Looking east, companies finally spy Myanmar

Indian corporates are only now waking up to the potential of their nearest neighbour

The strategically-located Myanmar, which shares its boundary with China, Thailand, Laos, and Bangladesh, could well become India's gateway to the Association of Southeast Asian Nations (ASEAN). Having woken up to this realisation, several Indian companies are lining up to enter the country and make their presence felt in every segment of its economy.

The wakeup call has, however, come a little late in the day. China has already gained a strong foothold in Myanmar's economy and has been exploring the vast reserves of its natural resources.

Out of Myanmar's total trade of over $18 billion, India accounted for only about 7.5 per cent in 2011-12 - falling short of China, Singapore, Thailand and Japan in terms of export to Myanmar. Though the export of Indian goods has witnessed a robust growth in recent years, "an analysis of India's share vis-à-vis Myanmar's global imports shows that there is tremendous scope to boost this," says D S Rawat, secretary general of Assocham.

India-Myanmar bilateral trade expanded significantly from $12.4 million in 1980-81 to $1,070.88 million in 2010-11. India's exports stand at $334.4 million, while it imports goods worth over $1 billion from Myanmar. The main exports to Myanmar are pharma products, iron and steel, and electrical machinery and equipment. India imports large amounts of vegetables and wood from Myanmar. (See box for other investors)

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Myanmar's has been a history of ups and downs. Though the economy of Myanmar (then Burma) grew under the British rule, power and wealth remained in the hands of the British and Anglo-Burmese migrants from India. After its independence, the initial years from 1948 to 1962 were marked by insurgency. Thereafter, in 1962, following a coup, the country came under military rule. It was only in 2010, after several tumultuous years, that the military regime officially retired following the first general election in the country in decades. It was time to pursue reforms. Today, with the country poised for greater participation in the global community, India has an opportunity at hand.

India's investment in Myanmar currently stands at around $273.5 million. It is expected to soar to $2.6 billion over the next few years. Indian companies which now have presence in Myanmar include ONGC Videsh Limited (OVL), Jubilant Oil and Gas and CenturyPly.

Recently, during his visit to the country, commerce and industry minister Anand Sharma announced the establishment of India-Myanmar Joint Trade Committee which will be co-chaired by Bharti Enterprises' Sunil Bharti Mittal. The committee met for the first time on June 7. This was another step towards bettering trade relations with Myanmar. "Myanmar represents a bridge between the vibrant economies of India, ASEAN and East Asia through the northeastern states and offers huge scope for Indian companies to invest across diverse sectors, particularly in energy, forestry and minerals," says Sanjay Kirloskar, chairman, CII ASEAN / ANZ Regional Committee and chairman & managing director, Kirloskar Brothers.

In the oil and gas sector, the government of Myanmar has shortlisted 59 companies which will submit final bids for 18 onshore gas blocks. Seven Indian companies, including ONGC-OVL, Jubilant and Cairn Energy, have qualified for the second round of bidding. OVL and GAIL have already announced a $1.33-billion investment plan in the China-Myanmar gas pipeline project. (Top 10 product categories India Export / Imports from Myanmar)

The construction of two parallel pipelines for oil and gas has been awarded to Punj Lloyd. This involves an investment of $475 million to build the 200-km Kyaukphyu-Kunming oil and gas pipeline. Jubilant Energy India has also won the government's contract which is worth $73 million for exploring an onshore block in central Myanmar.

India has also urged the Myanmar government to revive discussions on the gas pipeline between the two countries which runs through Bangladesh. For this, India has recommended the name of Essar Ltd. As part of the initiatives to facilitate border trade, India has also entered into a Free Trade Agreement with Myanmar by Land Route.

The Confederation of Indian Industry (CII) has recommended that border trade and investment facilitation as well as cooperation in services and technology transfer must be addressed for greater economic linkages with Myanmar. The two countries should conclude an agreement on cooperation in banking and financial services to enable greater private sector engagement, suggested CII in a report. In a study, the trade body said that Indian businesses are still not aware of Myanmar's potential. Hence, better communication between the trading partners is critical.

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To create better connectivity, India's SpiceJet has asked for operating rights for flying to Yangon from Delhi through Dhaka (Bangladesh). And, the Shipping Corporation of India has conducted a feasibility study to start a liner service between the two countries. Apart from this, India is involved in infrastructure development at Myanmar. Inland waterways and the upgradation of the strategic Sittwe Port are among the projects which Indian companies have taken up.

Myanmar is rich in agricultural, marine and forest wealth. Large deposits of metals, minerals and precious stones form an important part of its export basket. Its gas reserves which are estimated at 2.54 trillion cubic meters promise the much-needed foreign exchange for the growing economy. India can target the development of these areas to meet its import needs.

In April 2008, India and Myanmar signed the Double Taxation Avoidance Agreement which enables the nations to prevent tax evasion and also ensure that business profits are taxed only in the country where the company has a permanent establishment. This was done to attract greater foreign direct investment (FDI) between the countries.

However, the challenges which the banking sector faces need to be looked into if trade and investments are improve. Indian banks have expressed interest in opening branches in Myanmar. United Bank of India has set up a representative office in the country which, it is expected, will soon be granted permission to open full-fledged banking services. Two other public sector banks - Bank of India and State Bank of India - may also be permitted to operate in Myanmar.

The signs are promising.