India, Myanmar Eye Expanded Border Trade

On February 20, one of India’s top officials told an ASEAN-India forum that New Delhi is looking to move forward on plans to set up nine local markets along its border with Myanmar in a bid to facilitate bilateral trade.

Speaking at the eighth iteration of the Delhi Dialogue – a premier event to discuss engagement between ASEAN and India – Anil Wadhwa, the secretary in the Ministry of External Affairs, said that India was moving forward on increasing trade with Myanmar with which it shares a long 1,643 kilometer land border.

Wadhwa’s comments come as Indian Prime Minister Narendra Modi tries to advance his “Act East” policy – a more action-oriented variation on the “Look East” policy first formulated under then premier Narasimha Rao in the 1990s, which sought to strengthen relationships with ASEAN specifically and East Asia more generally. Advancing economic ties with Myanmar is seen as a key litmus test for the policy because although Myanmar is the only ASEAN country that shares a physical land border with India, Indian officials and scholars have long acknowledged that bilateral trade has remained far below its potential.

The border trade is a critical and growing part of the Indo-Myanmar economic relationship. While border trade in goods between India and Myanmar has a long history, both sides began formalizing and expanding it in the 1990s, including by opening several border trading points and expanding the list of tradeable items between them. Partly as a result of these efforts, official border trade has risen in recent years, climbing from $15.41 million in 2005 to $48.63 million in 2014 according to Myanmar’s commerce ministry. (With smuggling, informal trade is estimated to far outstrip the official number.)

Both sides have been looking to boost these figures even further over the past few years, and the proposed establishment of haats – rural markets aimed at facilitating trade in locally produced goods – has been floated as part of this effort. Indeed, this effort predates Modi. The two countries signed a key memorandum of understanding back in 2012 on the border trade. That MoU, along with other related proposals, looked to expand the border trade including through the setting up of nine border haats. The first meeting of the resulting India-Myanmar Border Trade Committee was held in Moreh (Manipur) later that year. New Delhi and Naypyidaw have also been looking to open a third border point at Avakhung-Pansat/Somra, in addition to the two operational points that already exist: Moreh-Tamu in Manipur and Zowkhatar-Rhi in Mizoram. Yet as with many other proposals in ASEAN-India relations, some of these ideas have been lacking in follow-through.

Last week, Wadhwa sought to reassure observers that New Delhi was in fact making progress on some of these initiatives. He said that the two sides were still keen on setting up the nine border haats in Arunachal Pradesh, Nagaland, Manipur and Mizoram. He also added that the border point at Moreh-Tamu was being upgraded from a land customs station into an integrated check post. Wadhwa also noted that progress was being made on larger infrastructure projects undertaken by India and other ASEAN neighbors that could also further expand border trade, including the India-Myanmar-Thailand Trilateral Highway and the Kaladan Multimodal Project.

While these are no doubt encouraging signs, seasoned observers know that when it comes to the border trade, the devil is ultimately in the details, which were lacking in some of Wadhwa’s comments. For instance, while he argued that progress was being made on the border haats, he was vague on where exactly officials are in the process. In reality, both sides have been discussing the so-called Mode of Operation detailing how the haats would operate since the first meeting of the Joint Committee on Border Haats in October 2012. Yet as of the end of 2015, more than three years later, the operating procedure to allow trade to actually take place had not been finalized.

More broadly, technical concerns continue to plague the border trade between the two countries even as they try to boost ties. For example, India effectively imposed a ban on the bartering of certain local goods along the border in December last year after New Delhi concluded that adequate banking systems existed on both sides of the border, making trade by barter not necessary. Reports early this year, however, suggest that the infrastructure had in fact not been put in place, and the ban effectively shut down border trade. The Myanmar Times reported in late January that with banks not yet issuing letters of credit and dealers still not trusting each other to engage in cash transactions, bilateral trade had reached only around a third of its target last month.

These obstacles are too familiar to those who have analyzed and worked on India-Myanmar relations through the years. And though removing them may be fraught with difficulty, doing so is essential to realize the full promise of bilateral economic ties. In a detailed report on the subject commissioned by the Indian government and released in 2014, India’s former ambassador to Myanmar V.S. Seshadri argued that steps like boosting and regulating the border trade would transform the “connectivity corridors” between the two countries into “development corridors.” At least for now, New Delhi still appears to be quite far from making that vision a reality, despite what its officials suggest publicly.