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Service sector hurdles may block expanding ASEAN-India FTA

Jakarta Post, Indonesia

Service sector hurdles may block expanding ASEAN-India FTA

By Novan Iman Santosa, The Jakarta Post, Phnom Penh

21 November 21 2012, 11:52 AM

ASEAN member nations are committing to forging an expanded FTA with India in late December, despite hurdles in the service sector, with negotiations not progressing as expected, Trade Minister Gita Wirjawan said late Monday.

“During the ASEAN-India Summit, all ASEAN leaders emphasized progress on the negotiation expanded FTA,” Gita said.

“The target is to have the expanded FTA officially launched during the ASEAN-India Commemorative Summit in India on Dec. 20 and 21,” he said.

The current FTA covers only tariffs for goods and became effective on Jan. 1, 2010. The expanded FTA will cover investment and services.

With a combined population of 1.8 billion and GDP of US$2.75 trillion, ASEAN and India have created one of the largest free trade areas in the world.

Gita said notice of all obstacles had been conveyed to Indian Prime Minister Manmohan Singh, and that the leaders asked whether India was serious in its intention to complete the expanded FTA. “The Indian prime minister responded that they would work their best to complete the agreement,” Gita said.

“I have also spoken with Indian Trade Minister Anand Sharma that this should be completed, but I said that Indonesia was not the only one. Other ASEAN member countries also have their own issues, on which we have yet to make much progress,” he said.

The major stumbling block is India’s demand for ASEAN to open the its service sector widely by including the independent professional services (IPS), Gita said. “We are not familiar with this concept. Our objection is because the IPS does not have any limits,” he said.

“ASEAN countries also want to limit India’s contractual service suppliers to the level of directors, managers and specialists, while India demanded full access.

“India also did not respond fully on investment, because the country was only focusing on facilitation and promotion,” Gita said.

“Investment does not only need facilitation and promotion but also requires protection and liberalization, which have not been fully responded to by India,” he continued.

Gita said that both sides had to be ready to offer reasonable concessions, with Indonesia and the Philippines agreeing that there should be some limitations in the service sector.

“Our view is not unique, as other ASEAN countries also see there is still a considerable gap with India, so we have to be realistic,” he said.

“We are committed to do this because we also have the idea that this ASEAN-India FTA can become an amazing foundation for the Regional Comprehensive Economic Partnership [RCEP].”

Gita said that ASEAN was also about to expand its FTA with Japan and make its RCEP richer and able to compete with the Trans-Pacific Partnership (TPP) being promoted by US President Barack Obama.

“We already have FTAs with our six major partners in the RCEP, while the TPP must start from scratch.”

During the ASEAN-US Summit on Monday evening, Obama said he wished that the TPP would not only include the ASEAN countries of Brunei Darussalam, Malaysia, Singapore and Vietnam, but all 10 countries.

The US is a huge market with a $15 trillion GDP, making it an attraction for TPP member countries, but on the other hand, the RCEP also has the same combined amount of GDP.

Gita said that so far Indonesia has yet to find that the TPP was beneficial for the country and prefer to focus on launching the RCEP.