Vi­brant Gu­jarat Global Sum­mit 2017: Big­ger & Bet­ter

FICCI Business Digest - - News - Suresh K Reddy, In­dian Am­bas­sador to ASEAN

I re­cently read the 2017 ASEAN

Busi­ness Out­look Sur­vey pub­lished by AMCHAM Sin­ga­pore and the US Cham­ber of Com­merce with a lot of in­ter­est. The sur­vey con­firmed what I have been hear­ing from busi­ness­men as well. 53% of the re­spon­dents stated that the ASEAN mar­kets have be­come more im­por­tant in terms of their com­pa­nies' world­wide rev­enue over the last two years. A large ma­jor­ity of over 87% re­spon­dents ex­pressed that their com­pa­nies' level of in­vest­ment and trade in ASEAN would in­crease over the next 5 years and a sig­nif­i­cant 49 % ex­pected their work­force to in­crease in the re­gion.

This op­ti­mism is only un­der­stand­able as the fig­ures speak for them­selves. The GDP of the ASEAN as a sin­gle en­tity has al­ready grown to over US$2.6 tril­lion mak­ing it the sev­enth largest econ­omy in the world. It is pro­jected to be­come the 4th largest econ­omy by 2050. The GDP has al­most dou­bled in 7 years from US$1.35 tril­lion in 2007 to US$2.6 tril­lion in 2014 re­flect­ing the rapid growth achieved by the re­gion. The per capita in­come has also pro­por­tion­ately in­creased by over 76% dur­ing the same pe­riod reach­ing al­most US$4000 cre­at­ing a huge mid­dle class pop­u­la­tion of over 65 mil­lion.

The op­ti­mism of the global mar­ket in ASEANs po­ten­tial was re­flected by the sharp growth in FDI in­flows with it reach­ing a peak of US$136 bil­lion in 2014, al­most 11% of the global FDI. How­ever the most im­pres­sive growth was on the trade front with the to­tal trade in­creas­ing by al­most US$1 tril­lion from 2007 to 2014 reach­ing US$2.5 tril­lion.

The ASEAN Eco­nomic Com­mu­nity which for­mally came into be­ing on 31st De­cem­ber 2015 not only cre­ates new op­por­tu­ni­ties but pro­vides a plat­form for en­hanced in­vest­ments for busi­ness in the ASEAN re­gion. The AEC is the re­al­i­sa­tion of the re­gion's goal of eco­nomic in­te­gra­tion. It en­vi­sions ASEAN as a sin­gle mar­ket and pro­duc­tion base, a highly com­pet­i­tive re­gion, with eq­ui­table eco­nomic de­vel­op­ment and which is fully in­te­grated into the global econ­omy. By trans­form­ing Asean into a sin­gle mar­ket and pro­duc­tion base, the AEC will also boost the com­pet­i­tive­ness and con­nec­tiv­ity of the re­gion as a whole.

The As­so­ci­a­tion of South­east Asian Na­tions (ASEAN) has in­deed been a role model for re­gional in­te­gra­tion since it was set up in 1967. As it cel­e­brates its 50th an­niver­sary this year it can look back with pride on its ac­com­plish­ments. Each of those achieve­ments were ac­com­plished in the char­ac­ter­is­tic ASEAN style viz., through con­sen­sus and con­sul­ta­tions. The most com­mend­able of its achieve­ments has been the re­duc­tion of poverty from 40% (1990) to Less than 8% in 2012.

The ASEAN must also be com­pli­mented for pro­vid­ing sta­bil­ity to the re­gion es­pe­cially on the po­lit­i­cal front. It has come a long way in trans­form­ing a re­gion that was con­flict prone to one of

The bright side to the chal­lenge of skill de­vel­op­ment is that the gov­ern­ment rec­og­nizes India's favourable de­mo­graphic div­i­dend and is shoul­der­ing the re­spon­si­bil­ity of pro­vid­ing em­ploy­ment to mil­lions of youth in a big way.

peace­ful eco­nomic in­te­gra­tion. It has worked ac­tively to­wards cre­at­ing an ASEAN Com­mu­nity. The peace­ful and sta­ble en­vi­ron­ment that ASEAN cre­ated has not only ben­e­fited the mem­ber states but also the re­gion at large in­clud­ing India.

It's a mat­ter of sat­is­fac­tion that our en­gage­ment with ASEAN has also grown over the years with 2017 mark­ing the 25th an­niver­sary of the Strate­gic Part­ner­ship be­tween India and ASEAN. Since be­com­ing a full Di­a­logue Part­ner in 1995 (be­came a Sec­toral Di­a­logue Part­ner in 1992), there have been reg­u­lar in­ter­ac­tions be­tween the lead­ers of ASEAN and India through the an­nual Sum­mits, Min­is­te­rial meet­ings, Se­nior Of­fi­cials Level meet­ings etc.

On the re­gional front, India and ASEAN also work closely through the other ASEAN led fora such as East Asia Sum­mit (EAS) process, Asean Re­gional Fo­rum (ARF), etc. India has been ac­tively sup­port­ing ASEAN's ini­tia­tives and spe­cially the prin­ci­ple of “ASEAN Cen­tral­ity” which ac­knowl­edges the crit­i­cal­ity of the role played by ASEAN in the re­gion.

While the part­ner­ship on the po­lit­i­cal and se­cu­rity front has been strong and grow­ing, the en­gage­ment on the eco­nomic front has been lag­ging con­sid­er­ably and has not re­al­ized its full po­ten­tial. While ASEAN's trade with the world was grow­ing rapidly (US$2.5 tril­lion in 2014), our trade with ASEAN grew from US$12 bil­lion in 2003 to only US$68 Bil­lion in 2014 which again dropped to US$ 58 Bil­lion in 2015. At the 10th ASEAN – India Sum­mit in 2012, the lead­ers set a trade tar­get of US$100 bil­lion by 2015 which is yet to be re­al­ized. We signed the ASEAN- India Trade in Goods Agree­ment in 2009 and the Agree­ment on In­vest­ment and Ser­vices in Novem­ber 2014. The Asean – India Trade in Goods Agree­ment cre­ated one of the world's largest Free Trade Ar­eas with a com­bined GDP of US$5 Tril­lion and a pop­u­la­tion of 1.8 bil­lion. Hence the plat­form has been pro­vided for the busi­ness­men of the two sides to uti­lize to their ben­e­fit and in­ter­alia to strengthen the ASEAN –India Eco­nomic Part­ner­ship.

The boom­ing mid­dle class of ASEAN is set to dou­ble to 125 mil­lion in a few years' time. This is a mid­dle class with a high per capita in­come and hence it is not sur­pris­ing that it is al­ready emerg­ing as a key con­sumer mar­ket. The ASEAN con­sumers are in­creas­ingly more brand savvy and will­ing to spend more on leisure ac­tiv­i­ties. With the grow­ing ur­ban­iza­tion, con­sumerism is also on the rise with on­line re­tail mar­ket ex­pand­ing rapidly in tan­dem with in­ter­net pen­e­tra­tion. This ur­ban­iza­tion and grow­ing con­sumer mar­ket nat­u­rally pro­vide var­ied op­por­tu­ni­ties for our in­dus­tries and ser­vice providers.

ASEAN is the 4th largest ex­port­ing re­gion of the world and well placed in the global trade flow map con­nect­ing var­i­ous dots. It has also be­come a so­phis­ti­cated ex­porter with the mem­ber coun­tries iden­ti­fy­ing niche ar­eas for man­u­fac­tur­ing and ex­ports. This growth has been fu­eled by both in­tra-ASEAN in­vest­ments as well as in­vest­ments from out­side the re­gion. While India has started to at­tract greater in­vest­ments as com­pared to the past, ev­i­dently we need to ex­plore newer ways and means of at­tract­ing more in­vest­ments from ASEAN into India as in­tra ASEAN in­vest­ments amounted to more than US$ 50 bil­lion in 2014.

A key area that per­haps India needs to tap into is in at­tract­ing tourists from ASEAN. ASEAN to­day re­ceives over 100 mil­lion tourists with al­most 50% be­ing in­tra ASEAN trav­el­ers thanks to the rapidly ris­ing mid­dle class. In­deed many coun­tries have started to ac­tively woo the ASEAN trav­eller rec­og­niz­ing the grow­ing spend­ing power of the ASEAN Com­mu­nity.

India along with the ASEAN is also ac­tively in­volved in ne­go­ti­a­tions on the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP) which when es­tab­lished will have a com­bined GDP of US$23 Tril­lion with a 32% share of world goods ex­ports. The 16 mem­ber group­ing will be a po­ten­tial game changer for not only the eco­nomic land­scape of the re­gion but also in­deed of the world as it would have a share of 28% of global GDP and en­able the trade, ser­vices and in­vest­ment flow within the re­gion even fur­ther.

India is also emerg­ing as the big growth story of the re­gion and of Asia. Its econ­omy has been rapidly ex­pand­ing and the var­i­ous ini­tia­tives such as Make in India, Dig­i­tal India, Startup India etc are pro­vid­ing fur­ther mo­men­tum to this growth.

The time has come to re­al­ize the po­ten­tial of the India ASEAN part­ner­ship. This shared as­pi­ra­tion of mu­tual pros­per­ity and so­cio eco­nomic growth is pos­si­ble if our busi­nesses and im­por­tantly our Cham­bers and Ex­port Pro­mo­tion coun­cils start en­gag­ing with the large ASEAN mar­ket more ac­tively. This is also needed if we are keen to be­come part of the re­gional sup­ply chain feed­ing into the global sup­ply chain. This will strengthen our, Make in India and other ini­tia­tives and make them a huge suc­cess.

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