Presentation at Brainstorming Session on India-Myanmar Strategic Partnership, Organised by RIS, 4 February 2013 Challenges to India-Myanmar Trade and Connectivity Prabir De RIS 4 February 2013
Three stylized facts Unlike many LDCs, India is having trade deficit with Myanmar (US$ 780 million in 2011-12) India provides higher market access to Myanmar than China (export to India was 12%, compared to 4% in China in 2011) Both India and China provide DFTP to Myanmar Adjacent, but China engages border for trade with Myanmar, whereas India uses ocean as principal mode of exchange of goods.
What India imports from Myanmar. Year: 2011 HS Code Product Description Import (US$ million) Share in Total Import (%) 4403 Wood in the rough, whether or not 589.47 46.71 0713 Dried leguminous vegetables, shellec 584.14 46.29 4412 Plywood, veneered panels and similar 11.34 0.90 2814 Ammonia, anhydrous or in aqueous so 7.37 0.58 0501 Human hair, unworked, whether or no 5.53 0.44 9999 Commodities not specified according 5.16 0.41 4408 Sheets for veneering (including 4.01 0.32 7304 Tubes, pipes and hollow profiles, 3.21 0.25 0910 Ginger, saffron, turmeric (curcuma) 2.99 0.24 4001 Natural rubber, balata, gutta-perch 2.78 0.22 Total of above 1216.00 96.35
What India exports to Myanmar. Year: 2011 HS Code Product Description Export (US$ million) Share in Total Export (%) 7305 Other tubes and pipes 120.71 26.48 3004 Medicaments (excluding goods of 68.05 14.93 0202 Meat of bovine animals, frozen 26.41 5.79 2304 Oil-cake and other solid residues, 22.72 4.98 7210 Flat-rolled products of iron or non 22.44 4.92 1701 Cane or beet sugar and chemically 15.98 3.51 4011 New pneumatic tyres, of rubber. 11.23 2.46 5205 Cotton yarn (other than sewing 7.64 1.68 9608 Ball point pens; felt tipped and 5.69 1.25 8544 Insulated (including enamelled or 5.08 1.11 Total of above 305.95 67.11
Bilateral trade is regarded as intense but overall trade intensity showing a decreasing trend Trade Intensity Index (TII)
Relatively high trade complementarity, showing high prospects of bilateral trade Trade Complementarity Index (TCI)
Long border, but no trade at border Trends in India-Myanmar Bilateral Trade NER State in India Arunachal Pradesh Manipur Mizoram Mizoram LCS in India Nampong Moreh Zokhawthar (Champai) Zorinpuri (proposed) LCS in Myanmar Pan Saung Tamu Rih Total length of border: 1643 km
..border is yet to be engaged for a healthy bilateral trade What we trade through ocean, doesn t match with what we trade through border. Mismatch negates the comparative advantage of goods. Products loosing competitiveness, disadvantage to production networks, and slowing down the economic exchange expansion between the two countries. Year 2001 2007 2009 Year 2001 2007 2009 India s Top Three Traded Items with Myanmar at Moreh-Tamu Border Export Item1 Soyabari Soyabari Soyabari Import Item1 Betel nut Betel nut Ginger Export Item 2 Sumon rose powder Soya grid Import Item2 Garlic Ginger Betel nut Export Item 3 Cumin seeds Cumin seeds Import Item3 Pulses Pulses Pulses
Some major deterrents to trade prospects at border Borders are open and porous Large informal trade Smuggling of goods, drugs and narcotics, and human tracking Political disturbances, etc. Ransoms of insurgents groups (operating in both India and Myanmar), strikes, ethnic conflicts, etc. at the border areas Lack of basic trade infrastructure Positive list of trade items Exchange rate anomaly and inadequate banking L/C does not work, a.o.
India s recent initiatives to strengthen trade at border India and Myanmar have agreed to upgrade the status of border trade to normal trade, but process has been slow. The border trade agreement between the two countries, which was made on Jan. 21, 1994, allowed only 18 kinds of goods. In 2008, both the countries expanded the tradable items from 18 to 40. In December 2012, DGFT raised the number of border trade items to 62. Rice, wheat, corn, medicines and 18 other items were added to the list of goods for trade at India-Myanmar bordering areas. The other newly added items include agricultural tools, bicycles, coal, garments, edible oil, electrical appliances, steel products, tea, beverages, motor cycles and spare parts, semi precious stone, sewing machines and three wheelers/cars below 100cc. ICP at Moreh with an investment of Rs. 13.60 billion Road from Imphal to Moreh has been widened, except few places. Link road from Champai to border in Mizoram (links to Kaladan) is ongoing.
Myanmar has introduced some important trade facilitation measures Separate Ministry handling border trade Commercial tax and income tax for export has been reduced to zero from 10% except for 18 special commodities such as cigarettes and alcohol. No income tax on CMP exports, which was earlier 10%. New export and import items have been allowed. Export Import Law has been promulgated in September 2012 Cargo inspection stations at road checkpoints have been reduced. Government monopoly in trading (e.g. palm oil, diesel) has been curtailed. Automation of trade procedures such as (i) Online Licensing System, and (ii) Border Trade Online System (BTOS) has been introduced.
Connectivity contrast... wide gaps, Particulars provide huge investment opportunities Fixed telephone mainline (per 100 population), 2011 Mobile cellular subscriptions (per 100 population), 2011 Internet users (per 100 population), 2011 Railway density (km of railway length per 1000 sq. km. land area), 2010 Road density (km of road length per 1000 sq. km. land area), 2010 Paved roads (% of road), 2010 Air freight transport (million ton-km), 2010 Air passengers carried (million), 2010 Container port traffic (million TEUs), 2010 Liner shipping connectivity index, 2010 Electric power consumption (kwh per capita), 2010 India 2.6 72.0 10.1 21.5 1382.2 67.4 1720 64.14 9.75 41 616 Myanmar 1.1 2.6 1.0 5.1 41.3 11.9 2 0.40 0.17 4 131
International highway projects in Myanmar Sr. No Particulars No. of Highways Length (km)# 1 Asian Highways 1, 2, 3 and 14 4 3,018 2 ASEAN Highways 111, 112, and 123 3 1,438 3 GMS Economic Corridors: East West, North South, Western, Northern and Southern Corridors 5 1,302 4 Trilateral Highway connecting India, Myanmar and Thailand (also known as BIMSTEC Highway)* 1 1,360 5 Mekong India Economic Corridor 1 120 6 India Myanmar Lao PDR Cambodia - Vietnam Highway** 1 n.a 7 Bangladesh Myanmar Highway** 1 n.a 8 Thailand Myanmar Highway** 1 n.a 9 China Myanmar Corridor** 1 n.a
International railway projects in Myanmar Three missing links (i) Kalay to Tamu (127 km) at Indian border, (ii) Lashio to Rueli (142 km) at Chinese border, and (iii) Thanbyuzayat to Three Pagoda Pass (110 km) at Thai border. According to the Myanmar Ministry of Transportation, bridging these three gaps would cost around US$ 823 million. Kalya to Tamu (US$ 98 million), Lashio to Muse (US$ 480 million), and Thanbyzayat- Three Pagoda Pass (US$ 246 million).
International port projects in Myanmar is planning to set-up three major seaports at Kyaukpyu, Kalagauk, and Dawei Shipping through Kyaukpyu port would be the shortest trade route from India to China. Klagauk port falls along the ADB s West-East Economic Corridor (EWEC), linking Indian Ocean with the Pacific, cutting the distance of the conventional circuitous sea route passing the Malacca Strait by almost two-third. Dawei port is part of Mekong India Economic Corridor, links Southeast Asia with vast and growing Indian market. Myanmar
India Myanmar infrastructure links and ongoing connectivity projects Two major connectivity projects: (i) Trilateral Highway (TH) and (ii) Kaladan Multimodal Transit Transport Project (KMTTP). Three upcoming projects: (i) extending TH to connect Cambodia and Vietnam, (ii) India Myanmar Lao PDR Cambodia - Vietnam Highway, and (iii) Delhi Ha Noi railway link. Two important projects: (i) Stillwell Road, and (ii) Tiddim-Rih-Falam Road. Mekong India Economic Corridor (MIEC).
Bilateral infrastructure links India Myanmar Shipping Services Myanmar Air Services India Myanmar Oil and Gas Pipelines India Myanmar Telecom Links
Trilateral Highway
Delhi Hanoi Railway Link
Kaladan Multimodal Transit Transport Project
Mekong India Economic Corridor (MIEC)
Some major challenges to India- Myanmar connectivity Unsupportive financial sector in the area of trade (e.g. working capital issues, trade finance, etc.) FDI policy is still non-transparent. Economic sanction is fully removed but market-driven normal operation is yet to be restored. Volatile Myanmar currency Kyat. Poor banking infrastructure (L/C payment system not popular yet) Poor border infrastructure Ports, shipping and air links are very weak Trade between India and Myanmar will have to move from Switch Bill of Lading System to normal Bill of Lading System. Lack in coordination between public and private sector. Private sector associations are few in numbers and weak in strength. Political instability and insurgency in some part of Myanmar (and also in India s Northeast) add to the investment risks, lowering in feasibility of cross-border infrastructure development.
Recommendations Complete the Trilateral Highway before 2015, the year when ASEAN Economic Community will start operating and a greater part of Asia comes under regional free trade regime; Connect the capital cities in India and Myanmar with direct air links and extend it to other import cities such as Mandalay and India s northeast (Spice Jet to start operation) Government may think to call a conference of ports and shipping industries of India and Myanmar, which would help understand the local requirements and build business networks; Intermodal operation connecting ports and land would be feasible to access inland areas of Southeast and South Asia, and therefore allow short sea shipping between coast of India and Myanmar; Set-up SEZ at Sittwe in Myanmar for Indian investors and build highway linking it to major Indian, Bangladesh and Myanmar cities; Improve border infrastructure at Moreh-Tamu or Champai-Rih Financial market development and market-driven currency exchange rate stability are essential; Allow more Indian banks to operate in major Myanmar cities and vice versa; Consistent and standardized border crossing formalities and procedures are very important; Capacity building in transportation should be taken up on priority
Thank you