NER's participation in Act East Policy : Potentials and needs

Reimeingam Marchang *

North Eastern Region (NER), an increasingly service driven economy, lags behind the rest of India in terms of economic growth, per capita income as well as several other development indicators specifically infrastructure. Industrialisation has failed to take off in the region. Industrialisation is underdeveloped in terms of physical presence and productivity resulting to almost stagnant income from manufacturing sector that contributes a major component of tradable items in the region.

The region is endowed with rich natural resources for large scale industrial production such as petrochemicals, cements, steel etc however such producing industries did not exist in the region. This indicates that the region has a great potential for large scale industries which necessitates developing Special Economic Zone (SEZ) for specialised production of goods and services.

The 1990s India's economic reform to accelerate India's economic and modernisation drive has not trickledown effect on NER as industrialisation remains underdeveloped. In 2012-13 the region contributes only one percent to total factory output value of India. Most (78%) of the industries namely factory are also located in Assam that is large in terms of geographical area and population size.

As such 80% of the factory output value of the region comes from Assam. Three percent of the region's factory is situated in Manipur contributing less than one percent of the region's output. This necessitates a 'big-push' in initiative as well as investment for industrial development in Manipur to enable production of tradable goods and service in the international market for active participation in the Act East Policy (AEP).

Sadly, there is not a single operational SEZ in the region despite of its abundant endowment of natural resources for potential establishment of large scale industries for production of specialised goods and services. MODONER hinted that the region is endowed with vibrant natural resources of energy, oil, natural gas, coal, and limestone, water system (Brahmaputra river and its tributaries) and has the potential to develop economic power-plant; besides having a great potential for development of tourism.

It has a great potential and economic implication to develop a SEZ utilising the natural economic resources and promote trade. India in general and NER in particular is required to emphasis on development of export potential goods and services by operating SEZ to boost economic development. The state of Manipur can intercede for trade since it has a well established trading (both border trade and normal trade) history with the eastern economies particularly Myanmar.

As on 30th July 2017, NER has three (one in Manipur and two in Nagaland) approved SEZs out of 420 approved SEZs in India. More than half of it is operational in India. However, none of the three approved and notified as SEZs in NER is operational. The notified SEZs in Manipur was for information technology (IT) or IT enabled services, notified on 26th February 2014, and Nagaland was for agro and food processing, notified on 9th July 2009, and for multi product, notified on 15th October 2012.

It is due to the apathy of India, and inability and slacking of the concerned state like Manipur, to invest and develop despite of its rich natural resources endowment and human capital. It is also possible that investors/developers are averting risk such as insurgency problems, poor transportation system, narrow market etc involving in establishing SEZ in the region.

Modernisation and optimisation of existing trade infrastructure such as land-customs stations is essential for trade facilitation in the region. However, a scepticism and hunch concerning development of IT or IT enabled services SEZ in Manipur is its impracticality, at least presently, that is crippled by poor power supply and regular unpredictable strikes by citizens and disruption of communication network due to its suspension driven by monetary demand from insurgents. Importantly, IT human capital is lacking for successful establishment and functioning of IT based SEZ.

Meanwhile, NER, presently considered as India's gateway to Southeast and East Asian countries, has gained eminence in the India's foreign policy after Look East Policy (LEP), meant for better economic engagement, was launched in the early 1990s. However, ironically, the region has not engaged with its implementation due to geographical landlocked, underdeveloped infrastructure and underdeveloped industrialisation particularly for trade business.

The economy of NER needs to open up with India's neighbouring Southeast and East Asian economies that have an immense potential to generate tremendous economic activities ranging from employment to trade for the region's benefit. Promotion of tourism industry in the state like Manipur would integrate the neighbouring tourism economies. The AEP, then LEP, is the ideal platform to facilitate in integrating the region with the Asia-Pacific region (APR).

AEP, unlike existing others multilateral economic cooperation such as Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation or Asia Cooperation Dialogue or Mekong Ganga Cooperation that are hardly implemented and hardly involved by NER, envisaged to actively participate NER considering the region's geographical proximity with the neighbouring economies. AEP objective is to promote economic cooperation, cultural ties and develop strategic relationship through continuous engagement between India by involving NER and countries in APR.

The region need to establish economic base (industries), develop infrastructure (transport system), create conducive political environment (insurgency free), enter trade agreement (free trade) and develop human capital (skill labour), ensure local (NER) participation in AEP, ensure local participation in decision-making power in the establishment, development and operation of AEP, secure the region with no strike/bandh, road blockage or insurgencies by the state machineries for active participation by NER and for success of the policy.

Development of industries by establishing SEZs in the region is essential for active participation in the policy. Success of AEP also depends on the extent of NER's active engagement with APR countries. Production of complementary goods for trade in NER and NER's cooperation (economic and strategic) with APR is needed for successful implementation of the policy. It calls forth for a liberalised trade policy measures including both tariff and non-tariff by establishing a regional, rather than national, Free Trade Agreement.

It is crucial to ensure a proper infrastructural connectivity and participation as an instrument of all NE states to benefit NER as a whole from AEP. NER should not be a mere transit point or route for implementation of AEP that would not benefit the region. Therefore, the participating economies, particularly NER, depending on the nature and extent of inter-economic participation and competition through labour flow, technology flow, trade liberalisation among others would accelerate economic growth, international exposure, peace and prosperity.