1. Prologue
2. ASEAN: Origin
   1. Musyawarah & Mufakat
   2. TAC Treaty
3. Timeline: Growth of ASEAN since 90s
   1. ASEAN Community (2015)
   2. ASEAN Performance: GOOD
   3. ASEAN Performance: NOT so GOOD
   4. Chinese Arm twisting
4. India-ASEAN Relations
   1. Why ASEAN important for India?
   2. India-ASEAN FTAs: A Timeline
   3. India ASEAN FTA in Goods
   4. India ASEAN FTA in services and investment
   5. Benefits of FTA in services and investment?
5. Mock Questions for Mains

Prologue

• This is an old article, I’ve only updated the bottom part of it (FTA in services and investment)
• As such that FTA topic was part of September week1 current series but for better revision of theory + trade relations, I’ve fitted it into this old article.

ASEAN: Origin

• Recall the Article on Colonization of Asia. We had seen how the British, French and Americans had colonized almost entire South Asia.
• After Second World War, most of these colonies attained independence. But they also had internal dispute regarding territories and borders.
• One such dispute was Indonesia-Malaysia conflict over the Borneo islands.
• This conflict + the then ongoing Vietnam War raised fears of increased external involvement in the newly independent states.
• They feared that south east region would become a theatre of western vs. communist ideologies
• Hence they decided to form a common platform:
• To resolve bilateral issues among themselves
• Present a collective front to the world.
• 1967, five countries signed “Bangkok declaration” to form the Association of Southeast Asian Nations (ASEAN), later another 5 joined. Thus today ASEAN has 10 members

List of 10 ASEAN nations

Indonesia (ASEAN HQ is here, in Jakarta) Malaysia Philippines Singapore Thailand

Brunei Cambodia Laos Vietnam Myanmar

Musyawarah & Mufakat

ASEAN follows the principle of “ASEAN way”. Meaning,

1. Musyawarah And Mufakat  [deliberation and consensus]
2. don’t use force/confrontation
3. don’t interfere in the internal matters of states
4. Informal discussion
5. minimal institutionalization

To achieve “the ASEAN way”, Treaty of Amity and Cooperation in Southeast Asia (TAC) was signed.

TAC Treaty

It provides the guiding principles of ASEAN

1. they’ll not interfere in the internal affairs of one another,
2. they’ll not use threat or use of force to settle differences / disputes
3. they’ll settle of differences or disputes by peaceful means,
4. They’ll effectively cooperate among themselves.
5. they’ll mutually respect each other’s’ independence, sovereignty, equality, territorial integrity and national identity
6. Every State has right lead its national existence free from external interference, subversion or coercion,

India had signed TAC treaty with ASEAN in 2003.

Timeline: Growth of ASEAN since 90s

1994	ASEAN regional forum (ARF). already discussed in separate article click me
1997	ASEAN+3 is formed to increase regional integration. This includes China Japan South Korea
2002	Treaty to control haze pollution in South East Asia
2006	ASEAN gets observer status in UNGA (General assembly)
2007	Cebu declaration for energy securities and renewable energy.
2010	Chiang Mai Initiative (CMI) It is a currency swap agreement among ASEAN +3, It provides emergency liquidity to those economies during crises.
2012	Asean Human Rights Declaration 21st ASEAN Summit in Phnom Penh Combodia with theme:“ASEAN: One Community, One Destiny”
2013	22nd ASEAN summit in Brunei, theme: Our People, Our Future Together.
2015	ASEAN community will be setup.

ASEAN Community (2015)

Similar to European Union. will be setup in 2015 and will have three pillars

1. ASEAN Political Security Community
2. ASEAN Economic Community
3. ASEAN Socio-Cultural Community

ASEAN Performance: GOOD

ASEAN has a mixed record of achievements since its formation.

ASEAN performed well here:

Peace	Successfully maintaining peace in the region. e.g. during Thailand and Cambodia conflict over Preah Vihear temple (2011)
Economy	Has made comprehensive deals like ASEAN Free Trade Area (AFTA) ASEAN Comprehensive Investment Area(ACIA) Chiang Mai Initiative (CMI) Aims to setup the ASEAN Economic Community 2015, having a single market and production base.

ASEAN Performance: NOT so GOOD

ASEAN didnot perform well here

Economy	ASEAN Failed to prevent the 1997 financial crisis.
Human rights	ASEAN has been too soft on the authoritarian regime of Myanmar. Despite call from international community it didn’t suspend Myanmar or put economic sanction on it during the military regime’s crackdown on peaceful protestors. 2012: ASEAN released declaration on Human rights. But led to lot of protests from civil society and NGOs. They terms it as just another piece of paper.
Environment	In 2002, ASEAN came up with Treaty to control haze pollution in South East Asia. still there were outbreaks of Haze in 2005 and 06. ASEAN also has mechanism for wildlife protection. Yet it hasn’t drastically reduced the illegal trade in endangered species (especially for medicine).

Chinese Arm twisting

ASEAN is becoming a victim of Chinese assertiveness/pseudo-bullying. for example in the the meeting of ASEAN (Dec 2012@ Phnom Penh), no joint communique was issued-for the first time in the 45 years of history of ASEAN Summits. WHY? Because…

• Cambodia (host of the summit) is an ally of China

• China did not want the joint communique text to mention South China Sea as a standing conflict.
• but other gang members- Vietnam, Philippines, Malaysia and Brunei wanted the text to contain  their respective grievances regarding territorial issues with China.
• In wake of such unprecedented influencing of China into the ASEAN matters, the ASEAN is looking towards India like never before.
• India is being seen as the counter balance to China at the ASEAN platform.

Now, let’s focus on:

India-ASEAN Relations

Combined Population	~1.8 billion = ~1/4th of total world population
Combined GDP	~4 trillion USD
Two way investment	40+ billion dollars in past decade

• India is actively contributing to ASEAN+1, the ASEAN Regional Forum (ARF), the East Asia Summit (EAS) and the ASEAN Defense Ministers’ Meeting (ADMM) Plus etc.
• We have institutionalized annual summits, ministerial consultations; and nearly 25 mechanisms for dialogue and cooperation.

Timeline of India-ASEAN relations

1990	India starts engaging with ASEAN, part of Look East Policy.
1992	India becomes a sectoral dialogue partner of ASEAN
1996	India becomes full dialogue partner of ASEAN
2002	India starts having annual summits with ASEAN
2003	India accedes to the Treaty of Amity and Cooperation in Southeast Asia (TAC)India signs counter-terrorism declaration with ASEAN.
2009	FTA* in goods signed This established Free Trade Area established between India-ASEAN.
2010	FTA in goods becomes effective
2012	20th Anniversary of ASEAN-India Dialogue. ASEAN – India Commemorative Summit is held. Now India becomes a strategic partner of ASEAN FTA* in services and investment- talks concluded
2014	FTA in services and investment signed- by all ASEAN nations with India. Except Philippines.

Why ASEAN important for India?

Strategically

1. ASEAN nations are at the intersections of major land and sea routes.
2. The Future architecture of Asia is going to be shaped by the US, China and India.
3. Maritime boundary disputes between China and a number of ASEAN countries; claims over South China Sea – hence those ASEAN countries look towards India as a counterbalance against China.
4. For India, a stronger posturing at ASEAN provides its stature as a global power. After all, without becoming a strong regional player first, we cannot dream of becoming global power!

Energy

1. ASEAN countries, particularly Myanmar, Vietnam and Malaysia can potentially contribute to India’s energy security.
2. Oil and natural gas deposits in the South China Sea region.
3. India and several ASEAN countries are net importers of hydrocarbon. They need to develop alternative energy sources. But R&D in renewable =need truckload of ca$H hence regional cooperation essential for financing those projects.

Economy

1. In terms of income, India-ASEAN community is roughly the size of the EU
2. In terms of Trade, India-ASEAN community NAFTA.
3. The ASEAN is India’s fourth-largest trading partner after the EU, the US and China.
4. India – ASEAN is slated to grow faster than the rest of the world due to a favorable demographic profile and growing market for goods and services.
5. India’s trade relations are shifting from West economies towards the East, comprising of Japan, China, Korea and ASEAN.
6. India-ASEAN linkage provides for large-scale movement of people, capital, ideas and creativity.

For Indian States

1. The coastal states: West Bengal, Orissa, Andhra Pradesh and Tamil Nadu are looking to rebuild maritime links with ASEAN nations to boost their own trade and economy.
2. Union government is also building infrastructure while in the Northeastern states so they can engage in commerce with South East Asian nations.

Diseases

Pandemics and disease are no longer limited to national boundaries and have assumed a trans-national dimension. SARS and H1N1 virus have in recent times afflicted the region. Hence cooperation is essential between India-ASEAN.

Now let’s take a look @India-ASEAN trade relations

India-ASEAN FTAs: A Timeline

Timeline of India ASEAN FTAs

2009	India ASEAN FTA in goods signed.
2010	India-ASEAN FTA in goods became effective.
2012	India ASEAN FTA in services and investment-talks concluded.
2013, December	Indian Cabinet approved FTA in services. (Those ASEAN nations need to get such FTAs approved from their respective parliaments.)
2014, Sep	Nine out of ten ASEAN countries have signed FTA in services and investment, with India. Only Philippines remains. Philippines opposed saying it’ll harm their domestic service sector given the India’s expertise (and cheapness) in the services sector.

 

Trade volume

Year	Trade /expectation (USD)
2012	75 billion
By 2015	100 billion
By 2022	200 billion

India ASEAN FTA in Goods

1. Signed in 2009, effective from 2012.
2. Before this agreement, the India-ASEAN annual trade was ~30 billion but quickly jumped to ~75 billion$ in 2012.
3. Main products: – metal parts and components, electronic components, processed fruits, ceramics, gloves and knittings, fertilizers, chemicals like fatty alcohol, coconut and vegetable oil, refined glycerine.
4. But did India benefit from this? Answer is no.
5. Cheaper palm oil from ASEAN = hurting local producers in Kerala.
6. Our groundnut and pepper farmers also suffering due to cheaper ASEAN imports.
7. Hence over all, the goods import from ASEAN nations increased but our exports did not increase. Consequently, trade deficit between India-ASEAN widened.
8. Thus India did not benefit much from FTA in goods.
9. However, FTA in services may help in reducing trade deficit with ASEAN, because we’ve comparative advantage over them in education, healthcare, IT-software, Accountancy and consultancy services.

India ASEAN FTA in services and investment

• This Trade agreement in services and investment =follows “8+1+1” pattern.
• Meaning, agreement provides 3 separate arrangements for:

1.  For 8 countries	= all ASEAN countries except Indonesia and Philippines
2. For Indonesia	Special terms because services sector is vital for their economies, and they’re worried their local service sector will be hurt while competing with India’s strong services sector. Philippines most worried because ~50% of their workforce in IT sector*
3. For Philippines

• *recall we are facing similar issue in FTA in Goods, because of cheaper plantation products from ASEAN
• Although India is not putting all eggs in one FTA basket. We’re also doing bilateral trade agreements with individual countries in the region. for example

FTA already done	Singapore (CECA in ‘05) Malaysia (CECA in ‘11)
In process	Indonesia Thailand

Benefits of FTA in services and investment?

1. Will facilitate the moment of manpower and investment between India and ASEAN.
2. Will help reducing our trade deficit with ASEAN. (Because in the goods sector, we are importing more and exporting less. Service sector will be reverse.)
3. Will boost the trade between India and ASEAN to $100 billion by 2015.
4. Provides joint review, dispute settlement and other mechanisms to iron out problems.
5. Contains an annex on Movement of Natural persons- Business Visitors, Managers, Executives Specialists and Contractual Service Suppliers. This annex will help provide facilitate movement of Indian service professional in ASEAN countries.
6. This will be a stepping stone in moving towards the regional comprehensive economic partnership (RCEP) pact.
7. RCEP is to be signed between ASEAN and its six — Australia, China, India, Japan, South Korea and New Zealand.
8. The agreement will also facilitate investments in both regions

Indian investors want to enter ASEAN for	ASEAN investors want to enter India for
IT automobiles engineering Pharmaceuticals	construction services Transportation services. engineering services shipping

Mock Questions for Mains

Write a note on following, 200 words each:

1. The ASEAN way of musyawarah and mufakat resonates with India’s foreign policy and world view. Elaborate
2. Explain the importance of ASEAN for India’s look east policy
3. Enumerate the strategic and economic interests of India in South East Asia. How can ASEAN help achieving them?
4. A healthy relation with ASEAN nations can help transform the Indian economy in general and Northeast India in particular. Explain
5. There is tremendous scope for India to leverage its soft power in South East Asia. Elaborate.
6. Chinese assertiveness in ASEAN is both an opportunity and a challenge for India. Comment.
7. While India had signed a FTA in goods with ASEAN in 2009, the two sides have recently concluded a FTA in services. Examine the impact of 2009 FTA in goods and analyze the future potential of FTA in services and investment.
8. Provide an account of India’s increasing involvement in the South – East Asian region.
9. Write a note on Indian Diaspora in South East Asia.
10. India ASEAN vision 2020

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