India to Sign Services and Investment FTA with ASEAN by December

October 16, 2013 Posted by ASEAN Briefing Reading Time: 2 minutes

Oct. 16 – Indian Prime Minister Manmohan Singh announced at the 11th Annual India-ASEAN Summit his country’s readiness to sign an ASEAN-India FTA in Services and Investment by December. If all goes as planned, the FTA will take effect in July 2014. India’s dedication to the region was further emphasized by PM Singh’s plan to open a dedicated mission and appoint a fulltime ambassador to the ASEAN Secretariat in Jakarta.

“Today, we stand on the threshold of the third decade of our engagement. In keeping with our substantial achievements, the recent elevation of our ties to a strategic partnership and the rich potential of our cooperation, I feel it would be appropriate for me to take this opportunity to announce that India will soon set up a separate mission to the ASEAN in Jakarta with a full time resident ambassador,” said Singh.

An India-ASEAN FTA in goods has existed since 2010, amounting to over US$80 billion. This additional services and investment FTA is estimated to increase total annual trade to over US$100 billion in the coming years.

A services and investment FTA will help India rebalance its growing trade deficit with its ASEAN trade partners. India’s weaker manufacturing sector has led to large import volumes in goods from ASEAN nations. ASEAN’s exports were valued at US$43.84 billion, while Indian imports into ASEAN only reached US$27.72 billion in 2012.

This new FTA will provide the services industry, including business professionals, consultants and contractual workers, with easier access to growing Southeast Asian markets, particularly Singapore, Malaysia and Indonesia. In 2011, India’s services sector made up about 58 percent of its GDP, according to a joint report by Deloitte and the Indian Chambers of Commerce and Industry.

The joint study revealed that compared to ASEAN nations, India has a greater comparative advantage in the services sector. India’s leading position in the global IT sector will also experience significant growth from this FTA.

From a geopolitical perspective, ASEAN has much to gain from further Indian trade and cooperation. China is becoming the major powerhouse in the ASEAN region, with a recently announced goal to increase China-ASEAN trade to US$1 trillion by 2020 (from US$320 billion in 2012).

The United States, in comparison, has been relatively quiet in the ASEAN scene, emphasized by President Obama’s recent absence from the APEC summit amidst the U.S. government shutdown.

India, as a major trade partner, can help ASEAN nations avoid overdependence on Chinese investment and support.

In 1991, India initiated its Look-East Policy in the context of the booming Asian miracles and China’s rapid growth. The now two-decade long policy continues to advocate deeper economic and political cooperation with Southeast Asia.

The Prime Minister applauded ASEAN for advocating close “cooperation and integration, not only among themselves, but also in the broader region.”

“For India, it is an article of faith of our Look-East policy that ASEAN must remain central to the future evolution of regional mechanisms, which must be open and inclusive. We share your vision and aspirations for the region and we applaud your march towards an ASEAN Economic Community in 2015,” he added.

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