ASEAN –A Brief profile
Replicating the Euro unions the ASEAN- Association of Southeast Asian Nation is a geopolitical and economic organization of 10 nations which is located in the Southeast Asia. The organization was formed on 8 August 1967 by its 5 member nations which consisted of Indonesia, Malaysia, Philippines, Singapore and Thailand. Subsequently five more members were added to the list such as Brunei Darussalam (1984), Vietnam (1995), Burma (Myanmar) (1997), Cambodia (1999), and Laos (1997).
Today, the economic block of 10 nations is spread over the vast area of 4.46 million km2 with the population of about 587 millions which comes around 8.7% of the world population in 2008.ASEAN operates with "One Vision, One Identity, and One Community”. Unity of these ten nations forms the base of this organization (1). In 2009, its combined nominal GDP had grown to more than USD $1.5 trillion (2).If ASEAN was a single country, it would rank as the 9th largest economy in the world in terms of nominal GDP. ASEAN member-countries attracted Foreign Direct Investment (FDI) in of USD 60.50 billion in 2007(3).
India- ASEAN Free Trade Agreement
Since its inception, the ASEAN nations have shown a keen interest in partnerships with India. However, it was only in 2003, that the first proposal for free trade was put up by the ASEAN nations to India. After serious consideration and discussions, finally the India-ASEAN Free Trade Agreement (FTA) in respect of goods was signed in August, 2009 at Bangkok.
The ASEAN-India Free Trade Agreement signed in August, 2009 would create a new free trade area of 1.7 billion people covering 11 countries – India and 10 ASEAN countries with a combined GDP of USD 2.3 trillion. The Agreement would pave the way to integrate the two globally important economic blocks for mutually beneficial economic gains .The FTA would lead to tariff reduction for more than 4,000 categories of goods in the member countries from January 1, 2010 (4). The elimination of tariffs on 80 per cent of the items traded between the sides would be in a phased manner by 2015. However, tariffs will not be eliminated for about 10 per cent of items on the sensitive track, instead would be brought down to 5 per cent According to Union Commerce and Industry Ministry, although, the agreement will pave way to eliminate tariffs on about 4,000 items being traded between the ASEAN and India, India will be able to protect its interests especially in the agriculture sector. This was possible by excluding about 489 items from the list of tariff concessions and 590 items excluded from the list of tariff eliminations in the agreement pertain to farm products, automobiles, certain auto-parts, machinery, chemicals, and crude and textile products (6).
The Agreement also provides for bilateral safeguard mechanisms to address sudden surge in imports after the Agreement comes into force. In such an eventuality, if it hurts a domestic industry, safeguard measures, including imposition of safeguard duties, may be put in place for a period up to four years. The flexibility to invoke the safeguard measures will remain available for both the sides for a period of seven years to fifteen years from the date the Agreement comes into force (7).
Bilateral Trade between India and Members of ASEAN
ASEAN is India’s fourth largest trading partner after E.U., the United States and China (8).Indo-ASEAN trade, which has been growing at a compounded annual growth rate (CAGR) of 27 per cent since 2000, stood at USD 38.37 billion in 2007-08. India-ASEAN trade is expected to surpass USD 50 billion by 2010 Compared to other regional groupings, ASEAN is the fifth most important market in the world in terms of Indian exports and fourth in terms of imports. India accounts for less than 2% of ASEAN global trade, while India’s trade with ASEAN Members constitutes about 9.5% of India’s global trade(10).The agreement paved way for creation of one of the world’s largest free trade areas (FTA)- market of about 1.8 billion people with a combined GDP of US$ 2.75 trillion(11). India and ASEAN have set a target of achieving bilateral trade of US$ 50 billion by 2010 which is likely to be achieved (12). India’s trade with ASEAN countries has increased from USD 30.7 billion in 2006-07 to USD 39.08 billion in 2007-08 and to USD 45.34 billion in 2008-09. During April – September 2009-10, India’s trade with ASEAN was USD 20.19 billion. Similarly in 2008-09, India's exports to ASEAN totalled USD 19.14 billion. During April-December 2009-10, India exported goods worth USD 12.8 billion to ASEAN. In the case of imports, India imported goods worth USD 26.3 billion in 2008-09 from ASEAN. During the period April-December 2009-10, India's imports from ASEAN totalled USD 18.09 billion, according to data released by the Ministry of Commerce and Industry (13).
In ASEAN, Singapore, Malaysia and Thailand are the majour trading partners of India. In January 2010, Singapore, Malaysia and Thailand operationalised the India-ASEAN FTA on goods. The other seven ASEAN countries will operationalise the FTA only by the end of 2010., Malaysia and Thailand who have already operationalised the FTA on goods in January 2010.
Singapore
India and Singapore enjoy good trade relations .Moreover, Singapore is considered to be a getaway to ASEAN and china. India’s major exports to Singapore include Crudes, Parts and Accessories Of Automatic Data Processing Machines, Automatic Data Processing Input And Output Units, Motor Spirit Refined Premium Leaded, Styrene, Automatic Data Processing Storage Units, Other Monolithic Integrated Circuits, P-Xylene, Monolithic Digital Integrated Circuits and Radio Transmission Apparatus with Reception Apparatus.India’s major imports from Singapore include Non-Industrial Diamonds Worked, Topped Crudes, Motor Spirit Refined Premium Leaded, Aluminium Unwrought, Benzene, Articles Of Jewellery Of Other Precious Metal Whether Or not Plated Or Clad With Precious Metal, Other Medicaments Packed For Retail Sale, Parts Of Boring Or Sinking Machinery, Static Converters, and Other Medical Surgical Dental Or Veterinary Instruments and Appliances.
In 2005, India and Singapore signed the Comprehensive Economic Co-operation Agreement (CECA), an integrated package comprising a free trade agreement, a bilateral agreement on investment promotion and protection, an improved double taxation avoidance agreement and a work programme for cooperation in healthcare, education, media, tourism, customs, e-commerce, intellectual property and science and technology.
Singapore accounts for 38% of India's trade with ASEAN member nations and 3.4% of its total foreign trade (14). As per the data provided by the Department of Statistics, Government of Singapore, Singapore’s bilateral (merchandise) trade with India showed a near five-fold increase in the three years from about SD5.9 billion in 2005 to SD28.8 billion in 2008.In the case of commercial services, however, the gains have not been as significant as in the case of goods, with less than two-fold increase in total bilateral trade values. Singapore’s service exports to India grew from a level of SD2.4 billion in 2005 to (estimated) SD4.6 billion in 2008, while bilateral imports grew from SD1.3 billion in 2005 to an estimated SD2.3 billion in 2008( 15) . According to data released by the Ministry of Commerce and Industry, the total bilateral trade between the countries during 2008-09 was USD 16.1 billion, an increase of 3.86 per cent over USD 15.5 billion in 2007-08 .During 2008-09, India exported goods worth USD 8.45 billion to Singapore. During April-December 2009-10, Indian merchandise exports to Singapore totalled USD 5.12 billion (16) .India was Singapore's 11th largest trading partner in 2009. The two countries are further looking to remove trade barriers, expand the product basket and encourage the flow of tourists, businessmen and professionals (17). Since the signing of CECA the total trade between the two nations has been rising with an annual rate of 20 per cent. According to the economic roadmap the two countries will work in the coming years towards doubling the annual bilateral trade by 2015.
Malaysia
Malaysia is India’s second largest trading partner in the Association of South East Asian Nations (ASEAN).India-Malaysia trade relations have witnessed exponential growth since 1991. India is Malaysia’s 12th largest trading partner and 11th largest major exports destination. Malaysia is currently the 13th largest exports destination of India.(18).India’s major exports to Malaysia include meat and meat preparations, sugar, rice (other than basmati), wheat, fresh vegetables and fruits, cotton yarn, RMG cotton and accessories, primary and semi-finished iron, made-ups, fabrics, machinery and instruments, electronic goods and metal manufactures. India’s major Imports from Malaysia include crude Petroleum, palm oil, electronic and electrical products, chemicals & chemical products and petroleum products.
Bilateral trade between India and Malaysia witnessed a healthy growth of 23.7% per annum between 1998 and 2008.Bilateral trade among the two countries amounted to USD 8.57 billion during 2007-08. In 2007-08, India exported goods worth USD 2.56 billion to Malaysia. The free trade agreement with ASEAN enables greater integration between two economies within Asia that will be the areas of significant growth. So, it is only natural to integrate through a nexus of multilateral, bilateral and partnership agreements. However, in 2009, it witnessed a decline of 29% lower than the USD10.5billion registered in 2008 due to global economic turmoil. In 2009, trade between two countries amounted to USD 7.1 billion, with India’s export to Malaysia at USD2.2 billion and import at USD4.8 billion. However, with the implementation of the ASEAN- India Trade in Goods Agreement; it is expected that the trade performance will be improved in the coming years. The commerce ministry of India expects that the target of USD15 billion trades between two countries would be met much earlier than 2015. The bi-lateral trade between the two countries has increased by 11% in the first five months of 2010 giving hope that the annual figure will be better than last year (19). However, there are still big opportunities for trade in goods, services such as medical, healthcare, computers, and investment in construction, telecommunications, civil aviation and tourism.
Thailand
Mutual trade between the two countries clocked USD4.11 billion in 2007-08 as opposed to USD 3.18 billion in 2006-07(20). The figures show that the trade balance between the countries was heavily tilted in favor of Thailand with its exports amounting to USD2, 301 million while India’s export to Thailand was USD1, 807.91 million in 2007-08(21). Bilateral trade between the two countries touched USD 4.6 billion in 2008-09, which registered a growth of 12.9 per cent over the previous year according to data released by the Ministry of Commerce and Industry. India exported goods worth USD 1.94 billion in 2008-09 and worth USD 1.25 billion during April-December 2009-10,(22).Indian exports to Thailand mainly include gems and jewellery, non-ferrous metals, primary and semi-finished iron and steel, prepared animal fodder, and organic chemicals. Whereas, Thai exports to India include electronic goods, non-electrical machinery, artificial resins and plastic materials, iron and steel.
The bilateral Early Harvest Scheme established between the two countries which became operational in 2006, allows free trade in 82 items which include plastics, auto components, refrigerators and air-conditioners. However, this bilateral trade pact agreement has contributed to improve the bilateral trade in a limited way. Therefore, with the recently signed FTA between India ASEAN, the two countries expect to expand their mutual commerce. Thailand hopes to expand business with India ranging from electrical, chemical, logistics, textiles, automotive industries, spa services, real estate development, jewellery, food, processed meat and veterinary pharmacy. Current expansion of commercial ties is expected to help the two economies to take their bilateral trade to USD 10 billion by 2011(23).
CONCLUSION
Regional and sub-regional co-operation is expected to become a hot topic for discussion especially when the World Trade Organisation struggles in finding success in talks. In the post era of the global economic recession Asian countries and their regional co-operation have more relevance. In the coming years these regions and sub-regions are expected to move toward closer integration, yielding tremendous benefits for all. Over dependence on EU and USA in trade can be alleviated through boosting of bilateral trade among Asian countries for which the cooperation between Indo-ASEAN countries has considerable relevance. It is a fact that EU and USA are the major trading partners of India. As per the detailed trade data available for the first 5 months of FY 2010, they bought 20 percent and 11 percent respectively of India’s exports. With regard to Indian imports, they have shares of 14 percent and 6 percent respectively. China, with a share of 12 percent, is the second largest supplier to Indian market (24). From the forgoing analysis of data with regard to the bilateral trade between India and the majour ASEAN countries, it is apparent that the signing of the trade agreement in 2009 is a major step towards diversification of India’s international trade. The ASEAN region can be seen as a highly potential market in future for Indian goods and services exports. Further opening of ASEAN markets is definitely good news but a step of caution is must to save the economy from the negative effects of globalization and free trade agreements.
