India and ASEAN Strengthening Economic Ties

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India’s economic and political relationship with ASEAN is growing stronger because of new regional dynamics. Many Indian businesses have sought to establish themselves in ASEAN to take advantage of regional trade flows as well as access to the Chinese market.

Recently, the Indian government has stepped up its efforts to solidify its relationship with ASEAN. Vice President Hamid Ansari made trips to Indonesia and Brunei to strengthen ASEAN ties, while the Indian government is also lobbying for an early ratification of a Free Trade Agreement (FTA) between India and ASEAN.

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Vice President Visits ASEAN countries

Vice President Ansari is currently on an official visit to Indonesia and Brunei.

Indonesia is India’s second largest trading partner in Southeast Asia. Ansari arrived in Jakarta, Indonesia on 1 November. During his stay in Indonesia, Ansari reportedly explored the potential for bilateral partnerships on renewable energy – a major domestic initiative for the Indian government. In addition, Ansari will inaugurate a business forum in Jakarta. The trip marks the beginning of greater economic cooperation between India and the ASEAN member state.

Ansari’s trip to Brunei stands as the highest level visit by an Indian government official to Brunei. During his stay in Brunei, Ansari will meet Sultan Hassanal Bolkiah and Crown Prince Haji Al-Muhtadee Billah. Indian media reports state that the leaders will discuss economic cooperation in sectors such as information and communication technology, civil aviation and hydrocarbons. This historic visit highlights India’s increased interest in strengthening political and economic ties between India and ASEAN.

Free Trade with ASEAN

Prior to Ansari’s trip to Indonesia and Brunei, Ministry of External Affairs Anil Wadhwa on 27 October highlighted ways that India and ASEAN can collaborate at the ‘ASEAN-India: Integration and Development” event in India’s capital Delhi. Wadhwa stated that there is enormous potential to develop economic relations between India and ASEAN, and specifically identified connectivity and trade infrastructure as key elements that can boost India-ASEAN relations.

Wadhwa also discussed FTAs between India and ASEAN. India and ASEAN have an FTA for goods; however, an FTA for investments and services remains pending. Earlier in October, External Affairs Minister Sushma Swaraj lobbied ASEAN to ratify the investments and services FTA during the third India-Philippines Joint Commission meeting in Delhi. Although ratifying the FTA across the ten-member ASEAN countries may take more time than India hopes, India and the Philippines were able to reach a number of bilateral economic and security agreements during the meeting that highlight the bonds between the two countries.

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Business Optimism on Wane

The latest ASEAN Business Optimism Index by Dun & Bradstreet shows that despite a slight downturn in economic activity for some ASEAN countries in the last quarter of 2015, the economic forecast for the region continues to remain healthy. Nevertheless, the ASEAN Business Optimism Index: Quarter 4 2015 report shows that business optimism is on the decline across ASEAN.

According to the report, respondents in the Philippines and Malaysia remain most optimistic, but confidence in Malaysia and Singapore has declined. Despite indications that some businesspeople in ASEAN may be less optimistic about their prospects, governments across Asia continue to strike the bilateral and multilateral agreements needed to unlock the continent’s economic potential.

Observers should expect India and ASEAN to continue to develop economic relationships that support business-to-business activity India and ASEAN over the long-term.


AeeoOaASEAN_Business_Optimism_Index_Quarter_4_2015_imageThe Business Optimism Index, released every quarter by Dun & Bradstreet, is considered a leading economic indicator for turning points in business activity and measuring business sentiment. The Index captures business expectations for the quarter ahead based on six parameters: sales volume, net profit, selling price, new orders, inventory, and employment. Sampling in the Index represents key business sectors including manufacturing, construction, wholesale, transportation, services, finance, mining and agriculture, according to their GDP contribution in each nation.

The ASEAN Business Optimism Index for Q4 2015 is out now and available as a complimentary download in the Asia Briefing Bookstore.

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