Pradumna B Rana Associate Professor

Transcription

1 Pradumna B Rana Associate Professor (Based on an on-going project on Reinvigorating South Asia: Looking Within, Looking East, and Looking West, supported by a research grant from NTU) Prepared for the Round Table of ASEAN- India Think Tanks, New Delhi 7-8 August, 2012

2 Strong potential for India to develop multinational-led production networks in South Asia (mainly in agro-processing, water/energy resources, and services) and to link them to production networks and supply chains in East Asia and the ROW This would not only re-invigorate the dormant level of economic integration in South Asia but would enhance SA s contribution to the evolution of an integrated and prosperous Asia

3 I. Why study economic linkages between SA/EA? II. III. Why focus on India/ASEAN relations? Evolving relations between India/ASEAN IV. Trends V. Potential and Complementarities VI. Required Policies and Actions

4 ASEAN, China, and India (ACI) are undergoing a great transformation with implications for ACI, Asia, and the world (ADB 2012) So far, AEI=EA integration, could SA/EA relations be the second phase of Pan-Asian integration? (Rana 2009) Could it be a new driver of South Asian integration that has stalled since the Partition? Are we seeing the re-emergence of integrated and prosperous Pan Asia? (Rana 2012)

5 Together with India/China, India/ASEAN trade is the largest component of SA/EA trade ASEAN welcomes India s participation in the proposed Regional Comprehensive Economic Partnership, Singapore s PM in Singapore Dialogue organized by ISAS in New Delhi,12 July 2012 Former Thai Finance Minister (Sussangkarn 2010) has made the case for India, Australia, and New Zealand to be associate members/contributing partners in CMIM Expanded ASEAN+3 would strengthen Asia s voice in the G20 (Rana 2012)

6 1991: India adopted Look East policy 1992: India became ASEAN s sectoral dialogue partner 1996: India became ASEAN s full dialogue partner 1997: BIMSTEC established 2000: Mekong-Ganga Cooperation established 2004: Early Harvest Scheme for India-Thai FTA 2005: India-Singapore CECA EAS established 2010: Comprehensive Asia Development Plan (CADP) submitted by ERIA to EAS Masterplan on ASEAN Connectivity approved ASEAN/India FTA (in goods trade) became effective 2011: ASEAN/India connectivity selected as main theme of CADPII 2012: Prof Sen appointed Chancellor of Nalanda University

7 Total trade (X+M, bl $)

8 FDI inflows to SA from EA are increasing China, Malaysia, and Thailand are joining traditional high income countries such as HK, Korea, Japan and Singapore India s service exports to Singapore have increased due to CECA, Singapore is second-ranked FDI source, also movement of professionals Automobile industry in India benefitting from FDI from Korea and Japan: Electronics in India benefiting from FDI from Korea, Taiwan, and Singapore: Infrastructure in India and other SA countries benefiting from FDI from China, Malaysia, and Singapore FDI inflows from SA to EA are also increasing: 1500 Indian companies are currently based in Singapore: large number of flights

9 Growing opportunities for service exports from SA: health services (India), travel (Nepal), telecoms (Pakistan and Sri Lanka), financial services (India and Singapore) (Findlay et al 2009)

10 India s trade potential is highest with East Asia followed by EU, NAFTA, and South Asia (De 2010) (i)(i) Calculations of RCAs and trade complementarity indices for India and East Asia suggest this potential both for goods and services trade (World Bank 2010, Rana 2009) (ii)

11 (ii) Beyond static analysis, there is great potential for India ( SA) to link with production networks in East Asia and the world: India could also develop production networks in South Asia in agro-processing and services Multinational-led production networks (product fragmentation and vertical specialization) are key contributors to regional integration and dynamism of East Asia Akamatsu s flying geese theory of nexus between FDI and trade, technological developments, and Kimura s product fragmentation and economic geography theories are used to explain these developments and trade in parts and components

12 Drivers of trade go beyond factor endowments and complementarities to the use of IT and communications and geography For these theories to function one needs (i) countries with different factor endowments (ii) dynamic private sector that can mobilize cross-border FDI (iii) technology that allow product fragmentation, and (iii) not-too-expensive service link cost to connect fragmented production processes Some production sharing with East Asia in apparel and textiles (in Bangladesh and Sri Lanka: automobiles (in India): Electrical and telecom parts (in Sri Lanka)

13 1. First generation reforms implemented by India and SA have reduced tariffs and NTBs, but they are still higher than in EA (Rana2009) 2. India/SA needs to accelerate implementation of Second Generation reforms. These include reforms of public institutions for good governance (civil service, bureaucracy, and public administration), institutions to create or maintain human capital (education and health), and improving the environment affecting the private sector (regulatory environment, flexibility in labor market, legal and physical infrastructure, and clearly defined property rights) (Rana 2009)

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15 3. ASEAN and India should re-double efforts to conclude investment and services chapter of the ASEAN/India FTA 4. A number of bilateral FTAs have become effective between India/SA and EA: to make these stepping stones rather than stumbling blocs to multilateralism, there is a need to consolidate them into a single Asiawide FTA (Francois, Rana, Wignaraja 2009) - This argument supports Singapore PM s call for India to join ASEAN s RCEP

16 No. of FTAs involving both South and East Asian countries FTAs In Effect: APTA (1976) India-Singapore CECA (2005) PRC-Pakistan (2007) Malaysia-Pakistan (2008) India-Korea (2010) ASEAN-India (2010) 1 Signed: PTA Group of Eight (2006) Future FTAs Concluded FTAs Source: ADB s Asia Regional Integration Center (ARIC) FTA database ( data as of 15 January

17 Change in income compared to 2017 baseline, % 0.45 Total Gains: 214 $BN 0.52 Total Gains: 251 $BN 0.54 Total Gains: 261 $BN 0 ASEAN+3 FTA ASEAN+3 and India FTA ASEAN+3 and South Asia FTA Francois, Rana, Wignaraja (2009) 17

18 5. With lower tariffs, trade facilitation policies to reduce non-tariff trading costs (including at the border and behind the border costs and logistics) have become the critical determinants of India/SA and EA trade

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21 6. Trade facilitation is not only a question of software but also physical integration or connectivity which needs to be expedited - A dozen or so infrastructure projects seek to connect SA with EA, and these have received a fillip with the gradual and cautious reforms in Myanmar, a node/economic bridge between SA and EA - The key projects are: Mekong-India Economic Corridor (MIEC) proposed by ERIA; Trilateral Highway between, India, Myanmar, and Thailand along Asian Highway 1 (by 2016); Kaladan Multimodal Transit transport Project; Second Highway link between Nepal and China

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25 ADB ASEAN, the PRC, and India: The Great Transformation, draft De Prabir South Asia: Trade Integration after the Global Crisis, Background Paper, World Bank Findlay, C and P Dee Integrating Services Market in Francois, Rana, and Wignaraja Francois, PB Rana, G Wignaraja Pan-Asian Integration: Linking East and South Asia Palgrave MacMillan

26 Rana, PB South Asia: Rising to the Challenge of Globalization. World Scientific Rana, PB Renaissance of Asia: Evolving Linkages between South Asia and East Asia. World Scientific Sussangkarn, C The Chiang Mai Multilateralization: Origin, Development, and Outlook, ADBI Working Paper World Bank Moving Up, Looking East> World Bank South Asia Economic Update

27 Thank You