India-Asean FTA falters just before finalization over services pact

NEW DELHI: India may not get its sought-after services pact with Asean this August because of concerns on both the sides as the details of the broad agreement finalised in December last year are worked out. Issues related to movement of professionals under mode 4 and mutual recognition of qualification in medical and education are learnt to be the main roadblocks, a person familiar with the development told ET.

India and the 10-member Asean ( Association of Southeast Asian Nations) had in December finalised the much-awaited free trade agreement in services and investments. “The signing looks a bit difficult now. The negotiating team is legally scrutinising the text, where there are minor issues related to one or two services and investment,” the person told ET. But a senior official in the commerce and ministry played down the issue. “We have had two rounds of legal scrubbing and made some progress, and signing depends upon domestic procedures of all the members. So, after it is concluded and legally scrutinized, each of the member states goes through its domestic procedures and then it will be signed,” he said.
The two sides have signed an agreement for trade in goods, which benefited Asean more, giving it access to India’s vast consumer market. India has a bigger stake in the services agreement, as it can help push exports to the region. The comprehensive agreement on services and goods is expected to boost trade to $100 billion by 2015.

India’s exports to Asean declined by 10.2 per cent in 2012-13 to $32 billion, while imports grew by 2.86 per cent to $43.7 billion, leaving a trade gap of about $11 billion. The pact on services will help India gain some ground. Asean’s share in India’s IT export is a mere 5 per cent, as per estimates. Countries like Malaysia and Thailand are not keen on allowing mode 4 of the services pact, which will make entry of Indian professionals easier in their countries.

Under mode 4, Indian professionals will be able to work in the Asean nations. These countries believe that it will affect their workforce with the increased presence of Indian workers, and are opposing the agreement. “These countries apparently want Indian professionals to get an additional qualification from their countries to be eligible under mode 4 movements. It makes sense for India to sign the deal only if we get mutual recognition agreement,” said an expert.

For instance, to practice medicine in Thailand, a person needs a licence from the Thai Medical Council, with the council conducting its examination in Thai, which only a few foreign practitioners can clear. While in education, foreign professionals require an invitation from the education institute that will employ them and also should meet the criteria set by the ministry of education. Some Asean countries, it is learnt, have an issue with India providing subsidies in higher education, whereas they give it at full cost price, which would give Indian professionals an edge, he added.

India wants mutual recognition agreement with Asean which will enable qualifications of professional service supplies such as engineering, medical and education among others to be mutually recognised by signatory member countries. If such an agreement is not signed at the Asean level, India would have to sign MRA degrees and licence of equivalence agreements with individual Asean members, making the process more cumbersome.

Another expert who has been part of the negotiation of the goods deal with Asean, attributed the delay more to the Asean side rather than India.