October 25, 2016

India-Myanmar Relations: Frontiers of a New Relationship

~ By : Gautam Mukhipadhyaya

India-Myanmar relations are poised to take-off, cross existing frontiers and attain new dimensions. We are on the threshold of a new Myanmar; Prime Minister Modi’s economic policies and energetic diplomacy promise to place the Indian economy into a qualitatively high growth path and India itself in the forefront of the international community; and with structural changes under way in the Arab world, Europe, not to forget challenges in the US and China, the world itself is in the throes of uncertainty and (possible) metamorphosis.

Together, these developments throw, as the cliché goes, both challenges and opportunities as some countries and regions face shocks and prospects of relative decline and others, emerge. How could India and Myanmar avoid the pitfalls of the first and capitalise on the possibilities of the second? Could India and Myanmar forge a strategic economic partnership in which we could be a major partner in new Myanmar’s democratic transition and sustainable economic development, and Myanmar could provide India an economic base to expand its presence in the nascent ASEAN Economic Community and the Greater Mekong sub-region up to the South China Sea and the South Pacific? Could India and Myanmar together with the other members of BIMSTEC, build a truly prosperous Bay of Bengal Community linking South and South East Asia?

While it is tempting to touch on the whole spectrum of the agenda of this Conference, I would concentrate in some detail on one strategic initiative that according to me deserves special attention: our economic relationship, in particular the role that Indian investment in Myanmar could play in promoting India-Myanmar relations, contributing to Myanmar’s economic development after nearly 50 years of self-imposed and forced isolation, and expanding India’s economic presence and political profile in South East Asia. This emphasis would mean the relative negligence of political, security, cultural and people to people initiatives.

It is commonplace at present to talk about India’s ‘Look’ and ‘Act East’ policy, and the North East of India as a gateway for it, but so far, discussions and initiatives in this regard have taken place largely in terms of trade and connectivity. The idea of Indian investment, especially private sector investment in Myanmar, has not really entered into India’s vocabulary as a separate category that requires a conscious policy, strategy and attention at the political and industry level.

Indeed, the rhetoric of ‘Act East’, ‘gateway’, ‘trade and connectivity’, etc. has tended to be framed in terms of an outlet for and development of the North East, and access to the markets of the ASEAN and South East Asia, with Myanmar implicitly as a ‘transit’ country. Though a bit of a simplification, this tends to overlook the potential of the Myanmar economy, or of its value to us for our economy, or of Indian investment in Myanmar as a ‘base’ and or ‘spring board’ for India towards the South China Sea and South Pacific. This is not a one-sided proposition and would benefit both sides.

This means that in the process a huge opportunity is missed that others are already cashing in on. In fact, Japan has already done that with Thailand in a previous generation and reaping the rewards in terms of market entry into south East Asia, and is now doing that in Myanmar. Similarly, Thailand has been aggressively promoting its products in Myanmar and pushing westwards through land and, via the planned SEZ in Dawei, the sea.

China’s investments have been mostly extractive, but even they are moving towards more strategic investments in oil and gas pipelines, a deep sea port, and a Special Economic Zone Kyaukphyu, and if they could help it, road and rail connectivity from Yunnan to Kyaukphyu, both as an outlet for Yunnan and access to the Bay of Bengal as part of its OBOR strategy. This obviously has strategic implications for India, which too have not been adequately realised.

Admittedly, all three have had a head start over us. But why has India, which has had the deepest cultural links of all three through history, and the closest administrative, trade, connectivity, migration and people-to-people ties for 150 years through British rule and 15 years of the post-independence until the 1960s, not realised the value of Myanmar as an investment destination?

How is it that despite the fact that India and Myanmar are cultural and geographical neighbours that share 1,600 kms of land boundary and a comparable maritime boundary in the Bay of Bengal and Andaman Sea, both countries do not think of themselves as neighbours psychologically in the same way as we think of Bangladesh or Nepal, or Pakistan, Bhutan, Sri Lanka, Maldives, Afghanistan, or even Singapore, Thailand, Mauritius or Malaysia, further away?

Similarly, in 50 years, Myanmar, a country that once tilted culturally towards India, has turned its face definitively towards the east; and now also looks to the West, ‘overlooking’ India as it were. We are neighbours, but practically strangers. Despite a huge Indian origin diaspora in Myanmar, Myanmar’s once large post-1960s population of Indian returnees, and a Myanmar exile population in India during the period of military rule, we hardly know each other. We hardly know our diaspora in Myanmar either. All that most Indians know about Myanmar is the saga of Daw Aung San Suu Kyi.

Is severance from British yoke and 50 years of reclusive and sanctioned military rule enough to cause such mental amnesia on both sides?

Further, why we do not as yet think of Myanmar as a land of economic opportunities, which is undoubtedly is? This is even more puzzling if we look around us.

It is obvious that Myanmar is our most well-endowed neighbour. With an area of 653,000 sq kms, it is second in size only to Pakistan (and about the same size as Afghanistan), but with a population density of only 82 per sq km, [higher than only Bhutan (20) and Afghanistan (48) in South Asia], and less populated than Bangladesh or Pakistan, by a factor of more than three.

It is strategically located between the huge markets and geo-politically important centres of India, China and the ASEAN. It has perhaps those most valuable of natural resources, plenty of land, water and sun. It has fertile agricultural land and potential, and rich forests. It has oil & gas, precious stones like rubies and jade, precious metals like gold, and copper and lesser metals in abundance.

It is poor but not as poor as most of populous South Asia (with a GDP per capita of US$ 1,228). It is a country with high social capital and degree of equality, and a relatively educated, culturally disciplined, and easily trainable work force. It is still a low cost economy. It has almost everything an investor could want and need.

Not that this was unknown to us. In our ancient history Myanmar was the original ‘swarnabhumi’ or golden land, ’Brahmadesh’, the land of Brahma. Just 100 years back, it was seen as a land of opportunity for hundreds of thousands of migrants from practically all parts of India. In his highly readable book, ‘the River of Lost Footsteps’, Thant Myint U notes that at one time between the wars, Myanmar received, under British rule, as many or more migrants than New York or the United States, almost entirely from India! Downtown Rangoon was practically an Indian city (and still bears the character of one).

Until Gen. Ne Win’s military coup in the 1960s, it was the Bangkok of today, a crucial transit point in the air routes to the east and west (and even to the Andaman Islands). Rangoon University was arguably the foremost university in South East Asia. Myanmar was in the forefront of the region, not part of the CLMV (Cambodia, Lao PDR, Myanmar, Vietnam), the least developed countries of the ASEAN. It produced civil servants of the class of U Thant.

It is my considered view that with the reforms unleashed by President U Thein Sein’s government, the voice and power of the people especially its talented youth liberated by the remarkable November 2015 elections which has brought the NLD to government, and its current growth rate of around 8% (albeit from a low base), Myanmar could easily become the new tiger economy on the block in 5-10 years, not just any tiger economy, but a large tiger economy whose roar could be heard well beyond the region. All the more reason why India should take it seriously.

It is true that there are also challenges: of peace, reconciliation, a not yet fully democratic constitution, a lack of, or poorly developed civil institutions; issues of land ownership, records, titles and forced or disputed acquisitions; need for a modern and enabling legal and regulatory environment; political stability and risk; and political, environmental and social opposition to some projects and investments. Not all is well between the elected government and the military. The constitution is disputed. The new government lacks administrative experience, and is still trying to craft its polices for peace and development.

But these are all being addressed. Most of the all, the leadership is rational and enlightened; highly educated expatriates are returning, the young generation keen to catch up with the world, and the public increasingly involved in decision-making. Issues are being debated. It is a thoughtful process.

It is fortunate in that between India and Myanmar, there are really no contentious political issues, and the few areas that require attention are not intractable and could be addressed reasonably. India also enjoys cordial, if not necessarily close relations with virtually all political forces in Myanmar. India should actively support and play a constructive role in Myanmar’s democratic transition, peace process, and sustainable economic growth and development.

Not that the Government of India has been inactive. In fact, successive governments have followed a very thoughtful policy on Myanmar since independence but particularly since the challenge posed by Gen. Ne Win’s coup. They have, in different phases covered political, security, trade, connectivity and development initiatives, but not the idea of Indian investment in Myanmar.

India’s initiatives in the areas of connectivity and development are particularly impressive. Not many know or are aware, that the total value of the Government of India’s development commitment to Myanmar totals nearly US$ 2 bn, US$ 1.2 bn on connectivity, capacity-building, social infrastructure and border area development projects, and another nearly USS$ 750 million on soft lines of credit for physical infrastructure such as power transmission lines, roads, irrigation, telecommunications, industry and rail transport according to priorities set by the Government of Myanmar for projects that it often cannot find financing for elsewhere.

This compares favourably with the most generous donors. To the best of my knowledge, no other country is fully funding and executing physical connectivity projects of the scale of the Kaladan project and the Tamu-Kalay-Kalewa-Yargyi roads and bridges that are part of the trilateral highway; nor mentoring high value, state of the art, capacity building projects like the Myanmar Institute of Information Technology (MII) and the Advanced Centre for Agricultural Research and Extension (ACARE) as India is, not even major donors like Japan, the European Union or even China which as a direct interest in connectivity. Not many even in Myanmar seem fully aware of this.

But while the Indian government is doing a lot in the area of development, our development partnership needs some tweaking and diversification. Most of our projects are infrastructure oriented, capital intensive, and once completed, be hands off. The human dimension has been limited. This is one reason why its public impact has been low compared to many western, Japanese and Korean projects.

We need to broaden the engagement to target first, the grassroots, through initiatives in agricultural extension, livestock, fisheries, decentralised, non-conventional energy, rural agro-based and other industries, garments and light manufacturing etc. where the large mass of Myanmar are concentrated and form the base of the economy; the intermediate strata through school, college, vocational and English language education that forms the catchment area for stronger social and cultural relations, through arrangements for the education of Myanmar students in Myanmar and India; and the business and intellectual elite through higher education, academic, university, professional and civil society linkages in the sciences, management, IT, accounting, law, development and all the other disciplines necessary for a modern economy.

We also need to decrease our dependence on large government executed or government-to-government projects, and diversify our development partnership to include proven NGOs, cooperatives, SMEs, and even United Nations development organisations on a case to case basis. We have so far been wary of involving these two categories that other, mainly western countries use to great effect, but both these categories have much greater capacity to get to the grassroots than government organisations and entities.

More importantly, we have been lagging behind the rest of Asia (and even Europe and the US) in the commercial economic arena. As you drive in from the spanking new airport into a booming Yangon, amidst the numerous Japanese, Chinese, Thai, Singaporean, Korean, Taiwanese, European, Gulf and even Vietnamese brands advertised, there is not a single Indian brand (except to a very small extent, Tatas) to be seen.

In trade, we have slipped from third place in 2011 to 5th place now with a bilateral trade of approx. US$ 2 bn, not because our trade has gone down, but because others, notably Singapore ($5 bn) and Japan (2.3 bn) have overtaken us. This is not at all commensurate with our proximity, historical ties, and size of our economy and market, and compares very unfavourably with Myanmar’s principal land and economic neighbours, China and Thailand. China’s official trade stands at over US$ 10 bn; Thailand’s at about US$ 6 bn; but if we include the high volumes of unofficial trade, would be considerably higher. We have not been able to achieve our trade target of US$ 3 bn for 2015 set in 2011. Yet others, like Korea and Malaysia, are catching up.

Tellingly, with much of the trade being Myanmar exports of primary agricultural and forest products, and Indian exports, except pharmaceuticals, mainly engineering goods, Indian brands and consumer goods which give visibility, are generally absent.

But those figures are not as negative as they look if we consider that we were Myanmar’s third largest trade partner until 2011 through 40 years of a political and economic hiatus in our relationship caused by nationalisation, suppression of democracy, isolation and sanctions, when, for various reasons, China and Thailand became much more plugged in to the Myanmar economy. The core of that trade has been Myanmar exports of beans and pulses and timber.

The importance of this trade for both sides can be appreciated if we realise that while exports from 1.8 MT of rice, easily Myanmar’s most important food crop, in 2014-15 (the highest in 50 years, 50% of which is sold to China), earned Myanmar US$ 644 million, exports of beans & pulses (approx. of 1.54 million metric tons), 75-80% to India, accounts for over US$ 1 bn in export earnings for Myanmar. India is also Myanmar’s third largest export market overall, and Myanmar, India’s second largest source of beans and pulses, a politically sensitive commodity. The beans and pulses export of over 1 million tonnes to India is therefore the single largest export item of Myanmar to any country.

The fundamentals of this trade relationship are therefore strong, and grown steadily through thick and thin regardless of the political weather. It therefore represents the base line in our trade relationship. In fact, given the political and economic openings of the last few years, the complementarity of our two economies, India’s current rate of growth, and the untapped potential of Indian exports and Indian investments in Myanmar, India-Myanmar trade should grow faster than those of Myanmar’s other neighbours whose trade is more saturated.

Indian industrial goods, pharmaceutical products and IT services have started entering the Myanmar market and enjoy a good reputation for quality, but given the head start that our competitors have, cost and price considerations, and the logistical handicaps we will continue to face, it is unlikely that we will be able to catch up with either of them or compete with several other players, through trade alone.

In my view the only way this can be done is if we build on the comparative advantages of Myanmar already outlined, and the market access to the AEC, India, ASEAN FTA partners and the EU that Myanmar can provide to actually also produce and manufacture in Myanmar for these markets. Taking China as an example, given Chinese pricing, we cannot compete with China in Myanmar by exports from India alone. But we can (compete with them) even beyond Myanmar (in the ASEAN and even China itself), if we combine lower factor costs of production in the CMLV countries with Indian technology and management and build a brand image in the region around quality, cost and reliability that India is already beginning to enjoy. I believe that India could also compete with Japan on the cost-quality index on many products if these were produced locally.

In so doing, our companies would also raise domestic industrial and service capabilities, create new employment opportunities, and add value to local products (that Myanmar is seeking from foreign investors), and create a symbiotic and productive (rather than extractive) economic relationship between India and Myanmar that would benefit both.

So far however, private sector Indian investment in Myanmar has been disappointing. Today, in contrast to the Government’s development investment commitment of nearly US$ 2 bn, India ranks only 9th in FDI, amounting to approx. US$ 730 million, with public sector oil and gas PSUs accounting for over US$ 500 million and the private sector accounting for only about US$ 200 million.

By way of comparison, approved Chinese investments stand at over US$ 18 bn or over 28% of all FDI (a major part of it in extractive industries such as mining and hydro-power); Singapore, US$ 13 bn (20.5%), Thailand, US$ 10 bn (16.5%), Hong Kong, US$ 7.35% (11.5%), Korea,  US$ 3.5 bn (5.5%), and Malaysia, nearly 2 bn (3%). 2 European countries stand in the top 10, UK with over US$ 4 bn (6.4%), and The Netherlands, nearly US$ 1 bn (1.5%). Vietnam and late comer, Japan stand at 10th and 11th.

The are several reasons for this: Myanmar’s self-imposed isolation and externally imposed sanctions; our mental amnesia towards each other as neighbours, lack of connectivity, especially air connectivity that is crucial as our trade becomes more service oriented; lack of banking channels; and perhaps also a risk averse Indian industry. These are gradually being addressed, but will need some gestation time.

But the most important reasons are two others. First, as has already been pointed out, Myanmar falls in a cognitive and information blind spot for Indian industry. How many Indian investors think of Myanmar as a neighbour, and a resource rich neighbour at that? Or appreciate the strategic economic value of Myanmar for our ‘Act East’ policy? Or the importance of Mandalay as distribution centre for goods from the north, south, east or west? Or have even heard of the SEZ’s in Myanmar, Thilawa, Dawei, or Kyaukphyu?

And second, that we have rarely thought of Indian investment abroad as an arm of our foreign policy or as an instrument of political and economic influence. All our efforts have revolved around building domestic industrial capacity, with foreign investment and integration global value chains as the relatively elements. Though there are growing exceptions, Indian industrialists too have thought more in terms of the domestic market than global markets, and when they have, the reasons have sometimes been questionable.

Perhaps, in our ambivalence towards Indian investment abroad there is a fear that this would mean an outflow of badly needed investment and jobs that could be had in India. This would be somewhat short-sighted because ‘Make in India’ does not have to be at the expense of ‘Made by India abroad’. There are comparative advantages in investing abroad in many cases, and opportunity costs of not doing so.

To give an example, Indian garment manufacturers investing in Myanmar’s SEZs, could get additional access to the European market (and hopefully in future, the US also) that they cannot get from India. Conversely, global chains and companies from Korea, Taiwan, Thailand, Japan and others will cash in on the opportunity, as they are already doing, and we will be the losers.

At the very least, our neighbourhood could be integrated into our ‘Make in India’ campaign through PM’s ‘neighbourhood first’ policy as indeed it seems to have been envisaged in the North-East India-Myanmar industrial corridor that is part of ‘Make in India’.

With a view to working out the different areas of Myanmar’s economy that Indian investment could flow into, I would propose a fresh strategy for India than prevailing trends and orthodoxy.

Out of a total, cumulative approved foreign investment of US$ 67 bn in Myanmar until May 2016, over 66%, or two-thirds, are destined for the oil & gas and power sectors, sectors that require heavy investments and that are not particularly employment intensive. About 4.5% goes into mining (that is extractive), 5% into real estate and construction (that is mostly in the luxury segment for the wealthy and expatriates), and only 10.3% into manufacturing, 8% into transport and communication, and about 4% into hotels and tourism that are employment generating. Only a little over 1% is going into livestock, fisheries and agriculture where nearly 70% of Myanmar’s population is engaged in.

As we can see, the pattern of foreign investment in Myanmar is in the most capital intensive and revenue generating rather than employment generating sectors, and is bypassing the vast majority of the people. Additionally, notwithstanding the rhetoric of sustainability, inclusivity and equitability advocated by major international development and financial institutions and foreign investors on grounds of need, scale and viability, large, capital intensive projects tend also to be the ones that are the most socially, economically and environmentally disruptive, forcing people from the countryside into cities, from inner cities to shanty towns on the outskirts and suburbs, and with the greatest environmental impacts.

Of course, large projects are also required, but as a matter of development and investment strategy, I would advocate a very different approach for India. Having undertaken major connectivity projects which will serve Myanmar’s development and our trade interests, we should now focus our development and investment efforts towards the base of the economic pyramid where the largest numbers of Myanmar are engaged in their livelihoods, sectors like agriculture, livestock, fisheries, agriculture and food processing, and light industries including garments, and the infrastructure support for them like small irrigation projects, renewable energy for the countryside and rural industries, vocational training, education, etc.

These are precisely those areas where the least investment is now heading, and where small investments, spread wide, would benefit the largest number of people directly, be least disruptive, and bring about equitable development from the base of the economy upward. This would also be a good political investment at the level of the people.

One of the fundamental problems for investment at this level and sectors is that while it is not difficult to find financing for large projects and investments, mobilising finance for small scale investments and for SMEs is not easy. We have done this in India quite successfully, but need some viable strategies for handholding and finance for such investments abroad.

Recognising Myanmar’s basic strength as an agricultural country, the top leadership of the NLD has a vision of developing Myanmar as a 21st century organic agricultural power. The Party is being criticised for not coming out with a clear economic policy as yet, but given their base among the people and public interests that are at variance from international development orthodoxy, they are thinking hard about these things.

With our investment in the ACARE and Rice Biopark, and a healthy line of credit that can be used for agriculture, we have the opportunity of taking the lead and partnering Myanmar in this effort. By doing so, we would be aligning our investment with Myanmar’s priorities as indeed, as a good neighbour, we should.

This is also very much in our interest. As the largest agricultural surplus country in our vicinity already bound to India through its trade in pulses, Myanmar is already important for us for our food security. This could be developed and formalised into a strategic food security relationship for both countries.

For some time now, we have been trying to promote the idea of a stable arrangement for procurement and supply of beans and pulses with Myanmar that could serve the interest of Myanmar farmers for an assured market and predictable, remunerative prices as well as availability of pulses and price stability in India. Recently, Minister of State for Commerce & Industry Nirmala Sitharaman has had intensive discussions with the Myanmar Minister of Commerce on the subject. So far, it has not yet fructified not because Myanmar is not willing to consider it, but because it does not have a procurement and canalising agency. Discussions are on.

An agreement on beans and pulses can be the building block of a much larger food security relationship. These could include increasing production through extension of Indian agricultural scientific, technical (including adaptation measures to climate change), market access services, procurement and import of not only beans and pulses, but also rice and edible oilseeds (which too Myanmar produces for export and which we import on a large scale), and mutual food assistance in case of floods, cyclones and other natural disasters which typically affect both of us. Such an agreement would be novel and worthy of signature at the level of Prime Minister and the top leadership of Myanmar.

I would like to particularly mention the strategic significance of rice trade with Myanmar. Presently, we do not import rice from Myanmar. Proposals for import of small quantities of rice from Myanmar for political and strategic reasons have been made by our Ambassadors in Myanmar from time to time, but run up against resistance from our public food distribution agencies on economic and other grounds. It was made once again two years back to supply rice to Manipur and Mizoram while the Lumgding-Silchar railway line was being upgraded to broad gauge. It could not fructify.

Currently, Myanmar supplies nearly 1 MT of rice to China (900,000 in 2014-15, and expected to increase). But the trade which is crucial for Myanmar farmers and traders, is subject to quality and arbitrary barriers and arm-twisting by authorities and importers on the China side. Even modest, 10,000-20,000 tonnes of rice imports for the North East (which is close to Shwebo, one of finest rice growing areas of Myanmar) where Myanmar rice varieties are appreciated, would be a great political gesture to Myanmar farmers, establish our image as a good and friendly neighbour, and promote the kind of North East-Myanmar trade ties that would benefit both sides, without making much of a difference to us.

Of course, agriculture and related industries are not the only areas of investment interest to Myanmar and foreign investors. Recently, in the third week of May (2016), the Embassy of India hosted a major business conclave at CIM’s initiative on the theme of ‘How Indian Business can contribute to Myanmar’s development’ that was attended by three key economic ministers of trade, construction and industry and one Chief Minister besides leading businesses from India and Myanmar.

The event was an eye-opener for our industry and highly welcomed by the Myanmar as a signal that India was serious about Myanmar. It was structured around agriculture, livestock and fisheries; light industry; training, education, health and IT; connectivity & tourism; energy and power; investment hubs and corridors; and rounding it all up, financing investments. I would particularly like to highlight garment manufacturing and consumer goods, air connectivity, capacity-building, health and IT, tourism, and renewable energy as areas for trade and investment that would bring us particularly good dividends in terms of business, branding, and image of India.

Having addressed the question of why and what areas, sectors and level to invest in, I will next turn to where to invest. This too is of strategic significance as investing in Myanmar can enable us to expand our economic footprint across the Greater Mekong Sub-region all the way to Vietnam and to the South China Sea.

If we look at a connectivity map of Myanmar and the GMS or the ASEAN Master Plan on Connectivity you will see the whole region seeking to be interconnected by a network of north-south and east-west road, rail, maritime and riverine routes. As I have said earlier, India itself is making huge investments in surface connectivity from Sittwe via Ponnagyun industrial zone, Paletwa and Myeikwa to Mizoram through the Kaladaan waterway and valley; and about 200 miles from Moreh-Tamu-Kalay-Kaleywa to Yargyi along the trilateral highway to Thailand via Monywa, Mandalay, Meiktila, Bago, Hpa-an, Kawkareik and Myawaddy.

Each of these places along these routes can be investment centres depending on their local strengths. Sittwe port can and should also be connected to the beans and pulse growing hinterland of Magwey through (a place called) Ann, and southwards to the Ayeyawady delta.  Sittwe is the obvious base for trade and investment in Myanmar and Rakhine state from Kolkata (as it used to be under the British).

The diagonal, north-west-south-east Trilateral Highway from Moreh to Myawaddy also intersects with the highway from Mandalay to Ruili in China (AH 14), and the northern East-West highway (AH 2) from Meiktila to Laos and northern Thailand through Shan state. While there is quite a lot of excitement about the Trilateral Highway (and the central and coastal east-west highways though Thailand and Cambodia), we should look at the potential of this route as a trade route and investment corridor leading towards the northern GMS, to Laos and onward to Vietnam via Dien Bien Phu to Hanoi.

This is unexplored territory in general especially from Laos to Vietnam, but it goes through incredibly rich agricultural lands in Shan territory, and though conflict affected to the north and south, it has tremendous potential for investment in the  agriculture sector, and another strategic link to Vietnam.

The second set of zones to invest in are the three Special Economic Zones that are in various stages of development at Thilawa near Yangon, Dawei on the eastern shore of the Andaman Sea near Thailand, and Kyaukphyu, on the Bay on Bengal coast, just south of Sittwe, and some 25 plus industrial zones coming up in various parts of the country along major trunk routes.

There is some uncertainty about the status of some of these SEZ’s and industrial zones under the NLD, but if given the green light, each of these SEZ’s and industrial zones offer specific advantages.

Thilawa, being built with Japanese partnership, is the most advanced and the best connected for international trade, but until May, not a single Indian investor had invested in the zone.

The SEZ for Kyaukphyu and deep sea port, hurriedly awarded by the outgoing government in January to a Chinese-led consortium headed by CITIC, is ideally suited for us as an investment destination in the Bay of Bengal for Indian and international markets. It can be developed for fisheries, agriculture and food processing, other light industries, and downstream oil and gas industries from the nearby oil & gas blocks.

Though at an early stage, Kyaukphyu is of strategic significance for us as it is part of China’s OBOR, and with oil and gas pipeline terminals, an SEZ, a deep sea port, and ambitions to connect it to Yunnan province, there is little doubt that the Chinese will need to securitize the investment within Myanmar and in the Bay of Bengal.

There is, at this stage, very little knowledge, let alone understanding and appreciation of the Chinese plans and implications of this project in strategic or commercial quarters for us. There is some opposition to the project in Kyaukphyu and Rakhine state in general on Rakhine nationalist grounds as well as environmental and anti-Chinese feelings, and we have been approached by several Myanmar businessmen, even those working closely with the Chinese, for India to be part of the SEZ, and not to let the Chinese monopolise the project. The Chinese too realise that India is a natural partner to make this project viable.

We need to take a serious call, taking into account Myanmar’s views on these projects, whether it is in our interest to keep a distance from these plans, or join them if we cannot beat them.

The third planned SEZ in Dawei too has offers strategic economic possibilities for us. Dawei SEZ is a Thai-Myanmar project being promoted by the Thai that is basically conceptualised as an SEZ and transhipment point for shipping from the Gulf and Red Sea, Colombo and the eastern seaboard of India cutting through Kanchanaburi and Thailand to the South China Sea and East Asia, bypassing Singapore. It has still not achieved financial closure and is undergoing restructuring with the Myanmar and Thailand trying to rope in Japan. For some odd reason, nobody has thought of courting us for this project.

Dawei stands due west of Chennai, location of a number of Japanese and Korean investments in the auto, electronics and other sectors and close to one of the garment and hosiery manufacturing centres of India. Potentially, it could serve as potential processing point for value chains between India and East Asia, and local products, once again typically marine and agricultural products, light and medium industries, and downstream hydrocarbon industries drawing from the offshore Yetagun and Moattama oil fields. Dawei could also be a serious launching pad for Indian investments eastwards to the Pacific.

In addition to these SEZ’s there are several industrial zones scattered all over Myanmar of varying degrees of readiness, interest and viability. For geographical, connectivity and resource reasons,  besides those along our connectivity projects that I have already referred to, we should look at the agriculturally (especially rice) rich Shwebo in Sagaing Region adjacent to Manipur, Pathein in the Ayeyawady delta in the deep south west of Myanmar, Nyaungshwe near Inle lake and/or Namshan on the Meiktila-Kyaingtong highway, Mowgaung-Tanai in Kachin state, and in a number of more central areas like Pyay and Bago, north and east of Yangon respectively which are well connected.

Finally, how should one structure Indian investments in Myanmar especially in the SME sector? I do not have the economic experience to provide answers, but as Ambassador, I was often confronted with Indian businessmen keen to invest in the power or capacity-building sectors, and others willing to consider investing in Myanmar. My suggestion is that Chambers of Industry, big ticket consultants or interested large entrepreneurs should take the lead in forming a consortium of companies willing to invest along with a power provider and a training partner to propose consolidated, Indian industrial zones in areas of interest, with power and training solutions and surplus capacity open to all. This would also give our investors the necessary bargaining power to get a good deal.

Second, we really need to find a way to hand hold and finance small investments broadly in the rural sector, perhaps through some kind of partnership between institutions like the NSIDC, NABARD and others.

Third, we need to give a push and support for capable dairy and agriculture cooperatives to replicate the Gujarat dairy model in Myanmar where the east Indian origin populations in Bago Region could easily provide an opportunity for a pilot project for the rest of Myanmar.

Fourth, in certain poorly endowed areas like Chin state, there is merit in encouraging our border states and the kindred Mizo-Kuki-Chin of Mizoram and Manipur to extend successful all purpose cooperatives and some of their development programmes (like the NELP in Mizoram) across the border.

Fifth, we need to see how we can encourage and mobilise successful examples of extension services, hiring (rather than ownership) of farm machinery which few can afford, and market information, storage and warehousing and access for agricultural products to markets through not-for-profit NGO or commercial rather than government channels to help the Myanmar farmer and rural sector.

We certainly need to go beyond the government to involve a range of potential partners from NGOs to private enterprise and border state governments in our relations with Myanmar.

India would do well to look beyond the political and other areas of its relationship with Myanmar and focus on one area that is still, I think, under valued rather than spread myself thin. In any case, the way I see it, the economic case that I have made, is basically political not perhaps in the sense of day to day, or party politics, but politics in the larger sense.

(The author is a former IFS official and a former Ambassador to Myanmar and Afghanistan. The article is the gist of the key-note address delivered on 5th July, 2016 at the Bilateral Conference on “India-Myanmar – Frontiers of New Relationship” hosted by India Foundation at New Delhi.)


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