1. Indo-ASEAN partnership key to Asia’s growth

Indo-ASEAN partnership key to Asia’s growth

Bolstering economic ties and connectivity benefits India’s North East and the less-developed ASEAN economies

By: | Updated: November 21, 2014 8:46 AM

India is participating in the Ninth East Asia Summit being held in Myanmar. The East Asia Summit process, launched in 2006, brings together ASEAN, India, China, Japan, Korea, Australia, and New Zealand on a dialogue platform that also includes the Regional Comprehensive Economic Partnership (RCEP) as a proposed mega trading region.

Asia has been demonstrating steady economic growth, functioning as the growth engine for global prosperity. The Asian Development Bank estimates that the average GDP growth of the Asian region will edge up from 6.1% in 2013 to 6.2% in 2014 and 6.4% in 2015, with an economic ripple impact on other regions.

Within the continent, India and ASEAN are expected to lead this charge. The IMF’s World Economic Outlook of October 2014 has noted that growth in India is expected to pick up to 5.6% in 2014 and 6.4% in 2015 while the ASEAN-5 nations (Indonesia, Malaysia, Thailand, Philippines and Vietnam) are projected to witness a growth of 4.7% and 5.4% respectively.

India and ASEAN, in fact, have the capacity for dynamic growth and are playing a major role in the global economy. ASEAN sees India as an emerging power in Asia and is keen to develop relations with it that would be beneficial to member nations and to the region as a whole. Currently, India is collaborating closely with many Southeast Asian countries, in various areas such as trade, science and technology, human resource development, healthcare, space science, agriculture, new and renewable energy among others.

In addition to the common goal of maximising overall economic gain, India perceives economic engagement with ASEAN as a way to develop its northeastern states, while ASEAN views India’s economic linkages with Cambodia, Laos, Myanmar and Vietnam (CLMV) as an opportunity to help these new, less developed members of the organisation to catch up with the others and further strengthen intra-ASEAN trade and unity.
India and ASEAN also have much to gain from cooperation that goes beyond economic ties. Besides being dynamic economies and attractive markets, both also share similar concerns and interests in several other fields like drug trafficking, natural disaster relief, terrorism, piracy, protection of shipping lanes and climate change among others.

Substantial mutual cooperation between India and the Southeast Asian region began in 1992 when India launched its Look East Policy. Initially confined to the economic sphere, the cooperation rapidly broadened to include the political and security fields when India was accorded full ASEAN dialogue status in 1996. India then became a member of the ASEAN Regional Forum (ARF) in 1996 and the East Asian Summit in 2005.
The annual Summits with the Association of Southeast Asian Nations (ASEAN), which started in 2003, followed six years later by the establishment of an ASEAN-India Trade in Goods Agreement in 2009, laid the foundation for strengthening markets through better connectivity. The two sides are now negotiating on trade in services and bilateral investments. Bilateral free trade agreements with Singapore, Malaysia and Thailand and sub-regional initiatives like the Mekong-Ganga Cooperation Initiative (MGCI) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)—in 2004—were also initiated.

ASEAN connectivity—for both intra-ASEAN connectivity as per the Master Plan on ASEAN connectivity and for connectivity with dialogue partners such as India—has been generating a lot of buzz both regionally and globally. ASEAN’s framework for enhancing connectivity consists of three dimensions, i.e., physical connectivity (related to land and maritime transport, ICT and Energy); institutional connectivity (related to free flow of goods and investment and transport facilitation) and people-to-people connectivity (related to movement of people to help tourism, culture and education).

India is working on improving road connectivity with ASEAN to create new opportunities for the North East. Several projects are underway that aim to boost up connectivity and strengthen the ASEAN-India Strategic Partnership. These include the India-Myanmar-Thailand Trilateral Highway and the Kaladan Multimodal Transit Transport Project.

Connecting these countries with India can yield numerous benefits: larger markets can bring about economies of scale in production and enhance competitiveness. Integration of markets can facilitate the movement of production networks and attract more FDI along with the benefits of knowledge and technology transfer and opportunities to connect to regional and global supply chains. Such cooperation has the potential to absorb significantly large investments in infrastructure and industry. The Economic Research Institute for ASEAN and East Asia (ERIA) estimates that with proper transport development and border process improvement, real GDP could increase by as much as 37.8% in Vietnam, 17.6% in Cambodia, 4.8% in Myanmar and 1.9% in Thailand.

But there are challenges as well. These include inadequate and problematic cross-border infrastructure links, procedural constraints to the movement of goods, non-tariff barriers, barriers to FDI and doing business efficiently, and weak institutions. While these challenges would need action at the level of individual countries, they could be addressed more vigorously by collective action through regional cooperation. In pursuing collective action, it is essential that various stakeholders are made aware of the potentials and opportunities that such connectivity between the ASEAN and India sub-regions could bring.

The author is director general, CII

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