As New Delhi struggles to implement its ‘Look East’ policy, the ASEAN bloc is integrating faster. During his recent tour to Malayasia and Singapore, Prime Minister rendra Modi was witness to the South East Asian grouping at Kuala Lumpur formally creating a unified ASEAN economic community. Projected to be larger than the European Union, the ASEAN market is estimated to have a combined GDP of 2.57 trillion dollars. Envisaged in 2002, the ASEAN members have been building up to this target through incremental steps like removing tariff barriers and visa restrictions. Experts have however pointed out that though this bloc is primarily export-driven, trade within its members have been receiving lesser priority, standing at only 24 percent of the total global trade of ASEAN in the past decade. Opening up hitherto protected sectors like agriculture, steel and automobiles is bound to be politically sensitive for its member tions. After December 31 when it will become a legal entity, the ASEAN community will also have to boost political and diplomatic cooperation among its members. India already has a strong relationship going with ASEAN — there are some 30 dialogue mechanisms between the two sides, including a summit and seven ministerial groups covering foreign affairs, commerce, agriculture, tourism, telecommunications, environment and renewable energy. There is a free trade agreement (FTA) in goods between the two sides signed in 2009. But India has not gained much from this pact on goods because tariffs were already low in the region. So India has been keen on an FTA in services and investment; though this pact came into force from July this year, some ASEAN members are yet to ratify it.
Addressing the ASEAN-India summit and thereafter the East Asia summit, Modi promised more reforms to provide a transparent and predictable tax regime as well as protection to intellectual property rights. He spoke of how his government has reined in inflation, which have led to higher GDP growth and foreign investment. While Modi’s references to the looming terror threat in the backdrop of the West Asia situation, as well as Chi’s assertiveness in the South Chi seas received much media attention, his main agenda was to ratchet up trade ties with ASEAN and attract more investments. After all, the core of the ASEAN-India partnership has been economic — the strategic partnership dimension is a later development with some ASEAN members mindful of Chi’s growing influence. But then, Beijing’s clout is directly proportiol to its huge trade and investment in the SE Asian region. While India will struggle to match the Chinese dragon here, it is now focusing more on deepening security and cultural ties, along with institutiol economic relations. The problem for New Delhi will be to sufficiently convince the ASEAN members that its domestic economic reforms are on track, even though the Indian economy remains one of the world’s ‘bright’ spots growing at above 7 percent. With the parliamentary logjam creating a perceived policy paralysis at the Centre, New Delhi has its task cut out here. Malaysian Prime Minister Lee Hsien Loong has pointed out that the India-ASEAN trade linkage will grow stronger after both sides get going with the more comprehensive FTA, complete a separate Regiol Comprehensive Economic Partnership (RCEP) involving ASEAN members and six other countries including India, and move quicker to complete the ASEAN-India air transport pact to open more flight routes.
Investment flows between ASEAN and India have been growing substantially. Between April 2007 and March 2015, India invested 38.6 billion dollars in ASEAN which in turn invested 32.4 billion dollars in India. The country’s trade with the South East Asian bloc grew to 76.5 billion dollars in 2014-2015; ASEAN is presently India’s fourth largest trading partner. Both sides are targeting to raise this to 100 billion dollars in the current year, even though that is only half the potential 200 billion dollars that experts believe is achievable by 2022. This effort will gain more urgency after the 16-member RCEP comes into being, comprising of 10 ASEAN members and its six FTA partners India, Chi, Japan, Korea, Australia and New Zealand. If this mega deal is filised next year as expected, it will open up for Indian business a combined RCEP market of 17 trillion dollars. Then there is another gigantic regiol trade pact in the offing among some countries on the Pacific Rim — the Trans-Pacific Partnership (TPP), in which ASEAN will again figure prominently. The India-ASEAN relationship is thus a work in progress. Much depends on how New Delhi plays its cards to establish a strong presence in the huge ASEAN market. This has huge implications for the Northeastern states as well. If the necessary road, rail and telecommunication infrastructure is not in place soon, this region will miss the bus vis-a-vis Kolkata as the country seeks to get closer with SE Asia. The multi-modal Kaladan transport project with ASEAN member Myanmar as well as expanding the rail network in the region to its periphery, is now a matter of utmost importance to the Northeast.