Talks may be finalised by year-end
Indian Ambassador Anil Wadhwa is confident the Thai-Indian free-trade agreement (FTA) will not be affected by the exodus of foreign funds from his country’s shores, saying talks will be finalised by the end of the year.
“In no way will this affect the bilateral FTA and projects between India and Thailand,” he said yesterday.
The projects include the completion of the India-Myanmar-Thailand Trilateral Highway and the Dawei Special Economic Zone in Myanmar.
Wadhwa admitted that India has not escaped the outflow of foreign funds seen in many economies in anticipation of the tapering of the United States’ quantitative easing. The rupee slumped to an all-time low of 68.025 against the greenback yesterday, extending its decline this year to 19.2 per cent, and setting it up for its worst annual loss since 1991.
Despite the obvious negative sentiment, the ambassador says the silver lining for India is a boost for its export sector.
The funds withdrawn by foreign institutional investors are from mutual funds and equities, not investment projects. India’s economic fundamentals remain strong as its foreign-exchange reserves are close to US$280 billion (Bt9 trillion) and its large pool of human resources helps it increase its share of manufacturing, he said.
Along with China, India remains a giant trade partner with Thailand. Two-way trade reached $9 billion in the past year alone. Boosting trade is the upcoming FTA, which will see the number of zero-tariff traded items rise from 84 to 200.
However, as with any negotiations there are obstacles that must be overcome. In this case it is the sensitive issue of the service industry, where both countries share similar strengths. India is keen on the removal of the restriction on commercial presence and market access for independent professionals and contractual service suppliers, including professionals in the health industries. There is also the issue of the limitations and conditions to residency.
Progress has been made as the commerce ministers of both countries met at the Asean Economic Ministers meeting in Brunei to complete “legal scrubbing” for the FTA. The finalisation of the terms on goods, investment and services will be adopted in October.
More than 10,000 Indians are working in Thailand, versus the 7,000-8,000 Thai professionals in India. Thailand, as an opened country, still lacks professionals such as accountants, architects and specialists who can speak English.
“Given the population imbalance I suppose this is proportionally okay. I do not see too much of a change. We would have professionals working in areas where there is a deficiency. The numbers will still be limited,” he said.
The FTA will also give each country the right to refuse professionals in sectors where there is already an oversupply of human resources.
India itself is undergoing massive investments in infrastructure in the next five years to develop its economy in the areas of the Delhi-Mumbai and Chennai-Bangalore Industrial Corridors, the Buddhist circuit and the northeastern states of India.
Making its move to connect with the Asean Economic Community (AEC) in 2015, India is steaming ahead with the India-Myanmar-Thailand Trilateral Highway, which will cut through newly opened Myanmar to bring more ease in trade between India and Thailand.
“There is a credit line of $500 million available to the Myanmar government, of which they are using $100 million to make sure that the trilateral highway comes up as scheduled,” said Wadhwa, who sees the project being completed by 2016.
The Border Roads Organisation of India has already completed 132 kilometres of the route, which was handed to Myanmar in 2009. There remain 28km to be rebuilt and strengthened this year, as rough terrain has brought many changes to the route.
After the visit of Indian Prime Minister Manmohan Singh in May, Thailand is set to host the next India-Myanmar-Thailand Joint Task Force meeting and second meeting of the Thailand Joint Working Group on Connectivity and Infrastructure.
The trilateral highway is just the beginning of India’s presence in Myanmar, as it has shown much interest in contributing to the much-awaited Dawei Special Economic Zone, which will bring port-port linkages. India’s reasons for joining the project are simple.
“If you draw a straight line from Dawei into Chennai port, it is only 300km. It cuts down the time taken for transportation by sea compared to the Malacca Strait by exactly a half,” he said.
Thailand already has plans for a roadshow in India, inviting Indian companies to contribute their expertise in steel, manufacturing, power and petrochemicals services.
But with the concerns on funding and Japan’s role in the project, India says it will have to wait for more clarity on how the project will be funded and how it can contribute.
“We will certainly contribute – but once the situation is clear on how we can contribute. That is why we are saying all along that we would require a clear demarcation of the projects and also which areas we can contribute in.”