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India and the 10-nation Asean is on the verge of implementing the free trade deal early next year assuming the final agreement is signed as scheduled in December 2008. The two sides have been pushing to wrap up the FTA for more than four years, missing the initial conclusion deadlines. But then, the negotiations seem to have gained momentum in the wake of the breakdown of Doha Round in July due to a dispute between India and the United States over agricultural tariffs. India is seventh on the list of Asean’s biggest trading partners, trailing Australia, South Korea, China and others, according to Asean figures. Total trade between Asean and India amounted to $37 billion in 2007, up 29 percent from the year before. India is looking forward to raising this volume to $50 billion by 2010.
Upbeat over the prospects of the forthcoming free trade agreement with Asean are Indian policymakers - Pranab Mukherjee, Minister of External Affairs, and Kamal Nath, Minister of Commerce and Industry, who share their views and opinions in the exclusive interviews that follow.

Interview with Pranab Mukherjee Minister of External Affairs, India


Q. What are the dividends India's “Look East” policy has achieved so far especially in its relationship with Southeast Asia?

A. India’s engagement with Southeast Asia continues to be the pillar of India’s “Look East” policy, and Asean’s leading role and centrality facilitated India’s rapid development of ties with the region.  The Look East Policy pursued by the government of India attempts to synergise India’s growing relations with Asean countries into bringing bilateral economic benefits. Countries of the region are our natural partners when we look at the myriad possibilities of significantly expanding our economic engagement with the rest of the world.
    As a consequence of India’s increasing economic engagement and integration, Asean-India bilateral trade has already reached $30 billion, and we look forward to achieving the target of $50 billion in 2010. The total volume of India’s trade with the 16 East Asia Summit countries amounted to $80 billion in 2006.
    With economic liberalisation, businesses in Asean are increasingly undertaking foreign direct investment (FDI) in India in crucial infrastructure sectors such as highways, telecommunications, hotel and tourism services, heavy industry, chemicals, fertilisers and food processing etc.  Asean, especially Malaysia, Singapore, Indonesia and Thailand, have become a major source of FDI into India.
    We have recently concluded negotiation on the India- Asean Free Trade Agreement in goods, which could be signed at the forthcoming Summit in December 2008.
    We have achieved progress in the key areas of connectivity. Today, there are over 215 direct and indirect flights every week between India and Singapore, 115 flights with Thailand and 50 with Malaysia. We are also keen to join the Open Skies regime amongst Asean countries. 

Q. What is the significance of the Mekong Ganga Cooperation (MGC) and how does it complement the “Look East” policy?
A. Mekong Ganga Cooperation (MGC) is another building block of our Look East Policy.  The focus of the MGC is on promotion of tourism, cultural & education cooperation and transport & communications. For India, the MGC offers immense scope for creating the “linkages” with the member countries.  India has thus enlarged its engagement with the Asean region.

Q. Developing commercial linkage between India's Northeast and Asean could turn the Northeast from a security burden into a land of economic opportunity.  How will it benefit those countries which are part of this road and rail network?
A. The northeast region of India which comprises of eight States is a unique region. Accounting for roughly 8 percent of India’s total land mass and 4 percent of India’s population, the Region is rich in both human (high literacy rate of over 65 percent) and natural resources and has the true potential of becoming the gateway of India to Asean. Given the tremendous availability of natural resources, and many incentives specially designed for the North East Region, it is today poised as a major growth area waiting for investment. The idea of rail and road connectivity is under examination to help increase our exchanges with Asean countries.

Q. Despite its growing status as an economic powerhouse and its participation in the ARF dialogues, India, say observers remains an insignificant player in the security structure of the region your comments, please.
A. We are not hesitant in building strong relationships with the countries in South East Asia. Far from it, we have age-old historical and
civilisational relations with Southeast Asian countries, a result of the tradition of maritime trade and patterns of immigration. These historical ties have further deepened in the past decade. Today, Indian companies have established their presence across the region enriching our physical and cultural ties. I must add that we do not see our relationship with Southeast Asian countries from the prism of our relations with any one country. As a member of ARF, India has been contributing to stability in the region. We believe that the unfolding global order should be pluralistic and reflective of the diversity of the region.

Q. What are the new initiatives India is taking to further its integration with Southeast Asia now that India-Asian FTA is set to be sealed in December?
A. India has concluded negotiations on a free trade agreement (FTA) with the Asean, which will ensure lowering of duties and free flow of trade in goods.  The agreement will create a market of over 1.5 billion people in the region. We will now work for commencing discussions in the investment and services sector.

Q. How is India addressing energy security, a strategic issue driving India- Asean relations and its response to the growing competition for energy resources in Asean for example, the supply of natural gas from Myanmar?
A. India views energy cooperation with Myanmar as an important and mutually beneficial area of cooperation. Both countries signed a MoU on Cooperation in the Petroleum sector in March 2006. Indian companies are involved in oil and gas exploration in Myanmar. Indian companies have acquired a 30% stake in exploration and production of off-shore blocks A1 and A3 and signed agreements in September 2007 for 3 blocks off the Rakhine coast of Myanmar.


 Interview with Kamal Nath  Minister of Commerce and Industry , India



Q. What are the dividends so far received from India’s pursuit of ‘Look East’ policy, especially with the Association of Southeast Asian Nations (Asean)?

A. India- Asean trade was $38.37 billion in 2007-08 with a compounded annual growth rate (CAGR) of 27 percent since 2000. It is targeted to reach $50 billion by 2010. India's Look East Policy has tremendously helped India integrate with these economies.

Q. The failure of the Doha Round seems to have prompted India to urgently secure the FTA pact with Asean. Please share your opinion.

A. India's engagement with Asean is not limited to the FTA and has been going on for many years. All the sides realised the potential for greater economic gains through the FTA and have concluded the negotiations by showing flexibility. WTO negotiations have only 'paused' and have not failed. We are committed to the successful conclusion of the WTO Doha Round given the global economic and development benefits this will deliver.

Q. The trade agreement between India and Asean has yet to be signed and announced formally. Could there be any further adjustments before the deal is sealed in December?

A. The modalities are agreed between the parties. We don’t see any differences cropping up at this stage.

Q. India is keeping agriculture, textile and chemical sectors out of the free trade agreement, or in the exclusion list. How will that affect the two-way trade between India and Asean?

A. It is not true that these sectors are kept out of the FTA. In fact, only 5 percent of the trade is out of the FTA. Tariff concessions are exchanged on 95 percent of India- Asean trade. Therefore, there would be negligible effect of our exclusion lists on the trade.

Q. India-Asean trade has reportedly reached $20 billion in 2007, and is expected to hit $30 billion by 2010. Do you see that happening, why?

A. India-Asean trade has already reached about $40 billion and we are confident that we would achieve the target of $50 billion before the deadline of 2010.

Q. Asean-China mega free trade zone planned for 2010 may play an important role after the breakdown in global trade talks. What is your take?

A. One should look at the broader goal of Asian economic integration. The East Asia Summit in December 2008 would be considering a Report of experts on the benefits that would accrue through a pan-Asian FTA. India supports this idea and looks forward to positive movement on this.

Q. How would the FTA with Asean help India in its perceived competition with China for trade ties and access to natural resources in Southeast Asia?

A. It is our aim to economically integrate with the East Asian counties. This would benefit all the countries involved, and would create a larger Asian market that could effectively place itself in the globalised world.

Q. Asean’s accelerated drive for a single market in 2015, if it is achieved, could see the EU, US, Australia and New Zealand, etc. joining the list of FTA partners with Asean. What are the pros and cons for India?

A. The process would carry all of us towards an integrated market that would provide benefits to all the economies involved. As a next step, we look forward to broader economic integration such as Asean +6 that could help integrate the Asian economies.

Q. India has been actively pursuing trade and promoting bilateral ties with Burma. Should India be doing as much in advocating democratic reforms there?   

A. This is not my area.






The Ties that Bind
A Timeline of fast-growing relationship between India and Asean

  December 2008
Trade deal scheduled to be signed. Implementation to start from January 1, 2009 after ratification of the trade pact by the governments of all Asean member countries and India.
August 2008
Negotiations concluded
Talks bogged due to disagreement over reduction of import tariffs on palm oil by India but resumed after compromise
FTA negotiations launched, with conclusion initially scheduled for end 2005; India acceded to the Treaty of Amity and Co-operation (TAC)
Indo-Asean summits began after India ontained membership of the high-profile strategic forum ARF (Asean Regional Forum) in 1996.
Mekong-Ganga Cooperation (MGC) framework, which comprises five members of Asean, namely Cambodia, Laos, Myanmar, Thailand and Vietnam, launched inaugural meeting at Vientiane, Laos.

Beginning of political dialogue and consultation at the senior officials level.

Asean-India Joint Cooperation Committee (JCC) Meeting established.

Asean awarded India full Dialogue Partner status.

Asean agreed to grant India Sectoral Dialogue Partner status.



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