Fri, 12 Mar 2010

The South-East Asian country has expressed its inability to resolve domestic opposition to the trade pact

New Delhi: A proposed bilateral trade agreement between India and Indonesia has been put in cold storage as the Southeast Asian nation expressed its inability to resolve domestic opposition to such a pact. A joint study group set up by the two countries had strongly favoured a comprehensive bilateral trade agreement.

“There is no great enthusiasm on Indonesia’s part for a bilateral treaty with India,” said a commerce ministry official who didn’t want to be named. “They faced problems with a treaty with China also where the domestic industry protested. They have sensitivities in sectors like agriculture, automobiles and allied products.”

Business associations in Indonesia lobbied hard to stall a trade agreement between the Association of Southeast Asian Nations (Asean), of which it is a member, and China beginning 1 January this year, fearing it would have a negative impact on domestic manufacturing industries.

Indonesia is also yet to ratify the India-Asean free trade agreement.

“It (free trade pact between India and Indonesia) may be taken up at an appropriate time. There is nothing immediately round the corner,” the commerce ministry official said.

Still, it may not mean the end of the road for the treaty with Indonesia, said Biswajit Dhar, director-general of Delhi-based Research and Information Systems for Developing Countries, a think tank.

“First, we have to see how we can take advantage of the existing commitment under the India-Asean treaty,” Dhar said. “We need to fast-track the services and investment agreement with Asean as we will gain the maximum from Indonesia on the services front. Indonesia is no more a sick Asean nation. It is a dynamic economy and a key market for us.”

India is aiming to conclude negotiations with Asean for a treaty on services and investment by August this year. An agreement on trade in goods between the two sides came into effect at the beginning of the year. Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

In November 2005, Prime Minister Manmohan Singh and Indonesian President H. Susilo Bambang Yudhoyono agreed to form a strategic partnership between the two countries. A joint study group was set up to examine the possibility of a Comprehensive Economic Cooperation Agreement (CECA).

The study group, which submitted its report in September last year, recommended negotiations between the two countries for a trade agreement covering goods and services, investment, trade facilitation and other areas of economic cooperation as a “single undertaking”. It said the agreement should go beyond the India-Asean FTA.

The group estimated that India’s exports to Indonesia could reach $7.8 billion by the year 2020 and its imports could touch $9.7 billion by the same year. Total trade between India and Indonesia stood at $9.2 billion in 2008-09, growing 32% from a year earlier.