ASEAN Path #5 | INDIA-ASEAN FTA in services and investments: How long is the wait?

ASEAN PATH is a series of white papers prepared by DFDL’s experts aiming to assess, in more depth, compelling issues arising from the regional economic integration under the auspices of the Association of Southeast Asian Nations (“ASEAN”) Economic Community Blueprint. The articles are based on an in-depth legal analysis of the local and ASEAN legal framework from the perspective of a practitioner assisting foreign and ASEAN investors in their investments and operations throughout various ASEAN Member States.

In 2009, India and the ASEAN nations signed and ratified a free trade agreement relating to goods. In 2014, it appears that negotiations on a separate India-ASEAN FTA covering services and investments will similarly be ratified, having the potential to change the shape of the India-ASEAN relationship. Though a formal conclusion to negotiations regarding this agreement came on 20 December 2012, the expected date of signing has been one marred with controversy. Despite being negotiated over the past five years, the content of the ASEAN-India Trade in Services Agreement (the “Services FTA”) and parallel ASEAN-India Investment Agreement 2 package is not yet in the public domain.

From the limited and general information available thus far, the Services FTA is expected to extend to telecommunications, information technology, transportation and logistics, financial services, education, real estate, business services, health and community/social services and the “Mode IV” free movement of natural persons and professionals. Such an agreement shows great promise, allowing for the generally accepted advantages that come with deeper integration and the harnessing of new markets, greater competition and specialization, efficiency and freedom of movement and growth as a whole. While the deal has been completed, significant challenges still exist in getting over the line in terms of ratification, with disagreement over the relative bargaining position of certain sectors and the merits of comparative advantage of each of the parties. Such issues are the essence of trade negotiation, with a multitude of stakeholders and domestic pressures adding uncertainty to the success or otherwise of final implementation. However, if successful, it appears that the breadth of a new Services FTA will have far-reaching effects, whatever its final form.