07/11/2016

IndoMyanmarBorderTrade

DialogueJulySeptember2007,Volume9No.1

Indo-Myanmar Border Trade: The Stakes for North East India

M.P.Bezbaruah*
I.Introduction
Thelastdecadeofthe20thcenturymarksthebeginningofaneweraofeconomicintegrationofcountriesacrosstheglobe.
With the emergence of the World Trade Organization (WTO) the institutional framework for freer multilateral movement of
goodsandserviceshasbeenstrengthened.Parallelly,countriesindifferentpartsoftheglobehaveformedregionaltradingblocks
withinwhichtradebarriersareremovedtoagreaterextentthanwhathasbeenpossibleatthemultilaterallevel.Byandlarge,the
process of global economic integration has proved to be beneficial for most countries and the countries that have failed to
integrateappeartohavebeenleftbehind.Yettheprocesscannotbehailedasanunmitigatedboon.Whileintegrationopensup
newopportunitiesbesidesprovidingwiderchoicetoconsumers,italsodemandspainfuladjustmentsandrelocationfrompeople
whosetrademayberendereduncompetitiveinthepostintegratedworld.
IndiasNortheasternregionisoneofthepocketsthatdonotseemtohaveprofitedinthechangedeconomicenvironment.In
thestrongstatecontrolledeconomicregimeofpreliberalizedIndia,theregionhadnotfaredverywelleither.Inthefirsttwo
decades of economic planning (i.e., in nineteen fifties and sixties) the region had very little to show in terms of economic
achievements.Inthesubsequenttwodecadesfiscalinflowtotheregionweresteppedup,partlytocounterthesenseofneglectby
thecentralgovernmentamongthepeopleintheregionandpartlynecessitated by political reorganization of the region with
formationoffiscallyunviablestates.Theseinflowsgeneratedsomegovernmentsectorexpansionledgrowthintheeconomiesin
theregion.Inthepost1991liberalizedandglobalizedeconomicenvironment,whereeconomiesaretobelargelymarketdriven,
theregionhasfounditselfinyetanotherphaseofretardedeconomicgrowth.WhiletheevidenceofglobalizationoftheIndian
economyisvisibleintheregionintheformofwiderrangeofgoodsdisplayedinthemarketplacesforconsumersoftheregionto
choose from, there is hardly any visible impact of the process in the form of a boost to production and income generating
activities.Onthecontrary,thereareinstancesofclosureofsmallscaleindustrialunitsthatthrivedunderprotectionsavailablein
theearlierregimeandlossoffarmincomeduetoinflowofcheaperimportofcommoditieslikearecanut.
Withitsgeographicalremoteness,inherentdeficiencyininfrastructureandthebadpublicityforrecurrentethnicstrifeand
militant activities, the region obviously could not become an attractive destination for private capital investment. But in the
periodinwhichclosercrossbordereconomictiesarebeingforgedinmanypartsoftheworld,bordertradehascometobelooked
uponwithalotofexpectationsinthisregionasameansforbreakingfreefromtheshacklesofgeographicalisolation.Allbuttwo
percentoftheboundaryoftheregionhappenstobeinternationalborderwhichissharedwithBhutan,China,Myanmarand
Bangladesh.WhiletradewithBangladeshandBhutanhasassumedimportanceinthewakeofattemptstoforgegreaterSouth
Asianregionalcooperation,tradewithMyanmarhasacquiredaddedsignificanceinthecontextofIndiasproclaimedlookeast
policybecauseofMyanmarsgeographicalproximitytotheprosperouseconomiesofSouthEastAsiaandChina.Inotherwords,
tradeacrossIndoMyanmarborderisperceivedasnotmerelyatwocountryaffairbutaviamediaforclosereconomictieseven
withcountiestotheeastandsoutheastofMyanmar.
Intheabovecontext,thispaperattemptstoassesstheextenttowhichtheexpectationsregardingtheseprospectsofIndo
Myanmar border trade though the North Eastern Region are realizable and discuss the issues that need to be addressed for
realizingthesepotentials.Itbeginswithanassessmentofthevolumeandcompositionofthebordertradeandthentakesupthe
constrainsanddistortionsthetradecurrentlysuffersfromandgoesfurthertovisualisetheprospectofthetradeiftheproblems
identifiedareaddressed.

II.VolumeandCompositionofIndoMyanmarBorderTrade.
IndoMyanmarBorderTradeAgreementbetweenthegovernmentsoftheRepublicofIndiaandtheUnionofMyanmarwas
signedonJanuary21,1994withthegoalofformalisationofbordertradepracticesandsetsuchtradingactivitiesinacongenial
mode1.Theagreementinitiallyprovidedforcrossbordertradeintwentytwoproducts,mostlyagricultural/primarycommodities
producedinthetradingcountries(notthethirdcountryproductsthatdominatetheinformalbordertradeaswillbediscussed
later).In2001afewmoreitemswereaddedtothelistoftradableitems.Inpractice,theagreementactuallydoesnotgomuch
beyondaccordingaformalsanctiontoexchangestraditionallygoingonbetweenthelocalpopulationsintheborderareasofthe
twocountries.Butitholdssignificantsymbolicvalueintermsoffurtheringeconomictiesbetweenthetwocountries.
The agreement specified that trade should be conducted through the designated custom posts, viz, (a) Moreh in India
(ManipurState)andTamuinMyanmar,(b)ChamphaiinIndia(MizoramState)andHriinMyanmarand(c)otherplacesthatmay
be notified by mutual agreement between the two countries. Following the signing of the agreement the two land customs
stations(LCS)atMorehandChamphaionIndiansoilwerenotified.However,theChamphaistationhasnotbecomefunctional
tilldateandallofficialorformalIndoMyanmarbordertradehasbeentakingplacethroughtheMorehTamuroute.

II.1TrendsintheVolumeandCompositionofFormalTrade:
Soonafterthebordertradeagreement,therewasaspurtinformaltradeacrosstheMorehTamusector.Startingfromabout
Rs.15 Crores in 199596, the trade volume quickly reached Rs.46.49 crores and Rs. 62.39 crores in 199697 and 199798
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

1/9

07/11/2016

IndoMyanmarBorderTrade

respectively.Butinthe next year the volume fell sharply. This followed the restriction imposed by Myanmarauthoritiesthat
exportsfromIndiashouldprecedeimportsfromMyanmarwitheffectfrom26November1997.Inthefollowingyearsthough
therehasbeensomerecovery,thetradevolumehasnotrevivedtoanywherenearthelevelsof199697and199798.
ItisworthnotingherethatinthetotalvolumeofIndoMyanmarinternationaltrade,formalbordertradeacrosstheNorthEast
is virtually negligible. For instance, in 200203 formal border trade across the North East constituted only 1.05% of Indias
export,0.71%ofimportand0.79%ofvolumeoftradewithMyanmar.Aspercentageofcombineddomesticincomeoftheseven
statesoftheNorthEasternRegionalsothistradeisvirtuallynegligible.
ThecompositionofexportsandimportsforthepeakyearofIndoMyanmarbordertradeandthelatestyearforwhichdatais
nowavailableispresentedintables2and3.Itisclearfromthefiguresinthetablesthatwiththedeclineinthevolumesincethe
peakyearof199798,thediversityoftheformalbordertradehasalsogotdrasticallyreduced.InthevalueofexportfromIndia,
theshareofwheatflourhasdrasticallycomedownfrom76%tolessthan10%.Accordingtoinformationprovidedbycustoms
officialsatMorehLCS,thedeclineintheexportofwheatflour is not because of Indian wheat becoming uncompetitive but
becauseofabilateraltradearrangementbetweenMyanmarandAustralia,underwhichnowMyanmar sources its wheat flour
importfromAustralia,albeitatacostlierterm.Buffaloappall(adriedbuffalomeatproduct)isnowthemostimportantitemof
export.Soyabatinuggetsandcuminseedsarethetwoitemswhichcontinuetobeexported.
The decline in the diversity of imports from Myanmar through the formal channel is even more drastic. Imports are now
virtuallyrestrictedtoonlyonecommodity,namelybetelnut.
Part of the explanation for the decline of formal border trade can be traced to the rigidities in the existing trading
arrangements.Theagreementof1996notonlylimitstheitemstobetradedacrosstheborder,butinpracticeitalsolimitsthefree
flowoftrade.Firstofall,aspertheagreementtradewillbebarterinnatureinthesensethatvalueofexportbyeachtraderwill
have to be matched by the value of the traders import. The stipulation creates hurdles for export and import to flow freely.
Traders also face difficulty in sending and receiving consignments and getting their dues cleared. Secondly, since as per the
existingarrangements,tradetransactionsaretoberecordedinhardcurrencies,grossovervaluationofMyanmarscurrencyasper
theirofficialexchangeratesdiscouragestradetoflowthroughformalchannels.WhileaspertheofficialexchangerateKyat1is
ratedataboutRs.7,intheinformalmarketatthetimeofthisfieldsurvey,thegoingexchangeratewasKyat20to21foraRupee
attheMorehTamusectorandKyat18foraRupeeintheChamphaiRhisector.Theseinformalratesaremarketdeterminedand
reflectthetrueexchangevalueofthecurrenciesofthetwocountries.Theartificialofficialexchangerateleavestraderwithlittle
incentivetomovetradetotheformalchannels.Thuswhileinformaltradecontinuestobethemainstreamofexchangeofgoods
acrossIndoMyanmarborder,theformalflowhaspracticallydriedup.

II.2Volume,CompositionandDirectionoftheInformalBorderTrade:
a)VolumeofInformalTrade:
All the studies on border trade in Indias North Eastern region that have come up in the last decade or so insistthatthe
volumeofinformalbordertradeexceedthatofformalbordertradebyseveraltimes.Thesereportsfurthershowthatthisistruerfor
IndoMyanmarbordertradethantheothercomponents,saytheIndoBangladeshtrade.Butbecauseoftheclandestinenatureof
thispartofbordertrade,itisdifficulttodirectlyestimatethevolumeandcompositionofthesetradeflows.Forthepresentpaper,
the volume of informal IndoMyanmar border trade has been estimated indirectly from custom seizure data by using the
methodology and parameters used by the Indian Institute of Entrepreneurship for their estimations for the year 2000012. A
comparativepictureoftheestimatesobtainedfortheyear200304withthoseoftheIndianInstituteofEntrepreneurshipforthe
year2001ispresentedintable4.ThetableshowsthatthetotalvolumeofIndoMyanmarinformalbordertradehasmoreorless
beenstagnantduringtheperiod200001to200304duringwhichIndiasvolumeoftradeincreasedby51.30%3.
However,asignificantchangeintheimportanceofthetraderoutescanbeseenfromthefigures.TheManipurborderroute,
whichisrelativelybetterconnectedwiththecommercialhubofMandalayintheheartlandofMyanmar,continuestoaccountfor
thesubstantialpartofthisinformaltrade.Butthetradeflowthroughthatroutehasdeclinedinabsoluteterm.Incontrast,the
volumeoftradethroughMizoramroutehasrapidlygrown.(Interestinglythegrowthofinformaltradeinthissectorkeptpace
withthatofthevolumeofIndiastrade.)Consequently,despitethelocationaldisadvantage,theMizoramsectorsshareinthe
volumeofinformaltradehassharplyimproved.
Apossibleexplanationforthischangeinrelativeimportanceofthetraderoutescanbetracedtotheinternalconditionsin
thetwostatesofManipurandMizoramontheIndiansideoftheborder.Twofactors,notunrelatedtoeachother,seemtobeat
work.First,Manipurcontinuestobeembroiledinsocialconflictsandextremistactivitiesofhordesofundergroundorganizations
which have contributed to sustaining if not aggravating the general economic environment in the state. Apart from frequent
disruptionsduetobandhsandclashes,transactioncostsarekepthighbyrentseekingactivitieswhicharedirectlyorindirectly
perpetratedbyextremism.Undersuchconditionsitisnotsurprisingthatbordertrade,asanyothereconomicactivity,suffers.In
contrastMizoramhasacquiredasthemostpeacefulstateintheentireNorthEast.Politicalandsocialstabilityhasturnedbusiness
environmentconduciveforeconomicventures.Withsloganofpeacepaysthestateisnowinaneconomicallyupbeatmode.
Bordertrademusthaveflourishedwiththegeneralupswingofeconomicactivitiesinthestate.Secondly,relativelyfastergrowth
ofpercapitaincomeinMizoraminthelastfewyearsmusthavecontributedtothefastergrowthofdemandfortheseimportsin
thatstate,whereassluggisheconomicgrowthinManipurhaspreventedasimilargrowthofimportstothatstate.

b)CompositionoftheInformalTrade:
CompositionofinformalimportsfromMyanmarhasbeenworkedoutfrominputsgatheredfromtradersandotherpersons
involved with the trade in Manipur and Mizoram. The table5 depicts the composition. The figures there point out some
interestingfeatures.
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

2/9

07/11/2016

IndoMyanmarBorderTrade

ThecompositionofimportstoMizoramisquitedistinctfromthosetoManipurthoughbecauseofhigherweightagethe
Manipurpatterndominatestheoverallcomposition. Textile and Footwear dominate imports to Mizoram. The group includes
blanketsandreadymadegarmentsamongotherthings.BlanketscomeasfarasfromChinaandSouthKoreaandfindtheirwayto
marketsoutsidethetwostates,inGuwahatiandShillongandevenbeyond.GarmentsandfootwearimportedtoMizorammostly
comefromThailandandthesearedesignedtosuitthetastesandpreferencesoftheconsumersinthestate.
In the imports to Manipur electrical and electronic goods dominate over other groups. Within the group, generator sets,
inverters and inverter battery are important components. These are mostly cheap and of inferior quality Chinese products,
typicallytargetedtobackwardeconomicsituationsmarkedbypowershortage.
Ingeneralimportofelectronicgoodshasdeclinedintherecentyears.
OnemajoritemofimporttoMizoramislivestockwhichoriginatesinMyanmarandcaterstothelocaldemandfor meat.
Thoughtherearenoofficialrestrictionsorcustomsbarrierstoimportoflivestock,informalrouteispreferredasthisobviatesthe
needofcheckupofthestateofhealthoftheanimals.
Asperearlierreports(Raoetal,1997),thecompositionofinformalexportsfromIndiatoMyanmarusedtobeveryvaried
andrangedfrombasicnecessitieslikemedicinesandkerosene,tohouseholdconsumptionitemssuchasclothes(mainlylungis),
manufactured food products and household appliances like sewing machines, pressure cookers and bicycles to construction
materials such as C.I. sheets and paints, to machinery and equipments and farm inputs such as fertilizers. The information
collected in the present study shows that the diversity of exports has been reduced over the years. However, medicines and
fertilizersarestillexportedinlargequantitiesandthesetwoitemsthesedaysdominatethecompositionofinformalexportfrom
theIndianside.

c)SourceandDestinationofInformalExportsandImports:
ThesourcesanddestinationsofInformalimportsandexportsatthetimeofthepresentstudyhavebroadlyremainedthesame
asreportedbyIndianInstituteofEntrepreneurshipreportafewyearback(IndianInstituteofEntrepreneurship,2001:p238240).
AlmosttheentireinformalexportfromIndiansideoriginatesinUttarPradesh,Delhi,Haryana,Punjabregionandendsupin
differentpartsof Myanmar extending to as far as Yangon. Cotton yarns, which used to be exported through both formal and
informalchannels,traveledfurtherasthisitemoriginatedinGujaratinwesternIndiaandendedupnotjustinMyanmarbuteven
inChina.
Asforinformalimports,exceptingthefarmproductssuchasanimals,beansandpulsesandpreciousstonessuchasjadeand
rubywhichoriginatesinMyanmar,everythingelsecomesfromathirdcountrywhichiseitherChinaorsomeASEANCountries
orSouthKoreaorJapan.WhiletheimportedpreciousstonesusuallygowellbeyondtheNorthEastregiontomarketsintherest
ofIndia,theotheritemsaremoreorlessabsorbedbyconsumersintheregion.AfewitemslikeChineseandKoreanblanketsfind
theirwaytomarketsintheneighbouringstateofWestBengaltoo.
However,thereareafewchangesinthedirectionofinformaltradeatthetimeofthepresentstudyfromthereportsofthe
previousstudies.IntheManipursector,thediversityofthesourceofinformalimportshasdecreasedovertheyears.About80%of
theimportsarenowChineseproducts.ChinesefactorieshavereportedlybeensetupwellwithinMyanmartocatertothis(and
also perhaps other) markets. In the Mizoram sector, where ready made garments and footwear are important components of
informal imports and growth of which are driven by growth of income and consumption in the state, the informal imports
originatesfromThailand.ItseemsthattextilemanufacturersinThailandhavegatheredgoodmarketintelligenceregardingtastes
andpreferencesofconsumersinMizoramandmanagedtoexploitthemarket,whichIndiantextileindustryhasfailedtocaterto.

III.TheScenarioforIndoMyanmarBorderTrade:ImpedimentsandProspects
Whilethereisalotofexpectationintheairaboutbordertrade,morespecifically IndoMyanmar border trade, liberating
NorthEastIndiafromtheshacklesofgeographicalisolation,anyattemptatrealisticassessmentofsuchprospectsraisesanumber
ofquestions,suchas:
WhatistheprospectoftradebetweentheNorthEastIndiaandMyanmarexpanding?Whatisthepossibilityofmovingthe
existinginformaltradetoformalchannels?andWhatistheprospectofIndoMyanmarbordertraderoutesofdeveloping into
majortradecorridorbetweenIndiaandEastandSouthEastAsiaclaimingasubstantialpartoftheexpectedincreaseintrade
trafficasaresultoftheFreeTradeAgreementscomingintoforce?
InthissectionthescenarioforIndoMyanmarbordertradewillbediscussedkeepinganeyeonthesequestions.

III.1FundamentalConstraintsonGrowthofBorderTrade:
Oneoftheapparentconstraintsonthegrowthofthetrade,whichisoftentalkedabout,isthepoorstateofinfrastructure,
starting with road connectivity and telecommunication to facilities at border transit points and banking and other financial
network.Stateofinfrastructureandconnectivityinfluencestransitandtransactioncostsinvolvedintrading.Obviouslybetter
connectivityandoverallstateofinfrastructurewouldlowertransitandtransactioncostsandfacilitate trade. But the fact that
informaltradecontinuestosustainwiththestateofinfrastructureremainingwhatithasbeen,indicatesthatitspoorstateisnot
thefundamentalconstraintonthegrowthofbordertrade.Ifotherissuesrelatedtotradearesortedoutandthepeoplesandthe
governmentsonbothsideofthebordergettoviewtradetobebeneficialprospect,theinfrastructurebottleneckcanbedealtwith
asuitableinvestmentpackage.Insightgatheredinmyinvestigations,directsmetoarguethattheinstitutionalfactors,especially
thoserelatingtotradeandexchangeratepolicyofGovernmentofMyanmar,aremorefundamentalhurdlesinmovingtowardsan
orderlyandlegitimatesystemofIndoMyanmarbordertrade.

a)TheDualCurrencyExchangeRateSystemofMyanmar:

http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

3/9

07/11/2016

IndoMyanmarBorderTrade

ThecurrencyexchangesystemstilloperatinginMyanmarisakinto,indeedinamoresevereform,whatIndiausedtohave
priorto1991.Thereisanofficialexchangeratewhichisgrosslyovervaluedandanunofficialmarketdeterminedratewhichisa
morerealisticreflectionofthecurrencysactualworth.Forinstance,whiletheofficialexchangerateforUS$1wasKt5.7atthe
endof2003,thefreemarketratewasKt850forUS$1(TheEconomicIntelligenceUnit, 2004: p. 1891). This implies that
officiallytheRewasequaltoaboutKt0.09,unofficiallyitwasroughlyequaltoKt19.Inthefieldsurveyforthepresentstudy
theunofficialexchangeratefortheRewasfoundtobeKt18inMizoramsectorinJuly2004andKt21inManipursectorinJuly
2005.ThesenumbersimplythatofficiallytheKyatisabout200timesovervaluedinrelationtotheIndianRupee.
Thediscrepancyhascontributedtodiversionoftradetoinformalchannelsinwhichtheexporterscanrealisevalueatthe
unofficialexchangerate.Theovervaluedofficialcurrencyexchangerateisnotonlyadisincentiveforcarryingtradingactivities
intheofficialchannel,butitalsodoesnotprovidebanksmuchopportunitiestodealwithforeignexchangetransactions.Lackof
involvementofbanksandotherfinancialinstitutionsobviouslyconstitutesaweaknessforthetradingsystem.

(b)TransitTrade:
ForeignTradeLawofMyanmarprovidesfortransittrade,underwhichgoodscanbeimportedtoMyanmarforfinaldelivery
inathirdcountry.TheoverseasbuyerorsellercanappointaMyanmarresidentorenterpriseasaconduitforthetransit.The
transitinvolvespaymentofsomenominalcommissiontotheconduit,2.5%customsduty,atransitmovementcostandaservice
chargetotheconcernedauthorities.Forthepurposeofdeterminingtheimportduty,thepriceinhardcurrencyisconvertedinto
Ktattheofficialexchangerate(IndianInstituteofForeignTrade,1995:p.4344).Theprocessresultsinartificiallyloweredprice
ofthegoodsforthebuyersinthefinaldestination.TheunusuallylowpriceofthirdcountryproductsimportedtoIndiafrom
Myanmarininformalbordertradecanbepartlyascribedtothisfactor.Theeffectisakintodumpingofthegoodsonthefinal
importer.Hencethetransittradeworksasanunfaircompetitionfordomesticproducersinthedestinationcountry.Thoughthe
MyanmarGovernmentalsolosesintermsofcustomsperunitofagood,thelossperunitislikelytobecompensatedatleastin
parts by the larger volume in demand due to suppressed price. Thus, the revenue effect of the mechanism for Myanmar
Governmentcannotbeascertainedwithoutworkingoutthevariouselasticities.

(c)TheBarterTradeMechanismforOfficialBorderTrade:
TheexistingmechanismofformalIndoMyanmarbordertradeisakintobartertradeinthesensethatexportfromonecountry
needstobebalancedbyimporttothatcountrybyindividualtrader.Moreover,foranIndiantraderthereisthestipulationthat
exports from India must precede imports from Myanmar. Balancing exports by imports is required to be completed within a
periodofsixmonths(IndianInstituteofForeignTrade,1998:p7980).Thesystemnotonlyhindersfreeflowoftradebutputs
theIndiantraderindisadvantage.AsreportedbyCustomsOfficialspostedinMoreh,oftenduetodelayinsupplyofimportsfrom
Myanmar side it becomes difficult for traders on Indian side to complete the balancing obligations within stipulated period.
Moreover,suchdelaysexposetheIndiantraderstogreateruncertainty.Itisthereforehardlysurprisingthatthespurtinformal
bordertradefollowing1994BorderTradeAgreementbetweenGovernmentsofIndiaandMyanmarquicklyendedinawhimper.
Thenarrowrangeofitemsidentifiedforformalbordertradeisanotherfactorrestrictingthenaturaltradeflows.Whileboth
countriesmayhavegeneralnegativelistsforimportsandexports,thescopeofbordertradeneedstobeextended to cover all
itemsonwhichtradingispermissibleaspertheexistingrulesforexternaltradeofthecountries.

(d)WaytoMoveForward:
ItisclearfromtheabovediscussionthatMyanmarseconomicregime,especiallythecomponentrelatedtoexternaltradeand
currencyexchangeratemechanism,isahindrancetofreeflowoftradebasedoneconomiccomplementaritiesunderacceptable
economicgovernance.Inordertoputbordertradeonarobustfootingandtobringtheinformaltradetotheformalchannels,
severalreformmeasuresstartingfrommodifyinggroundrulesforbordertradetoshifttosuitablecurrencyexchangemechanism
willhavetobedevised.
The first best option would have been Myanmar moving to a liberalised economic regime with a floating convertible
currencyexchangesystem4.However,thereareyetnoindicationsinthehorizonofsuchchangestakingplace.Apparentlythe
overvaluedcurrencyisconvenientforthepresentrulingjuntatogetitsessentialimportssuchasarmsandammunitionscheap,
whiletheflourishinginformaltradebringsintheessentialsuppliesfortheconsumptionofthemassesatthemarketdetermined
unofficialrate.Inthelongerrun,however,suchadistortedsystemwillnothelpthecountryindevelopingitsowneconomic
potentialsandcaninfactpushthesystemtowardssuddencollapse5.
Sincetheabovementionedfirstbestsolutionisunlikelytohappenatleastintheforeseeablefuture,theotheralternativethat
suggestsitselfisthetwocountriessitdowntodiscusstheissuesandcometosomeagreementssothatatleastthefollowingcan
beachieved:
i.Border trade is liberated from the shackles of the barter system and allowed to take place in the usual form of general
international trade. The list of items to be traded should not be restricted to the ones covered in the existing border trade
agreementsbutextendedtoincludeallitemspermissibleasperbilateralandmultilateralagreementsontradebetweenthetwo
countries.
ii.Tradeisofficiallyallowedtotakeplaceinthemarketdeterminedcurrencyexchangerate.
iii.Transitofthirdcountryproductsisallowedopenly,butasperrulessetundermultilateraltradeagreementsortheregional
trade agreement to come to force in the coming years. With customs duties already much reduced in India under WTO
obligations and slated to be further slashed between members countries of the forthcoming regional trading block, routing
existinginformalimportflowsthroughformalchannelsshouldnotbeaproblem.
iv.TheproblemsofmovingtheexistinginformalexportsfromIndiansidetoMyanmarinalegalwayneedtobesortedout.
Whilelegallyexportingsuchindustrialgoodslikemachineryandmedicinesshouldnotbeaproblem,theitemslikekerosene
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

4/9

07/11/2016

IndoMyanmarBorderTrade

andfertilisers,whichareheavilysubsidisedfordomesticusersinIndiaandnotmeanttobesubsidisedforexports,willpresent
somedifficulties.

III.2ProspectsforGrowthofTradebetweenNorthEastIndiaandMyanmar:
Ifthe trade and exchange rate policy related issues discussed in the preceding section are sorted out will IndoMyanmar
bordertradeflourish?Itisconceivablethatwithtraderestrictingfactorssortedoutandalegitimatesystemoftransittradeputin
place, formal border trade stands to expand. First of all the incentives for clandestine informal trade will be reduced. With
customsdutiescomingdownprogressivelyeconomicincentivesforsmugglingshouldalsobereduced.
Butthemorepertinentissueistowhatextentthechangeswillboosttradeinlocallyproducedgoodsandservicesbetween
NorthEastIndiaandMyanmar.Asthetworegionshavebroadlysimilareconomicstructuresinwhichagriculturestilldominates
and manufacturing activities contribute a rather small component of total production, one may be tempted to conclude that
resourcebaseandproductioncompositionsinthetworegionsarecompetitiveratherthancomplementarywhichlimitsthescope
fortradebetweenthem.However,acloserlookpointstowardsmanycomplementarities.

a)SomeExportPotentialsofMyanmarto/throughNorthEastIndia:
DespiteagriculturestillcommandingalargershareindomesticproductofNorthEasternregionthaninthatofthewhole
country,theregionisdeficientinproductionofquiteafewagriculturalcommodities.Theregionisdependentonsuppliesfrom
otherpartsofIndiaforitsalmostentirerequirementofpulsesandalsoasignificantpartofrequirementofrice.Riceandpulses
beingstaplefooditemsforthepopulationintheregionhavesteadyandstabledemand.ThesuppliesfromnorthwesternIndia
notonlyinvolvelargetransportcost,butthesupplyroutesarepronetodisruptionduringmonsoonduetofloodsinAssamplains.
Myanmaristraditionallysurplusproducerandexporterofthesetwoproducts.ThereisnoapparentreasonwhyMyanmarshould
notbeabletosupplythesecommoditiestotheconsumersofneighbouringNorthEastIndia.IndeedNorthEastIndiacanprovide
markets for other agricultural products of Myanmar too. For instance, onion from Myanmar often appears in the markets in
ManipurwheneverthereisashortageofitssupplyinIndia.Oncebordertradeisliberalised,theitemcanberegularlyexportedto
NorthEastIndiaandevenbeyond.AsofnowsuppliestoNorthEastIndiacomefromsuchdistantstatesasMaharastra.
ExportofsuchagriculturalproductsonaregularbasiscanhavebeneficialeffectonfarmproductioninbothMyanmarand
North East India. Market expansion will be an incentive for farmers in Myanmar to adopt better technology and expand
production.Receivingsupplyofstaplefooditemsfromtheneighbouringcountry,farmersinNorthEastIndiawillbeableto
concentratemoreonproductionofhighvaluehorticulturalandothercommercialcropsforwhichtheregionpossessessuitable
agroclimaticconditions.Developmentalongsuchlinescanboostfarmincomeonbothsidesoftheborder.
Myanmarcontinuestoexportforestproductsliketimberandtimberbasedproducts.ThoughNorthEastIndiaalsousedtobe
richinforestresources,unsustainablecommercialandindustrialexploitationoftheseresourcesovertheyearshavedenudedthe
regionfrommuchofitsforestcover.ThesituationhasdeterioratedtosuchanextentthatthehonourableSupremeCourtofIndia
inanorderintheyear1998hadtobanfellingoftimberintheregion.Forestbasedindustrialunitsintheregionincludingthe
plywoodfactorieshavevirtuallycloseddown.AnewsupplylinefromMyanmarcangiveanewleaseoflifetotheforestbased
industriesinthe region. However, in this context there are a few question marks on the ability of Myanmar to export forest
products for a prolonged period. If informal reports of scholars visiting interiors of Myanmar are to be believed, much of
Myanmarsteakreserves,especiallythepartsfallinginareascontrolledbyrebel groups, have already been depleted. Further,
officiallythereisabanimposedin1994onexportofrawtimberandhencetheitemcanatbestbeexportedintheformofsome
valueaddedproducts(IndianInstituteofEntrepreneurship,2001:p.137).Unlessthetradeprospectoftimberinducescommercial
reforestationactivities,theGovernmenttheremaynotbeinapositiontolifttheban.Inthatcaseimportingtimbertoresume
plywoodmanufacturingmaynothappen.ValueaddedtimberproductscanstillenjoyamarketintheNorthEastandevenother
partsofIndia,especiallyasinputsinthefurnitureandtheconstructionindustry.
Apart from producing agricultural surpluses, Myanmar also has strength in various types of mineral deposits. Granites
producedinMyanmarcanfindamarketinNorthEastIndiawherehouseconstructionhasbeenaboomingactivity.Asofnow
heavyandbulkystoneslikemarbleandgraniteusedinconstructionintheNorthEastcome,fromRajasthaninwesternIndia.
GranitesfromMyanmarshouldhavetransportcostadvantageinthemarketinNorthEastIndia.Myanmarisalsofamousforhigh
valuelowvolumestoneslikejadeandruby.SomequantityofthesestonesisinanycaseregularlysmuggledintoIndia.Withper
capita income level rising rapidly in India demand for such precious stones used for ornaments can be expected to rise.
Accordingly,suchstonescanbeimportedtoIndiathroughtheNorthEastthoughperhapsnotsomuchforsaleintheregion
itself.
Myanmarscoastalareasarerichlydepositedwithnaturalgas.CoupleofIndiancompaniesincludingtheONGCarealready
engagedinexplorationandproductionin the area. With the Indian economy growing rapidly the demand for energy is also
expectedtoriserapidly,indeedatafasterrate.InthatcontextgassupplyfromMyanmarcanbeofgreatadvantagefortheIndian
Economy. In fact there are already some initiatives towards laying pipelines for importing gas from Myanmar. Since laying
pipelinesthroughtheBayofBengalislikelytobefarmoreexpensivethanthroughland,thepipelineshouldbelaidthroughthe
NorthEast.AconnectingpipelinefromTripurawillthenenablethecountrytousetheTripuragasreservestoo.Theimportedand
domesticnaturalgascanbeusedforthermalpowergenerationandotherindustrialusesinNorthEastandtherestofthecountry.
ItisworthmentioningherethatasofnowtheNorthEastdependsheavilyonhydelpowerforitselectricityrequirement.Though
theregionhashugeuntappedpotentialforhydelpower,proposedconstructionofdamsforutilisingsuchpotentialhasruninto
controversies.Moreover,thesupplyfromexistinghydelpowerprojectsbecomeinsufficientandunreliableindrywintermonths,
especiallyintheyearsofdeficitmonsoon.Supplyformgasbasedthermalstationscanbeusefultostabilisethepowersupply
situationintheregion.

b)SomeExportPotentialsofNorthEastIndiatoMyanmar:
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

5/9

07/11/2016

IndoMyanmarBorderTrade

As most recent reports on Myanmars economy suggest, Chinese manufactured products have extensively penetrated
Myanmarsmarket.ThefactthatsuchproductshavefoundtheirwaytothemarketsinborderingstatesofManipur,Mizoramand
Nagaland,lendscredencetosuchreports.IndiaisyettoaggressivelyexploretheMyanmarmarketandnowmaynotfinditeasy
tocompetewiththealreadyestablishedChineseproducts.YetthepatternofexportsfromIndiatoMyanmarininformalborder
tradesuggeststhatIndia,andpossiblytheNorthEast,canstillenjoyasphereofadvantageoverothercompetitorsincateringto
Myanmarsrequirements.
DespitetheNorthEastregionsoverallindustrialbackwardness,theregionhascometoacquireasignificantcapacityfor
refiningcrudeoil.Thefourrefineriesoftheregion,alllocatedinthestateofAssam,togetherhavearefiningcapacityofabout
seven million tonnes of crude annually. In the event of all the four refineries operating near capacity, the region will have a
substantial exportable surplus of refinery products. Exporting these surpluses to neighbouring countries can be a more
economicalpropositionthantransportingthesametosomedistantpartsofthecountry.Alreadykeroseneproducedintheregion
issmuggledacrossthebordertoMyanmarasinformalexport.Inanormalisedandliberalisedtradingenvironmentbetweenthe
twocountrieskeroseneandotherrefineryproductsfromtheNorthEastcaneasilyfindoutletinMyanmar.
As mentioned in the previous section, manufactured items such as bicycles, motor parts, fertilisers, medicines and food
productslikeMoltovaandHorlicksetcareinformallyexportedfromIndiatoMyanmar.ThoughChinesepenetrationmighthave
reducedIndianshareinmarketsformanufacturedgoodsinMyanmar,incertainitemslikemedicinesandfertilisersIndiastill
commandsasubstantialshare.Oncebordertradeintheseitemsisliberalised,theIndianmanufacturerswillbeabletoexploreand
exploitmarketsinMyanmarmoreextensively.Thewaythe Chinese have established production centres near the border and
eveninsideMyanmartopenetrateintocrossbordermarkets,theIndianmanufacturerscansetupproductionbaseintheNorth
EastforcateringtothemarketsinMyanmarandbeyond.Indeedtherearenowaddedeconomicincentivesfordoingso,asan
attractivepackageoffiscalandotherconcessionshavebeenprovidedfornewindustrialestablishmentsintheregionunderthe
NorthEastIndustrialandInvestmentPromotionPolicy2007oftheGovernmentofIndia.Intheprocessindustrialisationofthe
regionwillreceiveaboost.

c)TheProspectinTradeinServices:
AnotherareaofpotentialtradebetweenMyanmarandNorthEastIndia,whichhassofarnotbeenexploredmuch,istradein
services like health care, hospitality and tourism, which through backward linkage can generate trade in transport,
communicationandrelatedservices.
Over the last few years facilities for advanced medical treatment have come up in the region. As of now most of these
facilitiesareconcentratedinGuwahati,thegatewaytotheregion,butthefacilitiesareavailedbypeoplefromtheneighbouring
statestoo.Softeningoftheborderandallowingfreermovementofpeopleacrossthebordercanopenthesefacilitiesforresidents
ofMyanmartoo.SomeborderstateslikeManipurhaverichpooloftrainedhumanresourcetosupplysuchservices.Oncedemand
fromacrosstheborderisperceived,thenecessaryinfrastructureforprovidingsuchserviceswillcomeupintheseborderstates
also,whichwillmakesuchservicesmoreeasilyaccessibletopeoplefromtheneighbouringareasinMyanmar.
TourismhasbeenlistedbyearlierreportsasoneofthepotentialserviceactivitiesonwhichNorthEastIndiaandMyanmar
canmutuallytradeon(IndianInstituteofEntrepreneurship,2001:p189207).However,consideringtherelativelylowlevelof
percapitaincomeonboththeseareas,travelforrecreationmaynothavemuchmutualdemand.Highincomeelasticityassuch
travelmaycommand,beingaluxuryitemofconsumptiondemandfortheserviceislikelytoremainlimitedinthenextfewyears
tocome.However,thepotentialforaspecialtypeoftourismactivityowingtotheethnicityintheborderareashasbeendetected
incourseofthefieldinvestigationforthepresentstudy.AllalongtheIndoMyanmarborderfromArunachalPradeshthrough
NagalandandManipurtoMizoram,therearemanyethnicgroupslivingonbothsides.Thepoliticalboundarynowkeepsmany
oftheseethnicgroupsseparate.Afewcontrolledorganisedtoursofpeopleacrossborderareastookplaceinthelastfewyears
throughtheMorehTamupointwhichreceivedenthusiasticsupport.Softeningoftheborderisboundtoincreasecontactbetween
peoplesharingsameethnicityacrosstheborder.Growthintransport,communication,hospitalityandrelatedserviceswillthen
followonbothsidesoftheborder.

IV.Conclusion:
TheformalcrossborderIndoMyanmartradehasnowbeenreducedtoameretrickleandvirtuallytheentireIndoMyanmar
border trade is now informal in nature. The commodities imported through the informal channels are largely third country
productscomingfromfurthereastandsoutheastofMyanmar,mostlyconsumergoodsmanufacturedinChina,ASEANcountries
or even Korea and Japan. In contrast, the informal exports to Myanmar from the Indian side are manufactured in India itself.
However,itisworthnotingherethatverylittleoftheseexportedgoodsareproducedwithintheNorthEasternregion.Thetrade
in its present form is thus useful for the North East region, for that matter even for Myanmar, only to the extent that these
commodityinflowssatisfylocalconsumptiondemand.Butboosttoproductionandincomegeneratingactivitiesfromthistrade
isminimaloneithersideoftheborder.
TheprospectofbordertradebetweenNorthEastIndiaandMyanmarisnotasbleakasmayappearatthefirstsight.Asof
nowthegrowthoforderlyandlegitimatetradebetweenMyanmarandNorthEastIndiahasbeenkeptinleashbyfactorssuchas
poor infrastructure and, more fundamentally, the rigidities and tangles in the trading arrangement and the overvaluation of
Myanmarscurrencyaspertheofficialexchangerate.Oncebordertradeisallowedtotakeplaceinatransparentandorderly
manner, many dynamic economic forces may be unleashed on both sides of the border leading to opening up of mutually
beneficialareasofeconomiccooperation.
Apartfromsubstitutionofinformaltradebyformaltrade,anorderlyandliberalisedsystemofbordertradeandtransitcan
make MyanmarNorth East India an attractive and economical transit route for trade between China and other East Asian
countriesononesideandIndiaandBangladeshontheother.Suchtransittrademaynotdirectlyresultinenhancedproductionof
goods in the two regions, but will surely generate spin off growth impetus to services like hospitality, transport and
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

6/9

07/11/2016

IndoMyanmarBorderTrade

communicationlinkedactivities.WhethertheNorthEast India and Myanmar can get to provide similar transit route to trade
betweenSouthEastAsiaandIndiais,however,amatterofsomedebate.(Baruah,2004:p23).Theanswerwillcriticallydepend
onthecomparativetransportcostbythealternativesofthemaritimerouteacrosstheBayofBengalandthecontinentalroute
throughMyanmarandNorthEastIndia.

References:
Baruah,Sanjib(2004),BetweenSouthandSoutheastAsia:NortheastIndiaandtheLookEastPolicy,CENESEASPapers4,Centrefor
NortheastIndia,SouthandSoutheastAsiaStudies,OmeoKumarDasInstituteofSocialChangeandDevelopment,Guwahati
IndianInstituteofEntrepreneurship(2001),BorderTradewithBangladeshandMyanmar:PreInvestmentFeasibilityReport,NorthEastern
DevelopmentFinanceCorporation,Guwahati
IndianInstituteofForeignTrade(1995),SurveyofExportOpportunitiesinMyanmar,IIFT,NewDelhi
IndianInstituteofForeignTrade(1998),IndustrialDevelopmentandExportPotentialoftheNorthEasternRegion,Volume1,IIFT,New
Delhi
Kondo,Takehiko(2001),HowtoNormalizeMyanmarsForeignExchangeRate,theJapanEconomicReview,April15
Pohit,SanjibandTaneja,Nisha(2000),IndiasInformalTradewithBangladeshandNepal:aQuantitativeAssessment,ICRIERWorking
PaperNo.58,IndiancouncilforResearchonInternationalEconomicRelations,NewDelhi
Rao,V.L.,Baruah,S.,Das,R.U.(1997),IndiasBorderTradewithSelectNeighbouringCountries,ResearchandInformationSystemfor
NonAlignedandOtherDevelopingCountries
Taneja,Nisha(1999),InformalTradeintheSAARCRegion,ICRIERWorkingPaperNo.47,IndiancouncilforResearchonInternational
EconomicRelations,NewDelhi
TheEconomistIntelligenceUnit(2004),Myanmar(Burma),CountryReport,May2004,TheEconomist
Table1:ValueofExportsandImportsacrossMorehTamuSectorunderFormalBorderTrade
ExportfromIndiaImportfromMyanmarTotalVolume
YearinRs.CroresinRs.CroresinRs.Crores
19959610.455.3915.84
19969729.7916.7046.49
19979825.1637.1962.35
1998994.883.748.62
1999003.316.529.83
2003049.458.8518.30
2000015.6812.4118.09
Note:Whileexportvalueconsistsonlyofinvoiceamounts,theimportvalue
2001021.298.139.42
includesinsurance,loadingandlandingcosts,localagencycommissionoverandabovetheinvoiceamounts
Source:LandCustomStation,Moreh,Manipur
2002033.8411.9015.74

Table2:CompositionofExportsthroughFormalChannel

CommoditiesPercentageShareinTotalValue
Wheatflour76.319.75
Buffaloappall58.01
Seeds7.49
199798200304
SoyabariNuggets4.6225.38
Rosepowder3.73
Cuminseeds2.925.91
Peas1.33
PowderMilk0.95
Sugar0.28
Stainlesssteel1.71
Electricbulb/switch0.41
Handsaw0.27
Sawblade0.24
Bleachingpowder0.38
Ammoniachloride0.11
Solamonicbar0.09
Corriander0.06
Goldfinger0.04
CommonSalt0.01
Total100.00100.00
Source:1.NationalInformaticsCentreandNEDFifor199394
<neidatabank@hub.nic.in>
2.ReserveBankofIndia,Guwahatifor200304

Table3:CompositionofImportsthroughFormalChannel

CommoditiesPercentageShareinTotalValue
199798200304
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

7/9

07/11/2016

IndoMyanmarBorderTrade

Betelnuts65.6799.24
Chickpeas12.58
Turmeric4.77
Mustardseeds3.31
Redkidneybeans2.82
Resin2.15
Uradpulse1.80
Pulsebeans1.71
Mugbeans1.49
Katha1.150.07
Ricebeans0.72
Kuth0.60
Chana0.31
Achar0.28
Ginger0.210.68
Cuminseeds0.16
Reedbroom0.12
Serpentineroots0.080.01
Drycagor0.04
Nimosapeedica0.02
Total100.00100.00
Source:1.NationalInformaticsCentreandNEDFifor199394
<neidatabank@hub.nic.in>
2.ReserveBankofIndia,Guwahatifor200304

Table4:TrendsinInformalIndoMyanmarBorderTrade
SectorsEstimatedVolumeofTradePercentageChange
(InRs.Crores)Over200004
200001200304
Manipur195.39181.697.01
(86.88)(79.98)
Mizoram29.5146.0456.08
(13.12)(20.02)
Total224.90227.731.26
Notes:EstimatefortheManipursectorisbasedonseizurestatisticsofImphaldivisionofthecustomsdepartmentandthatfortheMizoramsectoron
thesameoftheAizwaldivision.
Theestimatesfor200001arefromtheIndianInstituteofEntrepreneurshipstudyreproducedhereforcomparison.
Figureswithinparenthesesarepercentagesofrespectivecolumntotals
Figuresdonotincludetradeincontrabanditemslikenarcoticsandarms

Table5:CompositionofInformalImportsacrossIndoMyanmarBorder

CommoditiesPercentagesharesintotal
ManipurMizoramOverall
SectorSector
1.aBlankets4.1617.176.76
2.FoodandBeverages10.476.449.66
1.TextilesandFootWear11.8739.4817.39
3.Livestock25.755.15
4.ElectricalandElectronicItems57.3816.7449.25
4.aGenerator7.515.157.04
4.bInverter9.581.728.01
4.cInverterBattery12.381.2910.16
5.PlasticsandOtherSyntheticProducts6.522.235.66
5.aFloorMat5.642.154.94
6.CutleryandUtensils3.812.193.49
7.CosmeticsandToiletry2.901.672.65
8.Other7.055.496.74
8.aMiscellaneousConsumerGoods7.055.156.67
8.bPreciousStones0.340.07
TOTAL(1+2+3+4+5+6+7+8)100.00100.00100.00

References
1.FordetailsoftheagreementreferRaoetal(1997:p123126)
2ThatstudyusedthemodifiedDelphitechniquedevelopedbyAlafHelmerandNormanDalkeyforgatheringandprocessingjudgments /
informed opinion of knowledgeable persons leading to quantified estimate of a phenomenon not estimable directly. The knowledgeable
http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

8/9

07/11/2016

IndoMyanmarBorderTrade

sourcesinthecontextofinformalbordertradecomprisedofcustomoffices,BorderSecurityForce(BSF)personnel,policeofficersofthe
border areas, Deputy Commissioners of the border districts, members of Traders Associations, people in the intelligence service and
individual traders. Through repeated discussion and interactions with these identified knowledgeable respondents, the study arrived at the
estimatesofannualdetectionpercentages(A.D.P)ofillegaltrade,i.e.,thepercentageratioofdetected(bypreventionauthority)illegaltradeto
totalvolumeofsuchtrade.Theannualdetectedpercentagesthusestimatedforthetwocustomdivisionsrelevantforthestudywere2%for
Imphaland3%forAizawldivisions.(IndianInstituteofEntrepreneurship2001:p106)
3CalculatedfromfiguresinTable7.1(A)inpageS.78oftheEconomicSurvey200506ofMinistryofFinance,GovernmentofIndia
4AsianDevelopmentBanksRegionalandCountryHighlights2007onMyanmarcomments,Themostcriticalpolicyissuecontinuedtobe
thedualexchangeratesystem.Theforeignexchangevalueofdomesticcurrencyhasfallensharplysincethesecondhalfof1998,makingit
more difficult for the country to reform the exchange rate system (http://www.adb.org/Countries/Highlights/MYA.asp 2007 Asian
DevelopmentBankaccessedonJuly29,2007)
5Kondo(2001)discussessomeoftheadverseconsequencesoftheexistingdualexchangeratesystemfortheeconomyofMyanmarandalso
indicatesawayofmovingtoaunifiedexchangerate.

Dialogue(AquarterlyjournalofAstha
Bharati)

http://www.asthabharati.org/Dia_July07/m.p.%20bez%20.htm

AsthaBharati

9/9