BackCommerce ministry to move cabinet on CLMV investment structure
Move is part of an effort to derisk India from the impact of regional trade agreements and create new export clusters for Indian firms
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New Delhi: The commerce ministry will soon move the cabinet, seeking clearance for the structure to kick-start investments in Cambodia, Laos, Myanmar and Vietnam (CLMV)—part of an effort to derisk India from the impact of regional trade agreements and create new export clusters for Indian companies.
“A cabinet note will soon be moved to clear a project development company, special purpose vehicles and project development fund of ₹ 500 crore," a government official said on condition of anonymity.
In his budget speech, finance minister Arun Jaitley said the Act East policy of the National Democratic Alliance (NDA) was aimed at cultivating extensive economic and strategic relations in South-East Asia.
“In order to catalyse investments from the Indian private sector in this region, a project development firm will, through separate special purpose vehicles (SPVs), set up manufacturing hubs in CLMV countries," he said.
The project development company will be set up under Global Procurement Consultants Ltd (GPCL), a consulting firm promoted by Exim Bank, to kick-start investments in the CLMV group.
The subsidiary will subsequently create a number of special purpose vehicles with private entities, acquire a special economic zone (SEZ) or industrial park, develop it and then start allocating space in it to business entities in India against payment.
The first destination for investment is expected to be Vietnam, where a textile park could be developed. Of the four CLMV countries, Vietnam is part of ongoing negotiations for a 12-member Trans-Pacific Partnership agreement, which is expected to raise standards of trade, investment and intellectual property rights, making it difficult for non-members such as India to gain market access.
India is hoping that a presence in Vietnam can help it gain easier access to markets of developed member countries, including the US and Canada.
India’s exports to CLMV countries grew 38% to $6.4 billion in 2013-14, while its imports increased 4.2% to $4 billion during the same year.
The CLMV countries cover 32% of the geographical area of the Association of Southeast Asian Nations (Asean) region and account for around 9% of Asean’s gross domestic product. Asean includes Brunei, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Laos, Singapore, Thailand and Vietnam.
CLMV countries have been transiting from central planning to the market economy. CLMV nations, considered among the fastest growing economies in the region, are primarily agrarian. These economies are endowed with abundant natural resources and cheap labour, but they are plagued by underdeveloped infrastructure and logistics. Except Vietnam, the rest of the CLMV group is classified by the United Nations as least developed countries.
India’s plan to invest in CLMV countries is constructive for the region because these countries need investment capital in numerous sectors, said Joseph Lovell, senior partner at BNG Legal for Cambodia and Myanmar.
“India’s engagement as a partner in development is a win-win as it provides Indian business with opportunity in one of the world’s most rapidly growing regions while at the same time supporting growth in these emerging and frontier markets," Lovell said.
“Strategically, it allows India not to be eclipsed by China in a region where both countries have had great influence. This is key as the interests of the two emerging powers are not always identical," he added. “For CLMV nations, it allows a diversification of partnership which can help temper the influence that any one nation may gain through economic engagement, support and aid."
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