India-Asean FTA final draft likely to be signed in Myanmar

Nay Pyi Taw: The final draft of the much-awaited free trade agreement (FTA) on services and investment between India and the 10-member Association of Southeast Asian Nations (Asean) is likely to be approved during the Asean-India economic ministers' meeting in Myanmar this week.

Talks for concluding the deal, which will lead to the sealing of the India-Asean Comprehensive Economic Partnership Agreement, got substantially progressed during the visit of external affairs minister Sushma Swaraj to Myanmar earlier this month. The final modalities of the trade pact will be signed during commerce and industry minister Nirmala Sitharaman's visit to the Myanmar's capital Nay Pyi Taw on Tuesday and Wednesday.

"The final draft is complete. It now needs to be ratified by all the member countries of Asean. The main concern was with Thailand, because of the domestic problems there. But the military government has assured support for the trade deal," a senior official with the external affairs ministry told Business Standard.

The trade deal will be officially signed during the Asean-India Summit, which is likely to happen by the end of this year. The FTA in goods with Asean got implemented in 2000. However, the deal in services got entangled into several hurdles. During the visit of former prime minister Manmohan Singh to Brunei in October last year as part of the 11th Asean-India summit, both parties agreed to finally seal the deal. It was agreed then that the FTA in services would be operationalised by July 2014.

This is for the first time since its inception into the Asean group 17 years ago that Myanmar takes the chair of Asean this year. Myanmar holds the key to India's grand connectivity plans with the southeast, which forms a part of the Mekong-India Economic Corridor under the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) framework.

The Mekong-India Economic Corridor will be a network of land and sea infrastructure and the proposal is currently being studied by the external affairs ministry.

The basis of this corridor will be the larger India-Asean connectivity plans. It envisages the linking of vibrant emerging economies in the Asean region with India. The government's master plan on Asean connectivity consists both hard and soft infrastructure linkages.

India- Myanmar trade expanded significantly from $12.4 million in 1980-81 to $1,070.88 million in 2010-11. With Myanmar's exports to India being thrice its import value, trade balance has been in Myanmar's favour in the past several years.

Bilateral trade has gone up from about $500 million in 2004 to $1.3 billion in 2010. India's exports stand at $334 million, while it imports goods worth about $1 billion from Myanmar.

The main exports to Myanmar are pharma products, iron and steel, and electrical machinery and equipment. India imports large amounts of edible vegetables and wood from Myanmar.

The Confederation of Indian Industry (CII) has recommended that border trade and investment facilitation as well as cooperation in services and technology transfer must be addressed for greater economic linkages with Myanmar. According to CII, the two countries should conclude an agreement on cooperation in banking and financial services to enable greater private-sector engagement. In a study, CII noted that Indian businesses are still not aware about what Myanmar can offer.

Hence, better communication between trading partners is the key to increasing bilateral trade. The importance of business delegations, special promotion campaigns will help to create more awareness between the two countries. The business communities should come forward to take a lead and help increase the volume of the trade.

Two-way trade between India and Asean is expected to reach $100 billion by 2015 according to the set target from about $75 billion at present.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.