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Rediff.com  » Business » India, Malaysia set to sign historic economic pact

India, Malaysia set to sign historic economic pact

October 26, 2010 23:20 IST

When Prime Minister Manmohan Singh meets his Malaysian counterpart Mohammed Najib Tun Abdul Razak on Wednesday in Kuala Lumpur, the focus will be on strengthening bilateral trade relationship, apart from firming up political, defence and cultural ties.

Dr Singh arrived in Kuala Lumpur on a three-day visit on Tuesday to a rousing welcome. This is the 'first bilateral visit' by an Indian prime minister to Malaysia since 2001.

The two leaders are likely to finalise the Comprehensive Economic Cooperation Agreement, which will be formally signed in January next year after the due process of 'legal scrubbing' is over, sources said. The CECA, once signed, might come into force from July 2011.

If the free trade pact between the two nations goes through, it will be an enormous enabling instrument for goods, services and investment, apart from freer movement of people, sources said.

India has already signed bilateral free trade agreements with South Korea, Singapore, ASEAN. Dr Singh's productive visit to Tokyo also saw India firming up the Comprehensive Economic Partnership Agreement with Japan. The CEPA with Japan could be signed as early as January 2011, and will provide a tremendous impetus to Indo-Japanese bilateral trade.

The free trade agreement, for which seven rounds of negotiations were held in seven months, will be besides the one India has signed with the ASEAN grouping of which Malaysia is a part.

Once the CECA with Malaysia is signed, the Indian economy will connect with the other economies and the Indian footprint in Asia-Pacific region would be truly established.

India and Malaysia have seen their economic ties undergo a significant transformation over the last decade, with trade rising tenfold from $1.1 billion in 2001 to an expected $10 billion this year, sources said.

Malaysia is also India's second largest trading partner in ASEAN.

Dr Singh and Prime Minister Najib are also expected to sign five more agreements, covering issues like culture, science and technology, IT, and tourism, during his stay in Kuala Lumpur.

Malaysia plays a significant role in the ASEAN region and the top level exchanges between the two countries are a reflection of the strong mutual desire for a 'qualitatively new partnership'.

Apart from engaging in a dialogue to strengthen the overall ties between India and Malaysia, the two prime ministers are also likely to announce the setting up of a CEO's Forum to boost business. The CEO Forum will have L&T chief A M Naik as the co-chair and also include Biocon chairperson Kiran Mazumdar-Shaw, ICICI Bank CEO Chanda Kochhar, TCS CEO N Chandrasekaran, Apollo Hospitals managing director Preetha Reddy, HSBC India chief Naina Lal Kidwai, among others.

The two nations might also issue an outcome document which among other things is a roadmap to achieving their economic objectives.

The two prime ministers will also visit 'Little India' business area in Kuala Lumpur. Even as New Delhi and Kuala Lumpur plan to sign an agreement that will boost bilateral economic, cultural, political and defence ties, and allow for more people-to-people contact, a Malaysian party has urged India to look into the alleged discrimination against Indians, who feel marginalized, in their own country.

With the ethnic Indian population about 8 per cent of Malaysia's 28 million people, the community is over 2.1 million strong. To send a strong political message to the Indian community that, both, the Malaysian and the Indian governments will stand by them, the two leaders are paying a visit to Little India, sources said.

Dr Singh is accompanied by his wife Gursharan Kaur and a high level delegation, including Commerce Minister Anand Sharma.

The prime minister is in Malaysia on the second leg of a three-nation trip. The third leg of the tour will see him visiting Vietnam for the ASEAN Summit.

Shishir Bhate in Kuala Lumpur