India seeks stronger economic ties with ASEAN

“India’s Act East Policy is shaped around the ASEAN…Our wide-ranging agenda of cooperation under the ASEAN-India Plan of Action has progressed well covering the three crucial pillars of politico-security, economic and cultural partnership” PM Narendra Modi’s opening remarks at the 15th ASEAN-India Summit, Manila (November 14th 2017)

January 18, 2018

ASEAN region is central to the Government of India’s Act East policy, which is aimed at strengthening socio-political and economic ties with the fast-developing countries in the region

India-ASEAN Commemorative Summit is being hosted in New Delhi on January 25th to celebrate 25 years of relations. 10 ASEAN head of states are also attending India’s 69th Republic Day

Connectivity is one of the important issues of convergence between the ASEAN region and India, given its strategic importance in facilitating high-margin trade as well as maritime security

Several projects have been initiated by the Indian Government that are aimed at establishing better connectivity infrastructure with the ASEAN region through land, water, and airways

India’s Republic Day parade on January 26th 2018 will have the unique honour of being witnessed by 10 chief guests – a first in the glorious event’s 69-year history. The chief guests will be the highest-ranking representatives from 10 Association of Southeast Asian Nations (ASEAN) countries. The ASEAN bloc includes Indonesia, Singapore, Philippines, Malaysia, Brunei, Thailand, Cambodia, Lao PDR, Myanmar and Vietnam – some of the fastest growing economies in the world. The heads of these nations are visiting India to participate in the ASEAN-India Commemorative Summit 2018 in New Delhi on 25 January to mark 25 years of India-ASEAN relations. Coupled with the fact that Prime Minister Shri Narendra Modi has made bilateral visits to eight of the 10 ASEAN countries since assuming office in 2014, the Southeast Asian region has emerged as the cornerstone of Government of India’s well thought out ‘Act East’ policy.

This ‘Act East’ strategy, a step further from the ‘Look East’ policy initiated by the previous Central Government, aims to improve India’s outreach in its neighbourhood. India has, for a long time, shared deep-rooted cultural ties with its Southeast Asian neighbours, and is now seeking more efficient and expanded economic partnership in the ASEAN region to drive its fiscal and diplomatic prowess. India-ASEAN engagement has completed 25 years of dialogues, 15 years of summit level meetings, five years of strategic partnership, 30 sectoral dialogue mechanisms and seven ministerial level interactions. These successful engagements covered matters related to external affairs, defense, connectivity, commerce, telecommunications, agriculture, energy, environmental issues and tourism. The ‘ASEAN-India Partnership for Peace, Progress and Shared Prosperity’ in 2004 and the “Plan of Action” in 2012 highlighted the growing confluence in various areas between ASEAN and India.

India-ASEAN growing economic ties

India and the ASEAN bloc have signed a Free Trade Agreement (FTA) in goods in 2009, which was followed by an agreement on services and investments in 2014. India’s total trade with the ASEAN bloc increased to US$70 billion in the financial year 2016–17, from US$65 billion in 2015–16, with Indonesia, Malaysia and Singapore being the top three trade partners in the region. In 2016-17, the ASEAN region accounted for around 10.4 percent of India’s total exports (US$30 billion) and 10.6 percent of India’s total imports. Furthermore, around 10 percent of the total foreign direct investment (FDI) equity inflows to India during the fiscal year also came from the ASEAN region.

Beyond flourishing trade relations with the bloc, India shares strong bilateral ties with each of the 10 ASEAN member countries in forms of FTAs and Comprehensive Economic Cooperation Agreement (CECA), among others. India is also a partner of the Regional Comprehensive Economic Partnership (RCEP) – a free trade agreement currently being negotiated between the 10 ASEAN members and the bloc’s six FTA partners, namely Australia, China, India, Japan, South Korea, and New Zealand. The RCEP is expected to be finalised by end-2018, although there remains some differences between India and developed economies such as South Korea and Australia on matters related to agricultural, trade and immigration, as well as that among the ASEAN member countries.

India is working towards formalising its transit agreements and establishing better connectivity infrastructure within the ASEAN region through land, water, and airways

Improving connectivity to drive growth

Connectivity is one of the main issues of convergence between the ASEAN bloc and India, given its strategic importance in not just facilitating cross-regional production network and trade, but also augmenting maritime security. India is working towards formalising its transit agreements and establishing better connectivity infrastructure within the ASEAN region through land, water, and airways. PM Modi is expected to make a detailed presentation during the Commemorative Summit on India’s connectivity and maritime security plans, including updates on some of the ongoing projects, such as:

    • India–Myanmar–Thailand Trilateral Highway, connecting Moreh in Manipur to Bangkok, Thailand via Myanmar, which is expected to be completed by 2020. The highway is to be further extended to nonnect Cambodia, Laos and Vietnam at a later stage.
    • The Kaladan Multi-Modal Transit Transport Corridor connecting Myanmar’s Sittwe Port with the Kolkata port is nearing completion. The project includes road connectivity from Zorinpuri in Mizoram uptil the Sittwe port via Paletwa in Myanmar. A Special Economic Zone is also expected to come up there.
  • The Bangladesh-China-India-Myanmar (BCIM) economic corridor and hiway network that connects Kolkata, Dhaka, Silchar, Imphal, Mandalay, Boashan and Kunming, and covering a total length of 2,800 km, is also part of the mega connectivity plan.

India’s expanding outreach

India has announced a US$1 billion line of credit to promote projects that support physical and digital connectivity with the ASEAN region. The Government has also announced a project development fund with a corpus of US$77 million to develop manufacturing hubs in Cambodia, Laos, Myanmar and Vietnam. As part of its expanding outreach in the region, India contributes to three major cooperation funds within the ASEAN, namely the ASEAN–India Cooperation Fund, the ASEAN–India Science and Technology Development Fund and the ASEAN–India Green Fund. India is also working towards an early conclusion of the Agreement on Maritime Transport and opening negotiation of the Regional Air Services Arrangement between the ASEAN bloc and India.

While India’s connectivity initiatives with the ASEAN bloc might be smaller than China’s US$180-billion Belt and Road Initiative (BRI), the proactive and passionate efforts will in the long run help in positioning India as a counter balance to China’s influence in the region. More importantly, India’s increasing initiatives demonstrate the nation’s intent to actively engage with the ASEAN partners in the geo-political-economic space.