The recent FTA between India and  the Association of South East Asian Nations (ASEAN) is big news as the ASEAN door has been shut to India in the past. The FTA will break duty barriers in the 1.7 billion consumer market in the region and deliver new opportunities for Indian exporters.

ASEAN was formed in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand and later its membership expanded as it was joined by Brunei, Vietnam, Laos, Cambodia and Burma. Originally a defence pact, ASEAN soon became a vehicle for economic integration, particularly as soon as China and India started playing a dominating role in the Asian economy. In 2005, the the combined GDP (Nominal/PPP) of the ASEAN countries reached about USD$896.5 billion/$2,728 billion growing at an average rate of around 5.6% per annum. Nominal GDP had grown to USD $1.4 trillion in 2008.  

Critics argue that the ASEAN countries would benefit more than India from the free-trade agreement. But despite this imbalance, which will be corrected only through enlargement of the present agreement (which now covers goods) to include services and investments also, it cannot be denied that the recent FTA is a window of opportunity for Indian exporters. India-ASEAN trade reached $40 billion last year, and both sides have now set an bilateral trade target of $ 50 billion by 2010.

How would Indian exporters benefit from a link with the ASEAN bloc? Let's have a snapshot of the export/import opportunities the major ASEAN countries offer:

Brunei Darussalam
Major industries:  Agriculture (Rice, vegetables, fruits; chickens, water buffalo, eggs)
Other Industries: Petroleum, petroleum refining, liquefied natural gas, construction.
Major exports: Crude oil, natural gas, refined products.
Major imports:  Machinery and transport equipment, manufactured goods, food, chemicals.
Major trading partners: Japan, South Korea, Australia, U.S., Thailand, Indonesia, China, Singapore, Malaysia, UK .

Myanmar
Major Industries: Agriculture (Rice, pulses, beans, sesame, groundnuts, sugarcane; hardwood; fish and fish products).
Other Industries: agricultural processing; knit and woven apparel; wood and wood products; copper, tin, tungsten, iron; construction materials; pharmaceuticals; fertilizer; cement; natural gas
Major trading partners: Thailand, India, China, Japan, Singapore, South Korea, Malaysia

Cambodia
Major industries: Cement, and gem mining. Cambodia has significant mineral deposits of gold, silver, iron, copper, marble, limestone and phosphate, and a gem industry.
Major exports: Clothing industry exports and the garment industry grew well for the last few years.

Philippines
Major industries: The leading industries were textiles, pharmaceuticals, chemicals, wood products, food processing, petroleum products, electrical machinery, textiles, electronics assembly, petroleum refining, and fishing, with significant production in transport equipment, nonmetallic mineral products, fabricated metal products, beverages, rubber products, paper and paper products, leather products, publishing and printing, furniture and fixtures, and tobacco.

Major activities are assembly of computer chips and other electronic goods, many of them computer peripherals. Philippines was credited with one of the world's most technologically advanced export structures.

Indonesia
Major industries: Oil and natural gas processing, which accounted for more than 25 percent of total value-added in industrial output. The second major industrial activity was the production of kretek cigarettes, the popular traditional Indonesian cigarette made from tobacco blended with cloves.

Major manufacturing export industries: Plywood, clothing, and textiles,

Major trading partners: Japan, Hong Kong and South Korea. Singapore, Malaysia, and Indonesia.

Major industries: Automobile assembly plants in Indonesia produced about twenty international brand name automobiles, from Fiat to Toyota, primarily under license agreements. The automotive assembly industry grew amidst heavily protected markets.

SME sector: Small-scale establishments engaged in a wide range of activities, from traditional bamboo weaving to metal and leather working. Many of these industries offered part time employment to rural workers during off peak seasons.

Sumatran manufacturing is more diverse, including rubber processing, cement, and plywood. Major industries on Java included motor vehicle assembly in Jakarta.

Singapore
Major industries: Electronics, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, processed food and beverages, ship repair, and biotechnology.

Large-scale foreign manufacturing operations with the establishment of plants by several major multinational electronics corporations are functioning.

Petroleum refining is a well-established industry in Singapore. After Rotterdam and Houston, Singapore is the world's third largest refining center.

Laos
Major Industries: Copper, tin, gold, and gypsum mining; timber, electric power, agricultural processing, construction, garments, cement, tourism.
There is no heavy industry and much of the country's industry is comprised of smaller companies. Small establishments are involved primarily in the production of textiles and handicrafts. Laos is well known for the high quality of its aesthetically attractive textiles.

Thailand
Major industries: Four major industrial areas are food processing, automobiles, electronics, and petrochemicals. Rapid diversification of the industry sector which saw the rise of several industries, including petrochemicals, textiles, transportation equipment, and electronics, iron and steel, and minerals.

Major export markets:  United States, Japan, the European Union, Singapore, Malaysia, Hong Kong, Taiwan, and China.

Malaysia
Major industries: Rubber processing, the manufacture of tires and other rubber products, palm oil processing, tin smelting, and the manufacture of chemicals, plywood, furniture, and steel. Other industries were textiles, food processing, and the manufacture of electronic and electrical components, industrial products, etc.

Leading Malaysian industries by value are rubber and oil palm processing and manufacturing, light manufacturing industries, electronics, tin mining and smelting, and logging and processing timber. petroleum production, agricultural processing, petroleum production and refining. Foreign oil companies involved in the production of oil and gas. Malaysia has six oil refineries.

As we have mentioned earlier the recent FTA between India and the ASEAN does not include services and investment. But despite that it can be expected the investment agreement will attract a lot of foreign direct investment (FDI) from ASEAN countries. It will, needless to say, benefit our economy to a great extent. On the other hand, the FTA is an opportunity for Indian companies to invest in the ASEAN region, particularly in sectors such as pharmaceuticals, coal mining and automobiles.  

It can be expected that the ASEAN and India will turn their FTA into a comprehensive economic cooperation agreement in near future. If it happens, Indian exporters will benefit more than anyone. By looking at the present scenario, our SMEs need to gear up to explore the new land of opportunity.

* The article is prepared with valuable inputs from  L.N. Raghavan, a freelance consultant.