Improved links by sea and road will provide a major fillip to inter-regional trade.

Thirty-one Mahindra XUVs arrived in Singapore last week, all set to take part in an exciting adventure, the Second Asean-India Car Rally. The car rally, a commemorating 20 years of dialogue between India and the ten-member Association of South East Asian Nations (Asean), will traverse through nine countries to end at Guwahati. It will be officially flagged down by Prime Minister Manmohan Singh and heads of state of all ten Asean nations at New Delhi on December 20.

Apart from being an eye-catching auto event with participation from many countries, the car rally highlights the Asean-India economic partnership. By racing through nine countries, it emphasises the historical people-to-people links that bind the two sides. An extensive programme of business seminars and cultural events to build awareness on the potential of commercial linkages has been chalked out.


Since the first such rally held in 2004, the world has changed considerably. In the emerging global economic realities, the fast-growing India and Asean economies are key participants, with a combined population of 1.8 billion and a total GDP of $2.75 trillion. Following India’s Look East policy, India became a sectoral dialogue partner of Asean in 1992, and a full dialogue partner in 1996.

The two sides have held annual summit meetings since 2002, with the tenth such meeting having just concluded at Phnom Penh, Cambodia. With the Indo-Asean free trade agreement for goods being implemented from August 2011, a new phase of economic engagement has commenced. This would be further strengthened when the agreement on services and investments is concluded as planned.

In 2011-12, bilateral trade stood at $79.3 billion, recording a growth of 29 per cent over the previous year, when the FTA was instituted. India depends on Asean for key imports such as edible oils and crude oil. Similarly, it exports petroleum products, engineering goods, gems and jewellery to Asean. The multi-speed developmental process in Asean, ranging from an advanced economy like Singapore to Least Developed Countries such as Cambodia and Lao PDR, offers a range of opportunities for businesses.

Two-way investments too, have been robust. Indian companies have long operated in Asean, and in recent years have stepped up their interest. It is estimated that between April 2000 and July 2012, about $19 billion worth of equity investments came into India from Asean, while Indians too pledged $6 billion in Asean countries. Indian companies have invested across sectors, from oil palm plantations to biotechnology, from energy to steel and financial sectors. Malaysian companies are undertaking the largest number of construction projects outside of their country in India, while Singapore has emerged as the second largest source of FDI for India.


Infrastructure and transport connectivities will be central to opening up new trade routes, as envisaged by the car rally. The India-Myanmar-Thailand trilateral highway is already in progress and should be operational by 2016, opening new land routes via North East India to the vibrant Asean markets. Seaports, economic corridors, river transport, and air links all need to be leveraged effectively. This infrastructure creation itself will be a great opportunity for businesses.

Manufacturing represents a key area of cooperation, given that both sides need to create jobs for their young workforces. India’s manufacturing zones, envisaged under the new manufacturing policy as integrated world-class hubs, can offer investment opportunities to Asean construction firms. Indian companies too can step up investments in manufacturing regions coming up in Malaysia and Vietnam. In particular, such investments can help integrate value chains extending across the dynamic Asian economies and tap new markets in this region.

The knowledge economy poses an emerging opportunity. India offers scholarships to Asean students under various programmes, including training 320 Asean citizens in IT and space. It also provides English language training in Cambodia, Lao PDR, Myanmar and Vietnam. Skill development, vocational training, and industrial training can benefit from private sector participation. Several Indian IT firms are active in this area. Biotechnology, life sciences, and agriculture are being addressed by governments and businesses as well.

Among other sectors of opportunity are energy, both conventional and renewable. The Asean-India Green Fund was set up in 2007 for addressing climate change, and cooperation in renewable energy has been institutionalised. In fact, there is no end to the economic opportunities that rapid income growth and entry of new consumers into the markets offer to businesses, ranging from tourism and healthcare to advanced scientific and technological cooperation. The car rally will take our engagement to the next level.

The fact that high-level dignitaries, including Prime Ministers of Malaysia, Thailand and Cambodia, will be flagging off the car rally at various destinations, reinforces the importance attached to bilateral economic engagement by both sides. We could well see doubling of bilateral trade to $150 billion in the next three to five years.

The author is Director-General, CII.

(This article was published on November 25, 2012)
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