Let’s flow along with the Mekong

Imagine a highway that will take you right up to East Asia. Imagine a swathe of vibrant economic activity from Indian production centres across Myanmar, Thailand and Cambodia all the way up to Vietnam.

Such a corridor is no chimera. The Mekong-India Economic Corridor (MIEC) connects the fertile river basins of two great sub-continental rivers — the Ganga and the Brahmaputra — with the valleys and deltas of the mighty Mekong river, reinvigorating ancient links and building new bonds for the welfare of communities along its route.

Prime Minister Manmohan Singh recently spelled out his vision of India’s foreign policy in which regional connectivity, institutional capability and capacity-building played a prominent role.

Over the last two decades, India has systematically engaged in a series of sub-regional forums that aim to realise this vision. Since the turn of the century, specific economic cooperation arrangements have gathered pace, and initiatives such as Asean-India cooperation, Asean-India Regional Trade and Investment Area, Bay of Bengal Initiative for Multi-sectoral, Technical and Economic Cooperation (Bimstec) and others have strengthened.

The Mekong-Ganga cooperation initiative is one of the oldest of these, starting in 2000, but is perhaps the one where the least action has been taken, probably because it overlaps with other sub-regional platforms. So why should Asean and India think of reviving this under the MIEC?

Infrastructure gaps

For one, much of the region is underdeveloped and faces infrastructure gaps. A structured strategy of building the transport connections that can best leverage emerging opportunities is required.

There is need to set up deep sea ports, railways, highways, and power and telecom facilities in these areas — all this offers new investment opportunities. Secondly, while India has been rapidly progressing on its ‘Look East’ policy, the Mekong region countries have been relatively more dependent on advanced country markets.

Third, over the past decade, the Asian Development Bank (ADB) has been engaged in developing key infrastructure facilities, many of which are now operational and help to bring the different countries together. Finally, this strategic trade and investment sub-region has greatly gained from the opening up of Myanmar in recent years, which act as the bridge between Asean and India.

The Asean-India FTA is in operation, and merchandise trade between the two has soared from $7.1 billion in 2000 to almost $80 billion now. Further, Asean is the core of the emerging Regional Comprehensive Economic Partnership, embracing six other Asia-Pacific economies including China and India.

The combined population of 1.8 billion is relatively young and skilled — and greatly enjoys spending on goods and services at every income level.

The MIEC was one of the earlier corridors identified by the ADB, and includes the southern economic corridor which connects Chennai port to Bangkok through Dawei port in Myanmar on the sea route.

It passes through Ba Ria-Vung Tau and Ho Chi Minh in Vietnam, the MocBai-Bavet border, Phnom Penh in Cambodia, the Poipet-Aranyaprathet border, Bangkok, Kanchanaburi, Dawei and ends up in Chennai.

Unescap is also looking at land connectivity through the Asian Highway Network and the Trans-Asian Railways projects. Bimstec and the Trilateral Highway Initiative of India, Myanmar and Thailand additionally provide links among the countries of the MIEC.

However, it is not enough to merely build highways and sea routes. A lot more would need to be done to turn the connectivity projects into dynamic economic corridors that would act as development hubs for the participating regions.

Dynamic connectivity

To begin with, it is important to simultaneously look at the goods and services that are expected to travel along these routes.

By identifying specific products, other impediments to trade such as lack of manufacturing facilities, skill gaps, and bilateral agreements can be addressed in advance. The countries involved would need to have a clear strategy to align with global supply chains, factoring in the multiple free trade agreements that all of them have entered into with different trade partners.

Second, trade finance would be a key component of the economic corridor. Most of the countries in the proposed corridor are yet to fully develop their financial sectors, while capacities of private sector enterprises too are underdeveloped. Trade risks would need to be adequately covered through appropriate financial instruments such as lines of credit.

Third, trade facilitation must be a key endeavour going forward. Border trade infrastructure facilities need to be adequately created as also connected with the hinterland in each of the countries.

Customs harmonisation and mutual recognition standards should not be so difficult to manage since the MIEC participants are also members of the larger regional agreements between India and Asean.

Finally, private sector competitiveness would be a big issue going forward since small economies are involved. While countries such as Thailand, India and Vietnam have begun to address quality attainments, productivity and skill development, Myanmar and Cambodia are yet to set up institutional support for firms.

Private sector cooperation supported by governments as well as multilateral and bilateral development agencies can help examine and resolve some of these challenges.

Indian industry as the largest entity involved must take the lead in this and gain a strong foothold in the rapidly advancing regions along the Mekong.

( The author is Director-General, CII .)

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