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Services sector deal with asean bloc stuck

Business Standard, India

Services sector deal with asean bloc stuck

By Devjyot Ghoshal / Bali

17 November 2011

Prime Minister Manmohan Singh will reach Bali on Thursday to hold meetings with leaders from the Association of Southeast Asian Nations (Asean) and attend the East Asia Summit over the weekend, but a Comprehensive Economic Partnership Agreement (CEPA) between India and the 10-member regional bloc remains elusive.

Although India and Asean in 2009 signed a free trade agreement (FTA) in goods, a similar deal on services is yet to be inked, thereby holding up elevation of the existing pact into a CEPA.

The services deal remains stalled on disagreement over movement of natural persons (MNP), relating to the movement of human resources across markets, an essential component without which the entire process cannot move forward.

In particular, the Philippines continues to have reservations on the issue and is “not willing to open up” its market, as a result of which it is unlikely that the services FTA will be concluded this year, a senior Asean official told Business Standard.

The Philippines has previously cited concerns over the impact of the services agreement on its domestic workforce as a reason for rejection of the proposed pact, although the country’s trade secretary, Gregory Domingo, had in the past said the FTA would be in place by year-end.

Earlier this year, even Union Commerce Minister Anand Sharma had expressed confidence that an agreement would be reached within 2011, a result that would have boosted India’s thriving services sector, which accounts for over half of the country’s gross domestic product (GDP).

The official, who did not wish to named, said a new arrangement would have to be worked out, with a “need to have some limitations on MNP”.

“There may not be an open influx. Instead, there could be limits set, based on skills and the number of people,” he said, adding that negotiations on the disputed section would resume early next year.

The India-Asean FTA in goods intends lifting of tariffs on 4,000 items gradually between 2013 and 2016. A similar agreement on services would have further helped trade between the two reach the targeted number of $70 billion by 2012, up from $50 billion in 2010.