Enhancing India's Trade with Bangladesh and Myanmar Across Border
EXPORT-IMPORT BANK OF INDIA
WORKING PAPER NO. 77
ACT EAST: ENHANCING INDIA'S TRADE WITH BANGLADESH AND MYANMAR ACROSS BORDER
EXIM Bank's Working Paper Series is an a empt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promo on agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authen city of informa on and data, EXIM Bank accepts no responsibility for authen city, accuracy or completeness of such items.
© Export-Import Bank of India June 2018
Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
CONTENTS Page No. List of Tables 5 List of Charts 7 List of Exhibits 7 List of Annexures 9 Execu ve Summary 1. Background 22 2. Interna onal Trade of Bangladesh and Myanmar 27 3. Foreign Investment in Bangladesh and Myanmar 35 4. India's Bilateral Rela ons with Bangladesh and Myanmar 42 5. India's Border Trade and Connec vity with Bangladesh and Myanmar 53 6. Poten al Areas for Enhancing India's Trade with Bangladesh and Myanmar 67 7. Exim Bank's Presence in Bangladesh and Myanmar 91 8. Status of Infrastructure at Bangladesh and Myanmar Borders: Based On Field Visit 96 9. Key Observa ons and Way Forward 103 References 108
Project Team:
Mr. David Sinate, Chief General Manager Mr. Vanlalruata Fanai, Assistant General Manager Ms. Sara Joy, Manager
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Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
LIST OF TABLES Table No. Title Page No. 1.1 Macroeconomic Snapshot of Bangladesh- Select Indicators 24 1.2 Macroeconomic Snapshot of Myanmar- Select Indicators 26 2.1 Bangladesh's Export Composi on 29 2.2 Bangladesh's Import Composi on 29 2.3 Major Export Des na ons of Bangladesh 30 2.4 Major Import Sources of Bangladesh 30 2.5 Myanmar's Export Composi on 32 2.6 Myanmar's Import Composi on 33 2.7 Major Export Des na ons of Myanmar 33 2.8 Major Import Sources of Myanmar 34 3.1 Trends in Bangladesh's FDI Flows 35 3.2 FDI Flows in Myanmar 38 4.1 India's Major Exports to Bangladesh 43 4.2 India's Major Imports from Bangladesh 44 4.3 India's Major Exports to Myanmar 48 4.4 India's Major Imports from Myanmar 49 5.1 Length of India's Border with Bangladesh 54 5.2 India's Port Wise Exports to Bangladesh 54 5.3 India's Port Wise Imports from Bangladesh 55 5.4 List of Integrated Check Posts (ICPs)/Land Customs Sta ons (LCSs) 56 5.5 Length of India's Border with Myanmar 61 5.6 India's Port Wise Exports to Myanmar 62 5.7 India's Port Wise Imports from Myanmar 62 5.8 India's Border Trade with Myanmar 63 5.9 Land Customs Sta ons Dealing with Indo-Myanmar Trade 65 6.1 Bangladesh's Major Imports and India's Share in 2017 68 6.2 Bangladesh's Major Sources of Imports of Machinery and Mechanical Appliances (HS-84) 69 6.3 Machinery and Mechanical Appliances (HS-84) - Poten al Exports to Bangladesh 69 6.4 Bangladesh's Major Sources of Imports of Electrical Machinery and Equipment (HS-85) 70 6.5 Electrical Machinery and Equipment (HS-85) - Poten al Exports to Bangladesh 70 6.6 Bangladesh's Major Sources of Imports of Animal or Vegetable Fats and Oils (HS-15) 71 6.7 Animal or Vegetable Fats and Oils (HS-15) - Poten al Export Items to Bangladesh 72
5 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table No. Title Page No. 6.8 Bangladesh's Major Sources of Imports of Kni ed or Crocheted Fabrics (HS-60) 72 6.9 Kni ed or Crocheted Fabrics (HS-60) - Poten al Export to Bangladesh 73 6.10 Bangladesh's Major Sources of Imports of Sugars and Sugar Confec onery (HS-17) 73 6.11 Sugars and Sugar Confec onery (HS-17) - Poten al Export Items to Bangladesh 74 6.12 Bangladesh's Major Sources of Imports of Paper and Paperboard (HS-48) 74 6.13 Paper and Paperboard (HS-48) - Poten al Export Items to Bangladesh 75 6.14 Bangladesh's Major Sources of Imports of Op cal, Photographic, Medical and Surgical Apparatus (HS-90) 76 6.15 Op cal, Photographic, Medical and Surgical Apparatus (HS-90) - Poten al Export Items to Bangladesh 77 6.16 Bangladesh's Major Exports and India's Share in 2017 78 6.17 Myanmar's Major Imports and India's Share in 2017 79 6.18 Myanmar's Import Sources of Mineral fuels, Mineral Oils and Products of their Dis lla on (HS-27) 80 6.19 Mineral fuels, Mineral Oils and Products of their Dis lla on (HS-27) - Poten al Export Items to Myanmar 81 6.20 Myanmar's Import Sources of Plas cs and Ar cles (HS-39) 81 6.21 Plas cs and Ar cles (HS-39)-Poten al Export Items to Myanmar 82 6.22 Myanmar’s Import Sources of Animal or Vegetable Fats and Oils (HS-15) 83 6.23 Animal or Vegetable Fats and Oils (HS-15) - Poten al Export Items to Myanmar 83 6.24 Myanmar's Import Sources of Ar cles of Iron or Steel (HS-73) 84 6.25 Ar cles of Iron or Steel (HS-73) - Poten al Export Items to Myanmar 85 6.26 Myanmar's Import Sources of Miscellaneous Edible Prepara ons (HS-21) 86 6.27 Miscellaneous Edible Prepara ons (HS-21) - Poten al Export Items to Myanmar 86 6.28 Myanmar's Import Sources of Man-made Staple Fibres (HS-55) 87 6.29 Man-made Staple Fibres (HS-55) - Poten al Export Items to Myanmar 87 6.30 Myanmar's Import Sources of Man-made filaments, Strip and Tex le Materials (HS-54) 88 6.31 Man-made filaments, Strip and Tex le Materials (HS-54) - Poten al Export Items to Myanmar 89 6.32 Myanmar's Major Exports and India's Share in 2017 90 7.1 Exim Bank's Opera ve Lines of Credit in Bangladesh and Myanmar 92 8.1 Major Commodi es Traded at ICP Petrapole 97 8.2 Major Commodi es Traded at LCS Moreh 98 8.3 Major Commodi es Traded at LCS Zokhawthar 100
6 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
LIST OF CHARTS Chart No. Title Page No. 2.1 Interna onal Trade of Bangladesh 27 2.2 Exports and Imports of Bangladesh as a Percent of GDP 28 2.3 Interna onal Trade of Myanmar 31 2.4 Exports and Imports of Myanmar as a Percent of GDP 32 3.1 Sectorwise FDI Inflows to Bangladesh 35 3.2 Sectorwise FDI inflows to Myanmar 38 4.1 India's Trade with Bangladesh 42 4.2 Sectorwise FDI Inflows from India to Bangladesh 46 4.3 India's Trade with Myanmar 47 4.4 Sectorwise FDI Inflows from India to Myanmar 51
LIST OF EXHIBITS Exhibit No. Title Page No. 1.1 Map of Bangladesh 22 1.2 Map of Myanmar 25 4.1 ASEAN- India Free Trade Area 50 5.1 Protocol Routes 59 8.1 ICP Petrapole 96 8.2 Trucks wai ng for Transshipment at ICP Petrapole 97 8.3 Transshipment between Indian and Bangladeshi Trucks at ICP Petrapole 97 8.4 ICP Moreh 99 8.5 LCS Zokhawthar 100 8.6 Bridge Connec ng India and Myanmar at Zokhawthar 100 8.7 World Bank Road Connec ng Zokhawthar LCS Bypassing Champhai 102
List of Annexures Annexures No. Title Page No. I Roles and Func ons of Land Ports Authority of India (LPAI) 109 II List of Officials Consulted During Field Trip 111
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Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
EXECUTIVE SUMMARY
India's Look East Policy, which was introduced in 1992, discipline suppor ng macroeconomic stability. was relaunched in 2014 as the 'Act East Policy', with According to the Interna onal Monetary Fund (IMF), the objec ve of promo ng economic coopera on, the country has benefi ed from favorable external cultural es and develop strategic rela onship with demand, high remi ances, and low commodity countries in the Asia-Pacific region through prices, resul ng in strong output growth, falling con nuous engagement at bilateral, regional and infla on, moderate public debt, and a rebuilding of mul lateral levels, thereby providing enhanced external resilience. connec vity to the states of India's North East Region (NER). In fact, immediate border countries in the East rd and North East India region would play important role Bangladesh is the 43 largest economy in the world in the success of India's Act East Policy. Myanmar, the and is also among the fastest growing economies, only member country of Associa on of Southeast with a growth rate of 7.1 percent in 2017. Over the Asian Na ons (ASEAN), which borders India, shares a last decade, nominal GDP has more than trebled from land boundary of around 1,643 km with four Indian US$ 85.6 billion in 2007 to an es mated US$ 261.4 states including Manipur, Mizoram, Nagaland and billion in 2017, with a per-capita income of Arunachal Pradesh. Bangladesh is equally cri cal to US$ 1,601.7 in 2017. The economic growth of the success of India's 'Act East', with 4,096.7 km long Bangladesh has been mainly driven by exports, border is being shared with India along the states of especially of readymade garments, remi ances and West Bengal, Assam, Meghalaya, Tripura and agriculture sector. Bangladesh has managed to Mizoram. sustain a high growth of over 7 percent in 2017 in spite of marginal growth in exports and fall in Regional Coopera on such as Bay of Bengal Ini a ve remi ance inflows, supported by strong private for Mul -Sectoral Technical and Economic consump on and investments in infrastructure Coopera on (BIMSTEC), whose membership include projects. Consumer price infla on in Bangladesh countries such as Bangladesh, Bhutan, India, moderated in the last few years, averaging 5.7 Myanmar, Nepal, Sri Lanka and Thailand, become percent in 2017, as compared to 7.5 percent increasingly relevant. In fact, the strategic importance of BIMSTEC can be seen from the fact that it acts as a witnessed in 2013, in spite of various natural bridge between South Asia and South East Asia and calami es faced by the country. In 2017, external also serves as a common pla orm for intra-regional debt as a percentage of GDP increased to 18.9 trade and coopera on among the SAARC and ASEAN percent of GDP from 17.5 percent in 2016. The members. current account of Bangladesh is es mated to have recorded a deficit of US$ 3.2 billion in 2017 Recent Economic Developments in Bangladesh (equivalent of 1.2 percent of GDP) from a surplus of US$ 1.4 billion recorded in 2016. Bangladesh is strategically located in South Asia, bordered by India, Myanmar and the Bay of Bengal, Bangladesh's real GDP is expected to be sustained at making it one of the major hubs in the global trade around 7 percent during 2018-2022, driven mainly by arena. The country has a popula on of 163.2 million a rapid increase in private consump on and gross (2017) with a land area of 147,570 sq km. Bangladesh fixed investment. Infla on is expected to increase to 6 is a part of Goldman Sachs' N-11 group of countries, percent in 2018, driven by higher food and energy with steady monetary policy management and fiscal prices.
9 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Recent Economic Developments in Myanmar Interna onal Trade of Bangladesh Myanmar's strategic loca on provides immense During the last decade, the total trade of Bangladesh opportuni es and incen ves for it to engage increased two-fold, from US$ 39.8 billion in 2008 to effec vely in the region to advance trade, investment, US$ 85.8 billion in 2017. Exports from Bangladesh and developmental goals. For India, Myanmar is increased by a CAGR of 11 percent during 2008 to strategically important, as it is the only ASEAN country 2017 from US$ 15.5 billion to US$ 39.7 billion. with which it shares border. With its abundant natural Bangladesh's merchandise exports are highly resources, strategic loca on at the crossroads of Asia, concentrated within a select set of commodi es, with large youth popula on, and sizable market, Myanmar tex les and clothing contribu ng 89 percent of total could develop into an economic hub in the ASEAN exports of the country in 2017. Bangladesh's imports region offering a wide range of investment increased by a CAGR of 7.4 percent during the same opportuni es. As per the IMF, the economy grew at an period, from US$ 24.3 billion to US$ 46.2 billion. average rate of 8.2 percent during 2013 and 2014, as reforms opened up the space for private investment. In 2017, tex les and clothing alone accounted for Growth, however, eased in 2015 and 2016 due to a 88.7 percent of its global exports. Globally, supply shock from heavy flooding, a slowdown in new Bangladesh is the second-largest exporter of both investment flows during elec on year, and a more ar cles of apparel (knit or crochet), and ar cles of challenging external environment including lower apparel (not knit or crochet), a er China. The commodity prices affec ng Myanmar's main exports. garment sector has been the main driver of exports in It started recovering from 2017 onwards. Bangladesh over the years. The major components of Bangladesh's import basket in 2017 include Increase in Myanmar's economic ac vity in 2017 was machinery and mechanical appliances (12.4 percent mainly underpinned by large projects funded by of the total imports), co on (11.6 percent), electrical foreign investors in a number of industries, notably machinery and equipment (7.5 percent), mineral hydrocarbons, manufacturing and infrastructure. In fuels, oils and dis lla on products (6.8 percent), absolute terms, Myanmar's GDP stood at US$ 66.5 cereals (4.7 percent), iron and steel (4.4 percent) and billion in 2017, while GDP per capita was US$ 1,264. plas cs and ar cles (4.1 percent). Germany replaced Myanmar's current account deficit widened further the US as the major export des na on of Bangladesh to US$ 3.5 billion in 2017 from US$ 2.5 billion in 2016. in 2017, accoun ng for 15.4 percent of total exports Myanmar's foreign exchange reserves stood at of the country. The other major des na ons for US$ 4.9 billion in 2017, represen ng an import cover Bangladesh's exports in 2017 include the US, UK, of 3.5 months. In 2017, external debt as a percentage Spain, France, and Netherlands. China, with a share of of GDP increased to 11.6 percent of GDP from 10.3 32.9 percent of total imports, was the major import percent of GDP in 2016. The IMF's debt sustainability source of Bangladesh in 2017, followed by India, assessment carried out in 2017 assessed Myanmar at Singapore, Japan, Brazil and Indonesia. low risk of debt distress. Interna onal Trade of Myanmar Myanmar's real GDP is forecast to grow at an average of 7.1 percent during 2018-2022, supported by strong During the last decade, the total trade of Myanmar investment and growth in all the major sectors during increased more than three-fold, from US$ 10.4 billion this period. Higher growth and an expected rise in in 2008 to US$ 35.1 billion in 2017. During the same interna onal oil prices are expected to drive infla on period, exports from Myanmar increased two-fold to to 5.5 percent in 2018. US$ 13 billion in 2017 from US$ 6.6 billion in 2008,
10 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border witnessing a CAGR of 7.8 percent. On year-on-year US$ 2.3 billion in 2016 from US$ 2.2 million in 2015. basis, exports increased to US$ 13 billion in 2017 from According to Financial Times' fDi Markets database, US$ 11.7 billion in 2016, mainly due to increased during January 2003 to March 2018, the cumula ve exports of tex les and apparels, vis-à-vis the previous investment in Bangladesh in greenfield and year. Imports growth were seen significantly higher at brownfield expansion projects, were US$ 23.4 billion, US$ 22 billion in 2017, increasing from US$ 3.8 billion crea ng 60,503 jobs in the country, out of 272 in 2008, with a CAGR of 21.6 percent, resul ng in a projects. India was the major investor, with US$ 8.5 trade deficit of US$ 9 billion in 2017 from a surplus of billion (36.5 percent share) worth investment in US$ 2.8 billion in 2008. Bangladesh during the period, followed by the US, Malaysia, China, UK and Singapore. During this Myanmar's export basket is concentrated on fuels period, coal, oil and natural gas was the largest sector (natural gas), food and other primary commodi es. In to receive capital investment, with a share of 54.6 2017, mineral fuels were the major item of percent in total investment inflows into Bangladesh. Myanmar's exports, accoun ng for 24.1 percent of Other major sectors a rac ng capital investment in total exports. Other major export items include the country include transporta on, financial services, ar cles of apparel and clothing accessories, ores, slag communica on and chemicals. and ash, edible vegetables, copper and ar cles, marine products, and iron and steel, among others. Foreign Investment in Myanmar
Myanmar's imports are more diversified than According to UNCTAD, Myanmar received FDI of exports, with manufacturing products having US$ 2.2 billion in 2016, decreasing from maximum share in imports. Electrical machinery and US$ 2.8 billion in 2015, as a result of the delay in equipment and mineral fuels, oils and products of implemen ng large-scale projects and policy dis lla on formed Myanmar's major import items in uncertainty over coal fired power projects. Myanmar 2017, accoun ng for 11.2 percent each of total is expected to receive increasing levels of FDI inflows imports, followed by machinery and instruments, in infrastructure, labor-intensive manufacturing and vehicles other than railway or tramway, iron and steel extrac ve industries in the coming years. and plas cs and ar cles.
According to fDi Markets, Myanmar received US$ 59 Exports of Myanmar were primarily directed to the billion as FDI, covering 600 FDI projects during January top five markets viz. China, Thailand, India, Singapore, 2003 to March 2018, crea ng 100,167 jobs in the and Japan, which account for 82.2 percent of country. The major sectors receiving investment in Myanmar's total global exports. China was the major Myanmar were coal, oil and natural gas, followed by source for Myanmar's imports, accoun ng for 41 real estate, alterna ve or renewable energy, percent of Myanmar's imports in 2017, followed by transporta on, financial services and communica ons. Thailand, Singapore, Malaysia, Japan, Indonesia, and The major investors in the country were Japan India. (US$ 16.1 billion), China (US$ 10 billion), Thailand (US$ 8.9 billion), South Korea (US$ 3.8 billion), the US Foreign Investment in Bangladesh (US$ 3.4 billion), and India (US$ 3.1 billion).
Bangladesh became the fourth largest FDI des na on Indo-Bangladesh Bilateral Trade among LDCs in 2016. According to UNCTAD, total FDI inflows to Bangladesh increased by 4.4 percent to Bangladesh is India's largest trading partner in South
11 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Asia, accoun ng for 37.5 percent of India's total India was the major investor in Bangladesh during the exports to the region, and 20 percent of India's total period, with 36.5 percent share in Bangladesh's imports from the region in 2017. Indo-Bangladesh global investment. During this period, coal, oil and trade increased by almost two-fold over the past natural gas was the largest sector to receive capital decade to reach US$ 6.3 billion in 2017 from US$ 3.6 investment, with a share of 72 percent in total billion in 2008. Over the decade, India's exports to investment inflows from India into Bangladesh, Bangladesh increased by a CAGR of 6.7 percent to followed by chemicals, automo ve OEM, financial US$ 5.8 billion in 2017 from US$ 3.2 billion in 2008, services, tex les and leisure, and entertainment. while India's imports from Bangladesh increased by a CAGR of 3.8 percent from US$ 329.8 million in 2008 to Indo-Myanmar Bilateral Trade US$ 459.4 million in 2017. India's trade surplus with Bangladesh increased from US$ 2.9 billion in 2008, to Since the signing of India and Myanmar trade US$ 5.3 billion in 2017. agreement in 1970, bilateral trade has been growing steadily. Total trade between India and Myanmar Co on is the major commodity exported by India to have witnessed a steady growth in recent years, Bangladesh (20 percent of India's total exports to having risen from US$ 1.1 billion in 2008 to more than Bangladesh) in 2017, followed by vehicles other than US$ 1.2 billion in 2017. India maintain a trade surplus railway or tramway (12.3 percent), cereals (9 with Myanmar in the recent years from a deficit percent), mineral fuels, mineral oils and products of witnessed un l 2015, reflec ng lower imports of dis lla on (8.9 percent), and machinery and edible vegetables and certain roots and tubers, as instruments (6.9 percent). India's major imports from well as mber products from Myanmar vis-à-vis Bangladesh in 2017 included vegetable tex le fibres, previous years. paper yarn and woven fabric, which accounted for 20.7 percent of the total imports, followed by ar cles of apparel and clothing accessories, not kni ed or India's exports to Myanmar increased by a CAGR of crocheted (19.4 percent), ar cles of apparel and 12.5 percent to US$ 685.9 million in 2017, compared clothing accessories, kni ed or crocheted (7.4 to US$ 237.3 million in 2008. On a year-on-year basis, percent), salt, sulphur, stone, and cement (4.7 India's exports to Myanmar declined sharply by 39.9 percent), and lead and ar cles (4.6 percent). percent from US$ 1.1 billion in 2016 to US$ 685.9 million in 2017 mainly due to lower exports Indo-Bangladesh Investment Rela ons of sugars and sugar confec onery. India's imports from Myanmar also stood lower at US$ 578.3 million during 2017, decreasing from US$ 906.3 million in During April 1996 to March 2018, the cumula ve 2008. approved Indian FDI in joint ventures and wholly owned subsidiaries (FDI ou lows) including equity, loan and guarantee issued, in Bangladesh stood at India's export basket to Myanmar primarily US$ 474.6 million. On the other hand, cumula ve comprised pharmaceu cal products, iron and steel, inflows into India from Bangladesh during April 2000- sugars and sugar confec onery, electrical machinery December 2017 amounted to US$ 0.05 million. and equipment and vehicles, among others, which According to Financial Times' fDi Markets database, together accounted for 51.8 percent of India's total during January 2003 to March 2018, the cumula ve exports to Myanmar in 2017. Edible vegetables, roots Indian investment in Bangladesh in greenfield and and tubers, and mber products together accounted brownfield expansion projects, were US$ 8.5 billion, for 91 percent of India's total imports from Myanmar crea ng 14,166 jobs in the country out of 52 projects. in 2017. In fact, during 2017, Myanmar was India's
12 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border third largest global source of edible vegetables and which accounted for around 60 percent of exports to mber products. Bangladesh in 2016-17.
Indo-Myanmar Investment Rela ons A substan al por on of imports from Bangladesh enters India by trucks through the Land Customs During April 1996 to March 2018, the cumula ve Sta ons on India-Bangladesh border. Around three- approved Indian FDI in joint ventures and wholly fourth of imports are through land route, one-fi h owned subsidiaries (FDI ou lows) including equity, availed the sea route, 2.6 percent were routed by rail loans and guarantee issued, in Myanmar stood at and less than a percentage by air. The top 5 ports from where imports from Bangladesh took place in 2016- US$ 285.3 million. On the other hand, cumula ve 17 are Petrapole (land), Tu corin, Ghojadanga (land), inflows into India from Myanmar during April 2000- Mohedipur (land) and Nhava Sheva (sea). Over 75 December 2017 amounted to US$ 9 million. percent of India's total imports from Bangladesh are According to Financial Times' fDi Markets database, routed through these ports. during January 2003 to March 2018, the cumula ve Indian investment in Myanmar in greenfield and brownfield expansion projects, were US$ 3.1 billion, Land Custom Sta ons: Bilateral trade between India and Bangladesh is mainly carried out through land crea ng 1,563 jobs in the country out of 14 projects. route via 49 Land Customs Sta ons (LCSs) and 2 Integrated Check Posts (ICPs) along the border. Of the During January 2003-March 2018, coal, oil and 49 LCSs, 37 are currently func onal. The LCS at the natural gas was the largest sector to receive capital India-Bangladesh Border provide transit, customs investment, with a share of 90 percent in total and immigra on and cargo handling services for investment inflows from India into Myanmar. Other goods and passengers. The Land Customs Sta ons at major sectors a rac ng capital investment in Petrapole (West Bengal) and Agartala (Tripura) have Myanmar include financial services, non-automo ve been developed as Integrated Check Posts (ICPs). In transport OEM, wood products and automo ve OEM. order to facilitate movement of cargo across the border, ICP Petrapole has been made opera onal on India's Border Trade and Connec vity with 24x7 basis, seven-days-a-week Customs clearance Bangladesh facility basis since August 2017.
Border Haats: In order to curb unofficial trade, the India and Bangladesh share over 4,000 km of common interna onal border, with the states of Assam, India and Bangladesh had agreed to reopen Border Meghalaya, Mizoram, Tripura and West Bengal. Haats (market places). Border Haats generally have According to a report by Ministry of Commerce & limited number of products for trade, which would be Industry, Government of India, 46.5 percent of India's traded by iden fied vendors (generally from the exports to Bangladesh were routed by land through border districts), with buying limits on each market trucks, 0.5 percent through railways and balance 53 day. Currently, four Border Haats are opera onal, viz. percent through sea or air routes in 2016-17. ICP Srinagar and Kamalasagar in Tripura and at Kalaichar Petrapole is the largest gateway to Bangladesh and Balat in Meghalaya for the convenience of contribu ng 34 percent of total exports and 58 bordering communi es. According to PIB, cash trade percent of imports in 2016-17. Port-wise analysis equivalent to `1,686.62 lakhs was carried out at the shows that ICP Petrapole, Nhava Sheva (sea), Mundra, opera onal four Border Haats in the five year period Ghojadanga and Chennai (sea) are the top 5 ports ending 2015-16. According to Ministry of Commerce
13 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border and Industry of India, an es mated US$ 20 million are exported to Bangladesh through air. worth trade could take place annually between India and Bangladesh through the Border Haats. Protocol on Inland Water Transit and Trade (PIWTT): PIWTT signed in 1972 is an agreement between the Connec vity two governments for the transporta on of goods and keeping their respec ve waterways navigable, while Trade between India and Bangladesh is carried out providing infrastructure facili es. The protocol is a mostly by road. The major road route between mutually beneficial arrangement for the use of each Bangladesh and West Bengal is at the Petrapole - other's waterways for trade between two countries Benapole (on Bangladesh side) border, while in the and for transit cargo from Indian mainland (Kolkata) NER, Bangladesh mainly trades with Meghalaya, to North East Region. Under this Treaty, movement of Tripura and Assam. India and Bangladesh are also Indian goods and barges/vessels are permi ed signatories to the Asian Highway Network (AHN) project, a coopera ve project to improve the highway through the river systems of Bangladesh on the eight systems in Asia, by connec ng countries in Asia and specific routes between Kolkata and points in Assam Europe under the aegis of United Na ons Economic (Dhubri, Karimganj) on payment of Bangladeshi Taka and Social Commission for Asia and the Pacific 100 million as annual maintenance charges by India. (ESCAP). Two Asian Highway Network routes (AH-1 According to Bangladesh Inland Water Transport and 2) will be connec ng India and Bangladesh at Authority (BIWTA), during July 2016 to June 2017, West Bengal's Petrapole-Benapole ICP and Fulbari- about 2.62 million metric tons of goods were Banglabandha Inland Port, and Meghalaya's Dawki- transported via the Protocol routes per annum, which Tamabil LCS. The Bangladesh, Bhutan, India and Nepal include 2.618 ton inter- country trade cargo and – Motor Vehicle Agreement (BBIN-MVA) signed in about 0.006 million transit cargo. June 2015 is expected to boost connec vity by road, as the agreement allows vehicles to directly enter each other's territory, without the requirement for Coastal Shipping Agreement: A Coastal Shipping trans-shipment of goods from one country's truck to Agreement was signed between India and another at the border. Almost all of Bangladesh's Bangladesh in June 2015, which has enabled direct imports from India are through train route. At sea movement of containerized/bulk/dry cargo present, out of the erstwhile six rail links, 4 inter- between the two countries. This would enhance country railway links are opera onal (Petrapole- bilateral trade by reducing me in shipping goods and Benapole, Gede-Darshana, Radhikapur-Biral and enabling a huge saving in logis c costs of foreign trade Singhabad-Rohanpur) and 2 more are proposed to be transport between the two countries, which would reopened (Haldibari-Chilaha and Mahisasan- otherwise have to be routed through ports of Shahbazpur). A railway agreement in the Bangladesh, Colombo and Singapore. It has reduced the shipping Bhutan, India, Nepal (BBIN) sub region is also being me between India and Bangladesh from 30-40 days proposed, in line with expansion of railway links boos ng connec vity between India's North East and to 7-10 days and has the poten al to emerge as an its BBIN neighbors. Air cargo has a very small share as economical mode of transporta on of goods for it is much costlier than the other modes, i.e. bilateral trade. It also has the poten al to decongest waterways, roadways, and railways. Mostly costly roads and LCSs through which most of the trade is products like life-saving drugs and pharmaceu cals taking place now. This would also enable the
14 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border movement of cargo to the North East through coastal transac ons with Myanmar, including those at the shipping up to Chi agong and therea er by Indo-Myanmar border with effect from December 1, road/inland waterways. 2015, to be se led in any permi ed currency in addi on to the Asian Clearing Union mechanism. As India's Border Trade and Connec vity with per the DGFT public no ce no. 50 issued on Myanmar December 17, 2015, it has been decided that Border Myanmar share 1,643 km of common interna onal Trade at Moreh, Manipur would be upgraded to border with India in the North East Region, with the Normal Trade so as to promote bilateral trade states of Manipur, Mizoram, Nagaland and Arunachal between the two countries. Pradesh. According to Ministry of Commerce, Government of Myanmar, border trade increased Land Custom Sta ons: At present, there are two Land over six fold from US$ 15.4 million in 2011-12 to Custom Sta ons (LCS) in India dealing with border US$ 88.2 million in 2016-17. However, trade along trade with Myanmar. These include Moreh in Indo-Myanmar border remains rela vely low in Manipur with the corresponding LCS Tamu in comparison with Sino-Myanmar and Thai-Myanmar Myanmar and Zokhawtar in Mizoram with the borders. In terms of port wise trade with Myanmar, corresponding LCS Rih in Myanmar. The ini a on of most of bilateral trade are through sea. Nhava Sheva third LCS, Avangkhu in Nagaland with the (JNPT) is the largest gateway to Myanmar, corresponding sta on Somara in Myanmar has been contribu ng 19.3 percent of total exports and 24.8 bilaterally agreed, but it has not been no fied yet by percent of imports in 2016-17. Nhava Sheva (sea), the Government of India. As the nearest town in Kolkata (sea), Mundra, Chennai (sea) and Delhi (ICD) Myanmar which is func oning as LCS is Tiddim, which are the top 5 ports which accounted for 53.5 percent is at a distane of 75 km from the border village of of exports to Myanmar in 2016-17. Again, as regards Zokhawthar, Government of India is assis ng imports from Myanmar, it was mainly carried out Myanmar to build the Rih-Tiddim Road. Zorinpui in through sea ports in 2016-17, and were mainly Lawngtlai district of Mizoram was selected for a new imported via Chennai (sea), Nhava Sheva (sea), land custom sta on along the India-Myanmar border Tu corin (sea), GMR Hyd. Avia on Ltd. SEZ, Kolkata in Mizoram for the Kaladan Mul Modal Transport (sea) and Cochin (sea), These ports account for 88 project. Moreh is the most ac ve one among LCSs and percent of the total imports from Myanmar. Moreh most of the me handles over 90 percent of India's LCS accounted for 1.7 percent of India's total imports border trade with Myanmar. The Government of India from Myanmar, while not much imports have taken has decided to upgrade Moreh LCS to an Integrated place through Zokhawthar in 2016-17. Check-Post (ICP), to support the increased traffic volume of trade and to facilitate movement of India and Myanmar signed a border trade agreement people. in 1994. A total of 62 commodi es have been approved over me for border trade. Barter trade Border Haats: The Border Haats play a facilita ng role was ini ally permi ed as a part of border trade to of enabling local trade and increasing people-to- facilitate exchange of locally produced commodi es people contacts and promo ng the well-being of the along the Indo-Myanmar border. These transac ons people in areas of difficult access across the borders were, however, not captured in the banking system or of two countries. This is done through establishing a reflected in the trade sta s cs. With the tradi onal system of marke ng the local produce at diversifica on of trade basket over a period of me, local markets at the border. A er realising the and an increasing need to capture such transac ons requirements of communi es residing near the to support normal trade with Myanmar, the Reserve border, India and Myanmar took the decision to set Bank of India (RBI) has necessitated all trade up the Border Haats. Government of India has
15 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border executed a Memorandum of Understanding (MOU) Poten al Commodi es for Enhancing India's Trade with Government of Myanmar, under which Border with Bangladesh Haats are to be set up at nine mutually agreed loca ons. According to the signed MOU, the first Haat Commodi es at HS-code 6 Digit level which have will be set up at Pangsu Pass adjacent with Sagaing export poten al from India to Bangladesh under Region and Arunachal Pradesh as a pilot project even normal trade have been iden fied through the a er signing the Mode of Opera on of se ng up Border Haats by the designated authori es. following criteria: Iden fica on of major items in Bangladesh's import basket, and share of India in each product line (based on HS-code); and selec on Connec vity of poten al items, based on rela vely low share of India in Bangladesh's import basket of major Poor road condi ons along the border areas is a major commodi es despite India's global export capability. impediment for regular bus service. To enhance Based on the above analysis, poten al items of India's connec vity and trade between India's North East exports to Bangladesh have been iden fied as: states and Myanmar, India has signed an agreement with Myanmar to construct 71 bridges along the road Ÿ Machinery and instruments (HS-84) where the Indian buses will ply. The first Imphal- Ÿ Mandalay bus service carrying 27 officials was flagged Electrical machinery and equipment (HS-85) off by the Chief Minister of Manipur in December Ÿ Animal or vegetable fats and oils (HS-15) 2015. The Government of India is also involved in construc on and repairing of 69 bridges on the Tamu- Ÿ Kni ed or crocheted fabrics (HS-60) Kalay road for this purpose. Ÿ Sugars and sugar confec onery (HS-17) Ÿ Kaladan Mul Modal Transit Transport Project Paper and paperboard (HS-48) (KMTTP): The Kaladan Mul Modal Transit Transport Ÿ Op cal, photographic, cinematographic, medical Project was jointly iden fied by India and Myanmar to or surgical instruments (HS-90) create a mul -modal mode of transport for shipment of cargo from the eastern ports of India to Myanmar Similarly, poten al items of exports from Bangladesh to India, based on an analysis of Bangladesh's top as well as to the North East part of India through exports, India's share in Bangladesh's exports, and Myanmar. This project, which will connect Si we Port India's global import demand have been iden fied as: in Myanmar to the India-Myanmar border, is expected to contribute to the economic development Ÿ Ar cles of apparel and clothing accessories, of the North East states of India, by opening up the sea kni ed or crocheted (HS-61) route for the products. It also provides a strategic link to the North East, thereby reducing pressure on the Ÿ Ar cles of apparel and clothing accessories, not Siliguri Corridor. The development of this project not kni ed or crocheted (HS-62) only serves the economic, commercial and strategic Ÿ Other made-up tex le ar cles (HS-63) interests of India, but also contributes to the development of Myanmar, and its economic Ÿ Footwear, gaiters and the like (HS-64) integra on with India. Once completed, the project Ÿ would allow goods from Kolkata port to reach India's Ar cles of leather; saddlery and harness (HS-42) North East states more cheaply. It will also serve as Ÿ Raw hides, skins and leather (HS-41) cornerstone of India's “Act East Policy” aiming to Ÿ expand India's economic and poli cal influence in Furniture; bedding, ma resses and similar stuffed Southeast Asia. furnishings (HS-94)
16 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Poten al Commodi es for Enhancing India's Trade Indian counterpart. In the recent past, the number of with Myanmar trucks exi ng the cargo complex to Benapole side has gone upto 450. It was observed that export trucks generally took around 7-14 days to reach Benapole Poten al commodi es of exports from India to border, a er spending 7-10 days in private parking Myanmar based on iden fying major items in area in Bongaon, and 5-7 days at ICP Petrapole, Myanmar's import basket, and share of India in each reflecting lower truck handling capacity at Benapole product line (based on HS-code) and rela vely low side. share of India in Myanmar's import basket, despite Further, warehousing capacity at the ICP Petrapole India's global export capability under normal trade cargo complex, which currently has 5,000 MT have been iden fied as: capacity, is unable to match that of Benapole, which is around six to seven mes bigger in terms of capacity Ÿ Mineral fuels, mineral oils and products of their compared to ICP Petrapole. On an average, 70 – 80 dis lla on (HS-27) trucks carrying imported items are handled daily at Ÿ Plas cs and ar cles (HS-39) the cargo complex of ICP Petrapole. The me taken Ÿ for transshipment of imported items, i.e. transferring Animal or vegetable fats and oils (HS-15) the imported goods from Bangladesh Truck to Indian Ÿ Ar cles of iron or steel (HS-73) Truck and moving out towards India, is roughly 7-8 hours. The Immigra on Check post at Haridasspur Ÿ Miscellaneous edible prepara ons (HS-21) handles the movement of passenger from India to Ÿ Man-made staple fibres (HS-55) Bangladesh and vice versa. According to the officials, Ÿ Man-made filaments, strip and tex le materials the said complex is likely to get modernised on the (HS-54) model of Chennai Airport for which blue print is already in place. Development of the proposed state of the art passenger terminal will facilitate greater Similarly, poten al commodi es of exports from movement of passengers between the two countries. Myanmar to India have been iden fied as: Ÿ Mineral fuels, mineral oils and dis lla on products Current Status and Challenges at LCS Moreh (HS-27) Ÿ Ores, slag and ash (HS-26) Though banking facility is available with United Bank Ÿ Copper and ar cles (HS-74) of India (UBI), Moreh, along with the presence of other commercial banks such as State Bank of India Ÿ Iron and steel (HS-72) (SBI), Axis Bank and UCO Bank, the absence of foreign Ÿ Rubber and ar cles (HS-40) exchange facility is a major constraint for conduc ng Ÿ Pearls, precious or semi-precious stones, precious interna onal trade. There is no opera onal metals (HS-71) warehouse at LCS Moreh since the State government warehouse, which is the only available warehouse at LCS Moreh, has become non-opera onal due to non- Current Status and Challenges at ICP Petrapole fulfillment of condi ons as required under the Warehousing Regula ons 2016. The weighbridge According to the officials at the ICP Petrapole, the provided by the State Government is also not cargo complex of the ICP has the capacity to handle func oning. Moreh is a non-EDI Sta on, and lack of 700-750 export trucks but clears only 370 trucks, as internet connec vity causes hindrance to facilita ng the present infrastructure in Benapole cargo complex trade. at Bangladesh side could not match the facili es of its Roads are not well weathered and narrow, and at the
17 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border same me, bridges are also weak and in dilapidated Pangkhua-Thau border points, this is yet to be condi on, and therefore, could not support heavy implemented. Weighbridge has stopped func oning load. Road connec ng Imphal with the mainland India since May 2013, and need a repair. through Dimapur and Silchar are in a poor condi on Bonded warehouse is not available in the LCS. SBI and need an upgrade. A major bo leneck for border Branch func onal at the composite Land Custom trade is a lack of laboratory tes ng facili es for Building cannot accept Government challan or imported food items at the Moreh border, which is deposit. There are also issues with regards to crucial from the point of view of health and sanitary telephone and internet connec vity and shortage of and phytosanitary concerns. Further, there are not electric and water supply. At present, food tes ng enough storage facili es at the land ports, and there is facility is not available at the LCS Zokhawthar, and a need to extend storage capacity by providing proper tes ng has to be done at Imphal, Manipur which is warehousing, cold storage and logis cs facili es at very far and me consuming. The connec ng road Moreh. between Champhai and LCS Zokhawthar is in a very poor and rough condi on and needs substan al Border trade through Tamu/Moreh needs to become upgrada on and maintenance. more formalised with single-window clearances and easier currency arrangements. Moreh LCS have been Way Forward found to be beset with infrastructure deficit. Several factors such as unavailability of electricity, bad road, Need for Improving Border Related Infrastructure: manual handling of goods, unfriendly exchange rate There is an urgent need to improve the necessary and many such barriers, among others, are making border infrastructure at trading points to facilitate trade at border expensive, thus, resul ng in cross-border movement of goods between India and increasing incidence of unofficial (informal) trade. its neighbouring countries. Major infrastructure facili es required include development of land port Current Status and Challenges at LCS Zokhawthar with modern warehousing facility, food tes ng facility, IT and telecom support, weighbridge and development of the connec ng roads and bridges. LCS Haimual (Myanmar), adjacent to LCS Zokhawthar, Infrastructure bo lenecks and constraints at the ICP needs to be equipped with necessary infrastructure and the LCSs have to be addressed, and trade and banking facili es. There is a need for speedy facilita on needs to be promoted, to increase flow of implementa on of the MOU signed between goods between India and Bangladesh and Myanmar. Government of India and Government of Myanmar to construct/upgrade the Rih-Tiddim Road along the North East as a Gateway to Markets in the Asian Myanmar-India border, as the road connec ng LCS Region: There is a need to seriously look at the NER Zokhawthar to Myanmar is a single lane Kachha road more as a gateway to bigger markets across the with bad grade and poor condi on. Transporta on of border rather than a consumer market. NER has the tradeable commodi es in bulk quan ty is simply not poten al to serve as a major springboard to possible. penetrate neighbouring market in Asia region. Endowed with abundant rivers, the region offers Further, the bailey bridge connec ng Zokhawthar and perfect opportunity to implement a mul -modal Rih (Myanmar) is not capable of handling heavy goods mode of transport with the mix of road, rail and river traffic. Though the mee ng of Joint commi ee on based cargo movement. With right kind of Border Haats between Myanmar and India in Nay Pyi infrastructure and policy support in place, the NER Taw agreed in principle to set up Border Haat at has the poten al to facilitate trade and commerce Hnahlan-Darkhai, Zote-Farthang, Vaphai-Leilet and between India and its neighboring countries and
18 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border other Asian countries. Coastal shipping, supported by Border Trade, implying that the Circular is applicable logis cs service providers, could be considered for to all other border trading points at the Indo- effec ve movement of cargo between ports in Myanmar border, including LCS Zokhawthar. Bangladesh and Myanmar and the NER. However, one major issue is that there is no standard exchange rate at the LCSs at Indo-Myanmar border. Need to Build Connec vity and Related Number of Banks authorised in NER to handle foreign Infrastructure Support: Ensuring seamless currency transac on and L/C facili es is also limited. movement of goods through regional connec vity Myanmar Economic Bank in Myanmar and United and mul modal transport facility would help ensure Bank of India are designated banks for trade to put in growth in trade. There is a need to strategically build facili es for foreign exchange and opening of Le er of connec vity within and across the states of NER and Credit by the traders. However, there has been a lack link with the border trading points. The Kaladan Mul of banking facili es and necessary infrastructure on Modal Transit Transport Project (KMTTP), which is both sides of the border, due to which normal trade currently underway, will connect Kolkata with Si we has not been started. Further, due to high fluctua on seaport in Rakhine State, Myanmar by sea. In of exchange rate of Kyat in the market, traders found Myanmar, it will then link Si we seaport to Paletwa, it more economical to do business through unofficial Chin State via the Kaladan river boat route, and then channels. On the Bangladesh side, it has been noted from Paletwa by road to Mizoram state. It thus uses that Indian banks cannot carry on transac on directly sea, river and road transport modes to facilitate a with banks in Bangladesh for trading across border. development corridor in Myanmar and also The issues need to be resolved on a priority basis if movement of cargo between Indian mainland and the trade across border is to be con nued through NER. Harnessing the full benefit would necessitate normal route. To address these issues, conduc ng upgrade of transport infrastructure within the region. joint workshop for stakeholders including banks, There is an urgent need to upgrade the roads traders, government officials, diplomats, and industry especially trade routes to withstand regular representa ves, among others, could be a way movements of cargo vehicles. forward.
Banking Facility to be streamlined: A major shi that Need for Increasing Border Haat: With the has taken place regarding border trade between India normalisa on of cross-border trade at the Indo- and Myanmar is the shi from Border trade to Normal Myanmar, there is an urgent need to strengthen and Trade. Barter trade was ini ally permi ed to facilitate increase the presence of Border Haats at strategic exchange of locally produced commodi es along the points. Border Haats allows people from both Indo-Myanmar border. However, since these were countries to buy each other's products on a fixed day not captured in the banking system or reflected in the each week, with items traded limited to select locally trade sta s cs, and given that over a period of me grown agricultural and manufactured finished trade basket has diversified and adequate banking products. Se ng up of Border Haat at the India- presence is in place to support normal trade with Myanmar border will support higher economic Myanmar, the RBI eventually abolished barter trade ac vi es and engagements between people living in at the Border trading points on November 5, 2015. these areas. In addi on, an avenue for regular cross- Trade transac ons now need to be carried out in border bus services can also be explored to promote permi ed currencies only, in addi on to Asian people-to-people connec vity. Clearing Union mechanism. Accordingly, border trade at Moreh, Manipur was upgraded to normal trade on Make in India in the NER: Border trade sta s cs December 17, 2015 by DGFT and revoked all other especially at the LCS Moreh and LCS Zokhawthar former Public No ce rela ng to Indo-Myanmar suggests the need for se ng up of manufacturing
19 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border hub in the NER. While official imports from Myanmar `100 crore had been allocated by the Government of at the LCS Zokhawthar in the last nine years were India for the development of organic farming in the confined mostly to areca nut, and occasionally reed NE states way back in 2014-15. This ini a ve is broom and black pepper, official exports data has only an cipated to enable the NE states to benefit from one traded item, i.e. soyabari. The number of the development of commercial organic farming and exported items are more diversified at Moreh border, alter the agricultural mode from inorganic to organic. which include imports of wheat flour, bleaching In fact, the Mizoram Government also made an effort powder, dry chilli and dry grapes, while the only item towards organic farming by introducing the Organic imported is areca nut. It has been, however, learned Farming Act way back in 2004. Through the Act the that large quan es of other items have been State has encouraged the farmers to use organic exported from Zokhawthar to Myanmar through inputs like vermin-composts, bio-fer lisers and has informal channel which include fer lizers (locally strategically reduced the use of chemical inputs to known as lei chi), medicines, motorcycles, pes cides, make the State completely organic, thus giving a cycle parts, and solar gears. In fact, several truckloads healthy alterna ve for many farmers to u lize. of fer lizers and medicines are being supposedly Organic farming methods are being promoted by the shipped to Myanmar side every week. Similarly, large Government of Meghalaya taking into account the informal trade also happened at the Moreh LCS benefits that could be garnered from this method of border. It is therefore per nent to iden fy agriculture. The State had launched a new ini a ve commodi es which are on high demand at the other called 'Mission Organic' in January 2015. In 2016, side of the border and set up a manufacturing unit Sikkim became India's first fully organic state in India. accordingly, which will at the same me promote the Amongst the North Eastern States, Sikkim is the “Make in India” ini a ve of the Government, while leading State, cons tu ng around 73 percent of the suppor ng job crea on. Efforts could also be total organic area in the region, followed by Nagaland directed towards formalising the informal trade (15 percent). Since most of the tradi onal methods of items. The very fact that informal and unauthorised cul va on in the NER are generally organic by default, trade could flourish in the border area suggests that organic focus agro-based Industry could be set up in there is also a possibility to create a formal channel the region and transform the region into organic hub of trade, and that also on a larger scale with state in India. support. Informal trade could happen due to various reasons including rent-seeking ac vi es of public servants, inadequate banking facility, or Investment in Healthcare Infrastructure in cultural linkages. The root of the extensive informal Bangladesh and Myanmar: Both Bangladesh and trade over years needs to be examined and Myanmar have shortage of hospitals and have to rely carefully addressed. on facili es in the neighbouring countries for healthcare related services. The basic infrastructure Promo on of Organic Agro-based Industry in the requirement for both the countries could include NER: One of the key industries that the North East establishment of hospitals, specialist centers and states could focus for exports is the Organic Industry. clinics at the province as well as the central level. Major importers of Organic products include, among There is a need for super-specialty hospitals and others, China, Japan, Philippines, Singapore and Sri advanced healthcare technologies, owing to the Lanka. The North East region of India, where epidemiological shi . Many Indian hospital chains agricultural produc on is predominantly organic by have established hospitals in countries abroad. For default, can be instrumental in increasing India's organic agricultural exports. Realising the poten al example, African region has been a hub of Indian for the development of organic farming, a sum of investment in healthcare. For s Healthcare operates
20 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border two hospitals in Mauri us and is in management India's services trade, which is known for its low cost agreements with few hospitals in Uganda and Nigeria. and high quality services. Features such as low cost Manipal Hospitals has presence in Nigeria. Indus healthcare solu ons, availability of skilled healthcare healthcare opened office in South Africa in 2008 for professionals, reputa on for treatment in advanced catering to the medical tourism traffic to India. Apollo healthcare segments, India's tradi onal wellness hospitals has telemedicine peripheral centers in systems, and strengths in informa on technology Nigeria and Sudan. Both Bangladesh and Myanmar makes India an ideal des na on for pa ents from the too could become another investment hub for the two countries. While there have been significant Indian en es. According to a research study by flows of medical tourists to mainland India from Observer Research Founda on, India has assisted Bangladesh through Petrapole, medical tourism to Myanmar in the improvement of Yangon Children the NER has been limited except for Guwaha . At the Hospital and Si we General Hospital. India supplied medical equipment, and imparted training to staff in same me, Myanmarese na onals started reaping these hospitals. An Indian company has prepared the benefits through the Moreh border. Medical tourism Detailed Project Report (DPR) for these hospitals. In between India and Bangladesh and Myanmar offers a similar fashion, India's investment in the two countries lot of poten al. Na onals from the two countries could focus on healthcare infrastructure, among could take advantage of the region's proximity with others. India and visit the country for medical treatment. In Promo ng Medical Tourism: At the same me, fact, the Government of India has already made an medical tourism to India from Bangladesh and effort to connect India through Manipur to Myanmar Myanmar could also be encouraged. This will be and Thailand. Visa charge fees for visi ng are waived another springboard for building people to people off for Myanmar na onals (except e-visas). Similar contact, trust and coopera on. Medical tourism ini a ve could be replicated with Bangladesh sector has emerged as one of major components in na onals in the NER.
21 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
1. BACKGROUND
Introduc on Sri Lanka and Thailand, become increasingly relevant. India's Look East Policy, which was introduced in In fact, the strategic importance of BIMSTEC can be 1992,was relaunched in 2014 as the “Act East Policy”, seen from the fact that it acts a bridge between South with the objec ve of promo ng economic Asia and South East Asia and also serves as a common coopera on, cultural es and develop strategic pla orm for intra-regional trade and coopera on rela onship with countries in the Asia-Pacific region among the SAARC and ASEAN members. Enhanced through con nuous engagement at bilateral, regional cross-border connec vity and greater regional and mul lateral levels there by providing enhanced coopera on between India, Bangladesh and connec vity to the states of India's North East Region Myanmar, coupled with India's ‘Neighbourhood First (NER)¹. In fact, immediate border countries in the East Policy’ and ‘Act East Policy’, could bring significant and North East India region would play important role benefits for India and its neighbourhood, while in the success of India's Act East Policy. Myanmar, the transforming the NER as the gateway to Eastern and only ASEAN member country which border India, South East Asian region. shares a land boundary of around 1,643 km with four Recent Economic Developments In Bangladesh Indian states including Manipur, Mizoram, Nagaland Bangladesh is strategically located in South Asia, and Arunachal Pradesh². Bangladesh is equally cri cal bordered by India, Myanmar and the Bay of Bengal, to the success of India's 'Act East', with 4,096.7 km making it one of the major hubs in the global trade long border is being shared with India along the states arena (Exhibit 1.1). The country has a popula on of of West Bengal, Assam, Meghalaya, Tripura and 163.2 million (2017) with a land area of 147,570 sq Mizoram. During the visit of H.E. Md. Abdul Hamid, km. Bangladesh has the advantages of a mild tropical President of Bangladesh's visit to India in December 2014, the Hon'ble Prime Minister of India, Shri Exhibit 1.1: Map of Bangladesh Narendra Modi had emphasized that India's Act East Policy would begin from Bangladesh. Ac ng upon the Policy, India has accorded increasing importance to higher engagements with East and South East Asian Countries by focusing on connec vity, and border related infrastructure projects in the Eastern and the NER to facilitate trade and promote people to people contact. Ini a ves such as Kaladan Mul Modal Transit Transport Project would provide direct benefits to the NER by opening up fresh avenues for economic ac vi es. The India- Myanmar-Thailand Trilateral Highway is expected to further augment connec vity and economic coopera on in the sub-region and beyond. Regional Coopera ons such as Bay of Bengal Ini a ve for Mul -Sectoral Technical and Economic Coopera on (BIMSTEC), whose membership include countries such as Bangladesh, Bhutan, India, Myanmar, Nepal, Source: Economist Intelligence Unit (EIU)
¹ Government of India, "Act East Policy", Ministry of External Affairs, December 23, 2015 h p://pib.nic.in/newsite/PrintRelease.aspx?relid=133837 ² Ministry of Home Affairs, Government of India, h ps://mha.gov.in/sites/default/files/Mandate_Border_II_16022018.PDF 22 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border climate, fer le soil, rich marine resources and has Bangladesh has managed to sustain a high growth of huge volumes of natural and agricultural resources. over 7 percent in 2017 in spite of a marginal growth in There are substan al deposits of coal and gas in the exports and fall in remi ance inflows, supported by country, which are important raw materials for key strong private consump on and investments in industries. Bangladesh is a part of Goldman Sachs' N- infrastructure projects. This recent economic 11 group of countries, with steady monetary policy scenario reflects a structural transforma on in the management and fiscal discipline suppor ng growth story of Bangladesh. The medium term macroeconomic stability. According to the growth prospect of the country is expected to be Interna onal Monetary Fund (IMF), the country has driven mainly by rising private consump on and gross benefi ed from favorable external demand, high fixed investment. With an average growth rate of 6-7 remi ances, and low commodity prices, resul ng in percent over the last few years, Bangladesh holds strong output growth, falling infla on, moderate great poten al to emerge as one of the key economic public debt, and a rebuilding of external resilience. powers in the coming years. Economic Snapshot of Bangladesh Consumer price infla on of Bangladesh moderated in
rd the last few years, averaging 5.7 percent in 2017, as According to the IMF, Bangladesh is the 43 largest compared to 7.5 percent witnessed in 2013, in spite economy in the world and is also among the fastest of various natural calami es faced by the country. In growing economies, with a growth rate of 7.1 fact, Bangladesh has experienced devasta ng floods percent in 2017. Over the last decade, nominal GDP in 2017, which caused the destruc on of various has more than trebled from US$ 85.6 billion in 2007 crops, including 1.2 – 1.5 million tonnes of rice, which to an es mated US$ 261.4 billion in 2017, with a is the main dietary staple food in the country. This has per-capita income of US$ 1,601.7 (Table 1.1). led to a shortage of food supplies, which has resulted According to the World Bank, Bangladesh reached in a rise in food grain prices even as the government has ramped up imports to prevent a food crisis. the lower middle-income country status in 2014, Supply-side constraints, such as poor infrastructure, a supported by its rapid growth. According to the shortage of cold-storage facili es and higher global UN's Commi ee for Development Policy, commodity prices also have impacted infla on. As Bangladesh has fulfilled the eligibility criteria to the country relies mostly on imports to meet its graduate from LDC status for the first me in 2018, energy needs, an increase in energy prices are and if it could meet the eligibility criteria again in expected to have an upward pressure on infla on in 2021, it would be removed from the list of LDCs by the short run. Further, Bangladesh has started 2024. impor ng LNG this year, which would expose the country to addi onal infla onary pressure. The economic growth of Bangladesh has been mainly driven by exports, especially of readymade In 2017, external debt as a percentage of GDP garments, remi ances and agriculture sector. increased to 18.9 percent of GDP from17.5 percent in 2016. The IMF's Debt Sustainability Assessment Services sector dominates the economy, with a carried out in 2017 assessed Bangladesh at low risk of share of 56.5 percent of Bangladesh's GDP, debt distress. Cau ous fiscal policy of the followed by industry (29.2 percent) and agriculture government has kept the public debt on a sustainable (14.3 percent). Natural gas is the main source of path. Moderate fiscal deficits, concessional external energy in Bangladesh. The government of borrowing and prudent debt management policies Bangladesh is making efforts to increase the share have helped country to have a posi ve outlook. The of renewables in the country's energy reserves, country has ini ally planned to increase revenue by with a target of mee ng 10 percent of Bangladesh's introducing a flat 15 percent value-added tax (VAT). energy needs through renewable sources by 2020. However, amid pressure from businesses, the
23 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 1.1: Macroeconomic Snap shot of Bangladesh- Select Indic ators 2013 2014 2015 2016 2017e 2018f 2019f
Real GDP Growth (%) 6.0 6.3 6.8 7.2 7.1 7.0 7.0
Nominal GDP (US$ bn) 161.3 184.0 208.3 235.6 261.4 285.8 312.8
GDP Per Capita (US$) 1,030.0 1,163.0 1,303.2 1,458.9 1,601.7 1,733.5 1,877.7 Consumer Price Infla on (avg. % chang e) 7.5 7.0 6.2 5.7 5.7 6.0 6.0 Popula on (mn) 156.6 158.2 159.9 161.5 163.2 164.9 166.6 Current Account Balance (US$ bn) 1.9 2.1 3.6 1.4 -3.2 -5.8 -7.2 Current Account Balance (% of GDP) 1.2 1.2 1.7 0.6 -1.2 -2.0 -2.3 External Debt (US$ bn) 34.0 35.7 38.7 41.1 49.5 53.2 58.6 Interna onal Reserves (US$ bn) 18.1 22.3 27.5 32.3 33.4 34.5 35.1
Exchange Rate (Tk: US$, avg) 78.1 76.6 78.0 78.5 80.4 83.6 85.8 Note: e: Es mates; f: forecasts Source: IMF World Economic Outlook, April 2018 and EIU Country Reports implementa on of the new VAT, ini ally planned for fixed investment. Infla on is expected to increase to 6 July 1, 2017, was pushed back to 2019, which is percent in 2018, driven by higher food and energy expected to have a nega ve impact on revenue prices. The current account deficit is es mated to collec on. widen to 2 percent of GDP in 2018, due to deficits in The current account of Bangladesh is es mated to the trade, services and primary income accounts. have recorded a deficit of US$ 3.2 billion in 2017 Recent Economic Developments in Myanmar (equivalent of 1.2 percent of GDP) from a surplus of Myanmar, which covers an area of 676,578 sq km, is US$ 1.4 billion recorded in 2016. This is the first me bounded by Bangladesh, India, China, Lao PDR and since 2011 Bangladesh witnessing a deficit in its Thailand, and 2,800 km coast line of the Bay of Bengal current account, owing to large scale food imports in the West, and Andaman Sea on the South. due to floods that destroyed several food crops. Myanmar is rich in natural resources, including The local currency of Bangladesh is taka (Tk). The natural gas, copper, mber, gemstones, petroleum, exchange rate has been showing a deprecia ng trend n, an mony, zinc, tungsten, lead, coal, marble, in the recent years. The exchange rate stood at limestone, and hydropower. Tk 80.4: US$ 1 in 2017, deprecia ng from Tk 78.5: US$ Myanmar's strategic loca on provides immense 1 in 2016. The taka is expected to weaken further opportuni es and incen ves for it to engage against the US dollar in 2018-22, given the an cipated narrowing of the interest-rate differen al between effec vely in the region to advance trade, investment, the US and Bangladesh as well as from high import and developmental goals. For India, Myanmar is needs of Bangladesh as the government focuses on strategically important, as it is the only ASEAN infrastructure development to drive growth. Foreign- country with which it shares border. With its exchange reserves (excluding gold) stood at US$ 33.4 abundant natural resources, strategic loca on at the billion at end 2017, and is more than sufficient to crossroads of Asia, large youth popula on, and manage short-term exchange-rate vola lity. sizable market, Myanmar could develop into an Bangladesh's real GDP is expected to be sustained at economic hub in the ASEAN region offering a wide around 7 percent during 2018-2022, driven mainly by range of investment opportuni es. a rapid increase in private consump on and gross According to a study by the Asian Development Bank
24 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
(ADB), Myanmar has the poten al to become a expected to receive a boost. Services sector middle income na on by following Asia's fast growing dominates the economy, with a share of 39.6 percent economies and grow by 7-8 percent per annum. This, of Myanmar's GDP, followed by industry (34.7 however, would require sustaining of economic percent) and agriculture (25.7 percent). The major reforms it has ini ated in 2011. According to a study industrial sectors of Myanmar mainly comprise by McKinsey³, if Myanmar takes an ini a ve to tap agricultural processing, wood and wood products, poten als of its key sectors, it has the poten al to construc on materials, pharmaceu cals, fer lizer, oil grow as a larger than US$ 200 billion economy by and natural gas and garments. 2030. Myanmar is one of the fastest growing economies in According to the UN's Commi ee for Development Asia. As per the IMF, the economy grew at an average Policy, Myanmar has fulfilled the eligibility criteria to rate of 8.2 percent during 2013 and 2014, as reforms graduate from LDC status for the first me in 2018, opened up the space for private investment. Growth, and if it could meet the eligibility criteria again in however, eased in 2015 and 2016 due to a supply 2021, it would be removed from the list of LDCs in shock from heavy flooding, slowdown in new 2024. investment flows during elec on year, and a more challenging external environment including lower commodity prices affec ng Myanmar's main exports. It started recovering from 2017 onwards (Table 1.2). Exhibit 1.2: Map of Myanmar Increase in Myanmar's economic ac vity in 2017 was mainly underpinned by large projects funded by foreign investors in a number of industries, notably hydrocarbons, manufacturing and infrastructure. Foreign investment is seen increasing at a rapid pace since the introduc on of regulatory and legal reforms, aided by the li ing of remaining US sanc ons in October 2016. In absolute terms, Myanmar's GDP stood at US$ 66.5 billion in 2017, while GDP per capita was US$ 1,264. Myanmar is exposed to fluctua ons in the prices of imported fuels and local agricultural produce. Further, Central Bank’s financing of the fiscal deficit has been the primary cause of Myanmar's high infla on regime in the past 2 decades. Infla on has Source: Economist Intelligence Unit (EIU) subsided since 2008. This follows reduced mone za on of the fiscal deficit and a stronger kyat Economic Snapshot of Myanmar exchange rate in the unofficial market. Infla on With the suspension and li ing of most Western peaked at 10 percent in 2015, reflec ng a flood sanc ons since 2012, GDP growth is expected to induced supply shock caused by floods, but strengthen further in the coming years, driven by moderated therea er. Myanmar's current account large projects funded by investors in a number of deficit widened further to US$ 3.5 billion in 2017 from industries, notably power, petroleum and US$ 2.5 billion in 2016. Myanmar's foreign exchange infrastructure. Tourism, tex le, manufacturing, reserves stood at US$ 4.9 billion in 2017, represen ng construc on, agriculture and fisheries are also an import cover of 3.5 months.
³ Myanmar's Moment: Unique Opportuni es, Major challenges; McKinsey Global Ins tute; June 2013 25 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 1.2: Macroeconomic Snap shot of Myanmar- Select Indic ators Indicators 2013 2014 2015 2016 2017e 2018f 2019f Real GDP Growth (%) 8.4 8.0 7.0 5.9 6.7 6.9 7.0 Nominal GDP (US$ bn) 60.1 65.6 59.5 63.3 66.5 70.7 75.0
GDP Per Capita (US$) 1,179.6 1,275.3 1,147.3 1,210.5 1,263.9 1,338.5 1,414.1 Consumer Price Infla on (avg. % chang e) 5.7 5.1 10.0 6.8 5.1 5.5 5.8 Popula on (mn) 51.0 51.4 51.8 52.3 52.6 52.8 53.0 Current account balance (US$ bn) -2.9 -1.4 -3.0 -2.5 -3.5 -3.8 -4.2 Current account balance (% of GDP) -4.9 -2.2 -5.1 -3.9 -5.3 -5.4 -5.6 External Debt (US$ bn) 7.3 6.3 6.7 6.5 7.7 8.4 9.6 Interna onal Reserves (US$ bn) 8.6 2.0 3.8 4.6 4.9 5.5 6.0
Exchange Rate (Kt: US$, avg) 934 984 1,163 1,235 1,360 1,376 1,485 Note: e - es mates; f – forecasts Source: IMF World Economic Outlook, April 2018 and EIU Country Reports
Myanmar has run persistent fiscal deficits for a few receipts, including export tax income and customs years, which the Government has financed by du es. mone zing the debt. In 2017, external debt as a Myanmar's real GDP is expected to grow at an percentage of GDP increased to 11.6 percent of GDP average of 7.1 percent during 2018-2022, supported from 10.3 percent of GDP in 2016. The IMF's debt by strong investment and growth in all the major sustainability assessment carried out in 2017 sectors during this period. Higher growth and an assessed Myanmar at low risk of debt distress. expected rise in interna onal oil prices are expected On April 1, 2012, Myanmar removed its system of to drive infla on to 5.5 percent in 2018. Though an mul ple exchange rates by unifying the official and black market exchange rates for the kyat, which is the improved external situa on would support export local currency, resul ng in a massive devalua on of growth, it is expected to be outpaced by import the currency. As state enterprises are net exporters, growth necessary to support public investments the exchange rate realignment boosted budget resul ng in a widening of current account deficit.
26 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
2. INTERNATIONAL TRADE OF BANGLADESH AND MYANMAR
Bangladesh export markets and higher foreign exchange earnings Bangladesh, due to its strategic loca on, has the from the export of semi-skilled and skilled labour. poten al to become a trading and investment hub in Foreign Trade of Bangladesh South Asia. It could be an entry port to the region During the last decade, the total trade of Bangladesh covering Nepal, Bhutan, eight North East Indian states increased two-fold, from US$ 39.8 billion in 2008 to (Assam, Meghalaya, Manipur, Arunachal Pradesh, US$ 85.8 billion in 2017 (Chart 2.1). Exports from Nagaland, Mizoram, Tripura and Sikkim), and Bangladesh increased by a CAGR of 11 percent during resource-rich northern Myanmar, which could also 2008 to 2017 from US$ 15.5 billion to US$ 39.7 billion. serve as gateway to other ASEAN countries. Bangladesh's merchandise exports are highly Bangladesh’s reliance on imports of most essen al concentrated within a select set of commodi es, with goods, such as petroleum oil, inputs for its garment tex les and clothing contribu ng 89 percent of total industry, and more recently capital goods for its industry, resulted in persistent deficit in its trade exports of the country in 2017. Bangladesh's imports balance. Bangladesh has outlined a vision of increased by a CAGR of 7.4 percent during the same becoming a upper middle income country by 2021, period, from US$ 24.3 billion to US$ 46.2 billion. which would require the country to grow by at least 8 Bangladesh's imports have been much more percent annually, compared to the current 6-7 diversified than its exports. The period witnessed percent, supported by accelerated growth in the narrowing of trade deficit owing to higher growth in industrial and services sectors, diversifica on of exports.
Chart 2.1: Interna onal Trade of Bangladesh
85.8 79.8 81.9 75.3 65.5 60.9 60.0 49.7 48.1 46.2 42.8 39.8 38.8 41.2 40.7 39.1 39.7 36.4 35.5 34.6 US$ bn 30.5 31.7 24.3 23.2 24.3 24.5 24.5 19.2 15.5 15.6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -6.1 -3.6 -8.8 -7.7 -6.5 -11.3 -11.8 -11.0 -16.9 -16.3
Exports Imports Total Trade Trade Balance
Source: ITC Trade Map, derived from UN COMTRADE
27 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Export Propensity / export as a percentage of GDP percentage of GDP has declined sharply from 25.1 indicates the overall degree of reliance of domes c percent of GDP in 2008 to 17.7 percent of GDP in producers on foreign markets. It ranges from zero 2017. Further, a substan al propor on of (with no exports) to 100 (with all domes c Bangladesh's exports have high import intensity. This produc on exported). Bangladesh's export is true especially in case of readymade garments propensity has declined from 16 percent in 2008 to (RMG) exports which are reliant on imported inputs 15.2 percent in 2017 (Chart 2.2). Imports as a including co on.
Chart 2.2: Exports and Imports of Bangladesh as a Percent of GDP
31.4%
25.1% 25.0% 25.7% 23.1% 21.3% 22.0% 22.1% 18.2% 17.7%
18.5% 18.8% 17.3% 16.0% 15.8% 16.6% 14.3% 15.2% 15.2% 15.2%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports as % of GDP Imports as % of GDP
Source: ITC Trade Map, IMF WEO April 2018 and Exim Bank Analysis
Composi on of Bangladesh's Merchandise Trade In this sec on, recent trends in composi on of exports in Bangladesh over the years. merchandise trade of Bangladesh are analyzed using The garment industry developed mainly because of Harmonized System (HS) code at 2-digit level. In 2017, preferen al access to the European Union (EU) tex les and clothing alone accounted for 88.7 percent benefi ng from its 'Everything but Arms' (EBA) of its global exports (Table 2.1). As per Bangladesh scheme, which grants duty free, quota free access for Bank, RMG sector is the major source of foreign all exports, except arms and ammuni on. However, currency generator in the country. RMG sector the share of other exports have stagnated or declined include both apparel and clothing not kni ed as well over the me. Bangladesh's main advantage against as kni ed. Globally, Bangladesh is the second-largest its compe tors lies in abundant labour supply and low exporter of both ar cles of apparel (knit or crochet), cost wages. In fact, wages are much lower in and ar cles of apparel (not knit or crochet), a er Bangladesh than countries such as Cambodia, China, China. The garment sector has been the main driver of India, Sri Lanka and Vietnam.
28 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 2.1: Bangladesh's Export Composi on 2010 2017 CAGR HS (2010- Product Label Value % Value % Code 2017, (US$ mn) Shar e (US$ mn) Share %) Ar cles of apparel and clothing 61 accessories, kni ed or crocheted 7,785.5 40.5 17,521.4 44.2 12.3 Ar cles of apparel and clothing 62 accessories, not kni ed or crocheted 7,059.0 36.7 16,598.5 41.9 13.0 63 Other made-up tex le ar cles 686.3 3.6 1,044.4 2.6 6.2
64 Footwear, gaiters and the like 252.3 1.3 933.5 2.4 20.6
53 vegetable tex le fibres, paper yarn 822.7 4.3 726.7 1.8 -1.8
03 Fish and crustaceans, molluscs 537.1 2.8 626.9 1.6 2.2
65 Headgear and parts 46.0 0.2 297.1 0.7 30.5
42 Ar cles of leather 45.0 0.2 272.6 0.7 29.4 41 Raw hides and skins 257.2 1.3 143.7 0.4 -8.0 Source: ITC Trade Map, derived from UN COMTRADE Bangladesh's imports have been much more capital goods. The growth in the tex le industry of diversified than its exports. Machinery and Bangladesh has led to an increased dependence on mechanical appliances replaced co on as the major import of tex le related inputs. Bangladesh is able to imported product in 2017. The major components of meet only three percent of its garment industry's Bangladesh's import basket in 2017 include demand for co on, and the rest is imported making it machinery and mechanical appliances (12.4 percent the second largest co on importer in the world in of the total imports), co on (11.6 percent), electrical 2017. machinery and equipment (7.5 percent), mineral Direc on of Bangladesh's Merchandise Trade fuels, oils and dis lla on products (6.8 percent), cereals (4.7 percent), iron and steel (4.4 percent) and Germany replaced the US as the major export plas cs and ar cles (4.1 percent) (Table 2.2). des na on of Bangladesh in 2017, accoun ng for Bangladesh's import composi on has mostly been 15.4 percent of total exports of the country. The other concentrated towards tex le-related inputs and major des na ons for Bangladesh's exports in 2017
Table 2.2: Bangladesh's Import Composi on 2010 2017 CAGR HS Value % V alue % (2010- Product Label Code (US$ mn) Share (US$ mn) Share 2017, %) 84 Machinery and mechanical appliances 2,855.5 9.4 5,731.8 12.4 10.5 52 Co on 4,820.7 15.8 5,335.2 11.6 1.5 85 Electrical machinery and equipment 2,017.5 6.6 3,471.3 7.5 8.1 27 Mineral fuels, mineral oils and products of dis lla on 2,530.6 8.3 3,155.4 6.8 3.2 10 Cereals 1,149.1 3.8 2,177.9 4.7 9.6 72 Iron and steel 1,313.6 4.3 2,036.7 4.4 6.5 39 Plas cs and ar cles 1,016.1 3.3 1,911.1 4.1 9.4 87 Vehicles other than railway or tramway 1,033.2 3.4 1,716.8 3.7 7.5 15 Animal or vegetable fats and oils 2,147.8 7.0 1,648.9 3.6 3.7 55 Man-made staple fibres 919.6 3.0 1,590.9 3.4 8.1 Source: ITC Trade Map, derived from UN COMTRADE
29 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border include the US (14.9 percent), UK (9 percent), Spain (7 increased from US$ 2.1 billion in 2010 to US$ 3.5 percent), France (7 percent) and Netherlands (6.1 billion in 2017, though its share has decreased from 8 percent) (Table 2.3). As a region, EU is the major percent to 7.5 percent during the same period. export des na on of Bangladesh in 2017, with total Bangladesh's Trade Agreements and Arrangements⁴ exports from Bangladesh amoun ng to US$ 23.8 billion, increasing from US$ 11.5 billion in 2010, with a Agreements that have been signed by Bangladesh and are in effect include: corresponding increase in its share in Bangladesh's · Asia-Pacific Trade Agreement total exports from 55 percent in 2010 to 60 percent in · Preferen al Tariff Arrangement-Group of Eight 2017. Developing Countries The major import sources of Bangladesh in 2017 · South Asian Free Trade Area (FTA) include China (32.9 percent of total imports), India Agreements that have been signed and not yet in (12.6 percent), Singapore (6.2 percent), Japan (3.8 effect: percent), and Brazil and Indonesia (3.5 percent each) · Trade Preferen al System of the Organiza on of
(Table 2.4). Bangladesh's imports from EU as a region the Islamic Conference
Table 2.3: Major Export Des na ons of Bangladesh
2010 2017 CAGR Importers Value (US$ mn) % Share Value (US$ mn) % Shar e (2010-2017, %) Germany 3,115.7 15.0 6,094.2 15.4 10.1 USA 4,541.2 21.8 5,891.6 14.9 3.8 UK 2,071.7 9.9 3,563.1 9.0 8.1 Spain 931.8 4.5 2,789.3 7.0 17.0 France 1,499.3 7.2 2,770.3 7.0 9.2 Netherlands 612.7 2.9 2,411.9 6.1 21.6 Italy 725.7 3.5 1,560.9 3.9 11.6 Poland 380.3 1.8 1,313.3 3.3 19.4 Canada 813.3 3.9 1,270.7 3.2 6.6 Japan 375.1 1.8 1,167.9 2.9 17.6 Source: ITC Trade Map, derived from UN COMTRADE Table 2.4: Major Import Sources of Bangladesh
Exporters 2010 2017 CAGR Value (US$ mn) % Share Value (US$ mn) % Shar e (2010-2017, %) China 6,789.1 25.6 15,202.7 32.9 12.2 India 3,016.6 11.4 5,807.1 12.6 9.8 Singapore 1,703.3 6.4 2,882.9 6.2 7.8 Japan 1,023.0 3.9 1,741.0 3.8 7.9 Brazil 538.0 2.0 1,600.1 3.5 16.8 Indonesia 1,018.6 3.8 1,596.6 3.5 6.6 Malaysia 1,259.3 4.8 1,516.6 3.3 2.7 Hong Kong 831.1 3.1 1,509.1 3.3 8.9 USA 575.7 2.2 1,464.6 3.2 14.3 South Korea 1,554.3 5.9 1,278.0 2.8 2.8- Source: ITC Trade Map, derived from UN COMTRADE
⁴ ADB: Asia Regional Integra on Centre, Tracking Asian Integra on; h ps://aric.adb.org/ a-country 30 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Agreements for which nego a ons have been benefits to Myanmar's producers and consumers⁵. launched: Myanmar is rapidly opening up to interna onal trade · Bay of Bengal Ini a ve for Mul -Sectoral Technical following the li ing of US sanc ons, including a ban and Economic Coopera on (BIMSEC) FTA on the US imports from Myanmar, and the · Pakistan-Bangladesh Free Trade Agreement reinstatement of tradepreferences under EU's Foreign Trade Zones/Free Ports Everything but Arms (EBA) arrangement for LDCs. Under the Bangladesh Export Processing Zones Foreign Trade of Myanmar Authority Act of 1980, the government of Bangladesh During the last decade, the total trade of Myanmar established an Export Processing Zone (EPZ) in increased more than three-fold, from US$ 10.4 billion Chi agong in 1983. Addi onal EPZs now operate in in 2008 to US$ 35.1 billion in 2017 (Chart 2.3). During Dhaka (Savar), Mongla, Ishwardi, Comilla, U ara, the same period, exports from Myanmar increased Karnaphuli (Chi agong), Adamjee (Dhaka) and two-fold to US$ 13 billion in 2017 from US$ 6.6 billion private EPZ in Chi agong. The government has also in 2008, witnessing a CAGR of 7.8 percent. On year- announced plans to create up to 100 new economic on-year basis, exports increased to US$ 13 billion in zones (EZs) and invited private companies to develop 2017 from US$ 11.7 billion in 2016, mainly due to the zones. increased exports of tex les and apparels, vis-à-vis the previous year. To boost exports, the government Myanmar has exempted commercial tax on a number of export Myanmar has been a member of the World Trade items such as rice, beans, pulses, corn, sesame, Organisa on (WTO) since January 1, 1995 and a rubber, freshwater and salt water products and member of GATT since July 29, 1948. While various animal products (except prohibited ones) as well as economic sanc ons effec vely isolated Myanmar value added products made of mber and bamboo. from a large part of the rest of the world, reforms Gradual liberaliza on of imports, as well as a rapid since 2011 have reintegrated the country to the expansion in the number and total value of foreign- interna onal community. Among the policy priori es, invested projects in the oil and gas, power, mining and the government has given special a en on on import infrastructure sectors resulted in surge in import bill opening and investment liberaliza on. It has been of Myanmar. Imports growth were seen significantly taking steps to eliminate the linkage between export higher at US$ 22 billion in 2017 from US$ 3.8 billion in receipts and import licensing, considering that more 2008, with a CAGR of 21.6 percent, resul ng in a flexible import arrangements would help to limit widening of Myanmar's trade deficit to US$ 9 billion currency apprecia on pressures and provide broader in 2017 from a surplus of US$ 2.8 billion in 2008.
Chart 2.3: Interna onal Trade of Myanmar 35.1
29.1 27.7 27.4 23.4 22.0 16.7 16.9 16.2 16.9 15.7 11.8 13.0 10.4 10.2 12.0 12.2 11.7 9.1 11.4 11.5 7.6 8.1 8.6 7.8 6.6 6.3 3.8 3.8 4.2
US$ bn 1.2 2.8 3.5-0.4 2.5 -0.6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -4.8 -4.7 -4.0 -9.0 Exports Imports Total Trade Trade Balance
Source: ITC Trade Map, derived from UN COMTRADE
⁵ Myanmar Trade Policy Review, March 2014, World Trade Organisa on 31 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Chart 2.4: Exports and Imports of Myanmar as a Percent of GDP
33.1% 28.4% 24.7% 24.8% 20.0% 19.2% 16.7% 19.6% 15.4% 15.2% 14.3% 20.5% 19.0% 17.5% 18.5% 13.6% 13.1% 11.0% 10.1% 8.4%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports as % of GDP Imports as % of GDP
Source: ITC Trade Map, IMF WEO April 2018 and Exim Bank Analysis
Myanmar's export propensity has increased (natural gas), food and other primary commodi es. marginally from 19.2 percent in 2008 to 19.6 percent In 2017, mineral fuels were the major item of in 2017 (Chart 2.4). Imports as a percentage of GDP Myanmar's exports, accoun ng for 24.1 percent of has increased sharply from 11 percent of GDP in 2008 total exports (Table 2.5). Other major export items to 33.1 percent of GDP in 2017. include ar cles of apparel and clothing accessories; ores, slag and ash; edible vegetables; copper and Composi on of Myanmar's Merchandise Trade ar cles; marine products; and iron and steel, Myanmar's export basket is concentrated on fuels among others.
Table 2.5: Myanmar's Export Composi on 2010 2017 CAGR HS Product Label Value Value (2010-2017, Code % Share % Share (US$ mn) (US$ mn) %) Mineral fuels, mineral oils and 27 products of dis lla on 2,936.0 38.5 3,144.8 24.1 1.0 Ar cles of apparel and clothing accessories, not kni ed or
62 crocheted 332.5 4.4 2,232.8 17.1 31.3
26 Ores, slag and ash 10.4 0.1 1,167.2 9.0 96.3 Ar cles of apparel and clothing 61 accessories, kni ed or crocheted 4.9 0.1 989.5 7.6 113.7
07 Edible vegetables, roots and tubers 891.0 11.7 672.3 5.2 -3.9
74 Copper and ar cles 52.6 0.7 498.0 3.8 37.9 03 Fish and crustaceans, molluscs 318.3 4.2 418.5 3.2 4.0
72 Iron and steel - - 363.2 2.8 -
10 Cereals 169.5 2.2 351.6 2.7 11.0
64 Footwear, gaiters and the like 53.0 0.7 346.8 2.7 30.8 Note: - not available/negligible Source: ITC Trade Map, derived from UN COMTRADE
32 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 2.6: Myanmar's Import Composi on 2010 2017 HS CAGR Product Label Value % Value % Code (2010-2017, %) (US$ mn) Share (US$ mn) Share 85 Electrical machinery and equipment 238.6 5.7 2,458.2 11.2 39.5 Mineral fuels, mineral oils and products 27 of dis lla on 947.7 22.8 2,456.8 11.2 14.6
84 Machinery and mechanical appliances 534.8 12.8 2,313.0 10.5 23.3 87 Vehicles other than railway or tramway 168.0 4.0 1,989.1 9.0 42.3 72 Iron and steel 221.4 5.3 975.6 4.4 23.6 39 Plas cs and ar cles 214.5 5.2 842.3 3.8 21.6
15 Animal or vegetable fats and oils 174.6 4.2 654.6 3.0 20.8 73 Ar cles of iron or steel 289.9 7.0 647.2 2.9 12.2 17 Sugars and sugar confec onery 8.9 0.2 525.6 2.4 79.2 21 Miscellaneous edible prepara ons 25.0 0.6 459.0 2.1 51.5 Source: ITC Trade Map, derived from UN COMTRADE Myanmar's imports are more diversified than it’s Singapore, and Japan, which account for 82.2 exports, with manufacturing products having percent of Myanmar's total global exports (Table maximum share in imports. Electrical machinery and 2.7). China emerged as Myanmar's largest export equipment and mineral fuels, oils and products of des na on in 2014, replacing Thailand. China dis lla on formed Myanmar's major import items in accounted for 40.8 percent of Myanmar's total 2017, accoun ng for 11.2 percent each of total exports in 2017, followed by Thailand (19.2 percent), imports (Table 2.6). Other principal import items India (8.9 percent), Singapore (7.6 percent), and were machinery and instruments, vehicles other Japan (5.7 percent). Myanmar's exports to China are than railway or tramway, iron and steel, and plas cs concentrated on mineral fuels and ores, slag and ash, and ar cles. whereas its exports to Thailand is mostly mineral Direc on of Myanmar's Merchandise Trade fuels. Myanmar's exports to India is mainly edible Exports of Myanmar were primarily directed to the vegetables and certain roots, and wood and ar cles top five markets viz. China, Thailand, India, of wood. Table 2.7: Major Export Des na ons of Myanmar 2010 2017 CAGR Importers Value Value (2010- % Share % Share (US$ mn) (US$ mn) 2017, %) China 476.3 6.2 4,766.7 40.8 39.0 Thailand 3,177.2 41.7 2,241.5 19.2 -4.9 India 958.1 12.6 1,038.1 8.9 1.2 Singapore 276.3 3.6 890.8 7.6 18.2 Japan 215.2 2.8 663.4 5.7 17.5 South Korea 125.4 1.6 334.8 2.9 15.1
Hong Kong 1,611.8 21.1 192.6 1.7 26.2 Germany - - 172.4 1.5 - USA 1.7 - 150.3 1.3 89.8 Malaysia 162.8 2.1 144.4 1.2 -1.7 Note: - not available/negligible Source: ITC Trade Map, derived from UN COMTRADE
33 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 2.8: Major Import Sources of Myanmar 2010 2017 CAGR Exporters Value Value (2010-2017, % Shar e % Shar e (US$ mn) (US$ mn) %)
China 1,128.5 27.1 9,025.3 41.0 34.6 Thailand 473.4 11.4 4,300.4 19.5 37.1 Singapore 1,122.6 27.0 2,518.9 11.4 12.2 Malaysia 134.3 3.2 957.3 4.3 32.4 Japan 218.8 5.3 880.7 4.0 22.0 Indonesia 203.3 4.9 829.5 3.8 22.2 India 163.6 3.9 685.9 3.1 22.7 South Korea 252.5 6.1 573.2 2.6 12.4 Hong Kong 5.1 0.1 289.9 1.3 78.2 Taiwan 53.8 1.3 238.6 1.1 23.7 Source: ITC Trade Map, derived from UN COMTRADE
China was the major source for Myanmar's imports, · ASEAN-Japan Comprehensive Economic accoun ng for 41 percent of Myanmar's imports in Partnership 2017 (Table 2.8). Other major import sources during · ASEAN-People's Republic of China CECA the year include Thailand, Singapore, Malaysia, Japan, · ASEAN-Republic of Korea CECA Indonesia, and India. Agreements that have been signed and not yet in To boost exports, the government has been effect include: promo ng exports of tradi onal and value-added · Myanmar- US FTA products and explore new export markets as well. · ASEAN- Hong Kong FTA Myanmar's import policy inter-alia is to boost import of capital goods which are currently the major Agreements for which nego a ons have been requirements of the economy, as well infrastructure launched include: and commodi es that support export promo on · Bay of Bengal Ini a ve for Mul -Sectoral Technical ac vi es. and Economic Coopera on (BIMSEC) FTA Myanmar's Trade Agreements and Arrangements⁶ · Regional Comprehensive Economic Partnership Agreements that have been signed and are in effect Agreement include: Foreign Trade Zones/Free Ports · ASEAN FTA There are 48 industrial zones and three SEZs in · ASEAN-Australia and New Zealand FTA development, which include Kyaukphyu in Rakhine · ASEAN-India Comprehensive Economic State, Dawei in the Thanintharyi Region and the Coopera on Agreement (CECA) Thilawa in Yangon Region⁷.
⁶ ADB: Asia Regional Integra on Centre, Tracking Asian Integra on; h ps://aric.adb.org/ a-country ⁷ Directorate of Investment and Company Administra on, The Republic of the Union of Myanmar 34 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
3. FOREIGN INVESTMENT IN BANGLADESH AND MYANMAR
Bangladesh investment in Bangladesh in greenfield and The Bangladesh Investment Development Authority brownfield expansion projects, were US$ 23.4 billion, (BIDA) promotes and facilitates investments in the crea ng 60,503 jobs in the country, out of 272 country. Bangladesh has the advantage of having low- projects. India was the major investor with US$ 8.5 cost workforce, strategic loca on, in addi on to billion (36.5 percent share) worth investment in regional connec vity, and low cost of energy (mainly Bangladesh during the period. The other major compressed natural gas). investors in the country were the US (US$ 3.2 billion), Bangladesh offers the protec on of foreign investment Malaysia (US$ 3 billion), China (US$ 1.8 billion), UK by law, generous tax holiday, concessionary duty on (US$ 1.3 billion) and Singapore (US$ 0.7 billion). import of machinery, remi ances of royalty, 100 Chart 3.1: Sectorwise FDI Inflows to Bangladesh percent foreign equity, unrestricted exit policy, full repatria on of dividend and capital on exit. Alterna ve/Rene Building & Food & Tobacco Foreign Investment in Bangladesh wable energy 2% Construc on 1% Materials 2% Bangladesh became the fourth largest FDI des na on Tex les 4% among LDCs in 2016. According to UNCTAD, total FDI Automo ve OEM 4% inflows to Bangladesh increased by 4.4 percent to Chemicals 4%
US$ 2.3 billion in 2016 from US$ 2.2 million in 2015 Communica ons Coal, Oil and (Table 3.1). Supported by large-scale electricity 6% Natural Gas 55% projects, the total value of announced greenfield Financial Services 6% projects soared to US$ 6.4 billion in 2016, over three Transporta on mes of the annual average of US$ 2.0 billion in 6% 2013–2015. Bangladesh offered a new package of incen ves for investors in special economic zones (SEZs), exemp ng developers and investors from Note: fDi Markets tracks cross-border investment in a new physical project or expansion of an exis ng investment value-added tax and import du es on items directly which creates new jobs and capital investment. This data differs linked with the development and construc on of SEZs. from official data on FDI flows as company can raise capital locally, phase their investment over a period of me, and can channel According to Financial Times' fDi Markets database, their investment through different countries for tax efficiency. during January 2003 to March 2018, the cumula ve Source: fDi Markets Database and Exim Bank Analysis
Table 3.1: Trends in Bangladesh's FDI Flows (US$ million) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FDI Inflow s 666 1,086 700 913 1,136 1,293 1,599 1,551 2,235 2,333 FDI Ou low s 21 9 29 15 13 43 34 44 46 41 Source: UNCTADStat
35 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
During this period, coal, oil and natural gas was the (IPOs) without any regulatory restric ons. Also, largest sector to receive capital investment, with a incomes from dividends are tax-exempt for investors. share of 54.6 percent in total investment inflows into Other Incen ves: Bangladesh. Other major sectors a rac ng capital investment in the country include transporta on, · Tax exemp ons on royal es, technical know-how financial services, communica on, and chemicals fees received by any foreign collaborator, firm, (Chart 3.1). company and expert; · Tax exemp on on the interest on foreign loans Foreign Investment Laws in Bangladesh⁸ under certain condi ons; In order to encourage foreign investments in the · Six months mul ple entry visa for investors; country, the Government of Bangladesh offers liberal Ci zenship by inves ng a minimum of US$ 500,000 investment policies, supported by various incen ves. or by transferring US$ 1,000,000 to any recognized Select facili es and incen ves that Bangladesh financial ins tu on (non repatriable); provides to foreign investors, as per the Bangladesh · Permanent residency by inves ng a minimum of Investment Development Authority (BIDA), include: US$ 75,000 (non-repatriable); Tax Exemp ons: Generally five to seven years' tax · Tax exemp on on dividend income of non-resilient exemp ons are available for many business shareholders during tax exemp on period of an investments. However, for electric power genera on industry set up in export processing zone and also tax exemp ons are provided for up to 15 years. a er the expiry of tax exemp on period if the Duty: No import duty applicable for export oriented dividend is re-invested in the same project; industry. For other industries, it is 5 percent ad · Exemp on of tax on income from industrial valorem. undertakings set up in export processing zone for Income Tax: Double taxa on can be avoided in most ten years from the date of start of commercial cases as the country benefits from many bilateral produc on; and investment agreements. Exemp ons of income tax up · Tax exemp on on capital gains for the transfer of to three years for the expatriate employees in shares of public limited companies listed with a industries are specified in the relevant schedules of stock exchange. the income tax ordinance. To encourage export oriented industries, the Remi ances: Facili es for full repatria on of invested government ensures all support and co-opera on to capital, profits and dividends are the norm in most the exporter as per the export policy. Some of the situa ons. facili es and incen ves offered include the following: Exit: An investor can wind up an investment either · Concessionary duty allowed on the import of through a decision of an annual or extraordinary capital machinery and spare parts for se ng up general mee ng. Once a foreign investor completes export-oriented industries or BMRE of exis ng the formali es to exit the country, he or she can industries. For 100 percent export-oriented repatriate the net proceeds a er securing proper industries, no import duty is payable. authoriza on from the central bank (Bangladesh Bank). · Facili es such as special bonded warehouse against back-to-back le ers of credit or no onal import Ownership: Foreign investors can set up ventures, duty and non-payment of Value Added Tax (VAT) either wholly owned or in joint collabora on, with facili es are available as per SRO of the local partners. government. Inves ng in the Stock Market: Foreign investors are · System for duty drawback is being simplified and allowed to par cipate in ini al primary offerings ⁸ Dhaka Chamber of Commerce & Industry, h p://www.dhakachamber.com/home/investment_incen ves
36 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
concise. The exporter will be able to get back the diamond cu ng and polishing, jewellery, duty draw-back directly from the concerned sta onery goods, silk cloth, gi items, cut and commercial bank. ar ficial flowers and orchid, vegetable processing, · Bank loans, of up to 90 percent if the value against and engineering consultancy services iden fied by irrevocable and confirmed le ers of credit/sales the government as thrust sectors are provided agreement, are available. special facili es in the form of cash incen ves, venture capital and other facili es. · For gran ng export performance benefits, the list of export products and the rate of export · Export oriented industries are exempted from performance benefit (XPB) are reviewed from me paying local taxes (such as municipal taxes). to me. · Leather industries expor ng at least 80 percent · With the inten on of encouraging backward manufactured products will be treated as 100 linkages, export-oriented industries including percent export oriented industries. export-oriented readymade garment industries · Manufactures of indigenous fabrics (such as using indigenous raw materials instead of woven, knit, hosiery, grey, printed, dyed, garment imported materials, are given addi onal facili es check, hand loom, silk and specialized fabrics) and benefits at prescribed rates. Similar incen ves supplying their products to 100 percent export are extended to the suppliers of raw materials to oriented garment industries are en tled to avail a export-oriented industries. cash subsidy equivalent to 25 percent of the value · Export-oriented industries are allocated foreign of the fabrics, provided the manufacturers of the exchange for publicity campaigns and for opening fabrics do not enjoy duty draw back or duty free offices abroad. bonded warehouse facility. · En re export earnings from handicra s and co age Foreign Investment in Myanmar industries are exempted from income tax. In case Since the li ing of sanc ons in Myanmar, foreign of other industries, propor onal income tax investors have evinced interest in tapping the rebates on export earnings between 30 percent country's poten al opportuni es. The country has and 100 percent is given. Industries which export also been garnering considerable support from 100 percent of their products are given tax mul lateral ins tu ons and donors. Myanmar exemp on up to 100 percent. amended its investment law, simplifying investment · Facili es for impor ng raw materials are given for approval and authoriza on procedures for both manufacturing exportable commodi es under foreign and domes c investors, while reserving some banned/restricted list. special treatment for local small and medium-sized enterprises (SMEs) on market access, land lease and · Import of specified quan es of duty-free samples technical support. According to McKinsey Global for manufacturing exportable products is allowed. Ins tute⁹, Myanmar may a ract as much as US$ 100 The quan ty and value of samples is determined billion in foreign direct investment by 2030 if it spends jointly by the concerned sponsoring agency and enough to achieve its economic growth poten al. the Na onal Board of Revenue (NBR). According to UNCTAD, Myanmar received FDI of US$ · Local products supplied to local projects against 2 . 2 b i l l i o n i n 2 0 1 6 , d e c r e a s i n g f r o m foreign exchange under interna onal tender are US$ 2.8 billion in 2015 as a result of the delay in treated as indirect exports and the producer is implemen ng large-scale projects and policy en tled to avail of all export facili es. uncertainty over coal fired power projects (Table 3.2). · Export oriented industries like toys, luggage and Myanmar is expected to receive increasing levels of fashion ar cles, electronic goods, leather goods, FDI inflows in infrastructure, labor-intensive ⁹ Myanmar's Moment: Unique Opportuni es, Major Challenges, McKinsey Global Ins tute, June 2013
37 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 3.2: FDI Flows in Myanmar (US$ million) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FDI In flows 2 603 27 6,669 1,118 497 584 946 2,824 2,190
FDI Ou lows ------Note: - not available/negligible Source: UNCTADStat manufacturing and extrac ve industries in the country during the same period. The major sectors coming years. The largest sectors to receive FDI were receiving investment in Myanmar were coal, oil and mining and quarrying, transporta on and storage and natural gas followed by real estate, alterna ve or manufacturing during 2016. renewable energy, transporta on, financial services FDI flows to Myanmar are expected to con nue and communica ons. The major investors in the performing well, as the construc on of foreign- country were Japan (US$ 16.1 billion), China (US$ 10 invested industrial zones in the recent years would billion), Thailand (US$ 8.9 billion), South Korea boost FDI into both infrastructure and manufacturing. (US$ 3.8 billion), the US (US$ 3.4 billion), and India According to the ASEAN Investment Report 2017, (US$ 3.1 billion) (Chart 3.2). ASEAN countries accounted for the highest FDI Foreign Investment Laws in Myanmar contribu on to Myanmar during 2016, accoun ng for The Myanmar Investment Law, enacted in 2016, a share of 56 percent, followed by EU, China, and simplified the process for investment applica ons Hong Kong. and offers a number of tax breaks, incen ves, According to fDi Markets, Myanmar received US$ 59 guarantees, rights and protec ons for business billion as FDI out of 600 FDI projects during January ventures. It consolidated the 2012 Foreign 2003 to March 2018, crea ng 100,167 jobs in the Investment Law and the 2013 Ci zens Investment
Chart 3.2: Sectorwise FDI inflows to Myanmar
Automo ve OEM 2% Building & Others Construc on 12% Materials Metals 2% 4% Communica ons 5% Coal, Oil and Natural Gas Financial Services 49% 6%
Transporta on 6% Alterna ve/Rene wable energy Real Estate 6% 8%
Note: fDi Markets tracks cross-border investment in a new physical project or expansion of an exis ng investment which creates new jobs and capital investment. This data differs from official data on FDI flows as company can raise capital locally, phase their investment over a period of me, and can channel their investment through different countries for tax efficiency. Source: fDi Markets Database and Exim Bank Analysis
38 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Law, in order to speed up investment approvals¹⁰. Law. Companies with investment permits from MIC Myanmar simplified investment approval and are eligible for tax incen ves. Registra on of foreign authoriza on procedures for both foreign and investment involves the following steps: domes c investors. Myanmar has introduced the · Obtaining a permit from the MIC; new Condominium Law, which permit foreigners to own up to 40 percent of a condominium building. It · Applying for a permit to trade from the DICA; and also encourage foreign investment in construc on, · Applying for registra on with the Companies provided they engage in such ac vi es in joint Registra on Office (CRO). ventures with local firms. No foreign company could carry on business in Myanmar unless it has obtained a Cer ficate of According to the Special Economic Zone Law, 2014, foreign investors may choose to establish a foreign Incorpora on (COI). branch office in Myanmar; incorporate a private Branch of a Company Incorporated Outside limited company; apply for and secure an investment Myanmar permit from the Myanmar Investment Commission A foreign company se ng up its branch office in (MIC), which is also known as an MIC Permit; or apply Myanmar under the Companies Act does not need to for and secure an investment permit from the obtain an MIC permit, and is only required to apply for relevant department. For the first five years, there are a permit to trade and a registra on cer ficate. The income tax exemp ons and custom du es branch is allowed to be formed as a manufacturing or exemp ons on produc on machinery used. a services company. However, a foreign branch The governments of Myanmar and India have signed formed under the investment law need to obtain an an agreement for the promo on and protec on of MIC permit in addi on to a permit to trade and a investment, according to which, both the countries registra on cer ficate. should encourage and create favorable condi ons for Representa ve Office of a Company Incorporated investment from the other country. Outside Myanmar Types of Investment¹¹ Foreign companies with business rela ons or Under the Myanmar Foreign Investment Law, an investment projects in Myanmar may apply to open investment could be carried out through the representa ve offices in Myanmar. However, a following op ons: representa ve office of a company incorporated outside Myanmar is not allowed to perform direct · 100 percent Investment: Foreign investors may commercial or revenue genera ng ac vi es in invest without any local partners in permi ed Myanmar. But it is permi ed to liaise with its head sectors; office and collect data useful for the head office. · Joint Venture (JV): Joint ventures may be created Investment Incen ves with foreign, local and government en es; Some of the benefits and incen ves granted by the · Contract: Foreign investors may act under a MIC at its discre on include: mutually-agreed upon contract; and · Exemp on from income tax for up to five · Other Investment Forms: These include build consecu ve years for an enterprise engaged in the operate-transfer (BOT) and build-operate-own produc on of goods or services. The exemp on (BOO) investments. may be extended by the MIC for a further Registra on of Companies reasonable period, depending on the success of the enterprise. Foreign investors who register their companies under the Companies Act could also apply for an investment · Exemp on or relief from income tax on profits of permit from MIC and register under the Investment the business that are maintained in a reserve fund
¹⁰ Directorate of Investment and Company Administra on, the Republic of the Union of Myanmar ¹¹ Directorate of Investment and Company Administra on, the Republic of the union of Myanmar 39 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
and subsequently re-invested within one year a er For investors: the reserve fund is made. · Income tax holidays for the first seven years · Right to deduct deprecia on of machinery, star ng from the date of commercial opera on in equipment, building or other capital assets used in respect of those investment businesses operated in the business at the rates prescribed by the MIC. exempted zone or exempted zone businesses. · Relief from income tax of up to 50 percent of the · Income tax holidays for the first five years star ng profits accrued on exported goods, that are from the date of commercial opera on in respect produced by any manufacturing business. of those investment businesses operated in a business promoted zone or other business in a · Right to pay income tax on the income of foreign promoted zone. employees at the rates applicable to ci zens · residing in the country. 50 percent income tax relief for the investment businesses operated in an exempted zone and a · Right to deduct expenses from the assessable business promoted zone for the second five year income, such as expenses incurred in respect of period. research and development rela ng to the business · For the third five-year period, 50 percent income which are required and carried out within the tax relief on the profits of the business if they are country. maintained for re-investment in a reserve fund and · Right to carry forward and set off losses for up to re-invested therein within one year a er the three consecu ve years from the year the loss is reserve is made. sustained (within two years a er the tax holiday · Exemp on from customs duty and other taxes for period). raw materials, machinery and equipments and · Exemp on or relief from customs duty or other certain types of goods imported for investors in internal taxes on machinery equipment, exempted zones, whereas for investors in instruments, machinery components, spare parts prompted zones, exemp on from custom duty and and materials used in the business, and items other taxes for the first five years in respect of which are imported and required to be used during machinery and equipment imported which are the construc on period of the business. required for construc on star ng from the date of commercial opera on, followed by 50 percent · Exemp on or relief from customs duty or other relief of custom duty and other taxes for a further internal taxes on imported raw materials for the five years. first three years of commercial produc on following the comple on of construc on. · Carry forward of loss for five years from the year the loss is sustained. · If the investor increases the amount of investment and expands the business within the approved me For developers: frame, it may enjoy exemp on or/and relief from · Income tax holidays for the first eight years star ng customs duty or other internal taxes on machinery, from the date of commercial opera on. equipment, instruments, machinery components, · 50 percent income tax relief for the second five year spare parts and materials that are imported for the period. expansion of business. · For the third five year period, 50 percent income · Exemp on from commercial tax on goods that are tax relief on the profits of the business if they are manufactured for export. maintained for re-investment in a reserve fund and Special Economic Zones re-invested therein within one year a er the Incen ves under the Myanmar SEZ Law include: reserve is made.
40 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
· Exemp on from customs duty and other taxes for 50 years and renewable for a period of further 25 raw materials, machinery and equipment, and years. Developers/investors may rent, mortgage or certain types of imported goods. sell land and buildings to another person for · Carry forward of loss for five years from the year the investment purposes within the term granted with loss is sustained. the approval of the management commi ee Land use may be granted under an ini al lease of up to concerned.
41 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
4. INDIA'S BILATERAL RELATIONS WITH BANGLADESH AND MYANMAR
Bangladesh second-largest source of Bangladesh's imports a er China, accoun ng for 12.6 percent of Bangladesh's The geographical proximity between India and th Bangladesh provide an easy access to each other's total imports in 2017. As regards exports, India is 19 markets for their own products. Currently, India and largest export market (1.2 percent of the total Bangladesh are members of the South Asian Free exports) for Bangladesh in 2017. Trade Area (SAFTA), the Bay of Bengal Ini a ve for Indo-Bangladesh trade increased by almost two-fold Mul -Sectoral Technical and Economic Coopera on over the past decade to reach US$ 6.3 billion in 2017 (BIMSTEC), the Asia-Pacific Trade Agreement (APTA), from US$ 3.6 billion in 2008 (Chart 4.1). Over the and the Indian Ocean Rim Associa on for Regional Co- decade, India's exports to Bangladesh increased by a opera on (IOR-ARC). Bangladesh has received CAGR of 6.7 percent to US$ 5.8 billion in 2017 from preferen al market access treatment from India for a US$ 3.2 billion in 2008, while India's imports from large number of items of export under SAARC Bangladesh increased by a CAGR of 3.8 percent from Preferen al Trade Agreement (SAPTA) nego a ons US$ 329.8 million in 2008 to US$ 459.4 million in and also as part of Trade Liberalisa on Plan (TLP) of 2017. On a year-on-year basis, India's exports to the SAFTA. India provides preferen al trade access Bangladesh increased moderately by 2.4 percent to under these agreements as well as the Duty Free Tariff US$ 5.8 billion in 2017 from US$ 5.7 billion in 2016, Preferen al (DFTP) Scheme. whereas India's imports from Bangladesh fell sharply Bilateral Trade Rela ons between India and by 32.2 percent to US$ 459.4 million in 2017 from Bangladesh US$ 677.1 million in 2016. The sharp fall in imports Bangladesh is India's largest trading partner in South was mainly due to fall in imports of vegetable tex le Asia, accoun ng for 37.5 percent of India's total fibres, paper yarn and woven fabrics, and ar cles of exports to the region, and 20 percent of India's total apparel and clothing accessories vis-à-vis previous imports from the region in 2017. Globally, India is the year.
Chart 4.1: India's Trade with Bangladesh
6.5 6.8 6.2 6.3 6.3 5.5
5.7 4.0 5.5 5.3 3.6 3.4 4.9 5.0 4.4 2.4
US$ bn 2.9 2.7 2.8 1.9
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports Imports Total Trade Trade Balance
Source: ITC Trade Map, derived from UN COMTRADE
42 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 4.1: India's Major Exports to Bangladesh (US$ million) 2010 2017 CAGR HS Value V alue (2010 - Product Label % Code (US$ % (US$ 2017, Share mn) Share mn) %) 52 Co on 936.4 31.0 1 159.7 20.0 3.1 87 Vehicles other than railway or tramway 249.9 8.3 716.1 12.3 16.2 10 Cereals 157.1 5.2 523.4 9.0 18.8 Mineral fuels, mineral oils and products of 27 dis lla on 110.1 3.7 517.0 8.9 24.7 84 Machinery and mechanical appliances 91.2 3.0 401.7 6.9 23.6 85 Electrical machinery and equipment 58.0 1.9 214.4 3.7 20.5 Residues and waste from the food 23 industries 239.1 7.9 206.9 3.6 -2.0 72 Iron and steel 66.3 2.2 192.1 3.3 16.4 55 Man-made staple fibres 48.7 1.6 178.1 3.1 20.4 39 Plas cs and ar cles 74.0 2.5 154.8 2.7 11.1 Sour ce: ITC Trade Map, derived from UN COMTRADE
India's trade surplus with Bangladesh increased from equipment; mineral fuels, mineral oils and products US$ 2.9 billion in 2008, to US$ 5.3 billion in 2017. This of dis lla on; cereals; iron and steel; plas cs and rise can be mainly a ributed to the trade ar cles; and vehicles other than railway or tramway formalisa on efforts between the two countries and are among top import items of Bangladesh in 2017. Bangladesh's increased dependence on India, Co on is the major commodity exported by India to especially for co on. Bangladesh (20 percent of India's total exports to Composi on of India –Bangladesh Merchandise Bangladesh) in 2017, followed by vehicles other than Trade railway or tramway (12.3 percent), cereals (9 India's trade with Bangladesh has undergone a percent), mineral fuels, mineral oils and products of composi onal change across the years. Though the dis lla on (8.9 percent), and machinery and main components of India's exports to Bangladesh instruments (6.9 percent) (Table 4.1). An analysis of con nue to remain food items and other primary Bangladesh's co on imports reveal that at the 4-digit goods, reflec ng Bangladesh's changing industrial level, Bangladesh mainly imported co on not carded policy, exports have gradually expanded to capital or combed (HS-5201), followed by woven fabrics with goods as well. weight over 200 g/m2 (HS-5209), woven fabrics with In fact, India has become the largest supplier of weight under 200 g/m2 (HS-5208), and co on yarn vehicles other than railway or tramway and cereals, (HS-5205). Bangladesh's co on import from India the second-largest supplier of co on, a er China, the were mainly skewed towards co on and co on yarn, third-largest supplier of iron and steel, the fourth- largest supplier of mineral fuels, and electrical and while imports from China mainly included woven electronic equipment, and the fi h largest supplier of co on. In the case of cereals, where India is the major machinery and instruments, and plas cs and ar cles supplier to Bangladesh, Bangladesh's cereals import to Bangladesh. Machinery and mechanical from India were mainly rice (HS-1006) and maize or appliances; co on; electrical machinery and corn (HS-1005) in 2017.
43 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 4.2: India's Major Imports from Bangladesh (US$ million)
2010 2017 HS Value CAGR Product Label % Value % Code (US$ (2010-2017, Share (US$ mn) Share mn) %) Vegetable tex le fibres, paper yarn and 53 woven fabrics 76.4 21.4 95.1 20.7 3.2 Ar cles of apparel and clothing 62 accessories, not kni ed or crocheted 11.3 3.2 89.0 19.4 34.3 Ar cles of apparel and clothing 61 accessories, kni ed or crocheted 4.7 1.3 34.0 7.4 32.5 25 Salt, sulphur, stone, and cement 30.0 8.4 21.6 4.7 -4.6 78 Lead and ar cles 0.1 - 21.0 4.6 135.1 72 Iron and steel 14.3 4.0 16.4 3.6 1.9 63 Other made-up tex le ar cles 51.6 14.4 15.4 3.3 -15.9 52 Co on 8.9 2.5 13.7 3.0 6.3 89 Ships, boats and floa ng structures - - 12.9 2.8 - 03 Fish and crustaceans, molluscs 38.7 10.8 12.7 2.8 -14.7 Note: - not available/negligible Source: ITC Trade Map, derived from UN COMTRADE
India's major imports from Bangladesh in 2017 Ins tu onal Trade Mechanisms between India and included vegetable tex le fibres, paper yarn and Bangladesh woven fabric, which accounted for 20.7 percent of the Several instruments for facilita ng bilateral trade and total imports, followed by ar cles of apparel and economic linkages are in place including the clothing accessories, not kni ed or crocheted (19.4 Conven on for the Avoidance of Double Taxa on and percent), ar cles of apparel and clothing accessories, Preven on of Fiscal Evasion (DTAC), Bilateral kni ed or crocheted (7.4 percent), salt, sulphur, Investment Protec on & Promo on Agreement stone, and cement (4.7 percent), and lead and ar cles (BIPPA) and Agreement on Establishment of Joint (4.6 percent) (Table 4.2). India's co on imports from Economic Commission (JEC). Other agreements Bangladesh mainly includes co on fabric (HS- include: 520841). South Asia Free Trade Agreement (SAFTA) Apart from formal trade, the significant unofficial Due to several constraints in tradings under the trade between the two na ons denotes the SAARC Preferen al Trade Agreement (SAPTA), the possibility of enhancing bilateral trade by facilita ng SAARC countries signed the SAFTA Agreement in rou ng of these traded items through official January 2004, which was implemented with effect channels. Unofficial trade with Bangladesh occurs from January 1, 2006. In this agreement, three lists through the porous borders of Assam, Meghalaya, were nego ated, the Nega ve List, the Posi ve List Mizoram, Tripura and West Bengal. Major reasons for and the Residual List. According to SAFTA, while duty unofficial trade would include evasion of tariff and on items outside the sensi ve list would be non-tariff barriers, simplex procedures, be er market immediately reduced to 0 to 5 percent, items in the distribu on network, and nature and size of the sensi ve list of a country would not be considered for businessmen/traders. tariff reduc on and would need to enter that country
44 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border by paying Most Favoured Na on (MFN) du es at the the lines on which LDCs have made to exports to India Customs. The agreement specifies that member over the last two financial years. countries will review the sensi ve list every three The Bay of Bengal Ini a ve for Mul -Sectoral years. Technical and Economic Coopera on (BIMSTEC) Based on a Memorandum of Understanding (MOU) Under BIMSTEC (a regional trading ini a ve between signed between the two countries in 2008, India Bangladesh, Bhutan, India, Myanmar, Nepal, Sri agreed to provide zero duty market access for up to 8 Lanka and Thailand), member countries agreed to million pieces of garments from Bangladesh (Tariff establish the BIMSTEC Free Trade Area Framework Rate Quota [TRQ]). This was further increased to 10 Agreement in order to s mulate trade and million pieces every year in April 2011. In September investment in the par es, and a ract outsiders to 2011, during the then Prime Minister Dr. Manmohan trade with and invest in BIMSTEC at a higher level. Singh's visit to Dhaka, India granted duty-free, quota- Several sectors have been iden fied for preferen al free access to 46 tex le tariff lines of greatest trading among member countries, which include sensi vity to Bangladesh. Further, with effect from tex les and clothing, drugs and pharmaceu cals, November 9, 2011, India unilaterally reduced its gems and jewellery, hor culture and floriculture, sensi ve list for SAARC LDCs, including Bangladesh, to processed food, automo ves and components, 25 tariff lines. A er these announcements in 2011, rubber, tea and coffee, coconuts and spices. As per the TRQ between India and Bangladesh became the BIMSTEC agreement, tariff rates between redundant. India has granted Bangladesh duty-free, member countries will be reduced fully by 2023 at quota-free access on all items except tobacco and various stages for LDC and non LDC member alcohol under SAFTA. countries. Duty Free Tariff Preference (DFTP) Scheme for Least Asia-Pacific Trade Agreement (APTA) Developed Countries (LDCs) The Asia-Pacific Trade Agreement (APTA), which was The Government of India extended the Duty Free formerly known as the Bangkok Agreement, is a trade Tariff Preference (DFTP) Scheme for LDCs, including ini a ve with Bangladesh, China, India, Lao PDR, Bangladesh, gran ng duty free access on 94 percent South Korea and Sri Lanka as its members. Under of India's total tariff lines. Specifically, the Scheme APTA, a minimum local content of 45 percent is provided preferen al market access on tariff lines necessary in order to enjoy preferen al market that comprise 92.5 percent of global exports of all access, and 35 percent in the case of LDCs. LDCs. The Scheme came into effect in August 2008 Bangladesh enjoys tariff concessions in other with tariff reduc ons spread over five years. With member countries, such as tariff concessions on 570 effect from April 1, 2014, the DFTP scheme has been products, with addi onal tariff concessions on 48 expanded both in terms of coverage and facilita on of products (HS 6-digit level) in the Indian market with a trade to provide duty free / preferen al market access margin of preference ranging from 14 percent to 100 on about 98.2 percent of India's tariff lines. Only 1.8 percent. percent of the tariff lines have been retained in the Exclusion List, with no duty concessions. Only 97 lines Global System of Trade Preferences (GSTP) are under exclusion list and 114 lines are under The Agreement on Global System of Trade Margin of Preference (MOP) list. On all other lines, Preferences among developing countries (GSTP) was zero duty access has been provided for exports from signed on April 13, 1988 by 44 developing countries, beneficiary LDCs. In order to further facilitate trade, including India and Bangladesh. Under the trade certain procedural modifica ons were made to the preference scheme, the agricultural sector was Rules of Origin of the DFTP Scheme in 2015. The new provided with special preferences. Current applied scheme provides market access on 95.5 percent of tariff rates in GSTP countries are significantly lower
45 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border than the WTO bound rates. The local content territory of the other under mutually agreed requirement is 50 percent for non-LDC members, and terms was signed during PMs visit to Dhaka on 40 percent for LDC members. June 6, 2015. Protocol has five years validity with Some of the other recent agreements between India automa c renewal. and Bangladesh include: · Revised India –Bangladesh Trade Agreement · A Motor Vehicle Agreement for the Regula on of facilita ng connec vity to North East and trade Passenger, Personal and Cargo Vehicular Traffic with third countries signed on June 06, 2015. amongst Bangladesh, Bhutan, India and Nepal · A Memorandum of Understanding (MOU) on (BBIN) has been signed at the BBIN Transport Establishing Border Haats across the Border Ministers' mee ng on June 15, 2015 at Thimphu, between India and Bangladesh signed in April Bhutan. 2017. · Agreement on Coastal Shipping between India · MOU on Development of Fairway from Sirajganj and Bangladesh to promote two-way trade to Daikhowa and Ashuganj to Zakiganj on Indo- between both countries through ports was signed Bangladesh Protocol Route in April 2017. on June 6, 2015 at Dhaka, Bangladesh. Investment Rela ons between India and · Protocol on Inland Waterways Transit and Trade Bangladesh (PIWTT) outlining mutually beneficial arrangements for use of waterways of both Over the years, there has been a significant growth in countries for commerce between them and for the FDI flows from India to Bangladesh; however, passage of goods between two places in one there is marginal FDI movement from Bangladesh to country and to third countries through the India. During April 1996 to March 2018, the
Chart 4.2: Sectorwise FDI Inflows from India to Bangladesh
Leisure & Entertainment Tex les 2% 2% Others Financial Services 6% 3% Automo ve OEM 5%
Chemicals 9%
Coal, Oil and Natural Gas 72%
Note: fDi Markets tracks cross-border investment in a new physical project or expansion of an exis ng investment which creates new jobs and capital investment. This data differs from official data on FDI flows as company can raise capital locally, phase their investment over a period of me, and can channel their investment through different countries for tax efficiency. Source: fDi Markets Database and Exim Bank Analysis
46 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border cumula ve approved Indian FDI in joint ventures and banking and financial services; U ara Foods and wholly owned subsidiaries (FDI ou lows) including Feeds Ltd. in food products; Marico in FMCG and TCI equity, loan and guarantee issued, in Bangladesh in logis cs and transporta on sector. Poten al stood at US$ 474.6 million. On the other hand, sectors for Indian investment in Bangladesh would cumula ve inflows into India from Bangladesh during include co on yarn and fabric, man-made yarn and April 2000-December 2017 amounted to US$ 0.05 fabrics, machinery par cularly tex le machinery, million. Indian FDI flows into Bangladesh in 2017-18 mechanical appliances & parts, organic & inorganic was skewed toward electricity, gas and water sector. chemicals, automobiles, iron & steel items, electrical According to Financial Times' fDi Markets database, & electronic items, footwear, hor cultural products, during January 2003 to March 2018, the cumula ve informa on technology, health equipment & Indian investment in Bangladesh in greenfield and products and pharmaceu cals. brownfield expansion projects, were US$ 8.5 billion, Myanmar crea ng 14,166 jobs in the country, out of 52 projects. The adop on of Look East Policy by India was an India was the major investor in Bangladesh during the ini a ve towards developing extensive economic and period, with 36.5 percent share in Bangladesh's global strategic rela ons with the Associa on of Southeast investment. Asian Na ons (ASEAN) (including CLMV countries). Since then, India has progressed from being a During the same period, coal, oil and natural gas was dialogue partner to the present status of a strategic the largest sector to receive capital investment, with a partner with ASEAN. India's Look East Policy has now share of 72 percent in total investment inflows from been morphed into Act East Policy announced in the India into Bangladesh. Other major sectors a rac ng Union Budget Speech of 2015-16, which envisages capital investment in the region include chemicals, accelerated across-the-board engagement between automo ve OEM, financial services, tex les and India and East Asia. leisure and entertainment (Chart 4.2). Trade Rela ons with Myanmar Some of the Indian Companies present in Bangladesh include Pearl Fashion Pvt. Ltd., Pacific Apparels Ltd., Since the signing of India and Myanmar trade and Arvind Fashion Ltd. in the tex le industry; agreement in 1970, bilateral trade has been growing Na onal Thermal Power Corpora on Ltd; ONGC steadily. Total trade between India and Myanmar Videsh Ltd in electricity and gas sector; Polaris in have witnessed a steady growth in recent years, Chart 4.3: India's Trade with Myanmar
2261.3 2109.1 2226.1 1717.9 1873.0 1876.3 1390.0 1394.7 1143.6 1264.1
56.2 107.6
US$ mn 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -156.3 -623.4 -524.2 -668.9 -806.2 -973.6 -849.6 -819.3
Exports Imports Total Trade Trade Balance
Source: ITC Trade Map, derived from UN COMTRADE
47 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border having risen from US$ 1.1 billion in 2008 to US$ 1.3 accoun ng for 4.4 percent of Myanmar's global billion in 2017 (Chart 4.3). India maintained a trade exports. surplus with Myanmar in the recent years from a Composi on of India –Myanmar Merchandise Trade deficit witnessed un l 2015, reflec ng lower imports India's export basket to Myanmar primarily of edible vegetables, roots and tubers, as well as comprised pharmaceu cal products, iron and steel, mber products from Myanmar vis-à-vis previous sugars and sugar confec onery, electrical machinery years. and equipment and vehicles, among others, which India's exports to Myanmar increased by a CAGR of together accounted for 51.8 percent of India's total 12.5 percent to US$ 685.9 million in 2017, compared exports to Myanmar (Table 4.3). Though India's to US$ 237.3 million in 2008, accoun ng for 3.1 exports of sugar and sugar confec onery (HS-17), and percent of Myanmar's global imports. On a year-on- co on (HS-52) to Myanmar have shown significant year basis, India's exports to Myanmar witnessed a increase un l 2016, they have witnessed a decline in sharp decline of 39.9 percent from US$ 1.1 billion in 2017. This could be par ally a ributed to the 2016 to US$ 685.9 million in 2017, mainly due to temporary ban on sugar re-export by the lower exports of sugars and sugar confec onery. Government of Myanmar during the year. During India's imports from Myanmar stood at US$ 578.3 2017, Myanmar was India's second largest export million during 2017, decreasing from US$ 906.3 des na on for exports of railway or tramway million in 2008. On a year-on-year basis, India's locomo ves, rolling stock and parts, 4th largest export imports from Myanmar witnessed a sharp decline of des na on for sugar and confec onery and 12th 46.7 percent from US$ 1.1 billion in 2016 to US$ 579.3 largest des na on for exports of ar cle of feather. million in 2017, mainly due to lower exports of edible Overall, India was Myanmar's 7th largest source of vegetables and roots. In 2017, India was the fi h global imports during 2017, accoun ng for 3.1 largest global export des na on of Myanmar, percent of Myanmar's global imports.
Table 4.3: India's Major Exports to Myanmar (US$ million)
2010 2017 HS CAGR Product Label Value Value Code % Share % Share (2010- (US$ mn) (US$ mn) 2017, %) 30 Pharmaceu c al products 56.9 20.9 123.4 18.0 11.7 72 Iron and steel 18.6 6.8 70.0 10.2 20.8 17 Sugars and sugar confec onery 8.7 3.2 64.6 9.4 33.1 85 Electrical machinery and equipmen t 16.6 6.1 51.2 7.5 17.5 87 V ehicles other than railway or tramway 5.4 2.0 45.8 6.7 35.6 52 Co on 9.9 3.6 35.8 5.2 20.1 84 Machinery and mechanical appliances 13.8 5.0 34.6 5.0 14.1 Mineral fuels, mineral oils and products of their
27 dis lla on 2.8 1.0 33.5 4.9 42.3 23 Residues and waste from the food industries 10.3 3.8 33.0 4.8 18.2 Railway or tramway locomo ves, rolling stock 86 and parts 0.8 0.3 22.2 3.2 61.3 Source: ITC Trade Map, derived from UN COMTRADE
48 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 4.4: India's Major Imports from Myanmar (US$ million)
2010 2017 CAGR HS Code Product Label Value Value (2010-2017, % Share % Share (US$ mn) (US$ mn) %)
07 Edible vegetables, roots and tubers 506.5 55.9 414.8 71.7 -2.8 44 Wood and ar cles of wood 392.7 43.3 111.5 19.3 -16.5 72 Iron and steel - - 13.2 2.3 - 78 Lead and ar cles 0.1 - 11.2 1.9 112.6 09 Coffee, tea, maté and spices 0.8 0.1 5.9 1.0 33.7 03 Fish and crustaceans, molluscs 0.1 - 4.8 0.8 77.3 79 Zinc and ar cles - - 4.0 0.7 - 12 Oil seeds and oleaginous fruits - - 2.8 0.5 92.9 76 Aluminium and ar cles - - 2.1 0.4 - 41 Raw hides, skins and leather 1.4 0.2 1.7 0.3 2.6 Note: - not available/negligible Source: ITC Trade Map, derived from UN COMTRADE
Edible vegetables, roots and tubers, and mber countries of the MGC down the centuries. The products together accounted for 91 percent of India's Eighth Mekong Ganga Coopera on Ministerial total imports from Myanmar in 2017 (Table 4.4). In Mee ng was held on August 7, 2017 in Manila, fact, during 2017, Myanmar was India's third largest Philippines. The Ministers emphasized the need global source of edible vegetables and mber to expedite the collabora on under MGC while products. seeking con nuously to iden fy newer areas of India – Myanmar Regional Coopera on coopera on, in order to strengthen economic linkages and to tap trade and investment · Bay of Bengal Ini a ve for Mul -Sectoral poten al of the coopera on between India and Technical and Economic Coopera on (BIMSTEC): Mekong countries¹². BIMSTEC is an interna onal organisa on · South Asian Associa on for Regional involving Bangladesh, India, Myanmar, Sri Lanka, Coopera on (SAARC): SAARC is an organisa on Thailand, Bhutan and Nepal. Myanmar is a of eight South Asian na ons (Afghanistan, signatory to the BIMSTEC Free Trade Agreement, Bangladesh, Bhutan, India, Maldives, Nepal, and trades mostly with Thailand and India in the Pakistan and Sri Lanka). Myanmar was given the region. status of observer in SAARC in August 2008. · Mekong Ganga Coopera on (MGC): MGC is an · Associa on of Southeast Asian Na ons ini a ve by six countries – India and five ASEAN (ASEAN): Myanmar is the only ASEAN country countries namely, Cambodia, Lao PDR, Myanmar, which shares a land border with India, and is a Thailand and Vietnam – for coopera on in the bridge between India and Southeast Asian fields of tourism, educa on, culture, transport countries. The ASEAN-India Agreement on Trade and communica on, and was launched at in Goods came into force on September 1, 2010 Vien ane, Lao PDR. Both the Ganga and the for Myanmar. Elimina on or reduc on of tariffs Mekong are civiliza onal rivers, and the MGC ini a ve aims to facilitate closer contacts among under the various tariff categories like normal the people inhabi ng these two major river tracks 1 & 2, sensi ve track, special products and basins. The MGC is also indica ve of the cultural highly sensi ve track would be by 2024 for CLMV and commercial linkages among the member countries including Myanmar (Exhibit 4.1).
¹² Ministry of External Affairs (MEA), Government of India 49 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Exhibit 4.1: ASEAN- India Free Trade Area
In October 2003, a Framework Agreement on from the list of tariff elimina on to address Comprehensive Economic Coopera on was sensi vi es in agriculture, tex les, auto, signed between ASEAN and India, covering Free chemicals, petrochemicals, crude and refined Trade Agreements (FTA) in goods, services and palm oil, coffee, tea, pepper, etc. ASEAN investment, as well as areas of economic countries have also maintained country wise coopera on. The agreement for freeing trade in exclusion list from the proposed tariff goods was signed in August 2009. The concessions or elimina ons. agreement on Trade in Goods came into force On September 9, 2014, India signed the Trade in on January 1, 2010 in the case of Malaysia, Services and Trade in Investment Agreement Singapore and Thailand; June 1, 2010 for with ASEAN countries, including Myanmar, Vietnam; September 1, 2010 for Myanmar; which came into force on July 1, 2015. Select October 1, 2010 for Indonesia; November 1, ar cles contained in the Services Agreement 2010 for Brunei; January 24, 2011 for Lao PDR; include transparency, domes c regula ons, June 1, 2011 for Philippines; and July 29, 2011 recogni on, market access, and na onal for Cambodia. Elimina on or reduc on of tariffs treatment, increasing par cipa on of under the various tariff categories like normal tracks 1 & 2, sensi ve track, special products developing countries, joint commi ee on and highly sensi ve track would be by 2019 for services, review, dispute se lement and denial ASEAN non- CLMV barring Philippines; 2022 for of benefits. The Investment Agreement Philippines; and 2024 for Cambodia, Lao PDR, primarily focuses on protec on of investment Myanmar and Vietnam (CLMV). Tariff to ensure fair and equitable treatment for concessions in the Agreement are offered investors, non-discriminatory treatment in either through tariff elimina on or tariff expropria on or na onalisa on, and fair reduc on for about 4000 products (which compensa on. While the ASEAN-India Free include electronics, chemicals, machinery and Trade Area is fully func onal from July 2015, tex les) to zero or near zero levels. India is also ac vely engaged in the Regional Under the Agreement, ASEAN countries and Comprehensive Economic Partnership India have agreed to progressively eliminate nego a ons involving ASEAN and its six FTA tariffs on 80 percent of the tariff lines, partners, which, when completed, is expected accoun ng for 75 percent of the trade. India has to be the largest regional trading arrangement, excluded 489 tariff lines (HS-6 Digit level) from accoun ng for nearly 40 percent of the world the list of tariff concessions and 590 tariff lines trade.
Source: Ministry of Commerce and Industry, Government of India and Ministry of External Affairs (MEA), Government of India
50 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Other Areas of Coopera on between India and Friendship Road and construct the 126 km Myanmar¹³ Kalewa-Yargyi road segment for establishing seamless Trilateral Highway from Moreh in India · MOU on Coopera on in the construc on of 69 to Mae Sot in Thailand via Myanmar. Bridges including AP Aproach Roads in the Tamu- Kyigone-Kalewa Road Sec on of the Trilateral · India is also working on boos ng air, rail and sea Highway in Myanmar in August 2016. links. During the visit of Indian Prime Minister to Myanmar in May 2012, Air Services Agreement · MOU on Coopera on in the construc on / upgrada on of the Kalewa – Yagyi Road Sec on in was signed, and also agreed to set up Joint August 2016. Working Groups to determine the technical and commercial feasibility of cross-border rail links as · Mechanisms such as Joint Trade Commi ee, well as direct shipping links between the two Double Taxa on Avoidance Agreement, Bilateral countries. The bilateral Air Services Agreement Investment Protec on Agreement and other enables third, fourth and fi h freedom rights to technical level commi ee on trade have both Indian and Myanmar carriers. An MOU to contributed significantly in strengthening trade establish a direct Imphal-Mandalay bus service and investment rela ons. and the broad framework for the opera on of this · India is undertaking some important development service has been nego ated and ini alized. Air projects to enhance connec vity, notably, the India has launched a direct flight between Delhi- Kaladan project, and construc on/upgrada on of Gaya-Yangon once in a week during the peak Rih-Tiddim Road. India has agreed to Myanmar's season of 2014. The Shipping Corpora on of India request to undertake the task of building the 69 has launched a direct sea link between India and bridges along the Tamu Kalamyo-Kalewa (TKK) Myanmar in October, 2014.
Chart 4.4: Sectorwise FDI Inflows from India to Myanmar
Financial Services 6% Non-Automo ve Transport OEM Coal, Oil and 1% Natural Gas 90% Wood Products 2%
Automo ve OEM 1%
Note: fDi Markets tracks cross-border investment in a new physical project or expansion of an exis ng investment which creates new jobs and capital investment. This data differs from official data on FDI flows as company can raise capital locally, phase their investment over a period of me, and can channel their investment through different countries for tax efficiency. Source: fDi Markets Database and Exim Bank Analysis
¹³ India-Myanmar Rela ons, February 2016, MEA, GOI and List of MOU's signed during the visit of president of Myanmar to India , MEA, August 2016 51 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Investment Rela ons with Myanmar Several Indian companies have made their presence During April 1996 to March 2018, the cumula ve in Myanmar across sectors, which include ONGC approved Indian FDI in joint ventures and wholly Videsh Limited (OVL), Jubilant Oil and Gas, Century owned subsidiaries (FDI ou lows) including equity, Ply, Tata Motors, Essar Energy, RITES, Escorts, Sonalika loan and guarantee issued, in Myanmar stood at Tractors, Zydus Pharmaceu cals Ltd., Sun US$ 285.3 million. On the other hand, cumula ve Pharmaceu cals Ltd, Ranbaxy, Cadila Healthcare Ltd, inflows into India from Myanmar during April 2000- Shree Balaji Enterprises, Shree Cements, Dr. Reddy's December 2017 amounted to US$ 9 million. Around Lab., CIPLA, Ga Shipping Ltd, TCI Seaways, Apollo 90 percent of Indian investment in Myanmar is in the and AMRI. Indian companies have evinced interest in oil and gas sector. inves ng in Myanmar and major contracts have been won by Indian companies include Jubilant Energy According to Financial Times' fDi Markets database, India- PSC-1 onshore bloc, Punj Lloyd, Jindal Saw, during January 2003 to March 2018, the cumula ve Welspun India, Vihaan Networks, Nipha Exports and Indian investment in Myanmar in greenfield and Troika Exports, and Larsen & Toubro. Poten al sectors brownfield expansion projects, were US$ 3.1 billion billion, crea ng 1,563 jobs in the country, out of 14 for Indian investment in Myanmar would include projects. power, renewable energy, agri-business, food processing, construc on related industries, hospital During the same period coal, oil and natural gas was & healthcare, voca onal training & educa on, mining, oil and gas, refinery, fer lizer, pharma, and the largest sector to receive India’s capital iron and steel¹⁴. investment, with a share of 90 percent in total investment inflows from India into Myanmar. Other In Banking and Finance, New India Assurances major sectors a rac ng capital investment in the Limited, United Bank of India, State Bank of India (SBI) country include financial services, non-automo ve and Export-Import Bank of India have opened transport OEM, wood products and automo ve OEM representa ve offices in Yangon. Further, SBI was (Chart 4.4). granted commercial banking license in March 2016.
¹⁴ Ministry of External Affairs, Government of India and Overseas Direct Investment Data, RBI 52 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
5. INDIA'S BORDER TRADE AND CONNECTIVITY WITH BANGLADESH AND MYANMAR
India's trade rela ons with Bangladesh and Myanmar could provide the necessary link for India to connect have been strengthened across the years. However, the East and the Southeast Asia via the Indian NER. the full poten al is yet to be harnessed especially in India's Act East Policy would give the region a natural the context of India's North East Region (NER). The advantage for cross-border trade, and connec vity NER, which has been connected to mainland India through construc on of road, rail and ports will bring only by a very narrow transport corridor, known as the development and prosperity into the NER while Siliguri Corridor (a narrow strip of width 21-40 km), increasing India’s commercial engagement with East, has the loca onal advantage to gain from its long South and Southeast Asian regions. interna onal border with Bangladesh, Myanmar and The geographical loca on of the NER is such that they other neighboring countries in the region. In fact, incur a high transporta on cost to get supply of goods strategic engagement with the neighboring countries from their key sources, the nearest being Kolkata, and could bring an end to economic isola on of the NER, sources wide range of goods and commodi es from and bring prosperity to the region by boos ng mainland India due to weak local produc on base of economic ac vi es and development ini a ves. the region. Thus, the NER offer Bangladesh and With Myanmar sharing land border with India along Myanmar a desired market as well, par cularly in the the boundary of the states of Arunachal Pradesh, FMCG sector. Despite ini a ves taken to improve the Manipur, Mizoram and Nagaland, and Bangladesh NER's connec vity with Bangladesh and Myanmar, sharing border with the states of Assam, Meghalaya, the road and rail links between India and Myanmar Mizoram, Tripura and West Bengal, development of and Bangladesh remain erra c, with the quality of roads remaining sub-standard and missing links trade-related infrastructure, transporta on system exis ng in highways construc on. Though air and other logis c facili es in and around key border infrastructure has improved in the recent years, regions could go a long way in promo ng bilateral trading via air routes is much costlier, and air rela ons between India and the two countries. Here, connec vity is not adequate for connec ng to the importance of cross-border trade became secondary and small towns. relevant. India- Bangladesh Border Trade North East States of India and Bangladesh and India and Bangladesh share over 4,000 km of Myanmar common interna onal border, with the states of The North East Region of India has shared around 98 Assam, Meghalaya, Mizoram, Tripura and West percent of its borders with China, Myanmar, Bhutan, Bengal (Table 5.1). Characteris cally, it is interes ng Bangladesh, and Nepal and has agreements of to note that the trade pa ern between India and overland trade with these countries through Land Bangladesh across land borders differs across states Custom Sta ons no fied under Sec on 7 of the in terms of quan ty and variety of product. While Customs Act, 1962. only few trade points (land customs sta ons) across The NER has the poten al to be the gateway to the interna onal border are handling the bulk of Southeast Asia region. Bangladesh and Myanmar trade, many of the trade points are not u lized.
53 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 5.1: Length of India's Border with Bangladesh
Indian States Border Length with Bangladesh (in km) Assam 263.0 Meghalaya 443.0
Mizoram 318.0
Tripura 856.0
West Beng al 2,216.7 Total 4,096.7 Source: Management of Indo-Bangladesh Border, SATP
According to a report by Ministry of Commerce & Port-wise analysis shows that ICP Petrapole, Nhava Industry, Government of India¹⁵, 46.5 percent of Sheva (sea), Mundra, Ghojadanga and Chennai (sea) India's exports to Bangladesh were routed by land are the top 5 ports which accounted for 60 percent of through trucks, 0.5 percent through railways and exports to Bangladesh in 2016-17. While Dawki at balance 53 percent through sea or air routes in 2016- Meghalaya accounted for 0.3 percent of total exports 17. ICP Petrapole is the largest gateway to Bangladesh, contribu ng 34 percent of total exports to Bangladesh in 2016-17, there are not much export and 58 percent of imports in 2016-17 (Table 5.2). ac vi es through other ports such as Agartala.
Table 5.2: India's Port Wise Exports to Bangladesh
2012-13 2016-17 CAGR (2012-13 Ports to 2016- Value % V alue % 17, %) (US$ mn) Share (US$ mn) Share
Petrapole (Land ) 1,793.0 34.8 2,340.4 34.3 6.9 Nha va Sheva (Sea) 576.8 11.2 830.3 12.2 9.5 Mundr a 215.8 4.2 439.7 6.4 19.5 Ghajadang a 157.7 3.1 280.6 4.1 15.5 Chennai ( Sea) 271.4 5.3 204.2 3.0 -6.9 Tu c orin (Sea) 152.9 3.0 152.8 2.2 -0.002 Ranagha t 67.2 1.3 146.7 2.2 21.6 Kolka ta (Sea) 24.9 0.5 139.7 2.0 53.9 Hili (West) 149.5 2.9 118.6 1.7 -5.6 ICD Sabarma 35.8 0.7 107.6 1.6 31.7 Top 10 Ports Exports to Bangladesh 3,444.8 67.0 4,760.7 69.8 8.4 Total Exports to Bangladesh 5,145.0 100.0 6,820.1 100.0 7.3
Source: Directorate General of Commercial Intelligence and Sta s cs (DGCI&S), Ministry of Commerce and industry (MOCI), Government of India (GOI)
¹⁵ Ministry of Commerce and Industry, GOI, India's Trade with South Asia In 2016-17: An Analysis, September 2017
54 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 5.3: India's Port Wise Imports from Bangladesh
2012-13 2016-17 CAGR (2012- 13 to 2016-
Port Value (US$ mn) % Share Value (US$ mn) % Share 17, %)
Petrapole (Land) 408.4 63.9 407.2 58.0 -0.1
Tu corin (Sea) 0.4 0.1 37.9 5.4 212.0
Ghajadanga 4.7 0.7 28.9 4.1 57.5
Kotwaligate (Mohedipur) 8.0 1.3 28.7 4.1 37.6 Nhava She va (Sea) 35.4 5.5 26.4 3.8 -7.1 Agartala 40.8 6.4 20.9 3.0 -15.4 Mumbai (Sea) - - 18.5 2.6 771.5 Chengrabandha Rly.Sta on 10.3 1.6 18.5 2.6 15.8 Delhi (ICD) 1.1 0.2 16.5 2.4 97.8 Chennai (Sea) 11.2 1.8 14.3 2.0 6.2 Top 10 Ports Imports from Bangladesh 520.2 81.4 617.8 88.0 4.4 Total Imports from Bangladesh 639.3 100.0 701.7 100.0 2.4 Note: - not available/negligible Source: DGCI&S, MOCI, GOI A substan al por on of imports from Bangladesh (ICPs) along the border. Of the 49 LCSs, 37 are enters India by trucks through the Land Customs currently func onal (Table 5.4). The LCS at the India- Sta ons on India-Bangladesh border. Around three- Bangladesh Border provide transit, customs and fourth of imports are through land route, while one- immigra on and cargo handling services for goods fi h availed the sea route. Roughly 2.6 percent were and passengers. The Land Customs Sta ons at routed by rail and less than a percentage by air. The Petrapole (West Bengal) and Agartala (Tripura) have top 5 ports from where imports from Bangladesh took been developed as Integrated Check Posts (ICPs). In place in 2016-17 are Petrapole (land), Tu corin, order to facilitate movement of cargo across the Ghojadanga (land), Mohedipur (land) and Nhava border, ICP Petrapole has been made opera onal on Sheva (sea) (Table 5.3). Over 75 percent of India's 24x7 basis, seven-days-a-week Customs clearance total imports from Bangladesh are routed through facility basis since August 2017. In addi on to the these ports. In the NER, Agartala accounted for 3 above two ICPs, Land Ports Authority of India (LPAI) percent of India's total imports from Bangladesh, proposes to develop ICPs at eight other loca ons while no imports has taken place through Dawki and Zokhawthar in 2016-17. across India-Bangladesh border at Hili, Changrabandha, Mahadi Pur, Fulbari and Ghojadanga Land Customs Sta on (LCS) in West Bengal, Sutarkandi in Assam, Dawki in Bilateral trade between India and Bangladesh is Meghalaya and Kawrpuichhuah in Mizoram, which mainly carried out through land route via 49 Land will provide further boost to the bilateral trade Customs Sta ons (LCSs) and 2 Integrated Check Posts (Annexure-I).
55 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 5.4: List of Integrated Check Posts (ICPs)/Land Customs Sta ons (LCSs)
Name of the Corresponding LCS in S. No. Name of the ICP in India (Along with the state) Bangladesh 1 Petrapole ICP, West Bengal Benapole, Bangladesh 2 Agartala ICP, Tripura Akhaura, Bangladesh
Name of the Corresponding LCS in S. No. Name of the LCS in India (Along with the state) Bangladesh 1 Agartala LCS, Tripura Akhaura LCS, Bangladesh 2 Dhalaighat LCS (Agartala Division), Tripura Kumarghat LCS, Bangladesh 3 Khowaighat LCS (Agartala Division), Tripura Balla LCS, Bangladesh 4 Muhurighat LCS (Agartala Division), Tripura Belonia LCS, Bangladesh 5 Srimantapur LCS (Agartala Division), Tripura Bibirbazar LCS, Bangladesh 6 Karimganj Steamer & Ferry Ghat, Assam Zakiganj LCS, Bangladesh 7 Manu LCS (Karimganj Division), Tripura Cha apur LCS, Bangladesh 8 Old Raghnabazar LCS (Karimganj Division), Tripura Betuli (Fultali) LCS, Bangladesh 9 Sutarkandi LCS (Karimganj Division), Assam Sheola LCS, Bangladesh 10 Mahisasan Railway sta on (Karimganj Division), Assam Shabajpur LCS, Bangladesh 11 Bholaganj LCS, Mehalaya Bholaganj LCS, Companyganj, Bangladesh 12 Borsora LCS (Shillong Division), Meghalaya Borsora LCS, Bangladesh 13 Dawki LCS (Shillong), Meghalaya Tamabil LCS, Bangladesh 14 Shellabazar LCS (Shillong Division), Meghalaya Chhatak, Sunamganj LCS, Bangladesh 15 Ryngku LCS, (Shillong Division), Meghalaya Kalibari (Baganbari) LCS, Bangladesh 16 Baghmara LCS, Meghalaya Bijoypur LCS, Bangladesh 17 Dalu LCS, (Dhubri Division), Meghalaya Nakugaon LCS, Bangladesh 18 Dhubri Steamer and Ferry Ghat LCS, Assam Rohumari LCS, Bangladesh 19 Ghasuapara LCS (Dhubri Division) Gobrakura & Koroitali LCS, Bangladesh 20 Golakganj LCS (Dhubri Division), Assam Sonahat LCS, Bangladesh 21 Mahendraganj LCS, (Dhubri Division), Meghalaya Dhanua Kamalpur LCS, Bangladesh 22 Mankachar LCS, (Dhubri Division), Assam Rowmari LCS, Bangladesh 23 Guwaha Steamerghat LCS, Assam Rohumari LCS, Bangladesh 24 Silghat LCS, (Guwaha Division), Assam Rohumari LCS, Bangladesh 25 Changrabandha LCS, West Bengal Burimari LCS, Bangladesh 26 Fulbari LCS, West Bengal Banglabandha Land Port, Bangladesh 27 Radhikapur LCS, West Bengal Birol LCS, Bangladesh 28 Gitaldah LCS, West Bengal Mogul Ha , Bangladesh 29 Ghojadanga LCS, West Bengal Bhomra, Bangladesh 30 Mahadipur LCS, West Bengal Sinamasjid, Bangladesh 31 Hilli LCS, West Bengal Hili, Bangladesh 32 Hemnagar LCS, West Bengal Shaikberia, Bangladesh
56 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
33 Gede LCS, West Beng al Dorsona, Bangladesh 34 Ranaghat LCS, West Beng al Dorsona, Bangladesh 35 Singabad LCS, West Beng al Rohanpur, Bangladesh 36 T.T.Shed, Khidderpore LCS, West Bengal Khulna, Bangladesh 37 Kawrpuichhuah, Mizoram Thegamukh, Bangladesh Source: High Commission of India, Dhaka
Border Haats take place annually between India and Bangladesh In order to curb unofficial trade, India and Bangladesh through the 'Border Haats'. The commodi es traded had in the recent past agreed to reopen Border Haats include locally produced vegetables, food items, (market places). Before 1972, Border Haats were used fruits, spices; minor forest produce like bamboo, to help people residing on either side of the border to bamboo grass, and broom s ck excluding mber; trade their surplus produce in return for essen al product of local co age industry items like gamcha, items. But these Haats were later shut down during lungi, saree and any other handloom products; small Bangladesh's war of libera on. Realising the need to household and agriculture implements like dao, control unofficial border trade, both na ons decided plough, axe, spade, chisel, etc; garments, melamine to re-open the Border Haats. products, processed food items, fruit juice, toiletries, cosme cs, plas c products, aluminium products, According to the Ministry of Commerce and Industry, cookeries and sta onery; and any product of the Border Haats have been set up to promote “the indigenous nature specifically produced in the area wellbeing of the people dwelling in remote areas of Border Haats. The list of items allowed for trade across the borders of two countries, by establishing through Border Haats may be expanded/modified by tradi onal system of marke ng the local produce mutual consent¹⁷. through local markets”¹⁶. Border Haats generally have limited number of products for trade, which would be The trade at Border Haats is permi ed to be carried traded by iden fied vendors (generally from the out in Indian Rupees/Bangladesh Taka. Traders will border districts), with buying limits on each market exchange them in banks opera ng in the two border day. The first Border Haat was opened at Kalaichar- districts and on barter basis, and data of such trade is Baliamari (West Garo Hills-Kurigram) in Meghalaya, maintained by the Haat Management Commi ee of on July 23, 2011. Currently, four Border Haats are the respec ve Border Haat. This would make the opera onal, viz. Srinagar and Kamalasagar in Tripura border villages more prosperous by way of improved and at Kalaichar and Balat in Meghalaya for the market access for their goods, while strengthening convenience of bordering communi es. Two Border their economic and cultural es. The Haats are to be Haats in Tripura at Palbas and Kamlapur and four in set up within 5 km of the interna onal border, Meghalaya at Bholaganj, Nalikata, Shibbari and vendors/vendees shall be residents of the area within Ryngku have been agreed to be set up in-principle by 5 km radius from the loca on of Border Haats, and the the two countries. According to PIB, cash trade number of vendors are limited to be about 50 from equivalent to r 1,686.62 lakhs was carried out at the each country. Trading in these bazaars is being held opera onal four border haats in the five year period once or twice a week. Es mated value of such ending 2015-16. purchases cannot be more than respec ve local currency equivalent of US$ 200 for any par cular day. According to Ministry of Commerce and Industry of The commodi es sold in the Border Haats are India, an es mated US$ 20 million worth trade could exempted from the payment of customs du es.
¹⁶Ministry of Commerce and Industry, “Establishing Border Haats across the Border between India and Bangladesh,” Memorandum of Understanding between the Government of the Republic of India and the Government of the People's Republic of Bangladesh, April 8, 2017 ¹⁷Ministry of Commerce and Industry, GOI, Press Release, July 21, 2011 (h p://commerce.gov.in/PressRelease.aspx?Id=2806)
57 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Connec vity between India and Bangladesh¹⁸ with expansion of railway links boos ng connec vity As men oned earlier, trade between India and between India's North East and its BBIN neighbors. Bangladesh is carried out mostly by road. The major This ini a ve has the poten al to facilitate cross- road route between Bangladesh and West Bengal is at border transport of goods and people, enable an the Petrapole - Benapole (on Bangladesh side) border, efficient mul modal transport system to integrate while in the NER, Bangladesh mainly trades with and sustain the region's economic growth, and Meghalaya, Tripura and Assam. As regards, promote economic integra on. To enhance railway movement of people, there are currently five bus links in the region, the proposed Agartala-Akhaura rail services between India and Bangladesh, including line will be linked to the Trans-Asian Railway and Dhaka-Kolkata, Dhaka-Agartala, Kolkata-Dhaka- connect India to Bangladesh.²¹ Agartala, Dhaka-Shillong-Guwaha , and Kolkata- Inland Waterways Connec vity and Coastal Khulna Direct Bus Services which play important roles Shipping in promo ng people to people contacts. Protocol on Inland Water Transit and Trade (PIWTT): The Bangladesh, Bhutan, India and Nepal – Motor India and Bangladesh share 54 common rivers. Trade Vehicle Agreement (BBIN-MVA) signed in June 2015 is and transit through waterways between the two expected to boost connec vity by road, as the countries is regulated by the Protocol on Inland Water agreement allows vehicles to directly enter each Transit and Trade (PIWTT) which was first signed in other's territory, without the requirement for trans- 1972. The protocol is an agreement between the two shipment of goods from one country's truck to governments for the transporta on of goods and another at the border. A trial run of Cargo Movement keeping their respec ve waterways navigable, while on Trucks from Kolkata to Agartala via Dhaka and providing infrastructure facili es. The protocol is a Dhaka to New Delhi via Kolkata and Lucknow was mutually beneficial arrangement for the use of each conducted in August 2016.¹⁹ other's waterways for trade between two countries Almost all of Bangladesh's imports from India are and for transit cargo from Indian mainland (Kolkata) through train route. At present, out of the erstwhile to NER. The protocol further states that both six rail links, 4 inter-country railway links are countries will mutually decide the proposed opera onal (Petrapole-Benapole, Gede-Darshana, expenses; voyage permissions shall be taken at least Radhikapur-Biral and Singhabad-Rohanpur) and 2 four days prior to the actual journey; and the vessels more are proposed to be reopened (Haldibari- shall share equal tonnage. India's Na onal Chilaha and Mahisasan- Shahbazpur). To further Waterways 2 (NW 2), cu ng across Bangladesh, links boost cargo movements, three new rail links namely the NER with West Bengal. Transporta on of goods Akhaura-Agartala, Feni-Belonia and Panchagarh- between territories of two countries, take place in Siliguri, are proposed to be built. There are two accordance with the laws of the country through passenger trains, Maitree Express between Kolkata which goods are moving. Cargo vessels used for and Dhaka and Bandhan Express which runs between movement of goods from India to Bangladesh using Kolkata and Khulna. Further, every year in February, a waterways is under the regula on of the Inland pilgrim special train is run from Rajbari (Bangladesh) Waterways Authority of India (IWAI) and Bangladesh to Midnapore (India) for the pilgrims to a end the Urs Inland Water Transport Authority (BIWTA).²² It Sharif at Midnapore.²⁰ permits movement of goods over barges/vessels A railway agreement in the Bangladesh, Bhutan, India, between India and Bangladesh on eight protocol Nepal (BBIN) sub region is also being proposed, in line routes and also specifies 'ports of call' for inter
¹⁸High Commission of India, Dhaka and Inland Waterways Authority of India ¹⁹Pritam Bannerjee, “Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement: Unlocking the Poten al for Vibrant Regional Road Freight Connec vity”, CUTS Interna onal Discussion Paper, July 2015 ²⁰High Commission of India, Dhaka ²¹Building the missing links in the Trans-Asian Railway network, Economic and Social Commission for Asia and the Pacific, April 2017
58 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border country trade (Exhibit 5.1). 0.006 million transit cargo. Indian exports to Bangladesh through inland water transport mainly Both Governments have renewed this treaty comprises of cement, clinker and fly ash, food grain periodically. Under this Treaty, movement of Indian and project goods. The PIWTT also allows for trans- goods and barges/vessels are permi ed through the shipment of goods to North East states of India river systems of Bangladesh on these eight specific through Ashuganj river port by using waterways of routes between Kolkata and points in Assam (Dhubri, Bangladesh and further through Akhaura-Agartala by Karimganj) on payment of Bangladeshi Taka 100 road.²⁵ The first trans-shipment of food grains under million as annual maintenance charges by India.²³ this arrangement commenced in June 2016. In order According to Bangladesh Inland Water Transport to strengthen the infrastructure and facilitate Authority (BIWTA)²⁴, during July 2016 to June 2017, movement of goods through the waterways, India is about 2.62 million metric tons of goods were inves ng in establishing an Inland Container Port transported via the Protocol routes per annum, which (ICP) at Ashuganj, and in widening the exis ng road include 2.618 ton inter-country trade cargo and about between Akhaura Land Port and Ashuganj to 4 lanes.
Exhibit 5.1: Protocol Routes • Kolkata-Haldia-Raimongal-Chalna-Khulna-Mongla-Kawkhali-Barisal-Hizla-Chandpur-Narayanganj-Aricha- Sirajganj-Bahadurabad-Chilmari-Dhubri-Pandu-Shilghat. • Shilghat-Pandu-Dhubri-Chilmari-Bahadurabad-Sirajganj-Aricha-Narayanganj-Chandpur-Hizla-Barisal- Kawkhali-Mongla-Khulna-Chalna-Raimongal-Haldia- Kolkata. • Kolkata-Haldia-Raimongal-Mongla-Kawkhali-Barisal-Hizla-Chandpur-Narayanganj-Bhairab Bazar- Ashuganj-Ajmiriganj-Markuli-Sherpur-Fenchuganj-Zakiganj- Karimganj. • Karimganj-Zakiganj-Fenchuganj-Sherpur-Markuli-Ajmiriganj-Ashuganj-Bhairab Bazar-Narayanganj- Chandpur-Hizla-Barisal-Kawkhali- Mongla-Raimongal-Haldia-Kolkata. • Rajshahi-Godagari-Dhulian. • Dhulian-Godagari-Rajshahi. • Karimganj-Zakiganj-Fenchuganj-Sherpur-Markuli-Ajmiriganj-Ashuganj-BhairabBazar-Narayanganj- Chandpur-Aricha-Sirajganj-Bahadurabad-Chilmari-Dhubri-Pandu-Shilghat. • Shilghat-Pandu-Dhubri- Chilmari- Bahadurabad- Sirajganj- Aricha- Chandpur- Narayanganj-Bhairab Bazar- Ashuganj-Ajmiriganj- Markuli- Sherpur- Fenchuganj- Zakiganj- Karimganj. Ports of Call India Bangladesh Kolkata Narayanganj Haldia Khulna Karimganj Mongla Pandu Sirajganj Silghat Ashuganj Source: Inland Waterways Authority of India, Protocol on Inland Water Transit
²²High Commission of India, Dhaka ²³Ministry of External Affairs, GOI, Protocol on Inland Water Transit and Trade ²⁴Bangladesh Inland Water Transport Authority (BIWTA), Traffic Sta s cs during financial year 2010-2011 to 2016-2017 ²⁵World Bank, Bangladesh Regional Waterway Transport Project 1, Project Informa on Document, 2016
59 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Coastal Shipping Agreement: A Coastal Shipping The domes c liberalisa on of civil avia on sector in Agreement was signed between India and India has fostered trade and tourism, partly by Bangladesh in June 2015, which has enabled direct allowing private sector to run more airlines in South sea movement of containerized/bulk/dry cargo Asia, thus a rac ng more passengers. Yet there are between the two countries. This would enhance some bo lenecks in avia on infrastructure, bilateral trade by reducing me in shipping goods and par cularly busy airports in the region (e.g. Kolkata, enabling a huge saving in logis c costs of foreign trade Dhaka), which have to be fully revamped. Moreover, transport between the two countries, which would there could be direct flights connec ng India's NER otherwise have to be routed through ports of with its neighbouring countries, such as Bangladesh, Colombo and Singapore. It has reduced the shipping Bhutan, Myanmar, and Nepal. A much more vigorous me between India and Bangladesh from 30-40 days open skies policy can foster trade in the region. to 7-10 days and has the poten al to emerge as an Airlines in South Asia may introduce electronic data economical mode of transporta on of goods for interchange, interlinking trade agencies, customs, and immigra on for faster, efficient trade bilateral trade. It also has the poten al to decongest transac ons. roads and LCSs through which most of the trade is taking place now. This would also enable the Great Asian Highway movement of cargo to the North East through coastal Both India and Bangladesh are also signatories to the shipping upto Chi agong and therea er by Asian Highway Network (AHN) project, a coopera ve road/inland waterways. project to improve the highway systems in Asia by The first cargo ship under this framework sailed from connec ng countries in Asia and Europe, under the Chi agong to Vishakhapatnam in March 2016. In aegis of United Na ons Economic and Social February 2017, container ship services have started Commission for Asia and the Pacific (ESCAP). The between Kolkata and Pangaon (which is just around Asian Highway network is a network of 141,000 20 km from Dhaka) under this framework. Five Ports kilometres of standardised roadways across 32 Asian of Call have been iden fied in each country to provide countries including India and Bangladesh with linkages to Europe. The Highway will connect the facili es to the vessels of the other country engaged Eastern and the North East region of India via in inter-country trade. Vessels of either country plying Bangladesh and the ASEAN region through Myanmar. under the Protocol are permi ed to purchase fuels Two Asian Highway Network routes (AH-1 and 2) will and essen al stores at defined bunker points. Both be connec ng India and Bangladesh at Petrapole- countries have also signed an MOU on the use of Benapole, Fulbari-Banglabandha and Dawki-Tamabil Chi agong and Mongla ports for transfer of goods to points. and from India. Unofficial Trade between India and Bangladesh Air Connec vity One of the major challenges to strengthening India - Air cargo has a very small share as it is much costlier Bangladesh trade rela ons is the unofficial trade than the other modes, i.e. waterways, roadways, and between the two na ons. Unofficial trade basically railways. Mostly costly products like life-saving drugs takes place through two channels; cross-border trade and pharmaceu cals are exported to Bangladesh outside official channels, and illegal trade through through air. There are presently around 100 flights official channels via false invoicing. In case of India- opera ng between India and Bangladesh. Major ci es Bangladesh, such trade outside official channels of India and Bangladesh (Dhaka-Kolkata, Dhaka-Delhi, occur through the porous borders of Assam, Dhaka-Mumbai, Dhaka-Chennai, Chi agong-Kolkata) Meghalaya, Mizoram, Tripura, and West Bengal. are connected by air through several non-stop Major reasons for unofficial trade would include flights.²⁶ evasion of tariff and non-tariff barriers; simplex
²⁶Ministry of External Affairs, GOI, India-Bangladesh Rela ons, September 2017
60 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border procedures; be er market distribu on network; and West Bengal.²⁸ It has been argued that transac on nature and size of the businessmen/traders. costs of India's exports to Bangladesh have increased Studies on unofficial trade between India and despite simplifica on of documenta on at borders. It Bangladesh have consistently found a pa ern similar has also been observed that even though contrac ng to that of formal trade i.e. large volumes of goods partners in unofficial trade do not have any formal being smuggled from India to Bangladesh, but much contracts, these markets func on smoothly. Further, smaller volumes being smuggled in the opposite though unofficial trade has risks associated with it, direc on. Also, composi on of illegally traded the cost of mi ga ng this risk is quite low. These costs commodi es are dominated by essen al can be lowered s ll further by paying a nominal bribe. commodi es and goods of mass consump on. India- On the other hand, formal trading procedures are Bangladesh unofficial trade broadly ranges from extremely complex and me consuming. Another foodstuff (onion and rice, sugar and salt), tex les supplemen ng factor to unofficial trade between (sarees, readymade garments), livestock and ca le to India and Bangladesh is the issue of payments. As consumer goods. Es mates of informal trade compared to formal banking procedures, informal between India and Bangladesh vary a lot and it is banking provides easy access to foreign currency, difficult to assess the exact size. World Bank²⁷ through the 'Hundi' system in Bangladesh. es mates show that unofficial exports from India to India- Myanmar Border Trade Bangladesh, amounted to US$ 237 million in 2002-03, which is 20 percent of formal exports from India to Myanmar share 1,643 km of common interna onal Bangladesh in the same year. Sugar is smuggled to border with India in the NER, with the states of Bangladesh from India over the land borders and total Manipur, Mizoram, Nagaland and Arunachal Pradesh quan es of smuggled sugar are es mated to be (Table 5.5). Myanmar is strategically important for US$ 100-250 million in the years 2000-04. Similarly, India, as it is the only ASEAN country with which it ca le smuggling is a billion-dollar illegal industry, shares border. where around 1.5 million ca le worth around US$ In terms of port wise trade with Myanmar, most of 500 million are being smuggled every year across bilateral trade are through sea. Nhava Sheva (JNPT) is India and Bangladesh. the largest gateway to Myanmar contribu ng 19.3 The main unofficial trade centres on the India- percent of total exports and 24.8 percent of imports in Bangladesh borders include Fakiragram, Mankachat, 2016-17. Nhava Sheva (sea), Kolkata (sea), Mundra, and Karimganj in Assam; Lichubari and Dawki in Chennai (sea) and Delhi (ICD) are the top 5 ports which Meghalaya; Tlabung (Demagiri) in Mizoram; accounted for 53.5 percent of exports to Myanmar in Kailashahar, Agartala, Sonamora, Bilonia and 2016-17 (Table 5.6). In fact, no significant exports were Sabroom in Tripura and Petropole, Bagdha, Mejdia, carried out through the land borders, viz. land ports of Lalgola, Mohedpur, Radhikapur, Kaliagang and Hilli in Moreh LCS and Zokhawthar LCS during 2016-17.
Table 5.5: Length of India's Border with Myanmar Indian North East Sta tes Border length with Myanmar (in km) Arunachal Pradesh 520 Manipur 398 Miz oram 510 Nagaland 215 Total 1,643 Source: Ministry of Commerce and Industry (MOCI), Government of India (GOI)
²⁷World Bank, India-Bangladesh Bilateral Trade and Poten al Free Trade Agreement, 2006 28Sanjib Pohit and Nisha Taneja, India's Informal Trade with Bangladesh and Nepal: A Qualita ve Assessment', Indian Council for Research on Interna onal Economic Rela ons, 2000; Prabir De and Buddhadeb Ghosh, Reassessing Transac on Costs of Trade at the India- Bangladesh Border, 2008
61 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 5.6: India's Port Wise Exports to Myanmar 2012-13 2016-17 CAGR Value V alue (2012 - 13 t o Port (US$ mn) % Share (US$ mn) % Share 2016-17, %)
Nhava Sheva (Sea) 191.2 35.1 213.7 19.3 2.8
Kolkata (Sea) 87.9 16.1 175.4 15.8 18.9 Mundra 7.3 1.3 116.5 10.5 100.1 Chennai (Sea) 43.0 7.9 53.4 4.8 5.5 Delhi (ICD) 19.4 3.6 33.3 3.0 14.4 Mumbai (Air) 31.6 5.8 32.8 3.0 0.9 Tu corin (Sea) 9.4 1.7 28.9 2.6 32.4 Delhi (Air) 7.2 1.3 27.7 2.5 39.8
Kolkata (Air) 3.0 0.6 26.3 2.4 71.4
Hyderabad Airport 2.6 0.5 22.1 2.0 70.3
Top Ten Ports of Exports to Myanmar 402.7 73.9 730.0 65.9 16.0 Total Exports to Myanmar 544.7 100.0 1107.9 100.0 19.4
Source: DGCI&S, MOCI, GOI Again, as regards imports from Myanmar, it was account for 88 percent of the total imports from mainly carried out through sea ports in 2016-17, and Myanmar. Moreh LCS accounted for 1.7 percent of were mainly imported via Chennai (Sea), Nhava Sheva India's total imports from Myanmar, while not much (sea), Tu corin (sea), GMR Hyd. Avia on Ltd. SEZ, imports have taken place through Zokhawthar in Kolkata (sea) and Cochin (sea) (Table 5.7). These ports 2016-17.
Table 5.7: India's Port Wise Imports from Myanmar 2012-13 2016-17 CAGR (2012-13 % % to 2016 - Port Value (US$ mn) Share Value (US$ mn) Share 17, %) Chennai (Sea) 365.3 25.9 532.1 49.9 9.9 Nhava Sheva (Sea) 308.0 21.8 264.2 24.8 -3.8 GMR Hyd. Avia on Lt d, SEZ - - 50.7 4.8 - Kolka ta (Sea) 167.4 11.8 48.6 4.6 -26.6 Cochin (Sea) 46.7 3.3 43.9 4.1 -1.5 Mundra 0.8 0.1 25.7 2.4 135.9
Moreh 3.4 0.2 17.7 1.7 50.7
Delhi (ICD) 4.4 0.3 11.4 1.1 27.2 Newmang alore (Sea) 149.8 10.6 8.5 0.8 -51.2 Tu corin (Sea) 137.8 9.8 8.2 0.8 -50.6 Top 10 P orts of Imports from Myanmar 1183.7 83.8 1011.2 94.7 -3.9 Total Imports from Myanmar 1412.7 100.0 1067.3 100.0 -6.8 Note: - not available/negligible Source: DGCI&S, MOCI, GOI
62 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Table 5.8: India's Border Trade with Myanmar (US$ million) Myanmar's Myanmar's Total Balance Year Exports to Imports from Trade of Trade India India 2011-12 8.9 6.5 15.4 2.3 2012-13 8.9 3.2 12.0 5.7 2013-14 28.0 17.2 45.1 10.8
2014-15 42.6 18.1 60.7 24.5
2015-16 53.0 18.6 71.6 34.4
2016-17 63.5 24.7 88.2 38.7 Source: Ministry of Commerce, Myanmar
India and Myanmar signed a border trade agreement Commerce and Industry, GOI, under overall bilateral in 1994 and have two opera onal border trade points trade, pharmaceu cal products, iron and steel, (Moreh-Tamu and Zokhawthar –Rhi) on the 1,643 km ar cles of iron or steel, electrical and electronic long border. Agreement has also been reached on equipment, etc. cons tute major export items of se ng up a third border trade point at Avakhung- India and beans, pigeon peas, wood and ar cles of Pansat/ Somra. Later in 2008, it was agreed that wood, etc. cons tute India's major import items from exis ng border trading would be upgraded to normal Myanmar. Whereas, under the border trade regime, trade so as to promote bilateral trade between the major items imported by Myanmar from India include two countries. No fica ons to this effect have been co on yarn, auto parts, soyabean meal and issued by both sides. With the normaliza on of trade, pharmaceu cals. On the other hand, betel nuts, dried the unilateral Duty Free Tariff Preference (DFTP) ginger, green mung, black matpe, turmeric roots, Scheme of India and the ASEAN- India Trade in Goods resin and medicinal herbs are India's main imports Agreement (AITGA) became relevant in case of from Myanmar. There are reports that men on about Myanmar and the earlier limit no longer applies. the prevalence of informal trading of items like India- Myanmar border trade has increased over the fer lizers, vehicles, par cularly two-wheelers etc years. According to Ministry of Commerce, from India to Myanmar through land border. Hence, it Government of Myanmar, border trade increased can be summarized that bilateral trade and border over six fold from US$ 15.4 million in 2011-12 to trade between India and Myanmar are complements US$ 88.2 million in 2016-17 (Table 5.8). rather than subs tutes. Imports by India from Myanmar through the border is mainly goods from However, trade along Indo-Myanmar border remains third countries (especially from China and Thailand). rela vely low in comparison with Sino-Myanmar and Border Trade Agreements between India and Thai-Myanmar borders.²⁹ The opening of more Myanmar border points is likely to increase the volume of An agreement on border trade between India and border trade. Myanmar has favourable border trade Myanmar was signed on January 21, 1994 with its neighbouring countries, and has maintained a (opera onalised on April 12, 1995) to allow trade in border trade surplus with India throughout the years. locally produced commodi es across the India- A number of studies on India-Myanmar rela ons Myanmar border. The Agreement envisages that the found out that the composi on of overall bilateral border trade will take place through Custom Posts at trade between India and Myanmar trade is Moreh in Manipur and Zowkhawthar in Mizoram, completely different from composi on of border corresponding to Tamu and Rih in Myanmar, trade.³⁰ According to a report by Ministry of respec vely. A number of items were permi ed for ²⁹ h ps://www.mm mes.com/business/16294-border-trade-tops-2-4-billion-official.html ³⁰ Dr. Ram Upendra Das Gupta, Enhancing India-Myanmar Border Trade, 2016
63 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border the border trade between India and Myanmar. precious stone, 20. Sewing machines, 21. Tex le According to DGFT Public No ce No.30 (RE- fabrics, 22. Three wheelers/cars below 100 CC. 2012)/2009-2014, dated November 16, 2012, 22 new Current Situa on of India-Myanmar Border Trade commodi es/items have been added to the exis ng Agreement list of 40 tradable items, making a total of 62 commodi es allowed to be used in border trade There are certain recent changes in India-Myanmar between India and Myanmar. These commodi es Border Trade Agreement, including a shi from Barter included:³¹ to Normal Trade and another shi from Border Trade to Normal Trade that can take place through land 22 commodi es no fied on April 10, 1995: border. 1. Bamboo, 2. Betal Nuts and Leaves, 3. Chillies, 4. Coriander Seeds, 5. Food Items for Local Aboli on of Barter Trade by the Reserve Bank of consump on, 6. Fresh Vegetables, 7. Fruits, 8. Garlic, India (RBI) and shi to Normal Trade: 9. Ginger, 10. Katha, 11. Minor forest products The barter trade which was a part of border trade (excluding Teak), 12. Mustard/Rape seed, 13. Onion, between India and Myanmar was abolished by the 14. Pulses and Beans, 15. Reed Broom, 16. Resin, 17. RBI vide its circular no. RBI/2015-16/230 dated Roasted Sunflower Seeds 18. Sesame, 19. Soyabean, November 05, 2015.³² Barter trade was ini ally 20. Spices (excluding Nut Meg, Mace, Cloves, Cassia permi ed to facilitate exchange of locally produced & Cinnamon), 21. Tobacco, 22. Tomato. commodi es along the Indo-Myanmar border, and 18 commodi es no fied on November 7, 2008: hence were not captured in the banking system or 1. Agarba , 2. Bicycle's Spare parts, 3. Blades, 4. reflected in the trade sta s cs. RBI has found out that Bulbs, 5. Cosme cs, 6. Co on fabrics, 7. Fer lizers, 8. over a period of me the trade basket has diversified, Imita on jewellery, 9. Insec cides, 10. Leather with adequate banking presence to support normal footwear, 11. Life-saving drugs, 12. Menthol, 13. trade with Myanmar. Hence, RBI has decided to Mosquito Coils, 14. Paints & Varnishes, 15. Spices, 16. abolish barter system of trade at the Indo-Myanmar Stainless steel utensils, 17. Sugar & Salt, 18. X Ray border and switch over completely to normal trade paper & Photo paper. with effect from December 1, 2015. Accordingly, it 22 commodi es no fied on November 16, 2012: has been decided that all trade transac ons with Myanmar, including those at the Indo-Myanmar 1. Agricultural machinery/equipments/tools, 2. border to be se led in any permi ed currency in Bicycle, 3. Bleaching powder, 4. Coal, 5. Edible Oil, 6. addi on to the Asian Clearing Union mechanism with Electrical & Electric Appliances, 7. Fabricated steel effect from December 1, 2015. products, 8. Garments /readymade garments/cloths, 9. Handlooms and handicra s items, 10. Shi ing from Border Trade to Normal Trade Hardware/minor construc on materials and According to DGFT Public No ce No: 50/ (2015-2020), electrical fi ngs, 11. Lime, 12. Medicines, 13. Milk dated December 17, 2015, it has been decided that powder, tea, edible oil, beverages, 14. Motor Cycles & Border Trade at Moreh has been upgraded to Normal Motor Cycle Spare Parts, 15. Other items such as Trade so as to promote bilateral trade between the electronic/musical instruments, sta onary item, two countries. Though the DGFT no ce rescinded all torch light, 16. Plas c items: water tank, buckets, the previous documents related to India-Myanmar chairs, plas c pipes and briefcase, 17. Rice, Wheat, border trade including the India-Myanmar Border Maize, Millets & Oats, 18. Scented tobacco, 19. Semi Trade Agreement, the public no ce only men oned
³¹ h p://dg .gov.in/exim/2000/PN/PN12/Pn3012.htm ³² Switching from Barter Trade to Normal Trade at the Indo-Myanmar Border; RBI Circular RBI/2015-16/230; November 5, 2015
64 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border
Moreh. This has resulted in a lack of clarity regarding volume. The major commodi es exported from India the the policy regime for other LCS including to Myanmar at Moreh include cumin seeds, wheat Zokhawthar, and other trading points. There is also flour, pulses, co on yarn, auto parts, soya bean meal, lack of informa on regarding transi on to normal pharmaceu cals and dry grapes. On the other hand, trade at Moreh, resul ng in traders s ll dealing only India's major imports from Myanmar being traded at with the 62 items that were previously allowed. Moreh include betel nut, dry ginger, fresh ginger, mung, black matpe, turmeric roots, resin and Land Customs Sta on medicinal herbs, among others. At present, there are two Land Custom Sta ons (LCS) Border Haats in India dealing with border trade with Myanmar (Table 5.9). These include Moreh in Manipur with the The Border Haats plays a facilita ng role of enabling corresponding LCS in Tamu in Myanmar and local trade and increasing people-to-people contacts Zokhawtar in Mizoram with the corresponding LCS in and promo ng the well-being of the people in areas Rih in Myanmar. The ini a on of third LCS Avangkhu of difficult access across the borders of two countries. in Nagaland with the corresponding sta on Somara in This is done through establishing a tradi onal system Myanmar has been bilaterally agreed but it has not of marke ng the local produce at local markets at the been no fied yet by the government of India. As the border. A er realising the requirements of nearest town in Myanmar which is func oning as LCS communi es residing near the border, India and is Tiddim, which is approximately 75 km from the Myanmar took the decision to set up the Border border village of Zokhawthar, Government of India is Haats. Government of India has executed a assis ng Myanmar to build the Rih-Tiddim Road. Memorandum of Understanding (MOU) with Zorinpui in Lawngtlai district of Mizoram was selected Government of Myanmar, under which Border Haats for a new land custom sta on along the India- are to be set up at nine mutually agreed loca ons. Myanmar border in Mizoram for the Kaladan Mul - According to the signed MOU, the first Haat will be set Modal Transport Project. up at Pangsu Pass adjacent with Sagaing Region and Moreh is the most ac ve one among LCSs and most of Arunachal Pradesh as a pilot project even a er signing the me handles over 90 percent of India's border the Mode of Opera on of se ng up Border Haats by trade with Myanmar. The Government of India has the designated authori es. The Border Haats are decided to upgrade LCS Moreh to an Integrated allowed to sell local agricultural and hor cultural Check-Post (ICP), to support the increased traffic products, spices, minor forest products (excluding
Table 5.9: Land Customs Sta ons Dealing with Indo-Myanmar Trade
LCS in S. No LCS in India State Status Myanmar
1 Zokhawthar Mizoram Tiddim Func onal
Func onal. Being developed as 2 Moreh Manipur Tamu Integrated Check Post
Arunachal 3 Nampong (Pangsau Pass) Pangsu No fied but non-func onal Pradesh Bilaterally agreed to open new LCS but 4 Avangkhu Nagaland Somara not yet no fied
Sour ce: MOCI, GOI
65 Act East: Enhancing India's Trade with Bangladesh and Myanmar Across Border