The destinies of South-East Asia and India are intricately linked. As the two sides work to bolster their relationship, especially against the backdrop of India’s renewed commitment to ASEAN with its action-driven and result-oriented ‘Act East Policy’, we recognise that economic cooperation between India and ASEAN must go hand in hand with better understanding between our people and deeper integration of our societies.
Trade between India and South East Asia remains an important aspect of engagement in the 21st century, with ASEAN being India’s fourth largest trading partner. Today, they both are at the threshold of a qualitatively substantive relationship. As India and the countries of the ASEAN set new goals to move the ASEAN-India Strategic Partnership forward, all pillars of engagement – political, economic and socio-cultural – are crucial for enhancing this bond.
Our trade with ASEAN countries stood at over US$ 76.58 billion in 2014-15, and holds great potential for expansion. In addition to the Free Trade Agreement in Goods signed in 2009, the ASEAN-India Agreements on Trade in Services and Investment were signed in November 2014 completing our Free Trade Area with ASEAN.
These agreements will help our commercial engagement grow and provide enhanced confidence to businessmen, investors, along with the development of the ASEAN Economic Community.
India and ASEAN are also in the process of negotiating a Regional Comprehensive Economic Partnership with ASEAN and its six FTA partners (which include China, Japan, South Korea, Australia, New Zealand and India). We hope that the negotiations will proceed at an equal pace in goods, services and investments and conclude at an early date with a mutually beneficial ‘win-win’ deal for all.
India’s exports to ASEAN grew from $18.11 billion in 2009 to $32.01 billion in 2014. There was a growth in ASEAN imports into India from $25.7 billion to $44.7 billion in the same period. India-ASEAN bilateral trade grew 4.6 per cent from $68.4 billion in 2011 to $71.6 billion in 2012. In 2012, ASEAN’s exports were valued at $43.84 billion and imports from India amounted to $27.72 billion.
In the recent past, investment flows have also expanded with US$ 25 billion FDI equity flowing into India from ASEAN countries and US$ 31 billion in outflows from India to ASEAN Member States (AMS) in the period between April 2007 and March 2014. India’s investments into ASEAN in 2014 only accounted for 0.6 per cent of the latter’s FDI net inflow, whereas it had accounted for 3.72 and 1.13 per cent in 2012 and 2013 respectively.
Clearly, there is scope for much more, especially at a time when India is one of the fastest growing economies registering a growth of over 7 per cent with a clear objective of attaining much higher level of growth over the next few years.
Bolstering economic ties
On the economic front, the underpinnings of the ASEAN-India Strategic Partnership have been strengthened by the signing of the India-ASEAN Free Trade Agreement in Services and Investments. These are expected to bolster our economic partnership.
The volume of trade and investment flows between India and ASEAN have been increasing at a healthy pace and the target is to achieve trade worth US$100 billion by 2015 and US$ 200 billion by 2022. Further, negotiations for arriving on a common ground on the Regional Comprehensive Economic Partnership (RCEP) are also under way.
The success of the regional integration will be determined by the efforts made to realise the full trade and investment potential. There is scope for cooperation in between India and the ASEAN countries notably in the following sectors – ports and logistics, tourism and hospitality, food processing, preservation and packaging, as well as in SMEs, cyber security, the energy sector, skill development, food processing and agriculture. The services sector is a game changer in this region.
To realise the full potential of India-ASEAN trade cooperation, we have to generate Regional Value Chains and connectivity and work toward overcoming the challenges in terms of shallow tariff commitments, long implementation period, restrictive rules of origin, the ‘Spaghetti Bowl’ effect in terms of multiple FTAs and bilateral engagements, connectivity issues and implementation of the Services and Investment agreement.
In keeping with trends of economic globalisation and regional integration, there is a need for greater engagement between all sectors in ASEAN and India. Active participation by all the stakeholders will facilitate the early realisation of the true potential of our economic partnership. Development and economic prosperity are at the core of the ASEAN-India Strategic Partnership.
As Secretary East recently opined, “Our civilisational heritage, collective human resource potential and the diversity of our natural resources work together to strengthen the dimensions of India-ASEAN Strategic Partnership. ”
(The writer is Secretary General, Federation of Indian Chambers of Commerce and Industry)