Indo-Asean FTA needs a fillip

Font Size

Print

Feedback

Email

Discuss

: Last week’s failure to initial India’s FTA with Asean will cost the economy dear. That is because a week may be a long time in politics, but such delays in long-awaited trade treaties span an eternity in matters of political economy.

Just how fast matters have been moving might be seen from the fact that Indo-Asean bilateral trade grew at an annual rate of 11.22% rate, from $2.9 billion to $12.1 billion, over 1993-2003. That took up an entire decade. But, later on, it has taken just four years for the trade figure to reach $30 billion. No wonder, Prime Minister Manmohan Singh expressed confidence that the $50 billion benchmark will be attained by 2010. But delays have been plaguing the FTA and that seems to be a default scenario.

Worst of all, India is behind on the FTA simply because it is jealously protecting certain commodities like coffee, tea, palm oil and pepper. That explains why the FTA’s finalisation date is being put at 2008, although the full extent of tariff harmonisation will extend the process right up to 2018. That is indeed slow-going for a proposal which had been mooted in 2004, and was expected to be ratified by 2005. Such ‘stop-go’ progress on liberalising the plantation sector is also, doubtless, a reflection of dissonance within the commerce ministry between the convictions of Kamal Nath and Jairam Ramesh.

So the two key questions are—what, in the foreseeable future, will be India’s role vis-à-vis the East Asian economies? And, how far will it stand to gain from undertaking what seems to be expected of it?

The answers are disappointing—but it is through no fault of Asean’s. In fact, the consensus there seems to be that an India that is unwilling to immediately engage in the fray of the marketplace should devote itself to training others and be the coach instead. It can, at best be said that this is an entirely unforeseen denouement of India’s Look East Programme (LEP).

The beneficiaries have even been shortlisted. They comprise the economies of the Greater Mekong Sub-region (GMS)—Cambodia, Laos, Myanmar, China, Thailand and Vietnam. Four of them—the CLMV economies of Cambodia, Laos, Myanmar and Vietnam, are still at the nascent stages of business development, and the Asean would like India to mentor the CLMV in acquiring the softer skills fore which it is well known. They include education, skill-formation, planning and religious instruction.

In fact, Asean’s principal objective is to lift up the CLMV economies and transform them into a frictionlessly integrating, prospering and competing sub-region. A related aim is to raise the awareness of GMS governments so that they can better comprehend the policy, legal and regulatory imperatives for accelerating Public-Private Partnership (PPP). That will be of vital importance for infrastructure development—and they can learn from India’s experience in that sector. The foregoing should instill greater confidence within CLMV’s decision-makers and deepen their ability to identify potential sectors for cooperation.

That, in turn, should be accompanied by hikes in the quantum of trade, investment, tourism, language-use (English) and entrepreneurship development (ED). Indeed, ED is already well under way in the CLMV countries. It took off from February 2004 thanks to India’s support to the Initiative for Asean Integration (IAI).

As for IT and software development, they too will be taken up—much like they have been with the Asean since the year 2000. This is one area in which India can justly claim to be amongst the best—and strong demand has given it one of the biggest IT markets.

In fact, India today is a global IT hub, and the sector should grow by 28% (this year alone) to notch up $47.8 billion in value. Another sector characteristic is that it is ascending from low-end processes to high-value ones—Nasscom stresses that increases in offshore product development and engineering services will be integral to the sector.

But the GSM economies will find that their immediate need is to develop or identify, a domestic talent pool to kick-start the training process. But, in India, they will be choosing ‘right’. This economy will be able to supply academic needs within the sub-region and globally. India may also set up ED institutes there to make them employable.

In short, what we have been discussing is the fallout of India’s LEP, but in aid of CLMV economies thanks to Asean’s wishes. They are being put through a capacity-building regimen focused primarily on HR development.

New Delhi’s principal objective is to promote GMS as a rapidly integrating, increasingly prosperous, and internationally competitive growth subregion and to stimulate thinking and broaden awareness of GMS opportunities in the India business community. The forum will provide opportunity for identifying areas of cooperation in infrastructure development, trade and investment, tourism, information technology including software development, manufacturing and agribusiness. The forum will be a good occasion to share experiences in fostering regional economic integration in GMS and South Asia.

A secondary objective is to provide a venue for the GMS governments to gain better understanding of the policy, legal and regulatory requirements for promoting Public-Private Partnership (PPP) in infrastructure development by learning from the rich experience and best practices of India in PPP.

Even capacity-building in the defence sector has become more pronounced—as is evident from New Delhi’s offer to help out in maritime security during the 2007 Annual Meeting of the Asean Regional Forum (ARF).