Initially aimed at funding the reforms undertaken by the Rao government in the early 1990s, the Llook East Policy rapidly evolved into a comprehensive set of instruments to deal with a fast growing China. From an initial focus on developing trade and attracting foreign direct investment from the most dynamic economies in Asia, it soon became India’s instrument to assert itself in Asia through the institutionalisation of its relations with ASEAN members and ASEAN led institutions. The success of economic performances made it indispensable for India to develop its defence relationship with its new partners as a way the to control its sea lane of communications. They also led to an expansion of the Look East reach to East Asia.
This is a competent work that challenges the claim of new institutional economics and international regime theory that effective state institutions in the host country are vital to the inflow, and indeed growth, of foreign direct investment (FDI). It argues that the large amount of FDI China has attracted so far has been facilitated more by the informal societal institutions represented by strong personal networks operating in the country than by the formal state institutions manifested by the weak legal system. The author validates her arguments with a large number of anecdotes based on over 100 interviews she conducted in China.
Foreign Direct Investment in China: A Spatial Econometric Study