India Signs Long Awaited Services and Investments FTA with ASEAN

September 9, 2014 Posted by India Briefing Written by Dezan Shira & Associates Reading Time: 2 minutes

indiaASEAN India has formally signed an eagerly anticipated free trade pact (FTA) in services and investments with the 10 nation ASEAN bloc. The FTA, signed in New Delhi on September 8, is aimed at boosting cross-board investment and allowing freer movement of professionals.

The agreement covers an array of issues and variously encompasses transparency, domestic regulations, recognition, market access, national treatment, increasing participation of developing countries, joint committee on services, review, dispute settlement and denial of benefits.

Although negotiations for the deal started in 2005 and were formally concluded in 2012, internal ministerial squabbling in India and resistance from certain states within ASEAN itself resulted in delays. Opposition was particularly strong from Thailand, Indonesia, and the Philippines.

Pre-Investment, Market Entry Strategy Advisory

India has been wary of FTAs with ASEAN since largely losing out on a pact for goods signed with the 10 member bloc in 2009. Despite an increase in imports from ASEAN member states, it was widely felt that India’s rise in exports had been relatively insignificant due to already lower tariffs in the region.

However, with services and investment undeniably India’s strong suit, this deal is sure to reduce the trade deficit. Freer movement of professionals, particularly chartered accountants and those of the IT/ITeS sector, will be of distinct benefit to the Asian superpower.

With the exception of the Philippines – which remains somewhat cautious of opening up its services sector to Asia’s third largest economy – all member states of ASEAN have now ratified the agreement. However, according to an official, the Philippines will also sign upon completing the relevant domestic procedures.

The effects of the FTA will be far-reaching. When combined with the 2009 agreement in goods, the pacts in services and investments will become a comprehensive economic partnership between India and the 10 nation ASEAN bloc. This should help the two rapidly growing economies reach their target of US$100 billion in trade by 2015 (up from US$76 billion in 2012-13), and will further aid the lifting of import tariffs on more than 80 per cent of traded products by 2016.

About Us

India Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, Indonesia, Russia, the Silk Road, & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at india@dezshira.com or visit us at www.dezshira.com.