Asean Ready For Regional Trade And Investment Area With India

New Delhi, October 25: | Updated: Oct 26 2002, 05:30am hrs
After some initial hesitation, the Association of South East Asian Nations (Asean) trade ministers have finally agreed to accept New Delhis proposal for a regional trade and investment area (RTIA) in the long-term to address issues relating to trade and investment promotion as well as trade facilitation. The proposed RTIA is also intended to cover services and certain sectors like drugs and pharmaceuticals, genetic engineering, bio-technology, human resource development etc.

Trade experts feel that the move will help New Delhi pursue its Look East policy more firmly and pave the way for becoming a part of the regional trading block. However, they warn that New Delhi should move cautiously as the proposed RTIA will require it to bring down its tariff levels substantially which may have political and economic ramifications.

Senior commerce ministry officials have told FE that the Asean trade ministers agreed with New Delhis proposal mooted at the first Indo-Asean economic ministers meet held in Darusalam, Brunei, last month, as it was strongly supported by regional countries, including Singapore, Thailand, Brunei, Vietnam and Laos. The Indian delegation at the meet was led by commerce and industry minister Murasoli Maran.

The meet also decided to establish an Asean-India linkage taskforce, co-chaired by India and Malaysia, to work on the draft of a framework agreement.

Trade expert at the Jawaharlal Nehru University Manoj Pant told FE that the proposed RTIA with the Asean will give a boost to New Delhis Look-East policy being pursued since 1995. Dr Pant has also pointed out that the country needs this encouragement as even a small country like Myanmar is a member of the trading block and China too has got into a free trade area agreement with the region.

By attempting to work towards RTIA, New Delhi is trying to be part of the only effective Asian trading bloc as trading partners in the West have already been divided into two powerful regional blocs - the European Union and the North American Free Trade Area. Indias objective should be to become a part of the Asean and also bring other Saarc countries into its fold, says Dr Pant.

According to Research and Information System on Non-Aligned and other Developing Countries deputy director-general Nagesh Kumar, over the past few years, Asean countries share in Indias trade has been on the rise and the centre of gravity is shifting towards East Asia. India should make the most of the proposed RTIA as it will help to make its position stronger in the region.

However, Dr Pant has pointed out that New Delhi will have to bring down its tariff levels sharply as its average tariff is 40 per cent as opposed to the Asean level of 20 per cent. As Asean plans to lower its tariff further to about 10-12 per cent next year, pressure would build on India to follow suit. India should weigh the situation carefully and see if it is in a position to reciprocate.

To gain time for adjusting to lower tariff levels and other commitments which the RTIA will call for, New Delhi should ask for a phased implementation period, Dr Kumar said. China has got a 10-year-long implementation period. India, too, should demand an implementation period it is comfortable with.

The taskforce which will work on the draft agreement will follow the recommendations of the joint study by the Indian Institute of Foreign Trade, New Delhi, and the Malaysian Institute of Economic Research which has recommended that the RTIA process be started with the formation of an FTA in goods and to cover the area of services thereafter.

The FTA will provide the platform for a regional investment agreement to cover areas such as double taxation avoidance agreement, investment promotion and protection agreement, extending credit lines etc.

At the same time, discussions can be held to cover sectors such as information and communication technology, pharmaceuticals and bio-technology, protection of intellectual property rights, simplification and harmonisation of customs documents and procedures.

India became a sectoral dialogue partner of Asean in 1991 and full dialogue partner in 1996. Last November, this relationship was upgraded to summit level. Indo-Asean trade has grown by 30 per cent from $7.6 billion during 1999 to $9.8 billion during 2001.