India-ASEAN FTA: Implications for India's NorthEast
- Part 5 -

By James R. Ruolngul *

In 2001, India upgraded the 160 km long Tamu-Kalewa-Kalemyo highway. Plans for a 1400 km long trans-Asian highway that will connect India, Myanmar and Thailand is now being finalised. A railway link that will extend up to Imphal in Manipur in the first phase and up to Myanmar in the second phase is also being planned. Bilateral trade between India and Myanmar has also been expanding at a significant rate since 2001.

India has extended a number of general and project-specific credit lines in the last few years. Some major projects between the two, besides the ones already mentioned include the Rhi-Tiddim and Rhi-Falam Roads in Myanmar, the Kaladan Multimodal Transport Project and the Tamanthi Hydro Electric Power Project.

The Kaladan Multimodal Transit-cum-Transport project agreement was signed in April this year. Jairam Ramesh, the Minister of State for Commerce said that the Rs. 548 Crore project will help increase connectivity between the two countries. This project will link Kolkata and Sittwe, Kaleutwa in Myanmar by road and would go through Mizoram in India. It also envisages the development of a 225 km waterway on the Kaladan River and the construction of ports along the way.

The minister said that north eastern India will be able to boost its border trade with Myanmar. We will also consider opening up of trading points in Mizoram, Arunachal Pradesh and Nagaland. At present, we have only one trading point at Moreh in Manipur.

This project will also help India to effectively integrate with the ASEAN region through Myanmar. [ix] Plans to allow free movement of Myanmarese citizens up to Moreh town in Manipur is also afoot. The Manipur Government has also submitted a Rs. 200 Crore project proposal to the Central Government to develop infrastructure at Moreh.

In 2006, a proposal for a bus service between Imphal and Mandalay was considered and accepted by the Indian Government. But till now, no such service has been undertaken. But during the September 2008 visit of a 17-member trade delegation from Myanmar at Imphal, the Myanmar trade delegation expressed their desire to implement the proposed Imphal-Mandalay bus service definitely.

This visit was a reciprocal visit after a trade delegation from Manipur visited Mandalay during the month of April 2008. After holding a series of meetings, both the sides agreed to put pressure on their respective governments to improve the existing border trade between India and Myanmar.

Earlier in April 2008, after the visit of a strong Myanmar official and business delegation to India, both the two countries had agreed to increase border trade that is restricted to only 22 items, all being agricultural products. There are now plans to free more items including life saving drugs, fertilizers, garments, x-ray papers and motor parts.

The latest agreement signed between India and Myanmar is the four-point economic cooperation agreement signed in June this year. This agreement was signed by the Indian Minister for Commerce and Power Jairam Ramesh and the Myanmar Minister for National Planning and Economic Development U Soe Tha.

First, the Bilateral Investment Promotion Agreement (BIPA) was signed to encourage investment between the two countries. Second, a credit line agreement between the Exim Bank of India and the Myanmar Foreign Trade Bank was signed to finance three 290 kv transmission lines in Myanmar. This US$ 64 million project will be executed by the Power Grid Corporation of India.

Third, a credit line agreement for US$ 20 million between the Exim Bank of India and the Myanmar Trade Bank was signed to finance the establishment of an aluminium conductor steel reinforced wire manufacturing facility. This facility will be used for the expansion of power distribution network in Myanmar.

Fourth, the United Bank of India (UBI) and the Myanmar Economic Bank signed an agreement to encourage border trade through Moreh. There are also plans to expand trade centres to include Arangkhu and Lungwa in Nagaland, Zokhawthar in Mizoram, Pangsan Pass in Arunachal Pradesh and Behiang, Skip and Tusom in Manipur. [x]

At present, only Moreh border trade centre in Manipur is functional with other centres becoming non-functional.

Till now, results are far below expectations, especially for the Northeast. In practice, the agreements between India and Myanmar do not extend much beyond granting formal sanctions to the already existing exchanges between the local people. In effect, border trade remains insignificant and did not contribute much towards economic growth for neither country.

Among the many problems faced by both countries, security concerns and the poorly developed infrastructure for trade are the most acute. For trade and commerce to flourish, the entire network of transport and communication, industries and agriculture throughout the Northeast also needs to be revamped and developed. Unless this is done, the much touted India-ASEAN FTA will be just another statistics in the minds of a very few researchers, academicians, scholars and administrators in Northeast India.

An important point to note is that although trade performance has improved with India's eastern neighbours, many of these exchanges had been done through seaports, leaving the northeast states in the lurch. If the northeast is to benefit from any improved trade relations or any present or future FTAs, the numerous plans and proposals that has been put forth and are in paper only must be implemented and brought to fruition first. The very few roles that the northeast states are playing right now should also be promoted to a more central role so that the north east states could reap the fruits of its own fields.

In a nutshell, Northeast India, a storehouse of great natural resources but very backward economically, needs to be built up and readied if it is really going to be the 'gateway' or 'centre' of trade between India and East Asia. Unless the region is developed to catch up with the rest of the country in its growth rate and development, it will be hard to achieve what the people aspired for peace, security, prosperity and all round development.

To make this possible, substantial investment in infrastructure, construction of roads, bridges, communication networks, harnessing of the region's vast natural resources and other physical infrastructures that will facilitate trade and economic progress needs to be developed.

With the impending AIFTA, India's Northeast region has suddenly become the centre of focus once again. But this region has been lacking behind other Indian states in most respects in spite of its vast natural resources and strategic position as a link between India and Southeast and East Asian countries. The main reasons why this region remains backward are the lack of any infrastructure that could facilitate any development in the region, poor market access and, to some degree, security issues.

The Indian government also concedes that the Northeast has a long way to go to achieve the national growth rate of nearly 9 per cent. The growth rate of Northeast is only 4 per cent. To increase the growth rate and economy of this region will be an important step because herein lies many solutions to some pressing political and security problems.

Therefore, in the context of the present FTA, the author is of the opinion that unless the Northeast region is developed wholeheartedly, neither India nor ASEAN will really benefit from it.



To be continued ...