asean and india: past, present and the future · in 2012, asean’s gdp per capita reached $3,748,...

VOL 1 | ISSUE 1 Angela Journal of Socio Legal Studies September 2015

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ASEAN AND INDIA: PAST, PRESENT AND THE FUTURE

- Tanisha Agarwal

Semester IV, Student at Law, BA.LLB(Hons),

Institute of Law, Nirma University, Ahmedabad

+91-9726937900

Introduction

Regional Economic Groups are the associations of countries situated in a particular region, whereby

they come to a common understanding regarding rules and regulations to be followed while exporting

and importing goods among them. Such groups have liberal rules for member countries while a

separate set of rules is laid for non-members. They are popularly known as Trading Blocs. The

Association of South-east Asian Nations is one such trading bloc comprising of countries such as

Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Vietnam and Myanmar.37

ASEAN'S engagement with India has seen some vital breakthroughs for strengthening economic and

political affairs since the end of the Cold War and India's dead set pursual of a Look East Policy since

1991. In 1992, it set out as a sectoral dialogue partner of ASEAN in regions of trade, investment,

tourism, science and technology. Shared concern for a more comprehensive commitment between

the two deepened and led to India becoming a full dialogue partner in the fifth ASEAN Summit in

Bangkok in December 1995.38 Thereafter, India set out on numerous economic reforms with the aim of

joining the market oriented countries and entering the political mainstream of global community. On

the one hand, India’s liberal approach attracted the ASEAN community for its exports of goods,

services, technology and capital and on the other, India saw ASEAN as a major economic space.

However, the most important breakthrough came with the first ASEAN-India summit in Phnom Penh,

Cambodia in 2002. These visits highlighted the requirement for both sides to respectively participate

37 List of ASEAN member states, available at: http://www.asean.org/asean/asean-member-states 38 ASEAN, Overview of ASEAN-India Dialogue Relations, available at: http://www.asean.org/asean/external-relations/india/item/overview-of-

asean-india-dialogue-relations


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in summit level connections for a deeper and more prominent conception of the opportunities and

difficulties confronted by them, and discover routes for successful co-operation to make complaisant

energies for shared profits. India-ASEAN relations in this way advanced from sectoral dialogue

partnership to yearly summit level meetings in a moderately brief time.39

Today, ASEAN countries are on the economic upswing and are looking to strengthen their economic

ties with countries like India and China. India’s waves of economic reforms have made it a profitable

destination for multinational corporations (MNCs). India and ASEAN together form a huge market that

is growing faster than any other region in the world. From 2001 to 2013 alone, ASEAN’s collective GDP

rose threefold, reaching $2.4 trillion.40 If the ASEAN bloc were a country, its growth rate during that

period would rank second to China as the highest in Asia. Between 2004 and 2011, ASEAN member

states’ trade volumes, among one another and with the rest of the realm, more than doubled. In 2012,

ASEAN’s GDP per capita reached $3,748, more than double the 2000 figure of $1,17241 Whereas in

India, in the last three months of 2014, the highest growth rates were record for services: electricity,

gas, water supply and other utility (10.1 percent); trade, hotels, transport, communication and

broadcasting (7.2 percent); financial, real estate and professional (15.9 percent) and public

administration, defence and other services (20 percent). The manufacturing sector expanded 4.2

percent; mining and quarrying went up 2.9 percent and construction rose 1.7 percent. 42 The Indian

government estimates annual growth at 7.4 percent by the end of March 2015 from a revised 6.9

percent expansion a year earlier.43 Since the first annual summit, there has been phenomenal

progress in the India-ASEAN relationship. In the 2012 ASEAN-India commemorative summit held in New

Delhi, the leaders espoused the ASEAN-India Vision Statement and affirmed that the ASEAN-India

Partnership stands elevated to a Strategic Partnership. 44 Institution of a Free Trae Area (FTA)

between the two, signing of a Trade in Goods (TIG) agreement, conclusion of the ASEAN-India Trade in

Services and Investment Agreement, re-activation of the ASEAN-India Business Council (AIBC),

agreements with member countries in areas of aviation, transport, tourism, agriculture, forestry,

food security, information and technology, research and development, establishment of a Green Fund

and the latest Regional Cooperative Economic Partnership to which India is a signatory are all

immensely advantageous opportunities for the Indian Economy to grow and also for India to affirm

39 Ibid. 40 THE ASEAN SECRETARIAT, ASEAN STATISTICAL YEARBOOK 57-58 (2013) 41 THE ASEAN SECRETARIAT,ASEAN COMMUNITY IN FIGURES (ACIF) (2013) 42 Central Statistical Organisation, Databook for December 2014. Available at:

http://planningcommission.nic.in/data/datatable/data_2312/DatabookDec2014%2010.pdf 43 Unni Krishnan, India Says Its Economy Will Grow 7.4%, But Economists Can't Figure Out Why (2015) available at:

http://www.bloomberg.com/news/articles/2015-02-09/india-gdp-seen-surging-7-4-in-data-that-has-puzzled-economists 44 ASEAN, Overview of ASEAN-India Dialogue Relations available at: http://www.asean.org/asean/external-relations/india/item/overview-of-

asean-india-dialogue-relations


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and establish its significance in the world economy, it being the second fastest growing economy after

China.

In the light of these developments, the paper aims at studying the trade relations between India and

ASEAN over time, to identify the specific commodities and sectors with trade potential between the

nations which can further be enhanced, to ascertain the current situation of trade and where India

stands in terms of the impact and benefits of negotiations and look at the future prospects of the

trade relations between ASEAN nations and India.

From ‘Look East’ to ‘Act East’

During the Cold war years, India and ASEAN did not have any substance in their relationship. New Delhi

was rather indifferent to the formation of ASEAN. However, it did not even associate itself with those

countries that openly opposed its formation. In 1990, things started taking a different course with the

onset of stark changes in the international and regional politics. The economic liberalization policy

inaugurated by the Narasimha Rao government in India led to economic reforms, rearranging and

liberalising and thus aligning the Indian economy with that of the ASEAN countries. For ASEAN, factors

like India’s population, geographical size, educated and skilled middle class, industrial base, military

strength, technical capability, cultural ties and presence of Indians in their countries are all

lucrative.45 Therefore, ASEAN’s ‘Look West’ coincided with India’s ‘Look East’ and this mutual need led

to the building of a strong base for ASEAN-India relations. The period between 1992 to 1996 saw

India’s position change from that of a ‘sectoral dialogue’ partner to a ‘full dialogue’ partner. India also

became a part of the security wing of the ASEAN, The ASEAN Regional Forum (ARF) thereby helping to

elevate the profile of the Security forum. In 1997, Laos and Myanmar joined ASEAN and Cambodia

joined in 1999. These countries have not been able to catch up with the development and globalization

process as well as their other ASEAN counterparts. India shares a land boundary with Myanmar, and

cultural ties with all the three countries which has added to the economic opportunities. Various other

milestones have been achieved. In December 2012, the leaders of India and the ASEAN countries

congregated in New Delhi to rejoice the 20th anniversary of India’s sectoral dialogue partnership with

the ASEAN and the 10th anniversary of their annual summits. The summit saw the two sides moving

their ties to the level of a strategic partnership and concluded in the ASEAN-India Vision Statement,

which talks about taking this sustained relationship forward with a definitive path and object. India has

enthusiastically supported the ASEAN supremacy, the Initiative for ASEAN Integration for Narrowing

45 Tridib Chakraborti, Disparate Priorities: Explaining the Penumbra of India’s Look East Policy (2009)


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the Development Gap, the Master Plan on ASEAN Connectivity, and a Drug Free ASEAN by the end of

2015.

Commerce, Culture and Connectivity- ‘The three Cs’ are the three scaffolds of India’s vigorous

commitment with ASEAN. In the economic frontier, the India-ASEAN affairs are set to gage new

boundaries. The two sides are anticipated to embark upon an India-ASEAN FTA in services and

investments soon. This will supplement the FTA in goods which was contracted six years ago in 2009

and has resulted in a dramatic leap in bilateral trade, which is around $80 billion. The two sides are

now assured of taking it up to $100 billion by 2015 and double that size by 2022. The reciprocal

investments are on an upsurge: ASEAN investments in India over the last eight years amounted USD

27.9 billion, and Indian investments in ASEAN reached $32.4 billion.46

With the change in leadership in New Delhi, and the arrival of the Modi government has envisaged a

change from looking east to acting east actively. The Prime Minister, External Affairs Minister and the

President have all have taken up frequent visits to ASEAN countries like Vietnam, Myanmar and

Singapore. Thus, India-ASEAN relationship is set for a renewal in strategic issues like nuclear

proliferation, transnational terrorism, and maritime piracy. 47

Table 1.0: Timeline of ASEAN-India Relations

1990 India begins engaging with ASEAN, as part of Look East Policy

1992 India becomes a sectoral dialogue partner of ASEAN

1996 India becomes full dialogue partner of ASEAN

2003 -India becomes signatory to the Treaty of Amity and Cooperation in Southeast Asia (TAC).

-India signs counter-terrorism declaration with ASEAN.

2009 Free Trade Agreement (FTA) in goods signed and thus a Free Trade Area between India

and ASEAN is incorporated.

2010 FTA in goods becomes operative

2012 -India becomes strategic partner of ASEAN

-FTA in services and investment-talks finished

46 ASEAN, External Trade Statistics (2014) available at: http://www.asean.org/resources/2012-02-10-08-47-55/asean-

statistics/item/external-trade-statistics-3 47 Manish Chand, Act East: India’s ASEAN Journey (Nov. 10, 2014), available at: http://www.mea.gov.in/in-focus-

article.htm?24216/Act+East+Indias+ASEAN+Journey


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2013 Regional Comprehensive Economic Partnership (RCEP) talks are initiated which will link 16

nations. (Talks will conclude by the ned of 2015)

2014 FTA in services and investment signed by all ASEAN members with India. Except

Philippines.

Source: Author’s observations based on the Overview of ASEAN-India Dialogue Relations

Sector Specific Opportunities

With India’s vision of becoming a developed nation by 2020 keeps on being deciphered into domestic

reform enterprises and prompts a more prominent reconciliation with the world economy, the open

doors for ASEAN and other financial accomplices for commonly helpful monetary co-operation is

liable to grow. In 2015, ASEAN-India trade is targeted to grow to US$ 100 billion.48

Fig 1.0 Sector-wise trade between ASEAN and India

Source: FICCI, “Business Beyond Barriers” Survey conducted in 2013

48 Research and Information System for Developing Countries, ASEAN-India Maritime Connectivity Report (2014), available at:

http://www.ris.org.in/images/RIS_images/pdf/Final-Print-Martitime%20connectivity%20report.pdf


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A few complementarities in India-ASEAN fares propose space for both sides to pick up from trade.

India seems to have a leeway in pharmaceuticals, gems and jewellery and iron and steel. On the other

hand, ASEAN has a leeway in electronics and natural resources. There are contrasts in destinations

for exports. This prompted the beginning of an India-ASEAN Free Trade Agreement (FTA) in products in

2010. The FTA involves reduction in tariffs on 90 percent of exchanged products, which will be finished

by 2016. An agreement on services shall be drawn up soon too. For India, ASEAN is a key trading

partner because the country’s exports arise out of Asian demand. Over the previous decade, exports

to ASEAN have risen 11 times whereas imports rose just 6 times.

Fig 2(a): Trend in India’s Exports to ASEAN

Fig 2(B): Trend in India’s imports from ASEAN

Source: Direction of Trade Statistics, International Monetary Fund (IMF-DOTS)


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There is high potential for growth in Indian Export in 6 categories49:

1. Organic Chemicals

2. Petroleum Products

3. Pharmaceuticals

4. Vehicles

5. Gems and Jewellery

6. Apparel

These categories rank at India’s topmost 10 export items by value.50 Petroleum Products, Vehicles and

Organic Chemicals already account for a large share of total Indian exports to the ASEAN nations. In

sectors of Pharmaceuticals, Apparel and Gems and Jewellery, India still has the capacity to escalate

export growth rates to ASEAN.

Table 2.0: Areas of Complementarity in India-ASEAN trade

Total Exports, USD bn

Source: UNcomtrade, Standard Chartered Research

49 Ministry of Commerce and Industry, Trends in India’s Foreign Trade (2012), available at:

http://www.ris.org.in/images/RIS_images/pdf/Final-Print-Martitime%20connectivity%20report.pdf 50 Ibid


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Evident from Table 2.0, ASEAN has an upper hand in Natural Resources (edible oil, rubbwr, wood) and

electrical machinery and equipment. Likewise, India has the upper hand in services. The forthcoming

India-ASEAN agreement on Services and Investment will work to India’s advantage. ASEAN is key trade

accomplice for essential items- One-fifth of India’s petroleum products, which happen to be the

country’s biggest export item are channelled towards ASEAN countries, 15% each of Indian chemical

and cereal exports (these two are again, within India’s top 10 export commodities) are headed

towards ASEAN, Three-fourths of total Indian edible-oil imports (Among India’s top 10 import items)

emanate from ASEAN: 50% from Indonesia and 25% from Malaysia.

India is also fast becoming an export hub for major global auto companies. Hyundai, Ford, Volkswagen,

Toyota and Suzuki- they are all progressively using India as a sourcing centre to meet requirements

in the international market. Also, with the new government’s emphasis on making the manufacturing

sector flourish, productivity will also increase.51 The financial services industry, over the past few

years has progressed because of factors like deregulation of the insurance industry, entry of private

players in banking, and easement of terms for foreign financial institutions (expansion of branches,

etc.) This industry will further bloom because new players are attracted due to India’s liberalization in

banking and insurance.

The advancement of world-class framework in sections like telecommunications, roads, railways and

air and SEZs in India offer chances to ASEAN MNCs. In telecommunications, investors can enter the

market either as service providers or infrastructure providers, by obtaining a 49 percent stake in

joint endeavours with Indian organizations. India is also in a position to co-work with ASEAN in

significantly bringing down the expenses on crucial medications, including HIV-AIDS, and co-working in

food and energy security. Indian travellers are progressively becoming critical markets for tourism in

a few ASEAN nations, and their expert and specialized labour are making positive commitments to

supporting competitiveness of ASEAN nations. Experts from ASEAN nations, viz. Singapore and

Malaysia, are assuming a somewhat similar part in the Indian economy. Thus, aside from

merchandise, there is much possibility for development of co-operation in science and innovation,

tourism and manpower. In this manner, ASEAN and India could altogether join forces in areas of trade,

investment and human resource development.

Regional Comprehensive Economic Partnership: The Newest Stepping Stone

51 Standard Chartered Bank, India- Agenda for the New Government (2014), available at:

https://research.standardchartered.com/configuration/ROW%20Documents/India_%E2%80%93_Agenda_for_the_new_government_26_05

_14_13_34.pdf


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In November 2011, the Association of Southeast Asian Nations (ASEAN) proposed a new regional free

trade agreement (FTA) initiative52 called the Regional Comprehensive Economic Partnership (RCEP). In

the event that arranged effectively, RCEP would make the world's biggest trading bloc and have real

ramifications for Asian nations and the world economy. Negotiations among the 16 participating

countries started in right on time 2013 and are planned to close before the end of 2015. 53

The RCEP looks to attain to a current and extensive trade agreement among nations. The centre of the

arranging plan would encompass trade in goods and services, economic cooperation, investment and

dispute settlement.54 The organization would be a compelling vehicle to help the spread of worldwide

production webs and decrease the inefficiencies of numerous the present Asian trade agreements.

India is a noteworthy player in the RCEP arrangements and is under weight as of now to achieve steep

diminishments in its levies. Truth be told, a steep lessening in tariffs for merchandise from China has

been the greatest risk for mediators and the business, dreading a surge of low quality products from

over the fringe.

Also, nations, for example, Singapore, which has almost zero levies on most products, and Malaysia,

where 90 percent of exchange hardly has any duty, would likewise apply weight on India to reduce

barriers. Therefore, negotiators are taking a gander at conceivable choices to stay away from

colossal harm. The main choice being examined is to have a typical rundown for tariff decrease over

every one of the 16 RCEP individuals. The second alternative is to have one rundown for ASEAN

individuals and individual records for alternate nations. There is additionally the likelihood of having

cut outs for individual nations to augment picks up for India.

The association has much to pick up from a more liberalized trade. Despite the fact that this is a

delicate issue for some nations, it would be more suitable if a sector wise liberalization procedure is

embraced. Countries can then coordinate all the more unquestionably once the profits get to be

obvious. The attention on the RCEP transactions must be to further settle in ASEAN centrality, which is

being tested by numerous new and covering monetary collaboration game plans in the district. The

effective finish of the RCEP transactions would serve as a crisp move towards regional integration

and unleash financial linkages that future monstrously advantageous for all included.55 The RCEP will

definitely face stiff opposition from several interest groups within the participating countries. But now

52 ASEAN Framework for Regional Comprehensive Economic Partnership adopted at the 19th ASEAN Summit, Bali, Indonesia. November 17, 2011. 53 Ibid. 54 Regional Comprehensive Economic Partnership (RCEP) Joint Statement The First Meeting of Trade Negotiating Committee. May 10, 2013 55 Yoshifumi Fukunaga, ASEAN’s Leadership in the Regional Comprehensive Economic Partnership ASIA AND THE PACIFIC POLICY vol. 2, no. 1,

103–115 (2014)


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that India has set out to join, it will have to balance economic and strategic controls and get ready to

lead.

Conclusion and Future Prospects

The scope of existing complementarities between ASEAN and India and the degree of its right now

unutilized potential, shows that the future prospects for economic co-operation between ASEAN and

India do show up splendid, with a different concentrate on both subjective and also quantitative

extension in their two-sided financial relations. The foundation for such an extension has already been

laid down with the foundation of the Framework Agreement on Comprehensive Economic Co-

operation. ASEAN is mindful of the dangers included in depending on China alone as a motor of

development. Extra motors of development, including the United States, Japan, South Korea also India

could without a doubt diminish dangers for ASEAN.56

Expansion of export termini is the key. There is a school of thought that accepts that India is might not

pick up essentially from liberalization in ASEAN administrations exchange, given that India sends out

the greater part of' its IT administrations to Western economies. However, this can be recognized as

a limit to how high Asia's part in Indian exports can reach, as a large portion of the worldwide

multinationals that utilization Indian IT administrations are situated in developed markets. In any case,

there is degree to expand the offer of exports coordinated to ASEAN to catch organizations

headquartered and working inside the area. In this context, liberalizing the procurement of financial

services, facilitating visa necessities, and easing restrictions on FDI could support Indian service

exports. Expanding Asia's share would likewise broaden Indian exports, lessening India's

defencelessness to downturns in the West.

Connectivity, physical, institutional and mental, remains the persevering plan of the India-ASEAN

engagement.57 India has been in the front line of pushing a large group of trans-national ventures that

look to weave the locale together in a multifaceted web of road, rail and oceanic connections. The

fulfilment of the Tamu-Kalewa-Kalemyo division of the India-Myanmar-Thailand Trilateral Highway is

ready to make another dynamic in India's multi-faceted ties with the district.58 With the new Indian

government centring with replenished energy on impelling the monetary elevate of India's north-

eastern states, the passage to ASEAN, improved integration guarantees to unleash another success in

this area. In the days ahead, improving shipping and air network will be real focus areas.

56 Raj Agrawal, India, China and ASEAN: Strategic Trade Engagement THE JOURNAL OF BUSINESS PERSPECTIVE vol. 10, NO. 1 (2006) 57 FICCI AND CRISIL, India-ASEAN: Forging Partnership for Economic Integration (2010) available at:

http://www.ficci.com/spdocument/20186/India-ASEAN-Report-Exec-Summry.pdf 58 Supra note 42


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Setting new benchmarks for this blooming relationship, India has set up an Indian mission to the

ASEAN in Jakarta, and has set up an ASEAN-India Center which is housed in New Delhi. Capacity

building, formative collaboration, and knowledge partnership are key features of what specialists are

calling India's 'Improved Look East' strategy. This is reflected in India offering its mastery in limit

building ventures in Southeast Asian nations through the three trusts - the $50 million ASEAN-India

Cooperation Fund; the $5 million ASEAN-India Green Fund; and the ASEAN-India Science and

Technology Fund. India envisages to set up four IT Centers in Cambodia, Lao PDR, Myanmar and

Vietnam. India is likewise situated to dispatch a Tracking and Data Reception Center in Ho Chi Minh

City in Vietnam, which would make remote sensing information accessible from the RESOURCESAT and

OCEANSAT for applications in calamity administration and mineral exploration for ASEAN nations.

Social Connect- While Commerce, Connectivity and Capacity-building keep on pushing the India-ASEAN

relations to new turning points, Culture and Creativity give mental and otherworldly feed to sustain

this developing engagement. Referred to in antiquated times as Suvarnabhumi, the place where there

is gold, Southeast Asia bears profound awe of the Indian society. Ramayana and Mahabharata are

Indian stories, as well as civilizational memories India offers with numerous Southeast Asian nations

like Indonesia, Thailand and Cambodia. Buddhism structures the otherworldly core of India-ASEAN

relations as Buddhists from everywhere throughout the district group for journey to respected holy

places like Bodh Gaya, the spot where Lord Buddha achieved enlightenment under the Bodhi tree.

Mixing the antiquated and the advanced, the Nalanda University, an old seat of learning, is no more a

fantasy, however a living reality and has begun working not long from now. It was formally introduced

in September not long from now by India's External Affairs Minister. At last, its hearty individual’s to-

individuals relations that keep a strategic relationship murmuring with new thoughts and activities.

Furthermore rightly, the pioneers of India and ASEAN have recognized producing a learning and

society connect as the persisting approach to fructify the maximum capacity of the relationship." In

the next action plan, the focus will be on people-to-people contacts, increasing the civilizational

linkages, making sure that there are enough studies which are conducted on the linkages of the ASEAN

countries, on issues like language, religion, traditions, dress, and our traditional crafts,” Anil Wadhwa,

secretary (east) in India’s external affairs ministry had stated.59

59 Supra note 47


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With the brain and the heart in the ideal place, the multi-toned India-ASEAN relations are situated to

take off high and revive the acknowledgment of an Asian century. Entwining dreams of 1.8 billion

individuals, India and ASEAN are situated to grow a bend of flourishing over the district and write

another story of an Asian renaissance.

Outcomes

India-ASEAN relations have been built from the scratch since 1992 and today, both hold an

inevitable importance in each other’s economic share.

Understood what trading blocs are- their need and impact on regional members. ASEAN has

emerged as one of the most important trading bloc in the world and it’s engagement with

India has seen various agreements, partnerships and conclusion of talks.

With the FTA in goods becoming operative and emergence of RCEP, there is considerable

scope for improvement in various sectors of the Indian Economy.

The three Cs- Commerce, Connectivity and Capacity are the key to take the India-ASEAN

relationship forward.

Understanding of the National Economy

The Indian Economy, being the second fastest growing economy after China and perhaps also set to

surpass China in the coming times stands to be a lucrative space for investment, imports and exports,

and trade engagement with the ASEAN member nations. Both, India and ASEAN have needs which they

can mutually satisfy with co-operative economic engagement, domestic reforms, establishment of

strong institutional mechanisms and finding new growth niches. The Indian economy’s sectors like

Pharmaceuticals, Apparel, Gems and Jewellery, Infrastructure, Automobiles etc. have great scope for

growth which can further be facilitated by engagement in trade with the ASEAN nations.


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