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Thai-Indian FTA almost ready to sign

Bangkok Post, Thailand

Thai-Indian FTA almost ready to sign

Delhi minister expects deal by Q3, going beyond the scope of a planned India-Asean pact.

By Umesh Pandey

10 May 2008

India and Thailand are likely to be able to sign the much anticipated free trade agreement within two or three months as most of the key issues have been resolved, says India’s commerce minister.

"Most of the issues with countries in Asean have been sorted out and there are only a few minor problems that are being worked out. Once this is done, we can then go ahead with the trade agreement with Thailand," Kamal Nath said in an exclusive interview. "This should not take more than two or three months."

The agreement would help increase bilateral trade that touched $4.7 billion last year and is expected to exceed $5 billion this year, Mr Nath said.

Thailand and India have had an "early harvest" agreement for 82 items since 2003 and have seen trade figures rise dramatically, with Thailand the beneficiary. Thailand’s exports to India in 2006 were worth $1.75 billion against $870 million a year earlier.

"This quantum jump in exports to India was based on a small agreement that we had and imagine what will happen when there is a full fledged trade agreement?" Mr Nath said.

The next step for the two countries is to build on the success of the early harvest programme to create a full trade agreement, beyond what India is pursuing with the 10-member Association of South East Asian Nations (Asean).

"The agreement with Thailand has to be Asean Plus, not just what we have with Asean nations," he said.

India’s negotiations with Asean had been stalled as Malaysia and Indonesia were seeking more trade access, but these issues were being resolved, Mr Nath said, adding that he expected a signing no later than the third quarter.

"India is looking at Thailand as an important investment destination both for its domestic needs and as a gateway to the other Asean countries," said Mr Nath. "The aim is [to promote] manufacturing for high-tech equipment, and to push forward with this we have had a meeting with the industry minister and have looked at new ideas including inviting a business delegation to India."

Thai businessmen, he says, have already started to play a key role in India, with the Central Group having tied up with DLF Group, a leading Indian property developer, and Charoen Pokphand Group already having expressed its desire to have cold-storage operations across the country, with retail operations also a possibility for CP.

But Mr Nath says that the retail segment will continue to remain under restrictions and little participation from foreign investors would be allowed.

"There are only a few segments that we have restrictions on - retail, financial, and defence products - but the rest are free."

Thailand, meanwhile, is expected to make it easier for Indian companies to invest after the FTA and Indian firms are already searching for partners. Tata Motors, Tata Consultancy, Tata Steel and Satyam Computers are among major Indian players in Thailand already.

Mr Nath says that India is now open to all forms of investments from Thai companies and has opened up some areas such as mining that were restricted earlier. Foreign companies now can own 100% of Indian mines, while other areas such as services are being opened with investments in hotels now fully liberalised, while telecommunications holdings can be up to 74% foreign.

On his recent visit to Thailand, Mr Nath held talks with Siam Cement about serving India’s construction boom.

"Although we have no restrictions on imports of cement, it is a bulky material and we have to discuss ways to handle the logistics," he said.

The minister said that India also continued to look forward to Thailand and Vietnam taking the lead in increasing the efficiency of rice production.

"Rice is a very important aspect of daily lives in Asia and Africa and Thailand as the largest producer has to take the leading role to increase productivity, lowering wastage and [improving] seeds used for productivity," he said.

India has had record rice harvests but global prices have been surging and Mr Nath says producing countries should look at ways that would benefit farmers and not hedge funds.

"Although it is a difficult task, we have to make sure that the benefit reaches the farmers, and we as rice-producing countries have to look at ways we can achieve this," he says.