Myanmar is looking to break out of its uneasy embrace with China. India should give its ties with Myanmar a push.

The recent visit to India by the President of Myanmar took place against the backdrop of significant changes in his country. When President Mr Thein Sein took office last November, there was much scepticism about the new ‘civilian' government. Since then he has surprised his critics by initiating a slew of political and economic reforms. To be sure, these are tentative first steps. But it is likely that the reforms will continue; for, the process is driven by three inter-related considerations that cannot be wished away.

First, Mr Thein Sein realises that if Myanmar is to break out of its international isolation, it will have to institute a modicum of political accountability and economic transparency. The trade and financial sanctions imposed by the US and the EU are unlikely to be lifted in the immediate future. But Myanmar could reasonably hope for much-needed technical assistance from international financial institutions.

Second, the government is rather keen to chair the Asean summit in 2014. The reforms currently under way are essential to secure the approval of other members of Asean. Tightening its links with these countries is critical both to enable Myanmar to deal with the consequences of an extended Western boycott and to prepare the ground for wider acceptance by the international community.

Third, Myanmar does not wish to be locked in an exclusive embrace with China. For a good part of the last six decades — to go back no further in time— it has had a troubled relationship with China.

Through the 1950s, the presence of Kuomintang fighters in Northern Burma and their American intelligence advisors was a major source of friction between the two countries. China, for its part, began supporting an insurgency led by the Communist Party of Burma. During the fevered years of Mao's Cultural Revolution, there was a major riot in Rangoon against Chinese people and property and a retaliatory siege of the Burmese embassy in Beijing.

EQUATION WITH CHINA

Things began to change in the early 1990s, when both countries faced international ostracism owing to the military takeover after the Myanmar elections of 1988 and the Tiananmen Square incident of 1989.

In the following years, China emerged as Myanmar's most dependable friend. China is by far the largest investor in Myanmar, its second largest trading partner (after Thailand) and largest source of imports, and its main supplier of military equipment. In 2009-10, China accounted for around 61.5 per cent of foreign investment and 47.3 per cent of Myanmar's trade.

The local economy of Myanmar's regions adjoining China is almost entirely controlled by Chinese entrepreneurs and businesses.

The bulk of Chinese investment in Myanmar is geared towards extraction of natural resources — oil, gas, hydropower, and minerals.

Myanmar's economists and officials are worried that only 15 per cent of the FDI last year was directed to manufacturing and services. Even in areas of potential comparative advantage such as garments and footwear, there has been no growth of small and medium enterprises.

The most dramatic expression of the unease over China's economic profile was Mr Thein Sein's decision to put on hold the $3.6 billion Myitsone hydro-electric project financed by the Chinese government.

Interestingly, this step followed the suspension of another such project in Bhamo.

The decision on Mytisone was all the more surprising because it was taken in response to popular protests in the Irrawaddy valley —protests that received the endorsement of Ms Suu Kyi. It is unwise to read too much into one incident, and Myanmar is already trying to mollify China.

But it is undeniable that Myanmar's ruling class is not only concerned about China's economic dominance in the country but also about its political implications.

INDIA'S OPPORTUNITIES

India could help address some these underlying issues and so provide impetus to the reforms in Myanmar. Before the 1960s, Myanmar had closer political ties with India than any of its other neighbours.

Thereafter Myanmar's self-imposed isolation and the junta's refusal to step down in favour of an elected government resulted in the deterioration of the relationship.

In the late 1980s and early 90s, New Delhi supported Ms Suu Kyi. But once the military junta's staying power became clear, India embarked on a course correction.

New Delhi now accorded greater priority to its economic and security interests. The former pertained to accessing Myanmar's huge gas reserves and improving connectivity in order to facilitate India's access to its north-eastern states as well as other south-east Asian countries.

The latter related to securing Myanmar's cooperation in tackling insurgent groups operating in north-east India and to ensuring that China's mounting presence in Myanmar did not impinge upon Indian interests in the country and in the Bay of Bengal.

There is considerable room for deepening economic and political ties with Myanmar. Bilateral trade in 2009-10 was a $1.2 billion, just 9.16 per cent of Myanmar's total trade. Pulses and wood products account for 97.5 per cent of Myanmar's exports to India; buffalo meat and pharmaceuticals account for 45 per cent of its imports from India. India is the 13th largest investor in the country: its investment amounting to a paltry $189 million.

The Indian private sector has little presence in Myanmar. The recent agreement to extend a credit line of $500 million is a welcome step.

But if India wants to redress its position in Myanmar, it must pay attention to three key issues.

For one thing, it needs to ensure timely delivery of projects. Excessive delay, particularly in infrastructure projects, calls into question India's credibility and invites unfavourable comparisons with China.

For another, it must focus on upgrading infrastructure in the north-east. Despite four Indian states sharing a border with Myanmar, the bulk of trade does not happen over land.

Similarly, the absence of a pipeline implies that India is unable to benefit fully from its investment in Myanmar's gas blocks. Finally, India should use its increasing influence in international forums to push for an end to the sanctions.

A Myanmar that is more closely integrated with the international community will have better prospects for sustained political reform.

And it will also advance India's interests in its extended eastern neighbourhood.

(The author is Senior Fellow, Centre for Policy Research, Delhi. blfeedback@thehindu.co.in)

(This article was published on October 17, 2011)
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