India-ASEAN FTA: Implications for India's NorthEast
- Part 3 -

By James R. Ruolngul *

The deepening of relationship between India and ASEAN is reflected in the buoyancy of trade figures between the two. During April-September 2007-2008, trade grew from US$ 15.06 billion to US$ 17.02 billion, that is, trade grew by 13 per cent. India's Foreign Trade with ASEAN, according to the Directorate General of Commercial Intelligence and Statistics (DGCIS), is also on the rise.

During the period 2005-2006 to 2006-2007, India's exports to ASEAN registered a growth rate of 20.67 per cent. Similarly, India's imports from ASEAN during the same period registered a growth rate of 66 per cent. India-ASEAN trade stood at US$ 38.37 billion in 2007-2008 and is projected to reach US$ 48 billion during 2008-2009. [iv]

At the first India-ASEAN Summit held at Phnom Penh on November 5, 2001, India called for an India-ASEAN FTA within a 10-year time frame. In this context, the second India-ASEAN Summit held at Bali on October 8, 2003 was a significant landmark in India-ASEAN relations. This Summit saw the signing of the Framework Agreement for Comprehensive Economic Cooperation between India and ASEAN.

This agreement envisaged the establishment of an FTA within a period of ten years. In March 2004, an ASEAN-India Trade Negotiations Committee (AI-TNC) was established to negotiate the implementation of the provisions of the Framework Agreement. India has, since then, entered into numerous agreements with ASEAN.

At the sixth India-ASEAN Summit held at Singapore on November last year, India proposed to increase its bilateral trade with ASEAN to the tune of US$ 50 billion by the year 2010. The latest agreement is therefore, the result of many years of tactful policies that led to the thawing of the ice between these two important emerging economic powers in Asia.

In addition to these agreements with ASEAN, India has also made consistent efforts to develop bilateral ties with ASEAN members. With Thailand, India has 61 years of diplomatic relations. India also has a Free Trade Agreement with Thailand that was signed in 2004. The framework agreement on bilateral FTA of 2003 was the basis of this FTA with Thailand. Trade between the two increased from a mere US$ 606 million to US$ 3.14 billion in 2006-2007.

With the CLV countries (Cambodia, Laos and Vietnam), India entered into a number of bilateral agreements for cooperation in the fields of trade, science and technology , agriculture, defence, visa exemption, tourism, IT and culture. India has major projects in the fields of education, entrepreneurship development and IT in these three countries. In 2004, India extended a credit line of US$ 27 million to Vietnam.

Malaysia is a major source of Foreign Direct Investment (FDI) for India, particularly in the areas of LPG, power plants and highway constructions. Trade between the two rose from US$ 2.2 billion in 2002-2003 to US$ 6.6 billion in 2006-2007. Indian public sector undertakings such as BHEL and IRCON have also undertaken and completed a number of projects in Malaysia.

Presently, after the India-ASEAN FTA negotiations, it is reported that about 150 Indian engineering firms are eying to diversify their export base in ASEAN markets and are planning to make Malaysia the regional hub to penetrate the region.[v] Many of these companies are exploring the possibilities of joint ventures, technology transfers and investment opportunities.

It was mainly because of the insistence of Indonesia that India became a part of the East Asia Summit in 2005. Relations between the two had been very good for many years. Bilateral trade between the two increased by 44 per cent from 2005-2006 to 2006-2007.

India has a Comprehensive Economic Cooperation Agreement (CECA) with Singapore since 2005. This agreement included bilateral investment promotion treaty, double taxation avoidance agreement, an air services agreement and an FTA. Singapore, along with Indonesia had been an important factor for India's inclusion into the East Asian Summit.

In addition, it was Singapore's role that paved the way for India's association with the ARF. Singapore is the biggest source of FDI for India among ASEAN countries. During the period 2000 to 2008, the cumulative FDI of Singapore into India was worth a whooping US$ 4.35 billion. Concurrently, over two thousand Indian companies were based in Singapore.

India also has plans for a free trade area with Brunei, Indonesia and Malaysia by 2011 and with the remaining ASEAN countries by 2016. Since 1995, India had actively engaged Myanmar in trade. It has signed several agreements and MOUs including the Tripartite Maritime Agreement with Myanmar and Thailand, Border Trade Agreement and for cooperation between civilian authorities between India and Myanmar.

Since 2000, a number of high level visits have taken place. During these visits, several agreements and MOUs have been signed in areas ranging from hydroelectric projects on the Chindwin River and IT cooperation to cultural exchange programmes.

In the year 2003 alone, seven Agreements/MOUs were signed to promote trade and communication facilities. By 2006-2007, bilateral trade between India and Myanmar reached US$ 650 million as compared to US$ 341.40 million in 2004-2005.



To be continued ...