India and ASEAN Finalised FTA in Investments and Services

The awaited Free Trade Agreement (FTA) in investments and services was finalised between India and Association of Southeast Asian Nations (ASEAN) on 20 December 2012. The actions would be beneficial in enhancing the trade to around 100 billion dollar by 2015. Also, it will help in enhancing the economic ties.
 
FTA in the goods was operationalised in 2011 and since then both the sides were busy in widening the pact by also including investments and services. Trade between the two sides is at present 80 billion dollar. India’s Prime Minister Dr. Manmohan Singh declared that after implementation of FTA in the goods, the trade between the two sides increased by 41 percent in the year 2011-2012. Manmohan Singh announced at the summit that two-way flows in terms of investment grew rapidly and reached the mark of 43 billion dollar over last 10 years. Because the investments through ASEAN in India grew, therefore the ASEAN countries also emerged as lucrative destination for the Indian companies.
 
India was demanding from ASEAN to open the services sector even more which would also include the steps to cover contractual service suppliers along with independent professional services at all its levels. But following difficult rounds of talks and discussions on 19 December 2012, India decided to drop the demand of independent professional services. As trade-off, ASEAN on the other hand dropped the demand for prudential measures in context with financial services.
 
Impact of the agreement

The agreement would create new pathways for greater economic integration. Post, FTA in investments and services, India was also planning to hold market opening negotiations like these with other members of the group. FTA was already implemented with Malaysia and Singapore. Negotiations with Thailand and Indonesia were still on its way.

This FTA would also create pathways for discussions on the Regional Comprehensive Economic Partnership (RCEP) which ASEAN planned sealing with its six crucial trade partners, including India. ASEAN along with the six partners, India, China, Australia, New Zealand, Japan and South Korea would begin first negotiation rounds on RCEP in 2013. This would form the economic alliance of the world in 2015.

Final legal paper work on investment and services pact would be given a concrete shape by February 2013. Signing of the agreement would take place in August 2013.