Asean countries demand easing of multi-brand FDI rules

India's free trade agreement (FTA) on services with the 10-member Association

of Southeast Asian Nations (Asean) continues to remain on hold with countries such as Thailand and Indonesia demanding unconditional access to India's multi-brand retail segment and the Philippines expressing concerns over India's information technology (IT) sector.

Indonesia and Thailand have demanded that unless the ‘federal nature of the FDI policy in multi-brand retail’ is relaxed, they will not give a green signal to FTA with India. Sources claim that both the countries have intimated the commerce & industry ministry and external affairs ministry that they will enter India only when their retail chains are allowed to open stores wherever they want and not as per the wishes of state governments.

The demand from Thailand and Indonesia comes at a time when BJP, a probable party expected to form government post the ongoing Lok Sabha election announced opposition to the United Progressive Alliance (UPA) government's decision to allow up to 51 percent FDI in multi-brand retail.

On the other hand, Philippines readying to become the call-centre hub of the world, is cautious that Indian IT-ITeS (information technology-enabled services) sector might eat up its job opportunities. India has been trying to negotiate with that country by saying it has moved from being a call-centre hub to the more high-end and complex IT jobs.

The FTA for services was approved in India by the Cabinet Committee on Economic Affairs in December last year, despite objections from the finance ministry. This was the last FTA signed by the ruling UPA before the country went into elections. Big Indonesian retailers like Matahari Putra Prima, Indomarco Prismatama, Mitra Adi Perkasa and Ramayana are eyeing huge investments in India’s retail sector. And despite the current political unrest in Thailand, its retail sector is growing 9-10 percent annually.