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Economy

Boosting short and listless bilateral trade

The Confederation of Indian Industry recently co-organized a meeting in New Delhi to review trade relations with Southeast Asia ahead of a three-day ASEAN-India gathering in Malaysia in November.

NEW DELHI -- India is keen to step up engagement with the Association of Southeast Asian Nations amid concerns that a free trade agreement in goods is not being fully utilized and commerce has stagnated.

     The FTA was signed in 2009. In the year ending in March, bilateral trade was $76.6 billion, up $44 billion in five years.

     Trade saw average growth of 22% per annum in the decade up to 2012 but then levelled off. According to the Indian government, utilization of the FTA has only been about 17% of the potential.

     The main reason for under-utilization is that Indian exporters -- mostly small and medium enterprises -- "are not educated enough to know how to take advantage of the FTAs," Ravi Capoor, joint secretary at  the commerce ministry, said on Tuesday at an event co-organized by the Confederation of Indian Industry in the run-up to the three-day ASEAN-India summit starting on Nov. 21 in Malaysia.

     Analysts note that India-ASEAN trade is Singapore centric at present and needs to be expanded in the bloc. Nearly 45% of ASEAN trade is with the U.S., Japan, the European Union and South Korea, said Ajit Ranade, chief economist at the Aditya Birla Group.

     According to Anil Wadhwa, secretary (East) at the foreign ministry, connectivity and trade infrastructure are key to boosting economic  relations with ASEAN.

     Singapore is India's largest investment partner in ASEAN, and Wadhwa noted its strong record on transport and innovation.

     "Malaysia and Thailand are good in logistics and other sectors," he added, calling for more collaboration.

     Among Indian companies interested in Southeast Asia, Dabur India is looking for an acquisition in the region to develop a pan-ASEAN presence in consumer goods.

     Analysts believe the India-ASEAN partnership should be viewed in the context of the emerging regional trade architecture. This includes the U.S.-led Trans-Pacific Partnership involving 12 Pacific Rim countries, and the Regional Comprehensive Economic Partnership with all 10 ASEAN members plus six existing FTA partners: Australia, China, India, Japan, New Zealand and South Korea.

     ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

     Capoor notes that 44% of U.S. exports are to TPP countries, and that RCEP has half the world's population and 40% of its trade.

     Indian Vice President Hamid Ansari will vist Indonesia and Brunei in early November. Indonesia is India's second largest trading partner in ASEAN with bilateral trade of about $20 billion last fiscal year.

     India is the largest buyer of crude palm oil and coal from Indonesia, and imports minerals, rubber, pulp and paper, and hydrocarbons. It sends Indonesia refined petroleum products, maze, commercial vehicles, telecommunications equipment, animal feed, cotton, steel products, plastics and pharmaceuticals in bulk formulations.

     Indian investments in Indonesia amount to around $15 billion, and involve textiles, steel, automobiles, mining machinery, banking, information technology and consumer goods.

     India's trade with Brunei is considered to be running below potential at around $1 billion, Wadhwa said on Monday as he announced Ansari's Nov. 4 visit there.

     India's main imports from Brunei are crude oil and petroleum products. It also brings in organic chemicals, metal ores and scrap. India exports transport equipment, meat and meat products, and gems and jewelry to the sultanate.

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