Commerce min finds PM’s promise on services FTA with Asean tough to meet

Prime minister Manmohan Singh might have committed to finalising the free trade agreement (FTA) in services and investment before the Asean nations arrive in India next month for a summit, an internal note circulated within the government has categorically said that "Asean offer (in services) is below expectation" and offers "very limited commitments in Movement of Natural Person", the core strength of India.

The note says that India had entered into a liberal goods agreement with the 10-nation bloc with an understanding that the "balance will be achieved in the services negotiations", an assumption that looks unlikely to be fulfilled.

India had signed the FTA in goods with the Association of Southeast Asian Nations (Asean) in 2009 and has been negotiating the same into the services and investment sectors ever since. The FTA in goods became fully operational from August 1, 2011.

However, stiff opposition from the member countries on services, mainly over the issue of Mode 4 of services trade has led to the logjam. Mode 4 services refer to the movement of professionals both skilled and unskilled. The opposition has come mainly from countries like Indonesia and the Philippines which have a strong presence in the services sector and they fear that liberalising their services markets for India will take away a large share of jobs from them.

The services sector, which contributes around 60 per cent of India's GDP, is the key interest area for the country and opening up of the bloc will provide a huge window of opportunity to professionals. The Asean countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam.

On Monday, Singh in Cambodia said, "India is prepared to conclude the agreement on trade in services and investment promotion before the commemorative summit in Delhi in December. This will be a strong signal of our deepening economic engagement, and will allow for rapid expansion in trade and investment flows in both directions". He added that a comprehensive FTA would be the "springboard" for expansion in economic relations with Asean.

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