The Hindu Business Line : Wooing West Asia

NEW DELHI HAS CONSISTENTLY looked East to forge free-trade ties — from the latest comprehensive economic partnership framework with Singapore, a free trade agreement with Sri Lanka, and FTAs in the works with Thailand and the BIMST-EC grouping, to prospects of accords with the Association of South-East Asian Nations and China. Of course, this does not mean no effort has been made to strike such relationships in other parts of the world. The economic cooperation framework with South Africa and the Mercosur grouping of South America are but two examples. The thrust, however, has been on the East — a point the Prime Minister, Dr Manmohan Singh, made the other day while chairing a meeting of the Trade and Economic Relations Committee. He argued that the focus must now shift to other countries in the "wider Asian neighbourhood;" for example, West Asia, which forms a "part of our natural economic hinterland".

From the perspective of tapping every source that would benefit the national economy, the Prime Minister's initiative for talks with the Gulf Cooperation Council on an FTA is the right one, especially now when the region (comprising the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman) has benefited from high oil prices and is flush with funds. Indeed, the process began with the signing of the Framework Agreement on Economic Cooperation between the GCC and India last August, and then having two agencies list the pros and cons of such a tie-up. That the Prime Minister has now asked the Commerce and External Affairs Ministries to begin formal negotiations indicates the seriousness with which an FTA is viewed. Since India needs sizable investments — a point the Prime Minister has constantly emphasised ever since he assumed office last year — New Delhi must target the GCC, particularly in view of the Council's soaring oil revenues. If for many a global investment fund India is the preferred destination, there is no reason why it should be different for GCC's carpetbaggers. But New Delhi must do its bit to facilitate such investment flows.

Indeed fact, it can be argued that India-GCC economic ties should not be restricted to an FTA as trade in goods and investment flows are two different things, and an FTA deals only with the former. Certainly, trade plays an important role (the GCC accounts for 11 per cent of India's exports with the UAE and Saudi Arabia playing the dominant role), but just now it is the funds flow beyond remittances by non-resident Indians that should be accorded importance given the glut of such money. True, the Framework Agreement speaks of "initiating discussions on the feasibility of exploring the possibilities of a free trade area," but Article 4 draws attention to the need to "make appropriate arrangements for capital flows between (the two contracting parties), setting up joint investment projects and facilitating corporate investments in various fields of economy, trade and industry." Not surprisingly, the Agreement is widely seen as a vehicle for exploring opportunities in the areas of oil and gas, knowledge-based products, education, and health. Current comparative advantage being what it is between the GCC and India, it would be a pity if the opportunity is allowed to pass untapped.

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