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The Big Picture – Will ASEAN economic union help India?

The Big Picture – Will ASEAN economic union help India?


Leaders of the ASEAN group have formally created a unified economic community larger than the Economic Union. It’s a move that could bolster economic ties with India and give it greater access to a market with a combined GDP is 2.57 trillion dollars. The Kualalumpur declaration on establishment of ASEAN economic community has also been signed by the ASEAN leaders. ASEAN leaders have already taken several steps including removal of trade barriers to make this declaration a reality. The move is also expected to boost political and diplomatic cooperation between members of the grouping.

The community was originally envisaged in 2002 as an objective to be achieved by 2020. But, in 2007 during the 40th anniversary of ASEAN the objective was preponed to be achieved by 2015. Since 2007, ASEAN countries have been trying to achieve various objectives to realize the goal of a unified economic community. However, much needs to be done. This declaration was all about laying a path towards the future. In reality, the creation of this community has been postponed by one year.

For India, ASEAN has always been an important territory, both in terms of trade and strategic point of view. India already has a strong connect with the ASEAN grouping, with which it has some 30 dialogue mechanisms. This includes a summit and seven ministerial groups that cover foreign affairs, commerce, telecommunications, tourism, agriculture, environment and renewable energy.

The core of the ASEAN-India partnership is economic – the grouping is India’s fourth largest trading partner and India, in turn, is the sixth largest trading partner for ASEAN. Trade between the two sides amounted to $76.52 billion in 2014-15, with India’s exports worth $31.8 billion and imports $44.7 billion. There is also the human connect – more than five million citizens of the ASEAN nations trace their roots to India. The grouping is also seen as a huge middle-class market that Indian industries and services can take advantage of. For India, it is also an article of faith of our Look-East policy that ASEAN must remain central to the future evolution of regional mechanisms, which must be open and inclusive.

Experts estimate the economic community could lift aggregate output by 7% by 2025, and create 14 million new jobs. The 10 members of the grouping have already eliminated most tariff barriers, but the agreements commit them to harmonising economic strategies, recognising each other’s professional qualifications and consulting closely on macroeconomic and financial policies. The agreement will kickstart intra-Asean trade, which has remained stuck at some 24% of combined GDP for several years now, though tariff barriers have, in practice, been eliminated.

However, some experts believe the ASEAN Economic Community will take more time to become fully functional. Leaders of the grouping are yet to address politically sensitive areas such as opening up agriculture, steel, automobile production and other protected sectors. For the community to succeed, non-tariff barriers have to be removed and enhanced transport connectivity across the region must be ensured. Also the most important tests of the economic community’s success will be free movement of skilled workers, trade and capital for the region’s more than 600 million people.

Asean, unlike the EU, is politically diverse. Its members range from one-party communist-ruled Vietnam to quasi-military ruled Myanmar, the increasingly Islamist-leaning kingdom of Brunei and the raucously democratic The Philippines. To be successful, the community also requires a tremendous amount of political backing from both internal and external sources.