Expansion of North East India's Trade and Investment with Bangladesh
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Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar: An Assessment of the Opportunities and Constraints Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar: An Assessment of the Opportunities and Constraints Ministry of Development of RIS North Eastern North Eastern Region Research and Information System Council Government of India for Developing Countries Government of India Copyright © RIS, 2011 ISBN: 81-7122-100-9 Published in 2011 by: RIS Research and Information System for Developing Countries Core IV-B, Fourth Floor, India Habitat Centre Lodhi Road, New Delhi-110 003, India Ph.: +91-11-24682177-80, Fax: +91-11-24682173-74 E-mail: [email protected] Website: www.ris.org.in CONTENTS List of Abbreviations and Unit of Conversion............................................................. vi Message by Shri U. K. Sangma, Secretary, North Eastern Council.......................... vii Acknowledgements.................................................................................................... viii Executive Summary .................................................................................................. .. ix 1. Introduction ..................................................................................................... ... 1 2. State of the NER Economies .............................................................................. 7 3. NER-Bangladesh Border Trade: Emerging Pattern ......................................... 15 4. NER-Myanmar Border Trade: Emerging Pattern ............................................ 33 5. Field Survey Results.......................................................................................... 45 6. Policy Recommendations and the Way Forward............................................... 57 References.................................................................................................................. 61 Appendices................................................................................................................. 63 vi Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar LIST OF ABBREVIATIONS AAGR Average Annual Growth Rate ASEAN Association of Southeast Asian Nations APTA Asia-Pacific Trade Agreement BCIM Bangladesh, China, India, Myanmar Forum on Regional Cooperation BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation BIPPA Bilateral Investment Protection and Promotion Agreement BIS Bureau of Indian Standards BSTI Bangladesh Standards and Testing Institution BOT Balance of Trade EDICAGR ElectronicCompound Data Annual Int erchangeGrowth Rate EAS East Asia Summit GMSFTA GreatFree Tradeer Mekong Agreement Sub-region GDP Gross Domestic Product ICP Integrated Check Post IT Information Technology ITES Information Technology Enabled Services IWTT Inland Water Transit and Trade JEC Joint Economic Commission KSFS Karimganj Steamer and Ferry Station LC Letter of Credit LCSs Land Customs Stations LEP Look East Policy MEB Myanmar Economic Bank NERMGC NorthMekong Eastern Ganga R Cooperationegion MoU Memorandum of Understanding NH National Highway NSDP Net State Domestic Product RoOOTOP RulesOne Tambon of Origin One Product RMG Ready Made Garment SAARC South Asian Association for Regional Cooperation SAFTA South Asian Free Trade Agreement SASEC South Asia Sub-regional Economic Cooperation SDP State Domestic Product SHEFEXIL Shellac and Forest Products Export Promotion Council SMEs Small and Medium Enterprises UBI United Bank of India UNIT OF CONVERSION 1 Crore = 10 Million 10 Lakh = 1 Million 1 Lakh = 100,000 GOVERNMENT OF INDIA MINISTRY OF DEVELOPMENT OF NORTH EASTERN REGION NORTH EASTERN COUNCIL NONGRIM HILLS, SHILLONG - 793003 : (0364) 2522644, 2522645 (O) U.K. SANGMA, IAS (0364) 2521360 (R) SECRETARY Fax : (0364) 2522643 NORTH EASTERN COUNCIL e-mail : [email protected] th Dated: 15 November, 2011 MESSAGE The North Eastern Region of our country shares almost 98% of its total boundary with the neighbouring countries such as Bangladesh, Myanmar, China and Bhutan. Although some trade relations exist with some of these countries, there also exists enormous scope of development of the relations further. These relations would not only bring economic benefit to the region and its people but would also help in promotion of tourism in the long run. With this objective in view, NEC had commissioned a study to the Research and Information System for Developing Countries, New Delhi and I must say that the work done by the team headed by Dr. Biswajit Dhar, Director General, Research and Information System is a meaningful one. I congratulate them and also hope that this study will be useful for further policy initiatives. My best wishes and greetings to all concerned. (U. K. Sangma) viii Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar Acknowledgements The Report has been prepared by a research team led by Dr. Biswajit Dhar, Director-General, RIS, and comprising Dr. Prabir De, Fellow, RIS; Dr. Gurudas Das, Associate Professor, National Institute of Technology (NIT) Silchar; and Professor E. Bijoy Singh, Department of Economics, University of Manipur, Imphal. Ms. Poulomi Dasgupta provided research assistance to this study. Usual disclaimers apply. EXECUTIVE SUMMARY India’s North Eastern Region (hereinafter its “Look East” policy, India has increased its NER) has 9 per cent of India’s geographical engagements with the members of the ASEAN area and contributes 3 per cent to the country’s and countries3 belonging to the East Asia gross domestic product (GDP). In relative Summit (EAS) . As is clear from Figure 1, the terms, it is one of India’s economically laggard centrality of the NER is critical in effectively regions. However, given its natural resource pursuing these initiatives. base and strategic location, the NER has the Set against this backdrop, the present potential to become India’s “powerhouse” in study attempts to better understand the terms of trade and investment. Although the existing level of trade links through both NER is rich in resources like hydrocarbons and formal and informal channels between India other minerals, and has immense potential to and its neighbours around the country’s North produce hydroelectricity, absence of adequate East by focusing on two of its neighbours, viz. infrastructure has impeded its development. Bangladesh and Myanmar. More specifically, The NER is unique in terms of the the study analyses the scope of utilising major Land Customs Stations (LCSs) for economic opportunities it offers. About 98 improving border trade with two countries. per cent of the region’s borders form India’s Three sets of issues are examined in the international boundaries; it shares borders study. These are: (a) pattern of border trade with China, Bangladesh, Bhutan and Myanmar. between India and its two neighbours and Given its strategic location, the region can the possibilities of expanding it; (b) supply- be developed as a base for India’s growing side constraints that may exist in the NER economic links not only with the Association which inhibit India’s two-way trade with its of Southeast Asian Nations (ASEAN) but also two neighbours; and (c) exploring India’s with neighbouring countries, viz. Bangladesh, investment opportunities in Bangladesh and Bhutan, and Nepal. Myanmar with buy-back provisions that can promote border trade through the LCSs. Over the past several years, India has been a part of a number of regional and sub- Formal trade links between India and its regional initiatives that countries in South and two neighbours, Bangladesh and Myanmar, South East Asia have taken to deepen their have remained at a very low level. While the economic integration. These include the South share of Bangladesh in India’s total trade was Asian Free Trade Agreement (SAFTA), which is about 0.6 per cent in 2009-10, Myanmar had the first step towards an eventual South Asian an even smaller share of about 0.3 per cent. In absolute terms, India’s two-way trade Economic Union, the Bay1 of Bengal Initiative with Bangladesh increased from US$ 1.8 for Multi-Sectoral Technical and Economic billion in 2005-06 to US$ 2.6 billion in 2009- Cooperation (BIMSTEC) 2 and the Asia-Pacific 10. It should be pointed out that the level Trade Agreement (APTA) . Further, as a part of of two-way trade between the two dipped x Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar slightly in 2009-10 from the record level of The importance of border trade is US$ 3.2 billion registered in the immediately immense for the NER, for it brings direct preceding year. In the same period, India’s tangible benefits to the region. However, two-way trade with Myanmar grew almost border trade involving both Bangladesh three-fold between 2005-06 and 2009-10 to and Myanmar face a plethora of problems. reach US$ 1.5 billion. Supply-side constraints, among others, are These low levels of trade do not factor inhibiting two-way trade across the borders in the informal trade that takes place through with its two neighbours. There is an urgent the local trade points, which have not been need to strengthen not only transport and communication infrastructure but also the culturalsystematically links going recorded back soto far.several People centuries living in the border regions have had economic and institutional support for enhancing the existing level of trade and economic linkages. and drawing of the