New Delhi: Export-Import Bank of India will open a branch in Yangon next month as part of India’s efforts to boost trade ties with Myanmar, as it opens itself to the global economy after decades of isolation.
“Myanmar is our priority area,” T.C.A. Ranganathan, chairman and managing director of the state-owned lender, said in an interview. “The MEA (ministry of external affairs) said that we should have our office there.”
India has been trying to leverage its aid and loan programmes to counter Chinese influence on the South-East Asian economy. Myanmar’s attempt to improve its creaky infrastructure also holds out the promise of lucrative contracts for foreign companies.
Myanmar needs $650 billion (around Rs.42 trillion today) in investment by 2030 to support growth, according to a McKinsey and Co. report. Of this, $320 billion is required in infrastructure. More than 70% of Myanmar’s 60 million people live in rural areas.
India has already extended a $500 million credit line to Myanmar. Exim Bank has also extended seven credit lines totalling $247.4 million to Myanmar Foreign Trade Bank (MFTB) for projects such as the upgrade of Yangon-Mandalay railway system. Separately, Exim Bank has also given $50 million to MFTB, which has to be activated.
“We have given our application to the government of Myanmar and it will be inaugurated next month,” Ranganathan said. “There are some Indian companies who are already working in Myanmar and there are some Indian companies who plan to set up shop there.”
Exim Bank has given 167 credit lines totalling $8.57 billion to 75 countries. It has loan assets of Rs.65,563 crore and registered a net profit of Rs.742 crore in the last fiscal year.
India has been trying to expand banking in Myanmar. New Delhi was exploring opportunities to set up a bank through a joint venture in Myanmar as the country’s unsophisticated banking system poses a challenge for any country seeking to do business with it, Mint reported on 7 June. Indian lenders, including State Bank of India, the country’s largest, and United Bank of India, have shown interest in starting operations in Myanmar. United Bank is present in the country through a representative office.
Myanmar is key to India from a strategic point of view, given its proximity to the northeastern region, said Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations. “India is lagging behind China in developing its relations with Myanmar,” she said. “It has also to develop its northeastern region to reap benefits from the opportunities in Myanmar.”
India’s interest in Myanmar also stems from the promise of the country’s economy growing to $90 billion by 2018. Prime Minister Manmohan Singh’s visit to Myanmar last year was the first such visit in some 25 years.
India plans to use its buyer’s credit scheme under the National Export Insurance Account, which is operated by the Exim Bank, to engage with Myanmar economically. Through this scheme, Exim Bank extends credit facility to overseas sovereign governments and government-owned entities for import of goods and services from India on deferred credit terms.
India also wants to offer Myanmar its 2% interest subvention scheme for project exports to South Asian Association for Regional Cooperation countries.
India’s engagement with Myanmar has not been encouraging. The South-East Asian nation scrapped two hydroelectric projects being planned with India’s assistance at Tamanthi and Shwezaye on the Chindwin river in Myanmar. India’s earlier attempts to secure gas supplies from Myanmar have also failed.
Trade between Myanmar and India in 2012-13 was worth a little over $1.8 billion. India’s exports to Myanmar in the last fiscal year accounted for $532 million and imports from it at $1.33 billion. The two countries have set a target of $3 billion of bilateral trade by 2015.
India’s total investments in Myanmar are around $273 million, and the number is expected to rise to $2.6 billion in the next few years. India is Myanmar’s fourth largest trading partner after Thailand, Singapore and China. There has been considerable interest in Myanmar’s energy sector from neighbouring countries including China and India, both fast-growing major economies. Of Myanmar’s overall trade of around $19 billion, China accounts for around $5 billion.