Mr. from US$ 1.6 trillion in 2007

Mr. David Sinate, Dr.
Viswanath Jandhyala and Ms. Neha Raman*


The Association of Southeast Asian Nations (ASEAN) was established
on August 8, 1967 in Bangkok, Thailand, with the signing of the ASEAN
Declaration (Bangkok Declaration), and since then, has emerged as one of the fastest growing regions in the world. Over the past 50
years since its formation, ASEAN has made extraordinary progress both
economically and socially, with deepened intra-ASEAN cooperation and narrowed
developmental gap within and across ASEAN region.


The ASEAN economy has witnessed a robust growth during the last five
decades and expanded over 100-fold since its establishment, to reach a total
GDP of US$ 2.55 trillion in 2016, with a share of 6.2 percent in the world GDP
(based on US$ at PPP).  In 2016, the combined GDP of ASEAN, as a single economy, placed it as
the 6th largest in the world and the 3rd largest in Asia.


International Trade of ASEAN

ASEAN’s international trade has gained
significance and has been growing rapidly with the establishment of the ASEAN
Free Trade Area (AFTA), which has also resulted in increase in both value and
volume of intra-regional trade flows. The importance of international trade as
a growth facilitator has been recognized by ASEAN countries and is evident from
their growth performance in recent years. ASEAN’s total trade
accounts for 7.1 percent share of the world’s total trade and it is the fourth-largest trading region in the world, behind the
European Union, USA and China. Over the past decade, ASEAN’s total trade witnessed
an upward trend increasing from US$ 1.6 trillion in 2007 to US$ 2.3 trillion in


Collectively, the intra-ASEAN market is the largest for ASEAN trade. The
share of Intra-ASEAN exports in ASEAN’s total exports has continued to be on an
increasing trend since 1995, varying between 21 percent and 28 percent, while
the share of Intra- ASEAN imports increased even further over the same period,
from 16.5 percent in 1995 to 22.2 percent in 2016.


Investment Scenario in ASEAN


In recent years, the ASEAN region has benefited from growing Foreign
Direct Investment (FDI) inflows even amidst global economic uncertainties. FDI flows have
significantly evolved from US$ 3.04 billion in 1984 to US$ 96.7 billion in
2016, growing at a CAGR of 11.4 percent, attaining its peak in 2014, at US$
133.1 billion. Particularly during the past decade, FDI inflows to ASEAN have
more than doubled, from US$ 41.9 billion in 2005 to US$ 96.7 billion in 2016.

The share of
intra-ASEAN FDIs in ASEAN’s total inward FDI flows accounted for 15.1 percent
in 2010, and has nearly doubled to reach 24.8 percent in 2016.


25 Years of ASEAN-India Partnership


relationship with ASEAN is an important aspect of India’s foreign policy and
the foundation of India’s ‘Look East’ Policy. ASEAN-India dialogue relations
emerged into a sectoral dialogue partnership in 1992 and gradually grew into a
full dialogue partnership in December 1995. The bilateral relations, which saw
an expansion of trade and investment, exhibit the intensity of economic
engagements between India and ASEAN.


In order to further strengthen India- ASEAN relations and as an attempt
to provide an impetus to the regional integration that India has with its
eastern neighbours, India’s ‘Look East’ Policy was transformed to the ‘Act
East’ Policy in 2014. The objective of ‘Act East Policy’ is to promote economic
cooperation, cultural ties and develop strategic relationship with countries in
the Asia-Pacific region through continuous engagement at bilateral, regional
and multilateral levels thereby providing enhanced connectivity to the states
of India’s North-eastern Region.


The year
2017 has marked the 25th year of dialogue partnership and 15th
year of Summit level partnership between ASEAN and India. ASEAN and India have
been cooperating with each other, over the years, by way of implementation of
various projects in the fields of agriculture, science & technology, space,
environment & climate change, human resource development, capacity
building, new and renewable energy, tourism, people-to-people contacts and
connectivity, among others.



India’s Bilateral Trade and
Investment with ASEAN in the Recent Years


The trade and investment linkages between India and ASEAN witnessed
rapid expansion owing to the increasing intensity of economic engagements
between India and ASEAN. The ASEAN- India Framework Agreement on Comprehensive
Economic Cooperation (CECA) to institutionalise a framework for future economic
cooperation, with a twin-objective of facilitating investment and trade in
goods & services, forms the basis for ASEAN-India Free Trade Area (AIFTA).
Although the CECA was signed between India and ASEAN on October 8, 2003 in
Bali, Indonesia, the AIFTA became fully functional from July 1, 2015.


Presently, India stands as ASEAN’s 11th largest trading
partner (as per 2016 data). Over the past decade, India’s bilateral
trade with ASEAN has increased by nearly two-folds from US$ 34.9 bn in 2007 to
US$ 64.6 bn in 2016. However, during the past five years, India’s total trade
with the ASEAN has witnessed a moderation, essentially due to declining
commodity prices amidst a general slowing down of the global economy.


Chart 1: India’s Recent Bilateral Trade with
ASEAN (US$ bn)

Source: ITC, Geneva and Exim Bank


Over the past decade, India’s investments relations with ASEAN have also
strengthened. ASEAN countries are receiving strong investment interest from
India mainly due to their high-growth markets, low wage labour and natural
resource reserves. The share of
ASEAN in India’s total approved FDI inflows has increased by more than eight
times from 2 percent in 1996 to about 17.4 percent during 2016, while ASEAN
share in India’s FDI outflows have burgeoned by more than 20 times to reach
22.9 percent in 2016 up from 0.16 percent in 1996.


Table 1: India’s Bilateral FDI Flows with


FDI Outflows from India
US$ million
(April 1996 to March 2017)

FDI Inflows to India
US$ million
(April 2000 to June 2017)


































of ASEAN in India’s total Investments (%)



Source: Reserve Bank of India, DIPP, Ministry of Commerce and Industry, Govt. of India  


FDI flows to
India have primarily been in real estate sector, followed by coal, oil and
natural gas sector, while a major portion of India’s outward FDI to ASEAN is directed
towards coal, oil and natural gas sector and metals sector, followed by
services sectors such as software and IT services, financial services as well
as business services.


Boosting Trade and Investment
Through India’s CLMV Initiative


Within the ASEAN region, CLMV (Cambodia, Lao PDR, Myanmar, Vietnam)
collectively rank the third
largest in terms of size of economy, after Indonesia and Thailand. India and the CLMV
region have historically had civilizational, cultural and economic relations
since the ancient times. Due
to its close proximity, India is looking to boost trade and investment with the
CLMV region as part of the ‘Act East’ policy of the Government of India.


of India endeavours to cultivate extensive economic and strategic relations in
South-East Asia by way of stimulating investments from the Indian private
sector into the CLMV region. In order to step up India’s commercial engagements
with CLMV countries, the Government of India envisages establishment of an
institutional mechanism for encouraging investments by Indian manufacturing and
infrastructure development companies in CLMV countries through a Project
Development and Facilitation Framework (PDFF).


In view of
the above, a Project Development Fund (PDF) with a corpus of INR 500 crores to
develop manufacturing hubs in CLMV countries was announced by Honourable Indian
Prime Minister, at the 13th ASEAN-India Summit held in Malaysia in
November 2015. The PDF, housed in Department of Commerce, Ministry of Commerce and
Industry, Government of India would be operated through the Exim Bank, which
will act as the ‘Empowered Institution’ under the initiative. Exim Bank has been working closely with
Department of Commerce, Ministry of Commerce and Industry, Government of India for conducting a study
for developing a framework to identify opportunities for India in trade and
investments in CLMV countries.


countries are at
different stages of economic development, and thus, one of the top priorities
of ASEAN Community is the integration of Cambodia, Lao PDR, Myanmar and Vietnam
with ASEAN by bridging the development gaps


The Way Forward

India and ASEAN have
enjoyed a strong socio-economic relationship, which has strengthened over the
years. India’s relationship with ASEAN is a key pillar of India’s foreign
policy and the foundation of its “Act East Policy”. The up-gradation of the
relationship into a Strategic Partnership in 2012 was a natural progression to
the ground covered since India became a Sectoral Partner of the ASEAN in 1992,
Dialogue Partner in 1996 and Summit Level Partner in 2002.


An area of
concern that needs attention is the fact, that over the past five years,
India’s trade with ASEAN has witnessed moderation from US$ 75 bn in 2012 to US$
64.6 bn in 2016, with both India’s exports and imports slowing down over the
period.  The slowdown in India’s exports
to ASEAN, and thereby overall trade, has been especially consistent since
2013.  India stands as ASEAN’s 11th
largest trading partner in the year 2016.  There
is immense potential to enhance India’s trade relations with ASEAN, and in the
process to correct the trade imbalance between India and ASEAN.


The ASEAN region as a
whole is characterized by the presence of strong production networks and
Regional Value Chains (RVCs) both within and outside the ASEAN. On the other
hand, India is almost left out of any significant regional value chains in its
neighbourhood. It has been found that such endeavours unleash a dynamic process
that creates positive developmental pressures on forging better infrastructural
linkages. India and ASEAN could thus, explore opportunities to cooperate and
partner in mutually beneficial Regional Value Chain networks. Closer economic
and trade linkages among the economies of Asia could prove to be a mutually
rewarding association.



* Mr. David Sinate, Chief General Manager, Dr. Viswanath Jandhyala,
Chief Manager, and Ms. Neha Raman, Officer Trainee are part of the Research
& Analysis Group of Export-Import Bank of India  


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