India-Myanmar Trade Relations
Syed Ali Mujtaba, Ph.D. - 7/23/2007
Myanmar is the gateway to India’s ‘Look East’ policy. India is going all out to strengthen its relationship with Myanmar to achieve its stated objective. The current Indian government has infused a new momentum to keep its contacts robust with Myanmar. Indo-Myanmar relationship as a result is witnessing an unprecedented upswing in the recent years.
India is engaged in several river and land-based projects in Myanmar. The reconstruction of the Settwe port in Myanmar, Kaladan Multi-Modal Transport project and Tamu-Kalewa-Kalemyo road project are to name a few. The India-Myanmar gas pipeline project is another area where India is deeply involved in Myanmar.
India recently signed three important agreements with Myanmar; exploration of natural gas, satellite-based remote sensing and promotion of Buddhist studies in Myanmar. New Delhi is also looking for joint cooperation with Myanmar in several other fields including IT, automobile, textiles, and agro-based industries.
The scope of this paper is to focus on different aspects of India-Myanmar trade relationship. It’s organized with an overview of the Indo-Myanmar trade relationship, then looks at the border trade and discusses suggestions for improvisation of border trade. It touch upon the currency issue and then talk about commodities like pulses spices, tea and gems trade. There is also mention of narcotic trade and then briefs on the proposed India exhibition in Yungon. There is mention of regional grouping BIMST-EC and wrap-up the discussion with concluding remarks.
INDIA-MYANMAR TRADE RELATIONS
Relations between India and Myanmar have been growing during the past few years with cooperation in all sectors, particularly in those of trade and commerce.
India stands Myanmar’s 4th largest trading partner after Thailand, China and Singapore. India is Myanmar’s second largest export market after Thailand, absorbing 25 percent of its total exports. India is also the seventh most important source of Myanmar’s imports.
The governments of India and Myanmar had set a target of achieving $1 billion trade in 2006-07 but the available trade figures show its well below the desired mark.
India-Myanmar bilateral trade reached 650 million U.S. dollars in the fiscal year 2006-07. It stood at $ 341.40 million in 2004-05. It jumped to $ 557.68 million in ’05-06. This was up by 24 percent from 2004-05.
Indo Myanmar Chamber of Commerce blames lack of interest among Indians to invest in Myanmar and hold them responsible for the little growth in the volume of the trade. Out of total trade between two countries, India’s export to Myanmar is just $ 80 million.
India is taking steps such as extending airlines, land routes and sea routes to strengthen trade links with Myanmar. It is also cooperating with Myanmar in areas like agriculture, telecommunications, and oil and gas sectors etc. While there is increase in government to government cooperation in various fields, the private sector is still shying away from investment in Myanmar.
Myanmar government is going all out to woo Indian entrepreneurs and seeking Indian investments in areas like pharmaceutical, cement, steel, fertilizer, IT and food processing in a major way. With the kind of momentum that’s being built, there is little doubt that in near future bilateral trade between India and Myanmar may reach to the desired levels.
India and Myanmar share 1,643 kilometer-long common border along the Potkai Hills. India’s four states; Mizoram, Manipur, Nagaland and Arunachal Pradesh share international border with Myanmar.
The bilateral border trade agreement of 1994 provides framework facilities by which trade is carried out between India and Myanmar. Under the agreement trade is currently carried out through three designated border points one each in Manipur, Mizoram and Nagaland.
In Manipur the border trade post is at Moreh, in Mizoram it is at Zowkhathar and in Nagaland it is at Lungwa. Another trading point at Pangsau Pass in Mizoram is currently under discussion.
The volume of trade between India’s North East states and Myanmar has not been encouraging. The export growth is around 7% against the import of 32%. The Myanmar-India border trade for the first quarter of 2006-07 (April-June) amounted to just 2.91 million dollars.
Lack of memorandum of understanding between the designated banks on both sides, restriction on exports as well as on items in barter trade, and cross-border insurgency are being cited as major hurdles in two-way trade.
Right now only 22 items are allowed to be exported and imported under the free trade agreement signed between India and Myanmar. They include mustard seeds, pulses and beans, fresh vegetables, fruits and soyabean. On the other hand, India supply clothes, shoes, medicines, woolens and engineering goods to Myanmar. These items are in great demand in Myanmar.
HOW TO IMPROVE BORDER TRADE
There are certain suggestions made by the traders to improve the India- Myanmar bilateral trade. There is a plea to include items like mango, bicycles and its parts, life saving drugs, cosmetics, fertilizers, imitation jewellery, textiles and pan-masala in the list of the trade agreement.
Its also suggested to reach an agreement between the United Bank of India, Moreh branch and Myanmar Economic Bank, Tamu branch (both designated banks) to enable smooth trade operations at the Manipur border post.
There is demand for transport subsidies and more facilities to importers and exporters especially those dealing with Myanmar. There should be creation of special economic zone to facilitate the bilateral trade.
There is plea for maximum relaxation on the movement of the traders as the existing land pass issued by the Myanmar authority is usable due to restriction on traveling through land from Moreh to other parts of Myanmar.
There is also demand that Indian government should introduce International bus service linking Moreh with Mandalay. Till date, the Burmese junta does not allow the Indians to visit Burma through land routes. There are provisional entry facilities for Indian tourists through Moreh-Tamu trade point but tourists are asked to come back the same day before evening. Hence, it is an impossible for the tourists to visit Mandalay, which needs at least 12 hours to arrive there from Moreh-Tamu point. The bus service linking Moreh with Mandalay would not only just help the traders, but also bring in tourists from Myanmar to India.
To arrest the ongoing illegal trade, it’s suggested that the items of third country origin should be brought under the ambit of Indo-Myanmar Trade Agreement or under the clearance of third country origin goods vide Luggage Rule 1944.
The poor bilateral trade is apparently due to currency exchange problem on India-Myanmar border. Many a time a situation is created where Indian rupees become more to the Myanmar’s kyats triggering a fall in Indian currency. The sharp fall of Indian rupee is attributed to the drop in Chinese Yuan at the China-Burma border.
It is still unknown how much the move to close all dollar accounts and its substitution with Euro accounts has helped improving India- Myanmar border trade. Recently the Myanmar Government has approved that border trade with five neighboring countries including India would be conducted in Euro as well as the currencies of the countries concerned.
India even though being the major producer of pulses still depends on imports for 50 percent of its demand. It has entrusted National Agricultural Cooperative Marketing Federation (NAFED) and two other agencies for the import of pulses. India has also announced to do away with the import duties on the pluses.
Majority of pulses requirement of India comes from Myanmar whose 60 per cent of total global supply is made to India. However, India is finding it difficult to negotiate import of pulses from Myanmar as private traders dominate the market in the neighboring country. They tend to increase prices whenever they come to know that the Indian Government’s plans to import the pulses. The Government is aware of such intricacies but has no other go then to remain dependent on Myanmar to check the spiraling prices of pulses and also to meet its shortages.
India and Myanmar are vying with each other to dominate the world spice market particularly in curry or sauce ingredients-turmeric. India, which has a major say in this spice but of late is facing stiff competition from Myanmar.
While the Indian turmeric was selling at $1,350 per tone in the international market; the same was sold by Myanmar at $500 per tone.
The high price of Indian turmeric was due to its low production and huge demand in the local market. In the last fiscal, Indian turmeric exports were 34,500 tones at $ 27.52 million, estimated to be 20% less than the exports done during the previous year.
However, things have started looking up for India. The turmeric prices have stabilized in the domestic market due to bumper crop early this year. As a result it’s expected, turmeric exports will certainly go up, and India may once again be able to dominate the world market.
Myanmar produces about 90 million kilograms of tea annually with about 65 percent of the crop grown in northern Shan state. Tea is used in various religious and social functions, including royal ceremonies.
There are three types of tea produced in Myanmar; Green, Black and Pickled. Green-tea accounts for 52 percent of its production, Black-tea 31 percent and Pickled-tea 17 percent. Black tea is an essential ingredient of a popular national snack.
A Myanmar business delegation recently visited tea gardens in Assam and sought Indian technological help to boost its tea production. Myanmar is keen on importing available tea technology from India. They want the help of Indian tea industry in producing more tea and also improving its quality. The Niligris tea estates in South India have still not stepped in to seize this opportunity.
Myanmar is a well known producer of gems in the world. It possesses nine gems; ruby, diamond, cat’s eye, emerald, topaz, pearl, sapphire, coral and a variety of garnet tinged with yellow.
There are three famous gem lands in Myanmar; Mogok in Mandalay division, Mongshu in Shan state and Phakant in Kachin state.
Gem trade is major foreign currency earner for Myanmar which started to hold gem sale shows annually since 1964. So far it has earned more than $ 600 million from such events. The Indian Gem & Jewellery Export Promotion Council (GJEPC) is encouraging Indian buyers to participate in such gem sale shows in Myanmar.
On the India-Myanmar border, gem smuggling is a major issue. Gems like rubies, yellow diamonds and jade are often smuggled from Myanmar and sold to the Indian traders. However, due to the lack of knowledge to distinguish the real and fake gems, the smugglers are having a field day duping the Indian traders.
The Government of India is making efforts to stop gem smuggling on the Indo-Myanmar border. It has recently started a gem training programme in Mizoram where youths are trained to judge the quality and the purity of the gem.
India faces the problem of narco-terrorism through the porous Myanmar border wherein drugs are smuggled to India and exchanged for arms and ammunition. According to a report, the Indian army last year alone, seized drugs worth over 30 crore rupees in the international market from the Myanmar border. Myanmar remains the primary source of drugs problem in Manipur, Mizoram and Nagaland. Number of agreements has been signed between India and Myanmar since 1993 to collaborate to fight the drugs menace along their common border. Border fencing is important to check narco-terrorism along India-Myanmar border. Recently, India has sanctioned to raise the iron fencing, along Mizoram’s 404-km border with Myanmar. It has also ordered the fencing of the 14 kilometers of the porous international boundary at Moreh in Manipur.
INDIAN EXIBITION IN MYANMAR
To boost bilateral trade, the Indo-Myanmar Chamber of Commerce and Industries is organizing a Small and Medium enterprises exhibition, “SME India 2007” at Yangon on November 25.
The exhibition will be another Indian event in Yangon after the Confederation of Indian Industry held a "Made in India" industrial show in February 2004. In that event iron and steel products, construction materials, medicine and medical equipment, cosmetics, garment, handicraft, leather ware, farming equipment, electronic products and kitchen ware put on display.
This “SME India 2007” is organized to attract the attention of Indian entrepreneurs to tap business opportunities in Myanmar. Indo-Myanmar Chamber of commerce estimates that “SME India 2007” may fetch a total business of $ 25 million. Its also expects that Indian SMEs after the exhibition would invest in various industries in Myanmar in major way.
India and Myanmar are also part of the BIMST-EC, a regional body comprising Bay of Bengal nations.
BIMST-EC stands for Bangladesh, India, Myanmar, Sri Lanka, and Thailand- Economic Cooperation.
The conclusion of Free Trade Agreement among BIMST-EC nations is a pressing demand to facilitate hassle free trade flow among its member countries.
India has already concluded a free trade agreement with Sri Lanka in 1998 and with Thailand in 2004. It is yet to finalize this agreement with Bangladesh and Myanmar.
Currently the BIST-EC countries are discussing the list of items that may enjoy “preferential rules of origin” facilities. However, the fear among them is giving concessions under rules of origin may lead to third country imports flowing into the markets of member countries on preferential terms.
India is debating this issue very seriously as there are cases that under the garb of free trade agreement, non-BIMST countries have used Sri Lanka and Thailand as convenient destinations to dump their products into India.
India and Myanmar are considering series of initiatives for expansion of border trade between the two countries. Indian has given its approval for the signing of a proposed agreement with Myanmar for the avoidance of double taxation and prevention of fiscal evasion with respect to Income taxes. The agreement once comes into effect will stimulate the flow of investment, technology and personnel from India to Myanmar and vice versa. It is also expected to provide tax stability and facilitate mutual economic cooperation between the two countries.
The government has approved the linking of United Bank of India (UBI) at Moreh post in Manipur with Myanmar Economic Bank at the Tamu town in Myanmar. The two banks would avail the letter of credit (LoC) facilities and under this system Indian rupees and Myanmarese kyats can be legally converted into foreign currency at these banks.
To make banking facilities still easier, the two banks will be connected by telephone. The Central government is considering the survey report carried out by the Manipur telecom officials for the hotline facilities between Moreh and Tamu banks. Once this facility becomes operational, the exchange of cash would not only become legal but much easier. It is also expected that the volume of trade will automatically increase as well.
Talks are also on to increase the number of tradable commodities that at present is confined to only 22 items. New Delhi is considering items like life-saving drugs, bicycle parts, fertilizers, cosmetic items, garments, motorcycle parts, X-ray papers, and imitation jewellery items to be included in the tradable list.
There are also plans to allow free movement of Myanmarese citizens up to Moreh town. The Manipur government has submitted 200 crore rupees project proposal to the Central government for developing infrastructure at Moreh. This would include construction of a composite check-post.
Finally, a lot of people in India are still not aware about Myanmar produces and that these products could be officially traded. Better communication between trading partners is the key to increasing bilateral trade. The importance of business delegations, special promotion campaigns would create awareness between the two countries. The business communities would definitely come forward to take a lead and help in increasing the volume of the trade.
Syed Ali Mujtaba is a journalist based in Chennai, India. He can be contacted at email@example.com