Act East Policy: A boom or doom for local traders ?

Dr Mayengbam Lalit Singh *

Indo-Myanmar Friendship Gate at Moreh, a border town between India and Myanmar :: 23 August 2012
Indo-Myanmar Friendship Gate at Moreh, a border town between India and Myanmar in August 2012 :: Pix - CK Sharma

Erstwhile "Look East Policy" promised dream of free exchange of locally available goods and movement of people along the international border for both Manipur (India) and Myanmar. However, dreams of formal trade in non agriculture goods and infrastructural developments were left unfulfilled.

The recent "Act East Policy" is expected to yield in spectacular change in the minds of people. This article exclusively deals with impact of it on local traders. Look East policy during 1990s allowed only a few items under exchangeable items which are mainly agro-product only. Items out of this agro product also, are not permitted to trade under formal trade.

But people living in both sides have diverse choices which were not collected and included among the permitted list. However, people living in both sides along the international border have similar culture, tradition and food items. They are found to be interdependent on the various items available on both sides. Only political boundary makes it difficult to their movement and commodities legally.

In order to acquire their needs, they will import the out listed items informally. This is the main drawback of those government agencies to decide on list without proper understanding and consultancy with the local people. One of the most interesting points in that agreement is that both sides should not export and import those commodities originated from a third country apart from India and Myanmar.

For India, those commodities are very sensitive to production in Indian side. Myanmar, according to India's policy makers is seen a country through where commodities from industrialized east Asian countries like south Korea, Japan, China and Thailand had been found to transit. These goods are mostly cloths and textile, electronic goods, commonly used day to day goods, etc.

Such goods are produced in Indian side also and Indian policy makers keep them under sensitive list which are restricted heavily on their import. Such goods are made in those countries after analyzing the per capita income and demand structures of a developing country like India. These goods are dumping goods in their nature of prices and hence, India needs to check the import of such goods.

However, people in NER whose Per Capita GDP is low, have strong desire to acquire them because they could not buy relatively costlier Indian made goods. My published paper on "Dumping Potential and Intensity: A Case Study of Indo-Myanmar Border Trade" shows dumping potentials of these goods.

Now they have two options ahead of them either they should not consume the country made goods due to lack of income or they consume the foreign goods by importing them informally. India has produced commodities which ranges from agro based to highly sophisticated engineering goods and capital goods. However, the government policies permit to export those goods only through major ports. Exports of those goods are strictly restricted in such border trade.

Some of such goods are highly demanded in Myanmar also. In real those goods should be allowed to their export to Myanmar. But these goods are available in Manipur which is the main gate of Indo- Myanmar Border Trade. Owing to heavy demand from the Burmese people, traders in Manipur feel to export it by hook or crook.

Hence, traders from Manipur get them legally in the name of their use and export it informally out of legal rules. The losers in such informal trade are central and state governments since they avoid of revenue which can be collected by levying in the form of import tariff.

Gainers are informal traders, transporters and government servicemen who suppose to vigil on this informal trade. Local traders are highly beneficial from trade since they need not register to DGFT (Director General of Foreign Trade) for their export and import. With small amount of capital they can export and import paying a little greasing money (penalty) to smoothen trade flows. Such avoidance of official procedures persuades local traders whereas it dissuades official traders.

Recently, central government has transformed erstwhile Look East Policy into Act East Policy with eye on better infrastructure along wider scope for formal trade. However, vision of formal trade remains ambiguous since it is considered that official traders who are engaging at national ports may have dissatisfaction with government policy on this policy.

A wide range of India-ASEAN bilateral trade takes place at these ports. Shifting of export/import direction through border trade may hamper the volume at these ports since there is advantage of transport cost due to short root. State government will be benefitted from large revenue collection in the form of customs taxes. The big losers will be local traders since they have to register to DGFT for formal trade.

Too much official procedures may dissuade them in their export and import. They may not be able to compete with mainland traders who specialise in both capital as well as expertise in trade. There might be condition where these traders dumped their capital into local market to wipe out local traders which may be followed with exclusive monopoly in export/import.

Benefits in trade will take place when there is fitting of local traders in the supply chain between producers and final consumers. In order to reap maximum benefit, state government should constitute expert committee comprises scholars, beaurocrats and policy makers who can introspect for time being.

The committee should frame policies which can avail and galvanise the local traders in obtaining the maximum benefit from this border trade. One of the policies, they may frame is such that in the supply chain between producer and consumers in the state, only local traders should be allowed.

This may keep mainland traders at bay from local demand and supply chain. Government should construct special Economic Zones (SEZs) for the convenience of exporters and importers. At the same time, in order to remove xenophobic atmosphere which arises from the possible influx of non local people, government also should frame permit systems to check possible influx. These policies are not the last but least for border trade and government has to keep vigil for time being.

* Dr Mayengbam Lalit Singh wrote this article for The Sangai Express
The writer is an Assistant Professor of Economics
This article was posted on May 01, 2018.

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