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NEWS UPDATES Asean Affairs   19 April  2012

Asean- India services pact runs into a wall

19 April, 2012

The much-awaited services pact between India and the 10-member Association of Southeast Asian Nations (Asean) trading bloc has reached an impasse. The deal, which was expected to open a huge services market, is stuck over stiff differences.

Since the negotiations started, talks on services trade have faced serious roadblocks, especially over the issue of Mode 4 of services trade that refers to the movement of professionals. Countries like Indonesia and Philippines have strongly opposed liberalising their respective services markets for India, as these feel Indian professionals would take away a large share of jobs in these countries if trade is liberalised.

Earlier this week, another round of talks was held between the Asean nations and India, but this, too, remained inconclusive. “It is not progressing at all. The deal is stuck. But we are still trying and hope to achieve some consensus,” a senior commerce department official involved in the negotiations said.


* Countries like Indonesia & Philippines oppose liberalising their services markets for India
* Countries like Thailand & Malaysia ready to offer more access to services market to India alone
* Philippines feels India is a competitor in the business process outsourcing space

India’s primary demand under the deal has been greater job opportunities for its professionals, based on easier visa rules in the markets of Singapore, Malaysia, Indonesia, Vietnam, Thailand, Philippines, Cambodia, Laos, Brunei and Myanmar.

India wants greater access in sectors such as information technology, healthcare, pharmaceuticals, banking & financial services, tourism and legal services. Philippines, one of the bigger members of the bloc, feels India is a competitor in the business process outsourcing (BPO) space. The BPO industry in Philippines accounts for about 15 per cent of the global outsourcing market.

The major problem is while countries like Thailand, Malaysia and Indonesia are ready to offer greater access to their services market to India, these are not keen to give the same leverage to other Asean members.

Currently, India is also engaged in negotiations with Thailand and Indonesia to have separate bilateral trade and investment deals with those countries.

According to officials in the ministry of commerce & industry, India was able to gain significantly in services trade when it established a separate trade agreement with Malaysia, compared to gains from the larger Asean agreement.

In August 2009, India had signed a free trade agreement (FTA) with Asean members in Thailand. According to the FTA, Asean member countries and India would lift import tariffs on more than 80 per cent of traded products between 2013 and 2016.

In January 2010, Singapore, Malaysia and Thailand accepted the FTA on goods. It is expected to be extended to all Asean member countries by 2016. The FTA collectively covers a market of nearly 1.8 billion people and proposes to gradually slash tariffs for 4,000 product lines.

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