India, Indonesia joint panel pushes for FTA

Written by Rituparna Bhuyan | New Delhi | Updated: Oct 20 2009, 08:51am hrs
Nearly two months after India inked the Free Trade Agreement (FTA) with the Association of South East Asian nations (Asean), a joint panel comprising government officials and trade experts of India and Indonesia have recommended a similar trade deal between the two sides.

This will be the fourth bilateral free trade deal that India will explore with an Asean memberIndia has an operational FTA with Singapore, a functional FTA like deal involving 82 goods with Thailand as well as ongoing negotiations with Malaysia on a duty free trade agreement.

On the basis of an extensive study of various dimensions of the economies of the two countries, including an assessment of potential economic complementarities, the Joint Study Group (JSG) concludes that the proposed India-Indonesia Comprehensive Economic Cooperation Agreement (CECA) is feasible and is mutually beneficial in expanding bilateral economic linkages, the report tabled on September 29 said. The JSG report is a precursor to negotiations of an FTA. The go ahead for negotiations is given by the Prime Ministers Trade and Economic Relations Committee (Terc).

Trade economists maintain that the negotiations on the bilateral CECA will be tough as it would have to be more liberal than the Asean FTA, which was concluded after more than seven years of intense bargaining. The question is, are both the sides ready for committing more than whatever has been agreed to in the Asean FTA, said Biswajit Dhar, director general of Research and Information System on Developing Countries (RIS).

One point in this case is palm oil, a farm product of export interest of Indonesia and a cause of concern for coconut farmers in Kerala. The farm product had become a sticky point in the India-Asean FTA negotiations, often derailing the talks during the final stages as Indonesia wanted India to commit to lower duties on the commodity.

According to the report, while both the countries will gain from the enhanced trade flows, the quantum of benefits will be greater for Indonesia. Indias trade deficit with Indonesia has been increasing steadily from $ 9.3 million in 1996 to $ 3.2 billion in 2008. According to analysis done by experts of the panel, while Indias additional exports to Indonesia could be as high as $7.8 billion by 2020, imports from the south east Asian nation could be $ 9.7 billion. In 2008-09 exports from India to Indonesia stood at $ 2.51 billion whereas imports was $ 6.7 billion.

Along with liberalisation measures for trade in goods, services and investments, the report emphasised that there are considerable avenues for cooperation in developmental activities, people-to-people contacts as well as capacity building. Areas of economic cooperation of mutual interest which both India and Indonesia can exploit and foster closer collaborations include energy (oil and gas exploration), power, agriculture and fisheries, forestry, human resource development, transportation, Special Economic Zones, mining as well as visa and work permits.

Goods of Indias interest in Indias FTA include meat, fish and seafood, zinc, copper, lead and related products, furniture, lighting, ores, ships, vehicles, dairy products, furniture, electrical lights, ores, ships, vehicles, as well as related dairy products. As for the Indonesia, products of export interest include Railway, tramway locomotives, rolling stock, milling products, malt, starches, wheat gluten; Ships, boats and other floating structures, woven fabric, as well as vegetable fibre products.

The expert panel also called for setting up joint venture initiatives in products where both the countries have interest.However, it will be up to the firms of both countries to take advantage of this potential, which could also contribute to bilateral trade expansion, the report added.

The report, which also focused on services trade, pointed out scope for enhanced cooperation in sectors like IT, telecommunications, financial, audio-visual, education, health, tourism and travel, construction, professional services, and transportation. On investment, the panel called for measures for promotion and protection of investments, as both the countries are known for investing in overseas nations.