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24 May 2012, Gateway House

Myanmar: Liberalization benefits for India

As Myanmar’s economy opens up, neighbouring India is provided with an opportunity to enhance bilateral ties. Gateway House’s Hari Seshasayee interviews South Asia expert Sudeep Chakravarti to discuss the changes sweeping Myanmar and its significance for the region.

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After a 25-year hiatus, India’s Prime Minister will make a visit to Myanmar. The opening up of the economy and the on-going process of democratization are significant, especially for India’s North East. Can India leverage this opportunity to foster a more holistic relationship with Myanmar? Gateway House’s Hari Seshasayee interviews Sudeep Chakravarti, author and an expert on South Asia, to discuss the dynamic changes in Myanmar and its significance for the region.

Q: Last month, after Aung Sung Suu Kyi’s party won the by-elections, the EU and ASEAN (a total of 36 countries) lifted sanctions against Myanmar. How will this affect commerce in the country? And what does it mean for India’s North East?

An increase in foreign investments and the unshackling of Myanmar’s domestic economy will have a trickle-down effect. The positive effects will first be felt in the delta region (lower Myanmar, around the Yangon district) since it is more accessible. It will then slowly move up to Mandalay, then the other commercial hubs.

For it to move all the way up to Chin and other areas bordering Mizoram, Nagaland and Arunachal Pradesh, will take time. Those are the relatively less-developed parts of Myanmar.

Like any country’s liberalization process, its effects will be felt on neighbouring countries. For example, when India went through its liberalization in the 1990’s, neighbouring Bangladesh was looking at India and taking lessons from that process.

How do you see this process building-up in Myanmar? Who stands to gain from it?

As the economy grows, people will become more opportunity-oriented, and these aspirations will typically lead to more prosperity. If Myanmar prospers, activity along the border is likely to increase. In this sense, everybody gains.

The evidence is already there: if you go to the border towns in Myanmar now, look at the products. The food items, juices and soft drinks are all made in India; Coca-Cola is bottled in Meghalaya; Dabur juice packs are packaged by an Indian company in Nepal; Bajaj motorcycles can be found in the border areas; pharmaceutical products made in India are available in Myanmar.

These existing exchanges will now expand. Once people have greater purchasing power, they will look for the nearest and most convenient source.

Which states and sectors will this be channelized into?

Different parts of the country will garner different benefits. In the immediate border areas, the direct benefits will stem from the availability of goods and services. It could be food processing, power, textiles, grains, raw cotton, or even electronics.

The North East is abundant with fruits of the highest quality – oranges, pineapples, pears. All the states have a large capacity to generate power. Mizoram, Tripura, Nagaland and Manipur all have the advantage of having Myanmar on one side, Bangladesh on the other and even Bhutan to the north.

Does this present India with a larger opportunity? More than just a bilateral development?  

The opportunity is three-fold: first is to better the India-Myanmar bilateral, then increase trade and investments. The final step is better connectivity, which will allow for a free flow of goods and services, and more importantly, people.

The singular movement between the ports and the transportation hubs of the region, which Gateway House suggested in its paper, can be most beneficial. Both countries can then include businesses in their talks, knock off items from the negative trading list, add preferential duties on other goods. Several layers of contact will need to be addressed: waterways, shipping, ports, surface transport.

Look at India and Nepal for example. Numerous goods from Nepal have zero duty, because of the preferential trade benefits both countries offer each other.

Why can’t South-Asia, for instance, with Bangladesh, Bhutan, Nepal, Myanmar and Eastern India be the gigantic economic hub in the region?

Given the recent positive developments with our neighbours, isn’t this the most opportune time we have had for such a mass regional integration?

It is. And it will get increasingly more opportune as we leverage the positive aspects. But the insurgencies must also stop. You cannot speak about regional integration without first addressing domestic integration. Peace and security in the region is a must for leveraging on these recent bilateral developments.

You may have new laws, border trade posts, increasing investments, but for real economic prosperity, you require stability.

We have new transit ways now, but where does the road run? One comes from Myanmar to Mizoram, and then goes nowhere. If you only have Mizoram-Myanmar trade, then we will be trading in pineapples, sugarcane, radish, small-time arms and ammunition, and pigs.

A more holistic trade relationship must be fostered, where goods from all parts of India flow to the North East and are then traded with Myanmar, Bangladesh or Bhutan.

The India-Bangladesh bilateral too has seen some movement in the recent past: border trade has expanded; joint infrastructure projects are underway; trade restrictions have eased. Can this change the dynamic with bordering Indian states?

The agreements and projects alone will not bring about change. Rather, they act as building blocks that contribute to the bilateral. Such diplomatic endeavours can better or deter the relationship, but not transform it. That transformation is complex, especially when there is such rapid movement of people between the border areas.

In terms of commerce, trade and livelihood, there will be some progress. Within the immediate vicinity of the borders, say 250 kms along either side, the localized economy will thrive. That will be the immediate effect. It may also reduce tensions around the border, and help abate smuggling and informal or illegal trade.

But this will not prevent issues like rampant human trafficking, or even the cross-border movement of rebel groups with complete impunity. That’s a completely different dynamic.

Sudeep Chakravarti is an author, analyst and journalist. His latest work of narrative non-fiction ‘Highway 39: Journeys through a Fractured Land’ is set in the conflict zones of Nagaland and Manipur in India’s far east, as part of its 4th Estate imprint.

Hari Seshasayee is Researcher, Latin American Studies Programme, at Gateway House: Indian Council on Global Relations. 

This interview was exclusively conducted for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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