T

he 10-member Association of Southeast Asia Nations (ASEAN) concluded a long-bargained free trade agreement (FTA) with India on services and investment on Wednesday ahead of a two-day commemorative summit in New Delhi, India.

“The agreement will be able to significantly boost economic activities between India and ASEAN, as well as [those] between India and Indonesia,” Trade Minister Gita Wirjawan said in an SMS after the agreement was reached.

The FTA would also pave the way for discussions on a regional comprehensive economic partnership (RCEP) that ASEAN plan to seal with its six key trade partners, which includes India, Gita added.

The new agreement will add to the FTA on goods between ASEAN and India, said to have created one of the world’s biggest free trade areas with a market of around 1.8 billion people and a combined gross domestic product of US$2.8 trillion.

Bilateral trade between ASEAN and India totaled $55.4 billion in 2010, up 41.8 percent from 2009. During the 8th ASEAN-India Summit in 2010, leaders set the target to attain bilateral trade of $70 billion by 2012.

The trade in services and investment were not included in the FTA, which was signed in 2009 and took effect early last year, as both parties failed to reach agreement in time over several key issues.

India, for instance, demanded ASEAN open up its service sector further, including steps to cover independent professional services and contractual service suppliers at all levels.

The grouping has affected certain limitations on to the sector as well as protection and liberalization of investment.

However, the discussions have notably progressed since the ASEAN Summit in Phnom Penh, Cambodia, last month with ASEAN leaders showing stronger commitment to the expanded FTA.

Trade Ministry director general for international trade cooperation, Iman Pambagyo, said that the agreement was reached after various points were met by both sides, including India dropping its request for independent professional services and as a trade-off ASEAN dropping its request for prudential measures in financial services.

“ASEAN members and India will also put requirements and limitations of contractual service suppliers in its own schedule of commitment [of liberalization],” he said in a written statement.

Each country was expected to finalize legal documents for the pact on services and investment by February 2013, the signing is scheduled for August next year during a consultation between ASEAN Economic Ministers and India’s minister of commerce and industry in Brunei Darussalam.

“The completion of the FTA on goods and investment will smooth the process of RCEP talks as the features in this agreement is similar to other deals with ASEAN FTA partners, such as negative listings for investment and a positive approach for trade in services,” Iman said.

ASEAN and six partners — Australia, China, India, Japan, South Korea and New Zealand — will start first-round talks on the RCEP next year, which are expected to form the world’s economic bloc in 2015.

The trade pact has been considered a way for ASEAN to maintain its centrality after new challenges had arisen for other regional trade agreements, such as the Trans-Pacific Partnership (TPP), which does not include all 10 ASEAN member nations.