Strengthening relations with Myanmar

Written by Prabir De | Updated: Mar 19 2008, 04:32am hrs
India shares an abundance of economic interest with Myanmar today, particularly in the backdrop of Indias Look East Policy. Myanmar is important for India because the country holds over 1.5 million People of Indian Origin (PIO)largest outside India.

Why is Myanmar so keen to renew its relationship with India First, heavy migration of mainland Chinese people over the last few decades has forced Myanmar to seek an alternate partnership in the region. Second, Myanmar does not want to experience any more the awful side of free tradethe dumping and transit ground of cheap foreign goods and services.

Instead, Myanmar wants to enjoy the good side of globalisationto become a prosperous nation. Third, India has been providing higher market access to Myanmar, which has been helping them to build resource-based domestic industry and to enjoy comparative advantages of its energy resources. Finally, military ruler of the country wants to give a taste of democracy to its people from 2010 onwards.

How is the relationship then growing better and better between India and Myanmar India is witnessing rising trade in goods with Myanmar. India is now Myanmars fourth largest trading partner, next to Singapore, China and Thailand. The bilateral trade in goods was about $750 million in 2006, up from $227.23 million in 2000, of which Indias export to and import from Myanmar were $38 million and $612 million respectively.

Indias import from Myanmar is about 4.5 times higher than its export to that country. India sources mostly raw materials from Myanmar, of which two commodity groups, namely, edible vegetables and related products, and wood and wood products, share 63% and 34% of Indias total import from Myanmar, respectively. Compared to import, Indias export to Myanmar is diversified, mostly finished goods, such as pharmaceuticals, iron and steel, electrical machinery and equipment, among others.

India provides higher market access to Myanmar, compared to China (see table). Myanmars export to India ($555.10 million in 2006) was higher than Myanmars export to China ($229.70 million in 2006). India has also provided over $50 million Line of Credit to Myanmar in the past five years in order to help that country to expand its exports to India. However, the Myanmars trade structure with China will change completely once export of gas to China is resumed later this year.

Indias trade and investment with Myanmar will increase if barriers are removed. First of all, even though the two countries share a border they do not trade at the border. IndiaMyanmar should resume full-fledged trade at the border. Compared to ocean trade, border trade in value terms has been only 1% ($3.5 million in 2004) of the total bilateral trade.

The present form of border trade is restricted and not the MFN type. Border trade between the two countries is conducted at Moreh (India)Tamu (Myanmar), which was opened in 1995. The second border trade point at ZowkhatharRhi, opened in 2004, is not active. To improve border trade, India has offered assistance to construct the Rhi-Tiddim and Rhi-Falam roads along the Chin-Mizoram border.

India is relatively restrictive to Myanmars exports. Indias weighted average tariff in 2005 on imports from Myanmar was about 17.48% with the exchange of 270 tariff lines, whereas the same in case of Myanmar on imports from India was only 2.62% with the exchange of 2,071 tariff lines. Indias higher tariff is negating the distance advantage and escalating trade costs.

Indian investment in Myanmar is very small till date. Only one Indian company, Tractors India, has set-up a manufacturing unit in Myanmar. However, in order to attract overseas investments, Myanmar has to carry out large scale, domestic reforms in the money and banking sector. Otherwise, wage, resource and locational advantages will not generate any substantial dividend to Myanmar.

Modernisation of Land Customs Station at Moreh in Manipur would pave the way in formalising the informal rent-seeking local economy. In this regard, the proposed Integrated Check Post (ICP) at Moreh is certainly a good beginning. At the same time, India and Myanmar also need to simplify customs procedures and agree to the transit arrangement following their commitments in WTO.

Setting up a Special Economic Zone (SEZ) at the border will give a boost to the local economy at both sides of the IndiaMyanmar border. This will attract FDI in resource-based industries, such as newsprint, wood and wood products, agriculture and food processing, among others.

Cross-border projects are essential to foster mutually beneficial cooperation. In order to take the bilateral relationship forward, India has major responsibilities. India should link Manipur and Mizoram with its mainline railway corridor (NF Railway) and help Myanmar re-establish its railway network. Without a modern and harmonised railway system in Myanmar, Indias dream to link Delhi with Hanoi or to hook up with the Trans-Asian Railway (TAR) will be unfulfilled.

India has shown keenness to modernise the Myanmar railway network. In 2003, during the visit of Indias vice president to Myanmar, the offer of a $57 million Line of Credit (LC) was announced for upgradation of Myanmars railway network from Yangon to Mandalay.

There is some progress on Kaladan multimodal transportation project. Coming month will see the BTU (Build, Transfer and Use) agreement signed for $120 million Kaladan project. When completed, it will give an ocean access to Indias Northeast (starting with Mizoram) at Sittwee port in Myanmar.

Sittwee is 250 km from the Indian border on the north-western coast of Burma, where the Kaladan river joins the Bay of Bengal.

Overland connectivity is another important aspect of bilateral relation. India is implementing BIMSTEC Highway, which will provide an uninterrupted transportation linkage between South and Southeast Asia through Indias Northeast and Myanmar.

The successful upgradation of the 160-km Tamu-Kalay-Kalewa road (northern part of this highway) by India is a good beginning.

Myanmar has an abundance of offshore natural gas resources. Current engagement between the two countries in the energy sector is limited, but opportunities are plenty. The Essar Group is about to start drilling test well to explore natural gas at an inland block in Myanmars western coastal Rakhine state later this year.

OVL and GAIL are already involved in similar activities at Blocks A-1 and A-3 in the same offshore area in partnership with South Korean companies. India and Myanmar are working together for the development of a hydroelectric project at Tamanthi. This project has the potential of generating between 600 mw and 1,000 MW of electricity.

As India considers its future role in Asia, the rise of Myanmar would then represent a positive opportunity to advance this countrys Asian and global interests. It would be in Indias strong interest to see Myanmar develops a lasting growth. Offering membership in SAARC to Myanmar will certainly build mutual trust and confidence. Building a deeper cooperation with Myanmar should be one of the Indias highest priorities.

This author is Fellow, Research and Information System for Developing Countries. The views expressed are personal. Email: prabirde@ris.org.in