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NEW UPDATES Asean Affairs  11 March 2014  

India, ASEAN agreement on services and investment trade soon

The India-ASEAN agreement on trade in services and investment would be inked at the earliest to maximise the economic potential of the two regions, officials from the two sides said.

The agreement on trade in services and investment has been concluded and legally scrubbed but is yet to be signed because of policy differences and other domestic factors in individual countries. "The agreement should be ratified by all parties as soon as possible," said ASEAN Director General Le Luong Minh, who was in the Indian capital to take part in the annual India-ASEAN Dialogue during the weekend.

India and ASEAN forged a deal on goods five years ago that has led two-way trade to grow exponentially: it is now almost $80 billion. About 12 percent of India's exports and nine percent of India's imports was on account of trade with ASEAN during 2011-12. The country aims to increase its trade volume with Southeast Asia to $100-billion in 2015 and $200-billion in 2020. "It's a done deal," an official of the external affairs ministry said, confident that the agreement would be signed by the new government after the general election.

India was supposed to sign the agreement during the World Trade Organisation ministerial meeting in Bali in December last year, but differences between the finance and commerce ministries led to its postponement.

Minister of State for Commerce and Industry Sudarsana Natchiappan told parliament last month that the government has completed the internal procedure of inking the pact and the ASEAN secretariat has been asked to "inform dates" for its signing.

The delay in signing was partly due to some ASEAN members who are opposed to free movement of professionals the agreement will allow, given rising unemployment in their countries. "Do we not need to make it easier for our businessmen, professionals and experts to travel more easily between our countries?," External Affairs Minister Salman Khurshid asked the ASEAN representatives at the Dialogue. "This will help India build capacities in ASEAN and also incentivize investments from the private sectors," he reasoned.

China already has a trade in services agreement with the ASEAN. The agreement on trade in services and investment will allow India to leverage its competitive offerings in finance, education, health, IT, telecommunications, transport and movement of professionals. Indian service providers will be able to offer services to Asean customers with greater ease than what is available currently.

The agreement on trade in services would pave the way for an India-ASEAN Comprehensive Economic Partnership Agreement (CEPA) and India joining the Regional Comprehensive Economic Partnership (RCEP). "With a combined market of over 1.8 billion people and a GDP (gross domestic product) of $3.8-trillion as well as relative geographical proximity, there are huge potentials awaiting to be tapped in ASEAN-India trade, investment and economic cooperation," said Minh.

Services tend to be more value-added and generate greater economic returns than production of goods; they also create more jobs and are found to be the more efficient investement.

India has an advantage in services which contribute over 55% to the GDP. India's existing trade balance with Asean is negative. India is the 10th largest services exporter in the world.

In comparision, services in ASEAN countries remain underdeveloped, accounting for a smaller portion of economic output. But urbanisation and the emergence of a middle class are helping the sector grow. As more people move into cities, they demand more urban services.

According to the Asian Development Bank, services will account for about 50% of economic output of ASEAN economies. Expanding trade in services among members is also one of the key points of the agenda of the ASEAN Economic Community in 2015. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Minh said an air services agreement between the 10-country bloc and India would strengthen connectivity in the region. "ASEAN-India air connectivity could be strengthened by working towards greater liberalization of air services, both cargo and passengers. The ASEAN-India Air Services Agreement should be concluded as soon as possible," he said.

Vanu Gopala Menon, deputy secretary at Singapore's foreign affairs ministry, also said the Air Service Agreement should be signed soon to boost trade and tourism. Both also stressed deeper private sector engagement, which is "vital to enhance our economic ties".

Minh said regular exchanges between the ASEAN Connectivity Coordinating Committee and India's Inter-Ministerial Group on Connectivity would help advance ASEAN-India connectivity.

Participants at the Dialogue called for greater ASEAN-India cooperation on various other fields, such as information and communication, culture, science and technology, education and agriculture. "Periodic reviews of cooperation programmes are necessary for possible adjustments to enable them to correspond to the needs of both sides in their respective new stages of development," said Minh.

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AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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