PA G E 1 0

CHINA DAILY

ASIA WEEKLY

AUGUST 30-SEPTEMBER 5, 2013

RegionalNews

Indian companies playing catch-up

CONSIDERED SOUTHEAST ASIAS FINAL FRONTIER, MYANMAR IS ATTRACTING MAJOR INVESTMENT FROM ITS NEIGHBOR TO THE WEST
By INDRAJIT BASU in Kolkata For China Daily Asia Weekly

For many global investors, Myanmar is the nal frontier in Southeast Asia. The opening up in recent years of this Asian economy has triggered a rush of foreign investments, latching on to the growing opportunities of this untapped market. Many Indian companies have joined the bandwagon to invest in the strategically located nation, as the Indian government revives old connections and focuses on strengthening ties with its neighboring market. The wake-up call for India may have come somewhat late. After all, China, Japan, Thailand and even Singapore had previously made inroads exploring the countrys vast opportunities. However, with a slew of investments announced recently, India seems to be making up for lost time. Indian investments, currently at around $273.5 million, are expected to soar to around $2.6 billion by 2015, while India is seeking to increase the trade volume with Myanmar from $1.9 billion in 2012 to $3 billion by 2015. From a presence of just a handful of companies a few years back, almost two dozen Indian companies have since opened shop in the once military-ruled country, which include marquee names like the Tata Group, Ranbaxy Laboratories, Jubilant Energy, Escorts Group, and even Indian public sector behemoths like ONGC (Oil and Natural Gas Corporation) and GAIL (Gas Authority of India Limited). Sonal Tyagi, regional manager for Southeast Asia with Indian engineering company, Escorts Group, says that Myanmars transition to democracy opens a wealth of business possibilities. I think the greatest opportunity lies in the fact that it throws open a big market for Indian products. With Myanmar and Cambodia considered to be the two most lucrative markets remaining in the region, Tyagi says, investing in either country not only opens up a huge market, but theoretically Myanmar could also be a gateway to ASEAN (Association of Southeast Asian Nations) for India.

Escorts Group claims it was one of the rst Indian companies to realize the strategic importance of establishing operations with Myanmar when it started investing in 2008, almost two years before the country opted for democracy and began to open up. According to the group, besides being one of the largest marketers of India-made agricultural machinery in Myanmar, it also assists in running assembly plants of its products. We are helping them in setting up a local industry, says Tyagi. After decades of authoritarianism, Myanmar is indeed at a turning point. Snugly located between China and India, the country has begun to embrace a swift and startling democratic opening up over the last two years.

Sonal Tyagi, regional manager for Southeast Asia, Escorts Group.

Open market

The military junta that instituted a democratically elected government in November 2010 has not only ushered in political and economic reforms, but has also revived a peace process to address ethnic conicts and communal violence. All of which has laid the foundation for a truly open market. The transition has also won diplomatic rewards. Sweeping economic sanctions imposed by the West in the 1990s to contain the military rule have been lifted, reconnecting the country with the international nancial system. Myanmar is enjoying a groundswell of support from the global community that is keen to encourage the country in this transformation. More importantly for investors, Myanmar is also emerging as the most promising market in the region. According to a recent study by McKinsey & Company, while Myanmars economy has remained small only accounting for 0.2 percent of Asias GDP it offers unique opportunities to catch up with the huge progress that Asia has made over the last 25 years. Myanmar is a very unusual case: A large country with a rich history that remains an underdeveloped agrarian economy in the heart of the worlds fastest-growing regional economy perhaps one of the few remaining untapped markets in the world, said the report. Myanmars prospects are promis-

ing for businesses and investors, the report added, thanks to its abundant natural resources and proximity to a market of half a billion people (in China and India). This explains the interest of the Indian companies, says a chief operating officer of an Indian rm claiming to be one of the largest investors in Myanmar, who declined to be named. Besides, the country is hugely underserved and resource rich; very tempting for any resource-hungry country, he adds. For India however, Myanmar is not just an emerging market for exports or gaining access to natural resources. Its liberalization could also uplift the economy of Indias northeastern states that share 900 miles of border with Myanmar. Asma Masood, a research analyst with the Institute of Peace and Conict Studies based in New Delhi, says: As Myanmars economy opens up and grows, the northeast would be the rst to enjoy the benets of that growth. Undoubtedly the strategic importance is immense for India due to the fact that Myanmar is the gateway, or only land bridge, to ASEAN markets. Samik Mukherjee, an economic affairs analyst with the Indian Chamber of Commerce, further emphasizes the advantages for India. Myanmar plays a crucial role in Indias Look East policy, which aims to build stronger bridges of trade and economic cooperation between India and the countries in South and Southeast Asia, he says. According to the chamber, the

AFP

A farmer threshes rice seeds in Naypyidaw, Myanmar. Indian companies are stepping up their investments to take advantage of the business opportunities offered by the countrys recent opening up.

India-ASEAN trade has grown at around 30 percent over the last three years, and ties with Myanmar could open enormous economic opportunities to India, particularly to the eastern and northeastern Indian states. The Indo-Myanmar relationship is already on the upswing. For instance, India is engaged in several river- and land-based programs in Myanmar that include the reconstruction of Sittwe Port, the Kaladan multi-modal transport project, the India-Myanmar gas pipeline, and the India-MyanmarThailand trilateral highway. Nevertheless, as opportunities abound, so do the challenges. For one, while Myanmar has a quasicivilian government in place, the junta still calls the shots and reforms are incomplete. Key concerns of Indian investors include the high risks associated with transparency, corruption, human rights abuses and security.

Facing challenges

Indian investors also worry about the possibility of the ruling party reversing their policies. The Myanmar administration is known to have turned volte-face in the past, says

the chief operating officer who chose to remain anonymous. Besides, investors need more clarity in Myanmars legal environment. Foreign investments laws are still not comprehensively articulated, says Tyagi from Escorts Group. This can have an adverse effect on the manufacturing sector there. Similarly, reforms in the agricultural sector do not include land reforms, which is making investors in Myanmars agro-based industries wary, says Masood from the Institute of Peace and Conict Studies. Another major challenge is the lack of nancial infrastructure and banking facilities. This in fact is the biggest hurdle for Indian investors, says Vikash Ranjan, an analyst with the Indian Council of World Affairs. Many prospective investors are daunted by the lack of an efficient nancial system and are waiting in the sidelines for nancial reforms to take effect. Challenges aside, giant strides have been made. The regime in Myanmar acknowledges the importance of the recent inux of Indian investments, which in turn can play a leading role in the countrys development and transformation.