By INS Contributors

KUALA LUMPUR, Malaysia: Cooperation between Malaysia and India, both bilaterally and through regional mechanisms such as the Association of Southeast Asian Nations (ASEAN), will keep regional trade active and dynamic while unlocking the potential of India's vast and growing consumer base, according to officials at a trade conference here.

In his speech at the Malaysia-India Trade KL Conference 2024, Malaysia External Trade Development Corporation (MATRADE) chairman Reezal Merican Naina Merican said  trade between Malaysia and India stands at an impressive US$16.5 billion, supported by a compounded annual growth rate of 8.5 percent over the past two decades.

Reezal Merican said not only has trade between the two grown, the complexity and value of the trade has also progressed: two decades ago, Malaysia’s exports to India were predominantly comprised of palm oil and petroleum products, accounting for nearly two-thirds of total exports. However, as Malaysia’s economy has diversified, so has its trade portfolio.

"Today, electrical and electronics products have emerged as key export items, while the share of primary commodities has decreased to just one-third. This shift underscores Malaysia’s transition toward higher-value-added industries, a testament to its dynamic and forward-looking economic policies," he said in a speech delivered by Shah Nizam Ahmad, MATRADE deputy director (transformation and digital trade division).

"From India’s perspective, we see a similar evolution in its export portfolio to Malaysia. Historically centered around meat, dairy, and cereals, India’s exports have diversified significantly. Today, petroleum products and engineering goods are the largest components of Malaysia’s imports from India. This shift highlights India’s growing industrial capacity and its ability to adapt to the changing demands of international markets. These developments have been made possible by the economic frameworks that facilitate smoother trade flows and support sustained growth," he said.

But certain challenges must be overcome to realise the growing potential of India's trade with not only Malaysia but the region, Herald Vision Foundation president Ong Tee Keat said, explaining that while India-ASEAN trade is valued at US 131 billion, there lies a deficit of US43 billion on the part of India.

The asymmetry of ASEAN-India trade relations was attributed to the purportedly "ill-conceived" ASEAN-India Trade In Goods Agreement " which is said to be unfair to the Indian industries, under the lenses of New Delhi.

"In contrast, from the Southeast Asian entrepreneurial perspective,  India's trade policy still appears relatively protectionist, thus restricting its market access to its trade partners. The 11th hour withdrawal from the Regional Comprehensive Economic Partnership (RCEP) further bolsters the perception that India prioritises its domestic economic interests more than enhancing collective aspirations through multilateral economic cooperation," he said.

Ong added that India's low integration with the East Asia-centric global value chain (GVC), alongside its relatively under-developed manufacturing base, inhibits the most populous nation from becoming a preferred destination for the GVC diversification and an alternative manufacturing hub, particularly so when more industries were seeking to relocate their production bases out of China amid the escalating Sino-US tensions.

"In this context, certain ASEAN member states with manufacturing prowess may stand to rival against India as the choice of destination for GVC diversification. Nonetheless, as globalisation is becoming increasingly decentralised, coexistence and partnering of multiple destinations for GVC restructuring is no longer a myth. The entrenched China-ASEAN partnership in the East Asia-centric GVC shouldn't be the reason to alienate India from partnering with ASEAN in harnessing economic opportunities arising from the GVC shift," he said.

For his part, Governing Council of Research & Information System for Developing Countries (RIS) executive member Seshadri Ramanujan Chari said overcoming geopolitical challenges and headwinds in economic engagements, India-Malaysia trade is poised to reach a comfortable level of balance of trade.

Malaysia stands as India’s third-largest trading partner within the ASEAN region, while India is one of Malaysia’s largest trading partner in Southeast Asia.

"The Comprehensive Economic Cooperation Agreement (CECA) between Malaysia and India since 2011 and the free trade agreement (FTA) between India and ASEAN on Trade and Investment since 2015 have significantly streamlined trade and investment processes. These arrangements will need periodic review and should reflect the current realities, challenges and opportunities," he said.

"Besides edible oil and electronics, both have immense potential to trade in diverse products and services. While both countries have enormous potential in bilateral and multilateral trade, both are committed to ASEAN centrality in Asia’s regional security and multilateral cooperation," he added.

Organised by the Centre for Economic & Sustainable Development (CESDAsia) with the theme of “Exploring India-Malaysia Relations: Expanding Cooperation in

Trade, Security & Regional Development”, the trade conference brings together trade and economic experts to evaluate the path of Malaysia-India trade as well as India's trade potential with the wider ASEAN region in the context of geopolitical shifts in the Global South.