ASEAN-India Free Trade Area Part II: Indonesia, Vietnam & Myanmar

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By Alex Tangkilisan

Feb. 20 – In the second part of our ASEAN-India Free Trade Area analysis, we will examine trade trends and statistics from India to Indonesia, Vietnam and Myanmar.

Indonesia and Vietnam make up two of the major six economies in ASEAN, while Myanmar is one of the four smallest economies in the region (alongside Cambodia, Brunei and Laos). Together, these three countries combine for a total GDP of US$1.07 trillion, a population of 394.8 million, and exports to India amounting to US$13.37 billion (or, about 2.7 percent of India’s total imports).

In conjunction with ASEAN’s continued emergence as a regional economic powerhouse, these figures, although still somewhat small, are poised to grow thanks to the free trade agreements (FTAs) signed between India and ASEAN.

Indonesia-India Trade

As early as 1950, the first President of Indonesia, Sukarno, recognized the importance of the Indonesian-Indian relationship, and called for greater trade ties. In November 2005, Indonesia and India signed a bilateral strategic partnership agreement in which the two countries agreed to increase bilateral trade to $10 billion by 2010. This target was actually exceeded that year with total trade amounting to roughly $12 billion, tripling the $4 billion amount set in 2005. Bilateral trade between India and Indonesia topped out at $20 billion in 2012, and is expected to grow to $25 billion by 2015.

In addition, in 2005, Indonesia and India signed a memorandum of understanding (MoU) to establish a joint study group (JSG) to examine the positive aspects that would arise from signing a Comprehensive Economic Cooperation Agreement (CECA). The CECA is to be an agreement that covers economic cooperation and trade in goods and services and investments, which would lead to a higher-level of mutually beneficial economic cooperation between the two countries. The JSG projected that CECA would raise total exports between India and Indonesia to $17.5 billion in 2020, with exports from India raising to $7.8 billion and exports from Indonesia reaching $9.7 billion.

Over the years, CECA talks have progressed with discussions covering tariff reductions and the lifting of non-trade barriers on various goods of interest, including palm oil products from Indonesia and pharmaceuticals and buffalo meat from India. The CECA, however, has yet to be executed.

In 2010, India implemented a FTA with Indonesia which cut import duties on products such as seafood, chemicals and apparel. In return Indonesia slashed import duties on Indian goods. By 2011, India and Indonesia had signed a total of 18 agreements in the mining, infrastructure and manufacturing sectors worth a total of $15.1 billion, in addition to a FTA on goods.

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