Remarks at the ASEAN-India Forum 2017

Delivered at Roundtable Discussion I: Trade and Investment Prospects for India and ASEAN, ASEAN-India Trade and Investment Partnership in a Context of Asia-Pacific Cooperation in Bangkok, Thailand

Over the long-term, the ASEAN-India strategic partnership, an integral element of ESCAP’s regional cooperation and integration strategy, will promote prosperity and sustainable development for the Asia-Pacific region. A full-scale ASEAN-India alliance would offer benefits not only to the participating countries, but to the entire region. I would like to share with you some observations on the dynamics and prospects for this partnership.

First, there is a great deal of optimism for the ASEAN-India partnership. This is underpinned by their combined market of 1.85 billion people and a collective GDP of $ 5 trillion in 2017, which is expected to exceed $8 trillion by 2025. Underlying this optimism, there must be recognition that the partnership’s success requires effective implementation of the ASEAN 2025 Vision and its Action Plan, including the “Global ASEAN” theme to develop broader strategic and coherent approaches to external relations. India, as a $2.5 trillion economy, with its prioritization towards Make India and Act East Policies would benefit from an enhanced and well-functioning FTA that would facilitate smooth graduation and transition to the Regional Comprehensive Economic Partnership (RECP), so vital to deepening the regional integration both for ASEAN and India.

Second, unleashing the full potential of the ASEAN-India deal requires countries to fast-track their domestic transformations, anchored on Agenda 2030 which holds the promise to “leave no one behind,” while reducing inequalities given the rise in Atkinson index1 - a measure of inequality –in both partner countries over the period 2010 - 2015. Change demands economies pursue industrial diversification and innovation, dismantle outstanding market rigidities and fast track infrastructure connectivity. Emerging opportunities must be carefully guided to promote job creation and safeguard labor interests, while maximizing the benefits of trade and investment partnerships for nurturing SMEs. This will also enhance the competitive edge and labor-absorbing potential of all the participating economies. Our confidence in the present trade and investment agreement stems from ASEAN and India’s track record as major
trade players, with the former a leader in intraregional trade. Notably over two-thirds of ASEAN exports are destined for Asia-Pacific countries, and one-third of Indian exports are to other Asia-Pacific countries.

Third, the ASEAN-India Comprehensive Economic Cooperation Agreement (CECA) and preferential trade agreements on goods, services and investment offer an important opportunity to support India and ASEAN’s economic integration.2 In the short-term, accelerated and decisive efforts to deepen and implement the agreement are needed, as Asia- Pacific trade growth lags GDP growth, reaching an all-time low of around 3 per cent averaged over 2008-2016.

Fourth, the implementation of the ASEAN-India Trade in Goods Agreement with accompanying tariff liberalization of over 90 per cent of products traded has spurred ASEAN exports to India to nearly $38 billion and India’s export to ASEAN to more than $26 billion. This falls short of the $100 billion target. ASEAN and India bilateral trade as a share of their total trade has remained virtually unchanged over the last six years. More concerns are being echoed regarding its consequences on India’s trade deficit with ASEAN almost doubled from 2010 to 2016.

Fifth as liberalization widens with smaller ASEAN countries joining, benefits and welfare gains to India can be enhanced by expanding the scope of agreements through removal of non-tariff and behind the border bottlenecks and augmentation of investment agreements. This is critical as ASEAN India trade costs in tariff-equivalent terms are still around 145 per cent on average.3

Across the board, the potential benefits have yet to be exploited by industry. In particular, the low take-up by SMEs is a missed opportunity. This is unsurprising as the negotiated preferences are accompanied by complex rules of origin, inadequate tariff cuts, and lack of information, understanding to navigate through the preferential trading architecture. Significant industry restructuring is required to avail of emerging market niches. Bilateral investment flows are low as investment regimes remain restrictive while weak hard and soft infrastructure and administrative hurdles restrain flows. The investment climate in both ASEAN and India needs to be further strengthened.

Finally, the opportunities arising from the ASEAN-India partnership can be further augmented by the move towards a more integrated Asia-Pacific. The agreement of the Regional Comprehensive Economic Partnership could help remove residual weaknesses in ASEAN+1 type of agreements and add momentum to broader Asia-Pacific wide cooperation and Integration or RECI. Both ASEAN and India are key players and drivers of the ESCAP’s region wide and multisectoral regional integration strategic framework which is now being guided by the Agenda 2030. Among others, the cross-border Sustainable Development Goals can only be achieved through deepened regional economic cooperation and integration.

We count on ASEAN members and India to continue contributing to ESCAP’s efforts to improve trade efficiency in the Asia-Pacific region by eliminating burdensome trade and investment regulations and procedures; streamlining over 80 bilateral trade agreements; ratifying the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific, a UN treaty; and working on digital trade facilitation. Improvements in maritime and land transport and logistics, as well as enhancing digital connectivity play a key role. Fast tracking the completion of the India-Myanmar-Thailand trilateral highway and the adding the missing links of the Southern Trans-Asian Railway will connect Europe to Southeast Asia offering competitive corridors and container rail transport to traders.

In conclusion, unlocking the full potential of ASEAN-India partnership by harnessing domestic reforms and regional cooperation is win-win for all. Both ASEAN and India can lead the process by accelerating and deepening their structural reforms and tapping complementarities between Agenda 2030, ASEAN 2025 Action Plans and India’s Act East Policy. ESCAP is ready to work with member States and utilize its analytical capacity and intergovernmental platforms to support this partnership.

I thank you.

1The Atkinson Index is a welfare-based measure of inequality expressed as a percentage of total income that a
given society would have to forego in order to have more equal shares of income between its citizens.


3ESCAP-World Bank Trade Cost Database estimates.