INDIA - ASEAN ECONOMIC COPERATION IN

EMERGING GLOBAL ECONOMIC SCENARIO

Dr. Harish Anand

NATIONAL CONFERENCE ON
EMERGING GLOBAL ECONOMIC SCENARIO: ASEAN
AND INDIA
Department of Economics,
Kurukshetra University Kurukshetra
19th and 20th of March,2010
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Broad outlook of Global Economic Scenario

 Consumption Vs Saving/investment driven economies

 Cheap Money policy Vs(and) Saving Gut

 Existing and emerging Global financial architecture

 Slow Vs Fast growing economies

 Growing Regionalism for balanced growth

High degree of complexities and uncertainty

2
 55% of world population will continue to stay in Asia
with 46 per cent in 7 Asian countries only
In bn

1960 2009 2050

World 3.02 6.83 9.1
Developed countries 0.71 1.02 1.1
Developing countries 2.06 5.5 7.8
Developing countries 1960 2009 2050
Asia 1.6 3.9 5.02
Africa 0.28 1 2
America 0.21 0.577 0.723
Oceania 0.003 0.09 0.07
1960 2009 2050
Asia 3.9 5
East Asia 1.4 1.5
South Asia 1.7 2.4
South East Asia 0.6 0.8
W estern Asia 0.2 0.3
In crore
Asia 2009 2050
China 130 140
India 120 160
Indonesia 20 29
Phillipines 6.7 7.3
Thailand 18 33
Pakistan 16 22
Bangladesh 9 15
3
Total of above 320 406
 With developed countries accounted for 70% of world GDP,
Asia has highest share in developing economies GDP

Share in Asia developing countries GDP(%)

1970 1990 2008
39
40
World GDP- USD tril ion 3.3 12 60
35

Percent share in World GDP 30

Developed countries 70 79 69 25 20 1990

18 16
20
15
Developing countries 17 17 28 15 12
13 14 2008
11

Transition economies 13 4 3 10 8

5
Asia developing countries( % share) 9 10 18
0
Asia developing countries share in world China India Korea ASEAN South
Asia
developing countries( % share) 53 57 67
4
Asia, ASEAN, China, India witnessing rising share
in world trade
Regionwise world merchandise exports( % share)
1948 1983 1993 2008
World trade-USD BN 59 1838 3676 15717

North America 28 17 18 13
South and Central America 11 4 3 4
Europe 35 43 45 41
Africa 7 4 3 4
Middle East 2 7 4 6
Asia 14 19 26 28
China 1 1 2 9
Japan 0 8 10 5
India 2 0.50 0.6 1.1
Six East Asian traders 3 6 10 9
Australia and New Zealand 4 1 1 5 1
Though USA and EU remains largest importers, imports
in Asian countries have been growing

World merchandise imports(% share)

50.0
45.0
40.0 1948

35.0
30.0
1983
25.0
20.0
1993
15.0
10.0
5.0 2008
0.0
North Europe Asia China Japan India Six East
America Asian
traders

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Across the world geographical proximity is visible in
inter-regional trade flow

DESTINATION
South and
North Central Middle
Origin America America Europe CIS Africa East Asia
World 17 4 43 3 3 4 25
North America 50 8 18 1 2 3 18
South and
Central
America 28 26 20 1 3 2 17
Europe 7 1 73 4 3 3 8
Africa 22 3 39 0 10 3 20
Middle East 11 1 12 1 4 12 56
Asia 18 3 18 2 3 5 50

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 Emergence of ASEAN to its present status

 Erosion of Japan manufacturing competitiveness

• Unilateral tariff reduction to attract FDI by leading ASEAN economies

• Later on Korea and leading ASEAN economies followed suit
Hollowing out effects created ASIA MANUFACTURING MATRIX

 Regionalism delayed
– APEC 1995 BY USA and East Asian Economic Cooperation
– One agreement means 10 agreements

 ASEAN-China FTA possibility emerged in 2000

– Arrival of AFTA
– ASEAN crisis and China joining WTO
– Japan and Korea moved on “ Domino Theory”

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The genesis of ASEAN export led growth lies in FDI and their
country of origin

Origin wise FDI flow in ASEAN 2000-08( % share)

27
30

25

20
14 13
15 10
10 6

5 1

0
EU Japan ASEAN USA Asia NIE's (Hong China
Kong
+Korea+Taiwan)

50% of USD 342 bn FDI received in 2000-08 came in Singapore,

Malaysia(12%), Thailand(18%) Vietnam(8%)
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 ASEAN : Major Trading partners

• . EXPORTS( % SHARE) IMPORTS( % SHARE)

1995 2008 1995 2008
ASEAN 24 25 17 29
Major trading partners 76 79 83 74
Japan 15 12 25 13
European Union-25 15 10 14 14
China 2 12 2 10
USA 19 9 14 12
Republic of Korea 3 5 3 4
India 1 2 1 4
Taiwan 3 1.6 3 1
TOTAL -USD BN 296 879 318 831
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 Intra regional Trade indicates high integration
level of ASEAN

ASEAN: Intra Regional Trade

Share to
Value( USD mn)
total trade
Brunei Darussalam 3,544 30
FDI flow to ASEAN
Cambodia
+
1,910 22
Trading partners profile
Indonesia 68,162 26 +
Lao PDR 2,215 84 Intra regional(ASEAN) Trade
Malaysia 85,077 25
Myanmar 5,582 54 indicates high vertical integration
The Philippines 21,398 20
with in ASEAN and its
Singapore Trading partners
171,355 36
Thailand 69,375 20
Viet Nam 29,495 21
ASEAN 458,114 27

11
 With different tariff structures, low MOP, East Asia
especially ASEAN becoming Noodle bowl of FTAs
KOREA CHINA

ASIAN CHINA FTA

JAPAN ASEAN ASEAN+3

AFTA ASEAN+6
Indonesia EAST ASIA FTA
Malaysia APEC
Thailand EAEC
Singapore
Philippines JAPAN-KOREA
Vietnam JAPAN-ASEAN
Cambodia KOREA-ASEAN
Lao PDR
Myanmar
Brunei

INDIA 12
Is future of ASEAN hinge on fragile trade arrangements

 High level of vertical integration in ASEAN countries

 Trade agreements based on private sector initiatives
 ASEAN lack WTO type commitment- Article-2
 Top level commitment is missing-Continuum of Supranationality
 Overlapping FTAs and different tariff reduction schedules in
member countries in same FTA
– ASEAN has not discrimination in tariff due to RTAs etc

– The largest trade flow in East Asia is not covered under any FTA/RTA/PTA
• Japan and China and Japan and Korea

– Global crisis of 2008 endorse resilience and maturity

and mutual understanding

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 Fact sheet: India-ASEAN Trade

 India-ASEAN trade increased from $4 bn to $47 bn during 1995-

2008
 India exports to ASEAN and imports from ASEAN has increased by
about 20% CAGR during 1995-2008
 India’s negative trade balance increased from less than USD one
billion to about USD 13 bn during the same period.

During the same period, ASEAN-China Trade increased by 23% from

USD 13 bn to USD 192 bn and ASEAN Balance of Trade with China turned
negative from less than USD one bn to more than USD 21 bn

China share in ASEAN trade with world including intra ASEAN trade
increased from 11% to 42% during 1995-2008 14
India-ASEAN Free Trade Agreement: Key Issues

 Immediate gains in terms of positive BOT are not visible in near

future
 Japan and Korea presence in ASEAN and FDI in India
 China-ASEAN FTA is already operational

 Existing geo-political scene in ASEAN and East Asia not very

conducive for India

 India face serious supply chain constraints
– Low share of manufacturing in India GDP
– High cost economy
– Complementarities based on service sector strengths need validation

15
From Regional Integration towards Multilateral Trading
System: Framing India Strategy 2050

ASEAN ASEAN
Trans
PLUS 3 PLUS 3 + APEC
APEC
Atlantic
ASEAN JAPAN India+ OROR
Economic
KOREA Oceanic EAEC
EAEC Cooperation
CHINA countries

Economic Cooperation has been an instrument to achieve wider

social-political objectives as well as a strategic intent in itself

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 India ASEAN economic cooperation:
Way to Asian Integration

 Improving Connectivity with ASEAN

 : Physical and Soft

 Trade in goods and services and Investment promotion

 Financial stability in the world especially Asia

 Promoting economic and social welfare

 Environment, Health and Education

Orderly growth of the World economy and world trade

Addressing China factor
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 India ASEAN economic cooperation:
Internal policy imperatives

 Streamline FTAs signed and in process of signing

– SAFTA, BIMSTEC, India-Thailand …
– Standardized Rules of Origin

 Increase the share of manufacturing sector in India’s GDP

– Inorganic growth through FDI
– Infrastructure development
( China strengths lies in China only)

 Develop resources for FTA negotiations

– Data collection and dissemination should be speed up
– More focused research on impact of FTAs on different sectors of the
economy –industry, agriculture sector and services

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 Need to create centers in Universities for
tracking India-ASEAN and other regional
economic co-operation related developments

THANK YOU

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