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Dynamics of Indo-Myanmar Economic Ties

Dr. Saurabh, Research Fellow, Indian Council of World Affairs.
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  • January 06, 2010

    India and Myanmar are bound by a 1600-kilometer land frontier, a long maritime boundary and also by religious, cultural and ethnic ties, which go back two millennia. India's four states Mizoram, Manipur, Nagaland and Arunachal Pradesh share India’s international border with Myanmar. This geographical proximity between the two countries translated into long-standing trade relations across land borders and the sea route.

    India's Vice President Mr. Hamid Ansari Visited Myanmar last year and observed that the economic engagement between India and Myanmar promises immense potential. He also emphasized the importance of enhancing interaction between India’s North Eastern states and Myanmar which occupy a central place in India's Look East Policy. Myanmar is India's gateway to ASEAN as it is the only ASEAN country which has land and maritime borders with India. India and the ASEAN signed a Free Trade Agreement in August 2009 which will cover 11 countries, including Myanmar, with a combined Gross Domestic Product (GDP) of over $2 trillion. ASEAN Regional Forum, India-ASEAN Summits, East Asia Summit, BIMSTEC and Mekong-Ganga Cooperation provide further avenues for mutual cooperation between the two countries.

    The economic engagement between India and Myanmar has expanded into the public and private sectors. The first India-Myanmar Bilateral Border Trade Agreement was signed in New Delhi in January 1994 and was implemented in April 1995 with the opening of a cross border point between Moreh, India and Tamu, Myanmar. The agreement provides facilities by which trade is being carried out through the designated border expansion of the list of exchangeable items. The opening of border posts has also helped in checking illegal trade of goods and monitors the activities of insurgent groups between India and Myanmar.

    The year 2003 witnessed events which not only cemented existing bilateral ties, but also provided a foundation on which commercial and economic could expand in the future. A joint Trade Committee was set up to work towards increasing bilateral trade, a Memorandum of Understanding was signed on cooperation in information and communication technology, a new Line of Credit for 25 million US dollars was signed to boost exports, and in November 2003 the offer of a 57 million US dollars million credit line was announced by India in order to upgrade Myanmar's railway network.

    India is one of Myanmar's major trading partners and one of the largest markets for its goods. The most startling fact is that bilateral trade between India and Myanmar has grown more than eighty times in the last twenty eight years. From US$12.4 million in 1980-81, India-Myanmar trade grew steadily, to reach a level of 995 million US dollars in 2007-08. The actual trade turnover may probably be more if trade via third countries, particularly Singapore, is taken into account.

    India's exports to Myanmar, though small, range from primary commodities to manufactured products. Primary and semi-finished steel along with steel bars and rods constitute over one third of India's exports. Indian drugs and pharmaceuticals have also established a significant market presence. India's exports to Myanmar's in 1990-00 and 2007-08 were 72.16 million dollars and 162.98 million respectively.

    India's imports from Myanmar between 1990-00 and 2007-08 stood at 215.35 million dollars and 809.94 million dollars respectively. The balance of trade is heavily in favour of Myanmar. Myanmar contributes to nearly one fifth of India's imports of timber, second only to Malaysia, as timber and wood products accounted for nearly 30% of Myanmar's exports to India. Myanmar is the second largest supplier of beans and pulses to India, next only to Australia.

    Developmental projects have become essential elements of India's approach towards building good neighbourly relations and fostering mutually beneficial cooperation. Kaladan multi-modal project in Myanmar promises to be the cornerstone in India's efforts to develop infrastructure projects for cross-border benefits in the region. India is assisting the India-Myanmar-Thailand Trilateral Highway project and has also extended project specific credit lines for upgrading the Yangon-Mandalay Trunk line and for the optical fibre link between Moreh and Mandalay.

    Several positive developments have taken place recently in the areas of trade, investment, power, oil and natural gas, manufacturing and the vocational training sectors. In 2008, India and Myanmar signed four economic cooperation agreements which include the Bilateral Investment Promotion Agreement, two credit line agreements between the EXIM Bank of India and the Myanmar Foreign Trade Bank for 20 million dollars for financing the establishment of wire manufacturing plant, 64 million dollars for financing three 230kv transmission lines in Myanmar and the last agreement provides a banking link between Myanmar Economic Bank and United Bank of India. New vistas of cooperation in IT, automobiles, textiles, river and land-based transportation system were also explored.

    India-Myanmar trade has immense potential for cooperation in the field of natural gas as Myanmar has reportedly one of the world’s biggest gas reserves estimated to be more than 90 trillion cubic feet. ONGC Videsh Limited and Gas Authority of India Limited hold a 30% stake in the exploration and production of gas in Myanmar's off shore blocks located in the Sittwe Area of Arakan State. India has evinced keen interest to procure gas from Myanmar. India however, still faces the problem of transporting gas from Myanmar. A technical consultant company was engaged by the Gas Authority of India to prepare a detailed feasibility report for the pipeline route to Myanmar. The company has come up with the route that would link Myanmar's Sitwe Sea with Jagdishpur-Haldia pipeline at Gaya in Bihar. Once the negotiations are over and the deal is finalized, the Eastern and North-Eastern states of India are expected to witness a massive spurt in economic activity, and the India-Myanmar bilateral relationship will definitely get stronger.

    Clearly, there is immense scope for cooperation between India and Myanmar to deal in agro-based products, floriculture, engineering, timber and tobacco and expand business cooperation. Although there has been a significant increase in bilateral trade in recent years, full potential has yet to be realised.