Burma - India Relations

India-Myanmar Economic Cooperation: The Road Ahead – Analysis

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By Mihir Bhonsale

For once, there seems to be a convergence of interests for both the South-east Asian countries as well as the West in Myanmar, ever since the resource rich country undertook political and economic reforms. India, emerging from the policy of pragmatism towards Myanmar in the 1990s, has established itself as Naypyidaw’s fourth largest trading partner and a major investor in infrastructure and oil sectors. However, the lack of realisation of the full potential in enhancing India-Myanmar economic cooperation is likely to hurt Indian interests at a time when Myanmar is taking baby steps in globalising its economy.

India is eying a substantial increase in trade with the Association of South East Asian Nations (ASEAN) countries by 2015, and for that to happen enhancing economic cooperation with Myanmar is important as Myanmar is India’s only land-bridge to South East Asia.

Cooperation in recent times

India’s total trade with Myanmar in 2012 stood at an estimated $ 1.9 billion and both the countries have set a target of $ 3 billion by 2015 for bilateral trade1 . India-Myanmar trade has come a long way from the 1980s when it was $12.4 million in 1980-81 to $1070.88 million in 2010-11.

Indian oil and gas companies have invested in sourcing gas from blocks in Myanmar and India has also discussed apparel, refineries and information technology sectors. Myanmar expects India to invest in telecommunications and software and services sector. Mr Anand Sharma, India’s minister for commerce, industry and textiles, during his visit to Naypyidaw to attend the East Asian Forum in June, 2013 revived discussions on the gas pipeline connection between India and Myanmar through Bangladesh. Sharma is said to have explored the possibility of the two blocks awarded to Indian company ESSAR Ltd as a source for the pipeline to India.

In 2012, Myanmar and India had signed 12 MoU agreements on infrastructural projects and tapping of natural resources. India has also promised a $ 550 million as line of credit to Myanmar for the development of railways, transport, power transmission lines and oil refineries. The Kaladan Multi-Modal Transit Project once completed is expected to transform trade and commerce in the Rakhine and Chin states as well as the north-eastern states of India. The 3,200 km Trilateral Highway Project connecting Moreh in Manipur to Mae Sot in Thailand via Myanmar is expected to be completed by 2016.

The road head

With Myanmar already having taken over the chair of ASEAN, India is eyeing a window of opportunity to increase trade with Myanmar and ASEAN countries. India-ASEAN trade stood at $ 70 billion in 2012 and is expected to rise to $ 100 billion by 2015. And Myanmar would be crucial in determining New Delhi’s efforts to cooperate with the ASEAN. The India-ASEAN Free Trade Agreement (FTA) in goods has been able to record 30 percent growth in India-ASEAN trade which crossed US $ 50 billion mark in 2010-11 and $ 70 billion by 2012. The FTA is set to abolish tariff restrictions on 3,200 items by December, 2013 and thus promises to throw open enormous economic opportunities to India, particularly to India’s North-East and Eastern states.

Border trade is the most important when it comes to India’s trade with Myanmar. India shares a 1,600 kilometers long border with Myanmar especially through the Northern Eastern states of Manipur and Mizoram and the total border trade stood at around $ 13.73 billion in 2009-10. While Myanmar recorded a 58 percent hike in its border trade in 2011-12, amounting to $ 3.367 billion, India-Myanmar trade amounted to about $15.049 million only in the same period, reflecting the scope for more engagement in the area. Myanmar, in the recent past, has also opened two border trade-points with India – Tamu and Reedkhawdhar in the Sagaing region and Chin state of Myanmar respectively. A third border trade point is proposed to be opened at Avakhung- Pansat/ Somrai. With the road being cleared for trade between India and Myanmar via the Pangsau Pass on the Arunachal Pradesh border, the historic Stilwell Road is likely to come alive with commercial activities.

Myanmar is also India’s link to countries involved in sub- regional groupings like Mekong-Ganga Cooperation, the Bangladesh China India Myanmar (BCIM) regional economic cooperation, Greater Mekong Sub-region (GMS) development scheme, the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC). Myanmar is an observer in South Asian Association for Regional Cooperation (SAARC) and would depend on India to increase trade with South Asian nations.

Even though India’s trade with Myanmar is expected to reach to $3 billion in 2014-15, the trade would still be half of what China’s trade with Myanmar is today. More so, the trade balance is in favour of Myanmar with India bearing a trade deficit for all these years starting 2006-07 and in 2010-11 incurring a highest deficit of $ 681.38 million.

Also, with increased engagements of Japan and the West with Myanmar, the fears of crowding out New Delhi are real. However, it needs to be seen how well Myanmar takes the shocks of shrinking Chinese investment which according to a U.S. based think-tank study 2 indicated at drastically reducing from $ 12 billion from 2008 to 2011 to $ 407 million in financial year 2012-13. There are also reports of Beijing’s attempts to make inroads in influencing leaders of Myanmar’s opposition party, Suu Kyi’s National League for Democracy (NLD) whose candidate is said to be the front-runner in the 2015 presidential elections. Hence, there are fears that Myanmar is observing caution when it comes to upsetting, China.

India expects that its North East develops as a consequence to the connectivity with its South-eastern neighbours, including Myanmar. However, border trade where the two countries can instantly cooperate, still remains an area of concern. There is a dire need to resolve the issues on logistics and implementation. India is yet to open the historic Stillwell Road. The ambitious Kaladan Multi-modal Project is also moving slowly due to the unavailability of funding for infrastructural upgrade in India’s North East.

India’s public sector investments in infrastructure and oil in Myanmar are not enough and the private sector has to come forward to advance economic cooperation between the two countries. Indian private sector would also not have an easy go as they would have to compete with private players from across the world to make inroads into Myanmar. Having said this, it is still India’s moment to take the initiative in escalating economic ties between the two nations. Either, New Delhi strikes when the iron is hot or wait to be relegated as a mere spectator watch European Union, Japan and U.S. steal the show.

1. ’India-Myanmar Relations’ Ministry of External Affairs, Government of India Website

2. ’Chinese Investment in Myanmar: What Lies Ahead?’ www.stimsoncentre.org

(The writer is a Research Assistant at Observer Research Foundation, Kolkata)


About the author:

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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