The emerging Asean hotspot for India

As the global economic heft shifts eastwards, Indian industry too is looking for new opportunities in Asia. This is particularly true in our neighbourhood of Cambodia, Laos, Myanmar and Vietnam (CLMV), with which India has close historical links and which are emerging as resurgent economies.

Since India’s seminal Look East policy was initiated in the early 1990s, a strategic shift has transformed our relations with Asean, of which CLMV are member nations. Synergies between India and Asean are rooted in strong commercial, cultural and social commonalities. With the Asean-4, India has evolved a special model of cooperation which goes beyond trade and investment to assisting in capacity-building, rejuvenating people-to-people ties, and undertaking relevant and sustainable projects. Political and security cooperation extends to shaping the new Asian and regional security architecture and jointly working on maritime security concerns.

Asean — with which India has implemented a free trade agreement in goods and is finalising the agreement for services and investments — is expected to usher in the Asean Economic Community by 2015. Other initiatives such as for integration, narrowing of the development gap and the Master Plan on Asean Plus Connectivity too are being looked at. The CLMV group represents rapidly growing economies — with rising consumption, strategic location and access, rich natural resources and bio diversity, and an industrious workforce — offering India significant opportunities for trade in goods and services, investment and export of projects.

Bilateral benefits

The Indian Government has committed to setting up projects in the lower reaches of the Mekong river through the Mekong-Ganga Cooperation. The India-CLMV Quick Impact Project Fund will give a fillip to short gestation projects with an annual commitment of $1 million. India has also opened several centres for entrepreneurial development, English language training and vocational training in the region.

Additionally, the CLMV countries benefit from India’s trade policy for least developed countries, which places most imports from such countries under the zero-tariff regime.

These developments create a new level of opportunities for Indian businesses. Today, Asean has emerged as an important trade partner for India with bilateral exchange of goods at $76.7 billion in 2012-13. India and Asean have set a target of bilateral trade of $100 billion by 2015.

However, India's trade with CLMV countries was just $8.53 billion or 11 per cent of India's total trade with Asean in 2012-13, although this is a ten-fold rise from the level ten years ago.

Trade matters

India’s exports to the CLMV countries comprise mainly pharmaceuticals, machinery and instruments, vehicles, plastics and cotton. On the other hand, India’s key imports from the region include rubber, wood, ores and mineral fuels.

Regarding investments, Indian companies have committed about $2.6 billion in Myanmar and projects worth about $1 billion each in the other CLMV countries. Potential sectors of cooperation extend across agriculture, infrastructure, industry and services, and Indian industry must engage in all of these.

In agriculture, countries like Vietnam have made considerable progress in crops such as rice and coffee. Food processing, agricultural inputs, farm equipment and water and irrigation can be good areas of exchange. Development of ports, highways, airports, and new urban centres would offer consultancy, financing and turnkey opportunities. Oil and gas exploration has also attracted the interest of Indian companies.

Manufacturing, supported by facilitative policies, offers potential in sectors such as chemicals and fertilisers, automotives, pharmaceuticals, textiles and garments. The services sectors of education, healthcare, ICT, financial services and tourism, in particular, can absorb investments from Indian companies.

The CLMV countries enjoy a young workforce that is being groomed for globalisation. This can help improve people-to-people connectivity and strengthen India’s Inc’s brand image.

A real boost to trade can come from leveraging the historical land route between these countries and India. In his recent visit to Brunei for the Asean-India Summit, Prime Minister Manmohan Singh indicated his wish to extend the Trilateral Highway to these countries and also supported its linkages to ports in Asean and alignment with special economic zones. Additionally, protocols for Customs cooperation and mutual recognition agreements as well as air and sea connectivity between India and the CLMV nations need to be established.

Sectoral business delegations from both sides with specific projects and joint ventures in mind can explore opportunities. It is time Indian companies make the strategic decision to participate in the development process of CLMV countries for a sustainable and mutually-beneficial economic relationship.

(The author is Director General, CII.)

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