India signs trade pact with Malaysia

India signed a comprehensive economic cooperation agreement (CECA) with Malaysia which gives its doctors, accountants, two-wheelers, cotton garments and basmati rice greater access to the Malaysian market. This is in return for faster duty cuts for refined palm oil and binding tariffs on three other palm products. Besides, India has committed to freer entry norms for Malaysian engineers, accountants and IT specialists coming to the country on temporary contractual assignments. There is an agreement on both sides to foster investment with India allowing Malaysian companies to hold 49-100% equity in 84 service sectors while Malaysia provided a similar dispensation for Indian companies in 91 sectors including construction (51%), computer & related services and management & consultancy (100% each). The India-Malaysia CECA goes beyond the commitment offered by the two countries under the Asean agreement. In all, India will keep 1,225 items outside the ambit of tariff reduction, compared to 1,298 for Asean members. Similarly, Malaysia will keep 838 products in the exclusion list compared to 898 under the Asean pact. As a result, India has agreed to lower the import duty on refined palm oil to 45% by the end of December 2018, which is a year ahead of what it has committed under the Asean treaty. Similarly, the decision to bind tarriffs on three palm products by December 31, 2018 was not part of the Asean agreement. In terms of tariff reduction, there will be three tracks -- Normal I, Normal II and Sensitive. For Normal Track I, import duty on all products will be eliminated by the end of September 2013, as against December 31, 2013 under the Asean agreement. For Normal Track II, there will be a six-month advancement resulting in an elimination of tariffs by 30 June, 2016. For sensitive list items, the two countries have committed cap tariffs at 5% by 30 June 2016, six months ahead of the schedule provided under Asean. There is a fourth track too — Special Track — where tariffs are to be capped at 5-20% over a period of four-seven years. Apart from these, there are special provisions for India and Malaysia. For Malaysia, there is another list which includes highly sensitive items. Here, for goods attracting over 50% duty, Malaysia will cap these tariffs at 50% by the end of 2018. For highly sensitive items where the customs duty is 50% or below, there are two options. One is to cut duties by 50% by the end of 2018 or two, to lower it by 25% by then.