Myanmar is open for trade and investment but the response from Indian business has not been adequate despite the growing political ties between the two countries

A message coming out from our neighbour Myanmar that is transforming itself after 50 years of military rule is ‘we are open for business.’ Are our commercial establishments listening and are they ready?

Our bilateral relations with Myanmar have gathered momentum in recent times. We have agreed on a wide-ranging development cooperation agenda. India has made substantial commitments to assist Myanmar in the areas of capacity building, connectivity, infrastructure and border region development. Our trade and economic ties have however not kept pace. India figures at only the seventh place in Myanmar’s total imports and ranks, even lower at the13th place in terms of foreign investments into Myanmar. Being a large and contiguous neighbour, a closer overall engagement would call for a more robust trade and investment share that seems definitely possible at a time when rapid changes are unfolding.

Inclusive politics

To what extent has Myanmar transformed itself? President Thein Sein has, in the last two years, taken the country towards a democratic path that has made political life more inclusive; it has also enabled Daw Aung San Suu Kyi and her National League for Democracy to enter Parliament, albeit in a small way. The government has released a great majority of political prisoners and launched an ethnic reconciliation process to build peace with the various minority groups that have been out of the national mainstream from before independence.

Some problems have no doubt arisen in taking forward this process. Hostilities broke out with the Kachin rebels but the atmosphere has improved since late January. Tensions have also been building between the Buddhist and Muslim communities. Deadly riots erupted last year in Rakhine state in two spells between the Rohingayas and the Rakhine Buddhist community, leading to casualties and displacement of people. Last month there were attacks against the Muslim community in certain areas in Central Myanmar.

President Thein Sein has acknowledged that rioters have harmed the image of the country but he has also talked about adoption of a different approach to build trust. In a recent meeting with Muslim leaders, Ms Suu Kyi told them that the law has to be just for all and she would want everyone to feel proud of being a citizen of the country. Building trust and peace to pave the way for an inclusive society is a delicate and painstaking process. It is hoped that the troublemakers are firmly and effectively dealt with and the supremacy of the rule of law is maintained.

One can expect that responsible leaders of Myanmar would not want adverse domestic developments to affect its hosting of international events in the coming months — for the first time, the World Economic Forum East Asia Summit in June and the South East Asian Games in December 2013. It will also chair the ASEAN from January 2014.

More open economy

Myanmar is also moving towards an accelerated development programme with the promise of a more open economy. An unexpectedly deliberative Parliament, social activism and loosening of media controls have further energised the process. An economic reform programme launched with more debate is likely to be more acceptable and enduring even if the process is slower.

Several steps have already been taken. An IMF Staff Assessment Report on Myanmar acknowledges that the government has embarked on a bold set of reforms and cites changes brought about in the areas of foreign exchange, banking, budget formulation, agriculture and improvement in business climate. It further notes that economic performance has improved projecting a 6.25 per cent growth for 2012-13 and a growth rate of 7 per cent over the next five-year period. The local currency Kyat, for example, has seen a fair degree of stability.

On the financial front, private local banks have been granted an enhanced role, including in handling foreign exchange transfers, and allowed to consolidate themselves. Steps are under way to make the Central Bank more autonomous from the Finance Ministry.

On the trade side, procedures for import and export licences have been made easier. Myanmar products will also now enjoy concessional market access with the European Union making them eligible for benefits under its GSP scheme. This will be particularly attractive for those establishing garment making units in Myanmar. On the investment front, a new Foreign Investment Law was enacted in November 2012 after which new regulations and procedures for the processing of investment proposals have been issued. The Myanmar Investment Commission has provided further details about the areas where, and in what form, foreign investments will be allowed.

Lack of adequate infrastructure is a constraint and an opportunity. The government is paying attention to setting up power and other infrastructure projects. Expansion of telecom network, airports development, hotel zones in major cities and real estate development, including affordable housing, are other areas where one can see specific initiatives being taken. This is apart from the offers invited for a large number of onshore petroleum and gas blocks for which bids were due by mid-March and which should have elicited a good response. A few days ago, the government also invited bids for 30 offshore blocks, 19 deep sea ones and 11 in shallow waters.

Many Indian trade and industry associations have mounted delegations to Myanmar during the last several months. A few product shows have been held. Some companies are exploring trade and investment opportunities. A few have also been shortlisted for certain infrastructure projects. Our companies and industry associations will however need to pack in a lot more punch to significantly improve our trade and investment ranking. The $500 million concessional Line of Credit extended by EXIM Bank of India to the Myanmar government could play an important role in enhancing trade relations to mutual benefit. Both the governments and the agencies concerned will however need to ensure that the proposals for utilising these credit lines are quickly finalised and translated into contracts.

Development programmes

Devising suitable commercial strategies can also help to build on our development cooperation programmes. For example, our businesses can explore possible commercial ventures that can ride on the back of some of the infrastructure that will be created from the Indian government-assisted Kaladan project in western Myanmar or the Kalay-Yargyi road project in the North-West that will enable Moreh on our Manipur border to be connected to Mandalay and beyond by 2016 as part of the India-Myanmar-Thailand trilateral highway project. Similarly, our IT companies could work on commercial spillovers of benefit to both countries from the Myanmar Institute of Information Technology that is being set up with the Indian government support as a centre of excellence in Mandalay. All such commercial proposals will no doubt need host country approvals but if they are well conceived and bring value addition, they would be welcomed.

On its part, our government will also have to try and make the cost of doing business with Myanmar more competitive. Encouraging enhanced direct air connectivity between our metros and Yangon is now rendered easier with a more liberal bilateral air services agreement signed during Prime Minister Manmohan Singh’s visit to Myanmar in May 2012. As of now, there is only a tri-weekly Air India flight from Kolkata to Yangon. It is woefully inadequate. Compare this with airlines from Japan, the Republic of Korea, Qatar and Taiwan which have introduced regular flights to Yangon in the last six months, and airlines from China, Singapore and Thailand now flying more frequently every day and to more destinations in Myanmar.

Shipping, banking & finance

Furthermore, direct shipping services that will enable our goods to reach Myanmar in a matter of a few days, as in fact they did during the colonial days, than several weeks at present, would play a critical role in facilitating greater trade. The Shipping Corporation of India will need to take the initiative here with some initial support from the government to make the services viable.

Banking and finance are other areas. The United Bank of India made a beginning with the opening of a representative office in Yangon in December 2012. More Indian banks need to follow. Making available easy credit finance would provide a big boost. While the U.S. and EU have taken steps to suspend or waive the economic sanctions imposed by them earlier, these have not altogether translated into allowing U.S. Dollar denominated letters of credit to be opened vis-à-vis Myanmar. Our banks need to operationalise these as soon as they become possible.

Finally, our businesses have also to learn how to do business in Myanmar. Businesses from countries like China, Thailand, Korea, Japan and Singapore frequent the country. Many of them have established a strong local presence keeping regular contacts with government ministries in Nay Pyi Taw, the new capital, and networking with the local business people in Yangon, Mandalay and other business centres, all of which form an important part. Trade and industry associations of these countries have also made Myanmar a priority country. It is essential that as our political ties and development cooperation efforts gather momentum, our trade and investment relations also gain further strength so that they get to reinforce one another.

(The writer was the Indian Ambassador to Myanmar from July 2010 to February 2013)