Trade facilitation ahead with ASEAN-India deal upgrade
An upgrade for a trade deal between ASEAN and India should expand the two economies’ trade turnover and mutual investment into the Southeast Asian market in the time to come.
Indian Ambassador to Vietnam Sandeep Arya told VIR that ongoing review of the ASEAN-India Trade in Goods Agreement of 2009 (AITIGA) will be completed next year for improving the trade regime between the two countries.
“The India-Vietnam Joint Trade Sub-Commission, the Minister-level Joint Commission, and several joint working groups in agriculture, health, and IT are assessing and enhancing trade, economic, and business cooperation in these areas,” Arya said.
The fourth meeting of the AITIGA Joint Committee is planned to be held in Kuala Lumpur next month. A total of eight subcommittees have been constituted under the committee to undertake negotiations on different policy areas related to the agreement. The first three meetings of the committee were held in May and August 2023, and February this year.
The new version will be more user-friendly, simple, and trade facilitative for businesses as well as support sustainable and inclusive growth. It is also expected to enhance and diversify trade while bringing symmetry in the bilateral trade between ASEAN countries and India. The ministers have agreed to have a quarterly schedule of negotiations by the joint committee in order to conclude the review in 2025. Under the existing agreement, ASEAN member states and India have agreed to open their respective markets by progressively reducing and removing duties on 76.4 per cent of goods and liberalising tariffs on over 90 per cent of goods. At present, import tariffs for many types of agricultural materials have been removed, from an average of 10-15 per cent.
According to the ASEAN Secretariat, the new version will be aimed to provide more convenience for enterprises of the participating economies, therefrom helping increase trade and investment cooperation between India and Vietnam in particular and between India with the other ASEAN member states. This will also help further strengthen the regional supply chains and better respond to regional and global challenges now.
The AITIGA was clinched in 2009. ASEAN and India registered a two-way trade of $131.5 billion in the fiscal year of 2022-2023, accounting for 11.3 per cent of India’s global trade in this period. Bilateral trade between Vietnam and India hit $14.48 billion last year, with Vietnam’s exports of $8.56 billion and imports of 5.92 billion, Vietnam’s Ministry of Industry and Trade reported.
India’s main exports to Vietnam include metals, machinery, electronics and electronic equipment, and agricultural products. Vietnam exported to India many types of products such as electronic equipment, chemicals, machinery, and animal feed.
According to Ambassador Arya, many Indian businesses could benefit from the upgrade of the trade agrement which can enable them to engage more in the Vietnamese market, which they are seeing great potential.
Many businesses such as Bharat Electronics, Allanasons, Marhaba, and Fair Exports are already exporting their products to Vietnam. Some Indian participants at the Vietnam International Trade Fair held over a week ago in Hanoi are operating successful projects in Vietnam such as Spark Minda Corporation (automobiles), Marico (personal/consumer care), Tata Coffee, and KCP (machinery/sugar).
Meanwhile, Bharat Electronics, Adani Ports, and Ion Exchange are considering projects in communications, defence, infrastructure, waste management, and renewable energy sectors. In addition, Bank of India, present in Ho Chi Minh City for eight years, is expanding banking and financial services to businesses and individuals focusing on both nations.
“We have active plans this year to advance government and business exchanges towards enhance trade, industrial, digital, banking, defence and economic relations between the two countries,” Ambassador Arya stressed.
Vietnam’s Ministry of Planning and Investment reported that cumulatively as of March 20, Indian businesses had nearly 400 valid projects in Vietnam registered at $1.02 billion. Meanwhile, Vietnamese companies currently have six valid ventures in India with total registered capital of $28.55 million, operating in the sectors of pharmaceuticals, IT, chemicals, and building materials.
According to the Indian Embassy, hundreds of Indian businesses in Vietnam are creating economic values in areas such as consumer goods, vehicle sub-systems, sugar, coffee, IT services, mineral processing, hydrocarbons, garments and textiles, engineering goods, aviation, banking, and tourism.
New opportunities in energy, infrastructure, electronics, and digital technologies and arrangements for facilitating trade, bilateral digital payment transactions, and direct shipping are also being discussed.
“As two rapidly growing economies that are already comprehensive strategic partners, bilateral trade, business collaboration, investments, projects and economic partnership between the two countries are priority areas for both countries,” Ambassador Arya said.
In 2017, the Vietnamese government enacted a special import tariff scheme to carry out the commitments under the ASEAN-India Free Trade Area for the 2018-2022 period. Under the plan, nearly 5,700 lines of tariffs – around 60 per cent – have been either erased or reduced. Product groups with the most tax cuts consist of meat-based products, vegetables, and other types of agricultural products.
Vietnam and India have also agreed to actively cooperate in oil and gas exploration projects in third countries. Vietnam welcomes Indian oil and gas companies to take advantage of opportunities in the midstream and downstream sectors in Vietnam.
Vietnam has also become an attractive market of renewable energy for Indian companies. For example, Adani Group has invested in two projects in Vietnam, the Adani Phuoc Minh wind power plant and the Adani Phuoc Minh solar power plant.n