Feb 2, 2012

India, Myanmar to expand trade links. PM may offer $500m line of credit to Yangon

India and Myanmar will sign an umbrella agreement to widen their bilateral investment and trade relations during the proposed visit of prime minister Manmohan Singh in May this year.

As part of new trade and investment package, India will offer $500 million line of credit for which finance minister Pranab Mukherjee and external affairs minister SM Krishna have given a ‘go ahead’. Apart from cost-effective credit, both sides will jointly pursue large projects in railways, power, inland water transport, trade, banking, agriculture and road transport services.

National security advisor Shivshankar Menon chaired a meeting in PMO last fortnight with half a dozen secretaries to fine-tune the proposed agreement.

Major projects that will take off during prime minister’s visit include the border trade post at Rhi – Zawkhather. India will open border ‘haats’ along the Myanmar border. These commercial hubs would be on the lines of haats opened on Indo-Bangladesh border.

Similarly, finance ministry is also vetting a proposal of United Bank of India to set up five to seven branches and SBI to set up branches at all land customs points.

While RBI is pursuing the move to use Line of Credit (LC) to push larger trade, the commerce ministry is reviewing ‘credit’ worthiness of Myanmar. Commerce ministry is reviewing ECGC guidelines to give Myanmar ‘positive country’ status to ensure flow of cost-effective credit and guarantees.

These measures are being contemplated to arrest the decline in bilateral trade that was 9.7 per cent in 2010-11 at $1.35 billion vis-à-vis $1.49 billion in 2009-10. Exports from India to Myanmar include pharmaceutical products, iron and steel, prepared animal fodder, mechanical appliances and electrical machinery. Imports from Myanmar include vegetables, certain roots and tubers, wood and its articles as well as wood charcoal that declined by 21 per cent to $1.01 billion in 2010-11 as against $1.28 billion in the preceding year.

But, India may not actively pursue the 1200 mw Tamanthi hydroelectric po-wer project as it may not be ‘techno-economically’ feasible. Estimated cost of power from this venture may go up to as much as Rs 11 per unit given Myanmar’s request for 25 percent free power and share in equity of the venture. PMO has decided to put the power project on backburner, said an official on condition of anonymity. However, the government-run NHPC will expore the possibility of going ahead with Shwezaye power project in Myanmar with an installed capacity of 600 mw.

During Singh’s visit, both India and Myanmar will firm up the move to set up Kaladan multi-modal transit and transportation project for road connectivity betw-een two nations by exten-ding national highway 54 on Indian side to Myanmar border. PMO has apparently order both roads minister Kamal Nath and external affairs minister SM Krishna to ‘expedite the project’ to ens-ure seamless movement of goods between two countries.

Source: Financial Chronicle