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India to Strengthen Ties with ASEAN

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India is closer to fulfilling one of its top priorities - forging stronger economic ties with the Association of Southeast Asian nations. India and the 10-member ASEAN group will sign deals for a plan of action and to promote "shared prosperity" at the annual summit on November 29 and 30.

India launched its "Look East" policy more than a decade ago to raise its economic and diplomatic profile in Southeast Asia - wanting to emulate the region's growing prosperity.

Geetanjali Nataraj, professor at the Indian Institute for Foreign Trade, says India is looking beyond its traditional trading partners in the West, and taking advantage of ASEAN's increasing global trade and investment.

"India has set a target of achieving two percent share in world trade, and to achieve this target we need to explore new markets, enter new markets, and ASEAN is a big market for India," said Geetanjali Nataraj.

At first, ASEAN was slow to respond to Indian overtures. But that changed as Southeast Asian countries struggled with the financial crisis of 1997, and India's economy began showing signs of promise.

Experts say ASEAN also began to see how India could balance out China's power in Asia.

The relationship has acquired momentum in the past two years. At the 2003 ASEAN summit, India and the Southeast Asian bloc agreed to create a free trade area in goods, services and investment by 2011.

Arvind Virmani, director at the Indian Council for Research on International Economic Research, says much smaller ASEAN countries stand to gain from access to India's market of more than one billion people and in particular, its booming information technology sector.

"ASEAN has, of course, recognized India's prowess in IT and in service exports more generally," said Arvind Virmani. "That has also contributed in more recent years to a change in perspective of certain ASEAN countries who may have been hesitant otherwise in terms of much closer cooperation with India."

On the other hand, economists say that by wooing ASEAN, India ensures it is not isolated when regional trading arrangements are becoming the vogue.

This could include eventual economic integration with economically dynamic East Asia. In fact, New Delhi hopes closer links with ASEAN will help draw it into a larger economic community that includes China, Japan and South Korea.

India's need to build links with developing economies now is pressing as developed nations erect more trade barriers, despite preaching liberalization. Geetanjali Nataraj of the Institute for Foreign Trade explains.

"The developed countries are becoming more and more protectionist and they are imposing all sorts of barriers," she said. "Non-tariff barriers in the developed world are increasing rapidly. Therefore India has to look beyond the developed world to expand its trade and ASEAN countries offer great opportunities to India."

India is making better progress with some ASEAN members than with others. It has a free-trade pact with Thailand already, and, in the past year, greater investment from Malaysia and Singapore, with which it has a cooperation deal in the works.

Still, two-way India-ASEAN trade is far lower than it could be. In 2002 it was about $10 billion, only one percent of overall ASEAN trade.

Skeptics doubt India can move fast enough to change that. With Chinese goods flooding the region, India is its own worst enemy, raising tariff barriers higher than countries in East Asia. It has promised to reduce duties, but usually is slow to act. Transport and communication links with the region also need to be improved.

However, as India's economic profile grows, and its industry becomes more competitive globally, there is optimism the relationship will bear fruit.

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