Myanmar India Relations: Trade and Economic Perspectives

Transcription

1 2016 Myanmar India Relations: Trade and Economic Perspectives Shine Zaw Aung September 2016

2 Executive Summary Myanmar and India have a long history of cultural, political and economic linkages. They also share a land border which is over 1,600 km long; this border is India's only land-link with the ASEAN region. Despite these favorable conditions, India Myanmar trade and economic linkages are weak, compared to Myanmar's economic connections with other bordering and regional countries. This paper reviews current trade and economic linkages between Myanmar and India, with proposals for how these linkages can be effectively strengthened. The paper identifies three bottlenecks in economic relations between India and Myanmar: policy challenges, absence of physical linkages, and security challenges. Firstly, economic relations, especially border trade, have suffered from the lack of clear and consistent policy on both sides of the border. High tariffs from the Indian side have also made the country a less attractive market for Myanmar exporters. Secondly, logistical challenges remain, due to inadequate physical linkages. While India is involved in several capital-intensive infrastructure projects in Myanmar, air and sea linkages between the two countries are limited. Only two cities in India have air connections to Myanmar, and the number of Indians visiting Myanmar (and vice versa) remains a fraction of travels to China and Thailand. Thirdly, long-running insurgencies have disrupted bilateral relations. The economic policies of Myanmar and of India cannot be decoupled from politics, strategic views, and security concerns, and are affected by insurgencies in Northeastern India. Work on infrastructure and trade is routinely halted when there are insurgent activities on the border. 2

3 To solve these challenges, the paper proposes two medium-term policies. Firstly, Myanmar and India should shift their linkage focus from land to air and sea. Both countries should emphasize developing the port of Sittwe, on the Bay of Bengal, which is economically as well as strategically important for India due to the nearby Chinese presence at Kyauk Phyu. Secondly, Myanmar should strengthen institutional support for exports and imports. This will entail Myanmar negotiating a preferential trade agreement with India, with the emphasis on agricultural and border trade, and Myanmar seeking assistance from Exim Bank of India in establishing a local export import bank. Myanmar has re-emerged from years of isolation, and its trading linkages with the outside world are still weak. In strengthening these linkages, economic relations with its giant neighbor to the west will be crucial. This paper outlines the current state of relationship, indicating how to improve it, and the benefits to be derived for both sides. 3

4 Author Information Shine Zaw Aung graduated from Stanford University, California, in 2011 with Honors in International Relations. At Stanford, he was a Senior Class Fellow at the Center for International Security and Cooperation (CISAC). Since university, he has worked as a business and economic consultant for multinational companies in the USA, Europe, and South East Asia. He is a cofounder of First Rangoon Corporation, a business consultancy firm that advises local Myanmar companies on accounting and finance procedures. All views expressed in this article are his own and do not reflect the views of Myanmar ISIS or the Ministry of Foreign Affairs. His research paper on Myanmar India Relations: Trade and Economic Perspectives has been published online by the Myanmar Institute of Strategic and International Studies (MISIS) as part of a joint project by MISIS and the Norwegian Institute of International Affairs. It can be accessed through 4

5 Introduction India adopted its Look East" policy in 1992 as an initiative aimed at improving its economic and strategic relations with South East Asia. However, at that time, India's political relations with Myanmar were tense: that same year, India sponsored a UN resolution condemning Myanmar's violations of human rights (Thin Thin Aung &S oe Myint 2001). Since that lowest point, crossborder relations between two countries have slowly improved. In 1994, a bilateral agreement was signed on trading links through two border crossings, Moreh Tamu and Zowkhathar Rhi, and two countries signed a bilateral investment treaty in Trading links have improved substantially: in some years, India has been Myanmar's third biggest trading partner, after China and Thailand. Under India's new Prime Minister Narendra Modi, "Look East" was changed into "Act East" policy. The change was intended to counter China's grand economic proposals concerning the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Simultaneously, Myanmar was undergoing a series of political and economic reforms under President Thein Sein's administration ( ). These reforms provided the country with a commercial window for transforming itself into a trans-shipment hub between India and China, and served as strong motivation for India and Myanmar to improve their bilateral ties. In August 2016, Myanmar s President Htin Kyaw paid a four-day state visit to India, meeting with the President and the Prime Minister of India, and signing four MOUs on bilateral cooperation in road construction, renewable energy, and traditional medicine. In 2013 and 2014, Indian companies such as ONGC Videsh and Reliance won onshore and offshore oil concessions, and in 2016, the State Bank of India was granted a license to operate wholesale banking services in Myanmar. However, Myanmar's reforms have not yetled to any noteworthy strengthening of trade and economic relations. Myanmar today has stronger links with its two other neighbors, Thailand and China through FDI, trade, and tourism than with India. According to the Ministry of Commerce, Myanmar's trade with China in FY2015 was 5

6 US$9.6 billion and with Thailand was $5.7 billion, whereas trade with India was only $1.3 billion. Likewise, India is only the 9th biggest FDI investor in Myanmar representing a mere 1.36% of total FDI in Myanmar (DICA 2016). Number of Projects Amount Invested (USD m) % of total FDI in Myanmar China , Singapore , Hong Kong 107 7, UK 50 3, South Korea 113 3, Thailand 58 3, Malaysia 28 1, The Netherlands India Vietnam Table 1: Ten Biggest FDI investor countries in Myanmar (DICA) That India should play such a secondary role in Myanmar's economy is a curious anomaly, seen in the historical context. In the past, Myanmar had tense relationships with both Thailand and China, culminating in a series of vicious wars as recently as the 18 th century. By contrast, historical and cultural ties between Myanmar and India remained good. During the colonial period, the joint British administration of India and Myanmar led to close legal, commercial, and migration ties between the two countries. Also today, such ties are evident in the popularity of Indian food (street fare likes samosas and naan), music, and movies in Myanmar. Cultural artifacts like the longgyi were imported from India, and shared linguistic bonds still can be observed in common vocabulary used on both sides of the border, such as aloo (potato) and gobi (cabbage). This paper examines why India's commercial relations with Myanmar havelagged behind those of other countries. It also looks into the implications of such a limited relationship with regard 6

7 to India s and Myanmar's stated goals for development and engagement, and puts forward some recommendations for policymakers in both countries on how to improve bilateral trade ties. For this study, the author has drawn on personal interviews with Indian and Myanmar policymakers and businessmen, supported by secondary data from governmental and international bodies. 1 This research underlines three principal and interlinking factors that limit the role of the Indian businesses in Myanmar policy challenges, lack of physical linkages, and security challenges. Policy Challenges in Bilateral Trade Around one quarter of Myanmar's foreign trade is conducted across its borders. However, this is mostly done on the Chinese and Thai borders border trade with India accounts for less than one percent of Myanmar s total border trade. There are six official border trade posts between Myanmar and Thailand, and five trade posts between Myanmar and China, but only two trade posts connecting India and Myanmar. Difficult geography is part of the reason: in Chin and Sagaing, two Myanmar states which border on India, road network density is one-third of average elsewhere in Myanmar. Unlike Thai and Chinese border trade, the border trade with India was until recently largely dependent upon a barter trading system, whereby traders would exchange goods worth less than US$20,000 ranging from beans and beans to forest products. These barter transactions were not captured in the banking or statistical systems. 1 The interview breakdown is as follows: one Indian policymaker, one Myanmar policymaker, four Indian businessmen in Yangon, two Singaporean/Indian businessmen, and two Myanmar businessmen who have worked with Indian businesses. Three of the business interviewees were in the banking sector; the others were involved in general trading. 7

8 In November 2015, the Reserve Bank of India, in consultation with the Government of India, announced a policy reversal and suspended the barter system which had been in place since 1997 (Reserve Bank of India 2015). In part, this policy change is intended to anticipate the opening of the Myanmar India portion of the Asian Highway project. In practice, however, the policy shift has paralyzed trading between two countries. In the first month following the ban, trade reached only 70% of normal levels, and in the second month, only 35% (Chan Mya Htwe 2016).Border traders are unfamiliar with the new system, and trade has suffered consequently. Barter trade disruption is the latest in a series of setbacks for Myanmar India trade in recent years. Although trade with India increased from US$949 million in to over US$1.3 billion in , trade with India as a percentage of Myanmar's total trade with the world has been declining. As Myanmar opens up economically, new companies and new countries have entered the country, and India s share of Myanmar s foreign trade has declined from 7.3% in to 4.6% in In USD m (April Dec) Total Trade 1, , , Non-Border Trade 1, , , Border Trade % of Myanmar's Total Foreign Trade 7.3% 6.6% 4.6% 4.8% Table 2: Trade between Myanmar and India Trade with India has also suffered from another policy change on the part of Myanmar. In the early 2010s, India was Myanmar s most important trading partner for forestry products, taking around half of Myanmar exports of wood and articles of wood. However, most forestry products imported by India were logs, used primarily in the construction industry. Due to 8

9 deforestation and illegal logging, Myanmar instituted a progressive ban on log exports starting in April As a consequence of the ban, timber exports declined from US$564 million in to US$13 million in , and trade between India and Myanmar decreased sharply (Table 2). Indian buyers started looking for alternatives in African and Latin American hardwoods, as well as substitutes from Cambodia and Papua New Guinea. Although the export ban was necessary for environmental preservation, the market share of Myanmar wood products in India is expected to diminish significantly. 2 On the other hand, if the export ban is relaxed in the coming years, it might be possible for Indian importers to comply with new Myanmar environmental regulations and continue trade. Myanmar also needs to align its wood products with demands from the Indian side. According to a timber industry expert interviewed, although Burmese teak has very few competitors in sizes and quality, rigid norms for sawn-size exports by Myanmar authorities are keeping potential buyers away. Moreover, due to delays in shipping and cross-border trade (see below), the investment cycle on Myanmar wood is at least six months for any timber product (from the day of log purchase until the final processed product is shipped). Furthermore, if any company intends to invest in huge volumes, then the cycle is nothing less than 12 to 18 months. 3 Apart from this recent ban on logs, Myanmar's export mix to India has remained largely unchanged in the last decade. Myanmar exports only one major item besides wood products: beans/pulses. Around three-quarters of Myanmar's beans/pulses exports go to India:860,000 tons in A major competitor to Burmese ironwood (pyinkado) is Cambodian ironwood. Cambodian ironwood, in rough squares, is currently exported via Vietnam, and most of it is illegally extracted. However, the CIF price for the Cambodian ironwood at South Indian ports is US$1,200 significantly cheaper than the CIF price of Burmese ironwood (US$1,800 US$2,000). 3 Interview with the author, a timber industry expert, quoted on condition of anonymity. 9

10 Export potential here has been hindered by Indian tariff policy. For beans and pulses, import duties average 19.1%. For many other products too, tariffs make Indian markets less attractive than other comparable economies. For instance, Indian demand for rubber has grown dramatically, with an annual growth in value of 33% between 2009 and 2013 but Myanmar does not export rubber to India, because of the high tariffs. For Myanmar businesses, India is not an attractive market for rubber: it has a 10% tariff rate, compared to 6.6% in China, and 0% in Japan (National Export Strategy). In some areas, policy challenges overlap with lack of physical linkages, discussed in the next section. Both India and Myanmar score low on cross-bordertrade due to the cost and time required, coupled with heavy regulatory requirements in customs clearance (Table 3). Compared to neighboring countries, conducting trade across Myanmar and Indian borders takes two to three times longer, due to difficult terrain and lack of support infrastructure, according to the World Bank s Ease of Trading Across Borders indicators. To solve the policy-related challenges, Myanmar and Indian authorities need to coordinate their efforts on trade and tariffs and also on alignment of product mixes. Due to India s tense relationship with Myanmar s past governments (and its hospitality to Myanmar dissidents and exiles), the two countries did not have high-level state visits or dialogues between 1987 and Only recently have the two countries resumed state visits. The meetings between the President of Myanmar and his Indian counterparts as well as between Prime Minister Modi and Myanmar s State Counsellor Aung San Suu Kyi on the sidelines of the ASEAN Summit in Vientiane in September 2016 are welcome developments. As next steps, Myanmar and India should negotiate a bilateral trade agreement, focusing on agriculture and forestry exports from Myanmar, as well as pharmaceutical and machinery imports from India. The authorities should also pay attention to better alignment between Myanmar exports and Indian demand, as noted in the teak example above. India s Exim Bank is already present in Yangon and can play an important role in matching supply and demand. Currently, however, 10

11 the bank s activities are not well-known in Burmese business community and the bank itself has problems relying on local Myanmar banks as counterparties for letters of credits, according to local Burmese and Indian businessmen interviewed for this report. Trading Across Borders Exports Imports Rank out Cost of Cost of Cost of Border Cost of Border of 189 Documentary Documentary Compliance Compliance countries Compliance Compliance hours USD hours USD hours USD hours USD Myanmar India Thailand China Vietnam Table 3: Ease of trading across borders (World Bank Ease of Doing Business) Lack of Physical Linkages As part of "Act East" policy, India plans to leverage Myanmar's location between thriving economies of China, India, and ASEAN. An ambitious venture that India is undertaking in Myanmar is the Kaladan Multimodal Transit Project, which will upgrade the port in Sittwe for use as a link between the Indian port of Calcutta and the northeastern states of India, eventually even as an alternative route to Bhutan and Nepal. Along the border, two new trade posts at Palatwa and Myeik Wa are planned to assist this transit project. Strategically, Sittwe is equally important to India, due to its close proximity to the China-led multi-billion-dollar special economic zone at Kyauk Phyu. India has opened a consulate in Sittwe to keep an eye on Chinese activities at Kyauk Phyu, according to a Myanmar diplomat interviewed. 11

12 Map: Important towns along India Myanmar border (Author s Own version via Google Maps) Another priority for India is the trilateral India Myanmar Thailand (IMT) highway, which has been developed as part of Asian Highways project. However, there have been delays, mainly because of the challenging terrain between India and Myanmar, and the short working season in those areas due to weather conditions. However, for India, "Act East" and connectivity to ASEAN means looking beyond the IMT and access to Myanmar and Thailand. It plans to access the economies of Laos, Cambodia, and Vietnam through the land route. 4 4 SushmaSwaraj, Minister of External Affairs of India, quoted in Oxford Business Group (2016, p. 23). 12

13 Despite these efforts to link the two countries by land and sea, connections with India have been almost an afterthought for Myanmar and for its international development partners. For Special Economic Zones (SEZ), they look to China, with three decades of successful implementation (World Bank Group 2016, p. 44); and Indian companies are altogether absent from the SEZs. Myanmar itself has been looking eastwards, focusing resources more on economic corridors with its eastern ASEAN neighbors (Asian Development Bank 2014, p. 160). For trade and investment relations between Myanmar and India to flourish, physical and transportation linkages between the two must be improved. Myanmar only has two diplomatic representations in India the embassy in New Delhi and a consulate in Calcutta. A Myanmar diplomat interviewed for this study noted how Indian businesses interested in Myanmar need to go from Mumbai, Chennai, and elsewhere to the Delhi embassy for visas and accreditation documents. 5 Similarly, air linkages are sparse between two countries. Apart from the flight between Gaya and Yangon mainly dedicated to pilgrims' travel, only one other Indian city (Calcutta) is connected by air to Myanmar. In comparison, seven air routes link China and Myanmar, and there are five air routes between Myanmar and Bangkok. Nearly 800 seats flew daily between China and Myanmar in 2015, compared to 150 between India and Myanmar. Although citizens of all three countries can obtain visas on arrival, the number of Indians visiting Myanmar remains a fraction of the Chinese and the Thais visiting Myanmar. In 2015, fewer than 35,000 Indians visited Myanmar, compared to 200,000 Thais and 150,000 Chinese. In terms of visitor numbers, India is also behind European countries like the UK, France, and Germany. 5 Interview with U Ba, former Myanmar secretary at New Delhi embassy. In comparison, Myanmar maintains three representations in China an embassy in Beijing, and consulates in Kunming and Nanning. 13

14 Thailand 61,696 94, , , ,539 China 62,018 70,805 90, , ,977 Singapore 15,391 26,296 39,140 47,692 45,125 Malaysia 23,287 30,499 39,758 46,534 40,852 India 12,318 16,868 21,042 32,306 34,628 Japan 21,321 47,690 68,761 83,434 90,312 Table 4: Visitors from selected Asian countries to Myanmar (MOHT,2016) Strong personal tiesexist between India and Myanmar, akin to the guanxi connections Chinese businesses enjoy in Myanmar. The numbers of Indians and Chinese living in Myanmar under the Foreigner's Registration Act are comparable: in 2014, there were 23,812 Chinese and 23,903 Indians registered under the Act (Ministry of National Planning and Economic Development 2015, p. 21); moreover, there are nearly 150,000 persons of Indian descent in the Bago, Tanintharyi, and Mon regions of Myanmar. 6 However, as noted above, Indians do not travel as much as the Chinese to Myanmar; also visits from Myanmar to India are few in number. The numbers of Myanmar nationals visiting India and China were approximately the same in 2009, but since then, increased connectivity with China has led to more local Myanmar citizens to visit the People's Republic Thailand 136, , , , ,729 Singapore 114, , , , ,824 Malaysia 57,545 67,635 87,189 97, ,679 China 17,607 19,654 26,424 30,875 36,696 India 14,343 22,612 19,838 24,093 27,316 Table 5: Myanmar visitors to selected Asian countries(moht,2016) 6 Information from Embassy of India, Yangon, Myanmar. 14

15 Sushma Swaraj, India's Minister of External Affairs, has pledged to prioritize better air connectivity. 7 Air linkages between New Delhi, Mumbai, and Yangon are desired by Indian businessmen in Myanmar, as well as more frequent Calcutta Yangon flights. According to an Indian businessman interviewed for this study, such an increased connection is the demand most frequently voiced by the Indian business community in Myanmar whenever an Indian policymaker visits Myanmar. 8 Sea and shipping links between India and Myanmar are also weak. After the turn of the century, Indian shipping companies stopped their services to Myanmar due to lack of passengers and freight. Direct shipping services between India and Myanmar today are rare. Trade between India and Myanmar goes through transshipment in Singapore and the Switch Bill of Lading System (also based in Singapore). Direct shipping services between India and Myanmar is essential for better trade relationships between two. Even the proposed Kaladan project in Sittwe will have a limited impact on improving sea linkages, as Sittwe port is located in a place where only smaller vessels can access it. Security Challenges The governments of Myanmar and Indian wish to improve the physical linkages between their countries. One of the MOUs signed during President Htin Kyaw s visit to India in August 2016 concerned 69 bridges on the Tamu Kalewa Road. Construction is currently underway, with materials and machinery to be transported from the Indian border. However, that route will take at least a decade to develop, as India s national highways in Manipur and Assam are regularly disrupted by strikes, blockades and insurgencies (see Times of India 2016). Insurgency and counter insurgency measures pose challenges to improving road 7 SushmaSwaraj, Minister of External Affairs of India, quoted in Oxford Business Group (2016, p. 23). 8 Interview with Vijay Dhayal, Vice President, New Crossroads Asia. 15

16 and trade conditions between Myanmar and India. The India Myanmar border trade post at Moreh Tamu is routinely closed when there are insurgent activities along the border. There are two aspects to security challenges: (1) the presence of insurgent groups that are on both sides of the India Myanmar border, and (2) the role of China. Insurgency in Northeast India has been a problem since the 1960s; rebel groups fighting for their own independent homelands live on both sides of the border. In recent years, these insurgencies have been strengthened, with rebels from Nagaland and Manipur forming a coalition to renew the attack against the Indian army (BBC News 2015). Dealing with the insurgencies hasnot been easy, due to the difficult terrain and dense forests in the area. On the Indian side, there are worries that insurgent groups, especially the National Socialist Council of Nagaland (Khaplang), known by the acronym of NSCN(K), enjoy good relations with Myanmar (Mohapatra2015). Although Myanmar has helped India with some counterinsurgency measures against NSCN(K) in the past, the focus today is more on its own insurgency groups in Kachin and Shan states. With Myanmar's new government aiming for an inclusive nationwide ceasefire agreement, there is also reluctance to entering into newer conflicts with insurgency movements on the western border. Also on the Myanmar side there are security worries related to migration and immigration. As both sides of the border are relatively poor, and the border is porous, there has been certain cross-border sharing of social services and resources. For instance, children from the Myanmar side cross the border every day to attend school on the Indian side (Fernandes 2015, p. 46).The Indian Army crosses the border routinely, most recently in June 2015, in pursuit of insurgent groups. With increased road connectivity, Myanmar fears that such unregulated inflows and outflows may proliferatein the future 9. Such security concerns also limit tourism and travel across the India Myanmar border: whereas tourists areallowed to cross the China Myanmar and Thai Myanmar borders, India Myanmar border crossings require permits and 9 Interview with U Ba. 16

17 authorizations, in addition to visas. This aspect also limits the two countries' exposure to each other. Another shared concern is China simultaneously a partner for trade, and catalyst for instability. India and Myanmar view China as an important trading partner; however, they both suspect China of enjoying cordial relationships with border insurgency groups, at times supplying them with arms and materiel. Some of the insurgent groups have ideological leanings towards Beijing, and China has been accused by Indian commentators of using these groups for espionage. (See The Diplomat 2015.) These mutual suspicions have hindered cross-border relations in Myanmar's north, an area once referred to as "the New Crossroads of Asia" (Myint-U2012). A central element of this cross-border connectivity is the Stilwell (or Ledo) Road, connecting Ledo in Assam, India, to Kunming in Yunnan, China, via northern Myanmar. The states and peoples ofnortheastern India, northern Myanmar, and southern China are underdeveloped by the standards of their respective nations. They are, in the term coined by historian Willem van Schendel, Zomians highlanders historically beyond the control of governments that are located in the more populous lowland areas. Developing these regions is an important 21 st -century challenge for all three nations but that will be no easy task. In Zomia, political, economic, and strategic issues are intertwined. Infrastructure and economic developments are hindered by security concerns. Only when there were existential challenges, as during World War Two, were these areas emphasized for development. Back then, the Stilwell Road was developed to liberate what was then British Burma from Japanese forces, and later to supply the Kuomintang Army in China. After the war, the road was not maintained, and, because of the above-mentioned insurgencies, eventually closed. Subsequent monsoon rains and landslides have washed away most of the road and its bridges. 17

18 Re-opening the Stilwell Road could reduce transportation costs between northeastern India and China s Yunnan province by 30%, providing lower-priced goods for a large market of low-end consumers (Konwar 2014). Unlike India, China has acted quickly in re-establishing road linkages with Myanmar, which is a contributing factor in the thriving China Myanmar trade. China has helped Myanmar restore the Stilwell/Ledo Road from Kunming to Myitkyina in Myanmar's Kachin state. In recent years, the Chinese media have also routinely urged the three countries to establish a joint dialogue mechanism to restore the road. Logistically and economically, the road makes sense. In early 2016, Myanmar formalized reexport processes for a limited number of goods and consumables. For instance, sugar from India is re-exported via Myanmar into Yunnan province. However, currently these Indian commodity re-exports are unloaded in the already congested ports of Yangon, to be transferred to trucks headed for the Chinese border. By comparison, commodities imported from Thailand travel via land across Myanmar's Shan state into Yunnan province reducing both cost and time. Moreover, for India to truly look and act east, the Stilwell Road offers opportunities. 18

19 Policy Recommendations The current physical linkages and trade and economic policies of Myanmar and India represent obstacles to any rapid improvement in bilateral trade and economic relations. This paper has identified three areas of challenges; their solutions are intertwined. Regarding policy options that could be implemented over the coming years, there are two realignments in infrastructure and institutional priorities that could yield significant results. 1. Myanmar India trade relations should shift from land to air and sea India has recently announced plans to develop Chabahar Port in Iran, to compete with a nearby China-backed port in Pakistan. Indeed, India has pledged to invest $500 million for Chabahar port, plus $16 billion investment in Chabahar free trade zone. This example indicates that Indian government is open to investing in strategically important assets. Myanmar has such an asset in Sittwe, a port city close to the Chinese-backed special economic zone at Kyauk Phyu. Two governments should put emphasis on developing Sittwe. During President Htin Kyaw s visit to India, the two countries agreed that the completed facilities at Sittwe should be operational by December Logistics, processing, and manufacturing facilities can be sited at Sittwe to serve bilateral trade. While India and Myanmar share a longand historically important border, road and rail linkages across this border will take years to materialize and even longer to flourish. In interview discussions conducted for this study, policymakers and businessmen put the emphasis instead on air and sea linkages, for better connectivity and frequency of connections. This desire also is shared by the Indian Ministry of External Affairs. Prioritizing air and sea linkages would have the added advantage of bypassing concerns about border security felt by both sides. Thus, we underline air and sea linkages as a priority area of cooperation for two governments, with Sittwe as the centerpiece. 19

20 2. Myanmar should strengthen institutional support for exports and imports Myanmar's economic future lies with its location at the crossroads of China, India, and ASEAN, and its economic growth will come from its trading links with the neighbors. With the exception of India, Myanmar enjoys preferential trade arrangements with these neighboring markets (Ministry of Commerce 2015, p. 63). While India and Myanmar are linked by an ASEAN India trade agreement, a more specific arrangement covering agricultural exports should be negotiated in the coming years. In 2003, ASEAN and India signed a Framework Agreement on Comprehensive Economic Cooperation, with the goal of establishing an ASEAN India Regional Trade and Investment Area (RTIA). However, talks on this project have been delayed. Myanmar should initiate a preferential trade agreement with India, focusing on agricultural and forestry products, including border trade. The Myanmar Ministry of Commerce can engage in formal discussions with the Indian Embassy in Myanmar, Indian Mission to WTO in Geneva, and the Indian Ministry of Trade in New Delhi, with the goal of a preferential trade agreement to be signed in two years' time. Such an agreement would be advantageous for Myanmar s producers of beans and of rubber, as well as for Indian customers. Beyond ministerial promotion via trade agreements, Myanmar should explore creating an Export Import Bank. India has been a partner for Myanmar in various developmental training projects, including industrial, IT and language training centers. As such, India would be a suitable partner for Myanmar in developing an Exim Bank, not least because the Indian government-supported Exim Bank of India is already present in Myanmar, and is supporting the government of Myanmar with several projects. 10 Exim India and Myanmar could cooperate in 10 By cooperating with Exim Bank of India, Myanmar side can learn valuable export Import policy and support expertise, while Exim Bank of India can raise its profile in Myanmar. Many local company representatives interviewed for this study were not aware of Exim Bank of India's credit lines for local companies importing from India. 20

21 drafting a feasibility study on establishing a Myanmar Exim bank one of the policy recommendations outlined in the Myanmar National Export Policy Plan for (Ministry of Commerce 2015). Conclusions This paper has explored varying aspects of Myanmar and India's trade relations. Two countries' trade and economic relations are intertwined with politics. In the past, vastly different political systems in India and Myanmar served to limit economic cooperation and high-level dialogue between the two countries. India's new Act East policy and Myanmar's recent economic opening are main focal points in developing the two countries' economic relations, but physical, policy and security concerns remain and still hinder bilateral cooperation. Myanmar is in the early years of its political economic transformation. After years of isolation, the country must rely heavily on foreign investment, trade, and expertise to drive growth. Economic linkages with its eastern neighbors, China and Thailand, remained robust even during the years of isolation. Now, it is time for Myanmar to forge similar linkages with India. Thanks to its historical and cultural ties with India, Myanmar now has an excellent window of opportunity to learn from and grow with its dynamic neighbor to the west. 21

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