing exports. This isn’t ideological positioning; it’s empirical reality backed by hard data.

Singapore, despite its small size, achieved $470 billion in total trade in 2023 with minimal regulatory complexity. Businesses can be registered in 15 minutes online, with most permits issued within 2-3 days. The regulatory framework is predictable, with major changes announced annually and implemented systematically.

Vietnam’s success partly stems from its increasingly libertarian approach to export manufacturing. Export processing zones operate under simplified regulations, with businesses facing minimal compliance burden once established. The contrast with India is stark: Vietnamese exporters spend 2-3% of their time on compliance activities, compared to 15-18% for Indian counterparts.

Even within India, states that have adopted more libertarian approaches show superior performance. Gujarat’s single-window clearance system, operational since 2009, has attracted significantly higher manufacturing FDI per capita compared to states with complex approval processes. Tamil Nadu’s simplified labor regulations for export industries have made it a preferred destination for automotive and textile manufacturing.

The Jan Vishwas Act 2023 decriminalized 180 provisions, reducing imprisonment risks for minor business violations. While this represents progress, it barely scratches the surface. With 20,000 imprisonment clauses still in place and the proposed Jan Vishwas 2.0 targeting only 100 additional provisions, we’re implementing incremental reforms when radical deregulation is required.

Consider the regulatory approach differences: A smartphone manufacturer in India faces 67 different approvals across 14 agencies, compared to 23 approvals across 6 agencies in Vietnam and just 12 approvals across 4 agencies in Singapore. This isn’t about maintaining standards; it’s about regulatory rent-seeking that destroys competitiveness.

The libertarian solution isn’t about abandoning all regulations; it’s about smart regulation focused on outcomes rather than processes. Export-oriented manufacturing should operate under presumptive compliance—businesses assume compliance unless proven otherwise, rather than seeking pre-approvals for every activity.

The Vietnam Model: Libertarian Agility Over Bureaucratic Scale

Vietnam’s transformation offers crucial lessons in libertarian reform applied to export manufacturing. Between 2010 and 2023, Vietnam increased its manufacturing exports from $72 billion to $370 billion, a 414% growth compared to India’s 185% growth from $178 billion to $450 billion in total merchandise exports.

Vietnam’s success stems from three key libertarian principles that India must embrace:

Regulatory Minimalism: Vietnam’s export sector operates under what economists call “libertarian” zones”—areas where businesses face minimal regulatory interference once basic standards are met. While India debates comprehensive labor law reforms, Vietnam implemented sector-specific deregulation for export manufacturing, allowing 24/7 operations, flexible hiring, and performance-based compensation without bureaucratic approvals.

Strategic FDI Targeting with Minimal Barriers: Vietnam attracted $108 billion in manufacturing FDI between 2015 and 2023, focusing on electronics, textiles, and automotive components with streamlined approval processes. India received $67 billion in manufacturing FDI in the same period, spread across too many sectors with complex approval requirements. Vietnamese authorities can approve major manufacturing investments within 45 days; Indian approvals take 8-12 months on average.

Export Processing Zone Efficiency: Vietnam operates 16 EPZs contributing 40% of total exports, with average clearance times of 8 hours and minimal compliance requirements once operational. India’s 265 SEZs contribute only 25% of exports with average clearance times of 72 hours and continuous compliance monitoring that disrupts operations.

Trade Agreement Leverage: Vietnam has 16 operational FTAs covering 58 countries, compared to India’s 13 FTAs covering 32 countries. More importantly, Vietnam utilizes these agreements effectively—67% of Vietnamese exports benefit from preferential access compared to 31% for Indian exports. The difference lies in implementation: Vietnam’s streamlined customs procedures make FTA utilization cost-effective, while India’s complex procedures often make preferential rates economically unviable.

The China Challenge

China’s manufacturing dominance isn’t accidental; it’s systematically built through what I observe as a four-pronged strategy: technology acquisition, market creation, supply chain control, and financial leverage.

China’s outbound FDI in manufacturing reached $145 billion in 2023, often creating captive markets for Chinese exports. India’s outbound manufacturing investment was $8.2 billion, focused primarily on resource extraction rather than market creation.

The technology dimension is particularly concerning. China spent $444 billion on R&D in 2023, with 78% focused on manufacturing and industrial applications. India’s R&D expenditure was $66 billion, with only 34% targeting manufacturing. This gap isn’t just about current competitiveness; it’s about future technological leadership.

Supply chain control represents another strategic advantage. Chinese companies control critical nodes in global supply chains—from rare earth processing to semiconductor assembly. India’s supply chain participation remains largely peripheral, missing opportunities for value addition and strategic positioning.

A Comprehensive Reform Blueprint

Based on my analysis of successful models and India’s unique advantages, I propose a five-pillar transformation strategy:

Pillar 1: Export-Foreign Policy Integration

Every diplomatic mission should function as an export promotion hub. Our embassies in 47 countries with bilateral trade exceeding $1 billion should have dedicated commercial sections with annual export targets. Currently, only 12 missions have adequate commercial infrastructure.

Trade facilitation must become a diplomatic priority. India should negotiate dedicated export corridors with key trading partners, similar to China’s economic corridors. The proposed India-Middle East-Europe Economic Corridor should prioritize manufacturing export facilitation over general connectivity.

Strategic economic partnerships need restructuring around export complementarity. Our partnership with Japan, for instance, should focus on technology transfer for export-oriented manufacturing rather than domestic market access.

Pillar 2: Manufacturing Infrastructure Revolution

India needs 20 world-class manufacturing clusters in the next five years, each with integrated port connectivity, power supply, and digital infrastructure. Current industrial parks lack this integration, forcing manufacturers to create their own infrastructure at prohibitive costs.

Port modernization requires a $45 billion investment to match Chinese efficiency standards. This isn’t just about capacity; it’s about turnaround time, digital integration, and multimodal connectivity. Current port-to-factory connectivity adds 2-3 days to export timelines compared to Vietnamese competitors.

Digital infrastructure for manufacturing must move beyond basic connectivity to Industry 4.0 readiness. Only 12% of Indian manufacturers use advanced automation compared to 34% in China and 28% in Vietnam.

Pillar 3: Financial Architecture Redesign

Export financing needs fundamental restructuring. Current institutional lending covers only 23% of export credit needs, compared to 67% in China. We need specialized export development banks with $100 billion capitalization over five years.

Currency hedging mechanisms must evolve beyond current limited options. Vietnamese exporters access hedging products at 40% lower costs than Indian counterparts, directly impacting pricing competitiveness.

Investment promotion requires sector-specific targeting. Instead of generic FDI promotion, India needs dedicated agencies for electronics, textiles, automotive, and pharmaceuticals—sectors where we can realistically compete with China and Vietnam.

Pillar 4: Libertarian Regulatory Revolution

The current regulatory complexity creates what economists call “death by a thousand cuts,” but the solution requires embracing libertarian principles that prioritize business freedom over bureaucratic control. A smartphone manufacturer faces 67 different approvals across 14 agencies to start production, compared to 23 approvals across 6 agencies in Vietnam and just 12 in Singapore.

Presumptive Compliance Framework: Instead of seeking pre-approvals, export-oriented businesses should operate under presumptive compliance—assume businesses are compliant unless proven otherwise. This single change could reduce regulatory compliance time by 70% and eliminate opportunities for corruption in the approval process.

Single-Window Reality, Not Fiction: Real single-window systems require complete backend integration across agencies, not just common application forms. This technological integration needs a $2.8 billion investment but would save exporters $15 billion annually in compliance costs. More importantly, it should operate on risk-based assessment—low-risk activities get automatic clearance, medium-risk activities get fast-track approval, and only high-risk activities require detailed scrutiny.

Export Zone Libertarianism: Export-oriented manufacturing should operate under completely separate regulatory frameworks from domestic manufacturing. Singapore’s model demonstrates this: export manufacturers face minimal regulations, simplified labor laws, and tax incentives, while domestic manufacturers operate under standard frameworks. This isn’t about creating inequality; it’s about recognizing that export businesses face global competition and need regulatory advantages to remain viable.

Sunset Clauses for All Regulations: Every regulation affecting export businesses should have automatic sunset clauses requiring renewal every 3-5 years. This forces regulators to justify continued existence and prevents regulatory accumulation. Currently, regulations only get added, never removed, creating the 9,420 annual compliance updates that paralyze businesses.

One Nation, One Business Identity: The proposed consolidation of 23 different business identifiers into a single system represents a libertarian approach to reducing government interference. But it should go further—this single identity should provide access to all government services, eliminate renewal requirements, and operate on blockchain technology to prevent tampering and corruption.

Pillar 5: Technology and Skill Development

Manufacturing technology acquisition needs strategic focus. Current technology transfer agreements lack systematic knowledge absorption mechanisms. India should establish technology digestion centers in key manufacturing sectors, similar to China’s approach in the 1990s.

Skill development must align with export requirements rather than domestic needs. Current ITI and polytechnic curricula prepare students for local manufacturing, not global export standards. We need 500 export-oriented skill centers in the next three years.

Research and development for export competitiveness requires dedicated funding. The proposed National Manufacturing R&D Foundation should receive 1% of manufacturing exports annually—currently about $4.5 billion—to fund applied research for export enhancement.

Why Delay Is Dangerous

Global supply chains are undergoing fundamental restructuring. Companies are diversifying away from China-centric sourcing, creating a once-in-a-generation opportunity for countries like India. However, this window is narrowing rapidly.

Vietnam has already captured significant market share in textiles, electronics assembly, and furniture. Mexico is benefiting from nearshoring trends in North American markets. Bangladesh continues dominating low-cost textile manufacturing. Each day of policy delay allows competitors to strengthen their positions.

The demographic dividend argument also has a time limit. Current working-age population advantages will peak around 2035-2040. If we don’t create manufacturing jobs now, the demographic dividend becomes a demographic burden.

Technological evolution adds another urgency dimension. Manufacturing is becoming increasingly automated, potentially reducing labor cost advantages. Countries that establish manufacturing ecosystems now will benefit from technological upgrades, while late entrants may find fewer opportunities for labor-intensive manufacturing.

The Manufacturing Renaissance Imperative

India stands at a critical juncture. We can continue celebrating our digital achievements while manufacturing opportunities migrate to more decisive competitors, or we can undertake the comprehensive transformation our export potential demands.

The data is clear: manufacturing exports growth has stagnated while competitors surge ahead. The policy framework is fragmented while global supply chains seek reliable, efficient partners. The window of opportunity is narrowing while we debate incremental reforms.

This isn’t about choosing between services and manufacturing; it’s about leveraging our service sector strengths to build manufacturing competitiveness.

Our IT capabilities should power smart manufacturing, our financial sector should enable export growth, and our diplomatic networks should create market access.

The transformation I’ve outlined requires political will, financial commitment, and execution excellence.

But the cost of inaction—permanent manufacturing marginalization, employment crisis, and geopolitical irrelevance in global supply chains—far exceeds the investment required for transformation.

India’s manufacturing renaissance isn’t just an economic necessity; it’s a strategic imperative for sustained growth, employment generation, and global relevance. The question isn’t whether we can afford this transformation—it’s whether we can afford not to undertake it immediately.

The time for incremental reform has passed. India needs its manufacturing revolution now, before it’s too late to compete in the global economy of tomorrow.

Within the context of an enduring relationship dating back to May 1975, the establishment of the Economic Community of West African States (ECOWAS) as a regional bloc with an aspiration of transforming the elongated region along the Atlantic coast and stretching across the Sahel-Savanna bordering the Maghreb. ECOWAS sets out its broad operations incorporating politics, economy, security, social, and culture. The long-term goal is ensuring regional economic sovereignty and political unity among its twelve countries of West Africa.

Today, ECOWAS’s 50 years of its existence represent its marked achievement. It has lagged with issues of fostering strategic solidarity and commitments to its expected goals of sustainable economic transformation. As the regional bloc marked its 50th anniversary in May 2025, ECOWAS had a few achievements to show to the public but faced remarkable and daunting challenges, and these have raised questions about its future.  

On the stage of its aggrandizement, on May 26, ECOWAS officially launched activities commemorating its 50th anniversary in Praia, the capital city of Cabo Verde. The ceremony brought together high-level dignitaries, including the Secretary of State of Foreign Affairs and Cooperation of Cabo Verde, Miryan Vieira; the Acting Resident Representative of the ECOWAS Commission in Cabo Verde and Executive Director of ECREEE, Francis Sempore; the Director of the Multinational Maritime Coordination Centre for Zone G; members of the diplomatic corps; representatives of various municipalities; and ECOWAS officials in Cabo Verde.

Francis Sempore emphasized the importance of the golden jubilee, noting that “this 50th anniversary is a remarkable milestone — a time not only for celebration but also for reflection. As we mark five decades of regional cooperation and solidarity, we must redouble efforts to strengthen integration and foster collaboration for a brighter, united future in West Africa.”

Miryan Vieira commended ECOWAS for its continued presence and impact in Cabo Verde. Referring to the promotion of sustainable energy, she underlined the immense growth potential of the ECOWAS region and further called for a “people-centered approach” to regional integration that prioritizes human development and inclusivity.

The final launch was preceded by a press conference at the ECOWAS Representation in Praia. It is most important to remember here that ECOWAS’s golden jubilee commemorations aimed to deepen citizens’ connection to the regional vision, promote shared values, and inspire the next generation of West Africans to contribute to a more integrated and prosperous community.

Despite its excellent aspirations and objectives, regional security has been one of the main obstacles in the region. ECOWAS has seemingly been losing its decades-old credibility primarily due to its approach in ensuring regional peace and stability. The overarching combined narratives starkly pointed to this as its major weakness. The ultimate failure to comprehend the neocolonial goals of foreign powers has created deep cracks in ECOWAS.

According to our monitoring, Burkina Faso, Mali, and Niger, on 29 January 2025, declared withdrawal from the bloc. The three French-speaking West African countries, currently governed by military juntas, have formed the Alliance of Sahel States, citing sovereignty concerns and dissatisfaction with ECOWAS’s responses to political and security developments. As the Sahel region continues to grapple with instability and conflict, Burkina Faso, Mali, and Niger sought other alternatives, and foreign powers are competing to explore and control the abundant mineral resources of these countries in West Africa.

The regional bloc still looks for mechanisms to resolve the security crisis. It has persistently come under fierce criticism; it slackens on its primary responsibilities. Some experts have called for staff changes, attributing them to deep inefficiency. In fact, its reputation has been at stake, and most probably, it needs new dynamic faces at the Secretariat in Abuja, Nigeria.

On May 16th, the African Union Peace and Security Council (AU PSC) and the ECOWAS Mediation and Security Council (MSC) held their second joint consultative meeting at the AU Headquarters in Addis Ababa, Ethiopia, which served as a strategic platform to strengthen cooperation on governance, peace, and security within the frameworks of the African Peace and Security Architecture (APSA), the African Governance Architecture (AGA), and the AU’s Master Roadmap to Silence the Guns by 2030.

Opening the session, Ambassador Harold Bundu Saffa, Chair of the AU PSC for May 2025, welcomed the symbolic significance of holding the meeting and called for a deeper AU–ECOWAS cooperation built on mutual trust and joint responses to emerging challenges such as climate-related security risks, digital conflicts, and youth-led peace initiatives.

In his remarks, Ambassador Musa Sani Nuhu, Chair of the ECOWAS MSC, stressed the urgent need to intensify regional cooperation amid rising insecurity across the continent. He cited threats such as unconstitutional changes of government, terrorism, transnational organized crime, and humanitarian crises. “Africa stands at a defining moment in its history,” he stated. “It is vital that we engage in open and constructive dialogue to identify synergies and build a strong, united response to the challenges we all face.”

For his part, Ambassador Abdel-Fatau Musah, ECOWAS Commissioner for Political Affairs, Peace and Security, emphasized the need for inclusive and responsive governance, as well as stronger regional solidarity. “History will not remember our communiqués, but the peace we built, the lives we protected, and the future we dared to imagine together,” he said. Musah, however, advocated for the full involvement of youth and women in peace processes and urged Member States to make subsidiarity a practical foundation for trust and cooperation.

In his keynote address, Ambassador Bankole Adeoye, AU Commissioner for Political Affairs, Peace and Security, highlighted the importance of long-term institutional partnerships and regular consultations to secure regional peace and foster economic integration. “The AU PSC and ECOWAS MSC must work hand-in-hand on peace and security issues in West Africa,” he stated, commending ECOWAS’s leadership and achievements over its 50-year history, especially in conflict prevention and peace support operations.

At the conclusion of the meeting, the African Union and ECOWAS reaffirmed their strong commitment to strengthening their partnership in addressing the continent’s peace and security challenges through preventive diplomacy, mediation, and joint peace support operations, guided by the principles of subsidiarity, complementarity, and comparative advantage. Nevertheless, there is hope, most probably in the near future, to overcome these existing development roadblocks and make way for practical strategic development, as the countries in the region have both abundant human and natural resources under the umbrella of the Economic Community of West African States (ECOWAS).

With the recent pivot in US foreign policy regarding Europe and NATO, it has become clear that NATO’s European members need to ramp up spending on defense, and the time of relying on the US for defense in Europe is over. Many would argue that it’s well overdue, with Trump saying that NATO members should boost their defense spending to 5% of their GDP versus the traditional 2% target set by NATO. This target for NATO members was first set at the 2006 Riga summit; however, that target was reaffirmed and made more concrete in the 2014 Defence Investment Pledge at their summit in Wales, with only four members hitting the target that year. In 2024, those numbers were up, with NATO estimating 22 out of 32 would hit the target that year, so it’s clear defense spending in Europe is on the up. The Secretary-General of NATO, Mark Rutte, said, “We will need more time to consult amongst Allies what exactly the new level should be. But it is considerably more than 2%,” when asked about higher spending targets.

Inevitably, it will come down to the middle powers of NATO—France, Germany, Poland, and the UK—to step up to the plate and take over the leadership roles. Ultimately, this shift in responsibility will largely shape the alliance and Europe for years to come. But is this realistic, and what hurdles will the middle powers overcome to get there?

The US is the glue that holds NATO together.

Since NATO’s inception, the US has acted as the glue that keeps the alliance together, and it is evident from recent events just how crucial that role is. And it’s significantly more than just manpower/firepower, as you may expect.

The middle powers of NATO face a series of challenges ahead in their effort to step up and take over that role from the US. One of these challenges is the fact that the US plays a monumental role in the hierarchy of NATO’s various operational commands, with the US holding a lot of key roles within that structure that NATO, without the US, would not be able to operate certainly anywhere near as efficiently as it is currently run.

 The US also has an integral part to play in NATO’s capability for intelligence surveillance and reconnaissance (ISR), with most of the capability that NATO has being US-supplied and run. An example of this occurred during Operation Unified Protector (Libya, 2011): the US provided an estimated 75% of ISR assets, enabling NATO to carry out precision strikes and monitor Gaddafi regime movements.

All of this is said without even touching the subject of the US’s missile defense and general man/firepower capabilities, with the European nations currently not having an equivalent.

Defense spending and capabilities

The only way the middle powers will be able to step into the US’s shoes and fill the role Washington has traditionally played is through an increase in defense spending, resulting in a significant boost to their military capabilities. However, this necessity presents several challenges of its own, so what does the current situation look like, and how will it develop?

France has consistently maintained a capable military and spent a good amount of their GDP on defense. Fluctuations in their defense budget have meant they’ve fallen short of the 2% goal set by NATO in previous years.

President Macron announced plans in early 2023 to vastly increase military spending, pledging to spend 413 billion euros on defense in 2024-2030, an increase of 118 billion euros compared to the previous period.

Since the Russian invasion of Ukraine in 2022, we have seen a vast increase in defense budgets across NATO, none perhaps more noticeable than in Germany, with Chancellor Olaf Scholz wanting to inject 100 billion euros into the German military (Bundeswehr) to increase military capability and readiness. With the German Federal Minister of Defence, Boris Pistorius, pledging to make the German military “the backbone of deterrence and collective defense in Europe.”

It would seem this shift in defense policy is here to stay, with both German parliaments recently voting in favor of another boost to military spending.

Nevertheless, it’s not all plain sailing for Germany. With recent recruitment numbers falling short of their targets, the Bundeswehr still faces personnel shortages. It’s clear that the intention is there, but there are still many practical challenges for them to overcome.

Poland has quickly become a key player within NATO, from having a humble military at the time of the 2014 annexation of Crimea by Russian forces to boasting the third-largest military within NATO, only behind that of the US and Turkey. Their armed forces have undergone a significant modernization program at this time, too.

This rapid modernization has meant Poland has fast become one of the leading defense powers within NATO, playing a crucial role in securing their eastern flank; they have also become one of NATO’s highest spenders on defense, spending an impressive 4.12% of their GDP.

The UK has consistently hit the 2% target set by NATO and, for the past four years, has even slightly exceeded this, with projects such as the Challenger 3 and the Boxer armored vehicle receiving around £5 billion in funding.

As with Germany, this isn’t without its challenges. The UK has faced significant setbacks in recruitment, with it being reported in November 2024 that the British armed forces had “consistently fallen short of recruitment targets over the past five years,” with some saying that the armed forces were losing 300 people a month more than they were recruiting.

It is also worth mentioning that France and the UK both possess nuclear capabilities, although the UK’s Trident missile system is US-supplied and maintained. Meanwhile, the French “Force de dissuasion” is fully independent.

Whilst it is undoubtable that the middle powers and Europe as a whole are taking defense spending a lot more seriously, and, for the first time since the Cold War, it is being seen as a priority, there is still a long way to go before NATO without the US taking a primary role could even be considered comparable to the NATO we have known up until now.

No natural leader

Other issues the middle powers face when trying to take over these roles are cooperation, coordination of efforts, and political and military leadership. To put it simply, NATO risks lacking unified leadership without the US. There is no obvious alternative to U.S. leadership within NATO. This means the alliance’s future leadership will depend entirely on the ability of European members to cooperate. Historically, however, that cooperation has been difficult. Europe is often divided by differing political ideologies, national interests, and unresolved disputes between member states. Countries frequently prioritize their own agendas, making it hard to reach collective decisions. A key example of this is the long-standing tension between Turkey and Greece—both NATO members, yet frequently at odds due to their history of conflict and territorial disputes. There is also the issue of the European Union and NATO often failing to cooperate, causing frequent internal strife on key issues such as the situation with Turkey and Cyprus.

Nevertheless, there are recent examples of political cohesion, such as the UK stating it would back the potential incoming German chancellor Friedrich Merz in sending Taurus missiles to Ukraine come across more as a patchwork than cohesive leadership. Most of the middle powers appear to focus on strengthening their own national capabilities rather than fostering cohesion and building multinational capacity. The result is a fragmented and disorganized approach—unsurprising, given that NATO is fundamentally an alliance of countries with a long history of rivalry and conflict. However, one should never underestimate the power of an external threat in uniting nations and giving them a common enemy, and Russia certainly seems to be doing just that.

NATO going forward

What does all this mean going forward? Across the board, especially amongst the middle powers of NATO, the intention to take a more active role in defense is there. Generally, NATO isn’t in a terrible position, and the desire for collective defense amongst member states has become paramount.

That said, the alliance still faces significant challenges ahead, especially when it comes to leadership; the US has long been the force that bridged the gap where the European members fell short. The US shifting its focus away from Europe has undoubtedly had a profound effect. It was perhaps not until this happened that it became clear just how much NATO relied on Washington for political direction, and whilst it is entirely possible for the middle powers to collectively take over that role, presently, that reality seems distant. Reaching that reality will be far from an overnight process. With Europe’s attention firmly focused on the war in Ukraine, many argue that the clock is already ticking, bringing the prospect of a conflict with Russia closer to reality.

‘Numbers don’t lie,’ but certainly deceive in India. Behind every celebration of prosperity is a harsher reality of exclusion, injustice, and hunger. This isn’t simply economic inequality; it’s a catastrophe masquerading as progress. India’s economic narrative, which is frequently portrayed as one of “unstoppable growth” and technological dominance, begins to crack under scrutiny. Official numbers put India’s per capita income at roughly $2,800. But this figure, like the country’s projected image of a growing power, is misleading. When billionaires like Mukesh Ambani and Gautam Adani are excluded from the equation, the income level scarcely changes. However, excluding the top 1% and top 5% from the formula reduces the value to $1,730 and $1,130, respectively, which is lower than in some sub-Saharan African nations. What seems to be a statistical recalibration uncovers a more terrible truth: India’s progress is not merely unequal but fundamentally discriminatory.

This distortion is not an accounting oddity. It is an outcome of an economic approach that prioritizes accumulation over distribution. The sparkling pictures of India’s space missions, unicorn business enterprises, and diplomatic gatherings mask a harsher ground reality in which over 800 million Indians rely on free food rations for their survival. This is not a minor statistic; it is the distinguishing characteristic of India’s development trajectory.

The Illusion of Aggregate Growth

The illusion of aggregate growth has persisted in part because it serves a political function. Modern economic theory cautions against using averages in isolation. As Amartya Sen, a notable Indian economist, correctly cautioned, “Averages are often misleading when inequality is rampant.” This warning has been ignored in India’s policy settings, where GDP development has been used as a symbol of national pride, covering the erosion of basic human rights. This conflict between growing GDP and rising hunger demonstrates the decoupling of national wealth from human well-being, which John Rawls’ theory of justice as fairness would characterize as a failure of social institutions. Growth cannot be considered just if it fails to improve the lives of the poor citizens. In India, the increase is clearly benefiting the elites; the top 1% currently owns more than 40% of the country’s wealth. In any just society, such a concentration of resources would raise alarms. In India, it is hailed as a symbol of national achievement.

India’s K-Shaped Recovery and the “Trickle-Down” Myth

The COVID-19 epidemic indicated this structural disparity further, resulting in what economists refer to as a “K-shaped recovery.” The rich elite saw their fortunes increase dramatically, while low-income workers, daily wage laborers, and rural people saw widespread unemployment and pay collapse. With over 90% of India’s workers laboring in the informal sector, this was far from a small crisis; it was economic collapse camouflaged as resilience. Nonetheless, officials adhered to the flawed concept of trickle-down economics, providing corporate bailouts and tax breaks while ignoring health, education, and rural livelihoods. The Nobel Prize-winning economist Joseph Stiglitz has frequently warned that “trickle-down economics is a myth.” Inequality does not accelerate growth; rather, it slows it down. However, India continues to promote the wealthy through tax breaks, corporate bailouts, and lax laws, while insufficiently funding public health and education.

The Global Image vs. Domestic Realities

This internal difference is in sharp contrast to India’s self-proclaimed global reputation. In diplomatic circles, India is portrayed as a counterbalance to China, a technology powerhouse, and a rising climate leader. However, this is only a façade. Behind the glamour of moon landings and semiconductor ambitions is a country that houses about 33% of the world’s hungry children, according to UNICEF. These are not the features of a rising power. They are signs of a troubled society, not because of its objectives, but because of how it pursues them.

The gap between perception and reality is not novel. Partha Chatterjee, a political theorist, notably articulated the “politics of the governed,” in which the impoverished are regulated by governmental paternalism rather than empowered through structural transformation. The Indian state continues to create a narrative of modernity and strength for external consumption while depending on ration cards and token welfare measures to keep the populace calm. The elite are exalted, while the others are just administered.

A Colonial Continuity of Economic Extraction

India’s wealth inequality at present follows colonial extractive patterns. Dadabhai Naoroji’s “Drain Theory,” which stated that British colonization took India’s wealth without proper reinvestment, has eerie parallels in the present. Now, the corporate-financial elite, centered in metropolitan hubs such as Mumbai, Bangalore, and Delhi, act as internal colonists, enriching themselves while abusing workers and ignoring fundamental public services. India’s federal economic model exacerbates this split, as income remains concentrated in a few affluent states while significant portions of the country — from Bihar to Jharkhand — suffer from poverty, resulting in widespread internal migration and deepening social fragmentation.

Food Insecurity as a Political Choice

Food insecurity is at the root of this catastrophe, caused by policy failure rather than scarcity. India is a major producer of rice, wheat, and pulses internationally. Nonetheless, hunger endures on a massive scale. The Public Distribution System (PDS), while seemingly extensive on paper, is rife with corruption, exclusion mistakes, and inefficiencies. Access to food is still determined by social class, gender, and land ownership. In this perspective, hunger is not a natural calamity but a political decision. It is the unavoidable result of a system that refuses to transfer resources, defend the disadvantaged, or abolish entrenched privilege.

India’s fixation with GDP growth has evolved into an instrument of denial, a statistical mask worn by an elite class unable to confront the hardship that most Indians face on a daily basis. The World Bank may record billions of dollars in economic activity, but it does not include the girl child in rural Rajasthan who drops out of school owing to starvation or the farmer in Vidarbha who is driven to suicide by debt. India’s economic miracle, as frequently represented in Western media and diplomatic circles, is based on the purposeful marginalization of these people. Instead of correcting the failing paradigm, the Indian state has militarized it. Growth numbers are displayed at global conferences, while dissident voices—academics, journalists, and civil society—are repressed or labeled as “anti-national.” Instead of fixing the system, the state is cleaning up the truth. This is not development. This is deceit.

Conclusion

India’s economic model, lauded by its political elites and promoted to the world as the triumphant tale of the Global South, is in desperate need of scrutiny. India’s global image as a growing power is based on ethically and economically unsound assumptions. The sparkle of global conferences and billionaire meetings obscures a sobering reality: a country where the prosperity of a few masks the suffering of many. Real power comes from justice, equality, and dignity, not GDP stats or orbiting satellites. And unless India decides to raise its poor rather than just projecting its affluent, the mirage of prosperity will remain just that: a delusion.

So the white smoke emerged from Whitehall as the Prime Minister didn’t quite say “Habemas a Deal”. at the end of the much hyped UK-EU reset talks. The good news is that there is some amelioration of the 2020 Brexit Treaty negotiated by Boris Johnson. The bad news is that it won’t satisfy many on either side of the Brexit divide.

In 1992 the Swiss voted against the Maastricht Treaty enshrining Margaret Thatcher’s campaign to create a single market Europe with its four freedoms of movement of capital, goods, services and labour. Pope Saint John Paul II Mrs Thactcer’s Treat  “will hasten the process of European integration. A common political structure, the product of the free will of European citizens, far from endangering the identity of the peoples in the community, will be able to guarantee more equitably the rights, in particular the cultural rights, of all its regions. These united European peoples will not accept the domination of one nation or culture over the others, but they will uphold the equal right of all to enrich others with their difference.”

                  Quickly Europe’s richest nation in the Alps realised they had shot a crossbow arrow into their foot. Negotiations started and continue to this day to improve Switzerland’s access to the four freedoms without actually joining the EU.

                  The Alpine nation is governed by referendums and there have been 20 so far on aspects of the EU-Swiss relationship. 17 agreed to proposals put forward by negotiators in Berne and Brussels and 3 said no. In 2010 as David Cameron and Nick Clegg announced their referendum which both leaders thought would put the Europe question to bed the Swiss voted against allowing Europeans to work in sectors like care homes, agricultures, mountain tourism, or construction which Swiss like Brits chez nous didn’t want to work in.

                  Swiss employers recoiled in horror and launched a campaign to reverse the decision. Despite the fulminations of the anti-EU Swiss People’s Party a second referendum was held and Switzerland now benefits from access to the European labour market pool while the UK imported more than a million workers from Africa and Asia to do the work native Brits shunned.

                  Britain is now embarking on the laborious slog of the mountain climb of gradual  step by step improvements in the 2020 deal Boris Johnson signed.

                  This has led the ageing tenors of anti-European ideology emerging like Japanese soldiers from the jungle 20 years after the second world war ended still believing their inevitable triumph is just around the corner.

                  From Boris Johnson, through Jacob Rees Mogg, Priti Patel, David Frost, Andrew Neil or assorted peers and retired Oxbridge dons  the chorus of “Surrender!”, “Betrayal!”, or “Sell-out!” continues but is weaker and weaker.

                  As Rod Liddle who helped turn Today when he edited it into a platform for Nigel Farage and anti-European keenies now notes the old heartlands of Brexit know it has delivered none of its promises and just want to move on.

                  Some Labour ministers use Theresa May’s slogan she “would make Brexit work.” That is an oxymoron. When the very conservative governor of the Bank of England says here will be no growth if we continue to set our faces against trade with Europe that is an ex-cathedra statement saying Adieu to Brexit. 

                  The Prime minister has none of the flair, nor drive of a Tony Blair or Margaret Thatcher but after the excitements of Boris Johnson and Liz Truss, voters opted for caution, prudence, and stability.

                  `It will be a long haul but the 30 year long Brexit era of British politics is over. One day Polish workers will be welcome back in Britain and attendance at Sunday mass will go up.

Denis MacShane is the former Labour Minister for Europe. His book “Brexiternity. The uncertain future of Britain” is published by Bloomsbury.

The Netherlands’ relationship with the Islamic world has developed over the centuries, starting from the era of colonialism when the Dutch controlled the Dutch East Indies (now Indonesia), where the majority of the population is Muslim. This colonial legacy not only left a historical trace but also influenced the political and economic dynamics of the Netherlands in relation to Islamic countries. In addition, after World War II, the Netherlands received waves of migration from Muslim countries such as Turkey and Morocco, as well as from its former colonies, including Indonesia and Suriname. This led to a significant growth of the Muslim community in the Netherlands, which in turn created complex domestic social and political dynamics.

As a country that upholds the principles of liberal democracy and human rights, the Netherlands actively promotes these values in its foreign policy. This attitude often creates tensions in relations with Islamic countries, especially in issues related to religious freedom, women’s rights, and freedom of expression. For example, the debate over the ban on the burqa and criticism of sharia law in some Islamic countries show a clash between the principles of Dutch liberal democracy and the social norms of Islamic countries. However, on the other hand, the Netherlands also has great economic interests with Islamic countries, particularly in the field of trade and energy investment. Many Islamic countries, especially in the Middle East, are the Netherlands’ main trading partners, both in exports of agricultural products and in energy imports such as oil and gas.

The dilemma arose when the Netherlands had to balance between liberal democratic idealism and economic pragmatism. Criticism of human rights abuses in Islamic countries can risk disrupting trade and investment relations. For example, the diplomatic crisis with Turkey in 2017, in which the Netherlands banned Turkish ministers from campaigning in Rotterdam, reflected the tension between liberal democratic principles and political and economic interests. In addition, the Netherlands’ relations with countries such as Saudi Arabia and Iran are often colored by contradictions, where on the one hand the Netherlands denounces their authoritarian policies, but on the other hand maintains close economic cooperation.

This research becomes relevant in understanding how the Netherlands navigates its foreign relations with Islamic countries in the midst of the dilemma between liberal democratic values and economic interests. This study not only contributes to the study of international relations but also provides insight for policymakers in formulating a balanced strategy between the promotion of democratic values and national interests in the context of relations with the Islamic world. Thus, this study aims to examine the dynamics of Dutch foreign policy towards the Islamic world, identify the factors that influence its political decisions, and analyze the impact of the approach used by the Netherlands in maintaining a balance between liberal democracy and economic interests.

The relationship between the Netherlands and the Islamic world has a long history that has been shaped through various political, economic, and social dynamics. Since the 17th century, when the Netherlands became one of the largest maritime and colonial powers, interaction with the Islamic world has occurred, especially through trade and colonial activities in Muslim regions, such as Indonesia. In the 16th century, the Netherlands (which at that time was still part of the Spanish Empire) began to engage in the spice trade with the Islamic world, mainly by sea. Dutch traders explored trade routes controlled by Muslim traders and began to establish relationships with various kingdoms and sultanates in Southeast Asia, such as Aceh, Banten, and Makassar. There were conflicts and rivalries between the Dutch and the Muslim powers, despite favorable trade relations. One example is the Aceh War, which lasted ten years, in which the Dutch sought to control the Muslim sultanate of Aceh, which was very powerful in Sumatra. The history of relations between the Netherlands and the Islamic world is very complicated and full of conflicts. This relationship shows how two different societies interact with each other and shape each other. In addition to conflicts and difficulties, there is cooperation and mutual understanding. To build a better and more peaceful relationship in the future, it is important to understand our history.

The history of relations between the Netherlands and the Islamic world, particularly in Indonesia, reflects complex dynamics involving political, social, and cultural interactions. This relationship began with the arrival of the Dutch at the end of the 16th century and continued until the colonial period, which lasted more than three centuries. The arrival of the Dutch in Indonesia in 1596 was marked by the main goal of controlling the spice trade. Over time, they began to realize the growing power of Islam in the archipelago, especially through the influence of clerics and a strong social network among the Muslim community. The Dutch’s fear of potential resistance from Muslims, especially those connected to the Ottoman Caliphate, prompted them to develop a more strategic policy in dealing with Islam (Amalsyah, 2013).

During the colonial period, the Dutch controlled the Dutch East Indies (now Indonesia), where the majority of the population was Muslim. The Dutch colonial policy towards Islam was ambivalent—on the one hand, the colonial government sought to control and limit the influence of Islam in the nationalist movement, but on the other hand, they also worked closely with the local Muslim elite to maintain the stability of the colonial government. This colonial experience still has an impact on Dutch foreign policy towards the Islamic world to this day. In the modern era, the Netherlands’ relations with the Islamic world are growing, especially in economic and diplomatic aspects. The Netherlands has established trade relations with Islamic countries, especially in the energy and infrastructure sectors. Saudi Arabia, the United Arab Emirates, and Turkey are major trading partners, while relations with Iran remain complex due to geopolitical factors and international sanctions. 

In many cases, Dutch foreign policy faces a dilemma between economic interests and liberal democratic values. This is especially true in relations with developing countries such as Indonesia. The interaction between past and modern practices demonstrates this dynamic. The Round Table Conference (KMB) in 1949 was an attempt by the Netherlands to strengthen its economic dominance in Indonesia. It regulates Dutch company ownership in strategic areas such as banking and transportation. However, Indonesia’s nationalization policies in 1958, such as the State Commercial Bank and Garuda Indonesia, made the Dutch reconsider their strategy; they shifted from colonial control to economic diplomacy based on equality. Dutch policies combine development aid and trade promotion. For example, the development assistance budget was reduced from 0.7% of GDP to below the international threshold, and the budget was allocated to subsidize SME exports and military operations. This method has been criticized for undermining principles (Bieckmann, 2013).

The Netherlands implemented various policies to supervise and control the lives of Muslims. One of the first steps was the establishment of institutions such as the Priesterraden in 1882 to supervise the religious activities of Muslims. In 1905, strict regulations were enacted requiring permission from the colonial government to teach Islam. Snouck Hurgronje, a Dutch orientalist, played a key role in formulating this policy. He suggested that the government be neutral on the religious aspects of Islam but wary of its political potential. Snouck classifies Islam into two categories: religious and political, with a focus on controlling political aspects that are considered to have the potential to cause rebellion (Effendi, 2013).

In addition to bilateral relations with Muslim countries, domestic dynamics also play an important role. The Netherlands has a significant Muslim population, mainly of Turkish and Moroccan immigrant descent. The presence of this Muslim community is often a domestic political issue, especially in debates about integration, multiculturalism, and immigration policy. Political parties’ attitudes towards Islam at home often influence Dutch foreign policy towards Islamic countries. Against this historical background and contemporary dynamics, Dutch foreign policy towards the Islamic world continues to develop within the framework of a balance between economic interests, liberal democratic values, and domestic and global political dynamics.

The Netherlands faces a dilemma in carrying out its foreign policy towards Islamic countries, where the values of liberal democracy that are upheld often conflict with economic interests. As a country that actively promotes human rights, freedom of opinion, and democracy, the Netherlands has consistently criticized human rights violations in Islamic countries, especially regarding political freedom, women’s rights, and religious freedom. However, on the other hand, economic relations with Islamic countries, especially in the trade, investment, and energy sectors, remain a top priority. The Netherlands is a liberal democracy that strongly defends values such as democracy, human rights, and the rule of law. However, as a country with an open economy that relies heavily on foreign investment and international trade, liberal democratic values often conflict with economic interests in foreign policy.

This tension is evident in various diplomatic situations. One prime example is the Netherlands’ relationship with Turkey, which has experienced ups and downs due to differences in political views. When the Netherlands criticized President Recep Tayyip Erdoğan’s authoritarian policies and restricted Turkey’s political campaigns in Europe, bilateral relations between the two countries briefly deteriorated. However, economic cooperation continues due to the great trade interests between the two countries. Another case that reflects this dilemma is the relationship between the Netherlands and Saudi Arabia. The Netherlands has often criticized Saudi Arabia’s human rights record, especially regarding freedom of opinion and its treatment of political opposition. However, because Saudi Arabia is one of the Netherlands’ main trading partners in the energy and infrastructure sectors, the Dutch government maintains close economic ties. Even as the Dutch Parliament passed a resolution condemning Saudi Arabia’s involvement in human rights abuses, the government continued to look for ways to maintain a balance between political criticism and economic interests. 

This dilemma is also seen in the Dutch policy towards Iran. International sanctions against Iran, backed by the Netherlands, often collide with the desire of Dutch businessmen to expand trade with the country. The Netherlands must play a cautious diplomatic role in order to remain compliant with the norms of liberal democracy without harming its economic interests. Overall, Dutch foreign policy towards the Islamic world shows the tension between idealism and pragmatism. Although the Netherlands wants to maintain its image as a democratic country that defends human rights, economic interests remain a dominant factor in foreign policy decisions. Therefore, the Netherlands continues to seek balance in its approach by implementing a flexible diplomacy strategy so as not to lose both political influence and economic advantages in the Islamic world. In its foreign policy, the Netherlands has always faced a dilemma between economic interests and liberal democracy. There are no easy solutions, and the Dutch government must continue to strive to find ways to balance the country’s economic interests and its values. The Netherlands can maintain its economic advantages while supporting democracy, human rights, and sustainable development around the world by using innovative and responsible approaches.

The dilemma between liberal democracy and economic interests in Dutch foreign policy towards the Islamic world has various implications, both in bilateral relations, domestic dynamics, and the Netherlands’ position in the international arena. Dutch foreign policy has major consequences at the regional (European) and global levels. These affected areas include the economy, security, environment, and human rights. It is essential to understand these consequences in order to assess how effective the policies are and to plan a better plan for future use. The Netherlands’ free trade policy abroad has increased Dutch exports and investment around the world. This has boosted Dutch economic growth and created more jobs. However, there are risks associated with these policies, such as dependence on certain markets and the possible exploitation of workers in developing countries.

The Netherlands’ foreign policy, which often criticizes democratic and human rights issues in Islamic countries, has the potential to strain diplomatic relations. The case of tensions with Turkey and Saudi Arabia shows that Dutch criticism of political policies in Islamic countries can trigger a harsh response, such as ambassadorial withdrawals or trade restrictions. However, on the other hand, economic pragmatism encourages the Netherlands to maintain trade relations, especially in the energy and infrastructure sectors. 

The Netherlands’ foreign policy towards the Islamic world is also closely related to domestic political dynamics. The growing Muslim population in the Netherlands, especially of Turkish and Moroccan descent, has sparked debates about integration and national identity. The Netherlands is a NATO member that supports global climate action and is committed to reducing greenhouse gas emissions. The Netherlands also actively participates in NATO military operations and supports the improvement of European defense capabilities. The Netherlands also invests in renewable energy and supports international agreements on climate change. The Netherlands strongly supports human rights. This includes development assistance, diplomacy, and support for civil society institutions that fight for human rights. Political parties with a hardline stance towards Islam often exploit this issue in their political campaigns, which can then influence Dutch foreign policy towards Islamic countries. This attitude also has an effect on immigration policy, where the Netherlands is increasingly selective in accepting immigrants from Islamic countries, especially regarding security issues and social values.

As a member of the European Union, the Netherlands often follows European foreign policy as a whole in dealing with Islamic countries. However, in some cases, the Netherlands has taken a firmer stance than other European countries in criticizing human rights violations. This attitude could strengthen the Netherlands’ position as a country that upholds democratic values but also risks reducing economic access to the markets of Islamic countries. In addition, in international organizations such as the United Nations and the WTO, the Netherlands must maintain a balance between national interests and its commitment to multilateral policies. 

In the future, the Netherlands needs to develop a more flexible foreign policy strategy to manage relations with the Islamic world. Economic diplomacy that maintains democratic principles but with a more pragmatic and dialogical approach can be a solution in avoiding unnecessary diplomatic conflicts. In addition, increased cooperation in the fields of education, culture, and technology can be an alternative way to strengthen relations with Islamic countries without getting too caught up in political conflicts. Taking into account these various aspects, Dutch foreign policy towards the Islamic world will continue to be a challenge that requires a balance between political idealism and economic reality. Economic, security, environmental, and human rights are heavily influenced by Dutch international policies. The Netherlands must adapt its foreign policy to global trends and emerging problems if it wants to meet challenges and seize future opportunities. The Netherlands has the ability to contribute to the development of a safer, more prosperous, and more sustainable world by enhancing partnerships with like-minded countries, increasing investment in diplomacy, supporting international organizations, and protecting human rights.

Dutch foreign policy towards the Islamic world is in tension between liberal democracy and economic interests. As a country that upholds human rights and democratic freedoms, the Netherlands often criticizes political policies in Islamic countries, especially regarding freedom of opinion, women’s rights, and the system of government. However, on the other hand, economic relations with Islamic countries, especially in the trade and energy sectors, remain a top priority. This dilemma is reflected in various dynamics of bilateral relations, such as tensions with Turkey and Saudi Arabia due to differences in political views, but the establishment of close economic cooperation. In addition, domestic dynamics, including immigration issues and the integration of the Muslim community in the Netherlands, also play a role in shaping the country’s foreign policy. As part of the European Union, the Netherlands must balance its stance between the broader European foreign policy and its own national interests. In the future, the Netherlands needs to adopt a more flexible approach to establishing relations with Islamic countries, prioritizing economic diplomacy that remains based on democratic values but with a more pragmatic strategy to avoid unnecessary conflicts. With this balance, the Netherlands can maintain its position as a strong democratic country while maintaining the stability of economic relations with the Islamic world.

The ASEAN region is often cited as a successful example of regional cooperation. The ASEAN regional bloc consisting of 10 South East Asian countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. It was founded in 1967 with the founding members of the organisation being Indonesia, Singapore, Malaysia, Philippines and Thailand.

ASEAN’s economic achievements

The South-East Asian regional bloc has also been an engine of global growth. Even amidst the economic challenges in recent years, the average growth rate of the group was well over 4% in 2024. While Indonesia, Malaysia and Vietnam recorded growth of over 5%, Vietnam was the star performer growing at over 7%. According to forecasts, Vietnam is likely to comfortably surpass 6% growth in 2025 and 2026. While the foundations for these successes have been laid over decades, one of the reasons for the economic progress of these nations has been their ability to adapt to geopolitical and economic changes.

The ASEAN region has benefited significantly from globalisation, especially countries like Singapore, Malaysia, Indonesia and Vietnam.If one were to look at regional trade within the ASEAN group, it was estimated at $3.5 trillion.  ASEAN, which has robust economic relations with US and China, has also focused on enhancing trade with non-member countries.

ASEAN has also excelled in terms of attracting Foreign Direct Investment (FDI). In 2023, ASEAN’s Foreign Direct Investment (FDI) inflows exceeded $200 billion (230 billion). Thus, the regional bloc has emerged as the largest recipient of FDI in developing regions. The star performers, in terms of drawing FDI, in recent years of the ASEAN region have been Singapore, Indonesia and Vietnam. While earlier the successes of Singapore, Malaysia, Thailand and Indonesia drew international attention in recent years it is Vietnam’s economic success which has begun to draw attention. The successes of these countries can be attributed to investor friendly policies, increasing focus on R &D and tech, their geographical location and as mentioned their deftness in dealing with the changing landscape. So far, most ASEAN nations have steered clear of getting embroiled in geopolitical wrangling between China and the US. In recent months, several ASEAN countries have expressed their concern in the context of the downward spiral of ties between both countries.

ASEAN Soft Power

Apart from robust economic performance, the ASEAN grouping has also been reasonably successful in promoting their Soft Power. According to the Brand Finance Soft Power rankings 2025, Singapore ranked 21 globally was ranked the highest in the ASEAN region. It would be pertinent to point out, that rich and diverse culture of the region along with a tourist friendly eco-system has resulted in ASEAN being a preferred destination from tourists across the world. Apart from Singapore and Thailand, other popular tourist destinations in the region are; Indonesia, Malaysia, Cambodia and Vietnam. Recent years have witnessed a significant increase in the number of Indian tourists visiting the ASEAN region.

 One of the strong components of ASEAN power has been tourism. According to estimates, the ASEAN region was able to attract 123 million tourists in 2024. Six ASEAN countries — Thailand, Cambodia, Laos, Malaysia, Vietnam, and Myanmar — are also proposing a joint visa initiative dubbed as “6 countries, 1 destination”. This will be a common visa like Schengen. The idea was proposed by Thailand, which is heavily dependent upon tourism and believes that this initiative would give a further boost to tourism.

Some countries have also been able to draw international students. With western countries becoming more inward looking, there is scope for ASEAN countries like Singapore and Malaysia to attract international students. Singapore has emerged as a popular destination for students due to some of its higher education educations being highly ranked as well as the career avenues in that country. Malaysia received over 80,000 student application from international students – this was a 25% increase from 2023.  Both ASEAN countries could become especially attractive destinations for more South Asian students for whom countries in the Anglosphere have been favoured.

ASEAN member states reaction to Trump’s imposition of tariffs

ASEAN nations have expressed their scepticism regarding the deterioration in US-China ties, since they have close economic ties with both.  Apart from this, all have been extremely critical of tariffs and are looking to diversify their relationships. The Singapore PM, Lawrence Wong, while commenting on the recent tariffs announced by US President, Donald Trump said:

“..the recent Liberation Day announcement by the US leaves no room for doubt,…It marks a seismic change in the global order.”

ASEAN interest in BRICS in a changing situation

In the changing situation, it is likely that more ASEAN countries will also explore membership of BRICS+. Indonesia had joined BRICS in January 2025 as a member, while other ASEAN member states – Malaysia, Thailand, and Vietnam – joined as observers in October 2024. Indonesian foreign minister, Sugiono after joining BRICS had said that it’s decision to join BRICS+ was a reiteration of its independent foreign policy. Other ASEAN countries are also exploring the possibility of entering BRICS.

Conclusion

In conclusion, as mentioned earlier the ASEAN region has so far reaped the dividends of globalisation and a reasonably stable relationship between US and China for very long. The current geopolitical and economic situation is likely to pose significant challenges for the ASEAN region. Apart from internal contradictions within the Bloc, global uncertainty due to US policies during Trump 2.0 are likely to be a major challenge. While all eyes are on the economic impact of the current global turbulence, it is important for ASEAN to focus on ‘Soft Power’, since the region has specific potential in areas like tourism and education as has been discussed earlier. It remains to be seen whether ASEAN can effectively use “Smart Power” to deal with the changing global landscape.

Authors: Andi Mohammad Ilham and Andi Mohammad Johan*

In the midst of global trade confusion, especially following Trump’s machinery tariff back to the global stage, Asian countries have been compelled to reassess their positions, even in the post-tariff war era. Although Trump’s tariff list prominently targeted both well-established and emerging Asian economies, they still chose to not retaliate against Trump’s tariff, in particular ASEAN. Moreover, Asian emerging economies are fundamentally aware and strategically minded amidst the era of economic security and geopolitical shifts. Therefore, many economists believe that rebalancing growth, meaning growth away from exports to strengthening domestic and regional demand with diversification, is a key for Asia’s bargaining power in the global trade regime.

According to the McKinsey Global Institute data, from 2015 to 2021, the Asian region reached its shared number for 57% of global GDP growth. Additionally, this evidence demonstrates that Asian countries host 49 of the world’s 80 largest trade routes. Facing this reality, Asia will be joining “the world’s new majority” through five pillars. It consists of capitalization, resources & energy, demographic composition, technology forces, and world order. In other words, Asia’s power penetration, in these metrics, makes a potential synergy and energy between them to endure in the age of economic security. One spectacular finding in this report, conducted in collaboration with the Asia Business Council, reveals that nearly 80 percent of surveyed Asian business leaders expressed optimism about the new era while still emphasizing a need for profound transformation.

In terms of regional transformation, the Asian region must pay close attention, beyond investment and trade, but equally vital for rebalancing growth, to the collaboration for fiscal and tax policy. As noted in the IMF Asia-Pacific Department’s commentary, recently after the emergence of tariff war 2.0, Asia is one of the regions facing the highest US tariffs. Simultaneously, the IMF’s Asia-Pacific Department also voices the importance of a balancing act for policies, especially for fiscal and tax policy. Given this situation, Asia is essential to not only strengthen tax reform at home for all emerging markets and developing countries but also undertake the consolidation of credible strategies in long-term fiscal and tax sustainability cooperation. 

In recent years, the politics of global tax governance has culminated in the geo-economic consideration due to the implementation of two pillars of the OECD-led multilateral tax regime and the emerging initiative of the UN-led multilateral tax regime. Indeed, both frameworks have already introduced a necessary agenda for regional tax governance, but the latter grants a bold political decision to regions in contemporary global tax governance. Unfortunately, Asia’s position on the contemporary politics of global tax governance is widely different depending on each country’s geo-economic interest. This diversity is not a new analytical observation, as the foundation of Asia’s economic development has long centered on complementary comparative advantages.

In line with this development, the rationale for regional collaboration is not novel, as it has long been a theme in Asia’s international political economy discourse. However, regional collaboration in tax, which is markedly different from other incentives for regional cooperation, is crucial as the dynamics of global tax governance now touch upon intensified regional political coordination.

Based on functional characteristics, there are only two distinctions, which are tax policy and tax collection. One finding highlights three key prospects for why regional tax governance is needed, including concerning tax capacity building or technical assistance, regional political coordination, and regional engagement with international institutions. From the function of tax capacity building, it is about promoting regional cooperation concerning national tax administration and ensuring its technical assistance maintains productive relationships among members in the region. Meanwhile, both political coordination and regional engagement with global institutions relate more to the spheres of tax policy. 

Furthermore, the EU is frequently referenced as a well-established model of regional tax governance, through its EU Tax Policy. But, on the global stage, the EU still remains as a rule-taker because the position for rule-makers is handed over to the OECD. In contrast, the ATAF, African Tax Administration Forum, has progressively positioned itself as a rule-shaper due to its influential role not only in regional but also in global tax order. Subsequently, the emergence of the UN Tax Framework Convention further justified its position as a rule-shaper in contemporary global tax governance. 

Responding to these dynamics, Asia—as home to major economic powerhouses—must conceptualize its strategic position in the area of regional tax governance. Indeed, in 2021, the Asian Development Bank launched ADB’s initiative for regional tax governance, the Asia Pacific Tax Hub. Using a regional development bank model, this platform was expected to stimulate reflection debates to consolidate Asia’s economic strength in global tax governance. Despite the presence of the regional development bank model, the room for regional tax governance in Asia remains largely untapped and must be strategically leveraged by all Asian stakeholders. 

In essence, this finding also indicated that Asia’s corridor in regional tax governance still leaves room for development. Aligned with the broader objectives for Asia’s sustainable growth in the age of economic security and global trade uncertainty, it is imperative to ensure Asia’s regional tax governance framework appropriately fits in with the region’s expanding economic influence.

*Andi Mohammad Johan holds a Master’s in Fiscal Administrative Science at the University of Indonesia. He is a Partner at MMStax Consulting, Indonesia. He is also a member of the Indonesian Tax Consultants Association (ITCA).