19-Business With Association of Southeast Asian Nations

8/3/2019 19-Business With Association of Southeast Asian Nations

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DOING BUSINESS WITHASSOCIATION OF SOUTHEAST

ASIAN NATIONS (ASEAN)

Learning Values:After reading this chapter one can learn:

1. The gamut of South East Asian economy, industry and infrastructure.

2. Fast growing economies with their core competencies.

3. India-ASEAN trade: both inward and outward.

4. Emerging opportunities: sector wise.

5. Major challenges and strategic approaches to succeed

Geographic and ethnic closeness, eastward expansion for Indian

corporates and influence of Indian community in every walk of life

one can see in the whole member nations of ASEAN. Today, major

ventures of Indian business houses are striking in every sector in

ASEAN.


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The Association of Southeast AsianNations or ASEAN was established on 8August 1967 in Bangkok by the fiveoriginal Member Countries, namely,Indonesia, Malaysia, Philippines,Singapore, and Thailand, as a display ofsolidarity against Communist expansionin Vietnam and insurgency within theirown borders.Brunei Darussalam joinedon 8 January 1984, Vietnam on 28 July1995, Lao PDR and Myanmar on 23 July1997, and Cambodia on 30 April 1999.

The ASEAN region has a populationof about 600 million, a total area of 4.5million square kilometers, a combinedgross domestic product of almost US$800 billion, and a total trade of aboutUS$ 850 billion.

Objectives:

The ASEAN Declaration states thatthe aims and purposes of theAssociation are:

(1) To accelerate economic growth,social progress and culturaldevelopment in the region and

(2) To promote regional peace andstability through abiding respect for

justice and the rule of law in the

relationship among countries in theregion and adherence to the principles ofthe United Nations Charter.

The ASEAN Vision 2020, adopted bythe ASEAN Leaders is outward looking,living in peace, stability and prosperity,bonded together in partnership indynamic development and in acommunity of caring societies.

In 2003, the ASEAN Leadersresolved that an ASEAN Communityshould be established comprising threepillars, namely, ASEAN SecurityCommunity, ASEAN EconomicCommunity and ASEAN Socio-Cultural Community.

ASEAN flag

Members

Brunei

Cambodia

Indonesia

LaosMalaysia

MyanmarPhilippines

Singapore

Thailand

Vietnam

Seat of Secretariat Jakarta

Secretary General Ong Keng Yong

Area 4,480,000 km2

Population

- Total (2005)- Density

572,400,000122.3 people/km

GDP (2004)- Total- Total- GDP/capita- GDP/capita

$2553.1 billion (PPP)$800.6 billion (Nominal)$4,639 (PPP)$1,455 (Nominal)

Formation

- Signed

Bangkok Declaration

- 8 August 1967
http://en.wikipedia.org/wiki/ASEAN_flaghttp://en.wikipedia.org/wiki/List_of_members_of_the_ASEANhttp://en.wikipedia.org/wiki/ASEAN_flaghttp://en.wikipedia.org/wiki/List_of_members_of_the_ASEAN


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Fundamental Principles:ASEAN Member Countries have adopted the following fundamental principles in their relationswith one another, as contained in the Treaty of Amity and Cooperation in Southeast Asia (TAC):

Mutual respect for the independence, sovereignty, equality, territorial integrity, andnational identity of all nations;

The right of every State to lead its national existence free from external interference,subversion or coercion;

Non-interference in the internal affairs of one another; Settlement of differences or disputes by peaceful manner; Renunciation of the threat or use of force; and Effective cooperation among themselves.

Economic Indicators:

Recent Economic Indicators 2001 2002 2003 2004

GDP (US$bn) (current prices) 571.3 636.8 717.4 800.6

GDP PPP (US$bn) 2,037.20 2,176.10 2,345.50 2,553.10GDP per capita (US$) 1,089 1,193 1,324 1,455

GDP per capita PPP (US$) 3,883 4,078 4,330 4,639

Real GDP growth (% change YOY) 2.2 4.8 5.3 6.6

Current account balance (US$ mil.) 33,256 35,792 52,594 53,144

Current account balance (% GDP) 5.8 5.6 7.3 6.6

Inflation (% change YOY) 4.9 4.8 3.5 4

Vision 2020:

In 1997, the ASEAN leaders adopted the ASEAN Vision 2020, which called for ASEANpartnership in dynamic development aimed at creating closer economic integration within theregion. The vision statement also resolved to create a stable, prosperous and highly competitiveASEAN Economic Region, in which there is a free flow of goods, services, investments, capital,and equitable economic development and reduced poverty and socio-economic disparities. TheHanoi Plan of Action, adopted in 1998, serves as the first in a series of plans of action leading upto the realization of the ASEAN vision.

ASEAN Members Background Information:

For 2005 (In US$)

CountryBrunei

DarussalamCambodia Indonesia Lao PDR Malaysia

GDP PerCapita

25,751.3 404.3 1,278.6 479.9 5,008.5

Country Myanmar Philippines Singapore Thailand Viet Nam ASEANGDP PerCapita

199.4 1,154.5 26,880.7 2,720.8 635.3 1,582.6


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BRUNEI DARUSSALAM

Capital: Bandar Seri BegawanLand area: 5.8 thousand sq. kmPopulation: 370.1 thousand (2005)Language: Malay, EnglishMember of: ASEAN, APEC, APT, APDC, Commonwealth, ESCAP, GP 77,

GATT/WTO, ICAO, IMO, IMF, WMO, UNDP, WHO, WIPO, WTO-GBT,ASEM, EALAF, UN, OIC, NAM, AASROC, UNESCO, APG, WSIS, IDB,ADB and AMED

Currency: B$ (Bruneian Dollar).GDP: US$ 9,530.5 million at current market pricesMajor Industries: Oil and gas, textiles, food and beverages, building materialsMajor Exports: Oil and gas, ready-made garmentsMajor Imports: Transport equipment and machinery, manufactured goods, food

chemicals

Brunei does not have a Central Bank. The Ministry of Finance discharges the functions of theCentral Bank for Brunei.

CAMBODIACapital: Phnom PenhLand area: 181.0 thousand sq. kmPopulation: 13,661.4 thousandLanguage: Khmer Member of: ASEAN, CTBTO, ESCAP, FAO, IAEA, IBRD, ICAO, IDA, IFC, IFAD, ILO,

IMF, IMO, ITU, LDC, UNO, UNCTAD, UNESCO, UPO, UNIDO, WIPO,WHO

Currency: RielGDP: US$5,523 million (2005) at current market prices

Major Industries:Textiles and Garments, Beverages, Food Processing, WoodProcessing

Major Exports: Garments, Textile Product Sawn, Wood Furniture and RubberMajor Imports: Transport equipment and machinery, manufactured goods, food

chemicals

INDONESIACapital: Jakarta

Land area: 1,890.8 thousand sq. kmPopulation: 219,205.0 thousandLanguage: Bahasa IndonesiaMember of: ASEAN, UN, IMF, ESCAP, FAO, ILO, UNESCO, IBRD, IFC, MIGA, IDB,

IDA, ADB, WTO, APEC, ASEM, EALAFCurrency: RupiahGDP: US$ 280,265 million (2005) at current market prices

Major Industries:Pulp and paper, cement, basic metals and fertilizer, power generation,telecommunication, transportation

Major Exports: Textile, electronic goods, footwear, oil & gas, plywood, sawn timber


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Major Imports: Chemical and pharmaceutical, fertilizer, cotton yarns, textile fabric,machines, motor vehicles

Major Exports toIndia(2005-06):

Vegetable oil, Coal, coke and briquettes, Metalifferous ores and metalscrap, Non-electrical machinery, Pulp and waste paper

Major Importsfrom India(2005-

06)

Dyes, intermediates etc., Primary and semi-finished iron and steel, Oilmeals, Inorg/Org/agro chemicals, Machinery and Instruments

LAO PDRCapital: VientianeLand area: 236.8 thousand sq. kmPopulation: 5,938.8 thousandLanguage: LaoMember of: ASEAN, ADB, ESCAP, FAO, IBRD, WHO, IDA, WIPO, IFC, ILO, IMF, UN,

NCTAD, UNESCO, UNIDO, UNICEF, WHO, EALAFCurrency: KipGDP: US$ 2,872 million (2005) at current market pricesMajor Industries: Garment industry, wood-based and processing industries, electricityMajor Exports: Coffee, electricity, clothing, wood and forest product and GypsumMajor Imports: Industrial machinery, chemicals, iron, electrical machinery and parts,

steel, oil, construction material and consumption goods

MALAYSIACapital: Kuala Lumpur Land area: 330.3 thousand sq. kmPopulation: 26,127.7 thousandLanguage: Melayu, English, Chinese, TamilMember of: ASEAN, ADB, APEC, ASEM, D-8, EBRD, ECOSOP, ESCAP, FAO, G-15,

IAEA, IBRD, ICAO, IDA, IDB, ILO, EALAPCurrency: Malaysian RinggitGDP: US$ 130,860.5 million (2005) at current market prices

Major Industries:Electronic & electrical goods, textiles, clothing & footwear, chemicals,petroleum, wood and metal products and rubber

Major Exports:Electronic & electric machinery, petroleum & LNG, textiles, clothing &footwear, palm oil, sawn timber

Major Imports: Manufacturing inputs, machinery & transport equipment, metalproduct

Major Exports toIndia (2005-06)

Electronic goods, Organic Chemicals, Wood and wood products,Vegetable oils, Non-ferrous metals

Major Importsfrom India (2005-06)

Transport Equipments, Meat and preparations, Dyes, intermediatesetc., Machinery and Instruments, Inorg/org/agro chemicals


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MYANMAR


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Capital: YangonLand area: 676.6 thousand sq. kmPopulation: 56,002.6 thousands (2005)Language: Myanmar Member of: ASEAN, ADB, ESCAP, ACU, FAO, IBRD, IDA, IFC, ILO, IMF, ITU, WTO,

UNESCO, UNIDO, UNICEF, EALAF

Currency: Myanmar KyatGDP: US$ 11,168.8 million (2005) at current market pricesMajor Industries: Agro-based industries, textiles industries, steel millsMajor Exports: Rice, teak, beans & pulses, rubber, coffee, minerals, gems marine

productsMajor Imports: Power tillers, hand tractor, fertilizer, diesel oil, cement, dumper, loader

and spare parts, water pumps, hydraulic excavatorMajor Exports toIndia (2005-06)

Wood and wood products, Pulses, Natural rubber, Raw hides andskins, Fruits and nuts

PHILIPPINESCapital: ManilaLand area: 300.0 thousand sq. kmPopulation: 85,236.9 thousandsLanguage: Filipino, English, SpanishMember of: APEC, ARF, ACD, ADB, ASEAN, ASEM, CCC, Common Fund for

Commodities, CP, ESCAP, FEALAC, FAO, G-24, G-77, IAEA, IBRD,ICAO, ICC, ICFTU, ICRM, IDA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO,Interpol, IOC, IOM, ISO, ITU, NAM, OPCW, UN, UNCTAD, UNESCO,UNHCR, UNIDO, UNMIK, UNTAET, UNU, UPU, WCL, WFTU, WHO,WIPO, WMO, World Tourism Organization, World Trade Organization

Currency: PesoGDP: US$98,407.5 million (2005) at current market pricesMajor Industries: Priority sectors : construction materials, electronics, food, giftware

and holiday decor, home furnishings, IT & IT-enabled services, marineproducts, motor vehicle parts and components, organic and naturalproducts, wearables

Major Exports: Electronic products; garments; ignition wiring set and other wiringsets used in vehicles, aircrafts, and ships; coconut oil; woodcrafts andfurniture; other products manufactured from materials imported onconsignment basis; petroleum products; metal components; cathodesand sections of cathodes of refined copper; fresh bananas (per dataas of August 2005)

Major Imports: Electronic products; mineral fuels, lubricants, and related materials;industrial machinery and equipment; transport equipment; iron andsteel; cereal and cereal preparations; textile yarn, fabrics, made-uparticles, and related products; telecommunications equipment and

electrical machinery; plastics in primary and nonprimary forms;organic and inorganic chemicals (per data as of August 2005)

Major Exports toIndia (2005-06)

Electronic goods, Newsprint, Metaliferrous ores and metal scrap, Non-electrical Machinery, Organic chemicals

Major Importsfrom India (2005-06)

Primary and semi-finished Iron and Steel, Meat and preparations,Rubber manufactured products, Drugs, pharmaceutical and finechemicals, Plastic and Linoleum products


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SINGAPORECapital: SingaporeLand area: 697.1 sq. km

Population: 4.198 million (2004)Language: English, Malay, Mandarin, TamilMember of: ASEAN, ADB, APEC, ARF, COMMONWEALTH, FAO, IAEA, IBRD, IDA,

IFC, IMF, IFAD, IMO, ILO, ITU, UNIDO, UPO, WHO, ASEM, EALAF, WTO,WIPO, ICAO, NAM, G77

Currency: Singapore Dollar (S$)GDP: US$106,818 million (2004) at current market pricesMajor Industries: Electronics, chemicals, banking and finance, real estate, tourism,

tradingMajor Exports: Petroleum products, industrial machines, radio & television receivers

& parts, electronic component & parts, clothing, beverages & tobaccoMajor Imports: Crude petroleum, iron & steel, industrial machines, electric

generators, electronic component and parts

Major Exports toIndia (2005-06) Electronic goods, Organic chemicals, Non-electrical machinery,Printed books, news papers etc., Transport equipmentsMajor Importsfrom India (2005-06)

Gems and Jewellery, Transport equipments, Electronic goods,Machinery and Instruments, Dyes, intermediates etc.

THAILANDCapital: BangkokLand area: 513.3 thousand sq. kmPopulation: 64,763.0 thousands

Language: ThaiMember of: ASEAN, ADB, ASEM, ESCAP, FAO, IBRD, IDA, IFC, IMF, ILO, UNCTAD,UNESCO, WHO, WIPO, APEC, EALAF

Currency: BahtGDP: US$ 176,206.6 million (2005) at current market pricesMajor Industries: Electronics, gems and jewelry, footwear, textiles, clothing, mobilesMajor Exports: Textiles, computer & components, integrated circuits and parts, gems

& jewelry, footwearMajor Imports: Industrial machinery, iron & steel electrical machinery & parts, chassis

and bodyMajor Exports toIndia (2005-06)

Electronic goods, Non-electrical machinery, Artificial resins, plasticmaterials etc., Iron and Steel, Transport equipment

Major Imports

from India (2005-06)

Gems and jewellery, Non-ferrous metals, Primary and semi finished

Iron and Steel, Oil meals, Machinery and Insturments

VIETNAMCapital: Ha NoiLand area: 330.4 thousands sq. km


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Population: 83,119.9 thousandsLanguage: VietnameseMember of: ASEAN, IBRD, IDA, IFC, IMF, ASEM, MIGA, UNDP, UNCTAD, GSPT,

UNIDO, FAO, IFAD, ICAO, EALAFCurrency: DongGDP: US$ 52,807.6 million (2005) at current market prices

Major Industries: Agriculture, forestry, fishery, industrial constructionMajor Exports: Crude oil, coal, chromium, tin, cements, woolen carpet, jute carpet,rice cinnamon, marine products

Major Imports: Motors, petroleum products, diesel oil, fertilizersMajor Importsfrom India (2005-06)

Oil meals, Drugs, pharmaceutical and fine chemicals, Primary andsemi finished iron and steel, Plastic and linoleum products,Inorg/org/agro chemicals, Non-ferrous metals

ASEAN Trade:For 2005 (In million US$)

Country Exports Imports

Brunei Darussalam 6,369.3 1,503.1

Cambodia 3,091.5 2,824.7

Indonesia 85,660.0 57,700.9

Lao PDR 174.1 701.8

Malaysia 140,470.5 114,213.1

Myanmar 3,123.8 1,632.9

The Philippines 41,254.7 47,418.2

Singapore 229,804.1 200,162.8

Thailand 109,622.6 117,990.9

Viet Nam 28,576.5 32,593.9ASEAN 648,147.0 576,742.4

ASEAN's global merchandise trade:

ASEAN's principal export destinations, 2005:

1) Japan 14.7%2) United States 13.4%3) China 10.8%4) Republic of Korea 5.0%

5) Australia 4.5%

ASEAN's principal import sources, 2005:

1) Japan 18.6%2) United States 13.7%3) China 13.7%


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4) Hong Kong 7.3%5) Republic of Korea 5.1%6) Australia 2.8%

The ASEAN Free Trade Agreement:

ASEAN free trade area was launched in 1992 to eliminate tariff barriers among the South EastAsian Countries with a view to integrating Asian economies into a single production base andcreating a regional market.

At the Fourth ASEAN Summit in Singapore in January 1992, ASEAN initiated the ASEAN FreeTrade Area, or AFTA, which laid out a comprehensive program of regional tariff reduction, to becarried out in phases through the year 2008. This deadline was subsequently moved forward to2003. Over the course of the next several years, the program of tariff reductions was broadenedand accelerated, and a host of "AFTA Plus" activities were initiated, including efforts to eliminatenon-tariff barriers and quantitative restrictions and harmonize valuation, and procedures, anddevelop common product certification standards. In addition, ASEAN later signed frameworkagreements for the intra-regional liberalization of trade in services, and for regional IPRcooperation. An industrial complementation scheme designed to encourage intra-regional

investment was approved, and discussions were held on creating a free investment area withinthe region. During the financial crisis of 1997-98, ASEAN reaffirmed its commitment to AFTA, andas part of a series of "bold measures," agreed that the original six AFTA signatories wouldaccelerate many planned tariff cuts by one year, to 2002 from 2003.

When the AFTA agreement was originally signed, ASEAN had six members (Brunei,Indonesia, Malaysia, Philippines, Singapore, and Thailand). Vietnam joined in 1995, Laos andMyanmar in 1997, and Cambodia in 1999. All four countries were required to sign on to the AFTAagreement in order to join ASEAN, but were given longer time frames in which to meet AFTA'stariff reduction obligations

Common Effective Preferential Tariff (CEPT):

The CEPT is the mechanism by which tariffs on goods traded within the ASEAN region, whichmeet a 40% ASEAN content requirement, were reduced to 0-5% by the year 2002/2003 (2006 forVietnam, 2008 for Laos and Myanmar, and 2010 for Cambodia). The tariff reductions are movingahead on both the "fast" and "normal" tracks. Tariffs on goods in the fast track were largelyreduced to 0-5% by 2000. Tariffs on goods in the normal track were reduced to this level by 2002,or 2003 for a small number of products. Currently, about 81% of ASEAN's tariff lines are coveredby either the fast or normal track.

ASEAN members have the option of excluding products from the CEPT in three cases: 1.)Temporary exclusions; 2.) Sensitive agricultural products; 3.) General exceptions.

General Exceptions refer to products which a country deems necessary for the protection of

national security, public morals, the protection of human, animal or plant life and health, andprotection of articles of artistic, historic, or archaeological value. Approximately one percent ofASEAN tariff lines fall into this category. The CEPT scheme covered nearly 98 percent of all tarifflines in ASEAN by the year 2003; by then, the only products not included in the CEPT Schemewere those in the General Exceptions category and sensitive agricultural products.

In the longer term, the ASEAN countries have agreed to enact zero tariff rates on virtually allimports by 2010 for the original signatories, and 2015 for the four newer ASEAN members.


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Source: ASEAN Secretariat

ASEAN Investment Area:

The December 1995 ASEAN Summit endorsed in principle the concept of an ASEAN InvestmentArea (AIA), in which barriers to intra-regional investment were lowered and removed, regulations

were liberalized, streamlined, and made more transparent, and incentives were offered to boostregional investment. The basic concept was to substantially increase the flow of investment intoASEAN from both ASEAN and non-ASEAN sources by enhancing the region's competitiveness.

An initial list of temporary exclusions, covering the agriculture, forestry, and mining sectors, wasadopted at the AIA Ministerial Meeting in Thailand in October 2000. Under the AIA agreement,seven members had agreed to remove their temporary exclusion lists for ASEAN investors inmanufacturing by 2003. Full realization of the AIA with the removal of temporary exclusion lists inmanufacturing agriculture, fisheries, forestry and mining is scheduled by 2010 for the ASEAN-6and by 2015 for the new members (Cambodia, Laos, Myanmar, and Vietnam).

The main approaches on the AIA are as follows:

All industries are to be opened up for investment, with exclusions to be phased outaccording to schedules

National treatment is granted immediately to ASEAN investors with few exclusions Elimination of investment impediments Streamlining of investment process and procedures Enhancing transparency Undertaking investment facilitation measures

Average AFTA / CEPT Tariff Rates

1998 1999 2000 2001 2002 2003

Brunei 1.35 1.29 1.00 0.97 0.94 0.87

Indonesia 7.04 5.85 4.97 4.63 4.20 3.71

Laos 5.00 5.00 5.00 5.00 5.00 5.00

Malaysia 3.58 3.17 2.73 2.54 2.38 2.06

Myanmar 4.47 4.45 4.38 3.32 3.31 3.19

Philippines 7.96 7.00 5.59 5.07 4.80 3.75

Singapore 0.00 0.00 0.00 0.00 0.00 0.00

Thailand 10.56 9.75 7.40 7.36 6.02 4.64

Vietnam 6.06 3.78 3.30 2.90 2.89 2.02

ASEAN 5.37 4.77 3.87 3.65 3.25 2.68


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ASEAN-India:

ASEANS Trade with India

2001-02 2002-03 2003-04 2004-05 2005-06

EXPORTS 4400.31 5160.33 7438.22 9110.91 10609.34IMPORTS 3467.33 4627.65 5825.71 8422.42 10511.72

During the last five years the exports and imports both have increased significantly. There wasan increase of 1.41 times in exports and of 2.03 times in imports from/to ASEAN during thisperiod. The highest increase in exports was during the year 2003-04, while that of imports was inthe year 2004-05.

Indian exports to ASEANmajor commodity groups:Indias exports to ASEAN include oil meals, gems and jewellery, meat and meat preparations,cotton yarn, fabrics, made-ups, engineering goods, transport equipment, machinery andinstruments, electronic goods, marine products, fruits and vegetables, rice, drugs andpharmaceuticals, chemicals, etc.

Indian imports from ASEAN major commodity groups:Indias imports mainly consist of artificial resins, plastic material, natural rubber, wood and woodproducts, electronic goods, non-ferrous metals, metaliferous ores and metal scrap, organicchemicals, edible oils, coal,fertilizers,etc

Enhancing Indias exports to ASEAN: As mentioned earlier, focus should be on the sectors thatare of maximum importance to ASEAN, namely: Machinery, engineering products, Mineralproducts, base metal and metal articles, Chemicals, drugs and pharmaceuticals, Base metal andmetal articles, Transport equipment, Textiles and apparel, Plastics, Optical, precision andinstruments, Prepared foodstuffs, Vegetable products and Services.

Indias Relationship with ASEAN Countries:

ASEAN has four Summit level Dialogue Partners, i.e., China, Japan, ROK and India which isknown as ASEAN+4. In addition, it has a number of Dialogue and sectoral Dialogue Partners aswell.

Indias focus on a strengthened and multi-faceted relationship with ASEAN is an outcome ofthe significant changes in the worlds political and economic scenario since the early 1990s andIndias own march towards economic liberalization. Indias search for economic space hasresulted in ourLook Eastpolicy. ASEANs economic, political and strategic importance in thelarger Asia-Pacific Region and its potential to become a major partner of India in trade andinvestment is a significant factor in our policy paradigms. ASEANs steady expansion westward toinclude Myanmar has also brought it to our land boundaries. It now provides a land bridge forIndia to connect with the Asia-Pacific-centered economic crosscurrents shaping the 21st century

market place. ASEAN seeks access to Indias professional and technical strengths. Ourtraditional friendship with the CLMV countries (Cambodia, Lao PDR, Myanmar and Vietnam) alsomakes India a valuable ally for promoting the Initiative for ASEAN Integration (IAI).

India is actively engaged in the Mekong- Ganga-Cooperation (MGC) which brings togetherIndia and five ASEAN countries, Cambodia, Lao PDR, Myanmar, Thailand and Vietnam.

India has signed three agreements with ASEAN on October 8, 2003.1) A framework agreement for the creation of Indo-ASEAN free trade area by the year 20112) An agreement to cooperate to counter terrorism.


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3) India becoming a signatory to the ASEAN treaty of amity and cooperation.

Economic Cooperation Between India and ASEAN:

ASEAN member countries agreed to work towards an ASEAN-India Regional Trade andInvestment Area (RTIA) as a long-term objective and desired to adopt a Framework Agreementon Comprehensive Economic Cooperation between ASEAN and India to minimize barriers and

deepen economic linkages between the parties; lower costs; increase intra-regional trade andinvestment; increase economic efficiency; create a larger market with greater opportunities andlarger economies of scale for the businesses of the parties; and enhance the attractiveness of theparties to capital and talent.

Objectives:

The objectives of this Agreement are to:

1. Strengthen and enhance economic, trade and investment co-operation between theparties;

2. Progressively liberalize and promote trade in goods and services as well as create a

transparent, liberal and facilitative investment regime;3. Explore new areas and develop appropriate measures for closer economic co-operationbetween the parties; and

4. Facilitate the more effective economic integration of the new ASEAN Member States andbridge the development gap among the parties.

Measures of Economic Cooperation:

1. Progressive elimination of tariffs and non-tariff barriers in substantially all trade in goods;2. Progressive liberalization of trade in services with substantial sectoral coverage;3. Establishment of a liberal and competitive investment regime that facilitates and

promotes investment within the ASEAN-India RTIA;4. Provision of special and differential treatment to the New ASEAN Member States;5. Provision of flexibility to the Parties in the ASEAN-India RTIA negotiations to address

their sensitive areas in the goods, services and investment sectors with such flexibilitiesto be negotiated and mutually agreed based on the principle of reciprocity and mutualbenefits;

6. Establishment of effective trade and investment facilitation measures, including, but notlimited to, simplification of customs procedures and development of mutual recognitionarrangements;

7. Expansion of economic cooperation in areas as may be mutually agreed between theParties that will complement the deepening of trade and investment links between theParties and formulation of action plans and programmes in order to implement the agreedsectors/areas of co-operation; and

8. Establishment of appropriate mechanisms for the purposes of effective implementation ofthis Agreement.

Areas of Economic Cooperation:

Where appropriate, the Parties agreed to strengthen their cooperation in the following areas,including, but not limited to:


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1. Trade Facilitation Mutual Recognition Arrangements, conformity assessment, accreditation

procedures, and standards and technical regulations Non-tariff measures Customs cooperation Trade financing

Business visa and travel facilitation.2. Sectors of Cooperation

Agriculture, fisheries and forestry. Services: media and entertainment, health, financial, tourism, construction,

business process outsourcing, environment. Mining and energy: oil and natural gas, power generation and supply; Science and technology: information and communications technology, electronic-

commerce, biotechnology; Transport and infrastructure: transport and communication; Manufacturing: automotive, drugs and pharmaceuticals, textiles, petrochemicals,

garments, food processing, leather goods, light engineering goods, gems andjewellery processing;

Human resource development: capacity building, education, technology transfer;and Others: handicrafts, small and medium enterprises, competition policy, Mekong

Basin Development, intellectual property rights, government procurement.

3. Trade and Investment Promotion

Fairs and exhibitions; ASEAN-India web links & Business sector dialogues

Most Favoured Nation Treatment:

India shall continue to accord Most-Favoured Nation (MFN) Treatment consistent with WTO rulesand disciplines to all the non-WTO ASEAN Member States upon the date of signature of thisAgreement.

General Exception:

Such measures are not applied when it constitutes a means of arbitrary or unjustifiable ofarbitrary or unjustifiable discrimination between or among the Parties where the same conditionsprevail, or a disguised restriction on trade within the ASEAN-India FTA, nothing in this Agreementshall prevent any Party from taking action and adopting measures for the protection of its nationalsecurity or the protection of articles of artistic, historic and archaeological value, or such other

measures which it deems necessary for the protection of public morals, or for the protection ofhuman, animal or plant life, health and conservation of exhaustible natural resources.

Dispute Settlement Mechanism:

The Parties shall, within one (1) year after the date of entry into force of this Agreement,establish appropriate formal dispute settlement procedures and mechanism for the purposes ofthis Agreement and any disputes concerning the interpretation, implementation or application ofthis Agreement shall be settled amicably by mutual consultations.


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Trade and Investment:

ASEAN-India trade in 2003-4 was about US$ 15 billion, an increase of approximately 350%over the 1993-94 trade figures. The balance of trade is in favour of ASEAN. There remainssignificant potential to further expand these ties. For a total population of approx. 1.5 billionpeople and with a combined GDP of US$1.5 trillion, a trade turnover of approx. US$ 15 billion is

grossly inadequate. At the 2nd India-ASEAN Business Summit held in New Delhi and Mumbai in2003, a target 2 of US$ 15 billion by 2005 and US$ 30 billion for India ASEAN trade by 2007 wasset out. The target of US$ 30 billion was reiterated by Prime Minister at the 3rd ASEAN IndiaSummit held in Vientiane on November 30, 2004.

Indias exports to ASEAN member countries include oil meals, gems and Jewellery, meat andmeat preparations, cotton yarn, fabrics, machinery, rice, drugs and pharmaceuticals, chemicals,etc. Indias imports mainly consist of artificial resins, plastic material, natural rubber, wood andwood products, electronic goods, organic chemicals, edible oils, fertilizers, etc.

ASEAN countries, particularly, Malaysia, Singapore and Thailand, are also increasinglyinvesting in India in sectors such as telecommunications, fuels, hotel and tourism services, heavyindustry, chemicals, fertilizers, textiles, paper and pulp, and food processing.

Singapore and India sign Comprehensive Economic CooperationAgreement:

Singapore and India have sealed a groundbreaking pact on economic cooperation, the firstbetween Singapore and a South Asian country. The CECA came into force on 1 August 2005.The basic concepts of CECA mentioning that it is a FTA plus which includes foods, services,investment, IPR (Intellectual Property Right) and economic cooperation in areas like education,science and technology, air transport services and double tax avoidance agreement. ThoughSingapore is a small country, it is the heart of business connections between India and East Asia.Thus, Singapore can be Indias forward base to access markets and resources in the EastAsian region. Already 1600 Indian companies are using Singapore as a base to expand bothregionally and internationally.

The Comprehensive Economic Cooperation Agreement will enhance ties between both

countries by speeding up the already growing flows of trade, investment and people. Under it,

three-quarters of Singapore's exports to India will face zero or substantially reduced tariffs,

making them cheaper and more attractive to Indian consumers, unless for a small list of products

on the negative or sensitive list. Indian imports will also enter Singapore duty-free. This

agreement with India will give Singapore an added momentum to position itself as a free trade

hub and for India to leverage on that role.

Exporters will enjoy savings from simplified testing procedures for electronic and

telecommunication equipment as well as food products. So India will be able to export egg and

dairy products to Singapore within a shorter timeframe.

The Potential areas under CECA are: Food Processing Bio-Technology Pharmaceuticals Electronics and Electronic Equipments Banking systems and financial companies Professional cooperation and exchange, investment, movement of visitors


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With an improved double-taxation avoidance treatment agreement, there will be greater

investment flows between Singapore and India as they don't need to pay capital gains tax.

The agreement will also allow freer movement of skilled and qualified professionals between the

two countries.

This means, subject to further negotiations, within a year, doctors, dentists, nurses, accountants

and architects from both countries can practice in each other's country

Strategic approach to ASEAN members for Business :

Southeast Asia have long been tagged as one of the worlds most promising and dynamiceconomic region of the 21st century and as such is high on the priority list of countries to explorewhen a company wants to expand its business activities. The Association of Southeast AsianNations (ASEAN) $330 billion consumer market equals that of Chinas booming coastal region invalue and is bigger than any other market in Asia. The groups ten member countries (Brunei,Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, andVietnam) are amongst the fastest growing economies in the world. Southeast Asian economies

can be fragile, corrupt, and so frustrating when doing business that some days you may wonderwhy you ever decided to do business there. However, if youre willing to invest the time andresources necessary to succeed in securing business in the region, your efforts will be rewardedby tremendous opportunities and long-term buyer commitment.

IMPORTANT ELEMENTS FOR CONDUCTING EFFECTIVE BUSINESS

Personal Connections Having the right connections is crucial personal relationships and connections

are often more important than economic criteria in making government andbusiness decisions

Third Party Intervention

Tap the resources and energy of a third party who is respected by both parties inorder to help relieve strained ties and solve problems in negotiations

Negotiating

1. Bargaining is a way of life to people in Southeast Asia they bargain daily forpurchase of groceries and other goods, and it has become an automaticresponse to bargain and negotiate for more favorable terms in the business world

2. Join in the bargaining dont make concessions quickly, but be ready to use aconcession to extract a better bargain for yourself

3. Never lose your temper, shout or become overly demanding at delays in

decision-making or bureaucratic procedures4. Saving face is the rule let your local representative or partner monitor progress

and problems. If you must criticize, do so gently and indirectly


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SINGAPORE:

Singapore is an attractive destination for start-ups and incubation. There are various financialschemes and there is also an abundant pool of private equity investors who are interested in startups. The IP regime also acts as a magnet for start-ups and international investors have found theIP protection in Singapore to be excellent. The IP laws will give much protection to Indian

companies wishing to have their projects started or incubated in Singapore.

India is looking for capital, technology, and expertise, which can be provided by Singaporethrough investment and collaboration in areas like telecommunications, financial, and transportservices. On the other hand, Singapore is in search of a large market and also requiresmanpower to fulfill its potential as a service hub, both of which can be provided by India.

SECTORS ATTRACTING FDI FROM SINGAPORE:Top five sectors attracting FDI from Singapore are:

1. Telecommunications 17.93%,2. Services Sector (financial and non-financial) 16.28%,3. Electrical Equipments (including computer software & electronics) 12.40%4. Fuels (power & oil refinery) 11.12% and

5. Transportation Industries 8.85%.Singapores investments in India can be broadly classified into 3 categories, namely, (a)Investments by Temasek Holdings (b) Investments by Temasek Linked Companies (TLCs) and(c) Investments by private businesses. Most of the Singapores investments in India falls underthe first two categories.

Temasek Holdings, an investment holding company of Singapore government, opened an officein Mumbai in 2004 to focus on investment opportunities in India.

INVESTMENTS BY TEMASEK LINKED COMPANIES (TLCs)

CONSTRUCTION TELECOM PORT INFORMATION TECHNOLOGY POWER WASTE MANAGEMENT LOGISTICS

INDONESIA:

Banking:

Indonesia has both State-owned banks and private banks. All major international banks have apresence in Indonesia. The Bank of India maintains a representative office in Indonesia whileBank Indonesia International (BII) has a branch in Mumbai.

Promising areas for investment/joint ventures/services:


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These include oil and gas, manpower and engineering consultancy services for the petroleumindustry, mining, plantation products (particularly CPO), IT education and services, ports andrailways, telecommunications, pharmaceuticals and education (both School and University).

Doing business with Indonesia:

Patience is one key to conducting business in Indonesia. Although product quality and price areimportant, personal rapport is highly valued.Foreign companies may open a local representative office with the permission of the IndonesianDepartment of Trade. The representative may be an Indonesian company or individual, or aforeign national. Trade representatives are not permitted to engage in direct sales but mayengage in sales promotion and marketing, or provide market research and technical advice.

In many instances, representative offices of foreign companies have established closeconnections with Indonesian importers so that the two companies can operate virtually as one,with the Indonesian company acting as the importer/distributor and the trade representative officepromoting products and providing technical assistance.

Infrastructure development has not kept pace with the growing population and rapidly expandingeconomy. The government is working to modernize the infrastructure focusing on port and airportconstruction, power generation, telecommunications and environmental projects.

Indonesia's importers and distributors continue to welcome exporters who take time to learnabout the market, adapt their products and services to local needs and make a long-termstrategic decision to participate in the economy. Given some patience and preparation, thebusiness visitor should find that cultural differences and the physical environment pose no majorobstacles to a successful trip.

MALAYSIA:

Potential Indian Exports to Malaysia Potential Indian Imports fromMalaysia

Paper and wood products - Computer hardware and Transport equipments peripherals incl. microchips Gems & Jewellery - Business Machines Rubber - Consumer electronics Groundnuts Man-made yarns and fabrics Dyes and coal tar chemicals Glassware

Areas For India-Malaysia Synergies In New Economy

Space technology Bio-technology Pharmaceuticals Bio-informatics, Genomics and Ayurveda IT: Development of hardware and software, setting up of training centre in Malaysia. Telecommunication


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Infrastructure Food processing Tourism Banking- opening up of a Bank on reciprocal basis.

Market Entry Strategies

1. Licensed Manufacturing:

2. Franchise Agreement:

The principal forms of business entities in Malaysia are:

o locally incorporated company (public or private)

o Partnership or sole proprietorship

o Representative Office

o Joint Venture or subsidiary

Advantages:

Continued benefit from market growth Fully knowledgeable about the industry Able to identify emerging opportunities Control image, reputation, and sales of the company's

products

Control financial matters such as price and profit

Disadvantages:

Drain on financial, technical and personnel resources of theinvestor

Business and financial risk

PHILIPPINES:

Potential Sectors for Investment

Indian Investment in Philippines:

Textile machinery, Drugs and pharmaceuticals, Software development and training, Steeland metal, Manufacturing and design of gold jewellery, Engineering consultancy,Transport equipment

Philippines Investment in India :

Food processing, Fashion designing for garments, Packaging products,Telecommunications, Coconut-based products, Tourism


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THAILAND:

Indian investments in Thailand are mainly in areas which are relatively high-tech and evencapital intensive and cover a wide range of products and activities including production of rayonfiber, steel wires and rods, paper-grade pulp, chemicals, drugs and pharmaceuticals, nylon tyrecord and real estate. The major Indian groups involved are the Aditya Birla Group, Ballarpur

Industries, Baroda Rayon Group, Usha Martin Industries, Ranbaxy Laboratories, LupinLaboratories and the Ansals and the Uniworth International Ltd.

Telecommunications and fisheries accounted for chunk of the Thai investment while Thaiinvestors have also evinced interest in real estate and tourism sectors, light engineering industryand petrochemicals. The food processing and agro-industries in Thailand are well developed andhence, these sectors offer enormous opportunities for Indo-Thai Joint Venture in India.

The following bilateral agreements exist between India and Thailand in the economic field:-

i) Bilateral Trade Agreement

ii) Agreement for the Avoidance of Double Taxation

iii) Air Services Agreementiv) Cooperation Agreement between Board of Investment of Thailand and the Foreign

Investment Promotion Board of India

v) A Bilateral Investment Promotion and Protection Agreement have been signed by boththe countries in July 2000.

vi) Framework Agreement for establishing an FTA dated Oct. 9, 2003.

19-Business With Association of Southeast Asian Nations

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