Despite FTA, Indo-Thai economic ties need a boost

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: from India increased by 63% the following year) and has generated new investments in manufacturing and services in Thailand.

At present, both the countries are engaged in elevating the FTA into a comprehensive agreement by covering services and investments. Discussions are going on to make it as a perfect FTA by solving some critical issues like rules of origin, safeguard measures and dispute settlement mechanism, among others. If the rising pace of bilateral trade between the two countries has any indication to offer, Indo-Thai FTA is nonetheless helping the trade and investment to grow further and has also been cementing the India-Asean partnership.

Rising trade has been reflected in growing FDI between the two countries. Thailand holds the second highest concentration of Indian enterprises, next to the UK. Thailand was one of the first countries to have Indian investments as early as 1969 when the first Indian joint venture was established by the Aditya Birla Group. During 1991-2007, Indian investments in Thailand were about $315 million, whereas, Thai investments in India were about $78 million. From August 1991 to March 2007, there were about 41 technical pacts between India and Thailand. Compared with India, Thailand’s investment in China was four times higher in the same period.

Realising the investment potentials, both the countries signed the Agreement for the Avoidance of Double Taxation in 1986 and Bilateral Investment Promotion and Protection Agreement in July 2000. Thai entrepreneurs in the construction and automotive industries stand a good chance of investing more in India. However, given the size of the Indian economy, and the spirit of Indo-Thai FTA, Thailand’s actual FDI in India is very low, uneven, and disappointing too.

Due to the location of Thailand and its bilateral and regional FTAs, Indian enterprises enjoy relatively a bigger market in Southeast Asia in general and Mekong region in particular. A growing number of Indian companies have opened branches in Thailand, notably are Aditya Birla Group, Tata Motors, Tata Steel, Dabur Pharma, Usha Martin, Ranbaxy, Lupin Laboratories, Indo-Rama, 3iInfotech, Infosys, Satyam Computers and NIIT. The latest FDI from India was by the Tata Steel when it took over Thailand-based Millennium Steel with an investment of $130 million in 2006.