india's strategy for economic integration with...

India's Strategy for Economic Integration

with CLMV

Dr. RAM UPENDRA DAS

Department of Commerce

Ministry of Commerce and Industry

Government of India

lR;eso t;rs

India’s Strategy for Economic Integration with CLMV

India’s Strategy for Economic Integration with CLMV

by

Dr. Ram Upendra Das

Department of CommerceMinistry of Commerce and Industry

Government of India

lR;eso t;rs

All rights served. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior notice to or permission from the Publisher.

ISBN: 81-7122-109-2

Department of CommerceMinistry of Commerce and Industry Government of IndiaNew Delhi© 2015

ContEntS

Foreword by Shri Rajeev Kher, Commerce Secretary, Government of India ....................................vii

Acknowledgements ............................................................................................................................ix

Executive Summary ...........................................................................................................................xi

Chapter 1: Introduction ............................................................................................................1

Chapter II: Why CLMV?: Rationale for Economic Integration between India and CLMV ....................................................................................................5

Chapter III: Where cooperation?: Potential Goods, Services and FDI Sectors with complementarities ........................................................................................21

Chapter IV: How?: RVCs-Stages of Production in Identified Sectors Relevant for India ..................................................................................................25

Chapter V: Integrated Approach: Trade in Goods & Services and O-FDI in RVCs ........31

Chapter VI: Challenges in the Existing Scenario ....................................................................37

Chapter VII: Insights gained from Stakeholders’ Consultations ...........................................41

Chapter VIII: What and How of Cooperation?: Policy Strategy and Recommendations-RVCs and an Integrated Approach ..................................45

References ..................................................................................................................................55

Annexures ..................................................................................................................................57

Room No. 143, Udyog Bhawan, Tel.: 23063664 / Fax: 23061796 / E-mail : [email protected]

ACknowLEDGMEntS

Author is immensely grateful to Mr. Rajeev Kher, Commerce Secretary, Government of India for getting this study initiated. Important insights received from Mr Ravi Capoor, Joint Secretary and Ms. Amrit Raj, Director, Ministry of Commerce and Industry, GOI are gratefully acknowledged. The study benefitted from valuable discussions during the Inter-Ministerial Meetings convened by the Commerce Secretary on 8 July 2014 and 10 March 2015 in New Delhi including the submissions made by stakeholders and Ministries. Thanks are also due to Ms. Gamika Takkar for sincere research support, as well as Ms. Nitya Batra at the final stages of the study. The funding received from the Ministry of Commerce and Industry, GOI is also gratefully acknowledged. Thanks are also due to Mr. Tish Malhotra and Mr. Sachin Singhal for publication-related valuable technical support. However, usual disclaimers apply.

I. why CLMV?: Rationale for Economic Integration between India and CLMV

• Greater headroom for establ ishing commercial and economic linkages: Since CLMV are lesser developed economies, characterized with untapped potential for development, they offer more scope for scaling up economic linkages with India. They have also displayed tremendous GDP and GDP per capita growth dynamism in recent years. The development divide between the CLMV region and the rest of the ASEAN region is also evident. Thus, a better understanding of CLMV economies is needed, also as their developmental challenges are similar to India.

• Imperatives of economic cooperation are even more pronounced due to locational proximity with India. These also reflect in lower transportation costs and time.

• Cheap labour cost advantage in CLMV, open trade and FDI policy regimes and gradually improving infrastructure make CLMV an ideal setting for India to

harness the untapped economic potential that may exist in these countries.

• CLMV are keen to collaborate with India also due to the fact that they do not get adequate support from other ASEAN members – this could be helpful in India’s negotiations in RCEP i.e. ASEAN+6 etc. as they look up to India for leadership.

• Despite these advantages, the present India-CLMV economic linkages, both in trade and FDI, are considerably weak.

• On the o ther hand , the ma jor multinationals are already present in CLMV and there is a downside risk that India may miss the bus in terms of harnessing perhaps the last opportunity in terms of labour-cost arbitrage.

• There are several sectors in CLMV that have been identified as focus sectors by the CLMV governments such as agro-processing, oil and gas, pharmaceuticals, wood and timber, light engineering, garments, automobiles, education, IT, SMEs, tourism, skill development. These need to be taken cognizance of.

Executive Summary

IndIa’s strategy for economIc IntegratIon wIth cLmV

xii

• It has also been found that one of the most important ingredients of setting up business is skill availability and there exists considerable skill complementarity between India and CLMV in terms of skill availability in India matched with unavailability in CLMV.

II. where Cooperation?: Potential Goods, Services and FDI Sectors with Complementarities

• Various methodologies have been used to identify potential sectors for cooperation and building RVCs between India and CLMV. These include Dynamic RCA, Intra-Industry Trade, Cosine Index, Stakeholders’ Consultation, and secondary material. In doing so, by combining goods, services and FDI, an integrated approach is adopted.

• Potential sectors in goods’ trade and manufacturing are identified as Textiles and Garments, Processed Food, Electrical and Electronic Equipments, Pharmaceuticals, Gems and Jewellery, Marine and Seafood, Oil and Natural Gas, Automobile parts, Iron and Steel, Articles of Iron and Steel, Leather and Rubber and Rubber articles.

• Potential sectors in trade in services are identified as Software and ICT Services, Telecommunication services, Capacity Building, Agri-Diagnostic services, Health, Financial services, Professional Services, Education, Transport , Tourism and Travel Related Services.

• Potential sectors for India’s Outward- FDI (O-FDI) are identified as Marine Sector, Agriculture, Electrical and Electronic Equipments, Pharmaceuticals, Petroleum, Automobiles, Steel, Leather, Gems and Jewellery and Textiles and Garments.

• These together provide the basis for combining the sectors from goods, services and O-FDI into one whole integrated framework.

• The question where India could fit into the value chains was also identified through specific stages of production.

III. Challenges in the Existing Scenario

Some of the major challenges confronting the India-CLMV economic relations include:

• Information gap

• Asymmetric

• Inconsistent

• Inadequate

• Communication gap: limited interactions at various levels

• Integrating SME in RVCs

• Banking constraints

• Capacity building/Skill development

• Technical support

• Facilitating O-FDI

• Infrastructural constraints-Physical/Digital/soft

IV. what and How of Cooperation?: Policy Strategy and Recommendations-RVCs and an Integrated ApproachThe underdevelopment of CLMV is a developmental opportunity for India is the backdrop in which this study has provided sufficient rationale for economic integration between India and the CLMV region. In doing so, the study has found that the present levels of economic linkages including trade and investment between the two remain weak and low. On the other hand, the study finds

ExECuTIVE SuMMARy

xiii

enormous potential for a more heightened economic integration between India and the CLMV region in the domains of trade in goods, trade in services and FDI. Not only the sectors have been identified for this purpose in the study, they have also been placed in an Integrated Framework to enhance trade and investment flows as well as to tap skill complementarities so that regional value chains between India and CLMV could be created and strengthened. The study also finds that while there are enormous challenges that may have to be addressed, one of the important ways of utilising the CLMV’s economic space is by setting up manufacturing units in the region and access the Chinese markets through exports originating from CLMV under the China-ASEAN FTA. Given these, a summary of findings of the study for creating potential RVCs is presented in Table A.

In the light of broad concluding insights that the study presents, some broad contours of India’s strategy for economic integration with the CLMV region are presented by way of Policy Recommendations. They are divided into two parts, viz. theme-specific and horizontal. For theme-specific recommendations one may refer to Table B.

k e y H o r i z o n t a l P o l i c y Recommendations• Creating India-CLMV Convergence of

Interests in Regional trade negotiations: India must engage CLMV as it wants India to play a more pro-active role. This is because these countries often do not get their voices heard in the ASEAN Caucus. Therefore, India-CLMV relations could be important bedrock for even the RCEP negotiations where India can get support from these countries.

• Regional Value Chains (RVCs): Given the backdrop of India’s participation in RVCs being relatively low and the fact that

RVCs are not well-developed in CLMV, one of the prime strategies for India’s economic integration with CLMV region is to create RVCs. This is in contrast to the fact that RVCs have huge presence in ASEAN. Regional value chains entail relocation of production bases at different stages of production and manufacturing in different countries that are linked with services. The net outcome of such relocation is in terms of efficiency-seeking industrial restructuring. For this to be achieved, an integrated approach towards policy strategy is required.

• IntegratedApproach: IdentifiedSectorsand Integrated Policy Responses: As the study has highlighted, instead of addressing issues for trade augmentation and increase in FDI in an isolated manner, we need to adopt an integrated approach. For this to happen, trade in goods, trade in services and especially India’s outward FDI to CLMV region need to have integrated policy responses whereby interlinkages across these are well recognised. In addition, these would have a bearing on the evolving policy responses to interlinkages across sectors in the realms of agriculture, manufacturing and services. These need to be further aligned with the national level focus sectors in the CLMV region in order to harness inter-sectoral complementarities between India and each country of the CLMV region.

• Alignment of India’s Commercial Interests with CLMV’s Policy Focus: India must economically integrate with the CLMV also due to enormous comparative advantage and developmental experience that exist in India in areas that are identified as focus sectors as part of the respective national vision of each of the countries of the CLMV region. There are several sectors that qualify for such economic


xiv

tabl

e A

: Sum

mar

y of

Fin

ding

s fo

r Pot

entia

l RV

Cs

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

trad

e in

Goo

dsTe

xtil

es a

nd G

arm

ents

; G

ems

and

Jew

elle

ry;

Aut

omob

ile p

arts

; Lea

ther

; R

ub

ber

an

d R

ub

ber

ar

ticl

es,

Ele

ctri

cal

and

Elec

tron

ic E

quip

men

ts;

Iron

and

Ste

el, A

rtic

les

of

Iron

and

Ste

el; P

roce

ssed

Fo

od; O

il an

d N

atur

al G

as

Rub

ber

and

Rub

ber

arti

cles

; Ph

arm

aceu

tical

s, E

lect

rica

l and

El

ectr

onic

Equ

ipm

ents

; Ir

on

and

Stee

l, A

rtic

les

of I

ron

and

Stee

l; Pr

oces

sed

Food

; Oil

and

Nat

ural

Gas

Tex

tile

s an

d

Gar

men

ts;

Pha

rmac

euti

cals

; G

ems

and

Jew

elle

ry; M

arin

e an

d Se

afoo

d;

Aut

omob

ile,

E

lect

rica

l an

d El

ectr

onic

Equ

ipm

ents

; Iro

n an

d St

eel,

Art

icle

s of

Iro

n an

d St

eel;

Proc

esse

d Fo

od; O

il an

d N

atur

al

Gas

Te

xti

les

an

d

Ga

rme

nts

; Ph

arm

aceu

tical

s; G

ems a

nd Je

wel

lery

; M

arin

e an

d Se

afoo

d; A

utom

obile

; Le

athe

r; Ru

bber

and

Rub

ber a

rtic

les,

El

ectr

ical

and

Elec

tron

ic E

quip

men

ts;

Iron

and

Ste

el, A

rtic

les

of I

ron

and

Stee

l; P

roce

ssed

Foo

d;

Oil

and

N

atur

al G

as

tr

ad

e

in

Serv

ices

Agr

i Dia

gnos

tic s

ervi

ces:

Si

ngle

win

dow

del

iver

y sy

stem

for

tec

hnol

ogy

pro

du

cts,

dia

gn

osti

c se

rvic

es a

nd i

nfor

mat

ion

thro

ugh

Agr

icu

ltu

ral

Tech

nolo

gy I

nfor

mat

ion

Cen

tres

.t

ra

ns

po

rt

&

in

fras

truc

ture

: In

tern

al

Wat

erw

ays-

Pas

seng

er

& F

reig

ht t

rans

port

atio

n,

Ren

tal

of v

esse

ls w

ith

crew

, Mai

nten

ance

rep

air

of v

esse

ls, P

ushi

ng to

win

g se

rvic

es, R

ail-

Pass

enge

r &

Frei

ght

tran

spor

tatio

n,

Push

ing

tow

ing

serv

ices

, M

aint

enan

ce &

rep

air

of

rail

equ

ipm

ent,

R

oad-

P

asse

ng

er &

Fre

igh

t tr

ansp

orta

tion,

Ren

tal

of

com

mer

cial

veh

icle

s w

ith

oper

ator

, M

aint

enan

ce

repa

ir o

f roa

d eq

uipm

ent.

Agr

i Dia

gnos

tic se

rvic

es: S

ingl

e w

indo

w d

eliv

ery

syst

em f

or

tech

nolo

gy p

rodu

cts,

diag

nost

ic

serv

ices

an

d i

nfo

rmat

ion

thro

ug

h

Ag

ricu

ltu

ral

Tec

hn

olo

gy

In

form

atio

n C

entr

es.

tra

nspo

rt &

inf

rast

ruct

ure:

In

tern

al W

ater

way

s- P

asse

nger

&

Fre

igh

t tr

ansp

orta

tion

, R

enta

l of

ves

sels

wit

h cr

ew,

Mai

nten

ance

rep

air

of v

esse

ls,

Pu

shin

g to

win

g se

rvic

es,

Rai

l- P

asse

nge

r &

Frei

ght

tran

spor

tatio

n, P

ushi

ng to

win

g se

rvic

es, M

aint

enan

ce &

repa

ir of

ra

il eq

uipm

ent,

Roa

d- P

asse

nger

&

Fre

ight

tran

spor

tatio

n, R

enta

l of

com

mer

cial

veh

icle

s w

ith

oper

ator

, Mai

nten

ance

repa

ir o

f ro

ad e

quip

men

t.

Agr

i Dia

gnos

tic se

rvic

es: S

ingl

e w

indo

w d

eliv

ery

syst

em f

or

tech

nolo

gy p

rodu

cts,

dia

gnos

tic

serv

ices

an

d i

nfo

rmat

ion

thro

ugh

Agr

icul

tura

l Tec

hnol

ogy

Info

rmat

ion

Cen

tres

.t

rans

port

& i

nfra

stru

ctur

e:

Inte

rnal

Wat

erw

ays-

Pas

seng

er &

Fr

eigh

t tra

nspo

rtat

ion,

Ren

tal o

f ve

ssel

s w

ith c

rew

, Mai

nten

ance

re

pair

of v

esse

ls, P

ushi

ng to

win

g se

rvic

es, R

ail-

Pass

enge

r &Fr

eigh

t tr

ansp

orta

tion,

Pus

hing

tow

ing

serv

ices

, Mai

nten

ance

& re

pair

of

rail

equi

pmen

t, R

oad-

Pas

seng

er

& F

reig

ht tr

ansp

orta

tion,

Ren

tal

of c

omm

erci

al v

ehic

les

wit

h op

erat

or, M

aint

enan

ce r

epai

r of

ro

ad e

quip

men

t.

Agr

i D

iagn

osti

c se

rvic

es:

Sin

gle

win

dow

del

iver

y sy

stem

for

te

chno

logy

pro

duct

s, d

iagn

osti

c se

rvic

es a

nd i

nfor

mat

ion

thro

ugh

Agr

icul

tura

l Tec

hnol

ogy

Info

rmat

ion

Cen

tres

.En

viro

nmen

t and

ene

rgy

savi

ng:

cons

erva

tion

of

natu

re a

nd i

ts

reso

urce

s; p

rote

ctio

n of

envi

ronm

ent

from

pol

luti

on,

cons

erva

tion

of

eco

log

y;

C

om

mu

nit

y a

nd

Hab

itat

Eco

logy

; en

viro

nmen

tal

econ

omic

s; c

onse

rvat

ion

of p

rior

ity

med

icin

al p

lant

s;

poll

utio

n an

d re

habi

litat

ion

of d

ispl

aced

peo

ple

due

to d

evel

opm

enta

l ac

tivi

ties

; E

nv

iron

men

tal

Scie

nce

s an

d En

gine

erin

g;

New

and

Ren

ewab

le

Ener

gy;

sola

r en

ergy

tec

hnol

ogy;

en

erg

y-s

avin

g t

ech

niq

ues

in

man

ufa

ctu

rin

g an

d c

onsu

mer

du

rabl

es

Tabl

e A: c

ontin

ued.

..

ExECuTIVE SuMMARy

xv

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Hu

ma

n

Re

so

urc

e D

evel

opm

ent/

Cap

acit

y B

uil

din

g:

Tra

inin

g of

far

mer

s, T

rain

ing

of

exte

nsi

on p

erso

nn

el,

Voc

atio

nal t

rain

ing.

Educ

atio

n: E

duca

tion

al

inst

itut

es,

univ

ersi

ties

, En

glis

h La

ngua

ge tr

aini

ng

cent

res,

Soc

ial

Scie

nce

&

Hu

man

itie

s,

Med

ical

Sc

ienc

e ,

Man

agem

ent

Educ

atio

n.t

ouri

sm a

nd

tra

vel

Rel

ated

Ser

vice

s: H

otel

s an

d r

esta

ura

nts

(inc

l. ca

teri

ng),

Trav

el a

genc

ies

and

to

ur

op

erat

ors

’ se

rvic

es,

Tour

ist

guid

es

serv

ices

Hea

lth:

Hos

pita

l ser

vice

s-

lea

din

g

hea

lth

care

fa

cili

ties

, M

edic

al a

nd

dent

al se

rvic

es, V

eter

inar

y se

rvic

es, S

ervi

ces p

rovi

ded

by m

idw

ives

, n

urs

es,

phys

ioth

erap

ists

and

para

-m

edic

al p

erso

nnel

.

Ed

uca

tio

n:

Ed

uca

tio

nal

in

stitu

tes,

uni

vers

ities

, Eng

lish

Lan

guag

e tr

aini

ng c

entr

es,

Soci

al S

cien

ce &

Hum

aniti

es,

Med

ical

Sci

ence

, M

anag

emen

t Ed

ucat

ion.

Soft

war

e an

d IC

t S

ervi

ces:

C

omp

ute

r so

ftw

are,

Dat

a pr

oces

sing

ser

vice

s, D

ata

base

se

rvic

es.

Pro

fes

sio

na

l/

Lig

ht

Engi

neer

ing

Serv

ices

: Le

gal

Serv

ices

, Acc

ount

ing,

aud

iting

an

d b

ookk

eep

ing

serv

ices

, Ta

xatio

n Se

rvic

es ,

Engi

neer

ing

serv

ices

, u

rban

pla

nnin

g an

d la

ndsc

ape a

rchi

tect

ural

serv

ices

tou

rism

and

tra

vel

Rel

ated

Se

rvic

es: H

otel

s and

rest

aura

nts

(incl

. cat

erin

g), T

rave

l age

ncie

s an

d to

ur o

pera

tors

’ se

rvic

es,

Tour

ist g

uide

s se

rvic

es.

Hea

lth:

Hos

pit

al s

erv

ices

- le

adin

g he

alth

care

fac

iliti

es,

Med

ical

and

den

tal

serv

ices

, V

eter

inar

y se

rvic

es,

Serv

ices

pr

ovid

ed b

y m

idw

ives

, nur

ses,

ph

ysio

ther

apis

ts a

nd p

ara-

med

ical

per

sonn

el.

tel

ecom

mun

icat

ion

serv

ices

: V

oice

tele

phon

e ser

vice

s, Pa

cket

-sw

itch

ed &

Cir

cuit

-sw

itch

ed

data

tran

smis

sion

serv

ices

, Tel

ex

serv

ices

, Te

legr

aph

serv

ices

, Pr

ivat

e le

ased

cir

cuit

serv

ices

, E

lect

roni

c m

ail,

Voi

ce m

ail,

On-

line

info

rmat

ion

and

data

ba

se r

etri

eval

, el

ectr

onic

dat

a in

terc

hang

e (E

DI).

Fina

ncia

l ser

vice

s: In

sura

nce a

nd

rela

ted,

Ban

king

.t

ouri

sm a

nd t

rave

l R

elat

ed

Serv

ices

: Hot

els a

nd re

stau

rant

s (in

cl. c

ater

ing)

, Tra

vel

agen

cies

an

d to

ur o

pera

tors

’ se

rvic

es,

Tour

ist g

uide

s se

rvic

esH

ealth

: H

osp

ital

ser

vic

es-

lead

ing

heal

thca

re f

acil

itie

s,

Med

ical

and

den

tal

serv

ices

, V

eter

inar

y se

rvic

es,

Serv

ices

pr

ovid

ed b

y m

idw

ives

, nur

ses,

p

hysi

othe

rap

ists

and

par

a-m

edic

al p

erso

nnel

.

Hea

lth:

Hos

pita

l se

rvic

es-

lead

ing

heal

thca

re f

acili

ties

, M

edic

al a

nd

dent

al s

ervi

ces,

Vet

erin

ary

serv

ices

, Se

rvic

es p

rovi

ded

by m

idw

ives

, nu

rses

, phy

siot

hera

pist

s an

d pa

ra-

med

ical

per

sonn

el.

Tabl

e A: c

ontin

ued.

..

Tabl

e A: c

ontin

ued.

..


xvi

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Indi

an o

FDI

oil

& G

as:

Oil

an

d ga

s E

xplo

rati

on,

Lig

ht

Pet

role

um

o

ils

and

pre

par

atio

ns,

Oth

er

pet

role

um

o

ils

and

prep

arat

ions

.A

gri

cult

ure

: F

arm

M

echa

niza

tion

: P

add

y dr

um s

eede

r, T

ract

ors,

P

add

y t

ran

spla

nte

r,

Pow

er T

iller

, Zer

o til

l dri

ll;

Rub

ber

tech

nolo

gy s

uch

as R

ubbe

r ro

ller

ginn

ing

mac

hine

.M

arin

e Se

ctor

: In

dia

's

m-k

rishi

advi

sory

serv

ices

; Po

st h

arve

st m

anag

emen

tS

teel

: Ir

on a

nd S

teel

, A

rtic

les

of Ir

on a

nd S

teel

Leat

her:

Raw

hid

es, S

kins

an

d Le

athe

rG

ems

and

Jew

elle

ry:

Cu

ttin

g an

d p

olis

hing

of

Dia

mon

d a

nd o

ther

ge

ms,

Gol

d j

ewel

lery

ex

port

s, D

iam

ond

trad

ing

inst

itutio

ns: T

rain

ing

Ag

ric

ult

ur

e:

Fa

rm

M

echa

niza

tion

: Pa

ddy

drum

se

eder

, T

ract

ors

, P

add

y tr

ansp

lant

er, P

ower

Till

er, Z

ero

till

drill

; R

ubbe

r te

chno

logy

su

ch a

s R

ubbe

r ro

ller

ginn

ing

mac

hine

.P

ha

rm

ac

eu

ti

ca

ls

: P

har

mac

euti

cal

pro

du

cts

mfg

.: ch

emis

try

and

proc

ess

reen

gine

erin

g sk

ills

Mar

ine

Sect

or: I

ndia

's m

-kri

shi

advi

sory

ser

vice

s; P

ost h

arve

st

man

agem

ent

Stee

l: Ir

on a

nd S

teel

, Art

icle

s of

Iron

and

Ste

elLe

athe

r: Ra

w h

ides

, Ski

ns a

nd

Leat

her

Gem

s an

d Je

wel

lery

: Cut

ting

and

polis

hing

of D

iam

ond

and

othe

r ge

ms,

Gol

d je

wel

lery

ex

por

ts,

Dia

mon

d t

rad

ing

inst

itutio

ns: T

rain

ing

oil

& G

as:

Oil

an

d g

as

Expl

orat

ion,

Lig

ht P

etro

leum

oi

ls a

nd p

repa

rati

ons,

Oth

er

petr

oleu

m o

ils a

nd p

repa

ratio

ns.

Agr

icul

ture

: Far

m M

echa

niza

tion:

Pa

ddy

drum

see

der,

Tra

ctor

s,

Padd

y tr

ansp

lant

er, P

ower

Till

er,

Zero

till

drill

; Rub

ber t

echn

olog

y su

ch a

s R

ubbe

r ro

ller

ginn

ing

mac

hine

. Ph

arm

aceu

tical

s: Ph

arm

aceu

tical

pr

oduc

ts m

fg.:

chem

istr

y an

d pr

oces

s re

engi

neer

ing

skill

ste

xtile

s an

d G

arm

ents

: Cot

ton,

Si

lk,

Woo

l, M

anm

ade

stap

le

fibr

es,

Man

mad

e fi

lam

ents

, A

rtic

les

of a

ppar

el, a

cces

sori

es,

knit

or

croc

het,

Impr

egna

ted,

co

ated

or l

amin

ated

text

ile fa

bric

sM

arin

e Se

ctor

: Ind

ia's

m-k

rish

i ad

viso

ry s

ervi

ces;

Pos

t ha

rves

t m

anag

emen

tSt

eel:

Iron

and

Ste

el, A

rtic

les

of

Iron

and

Ste

elLe

athe

r: R

aw h

ides

, Ski

ns a

nd

Leat

her

Gem

s and

Jew

elle

ry: C

uttin

g an

d po

lishi

ng o

f Dia

mon

d an

d ot

her

gem

s, G

old

jew

elle

ry e

xpor

ts,

Dia

mon

d tr

adin

g in

stit

utio

ns:

Trai

ning

Agr

icul

ture

: Far

m M

echa

niza

tion:

Pa

ddy

drum

seed

er, T

ract

ors,

Pad

dy

tran

spla

nter

, Pow

er T

iller

, Zer

o til

l dr

ill;

Rub

ber

tech

nolo

gy s

uch

as

Rubb

er ro

ller g

inni

ng m

achi

ne.

Elec

tric

al an

d El

ectr

onic

Equ

ipm

ents

: El

ectr

onic

com

pone

nts,

Mot

ors,

Sim

C

ards

, Par

ts o

f Rad

io &

tran

sfor

mer

s, P

rint

ed c

ircu

its,

Tra

nsfo

rmer

s;

Com

pute

r ha

rdw

are:

D

isc

Dri

ves,

Pe

rson

al C

ompu

ters

, Sm

art

card

s ;

Tele

com

: Mob

ile P

hone

s, T

elec

om

&Te

levi

sion

Rec

epti

on a

ppar

atus

, op

tical

fibr

e ca

ble,

Set

Top

box

.A

utom

obil

es:

Mot

orcy

cles

wit

h re

cip

roca

tin

g p

isto

n e

ng

ine

dis

pla

cin

g> 5

0 cc

to

250

cc ,

A

utom

obil

es w

ith

reci

proc

atin

g pi

ston

eng

ine

disp

laci

ng>

1000

cc

to 1

500

cc; >

150

0 cc

to 3

000,

Mot

or

Veh

icle

par

ts, D

rive

Tra

nsm

issi

on,

En

gin

e P

arts

, P

asse

ng

er

&

Com

mer

cial

veh

icle

s, T

wo-

whe

eler

s &

Thr

ee w

heel

ers

Mar

ine

Sect

or:

Indi

a's

m-k

rish

i ad

viso

ry s

ervi

ces;

Pos

t ha

rves

t m

anag

emen

tSt

eel:

Iron

and

Ste

el, A

rtic

les o

f Iro

n an

d St

eel

Leat

her:

Raw

hid

es, S

kins

and

Leat

her

Gem

s an

d Je

wel

lery

: Cut

ting

and

polis

hing

of D

iam

ond

and

othe

r gem

s, G

old

jew

elle

ry e

xpor

ts,

Dia

mon

d tr

adin

g in

stitu

tions

: Tra

inin

g

Tabl

e A: c

ontin

ued.

..

Tabl

e A: c

ontin

ued.

..

ExECuTIVE SuMMARy

xvii

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Skill

s ava

ilabl

e in

In

dia

an

d re

qu

ired

by

CLM

V

tex

tile

s an

d G

arm

ents

: H

igh

tech

nolo

gy, f

ashi

on

and

man

agem

ent

IC

t

an

d t

elec

om

mu

nic

atio

n:

so

ft

wa

re

a

nd

tele

com

mu

nic

atio

ns

engi

neer

ing

Ph

arm

aceu

tica

ls a

nd

Med

icin

e:

Do

cto

rs,

Phar

mac

ists

, Nur

ses

Mar

ine

and

Sea

food

: hy

gien

ic h

andl

ing,

sort

ing,

w

eigh

ing

and

pack

ing

fish,

cr

eatio

n of

stor

age f

acili

ties

and

mod

ern

equi

pmen

ts

Ru

bb

er a

nd

Ru

bb

er

artic

les:

Rub

ber

plan

ting

tech

niqu

es

Bam

boo

sect

or: M

achi

nery

w

ith

late

st t

echn

olog

y,

incl

udin

g sp

littin

g pr

oces

s

Ele

ctri

cal

and

Ele

ctro

nic

Eq

uipm

ents

: E

ngin

eers

and

te

chni

cian

s

Aut

omob

ile p

arts

: M

echa

nica

l en

gine

ers

Rub

ber

and

Rub

ber

arti

cles

: L

acks

ap

pro

pri

ate

rubb

er

deve

lopm

ent t

echn

olog

y; m

ost

of t

he d

istr

icts

hav

e un

skill

ed

labo

ur

woo

d s

ecto

r:

Tra

dit

iona

l se

ctor

s of

car

pent

ry, f

urni

ture

-m

akin

g, c

onst

ruct

ion

Bam

boo

sec

tor:

M

oder

n te

chno

logy

text

iles

and

Gar

men

ts: s

kille

d te

xtile

wor

kers

ICt

and

tele

com

mun

icat

ion:

IT

tech

nici

ans,

eng

inee

rs

Phar

mac

eutic

als

and

Med

icin

e:

Den

tists

and

pha

rmac

ists

Ge

ms

an

d

Jew

ell

ery

: eq

uipm

ent a

nd c

ompu

ter-

aide

d m

anuf

actu

ring

Mar

ine

and

Seaf

ood:

M

oder

n te

chno

logy

oil

and

nat

ural

Gas

: Exp

erie

nced

an

d sk

illed

tech

nici

ans i

n oi

l and

ga

s exp

lora

tion

and

deve

lopm

ent

tex

tile

s an

d G

arm

ents

: H

uman

re

sour

ce tr

aini

ng o

f mid

dle

and

high

cl

ass

man

agem

ent,

tech

nolo

gy, a

nd

fash

ion

desi

gn a

re w

eak;

Lac

k of

sk

illed

wor

kers

with

exp

erie

nce

in

tech

nolo

gyPr

oces

sed

Food

: C

urre

ntly

, fa

ces

defi

cit

in t

echn

ical

exp

erts

, la

ck

of h

igh-

tech

equ

ipm

ents

; Im

port

s m

oder

n eq

uipm

ents

; The

gov

ernm

ent

is i

mpl

emen

ting

seve

ral

prog

ram

s to

enh

ance

foo

d (in

clud

ing

Dai

ry)

proc

essi

ng te

chno

logi

es.

ICt

an

d t

elec

omm

un

icat

ion

: sh

orta

ge o

f man

pow

er (t

echn

icia

ns)

Mar

ine

and

Seaf

ood:

O

utda

ted

pre

serv

ati

on

te

chn

iqu

es;

D

evel

opm

ent p

lans

incl

ude a

dopt

ion

of a

dva

nced

tec

hnol

ogie

s an

d im

prov

ed t

rain

ing

for

staf

f an

d te

chni

cian

so

il a

nd n

atur

al G

as:

Shor

tage

of

tech

nica

l exp

ertis

eA

utom

obil

e pa

rts:

R

isin

g la

bour

co

st f

or u

nski

lled

labo

ur a

nd t

he

shor

tage

of s

kille

d en

gine

ers;

Nee

ds

upgr

adat

ion

of sk

ills a

nd te

chno

logy

woo

d s

ecto

r:

Ou

tdat

ed a

nd

unsy

nchr

oniz

ed m

achi

nes

and

tool

s us

ed fo

r pro

cess

ing

of n

atur

al w

ood,

es

peci

ally

for

the

pro

cess

ing

of fi

ne

prod

ucts

Bam

boo

sect

or: N

eeds

cap

ital

and

upda

ted

tech

nolo

gy

Tabl

e A: c

ontin

ued.

..

Tabl

e A: c

ontin

ued.

..


xviii

Sect

oral

Con

side

ratio

nsSe

ctor

sC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Agr

icul

ture

Tim

ber

(w.r

.t t

o t

he

ban

on e

xpor

t of

raw

tim

ber

effe

ctiv

e fr

om

Apr

il 1,

201

4 in

M

yanm

ar)

Subs

titut

e w

ood

with

Ba

mbo

o: S

ubst

itutin

g ba

mbo

o w

ith

tim

ber

seem

s to

be

the

mos

t v

iab

le a

nd

gre

en

solu

tion

esp

ecia

lly

for

the

long

run

and

C

amb

od

ia,

Lao

s,

Vie

tnam

and

Ind

ia

are

all r

ich

in b

ambo

o su

pplie

s.

Imp

ort

woo

d p

rod

uct

s fr

om

Vie

tnam

and

Lao

s in

the

CLM

V

regi

on.

Thes

e ec

onom

ies

othe

r th

an h

avin

g lo

catio

n pr

oxim

ity ca

n m

ake u

se o

f the

skill

ed la

bour

and

m

oder

n te

chno

logy

that

Indi

a ha

s to

offe

r in

exch

ange

for s

uppl

ying

it

high

qua

lity

woo

d pr

oduc

ts a

nd

timbe

r.Su

bstit

ute

woo

d w

ith B

ambo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gr

een

solu

tion

espe

cial

ly f

or t

he

long

run

and

Cam

bodi

a, L

aos,

V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Impo

rt f

rom

Mal

aysi

a: I

ncre

ase

woo

d im

port

s fr

om M

alay

sia.

A

lthou

gh M

alay

sia

does

not

offe

r te

ak, I

ndia

n im

port

ers w

ill h

ave t

o m

ake d

o w

ith o

ther

kin

ds o

f woo

d.

Subs

titu

te w

ood

wit

h Ba

mbo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gr

een

solu

tion

espe

cial

ly f

or t

he

long

run

and

Cam

bodi

a, L

aos,

V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Impo

rt w

ood

prod

ucts

from

Vie

tnam

and

La

os in

the C

LMV

regi

on. T

hese

econ

omie

s ot

her

than

hav

ing

loca

tion

pro

xim

ity

can

mak

e us

e of

the

ski

lled

labo

ur a

nd

mod

ern

tech

nolo

gy th

at In

dia

has

to o

ffer

in e

xcha

nge

for

supp

lyin

g it

high

qua

lity

woo

d pr

oduc

ts a

nd ti

mbe

r.

Su

bst

itu

te w

oo

d w

ith

Bam

bo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gre

en s

olut

ion

espe

cial

ly fo

r the

long

run

and

Cam

bodi

a,

Laos

, V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Min

ing

Incr

ease

inv

estm

ent

in th

is s

ecto

r to

tap

its

full

pote

ntia

l:go

ld, c

oppe

r an

d ba

se

met

als,

iro

n or

e an

d ot

her i

ndus

tria

l met

als

such

as

zirc

oniu

m,

grap

hite

and

tita

nium

Incr

ease

inve

stm

ent i

n th

is se

ctor

to

tap

its

ful

l po

tent

ial:

Iron

, al

umin

ium

, tin

and

cop

per

Incr

ease

inve

stm

ent i

n th

is se

ctor

to

tap

its fu

ll po

tent

ial:

chro

miu

m,

copp

er,

gold

, le

ad,

silv

er, t

in, t

ungs

ten,

and

zinc

; ind

ustr

ial m

iner

als,

suc

h as

ba

rite

, cla

ys, d

olom

ite, f

elds

par,

gyp

sum

, li

mes

tone

, p

reci

ous

ston

es, a

nd s

alt;

Hyd

roca

rbon

sIn

crea

se in

vest

men

t in

this

sect

or

to t

ap i

ts f

ull

pote

ntia

l: m

iner

al

fuel

s, su

ch a

s coa

l, na

tura

l gas

, and

cr

ude

petr

oleu

mSt

eel (

w.r.

t to

an

orde

r re

quir

ing

to

ann

ou

nce

th

e ap

ply

ing

st

an

da

rd

for

go

od

s in

th

e re

lev

ant

impo

rt c

ontr

act

for

cust

om

s cl

eara

nce)

Use

of

equa

l Ind

ian

stan

dard

s fo

r te

stin

g st

ainl

ess s

teel

man

ufac

ture

d in

Indi

a ca

n be

ad

opte

d an

d al

so re

ques

t acc

epta

nce o

f the

se

test

rep

orts

by

the

auth

oriti

es in

Vie

tnam

. A

lso,

Ind

ian

agen

cies

may

be

auth

oris

ed

to c

ondu

ct t

esti

ng a

nd c

erti

fica

tion

of

Indi

an m

anuf

actu

rer

impo

rter

in I

ndia

as

per s

tand

ards

pre

scri

bed

and

the

resu

lt be

ac

cept

ed u

nder

the

notifi

catio

n.

Sect

ors

with

Hor

izon

tal I

mpl

icat

ions

acr

oss

coun

trie

s1.

Ph

arm

a: I

ndia

sho

uld

cons

ider

org

anis

ing

a “C

LMV

-Indi

a H

ealth

Car

e Se

min

ar “

in v

enue

out

side

Indi

a (o

n th

e lin

e of

CLM

V c

oncl

ave

done

in In

dia)

to

get t

he p

artic

ipat

ion

of th

e re

gula

tors

and

take

the

agen

da o

f har

mon

isat

ion

of th

e he

alth

sec

tor f

orw

ard.

2.

Pr

oces

sed

Food

: APE

DA

sho

uld

take

the

lead

to p

ropo

se c

apac

ity b

uild

ing

prog

ram

for t

hese

cou

ntri

es to

evo

lve

thei

r reg

ulat

ory

syst

ems

whe

re th

e ES

CA

P/ A

DB

plat

form

can

als

o be

con

side

red

in a

reas

of o

rgan

ic e

xpor

t, Im

port

con

trol

sys

tem

s in

clud

ing

the

SPS/

TBT

prot

ocol

s et

c.3.

R

ubbe

r: R

ubbe

r Boa

rd s

houl

d ex

amin

e th

e po

ssib

ility

of i

nves

tmen

ts in

pla

ntat

ion

sect

or to

sou

rce

rubb

er fr

om C

LMV

esp

ecia

lly V

ietn

am k

eepi

ng in

m

ind

the

futu

re re

quir

emen

t of r

ubbe

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ExECuTIVE SuMMARy

xix

TableB:Theme-SpecificPolicyRecommendations

Focus Sectors/ Areas for India Policy Recommendations

trade in Goods

Prioritization of areas in identified Sectors for trade: Leather, Textiles, Garments, Oil and Gas, EngineeringUse of equivalent Indian standards for testing stainless steel manufactured in India that can be adopted and also request acceptance of these test reports by the authorities in Vietnam. Also, Indian agencies may be authorized to conduct testing and certification of Indian manufacturer importer in India as per standards prescribed and the result be accepted under the notification.To combat the effect of ban on export of raw timber from Myanmar: Import wood from Malaysia, import wood products from Laos and Vietnam and substituting wood for bamboo and Cambodia, Laos, Vietnam and India are all rich in bamboo supplies.Utilizing China-ASEAN FTA: Detailed empirical exercise identified products at HS 6 digit level which if exported by manufacturing in CLMV to the Chinese market under the China-ASEAN FTA in goods, additional export expansion to the tune of uS$ 100 billion is feasible via normal track, sensitive track and highly sensitive track, combined. This can thus be an important component of overall strategy of India to integrate with the CLMV region especially harnessing the possibilities of manufacturing led exports from the CLMV region with the help of Indian OFDI. (Items that can be focused under this are identified as in Annexure 1)

trade in Services

RelevantServiceexportsintheidentifiedsectors:IT, especially in Myanmar, Offshore consultancy and onsite BPO, urban development related services, transport, energy, engineering, architectural, Mode of services: both offshore project design and onsite project implementation and Health services

o-FDI

Have a national level O-FDI strategy, address protective dimensions of CLMV FDI regimes, Investment security/protection, Mechanism: discussion with counterparts and bilateral treaties, create business forum, web-portal, visa facilitation.Sectors: Leather and Footwear, Infrastructure, Oil, Mining, Pharma, Textile, power, automobiles. Partnership Framework Development for Infrastructure in CLMV Countries: The concept of Project Development Company (PDC) for the CLMV is basically conceived to optimize on the existing Trade Institutions/infrastructure in these countries to get access to countries/ region where India does not have presence. India can also work on the space and opportunity which is being developed in these countries because of China moving out from the lower manufacturing segment. In addition, there are apprehensions about China in some of these countries on which India can capitalize because of its proximity to the region. The PDC can, therefore, anchor in these countries for the first mover advantage especially in trade and commerce sectors of potential interest to India in which we can integrate into the regional value chains. ExIM Bank should do a seminar with the identified sectors keeping the PDC contours in mind. The seminar can consider inviting the economic administrators from these countries to also familiarise them with the PDC project.

Skills

Capacity building and technical support: Efforts should be made to have a dedicated programme on capacity building for the CLMV countries’ officials, entrepreneurs and academia on various issues of international economic linkages and negotiations. Collaboration between Indian vocational training institutions and young workforce in CLMV countries also needs to be worked out to harness the full potential of creation of RVCs.

INDIA’S STRATEGy FOR ECONOMIC INTEGRATION WITH CLMV

xx

interactions between India and the CLMV region including Agricultural and seafood processing, Agricultural machinery, Oil and gas exploration, Extraction and export of metals, Small and Medium Enterprises, Labour-intensive industries, Processing and manufacturing industries such as Pharmaceuticals and healthcare, Wood and timber industry, Garment industries, Electronics, Ship-building, Manufacture of automobiles and spare parts, and Service sectors that include Transport, infrastructure and telecommunications, Energy and electricity, Tourism, Human resource development, education, Information Technology (IT), Light engineering, Financial Services, Banking and Insurance, Electricity generation and Environment and energy-saving services.

• Integrating the SME involvement in RVCs: three-pronged Strategy

It would be important to integrate the employment-intensive SMEs in RVCs through India-CLMV economic integration. This could be achieved with a three-pronged strategy:

◊ Linking SMEs with large companies locally and the latter gets engaged in O-FDI

◊ Linking SMEs with MNCs in CLMV

◊ Linking SMEs on a stand-alone basis with their counterparts in CLMV

• Increasing presence of Indian banks: No amount of commercial and economic linkages especially in the framework of RVCs would be possible without enhancing the number of Indian banks present in CLMV in their full-fledged form rather than just being representative offices.

• Bridging information gap: In order to address information gap, its asymmetry, inconsistency and inadequacy, it is important that a dedicated web portal on India-CLMV economic linkages is created.

• outreach Programme: RIS and FIEO could organise 5-6 outreach events to familiarise issues and potentials in India-CLMV economic cooperation, especially keeping in mind the PDC related issues.

• Joint ventures for digital and physical connectivity: The suggested PDC could also focus on initiating joint ventures in different areas of digital and physical connectivity.

• time frame: one year / Interim strategy in six months

India’s strategy needs to be set in place in an year’s time with the interim strategy including the PDC evolved in six months’ time.

I Introduction

Historically, India and Cambodia, Laos, Myanmar and Vietnam (CLMV) region has had civilisational, cultural and economic relations since ancient times. People, goods, capital and ideas have travelled between India and the CLMV countries over a long period. However, these linkages today are characterised by untapped potential. It is noticed that while there is a development divide between the CLMV region and the rest of the ASEAN region, India’s Look East policy has also not focused adequately enough in terms of India-CLMV economic integration. The trade and FDI linkages of India are asymmetric between the CLMV region and the rest of the ASEAN region. It is also important to highlight that India’s trade and FDI linkages are asymmetric even within the CLMV region with relatively stronger linkages vis-à-vis Vietnam and Myanmar. This presents with an opportunity for greater economic integration between India and the CLMV region. However, this would have to be situated in the realities of underdevelopment of the CLMV region and the production networks that have got evolved in the South-east Asian region.

The ASEAN region as a whole is characterized by the presence of strong production networks and Regional Value Chains (RVCs) both within and outside the ASEAN. On the other hand, India is almost left out of any significant regional value chains in its neighbourhood. It is now a common knowledge that regional value chains in different sectors act as a driver for regional economic integration, especially given the experiences in the South-east and East Asian regions. These are accomplished through private sector-driven flows of trade in goods, trade in services, FDI and movement of natural persons facilitated by conducive policy regimes. Such endeavours unleash a dynamic process that creates positive developmental pressures on forging better infrastructural linkages. They also bring to the fore the imperatives of addressing behind the border and non-trade issues including trade facilitation, border trade, visa facilitation, customs procedures, regulatory regimes, etc., in order to exploit potential economic complementarities. Thus, the evolution of regional values chains go beyond mere trade and investment integration but offer important avenues for a comprehensive economic integration across countries.


2

The regional value chains, though present, have somewhat bypassed the CLMV region when compared to the rest of the ASEAN. Thus, the situation in India and the CLMV is not very different from the point of view of regional value chains. The CLMV region can also be viewed as offering significant factor cost advantages and labour cost arbitrage possibilities, in India’s quest for developing regional values chains. Given this and the development deficit in CLMV countries along with India’s need to create advantageous regional value chains in different sectors, it is only natural that India focuses on the geographically proximate CLMV region in terms of economic integration.

I.2 ObjectivesIt is against this backdrop that the proposed study has the following objectives:

• Identifying potentials and challenges in regional value chain creation between India and CLMV region encompassing trade in goods, trade in services and FDI.

• Other issues of cooperation including infrastructural connectivity, behind the border issues and non-trade issues.

• Recommending an appropriate policy and institutional framework for economic integration between India and CLMV through creating regional values chains.

I.3 IssuesIn order to achieve the above mentioned objectives, the proposed study focuses on the following issues:

• Analytical basis of regional value chain encompassing trade in goods, trade in services, FDI, movement of people and connectivity.

• Present status of regional value chains in the CLMV region.

• Existing trade and investment linkages between India and CLMV.

• Assessing the potential for India-CLMV economic integration and regional value chain creation

• Identifying constraints on economic integration and regional value chain creation.

• Addressing other issues including infrastructural connectivity, behind the border and non- trade issues

• Making pol icy suggest ions for augmenting India-CLMV economic integration through an institutional framework that facilitates regional value chain creation.

Against this backdrop, the rationale for economic integration between India and CLMV is provided in Section II. This section tries to answer the question as to why India should be integrating economically with the CLMV region. The areas for potential economic integration are identified with the help of various methodologies in Section III. In doing so, an integrated approach towards trade in goods, trade in services and FDI has been adopted. While the potential sectors have been identified on the basis of deploying several research techniques, in order to make them more business-friendly and policy-oriented extensive sectoral stakeholders consultations involving both policymakers and the private sector representatives were held in India, Myanmar and Vietnam. Based on the preceding analysis, the conceptual basis of RVCs and India-CLMV integration in identified sectors for creating RVCs is elaborated in Section IV. In a novel attempt, considering that trade in goods, trade in services and FDI cannot be viewed in isolation, an integrated approach towards these within the framework of RVCs is presented in Section V. The specific structure and policy constraints that are expected to come in the way

INTRODuCTION

3

of India-CLMV economic integration process have been identified and are summarised briefly in Section VI. In this backdrop, Section VII dwells on evolving a strategy for India for

economic integration with the CLMV countries. Broad conclusions and policy recommendations are presented in Section VIII.

II Why CLMV?: Rationale for Economic Integration between India and CLMV

In this section we try to provide arguments in favour of more strengthened economic integration between India and CLMV. As it would be evident, there are various reasons why India must evolve a national level strategy for integrating with the CLMV region.

II.1 More Headroom for Establishing Commercial and Economic LinkagesOne of the main reasons for establishing greater commercial and economic linkages between India and CLMV is due to the fact that there is much untapped headroom. This is based on several major observations. First, the CLMV region is lesser developed. The underdevelopment of CLMV is a developmental opportunity for India. Second, these economies have shown tremendous growth dynamism, both in terms of annual growth in GDP and GDP per capita. This is especially important given the fact that since 2008 countries are mostly adversely affected by the global economic meltdown, more so for these countries as they have market size constraints and, are therefore; quite dependent on their external economic linkages covering trade and investment, among others (Table 1).

Third, it has been empirically demonstrated that the underdevelopment of CLMV region vis-a-vis rest of the ASEAN region has been enormous and on various variables, such as level of GDP, quality of life, social infrastructure, poverty profiles, the gap between the former and latter has remained wide (Das 2009). Finally, the developmental challenges of CLMV region are quite similar to India, on various dimensions that include poverty alleviation, inequality reduction, scaling up health and educational facilities, relieving infrastructural bottlenecks and balanced sectoral development across agriculture, industries and services.

II. 2 Weak Economic Linkages between India and CLMVIn this section, we present a synoptic view of existing economic linkages between India and CLMV especially in realms of trade in goods and FDI. These would serve as additional rationale for greater trade and FDI linkages between the two.

II.2.1 Trade LinkagesIndia’s trade has risen exponentially to CLMV since 1990 (Table 2). While exports from India


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to CLMV rose from a meagre uS$ 11 million in 1990 to uS$ 6.14 billion in 2013, imports increased from uS$ 150 million to uS$ 4.33 billion during the same period.

However, the bilateral trade relations with individual countries is quite asymmetric with most of the trade linkages accounted for by Vietnam and followed by Myanmar, calling for a course correction through direct policy measures that focus relatively more on Cambodia and Laos in terms of tapping trade complementarities as well as create a broader set of trade complementarities, possibly through evolving RVCs.

II.2.2 Trade TrendsThe bilateral trade trends offer some additional insights (Figures 1 and 2). In terms of India’s exports to the CLMV as a whole, most of the recent export dynamism is accounted for by Vietnam as destination, whereas Vietnam is followed by Myanmar as dynamic sources of imports. India’s trade surplus has shown an upward trend since 2000 (Figure 3).

II.2.3 Mutual ImportanceIt is discernible from Table 3 that the mutual importance of India in CLMV and vice versa is insignificant in terms of both exports and imports, suggesting enormous bilateral trade potential, with some exception in the case of Myanmar’s exports to India.

II.2.4 Sector-wise TradeThe export and import composition of India’s bilateral trade with individual CLMV countries present a very common but disheartening picture (Table 4). In most cases, trade basket is very concentrated across low value items, more so in terms of India’s imports from them. This may suggest very low export supply capacities in these countries, which could serve as an argument for building RVCs across them, converting them into significant FDI-led export platforms. Vietnam does appear to be an exception in terms of diversification to a small extent but surely not in terms of high volume export supply capacities.

Table 1: Macro Profile of CLMV countries for 2012

Macro Indicators Cambodia Lao PDR Myanmar Vietnam

Population (Total in million) 14.86 6.65 52.80 88.77

GDP (constant 2005 uS$ billion) 9.98 4.70 22.85 87.53

GDP growth (annual %) 7.26 8.20 6.3 5.25

GDP per capita (constant 2005 uS$) 671.64 707.41 433.00 986.01

GDP per capita growth (annual %) 5.39 6.17 5.4 4.14

Overall Trade of goods and services (constant 2005 uS$ billion) 16.82* 3.98 18.01* 141.21

Trade (% of GDP) 113.58* 84.68 0.2* 156.55

Source: World Bank, World Development Indicators 2014.

Notes: a) *Data is for 2011; b) Data for Myanmar’s GDP, GDP growth rate, GDP per capita and GDP per capita growth rate has been taken from uNCTAD 2013, Overall Trade and Trade as a per centage of GDP is obtained from Asian Development Bank Indicators 2013-2014; c) Trade is the sum of exports and imports of goods and services representing the value of all goods and other market services received from and provided to the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude compensation of employees and investment income (formerly called factor services) and transfer payments.

WHy CLMV?: RATIONALE FOR ECONOMIC INTEGRATION BETWEEN INDIA AND CLMV

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The threshold value of India’s exports and imports is often below the threshold level of uS$ 50,000 and is thus, represented by 0. The data suggests that the export/import trends are very erratic. For instance, exports of coffee, tea, mate and spices to Cambodia were there in 2007 and 2008 but not there after that, whereas in case of Laos, imports of ores, slag and ash started only in 2010. However, in most cases, major items of exports/imports show the feature of consistently being exported/imported with

very few exceptions. In addition, we observe that the exports are very low in value terms showing that there is far more potential in these areas taking further the case for creating RVCs.

II.3 FDI LinkagesIndia’s FDI Outflow vis-a-vis CLMV countries

Due to data limitations, it is quite difficult to obtain the extent and direction of India-CLMV FDI linkages, especially on the front of India’s

Table 2: India’s Exports to and Imports from CLMV(Amount in uS$ Million)

Country Partner Trade 1990 2000 2010 2013

India CambodiaExports 1.31 7.9 61.07 122.13Imports 0 1.03 7.68 12.64

India LaosExports 0.07 5 8.23 45.52Imports 0.37 0 20.04 111.73

India MyanmarExports 1.43 48.05 273.26 673.70Imports 90.14 179.18 1121 1372.73

India VietnamExports 8.26 208.03 2485.12 5302.62Imports 59.48 12.18 996.62 2838.08

India CLMVExports 11.07 306.33 3275.42 6143.98Imports 149.99 192.39 2145.34 4335.19

Source: Based on IMF DOTS 2014.

0.00

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3500.00

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4500.00

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MYANMAR CAMBODIA LAOS VIETNAM CLMV

Figure 1: India’s Imports from CLMV (US$ Million)



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MYANMAR CAMBODIA LAOS VIETNAM CLMV

Figure 2: India’s Exports to CLMV (US$ Million)


Table 3: Relative Trade Shares(Figures in percentage)

Country Partner Relative Trade 1990 2000 2010

Cambodia IndiaExports to India as a proportion of total exports 0 0.013 0.0145Imports from India as a proportion of total imports 2.57 0.651 1.072

Laos IndiaExports to India as a proportion of total exports 0.527 0 0.829Imports from India as a proportion of total imports 0.054 0.797 0.253

Myanmar IndiaExports to India as a proportion of total exports 10.816 8.225 15.79Imports from India as a proportion of total imports 0.216 1.738 3.022

Vietnam IndiaExports to India as a proportion of total exports 0.804 0.326 1.42Imports from India as a proportion of total imports 0.152 1.14 2.114

India Cambodia

Exports to Cambodia as a proportion of total exports

0.007354 0.018533 0.027395

Imports from Cambodia as a proportion of total imports 0 0.00205 0.00219

India LaosExports to Laos as a proportion of total exports 0.0003 0.011 0.004Imports from Laos as a proportion of total imports 0.0015 0 0.0057

India Myanmar

Exports to Myanmar as a proportion of total exports 0.008 0.113 0.123

Imports from Myanmar as a proportion of total imports 0.376 0.356 0.139

India VietnamExports to Vietnam as a proportion of total exports 0.046 0.488 0.115Imports from Vietnam as a proportion of total imports 0.247 0.242 0.284



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FDI outflows. As Table 5 suggests, India’s FDI to CLMV presents a dismal picture by being very low and directed to sectors (except agro processing) that are important but not so from the point of view of the RVCs, which is the prime focus of this study. This only points to the fact that RVCs have not been the focus of Indian FDI to these countries, highlighting the importance of this study, given that the analytical literature considers FDI as one of the important determinants of RVCs. The investment projects, joint ventures and lines of credit, all point to the same tendency.

According to Exim Bank’s study (2013), during April 1996-March 2012, India’s direct investments in CLMV region amounted to approximately uS$ 700 million with Vietnam receiving bulk flows. However, in a more

recent study, it has been established that India’s investment has been consistently rising in this region and is currently valued at uS$ 1100 million in the form of both joint ventures and wholly owned subsidiaries. The oil and gas sector in Myanmar has been the focus area with consistent investments throughout the period with a peak in 2013. Similar trend is observed in the case of Vietnam with processed food sector receiving steady investments. This observation is consistent with our findings that except processed food sector, India’s FDI to CLMV countries has not been in the areas crucial from RVCs perspective. In order to promote bilateral relations and strengthen regional commercial relations, Exim Bank has extended 17 LOCs amounting uS$ 558 million to the CLMV countries.

Table 4: Composition of Trade

India-Cambodia India-Laos India-Myanmar India-Vietnam

Major Items of Exports

Pharmaceutical Products P h a r m a c e u t i c a l Products

Residues, wastes of food industry, animal fodder

Meat and edible meat offal

cotton Articles of iron or steel Pharmaceutical ProductsF i s h , c r u s t a c e a n s , m o l l u s c s , a q u a t i c invertebrates

Residues, wastes of food industry, animal fodder

N u c l e a r r e a c t o r s , boilers, machinery etc. Iron and Steel Oil seed, oleagic fruits,

grain, seed, fruit, etc.

Manmade staple fibres Electrical, electronic equipment Articles of iron or steel Residues, wastes of food

industry, animal fodder

Nuclear reactors, boilers, machinery etc.

Vehicles other than railway, tramway

Elec t r i ca l , e lec t ronic equipment Cereals

Major Items of ImportsA n i m a l , v e g e t a b l e fats and oils, cleavage products, etc.

Ores, slag and ash Edible vegetables and certain roots and tubers

Electr ical , e lectronic equipment

Edible fruit, nuts, peel of citrus fruit, melons Wood and articles of wood,

wood charcoalNuclear reactors, boilers, machinery, etc

Iron and steelRubber and ar t i c les thereofCoffee, tea, mate and spices



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II.4 CLMV Focus SectorsAnother reason why India must economically integrate with the CLMV is due to the enormous comparative advantage and developmental experience that exists in India in areas that are identified as focus sectors as part of the respective national vision of each of the countries of the CLMV region. As evident from Table 6, there are several sectors that qualify for such economic interaction between India and the CLMV region.

It may be emphasized that the CLMV region is quite rich in natural and mineral resources, including hydrocarbons. Some of the include gold, copper and base metals, iron ore and other industrial metals such as zirconium, graphite and titanium (Cambodia), Iron, aluminium, tin and copper (Laos), chromium, copper, gold,

lead, silver, tin, tungsten, and zinc; industrial minerals, such as barite, clays, dolomite, feldspar, gypsum, limestone, precious stones, and salt (Myanmar).

II.5 Cheaper Labour Cost Advantage in CLMVOne of the main reasons why India must look at CLMV for manufacturing projects is due to the fact that CLMV countries possibly provide the last opportunity for labour cost arbitrage in India’s extended neighbourhood. This is quite evident from Table 7 where wage rate comparisons suggest that all the CLMV countries have lower wage rates as compared to India. What is more, they are considerably lower when compared to wage rates prevailing in China. This is important because this

Table 5: FDI Stock for 2012(Amount in uS$ Million)

FDI Stock (up to 2012) Cambodia Laos Myanmar Vietnam

Inward Stock from the world 8413 2483* 11910* 72530*India's outward stock 10.05 0.25 11.48 2.60

Source: uNCTAD World Investment Report, 2013; RBI Data on Overseas Investment.

Note: * Estimates; Data from RBI not available before June 2011 in public Domain.

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Figure 3: India’s Trade deficit/surplus with CLMV (in US$ million)



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has already spurred a spate of relocation of industries from China to the CLMV region and it is quite obvious that India too must take advantage of the available production space in the CLMV region.

II.6 Lower Land PricesLand prices are a major determinant of setting up any new industries in any country. Despite data difficulties it was somewhat possible to compare land prices in certain representative areas in India and the CLMV region. The fact

that land prices are lower than India, although not in all cases, is the inference that one can draw from Table 8.

II.7 Location Proximity with Indiayet another rationale provided for enhanced India-CLMV economic integration is embedded in the fact that the CLMV region is characterised by lower transportation costs and time (Table 9).

Further access to major industrial areas in CLMV to ports and harbours is quite easy, both in terms of distance to be travelled and

Table 6: CLMV Countries’ Vision / Focus Sectors

Cambodia Laos Myanmar Vietnam

I. Agriculture and MiningAgriculture and agro-industryOil & Gas, Mining

II. Manufacturing S m a l l a n d M e d i u m EnterprisesL a b o u r - i n t e n s i v e industries P r o c e s s i n g a n d manufacturing industries

III. ServicesTransport, infrastructure and telecommunicationsEnergy and electricityTourismH u m a n r e s o u r c e development, education

I . A g r i c u l t u r e a n d MiningAgricultureMining

II. ManufacturingSmal l and Medium EnterprisesAgro processingFood processing sectorsPharmaceuticals and healthcareW o o d a n d t i m b e r industry

III. ServicesTourismEducationInformation Technology (IT)InfrastructureLight engineering

I. Agriculture and MiningAgro-techMining, HydrocarbonsOil and gas explorationExtraction and export of metals

II. ManufacturingPharmaceuticals and HealthcareGarment industriesS m a l l a n d M e d i u m Enterprises

III. ServicesTransport InfrastructureT e l e c o m m u n i c a t i o n servicesFinancial ServicesTourismBanking and InsuranceElectricity generation

I. Agriculture and MiningAgricultural and seafood processing Agricultural machinery

II. ManufacturingElectronics Ship building M a n u f a c t u r e o f automobiles and spare parts

III. ServicesEnvironment and energy saving

Source: Royal Government of Cambodia, Ministry of Planning, April 2013; Ministry of Commerce, Cambodia; Myanmar’s Foreign Investment Law 2012; Ministry of Planning and Investment, Investment Promotion Department, Lao PDR; Vietnam Draft Industrialisation Strategy.


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time taken (Table 10). This means that any industrial activity in the industrial region need not be for the respective domestic markets but also for making them export platforms and reaching the regional and global markets at a much faster pace.

II.8 Skill ComplementarityAn attempt was made to match skill availability in India with those of the CLMV, in some of the major sectors wherein possibilities of greater economic linkages may exist. It is quite

amply demonstrated in Table 11 that there is tremendous complementarity in terms of skills/personnel/technology in a wide range of sectors including textiles and garments, processed food, electrical and electronic equipments, ICT and telecommunication, pharmaceuticals and medicine, gems and jewellery, marine and seafood, oil and natural gas, iron and steel, articles of iron and steel, leather, rubber and rubber articles, wood sector and bamboo sector.

Table 7: Wage Rate Comparison ( in uS$/year, at Current Prices )

2000 2005 2007 2009 2010Cambodia 874.63 960**Laos 439*Myanmar 13.51# 31.89# 132.74# 674.76**Vietnam 802.17 1338.73 1844.81 2009.73India 1356.38 1794.47 2351.99 2461.29China 1915.35 2898.71 4915.34 5550.95

Source: 1. Author’s own calculations using uNIDO Database. 2. * Data on Laos has been obtained from World Bank Report on Laos (2012). 3. # Data on Myanmar from LABORSTA, ILO, is wage rate per hour for men only in Kyat. 4. ** For the year 2014 sourced from ‘Comparative Wages in Selected Countries’, Department of Labor and Employment, National Wages and Productivity Commission. It may be noted that these are Minimum Wages as on 31 March 2014.

Table 8: Land Prices in India and CLMV

Country Industrial Zone Land Rental (uS$ per sq.m per annum)

CambodiaPrime Locations 2.5Lower quality areas ≤2

LaosVientiane (prime areas) 3-5

Other areas ≤0.5

Myanmar yangon 0.26-0.36

Vietnam

Thang Long 0.75Noi Bai 0.45Binh Xuyen 0.25Pho Noi A ≈0.25

IndiaFalta SEZ 0.91Kandla SEZ 2.07Cochin SEZ 1.79

Source: Data collected from various sources.


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Table 9: Transportation Time Between India and CLMV

Indian Ports Partner Country (Ports) Time taken Distance (in Kilometres)

Chennai Terminal

Cambodia (Sihanouk Ville Terminal) 10 Days, 6 hours 4691.116Cambodia (Phonm Penh) 10 days, 9 hours 4841.128Myanmar (yangon) 4 days, 8 hours 2120.54

Vietnam (Ho Chi Minh Terminal) 11 Days 4870.76Vietnam (Haiphong Terminal) 14 Days, 5 hours 6461.628Singapore (Singapore terminal) 7 Days, 9 hours 3502.132Thailand (Bangkok Terminal) 11 Days, 5 hours 5124.484

Kolka ta (Ca lcut ta ) Terminal

Cambodia (Sihanouk Ville Terminal) 11 Days, 1 hour 4926.32Cambodia (Phonm Penh) 11 Days, 4 hours 5076.332Myanmar (yangon) 4 Days, 1 hour 1805.7

Vietnam (Ho Chi Minh Terminal) 11 Days, 5 hours 5104.112Vietnam (Haiphong Terminal) 15 Days, 1 hour 6696.832Singapore (Singapore terminal) 8 Days, 4 hours 3737.336Thailand (Bangkok Terminal) 12 Days, 1 hour 5359.688

V i s h a k h a p a t n a m (Andhra Pradesh)

Cambodia (Sihanouk Ville Terminal) 11 Days, 1 hour 4926.32

Cambodia (Phonm Penh) 11 Days, 4 hours 5076.332Myanmar (yangon) 4 Days, 1 hour 1807.552

Vietnam (Ho Chi Minh Terminal) 11 Days, 5 hours 5105.964

Vietnam (Haiphong Terminal) 15 Days, 1 hour 6696.832Singapore (Singapore terminal) 8 Days, 4 hours 3737.336Thailand (Bangkok Terminal) 12 Days, 1 hour 5359.688

Mumbai (Maharashtra)

Cambodia (Sihanouk Ville Terminal) 13 Days, 7 hours 6072.708

Cambodia (Phonm Penh) 14 Days 6222.72

Myanmar (yangon) 9 Days, 8 hours 4359.608Vietnam (Ho Chi Minh Terminal) 14 days, 1 hour 6252.352Vietnam (Haiphong Terminal) 17 Days, 6 hours 7843.22Singapore (Singapore terminal) 11 Days 4883.724Thailand (Bangkok Terminal) 14 Days, 6 hours 6506.076Singapore (Singapore terminal) 11 Days 4883.724Thailand (Bangkok Terminal) 14 Days, 6 hours 6506.076

Cochin (Kerala)

Cambodia (Sihanouk Ville Terminal) 11 Days, 2 hours 4980.028

Cambodia (Phonm Penh) 11 Days, 5 hours 5130.04

Myanmar (yangon) 7 Days, 4 hours 3266.928Vietnam (Ho Chi Minh Terminal) 11 days, 6 hours 5159.672Vietnam (Haiphong Terminal) 15 Days, 2 hours 6750.54Singapore (Singapore terminal) 8 Days, 5 hours 3791.044

Thailand (Bangkok Terminal) 12 Days, 2 hours 5413.396Source: Ports.com

Notes: a) Days are calculated when travelling at speed of 10 Knots, b) The Indian ports chosen are the major ports handling 90 per cent of sea trade, c) The ports chosen for partner countries are the ones with nearest access to the respective major industrial areas.


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II.9 Open Trade and FDI Policy RegimesTrade Regime

The CLMV economies have a liberal trade regime and several initiatives have been taken by the respective economies to expand market access through trade agreements and improve their international competitiveness. As per the latest trade policy review by WTO, Cambodia has radically reformed its tariff structure and has bound 100 per cent of tariff lines besides reducing the heavy dependence on trade-related taxes. Following suit, Myanmar has bound 18.5 per cent of its tariff lines at the HS eight-digit level whereas Vietnam bound the entire tariff schedule in the context of its WTO accession mostly in the 0-40 per cent range. Myanmar government has adopted several measures to open up the economy including revising trade-related legislation, preparing a competition law, a Consumer Protection Law, and comprehensive IPR legislation, among others. In addition, Cambodia and Myanmar grant at least MFN treatment to all their trading partners (See Annexure II for further details).

In order to streamline and enhance the effectiveness of customs operations and to facilitate trade, CLMV economies have been reforming their custom regime to make it more liberal. Being a member of ASEAN, participation in ASEAN’s free-trade agreements with third countries strongly influences CLMV’s trade

policy. Moreover, 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.

FDI Regime

Recognising that CLMV region needs foreign capital and technology for continuous and sustainable development, these economies have liberal foreign investment regime. The respective governments provide various investment, tax and non-tax incentives and investment guarantees to the investors along with tax exemptions and reliefs. The economies are headed towards a system in which foreign investors face the same tax and tariff incentives as do the domestic investors. In order to encourage more foreign investment, the Lao PDR government, for instance, maintains lower business tax rates for foreign companies than those applicable to domestic companies. Lease of land is also permitted by all the countries in the region. These countries do require that foreign companies employ the local workforce and only when qualified nationals are not available, they bring their experts and technicians (See Annexure III for further details). However, barring Vietnam, all other CLMV countries showcase a poor business environment as reflected by their ranking in terms of Ease of Doing Business. On the contrary World Bank’s Ease of Doing Business index is a shaky parameter as it gives high marks to fewer restrictions on permits for

Table10: Access of Major Industrial Areas in CLMV to Ports and Harbours

Country Industrial Area Port Distance Time

Cambodia Phnom Penh Sihanouk Ville 220km 4-6hPhnom Penh Phnom Penh 13km

Lao PDR Vientiane Khlongtoey, Bangkok 650km 10hMyanmar yangon yangon 16km 1hVietnam Hanoi HaiPhong 100km 3h

Bien Hoa Ho Chi Minh 18km 0.7hBien Hoa Caimep&Thivai 60km 1h

Source: Ishida (2010).


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Table 11: Skill Availability and Non-Availability

Sectors Skills/Personnel/Technology available in

India

Skills/Personnel/Technology required by CLMV

Skills/Personnel/Technology available in

CLMV

Textiles and Garments K n o w n f o r f i n e craftsmanship; Integrated S k i l l D e v e l o p m e n t Scheme (ISDS) launched in order to upgrade the skills of textile workers/handloom weavers and develop competitiveness in the textile industry

Cambodia: Lack of skilled workers with experience in technology, fashion and management Myanmar: Lack of skilled textile workersVietnam: Human resource training of middle and high class management, technology, and fashion design are weak; Lack of skilled workers with experience in technology

Processed Food Presence of relatively low-cost and skilled workforce; offers high tech equipments

Vietnam: Currently, faces deficit in technical experts, lack of high-tech equipments; Imports modern equipments; The government is implementing several programs to enhance food (including Dairy) processing technologies.

E l e c t r i c a l a n d E l e c t r o n i c Equipments

C i v i l E n g i n e e r s , Electrical and Electronic engineers, Mechanical e n g i n e e r s , O t h e r engineers

Laos: Shortage of skills and personnel in electrical and electronics industry

ICT and Telecomm-unication

Large technical pool of skilled professionals, IT technicians, engineersHave se t up India -Myanmar Centre for Enhancement of IT Skills

C a m b o d i a : S o f t w a r e a n d telecommunications engineeringMyanmar: Shortage of manpower, IT technicians, engineersVietnam: shortage of manpower (technicians)

Pharmaceuticals and Medicine

Inherent strengths in Organic Chemistry, availability of skilled Manpower: Physicians and Surgeons( all fields); Nursing, Sanitary and Other Medical and Health Techniciansand a well established domestic industry

Cambodia: Doctors, Pharmacists, Nurses Myanmar: Dentists, Local talent pool for executive positions is limited

Gems and Jewellery G e m s c u t t i n g a n d polishing techniques; artisans have specialised skills in processing small diamonds

Myanmar: Labor intensive industry, limited equipment and absence of any automation; involves child labor

Table 11: continued...


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Marine and Seafood m - K r i s h i F i s h e r i e s Advisory Service; Post harvest management: Shelf life extension of freshwater fish in round polypropylene r igid containers, insulated boxes for storage

Vietnam: Outdated preservation techniques; Development plans include adoption of advanced technologies and improved training for staff and techniciansCambodia: Inadequate facilities for hygienically handling, sorting, weighing and packing fish, and lackof storage facilities and modern equipment Myanmar: Lack of modern technology

Oil and Natural Gas High-quality technical m a n p o w e r . B u t c u r r e n t l y f a c e s a n acute skill crisis due to challenges arising from an aging workforce. Lack of student Interest in petroleum further compounds the problem

Myanmar: Lacks experience and skilled technicians in oil and gas exploration and developmentVietnam: Shortage of technical expertise

Automobile parts Availability of skilled human capital

Laos: Limited human resources, weak capacity and Skill shortages in automotive and mechanics industryVietnam: Rising labour cost for unskilled labour and the shortage of skilled engineers; Needs upgradation of skills and technology

Myanmar: Availability of medium-educated technicians

I r o n a n d S t e e l ; Articles of Iron and Steel

Highly skilled manpower; expected shortage in skilled workforce by 2025; Faces problem of migration of manpower to the West

Leather I n d i a n L e a t h e r industry has skil led manpower, Modernized manufacturing units as well as innovative technology

V i e t n a m : Leather t a n n e r i e s t h a t a p p l y a d v a n c e d technology and modern equipment

Rubber and Rubber articles

Rubber technology such as Rubber roller ginning machine

Cambodia: Lack of skill in rubber planting techniquesLaos: Lacks appropriate rubber development technology; most of the districts have unskilled labor



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Wood sector Advance technology, institute of wood science and technology

L a o s : S k i l l a n d p e r s o n n e l shortages in traditional sectors of carpentry, furniture-making, construction Vietnam: Outdated and unsynchronized machines and tools used for processing of natural wood, especially for the processing of fine products

Bamboo sector C e n t r e f o r I n d i a n B a m b o o R e s o u r c e a n d T e c h n o l o g y ; regular workshops and seminars held by National Mission on Bamboo Application; Have expertise and skills of processing bamboo

Cambodia: Most of the bamboo used is split by hand. Needs machinery with latest technologyVietnam: Needs capital and updated technologyLaos: Lack of modern technology. uses only manual tools

L a o s : Traditional h a n d i c r a f t making skills

Source: Data compiled using varied sources.

construction, ignoring safety and environment concerns. This index is widely used to improve business conditions around the world as its underlying premise is that less regulation is better. Having a higher place on this index cannot be a true reflection of a country’s business setting and the need of the hour is the revamp of the influential Easy of Doing Business Index (Economic Times, 2014).

II.10 Already Improving Infrastructure in CLMV, Global Players’ Presence: Is India Missing the Bus?The CLMV region due to its underdevelopment as well as recent economic dynamism has caught the imagination of the world. This can be highlighted with the help of two illustrations; first by providing a glimpse of high quality infrastructural facilities present in what is known as Vietnam Singapore Industrial Park (VSIP). The Vietnam Singapore Industrial Park (VSIP) is a flagship project initiated by the governments of Vietnam and Singapore. The maiden VSIP project is located in Binh Duong province’s Thuan An district and is the most successful industrial park with 240 investors

from 22 countries establishing their long-term investment projects.

Some of the contours of VSIP include strong customer service support and availability of institutional infrastructure geared up to skilling of workforce within the same vicinity of VSIP, alongside state of the art industrial park which already has presence of companies from all over the world.

Customer service Support: VSIP provides investors a wide array of services:

• Assist investors in the Investment Certificate applications.

• Guide investors in company start-up

• Help investors to handle dai ly operational matters.

• On-Site Customs Office and Yard:

• Goods will be inspected and cleared at Customs yard in VSIP.

• Quick customs procedures and formalities of in-coming and out- going shipments for customers in VSIP.

• Efficient and experienced team of Customs officers at your service.



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Box 1: Myanmar: The Next Foreign Investment Hot SpotMercedes Steps into Myanmar Car MarketAutomobile Alliance Co. Ltd of Myanmar partnered with Singapore’s Jardine Cycle and Carriage Co. Ltd. to import luxury Mercedes Benz cars into Myanmar. A Satellite workshop is fully operational and Mercedes plans to open a showroom and a workshop early next year. Mercedes aims to serve Myanmar’s luxury segment with its friendly staff and world-class facilities and services.China’s Hin Leong Group Invests US$ 200m in Myanmar Oil sectorHin Leong Group, a Singapore-based oil trading company has entered into Myanmar market to meet the rising consumer demand for the commodity, which in turn is a consequence of increased business activity. As first step, the company will supply kerosene, gasoline, jet fuel and asphalt in amount of 100,000 cubic meters of storage in East Timor.EU and US try to Extend their Garment Manufacturing in MyanmarAccordingly to Daw KhineKhine Ngwe, secretary of Myanmar Garment Manufacturers Association, Europe and united States will invest in Myanmar garment manufacturing industry. Earlier, companies used to study Myanmar’s garment industry and then return to their native land. With the improved situation, there is an increasing number of companies willing to invest in Myanmar. For instance, Dewhurst Company, a uK-based garment manufacturing company, plans to extend its operations in the country with more than 2,000 workers.A Project That Will Change the Face of MyanmarThailand and Myanmar governments signed an Mou on July 23, 2012 to develop Dawei Special Economic Zone and its related project areas. The investment is aimed at developing a deep sea port facility, an industrial estate dividend into six zones, a petrochemical complex with oil and gas pipelines for the Gulf of Martaban to the Myanmar/Thailand border along a road and rail link from Dawei to Thailand.

Source: Myanmar B2B Management Magazine ACuMEN, September 2013; Myanmar Insider, Vol. 1, Issue 1, November 2013.

Vietnam Singapore Vocational College

The Vietnam Singapore Vocational College, (VSVC) located in close proximity to VSIP, was jointly initiated by the Vietnam and Singapore Governments and sponsored by VSIP aiming to improve the technical skills of the Vietnamese workforce. The courses include Electrical Maintenance, Mechanical Maintenance,

Machining, Electronics, Automobile Repairing, Accounting, etc.

The second illustration is manifested in Myanmar’s Economic Dynamism. It is clear from Box 1 that Myanmar is considered to be the next foreign investment hotspot with some of the major industrial players already present that include Mercedes.

Table 12: Accessing China via CLMV: Identification of products where India can access these markets through China-ASEAN FTA

Normal Track Sensitive Track Highly Sensitive Track

Number of products at HS6-Digit 119 152 87

Amount of Exports (in uS$ Billion) 2012 25.8 58.8 15.5

Source: Author’s own calculation based on uN COMTRADE 2014.


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II.11 India-CLMV Convergence of Interests in Regional Trade Negotiations CLMV wants India to play a more pro-active role as they often don’t get their voices heard in the ASEAN Caucus. Therefore, India-CLMV cooperation could be important bedrock for even the RCEP an negotiations where, India can get support from these countries.

II.12 Utilising ASEAN-China FTA in GoodsThe study undertook a detailed empirical exercise to identify products at HS 6 digit level which if exported by manufacturing in CLMV to the Chinese market under the China-ASEAN FTA in goods, additional export expansion to the tune of uS$ 100 billion is feasible via normal track, sensitive track and highly sensitive track combined. This can thus be an important

component of overall strategy of India to integrate with the CLMV region especially harnessing the possibilities of manufacturing led exports from the CLMV region with the help of Indian OFDI.

As is seen in Table 12, the number of products at HS6 digit level which India can export from CLMV to China under the China-Asean FTA in goods are 119 (normal track), 152 (sensitive track) and 87 (highly sensitive track). The details of these specific products are given in Annexure I. It is evident from the annexure that these are the products that invite lower tariff levels if the products originate in CLMV as compared to China’s MFN duty on same HS6 digit products. It may thus safely be concluded that accessing Chinese market for India’s exports is not only feasible under China-ASEAN FTA in goods but also imperative to make CLMV as manufacturing base for India’s exports to China.

In this section we try to identify areas and sectors for cooperation between India and CLMV with the help of different methodologies.

MethodologyThe analysis in the study would be based on the existing material on the subject but more importantly it has deployed advanced empirical techniques for assessing the potential for regional value chain creation. This would be complemented with identifying potential items for trade between India and CLMV at disaggregated HS 6-digit level.

Potential for trade in services is identified by analysing the domestic regulations in different sectors such as tourism, education, health, banking, IT, transport, etc. apart from analysis based on available trade in services statistics.

The Sectors for cooperation in FDI especially from the point of view of evolving regional value chains are explored encompassing a full range of economic activities such as design, production, marketing, distribution and after- sales services.

For identifying the constraints in regional economic integration secondary material is supplemented with direct interaction with the stakeholders in India and the CLMV region (primarily Myanmar and Vietnam) that includes policy makers, businesses and academia.

Trade in Goods Potential: Indices UsedThe potential for bilateral trade in goods between India and CLMV was ascertained with the help of methodologies that included dynamic RCA, IIT, and Cosine indices.

I. Revealed Comparative Advantage (RCA)

RCA = [Xij/Xtj] / [XiT/ Xw]where X is exports, i is product, j is country,

t is total exports to world of country j, T is total exports to world of all countries and w is total exports to world of all products of all countries.

IIIWhere Cooperation?: Potential Goods, Services and FDI Sectors with Complementarities


22

Dynamic RCA It is calculated over time to identify items at HS 6-digit level gaining comparative advantage and those having disadvantage. This is to avoid any anomaly that might be due to an RCA estimate for a single year and improve the efficacy of the Index.

II. Intra-Industry Trade (IIT)The Intra-industry trade refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.

The Grubel–Lloyd index measures intra-industry trade of a particular product. It was introduced by Herb Grubel and Peter Lloyd in 1971.

where Xi denotes the export, Mi the import of good i.

If GLi = 1, there is only intra-industry trade, no inter-industry trade. This means for example the country in consideration exports as same quantity of good i as much at it imports. Conversely, if GLi = 0, there is no intra-industry trade, only inter-industry trade. This would mean that the country in consideration only either exports or only imports good i.

III. Cosine IndexOne way of ascertaining trade complementarities is by matching the exports vector of one Central Asian country with import vector of another Central Asian country to determine similarity or dissimilarity in them, implying absence or presence of trade complementarity between the country under question. This is best given by the well-known Cosine index. Given two vectors

of exports and imports, A and B, the cosine similarity, θ, is represented by formula given

The resulting similarity ranges from −1 meaning exactly opposite, to 1 meaning exactly the same, with 0 usually indicating

independence, and in-between values indicating intermediate similarity or dissimilarity.

The above methodologies were complemented by a review of existing information on the subject, as well as stakeholder consultations in India and in Myanmar and Vietnam (See Annexure IV).

Inter-Ministerial Meetings in IndiaIn the inter-ministerial meetings convened by the Ministry of Commerce and Industry inputs were sought in a Common Template with a 5-point Action Plan. This included dimensions such as the following:

• Prioritisation of areas in identified Sectors for trade

• Relevant service exports in the identified sectors

• How to mobilise O-FDI

• How to integrate the SME involvement in RVCs

• Feasibility of time frame

Private sector stakeholder consultations

These were held both within the country as well as in Myanmar and Vietnam.

Potential goods sectorHaving presented a detailed account of justification on why India and CLMV region

WHERE COOPERATION?: POTENTIAL GOODS, SERVICES AND FDI SECTORS

23

should have a strategy for economic cooperation, it is important to make a thorough assessment of areas where potential for such cooperation exists. This also needs to be extended in terms of identifying specific sectors for trade in goods cooperation.The rigorous empirical excersise based on various techniques helped us in identifying various potential sectors for

bilateral trade in goods between India and CLMV. As was mentioned earlier, this was done on the basis of detailed examination of HS6-digit level data of trade with the help of indices mentioned above. The potential sectors with possibilities of trade cooperation in India and individual CLMV country are marked in grey in Table 13.

Table 13: Potential Sectors for RVC

Potential Sectors for RVC Cambodia Laos Myanmar Vietnam

Textiles and Garments Processed Food Electrical and Electronic Equipments Pharmaceuticals Gems and Jewellery Marine and Seafood Oil and Natural Gas Automobile parts Iron and Steel ; Articles of Iron and Steel Leather Rubber and Rubber articles Grey colour implies potential

Source: Based on Author’s calculations.

While the preceding section has identified the potential for trade in goods between India and CLMV, in order to harness the fullest potential of both sides it is imperative that the analysis is extended beyond the realms of trade in goods and is situated within the framework of RVCs.

IV.1 RVCsSimply defined, a production/value chain is the “full range of activities that firms and workers do to bring a product from its conception to its end use and beyond” (Gereffi and Fernandez-Stark, 2011). It consists of various activities such as design, production, marketing, distribution and support to the final consumer. On the other hand, when two or more value-chains are considered with at least one common network linkage, it is known as a production network.

In today’s world, most of the goods and a fair share of services are produced by various countries specialising in different functions and tasks as opposed to being produced by a single country, thus forming a Global Value Chain (GVC). Technological advancement along with trade and investment liberalisation has played a vital role in the emergence of GVCs. As a

result, economies become more interconnected and specialise in different stages of production rather than specific products or industries.

For developing countries, GVCs prove to be extremely beneficial. The trade, investment, and knowledge flows, that underpin GVCs, can provide mechanisms for rapid learning, innovation and industrial upgrading (Humphrey and Schmitz, 2002). Apart from benefitting from economies of scale, firms through participation in GVCs are pushed to acquire new competencies and be more quality centric. Such improvements have far reaching effects beyond exporting firms and sectors.

The attributes and determinants of GVC are quite similar to those of Regional Value Chain (RVC). RVCs are production hubs connected with service links that prosper with improvements in soft and hard connectivity. In other words, RVC is nothing but GVC in a regional context.

Production fragmentation essentially means when in order to reduce the total production cost incurred, firms/industry classify the various production processes according to their types, design, etc. and avail different location

IV How?: RVCs-Stages of Production in Identified Sectors Relevant for India


26

advantages. Jones and Kierzkowski (1990) made an early start in developing the theory of fragmentation. According to them, it is the benefits of inter-firm specialisation of factors that motivates fragmented production process connected by service links.

The main idea of fragmentation is presented in Figure 4. Fragmentation theory has played a central role in explaining the functioning of production networks. However, several conditions such as availability of different location advantages, transport and coordination costs, technical separability of production processes etc. need to be met for fragmentation of production process, to be economically viable and efficient. In order to form decisions regarding relocation or fragmentation, a number of factors need to be considered which are as follows:

• Land and Utilities: Land price for owning or leasing; price of energy and electricity; public services; price of water for industrial use

• Macro Indicators: population and GDP per capita of the country; Political stability

• Skill Availability: Educational level of workers; wage level for workers; availability of managerial and technical staff

• Investment Regime: Incentives like tax holidays; tax exemptions

• Infrastructure: Digital infrastructure such as ICT availability; internet users; telephone lines; mobile cellular subscriptions; Soft connectivity such as efficiency of the clearance process (i.e. speed, simplicity and predictability of formalities) by border control agencies, including customs; quality of trade and transport related infrastructure (e.g. ports, railroads, roads, information technology);ease of arranging competitively priced shipments; competence and quality of logistics services (e.g., transport operators, customs brokers);ability to track and trace consignments; timeliness of shipments in reaching destination within the scheduled or expected delivery time; Physical infrastructure such as access to ports and markets;

Figure 4: The Fragmentation Theory: Production Blocks and Service Links

Source: Kimura, F., and A. Obashi. 2011.

HOW?: RVCS-STAGES OF PRODuCTION IN IDENTIFIED SECTORS RELEVANT FOR INDIA

27

quality of port infrastructure; rail lines; air transport

IV.2 Where can India fit into the Value Chain vis-à-vis CLMV?While we have identified potential trade in goods sectors it is still, as we have argued, that one of the ways in which India can integrate with CLMV is through RVCs. We are still not clear where India fits into the value chain vis-a-vis CLMV region. Consequently, a three dimensional mapping was undertaken. This is captured in terms of sector-stage of production-country mapping and presented in Table 14, which suggests that which country has comparative advantage in relocating manufacturing in which stage of manufacturing/processing in which country.

Table 14: Sector-wise Stages of Production

Sectors Stages in the Production process Regional Value Chain

E l e c t r o n i c s Industry

Stage I: Supply of Raw Materials

Stage II: Manufacture of electronic components from raw materials by Component Manufacturers

Stage III: Designing the look of the electronic goods by Enclosure manufacturersStage IV: Contract manufacturers make the printed circuit boards India

Stage V: Electronics distributors stock and keep a wide variety of electronic goodsStage VI: End markets carry out the final transaction by making the product available for customers.

India, Vietnam

Food Processing Industry

Stage I: Procurement of Raw materials

Stage II: Primary Processing India , Vietnam

Stage III: Secondary Processing India , Vietnam

Stage IV: Tertiary Processing India , Vie tnam, Cambodia

G e m s a n d J e w e l l e r y Industry

Stage I: Mining and Extraction from natural deposits

Stage II: Processing including planning, cutting and polishing of DiamondsStage III: Fabrication including melting, setting, polishing and finishingStage IV: Retail including marketing, branding and selling India , Vietnam

These are also relevant from the point of view of SMEs in India and CLMV given their operational level relevance in RVCs (Abonyi 2005).

IV.3 Potential Services for RVCsHaving identified potential sectors for trade in goods and undertaken the three dimensional mapping in those very sectors in the preceding section, we try to identify the kind of potential trade in services for such RVCs that exist. For this India’s services export capacity to CLMV was assessed based on the requirements in the CLMV countries in different sectors of services. This is summarised in Table 15 on the basis of stakeholder consultations, both within India and Myanmar and Vietnam. Supplementary information from the existing literature was



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Textile IndustryStage I: Spinning India, Cambodia

Stage II: Weaving/ Knitting India, Cambodia

Stage III: Dyeing and Finishing

Stage IV: Designing, cutting, sewing, buttonholing, ironing India , Vie tnam, Cambodia

Pharma Industry Stage I: Research and development India

Stage II: Conversion of organic and natural substances into bulk pharmaceutical substances through chemical synthesis, fermentation and extraction

India

Stage III: Formulation of the final pharmaceutical product India

Stage IV: Sales and marketing India

Leather IndustryStage I:Dairy, draught and meat animals are sent to slaughterhouses

Vietnam

Stage II: Hide Processing( Tanning and Finishing) India

Stage III: After the leather is obtained than Other inputs such as design are added

Stage IV: Final output such as Footwear, Garments, Saddlery, Leather cloth are obtained

India

Stee l Making Industry

Stage I:Sourcing of Raw materials from scrap metal, direct reduced iron and hot metal

Stage II: Melting in EAF(Electric Arc Furnace)

Stage III: Secondary Metallurgy

Stage IV: Continuous Casting

Stage V: Rolling India, Vietnam

Stage VI: Finished products India, Vietnam Petro-chemical Industry

Stage I: Sourcing Raw materials of petroleum(hydrocarbon) origin

Stage II: Distillation of crude oil yields naphtha, gas oil, natural gas and petroleum gases India

Stage III: Cracking of Naphtha/Natural gas

Stage IV: Olefins such as ethylene, propylene, butadiene and aromatics such as benzene, toluene and xylene are obtained



HOW?: RVCS-STAGES OF PRODuCTION IN IDENTIFIED SECTORS RELEVANT FOR INDIA

29

Rubber and rubber articles

Production of Natural rubber Stage I.1: Tapping of the tree to collect latexStage I.2: Latex is then mixed with a diluted acidStage I.3: The rubber/acid mixture is then rolled to remove excess water Stage I.4: Rolling is again done to texture the rubber

Production of Synthetic rubbers Stage I.1: Refining of oil, coal or other hydrocarbons Stage I.2: Distillation of crude oil yields naphthaStage I.3: Naphtha is then combined with natural gas to produce monomers such as styrene and isopreneStage I.4: Monomers are then subjected to either an emulsion polymerisation process or a solution polymerisation processStage I.5: Chains of polymers are created which results in a latex or rubber substance

India, Vietnam (natural and synthetic) Cambodia (natural)

Stage II: Processing into finished goods consists of:(a) Compounding(b) Mixing(c) Shaping(d) Vulcanizing

India

Source: Based on Author’s calculations and secondary sources.

Table15: Potential Services for RVCs

Sectors India's Services' exports capacity: Potential based on requirementsSoftware and ICT Services Computer software, Data processing services, Data base services

Telecommunication services

Voice telephone services, Packet-switched & Circuit-switched data transmission services, Telex services, Telegraph services, Private leased circuit services, Electronic mail, Voice mail, On-line information and data base retrieval, electronic data interchange (EDI)

Capacity Building Capacity Building, Training of farmers, Training of extension personnel,Vocational training

Agri Diagnost ic services

Single window delivery system for technology products, diagnostic services and information through Agricultural Technology Information Centres

Health Hospital services: leading healthcare facilities, Medical and dental services, Veterinary services, Services provided by midwives, nurses, physiotherapists and para-medical personnel

Financial services Insurance and related, Banking

P r o f e s s i o n a l Services

Legal Services, Accounting, auditing and bookkeeping services, Taxation Services , Engineering services , urban planning and landscape architectural services

Education Educational institutes, universities, English Language training centres, Social Science & Humanities, Medical Science , Management Education

Transport

Internal Waterways: Passenger & Freight transportation , Rental of vessels with crew, Maintenance repair of vessels, Pushing towing services Rail: Passenger &Freight transportation, Pushing towing services , Maintenance &repair of rail equipment Road : Passenger & Freight transportation, Rental of commercial vehicles with operator, Maintenance repair of road equipment

Tourism and Travel Related Services

Hotels and restaurants (incl. catering), Travel agencies and tour operators services, Tourist guides services

Source: Based on Author’s calculations.



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also used. It is quite evident from the table that, India has enormous supply capacity in different services sector which would be crucial to link production hubs across India, Cambodia, Laos, Myanmar and Vietnam.

IV.4 Potential of O-FDI from IndiaOur analysis does not stop here and tries to stretch to include identification of sectors that have potential for outward FDI from India to

Table16: Potential O-FDI from India

Sectors India's Outward FDI Capacity: Potential-based on Requirements

Marine Sector India's m-krishi advisory services; Post harvest management

Agriculture Farm Mechanisation: Paddy drum seeder, Tractors, Paddy transplanter, Power Tiller, Zero till drill; ;Rubber technology such as Rubber roller ginning machine

E l e c t r i c a l a n d E l e c t r o n i c Equipments

Electronic components, Motors, Sim Cards, Parts of Radio & transformers, Printed circuits, Transformers; Computer hardware: Disc Drives, Personal Computers, Smart cards ; Telecom: Mobile Phones, Telecom &Television Reception apparatus, optical fibre cable, Set Top box

Pharmaceuticals Pharmaceutical products mfg.: chemistry and process reengineering skills

Petroleum Oil and gas Exploration, Light Petroleum oils and preparations, Other petroleum oils and preparations

Automobiles

Motorcycles with reciprocating piston engine displacing> 50 cc to 250 cc , Automobiles with reciprocating piston engine displacing> 1000 cc to 1500 cc; > 1500 cc to 3000, Motor Vehicle parts, Drive Transmission, Engine Parts, Passenger & Commercial vehicles, Two-wheelers & Three wheelers

Steel Iron and Steel, Articles of Iron and Steel

Leather Raw hides, Skins and Leather

Gems and Jewellery Cutting and polishing of Diamond and other gems, Gold jewellery exports, Diamond trading institutions: Training

T e x t i l e s a n d Garments

Cotton, Silk, Wool, Manmade staple fibres, Manmade filaments, Articles of apparel, accessories, knit or crochet, Impregnated, coated or laminated textile fabrics

Source: Author’s calculations.

CLMV countries. This was based on, again, the requirements in the CLMV region that emerged during stakeholder consultations as also secondary material.

Such an exercise was carried out with the objective of adopting RVCs as a strategy to integrate India and CLMV by keeping in mind the interlinkages among potential trade in goods sectors, trade in services sectors and O-FDI sectors (Table 16).

The section on potentials for trade in goods, services and O-FDI would only be relevant for creating RVCs between India and CLMV only when all these three are linked together in a common template. We first give the rationale for doing so which is followed by the actual template of interlinkages.

Trade in goods cannot be stepped up unless institutional mechanisms exist for facilitating concomitant trade in services. For instance, trade in goods is incumbent upon the presence of facilitative services, like post-shipment credit, consignment-insurance, bank-guarantees, shipping services, etc. that not only facilitate trade but also contribute to the competitiveness of exports. On the other hand, trade in services in a sector like health is dependent upon trade in goods pertaining to this specific service sector such as medical equipment and medicines. Thus, any regional trade agreement needs to recognize the two-way linkages between trade in goods and services. However, in reality the converse of it could also be observed. Given the increasing trend of disconnect between tangibles and

intangibles, for instance, in the case of real sector and financial sector, trade in goods and trade in services follow their independent growth dynamics. In any case, the autonomous flows in both trade in goods and services need to be reckoned with. The added argument stems from the fact that cooperation in upgrading infrastructural services helps reducing the transaction costs, making products cheaper in the regional context.

It needs to be further acknowledged that the strengthening of trade-investment linkages is crucial for achieving higher levels of regional trade and for its developmental impact. Such linkages help improving export supply capabilities in the countries of a regional grouping. They are also more employment generating with the different types of investment made to take advantage of trade liberalisation, regionally. While an FTA can spur investment flows in terms of efficiency-seeking regional restructuring, it is the trade-creating joint ventures that ultimately have a decisive impact on regional trade flows. The trade-creating joint ventures are in a position to take advantage of the regional FTA.

V Integrated Approach: Trade in Goods & Services and O-FDI in RVCs


32

In this context, if vertical integration and horizontal specialisation are also focused upon with the help of cross-country investment flows that strengthen trade-investment linkages, the gains in terms of higher trade and investment flows leading to greater employment generation become possible. This may essentially mean distribution of different stages of production in a particular industry regionally in an integrated manner viz. the vertical integration and specialisation in the same stage of production with the help of product differentiation across the region viz. the horizontal specialisation.

Given the analytical rationale for adopting an integrated approach Table 17 presents a common template for creating RVCs between India and CLMV through an integrated approach towards trade in goods, trade in services and India’s O-FDI. This includes sector wise different stages where different countries have comparative advantage and economic complementarities waiting to be tapped in the realms of towards trade in goods, trade in services and India’s O-FDI.

INTEGRATED APPROACH: TRADE IN GOODS & SERVICES AND O-FDI IN RVCS

33

Tabl

e 17

: RV

Cs

betw

een

Indi

a an

d C

LMV

: An

Inte

grat

ed A

ppro

ach

tow

ards

Tra

de in

Goo

ds, S

ervi

ces

and

O-F

DI

Indu

stry

Stag

es in

the

Prod

uctio

n pr

oces

s

Trad

e in

G

oods

: In

dia’

s Ex

port

s po

tent

ial

Serv

ices

requ

ired

in

pro

duct

ion

Serv

ices

requ

ired

be

twee

n st

ages

Serv

ices

requ

ired

af

ter p

rodu

ctio

n

Indi

a’s

expo

rts

of

pote

ntia

l Ser

vice

s an

d O

-FD

I

Elec

tron

ics

Indu

stry

Stag

e I:

Supp

ly o

f Raw

Mat

eria

ls

Se

rvic

es o

f en

gine

ers,

line

su

perv

isor

s an

d te

chni

cian

s ar

e re

quir

edD

esig

n an

d de

velo

pmen

t- se

rvic

es o

f de

sign

eng

inee

rs,

tech

nica

l offi

cers

an

d pr

ojec

t lea

ds

are

requ

ired

Sale

s- s

ervi

ces

of

sale

s m

anag

ers

and

exec

utiv

es a

re

requ

ired

Afte

r sal

es

serv

ices

- rep

air

mec

hani

cs a

nd

serv

ice

supp

ort

exec

utiv

es a

re

requ

ired

Elec

tron

ic

com

pone

nts,

M

otor

s, S

im C

ards

, Pa

rts

of R

adio

&

tran

sfor

mer

s,

Prin

ted

circ

uits

, Tr

ansf

orm

ers;

Te

leco

m: M

obile

Ph

ones

, Tel

ecom

&

Tele

visi

on

Rece

ptio

n ap

para

tus,

opt

ical

fib

re c

able

, Set

Top

bo

x

Stag

e II

: Man

ufac

ture

of

elec

tron

ic c

ompo

nent

s fr

om

raw

mat

eria

ls b

y C

ompo

nent

M

anuf

actu

rers

Stag

e II

I: D

esig

ning

the

look

of

the

elec

tron

ic g

oods

by

Encl

osur

e m

anuf

actu

rers

Stag

e IV

: Con

trac

t man

ufac

ture

rs

mak

e th

e p

rint

ed c

ircu

it bo

ards

Indi

a

Stag

e V

: Ele

ctro

nics

dis

trib

utor

s st

ock

and

keep

a w

ide

vari

ety

of

elec

tron

ic g

oods

Stag

e V

I: En

d m

arke

ts c

arry

ou

t the

fina

l tra

nsac

tion

by

mak

ing

the

prod

uct a

vaila

ble

for

cust

omer

s.

Indi

a ,

Vie

tnam

Food

Pr

oces

sing

In

dust

ry

Stag

e I:

Proc

urem

ent o

f Raw

mat

eria

ls

Pack

agin

g se

rvic

es

Stor

age

and

dist

ribu

tion

faci

litie

sC

ontr

olle

d at

mos

pher

e st

orag

e fa

cilit

ies,

an

d re

frig

erat

ed

tran

spor

tatio

nRe

frig

erat

ed

tran

spor

t fac

ilitie

sD

istr

ibut

ion,

re

frig

erat

ed

tran

spor

t fac

ilitie

s

Gra

ding

an

d pa

ckin

g ce

nter

s, te

stin

g la

bora

tori

esQ

ualit

y co

ntro

l

Stag

e II

: Pri

mar

y Pr

oces

sing

Indi

a,

Vie

tnam

Stag

e II

I: Se

cond

ary

Proc

essi

ngIn

dia

, V

ietn

am

Stag

e IV

: Ter

tiary

Pro

cess

ing

Indi

a ,

Vie

tnam

Tabl

e 17:

cont

inue

d...


34

Gem

s an

d Je

wel

lery

In

dust

ry

Stag

e I:

Min

ing

and

Extr

actio

n fr

om

natu

ral d

epos

its

Jew

elle

ry

Des

igni

ngM

arke

ting,

A

dver

tisin

g,A

nd S

ales

ser

vice

s

Tran

spor

tatio

n fa

cilit

ies

Ope

ratio

nal p

lann

ing

(dem

and

fore

cast

ing,

di

stri

butio

n pl

anni

ng)

Cut

ting

and

polis

hing

of

Dia

mon

d an

d ot

her g

ems,

Gol

d je

wel

lery

exp

orts

, D

iam

ond

trad

ing

inst

itutio

ns:

Trai

ning

Stag

e II

: Pro

cess

ing

incl

udin

g pl

anni

ng, c

uttin

g an

d po

lishi

ng

of D

iam

onds

Stag

e II

I: Fa

bric

atio

n in

clud

ing

mel

ting,

set

ting,

pol

ishi

ng a

nd

finis

hing

Stag

e IV

: Ret

ail i

nclu

ding

m

arke

ting,

bra

ndin

g an

d se

lling

Indi

a ,

Vie

tnam

Text

ile

Indu

stry

Stag

e I:

Spin

ning

Indi

a

M

anag

ers

for

proc

urem

ent,

prod

uctio

n

mai

nten

ance

and

qu

ality

con

trol

En

gine

erin

g/m

aint

enan

ceD

yein

g an

d pr

intin

gD

esig

ning

and

m

erch

andi

sing

Tran

spor

ting

the

proc

ured

ra

w m

ater

ial

to th

e te

xtile

m

anuf

actu

rers

Engi

neer

ing/

mai

nten

ance

, Q

ualit

y C

ontr

ol

Qua

lity

Con

trol

Tran

spor

t to

app

arel

m

anuf

actu

rers

Bran

ding

, ad

vert

isin

g an

d tr

ansp

ort t

o re

tail

outle

ts

Cot

ton,

Silk

, Woo

l, M

anm

ade

stap

le

fibre

s, M

anm

ade

filam

ents

, Art

icle

s of

app

arel

, ac

cess

orie

s,

knit

or c

roch

et,

Impr

egna

ted,

co

ated

or

lam

inat

ed te

xtile

fa

bric

s

Stag

e II

: Wea

ving

/ K

nitti

ngIn

dia

Stag

e II

I: D

yein

g an

d Fi

nish

ing

Stag

e IV

: Des

igni

ng, c

uttin

g,

sew

ing,

but

tonh

olin

g, ir

onin

gIn

dia

, V

ietn

am

Phar

ma

Indu

stry

Stag

e I:

Rese

arch

and

dev

elop

men

tIn

dia

Clin

ical

rese

arch

an

d tr

ials

-sc

ient

ists

requ

ired

Prod

uctio

n - M

anag

ers,

Su

perv

isor

s,

Wor

kmen

and

Te

chni

cian

s(La

b)

Qua

lity

Con

trol

Sale

s an

d M

arke

ting

serv

ices

Phar

mac

eutic

al

prod

ucts

mfg

.

Stag

e II

: Con

vers

ion

of o

rgan

ic

and

natu

ral s

ubst

ance

s in

to

bulk

pha

rmac

eutic

al s

ubst

ance

s th

roug

h ch

emic

al s

ynth

esis

, fe

rmen

tatio

n an

d ex

trac

tion

Indi

a

Stag

e II

I: Fo

rmul

atio

n of

the

final

ph

arm

aceu

tical

pro

duct

Indi

a

Stag

e IV

: Sal

es a

nd m

arke

ting

Indi

a

Tabl

e 17:

cont

inue

d...

Tabl

e 17:

cont

inue

d...

INTEGRATED APPROACH: TRADE IN GOODS & SERVICES AND O-FDI IN RVCS

35

Leat

her

Indu

stry

Stag

e I:D

airy

, dra

ught

and

mea

t an

imal

s ar

e se

nt to

sla

ught

erho

uses

Vie

tnam

Tann

ing

and

Fini

shin

gD

esig

ning

Refr

iger

ated

Tr

ansp

orta

tion

faci

litie

sTr

ansp

ort f

acili

ties

Dis

trib

utio

n,

Mar

ketin

g an

d Sa

les

serv

ices

Raw

hid

es, S

kins

an

d Le

athe

r

Stag

e II

: Hid

e Pr

oces

sing

( Ta

nnin

g an

d Fi

nish

ing)

Indi

a

Stag

e II

I: A

fter t

he le

athe

r is

obta

ined

than

Oth

er in

puts

suc

h as

des

ign

are

adde

dSt

age

IV: F

inal

out

put s

uch

as

Foot

wea

r, G

arm

ents

, Sad

dler

y,

Leat

her c

loth

are

obt

aine

dIn

dia

Stee

l Mak

ing

Indu

stry

Stag

e I:S

ourc

ing

of R

aw m

ater

ials

from

sc

rap

met

al, d

irec

t red

uced

iron

and

ho

t met

al

Engi

neer

ing

and

prep

arat

ion

of d

esig

n st

anda

rds,

wat

er

trea

tmen

t pla

nts,

sy

stem

s an

d pr

oces

s co

ntro

l, op

erat

iona

l su

ppor

t, en

viro

nmen

tal

plan

ning

Iron

and

Ste

el,

Art

icle

s of

Iron

and

St

eel

Stag

e II

: Mel

ting

in E

AF(

Elec

tric

A

rc F

urna

ce)

Stag

e II

I: Se

cond

ary

Met

allu

rgy

Stag

e IV

: Con

tinuo

us C

astin

gSt

age

V: R

ollin

gIn

dia,

V

ietn

am

Stag

e V

I: Fi

nish

ed p

rodu

cts

Indi

a,

Vie

tnam

Petr

o-ch

emic

al

Indu

stry

Stag

e I:

Sour

cing

Raw

mat

eria

ls o

f pe

trol

eum

(hyd

roca

rbon

) ori

gin

Oil

and

gas

Expl

orat

ion,

Lig

ht

Petr

oleu

m o

ils

and

prep

arat

ions

, O

ther

pet

role

um

oils

and

pr

epar

atio

ns

Stag

e II

: Dis

tilla

tion

of c

rude

oil

yiel

ds n

apht

ha, g

as o

il, n

atur

al

gas

and

petr

oleu

m g

ases

Indi

a

Stag

e II

I: C

rack

ing

of N

apht

ha/

Nat

ural

gas

Stag

e IV

: Ole

fins

such

as

ethy

lene

, pro

pyle

ne, b

utad

iene

an

d ar

omat

ics

such

as

benz

ene,

to

luen

e an

d xy

lene

are

obt

aine

dSo

urce

: Bas

ed o

n M

etho

dolo

gies

exp

lain

ed in

the

text

.

Not

e: L

aos

and

Cam

bodi

a no

t cov

ered

bec

ause

of l

ack

of tr

ade

data

and

nec

essa

ry in

form

atio

n.

Tabl

e 17:

cont

inue

d...

In this section, a brief overview of the challenges confronting India-CLMV economic relations is presented.

VI.1 Information GapThe information gap between India and CLMV countries is enormous due to the four prime reasons: (a) asymmetry, (b) inconsistency, (c) inadequacy, and (d) communication gap. It is asymmetric as various sources like uNCOMTRADE, IMF, national sources, etc. show varying data for different CLMV countries. For instance, statistics and databases are relatively more equipped to Myanmar and

Vietnam but not so for Cambodia and Laos. Also, the data available is inconsistent in terms of number of years and data for latest years is not the same. The web-based-information is inadequate as much as published sources. Additionally, due to limited interactions at various levels there is a huge communication gap that needs to be addressed as it gets manifested in the information gap.

VI.2 Banking ConstraintsAnother constraint in strengthening India-CLMV economic integration is the thin representation of Indian Banks in CLMV

VI Challenges in the Existing Scenario

Table 18: Overseas Branches/Representative Offices of Indian Banks in CLMV Countries

Country City Name of Indian Banks*

Cambodia Phnom Penh Bank of IndiaMyanmar yangon united Bank of IndiaMyanmar yangon Exim bank of IndiaVietnam Ho Chi Minh City Indian Overseas BankVietnam Ho Chi Minh City Bank of India

Source: Reserve Bank of India and Exim Bank of India

Note*: As on September 30, 2013


38

countries. As is evident from Table 18, very few Indian banks have branches present in CLMV nations.

VI.3 Capacity Building/Skill DevelopmentAs discussed previously, skill availability remains a huge challenge for the CLMV countries. There exists a mismatch between the skill/personnel/technology required by the CLMV economies and that which is available. To this end, effective collaboration for sector-specific skill sets’ availability would have to be addressed.

VI.4 Technical SupportInadequate availability of technical support was highlighted as a major constraint during stakeholders’ consultation. These include on-site and off-site technical assistance and during the phase of after-sales services. Collaborative ventures to enhance the availability of such human resources through vocational training endeavours need to be strengthened.

VI.5 Limited O-FDI of IndiaIndian O-FDI has remained low, especially as compared to global players’ presence in the CLMV region. This acts as a major constraint in any economic cooperation strategy between

Table 19: Digital Connectivity

Indicators of Digital Connectivity Cambodia Laos Myanmar Vietnam India

Communications, computer, etc. (% of service exports, BOP) 12.84127 12.20686d 12.00620d N.A 68.07937d

Communications, computer, etc. (% of service imports, BOP) 20.72705 11.28522d 19.8249d N.A 32.02447d

F ixed broadband In terne t subscribers 29734 93200 5400 4446600 14306000

F ixed broadband In terne t subscribers (per 100 people) 0.205369 1.462205 0.0110827 4.9555181 1.1368847

High-technology exports (current uS$) 5139291d N.A 41739c 4020110739c 12870672544d

ICT service exports (% of service exports, BOP) 8.416617 N.A N.A N.A 61.49208d

ICT goods imports (% total goods imports) 2.11683d N.A 1.68706c 8.40372c 5.9735d

ICT goods exports (% of total goods exports) 0.048715d N.A 0.02181c 7.90945c 2.1826d

Internet users (per 100 people) 4.939861 10.74768 1.0691 39.49 12.5800609Mobile cellular subscriptions 19105115 6492000 5440000 134066000 864720000Mobile cellular subscriptions (per 100 people) 131.9567 101.8523 11.164840 149.40999 68.718506

Technicians in R&D (per million people) 13.20102a N.A 142.49289a N.A 92.81055b

Telephone lines 584475 112000 556000 10191049 31080000Telephone lines (per 100 people) 4.03689 1.757157 1.1411123 11.357425 2.4698991

Source: World Bank, WDI Database (2013) .

Notes: *Data has been taken for the year 2012 but in case of some indicators, data has been taken for the latest available year as indicated by the superscripts - a: 2002, b: 2005, c: 2010, d: 2011 **Data for ICT service imports (% of service imports, BOP) is not available

CHALLENGES IN THE EXISTING SCENARIO

39

India and CLMV. This cooperation needs careful consideration as these can hinder the process of RVCs creation as well as manufacturing by Indian entrepreneurs in CLMV for tapping market access in China under the ASEAN-China FTA in goods.

VI.6 Infrastructural Constraints-Digital/PhysicalInfrastructure and Connectivity between India and CLMV countries remains a major area of concern. Although the status of

infrastructure in CLMV countries is improving, still connectivity with India is less. In terms of the three dimensions of connectivity digital, soft and hard/physical, CLMV countries lag behind India on many counts, with some exceptions in the case of Vietnam (Tables 19 and 20).

These highlight the imperatives of India’s greater O-FDI in some of the areas of connectivity in which India has capacity to do business, such as in the areas of digital connectivity and soft connectivity.

Table 20: Physical Connectivity

Indicators of Physical Connectivity Cambodia Laos Myanmar Vietnam India

Air transport, freight (million ton-km) 0.07766 0.96648 3.53038 485.09239 1712.966Air transport, passengers carried 380422 877950 1539676 17053248 70501495Transport services (% of service exports, BOP) 14.01932 9.33454 25.87596 N.A 12.75077

Transport services (% of service imports, BOP) 54.04326 6.88586 68.85861 N.A 45.51398

Travel services (% of service exports, BOP) 70.70170 73.8997 41.77118 N.A 12.75659

Travel services (% of service imports, BOP) 18.77572 71.7010 11.31647 N.A 11.01353

Motor vehicles (per 1,000 people) 21c 20e 7.18067h 13e 18.34957g

Passenger cars (per 1,000 people) 18c 2e 5.41483h 13e 11.83506g

Quality of port infrastructure, WEF (1=extremely underdeveloped to 7=well developed and efficient by international standards)

4.2 N.A N.A 3.4 4

Rail lines (total route-km) 650c N.A N.A 2347i 63974i

Road density (km of road per 100 sq. km of land area) 21.88356g 17g 5.080920h 48e 125f

Roads, paved (% of total roads) 6.28999b 13.7g 11.9c 47.6e 49.5f

Roads, total network (km) 39618g 39568g 34377h 160089e 410959f

Investment in transport with private participation (current uS$) 40100000d 1500000g N.A 155000000h 16570100000i

Logistics performance index: Quality of t rade and t ransport - re la ted infrastructure (1=low to 5=high)

2.2 2.4 2.1 2.68 2.87

Machinery and transport equipment (% of value added in manufacturing) 0.13068a N.A N.A 11.81179a 17.90563a

Vehicles (per km of road) 7b 3e 10c 7e 5f

Source: World Bank, WDI Database (2013).

Notes: Data has been taken for the year 2012 but in case of some indicators, data has been taken for the latest available year as indicated by the superscripts - a: 2000, b: 2004, c: 2005, d: 2006, e: 2007, f: 2008, g: 2009, h: 2010, i: 2011

The study undertook detailed stakeholders’ consultations. The insights and inputs gathered through this process are summarised in this section.

VII.1 Summary of Inputs Received from Ministerial Meetings• Sources of inputs:

a. Council for Leather Exports

b. Ministry of Road Transport and highways

c. Indian Chamber of Commerce (inputs provided only for Myanmar but SMEs inputs can be generalised across CLMV)

d. EEPC India

e. Ministry of New and Renewable Energy submitted that they do not have any inputs

• Dimensions of inputs:

i. Prioritisation of areas in identified Sectors for trade: Leather, Textiles, Garments, Oil and Gas, Engineering

ii. Relevant service exports in the identified sectors: IT, especially in Myanmar, offshore consultancy and onsite BPO, urban development related services, transport, energy, engineering, architectural, Mode of services: both offshore project design and onsite project implementation, health services,

iii. How to mobilise O–FDI:

a. Have a national level o-FDI strategy, address protective dimensions of CLMV FDI regimes, Investment security/protection,

b. Mechanism: discussion with counterparts and bilateral treaties, create business forum, web-portal, visa facilitation.

c. Sec tors : l ea ther and footwear , infrastructure, oil, mining, pharma, textile, power, and automobiles.

iv How to integrate the SME involvement in RVCs:

a. Linking SMEs with large companies locally and the latter gets engaged in O-FDI?: yes

VII Insights Gained from Stakeholders’ Consultations


42

b. Linking SMEs with MNCs in CLMV?: yes

c. Linking SMEs on a stand-alone basis with their counterparts in CLMV?: yes

v. Feasibility of time frame: One year/ Interim strategy in six months

(For further details see Annexure V.)

VII.2 Summary of Inputs Received from Private Sector• Case Study: Timber from Myanmar

I s s u e : M y a n m a r ’ s M i n i s t r y o f Environmental Conservation and Forestry implemented a ban on export of raw timber effective from April 1, 2014. This move was undertaken in keeping with Myanmar’s Forest Policy (1995) which focuses on addressing environmental protection and management, reforestation, forest industry and trade, forest research, institutional strengthening, and people’s participation and public awareness. As per the official figures from the Ministry, almost three quarters of the timber trade has been illegal amounting to almost $6 billion. In an effort to conserve the country’s natural timber resources and layoff the illegal timber trade, the country has finally imposed a blanket ban on export of raw logs.

The Way Forward• Import from Malaysia: To combat the

effect of the ban, India can increase its wood imports from Malaysia although Malaysia does not offer teak and Indian importers will have to make do with other kinds of wood.

• Import from Laos and Vietnam: Another alternative would be to import wood products from Vietnam and Laos in the CLMV region. Given that India heavily relies on imports to satisfy the country’s

growing appetite for wood products and Vietnam and Laos are both net exporters catering to all big markets such as uS, Eu, China, etc. but not India highlights the untapped potential that exists for linking Vietnam and Laos with India. These economies other than having location proximity can make use of the skilled labour and modern technology that India has to offer in exchange for supplying it high quality wood products and timber.

• Substitute Wood with Bamboo: In order to fulfill the growth in demand for wood, the strategies being explored suggest that relying on imports alone may not be the right course for India. Substituting bamboo with timber seems to be the most viable and green solution especially for the long run. From being able to replace wood in construction business to providing nutrition in the form of food, there are over 1500 uses of Bamboo. Everything from its leaves to its root is of value and can be used in various forms. For instance, furniture; fuel-wood, matchsticks, agarbattis, toothpicks, earthquake-resistant and long-lasting conventional housing and buildings, pulp and paper, particle board, MDF, handicrafts, bamboo shoots as food, leaves for medicinal uses, decorative and shuttering plywood, various board products such as wafer board, strip board, laminated boards, roofing sheets etc. are among various other products (National Bamboo Mission). With the use of modern industrial techniques, the spectrum of bamboo usage can be expanded in such a manner that it can easily substitute wood. Bamboo is the 21st century eco-friendly alternative to timber and Cambodia, Laos, Vietnam and India are all rich in bamboo supplies.

INSIGHTS GAINED FROM STAKEHOLDERS CONSuLTATIONS

43

• Case Study: Steel from Vietnam

Issue: The Joint Circular No. 44/2013/TTLT-BCT-BKHCN dated 31 December 2013 (taking effect from 01 June 2014) issued by the Ministry of Industry and Trade and the Ministry of Science and Technology, Vietnam provides for management of domestically-produced and imported steel quality. According to it, organisations and individuals who import steel have to announce the applying standard (basic standards, national standards of Vietnam, standards of other countries, international standards and regional standards) for goods in the relevant import contract for

customs clearance instead of only the origin of products and import contracts as done earlier.

The Way Forward: The use of equal Indian standards for testing stainless steel manufactured in India can be adopted and also acceptance of these test reports by the authorities in Vietnam. Also, Indian agencies may be authorised to conduct testing and certification of Indian manufacturer importer in India as per standards prescribed and the result be accepted under the notification.

(For further details see Annexure VI.)

VIIIWhat and How of Cooperation?: Policy Strategy and Recommendations-RVCs and an Integrated Approach

The underdevelopment of CLMV is a developmental opportunity for India is the backdrop in which this study has provided sufficient rationale for economic integration between India and the CLMV region. In doing so, the study has found that the present levels of economic linkages, including trade and investment, between the two remains weak and low. On the other hand, the study also finds enormous potential for a more heightened economic integration between India and the CLMV region in the domains of trade in goods, trade in services and FDI. Not only that the study has identified sectors for this purpose in the study, these sectors have also been placed in an Integrated Framework to enhance trade and investments flows as well as to tap skill complementarities so that regional value chains between India and CLMV could be created and strengthened. The study also finds that while there are enormous challenges that may have to be addressed, one of the important ways of utilising the CLMV’s economic space is by setting up manufacturing

units in the CLMV region and access the Chinese markets through exports originating from CLMV under the China-ASEAN FTA. Given these, a summary of findings of the study for creating potential RVCs is presented in Table 21.

In the light of the concluding insights that the study presents, some broad contours of India’s strategy for economic integration with the CLMV region are presented by way of Policy Recommendations. The Policy Recommendations are divided into two parts, viz. theme-specific and horizontal. For theme-specific recommendations one may refer to Table 22.

Key Horizontal Policy Recommendations• Creating India-CLMV Convergence of

Interests in Regional Trade Negotiations: India must engage CLMV as it wants India to play a more pro-active role. This is because they often do not get their voices


heard in the ASEAN Caucus. Therefore, India-CLMV could be important bedrock for even the RCEP negotiations where India can get support from these countries.

• Regional Value Chains (RVCs): Given the backdrop of India’s participation in RVCs being relatively low and the fact that RVCs are not well-developed in CLMV, one of the prime strategies for India’s economic integration with CLMV region is to create RVCs. This is in contrast to the fact that RVCs have huge presence in ASEAN. Regional value chains entail relocation of production bases at different stages of production and manufacturing in different countries that are linked with services. The net outcome of such relocation is in terms of efficiency-seeking industrial restructuring. For this to be achieved, an integrated approach towards policy strategy is required.

• Integrated Approach: Identified Sectors and Integrated Policy Responses

As the study has highlighted, instead of addressing issues for trade augmentation and increase in FDI in an isolated manner, we need to adopt an integrated approach. For this to happen, trade in goods, trade in services and especially India’s outward FDI to CLMV region need to have integrated policy responses whereby interlinkages across these are well recognised. In addition, these would have bearing on evolving policy responses to interlinkages across sectors in the realms of agriculture, manufacturing and services. These need to be further aligned to the national level focus sectors in the CLMV region in order to harness inter-sectoral complementarities between India and each country of the CLMV region.

• Alignment of India’s commercial interests with CLMV’s Policy Focus: India must economically integrate with the

CLMV also due to enormous comparative advantage and developmental experience that exists in India in areas that are identified as Focus Sectors as part of the respective national vision of each of the countries of the CLMV region. There are several sectors that qualify for such economic interactions between India and the CLMV region including agricultural and seafood processing, agricultural machinery, oil and gas exploration, extraction and export of metals, small and medium enterprises, labour-intensive industries, processing and manufacturing industries such as pharmaceuticals and healthcare, wood and timber industry, garment industries, electronics, ship building, manufacture of automobiles and spare parts, and service sectors that include transport, infrastructure and telecommunications, energy and electricity, tourism, human resource development, education, information technology (IT), light engineering, financial services, banking and insurance, electricity generation and environment and energy- saving services.

• Integrating the SME involvement in RVCs: Three-pronged Strategy

It would be important to integrate the employment-intensive SMEs in RVCs through India-CLMV economic integration. This could be achieved with a three-pronged strategy:

» By Linking SMEs with large companies locally the latter get engaged in O-FDI

» Linking SMEs with MNCs in CLMV

» Linking SMEs on a stand-alone basis with their counterparts in CLMV

• Increasing presence of Indian banks: No amount of commercial and economic linkages especially in the framework of RVCs would be possible without enhancing the number of Indian banks present in

46

Cambodia in their full-fledged form rather than just being representative offices.

• Bridging information gap: In order to address information gap, its asymmetry, inconsistency and inadequacy, it is important that a dedicated web portal on India-CLMV economic linkages is created.

• Outreach Programme: RIS and FIEO could organise 5-6 outreach events to familiarise issues and potentials in India-CLMV economic cooperation,

especially keeping in mind the PDC related issues.

• Joint ventures for digital and physical connectivity:The suggested PDC could also focus on initiating joint ventures in different areas of digital and physical connectivity.

• Time frame:One year with an interim strategy in six months, including the PDC could be considered for operationalising the Indian strategy for the CLMV region.

WHAT AND HOW OF COOPERATION?: POLICy STRATEGy AND RECOMMENDATIONS-RVCS

47


Tabl

e 21

: Sum

mar

y of

Fin

ding

s fo

r Pot

entia

l RV

Cs

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Trad

e in

Goo

dsTe

xtil

es a

nd G

arm

ents

; G

ems

and

Jew

elle

ry;

Aut

omob

ile p

arts

; Lea

ther

; R

ub

ber

an

d R

ub

ber

ar

ticl

es,

Ele

ctri

cal

and

Elec

tron

ic E

quip

men

ts;

Iron

and

Ste

el, A

rtic

les

of

Iron

and

Ste

el; P

roce

ssed

Fo

od; O

il an

d N

atur

al G

as

Rub

ber

and

Rub

ber

arti

cles

; Ph

arm

aceu

tical

s, E

lect

rica

l and

El

ectr

onic

Equ

ipm

ents

; Ir

on

and

Stee

l, A

rtic

les

of I

ron

and

Stee

l; Pr

oces

sed

Food

; Oil

and

Nat

ural

Gas

Tex

tile

s an

d

Gar

men

ts;

Pha

rmac

euti

cals

; G

ems

and

Jew

elle

ry; M

arin

e an

d Se

afoo

d;

Aut

omob

ile,

E

lect

rica

l an

d El

ectr

onic

Equ

ipm

ents

; Iro

n an

d St

eel,

Art

icle

s of

Iro

n an

d St

eel;

Proc

esse

d Fo

od; O

il an

d N

atur

al

Gas

Te

xti

les

an

d

Ga

rme

nts

; Ph

arm

aceu

tical

s; G

ems a

nd Je

wel

lery

; M

arin

e an

d Se

afoo

d; A

utom

obile

; Le

athe

r; Ru

bber

and

Rub

ber a

rtic

les,

El

ectr

ical

and

Elec

tron

ic E

quip

men

ts;

Iron

and

Ste

el, A

rtic

les

of I

ron

and

Stee

l; P

roce

ssed

Foo

d;

Oil

and

N

atur

al G

as

Tr

ad

e

in

Serv

ices

Agr

i Dia

gnos

tic s

ervi

ces:

Si

ngle

win

dow

del

iver

y sy

stem

for

tec

hnol

ogy

pro

du

cts,

dia

gn

osti

c se

rvic

es a

nd i

nfor

mat

ion

thro

ugh

Agr

icu

ltu

ral

Tech

nolo

gy I

nfor

mat

ion

Cen

tres

.T

ra

ns

po

rt

&

in

fras

truc

ture

: In

tern

al

Wat

erw

ays-

Pas

seng

er

& F

reig

ht t

rans

port

atio

n,

Ren

tal

of v

esse

ls w

ith

crew

, Mai

nten

ance

rep

air

of v

esse

ls, P

ushi

ng to

win

g se

rvic

es, R

ail-

Pass

enge

r &

Frei

ght

tran

spor

tatio

n,

Push

ing

tow

ing

serv

ices

, M

aint

enan

ce &

rep

air

of

rail

equ

ipm

ent,

R

oad-

P

asse

ng

er &

Fre

igh

t tr

ansp

orta

tion,

Ren

tal

of

com

mer

cial

veh

icle

s w

ith

oper

ator

, M

aint

enan

ce

repa

ir o

f roa

d eq

uipm

ent.

Agr

i Dia

gnos

tic se

rvic

es: S

ingl

e w

indo

w d

eliv

ery

syst

em f

or

tech

nolo

gy p

rodu

cts,

diag

nost

ic

serv

ices

an

d i

nfo

rmat

ion

thro

ug

h

Ag

ricu

ltu

ral

Tec

hn

olo

gy

In

form

atio

n C

entr

es.

Tra

nspo

rt &

inf

rast

ruct

ure:

In

tern

al W

ater

way

s- P

asse

nger

&

Fre

igh

t tr

ansp

orta

tion

, R

enta

l of

ves

sels

wit

h cr

ew,

Mai

nten

ance

rep

air

of v

esse

ls,

Pu

shin

g to

win

g se

rvic

es,

Rai

l- P

asse

nge

r &

Frei

ght

tran

spor

tatio

n, P

ushi

ng to

win

g se

rvic

es, M

aint

enan

ce &

repa

ir of

ra

il eq

uipm

ent,

Roa

d- P

asse

nger

&

Fre

ight

tran

spor

tatio

n, R

enta

l of

com

mer

cial

veh

icle

s w

ith

oper

ator

, Mai

nten

ance

repa

ir o

f ro

ad e

quip

men

t.

Agr

i Dia

gnos

tic se

rvic

es: S

ingl

e w

indo

w d

eliv

ery

syst

em f

or

tech

nolo

gy p

rodu

cts,

dia

gnos

tic

serv

ices

an

d i

nfo

rmat

ion

thro

ugh

Agr

icul

tura

l Tec

hnol

ogy

Info

rmat

ion

Cen

tres

.T

rans

port

& i

nfra

stru

ctur

e:

Inte

rnal

Wat

erw

ays-

Pas

seng

er &

Fr

eigh

t tra

nspo

rtat

ion,

Ren

tal o

f ve

ssel

s w

ith c

rew

, Mai

nten

ance

re

pair

of v

esse

ls, P

ushi

ng to

win

g se

rvic

es, R

ail-

Pass

enge

r &Fr

eigh

t tr

ansp

orta

tion,

Pus

hing

tow

ing

serv

ices

, Mai

nten

ance

& re

pair

of

rail

equi

pmen

t, R

oad-

Pas

seng

er

& F

reig

ht tr

ansp

orta

tion,

Ren

tal

of c

omm

erci

al v

ehic

les

wit

h op

erat

or, M

aint

enan

ce r

epai

r of

ro

ad e

quip

men

t.

Agr

i D

iagn

osti

c se

rvic

es:

Sin

gle

win

dow

del

iver

y sy

stem

for

te

chno

logy

pro

duct

s, d

iagn

osti

c se

rvic

es a

nd i

nfor

mat

ion

thro

ugh

Agr

icul

tura

l Tec

hnol

ogy

Info

rmat

ion

Cen

tres

.En

viro

nmen

t and

ene

rgy

savi

ng:

cons

erva

tion

of

natu

re a

nd i

ts

reso

urce

s; p

rote

ctio

n of

envi

ronm

ent

from

pol

luti

on,

cons

erva

tion

of

eco

log

y;

C

om

mu

nit

y a

nd

Hab

itat

Eco

logy

; en

viro

nmen

tal

econ

omic

s; c

onse

rvat

ion

of p

rior

ity

med

icin

al p

lant

s;

poll

utio

n an

d re

habi

litat

ion

of d

ispl

aced

peo

ple

due

to d

evel

opm

enta

l ac

tivi

ties

; E

nv

iron

men

tal

Scie

nce

s an

d En

gine

erin

g;

New

and

Ren

ewab

le

Ener

gy;

sola

r en

ergy

tec

hnol

ogy;

en

erg

y-s

avin

g t

ech

niq

ues

in

man

ufa

ctu

rin

g an

d c

onsu

mer

du

rabl

es

Tabl

e 21:

cont

inue

d...

48

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Hu

ma

n

Re

so

urc

e D

evel

opm

ent/

Cap

acit

y B

uil

din

g:

Tra

inin

g of

far

mer

s, T

rain

ing

of

exte

nsi

on p

erso

nn

el,

Voc

atio

nal t

rain

ing.

Educ

atio

n: E

duca

tion

al

inst

itut

es,

univ

ersi

ties

, En

glis

h La

ngua

ge tr

aini

ng

cent

res,

Soc

ial

Scie

nce

&

Hu

man

itie

s,

Med

ical

Sc

ienc

e ,

Man

agem

ent

Educ

atio

n.T

ouri

sm a

nd

Tra

vel

Rel

ated

Ser

vice

s: H

otel

s an

d r

esta

ura

nts

(inc

l. ca

teri

ng),

Trav

el a

genc

ies

and

to

ur

op

erat

ors

’ se

rvic

es,

Tour

ist

guid

es

serv

ices

Hea

lth:

Hos

pita

l ser

vice

s-

lea

din

g

hea

lth

care

fa

cili

ties

, M

edic

al a

nd

dent

al se

rvic

es, V

eter

inar

y se

rvic

es, S

ervi

ces p

rovi

ded

by m

idw

ives

, n

urs

es,

phys

ioth

erap

ists

and

para

-m

edic

al p

erso

nnel

.

Ed

uca

tio

n:

Ed

uca

tio

nal

in

stitu

tes,

uni

vers

ities

, Eng

lish

Lan

guag

e tr

aini

ng c

entr

es,

Soci

al S

cien

ce &

Hum

aniti

es,

Med

ical

Sci

ence

, M

anag

emen

t Ed

ucat

ion.

Soft

war

e an

d IC

T S

ervi

ces:

C

omp

ute

r so

ftw

are,

Dat

a pr

oces

sing

ser

vice

s, D

ata

base

se

rvic

es.

Pro

fes

sio

na

l/

Lig

ht

Engi

neer

ing

Serv

ices

: Le

gal

Serv

ices

, Acc

ount

ing,

aud

iting

an

d b

ookk

eep

ing

serv

ices

, Ta

xatio

n Se

rvic

es ,

Engi

neer

ing

serv

ices

, u

rban

pla

nnin

g an

d la

ndsc

ape a

rchi

tect

ural

serv

ices

Tou

rism

and

Tra

vel

Rel

ated

Se

rvic

es: H

otel

s and

rest

aura

nts

(incl

. cat

erin

g), T

rave

l age

ncie

s an

d to

ur o

pera

tors

’ se

rvic

es,

Tour

ist g

uide

s se

rvic

es.

Hea

lth:

Hos

pit

al s

erv

ices

- le

adin

g he

alth

care

fac

iliti

es,

Med

ical

and

den

tal

serv

ices

, V

eter

inar

y se

rvic

es,

Serv

ices

pr

ovid

ed b

y m

idw

ives

, nur

ses,

ph

ysio

ther

apis

ts a

nd p

ara-

med

ical

per

sonn

el.

Tel

ecom

mun

icat

ion

serv

ices

: V

oice

tele

phon

e ser

vice

s, Pa

cket

-sw

itch

ed &

Cir

cuit

-sw

itch

ed

data

tran

smis

sion

serv

ices

, Tel

ex

serv

ices

, Te

legr

aph

serv

ices

, Pr

ivat

e le

ased

cir

cuit

serv

ices

, E

lect

roni

c m

ail,

Voi

ce m

ail,

On-

line

info

rmat

ion

and

data

ba

se r

etri

eval

, el

ectr

onic

dat

a in

terc

hang

e (E

DI).

Fina

ncia

l ser

vice

s: In

sura

nce a

nd

rela

ted,

Ban

king

.T

ouri

sm a

nd T

rave

l R

elat

ed

Serv

ices

: Hot

els a

nd re

stau

rant

s (in

cl. c

ater

ing)

, Tra

vel

agen

cies

an

d to

ur o

pera

tors

’ se

rvic

es,

Tour

ist g

uide

s se

rvic

esH

ealth

: H

osp

ital

ser

vic

es-

lead

ing

heal

thca

re f

acil

itie

s,

Med

ical

and

den

tal

serv

ices

, V

eter

inar

y se

rvic

es,

Serv

ices

pr

ovid

ed b

y m

idw

ives

, nur

ses,

p

hysi

othe

rap

ists

and

par

a-m

edic

al p

erso

nnel

.

Hea

lth:

Hos

pita

l se

rvic

es-

lead

ing

heal

thca

re f

acili

ties

, M

edic

al a

nd

dent

al s

ervi

ces,

Vet

erin

ary

serv

ices

, Se

rvic

es p

rovi

ded

by m

idw

ives

, nu

rses

, phy

siot

hera

pist

s an

d pa

ra-

med

ical

per

sonn

el.

Tabl

e 21:

cont

inue

d...

Tabl

e 21:

cont

inue

d...


49


Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Indi

an O

FDI

Oil

& G

as:

Oil

an

d ga

s E

xplo

rati

on,

Lig

ht

Pet

role

um

o

ils

and

pre

par

atio

ns,

Oth

er

pet

role

um

o

ils

and

prep

arat

ions

.A

gri

cult

ure

: F

arm

M

echa

nisa

tion

: P

add

y dr

um s

eede

r, T

ract

ors,

P

add

y t

ran

spla

nte

r,

Pow

er T

iller

, Zer

o til

l dri

ll;

Rub

ber

tech

nolo

gy s

uch

as R

ubbe

r ro

ller

ginn

ing

mac

hine

.M

arin

e Se

ctor

: In

dia

's

m-k

rishi

advi

sory

serv

ices

; Po

st h

arve

st m

anag

emen

tS

teel

: Ir

on a

nd S

teel

, A

rtic

les

of Ir

on a

nd S

teel

Leat

her:

Raw

hid

es, S

kins

an

d Le

athe

rG

ems

and

Jew

elle

ry:

Cu

ttin

g an

d p

olis

hing

of

Dia

mon

d a

nd o

ther

ge

ms,

Gol

d j

ewel

lery

ex

port

s, D

iam

ond

trad

ing

inst

itutio

ns: T

rain

ing

Ag

ric

ult

ur

e:

Fa

rm

M

echa

nisa

tion

: Pa

ddy

drum

se

eder

, T

ract

ors

, P

add

y tr

ansp

lant

er, P

ower

Till

er, Z

ero

till

drill

; R

ubbe

r te

chno

logy

su

ch a

s R

ubbe

r ro

ller

ginn

ing

mac

hine

.P

ha

rm

ac

eu

ti

ca

ls

: P

har

mac

euti

cal

pro

du

cts

mfg

.: ch

emis

try

and

proc

ess

reen

gine

erin

g sk

ills

Mar

ine

Sect

or: I

ndia

's m

-kri

shi

advi

sory

ser

vice

s; P

ost h

arve

st

man

agem

ent

Stee

l: Ir

on a

nd S

teel

, Art

icle

s of

Iron

and

Ste

elLe

athe

r: Ra

w h

ides

, Ski

ns a

nd

Leat

her

Gem

s an

d Je

wel

lery

: Cut

ting

and

polis

hing

of D

iam

ond

and

othe

r ge

ms,

Gol

d je

wel

lery

ex

por

ts,

Dia

mon

d t

rad

ing

inst

itutio

ns: T

rain

ing

Oil

& G

as:

Oil

an

d g

as

Expl

orat

ion,

Lig

ht P

etro

leum

oi

ls a

nd p

repa

rati

ons,

Oth

er

petr

oleu

m o

ils a

nd p

repa

ratio

ns.

Agr

icul

ture

: Far

m M

echa

nisa

tion:

Pa

ddy

drum

see

der,

Tra

ctor

s,

Padd

y tr

ansp

lant

er, P

ower

Till

er,

Zero

till

drill

; Rub

ber t

echn

olog

y su

ch a

s R

ubbe

r ro

ller

ginn

ing

mac

hine

. Ph

arm

aceu

tical

s: Ph

arm

aceu

tical

pr

oduc

ts m

fg.:

chem

istr

y an

d pr

oces

s re

engi

neer

ing

skill

sTe

xtile

s an

d G

arm

ents

: Cot

ton,

Si

lk,

Woo

l, M

anm

ade

stap

le

fibr

es,

Man

mad

e fi

lam

ents

, A

rtic

les

of a

ppar

el, a

cces

sori

es,

knit

or

croc

het,

Impr

egna

ted,

co

ated

or l

amin

ated

text

ile fa

bric

sM

arin

e Se

ctor

: Ind

ia's

m-k

rish

i ad

viso

ry s

ervi

ces;

Pos

t ha

rves

t m

anag

emen

tSt

eel:

Iron

and

Ste

el, A

rtic

les

of

Iron

and

Ste

elLe

athe

r: R

aw h

ides

, Ski

ns a

nd

Leat

her

Gem

s and

Jew

elle

ry: C

uttin

g an

d po

lishi

ng o

f Dia

mon

d an

d ot

her

gem

s, G

old

jew

elle

ry e

xpor

ts,

Dia

mon

d tr

adin

g in

stit

utio

ns:

Trai

ning

Agr

icul

ture

: Far

m M

echa

nisa

tion:

Pa

ddy

drum

seed

er, T

ract

ors,

Pad

dy

tran

spla

nter

, Pow

er T

iller

, Zer

o til

l dr

ill;

Rub

ber

tech

nolo

gy s

uch

as

Rubb

er ro

ller g

inni

ng m

achi

ne.

Elec

tric

al an

d El

ectr

onic

Equ

ipm

ents

: El

ectr

onic

com

pone

nts,

Mot

ors,

Sim

C

ards

, Par

ts o

f Rad

io &

tran

sfor

mer

s, P

rint

ed c

ircu

its,

Tra

nsfo

rmer

s;

Com

pute

r ha

rdw

are:

D

isc

Dri

ves,

Pe

rson

al C

ompu

ters

, Sm

art

card

s ;

Tele

com

: Mob

ile P

hone

s, T

elec

om

&Te

levi

sion

Rec

epti

on a

ppar

atus

, op

tical

fibr

e ca

ble,

Set

Top

box

.A

utom

obil

es:

Mot

orcy

cles

wit

h re

cip

roca

tin

g p

isto

n e

ng

ine

dis

pla

cin

g> 5

0 cc

to

250

cc ,

A

utom

obil

es w

ith

reci

proc

atin

g pi

ston

eng

ine

disp

laci

ng>

1000

cc

to 1

500

cc; >

150

0 cc

to 3

000,

Mot

or

Veh

icle

par

ts, D

rive

Tra

nsm

issi

on,

En

gin

e P

arts

, P

asse

ng

er

&

Com

mer

cial

veh

icle

s, T

wo-

whe

eler

s &

Thr

ee w

heel

ers

Mar

ine

Sect

or:

Indi

a's

m-k

rish

i ad

viso

ry s

ervi

ces;

Pos

t ha

rves

t m

anag

emen

tSt

eel:

Iron

and

Ste

el, A

rtic

les o

f Iro

n an

d St

eel

Leat

her:

Raw

hid

es, S

kins

and

Leat

her

Gem

s an

d Je

wel

lery

: Cut

ting

and

polis

hing

of D

iam

ond

and

othe

r gem

s, G

old

jew

elle

ry e

xpor

ts,

Dia

mon

d tr

adin

g in

stitu

tions

: Tra

inin

g

Tabl

e 21:

cont

inue

d...

Tabl

e 21:

cont

inue

d...

50

Focu

s Se

ctor

s/

Are

as fo

r Ind

iaC

ambo

dia

Laos

Mya

nmar

Vie

tnam

Skill

s ava

ilabl

e in

In

dia

an

d re

qu

ired

by

CLM

V

Tex

tile

s an

d G

arm

ents

: H

igh

tech

nolo

gy, f

ashi

on

and

man

agem

ent

IC

T

an

d T

elec

om

mu

nic

atio

n:

so

ft

wa

re

a

nd

tele

com

mu

nic

atio

ns

engi

neer

ing

Ph

arm

aceu

tica

ls a

nd

Med

icin

e:

Do

cto

rs,

Phar

mac

ists

, Nur

ses

Mar

ine

and

Sea

food

: hy

gien

ic h

andl

ing,

sort

ing,

w

eigh

ing

and

pack

ing

fish,

cr

eatio

n of

stor

age f

acili

ties

and

mod

ern

equi

pmen

ts

Ru

bb

er a

nd

Ru

bb

er

artic

les:

Rub

ber

plan

ting

tech

niqu

es

Bam

boo

sect

or: M

achi

nery

w

ith

late

st t

echn

olog

y,

incl

udin

g sp

littin

g pr

oces

s

Ele

ctri

cal

and

Ele

ctro

nic

Eq

uipm

ents

: E

ngin

eers

and

te

chni

cian

s

Aut

omob

ile p

arts

: M

echa

nica

l en

gine

ers

Rub

ber

and

Rub

ber

arti

cles

: L

acks

ap

pro

pri

ate

rubb

er

deve

lopm

ent t

echn

olog

y; m

ost

of t

he d

istr

icts

hav

e un

skill

ed

labo

r

Woo

d s

ecto

r:

Tra

dit

iona

l se

ctor

s of

car

pent

ry, f

urni

ture

-m

akin

g, c

onst

ruct

ion

Bam

boo

sec

tor:

M

oder

n te

chno

logy

Text

iles

and

Gar

men

ts: s

kille

d te

xtile

wor

kers

ICT

and

Tele

com

mun

icat

ion:

IT

tech

nici

ans,

eng

inee

rs

Phar

mac

eutic

als

and

Med

icin

e:

Den

tists

and

pha

rmac

ists

Ge

ms

an

d

Jew

ell

ery

: eq

uipm

ent a

nd c

ompu

ter-

aide

d m

anuf

actu

ring

Mar

ine

and

Seaf

ood:

M

oder

n te

chno

logy

Oil

and

Nat

ural

Gas

: Exp

erie

nced

an

d sk

illed

tech

nici

ans i

n oi

l and

ga

s exp

lora

tion

and

deve

lopm

ent

Tex

tile

s an

d G

arm

ents

: H

uman

re

sour

ce tr

aini

ng o

f mid

dle

and

high

cl

ass

man

agem

ent,

tech

nolo

gy, a

nd

fash

ion

desi

gn a

re w

eak;

Lac

k of

sk

illed

wor

kers

with

exp

erie

nce

in

tech

nolo

gyPr

oces

sed

Food

: C

urre

ntly

, fa

ces

defi

cit

in t

echn

ical

exp

erts

, la

ck

of h

igh-

tech

equ

ipm

ents

; Im

port

s m

oder

n eq

uipm

ents

; The

gov

ernm

ent

is i

mpl

emen

ting

seve

ral

prog

ram

s to

enh

ance

foo

d (in

clud

ing

Dai

ry)

proc

essi

ng te

chno

logi

es.

ICT

an

d T

elec

omm

un

icat

ion

: sh

orta

ge o

f man

pow

er (t

echn

icia

ns)

Mar

ine

and

Seaf

ood:

O

utda

ted

pre

serv

ati

on

te

chn

iqu

es;

D

evel

opm

ent p

lans

incl

ude a

dopt

ion

of a

dva

nced

tec

hnol

ogie

s an

d im

prov

ed t

rain

ing

for

staf

f an

d te

chni

cian

sO

il a

nd N

atur

al G

as:

Shor

tage

of

tech

nica

l exp

ertis

eA

utom

obil

e pa

rts:

R

isin

g la

bour

co

st f

or u

nski

lled

labo

ur a

nd t

he

shor

tage

of s

kille

d en

gine

ers;

Nee

ds

upgr

adat

ion

of sk

ills a

nd te

chno

logy

Woo

d s

ecto

r:

Ou

tdat

ed a

nd

unsy

nchr

oniz

ed m

achi

nes

and

tool

s us

ed fo

r pro

cess

ing

of n

atur

al w

ood,

es

peci

ally

for

the

pro

cess

ing

of fi

ne

prod

ucts

Bam

boo

sect

or: N

eeds

cap

ital

and

upda

ted

tech

nolo

gy

Tabl

e 21:

cont

inue

d...

Tabl

e 21:

cont

inue

d...


51

IndIa’s strategy for economIc IntegratIon wIth cLmVSe

ctor

al C

onsi

dera

tions

Sect

ors

Cam

bodi

aLa

osM

yanm

arV

ietn

am

Agr

icul

ture

Tim

ber

(w.r

.t t

o t

he

ban

on e

xpor

t of

raw

tim

ber

effe

ctiv

e fr

om

Apr

il 1,

201

4 in

M

yanm

ar)

Subs

titut

e W

ood

with

Ba

mbo

o: S

ubst

itutin

g ba

mbo

o w

ith

tim

ber

seem

s to

be

the

mos

t v

iab

le a

nd

gre

en

solu

tion

esp

ecia

lly

for

the

long

run

and

C

amb

od

ia,

Lao

s,

Vie

tnam

and

Ind

ia

are

all r

ich

in b

ambo

o su

pplie

s.

Imp

ort

woo

d p

rod

uct

s fr

om

Vie

tnam

and

Lao

s in

the

CLM

V

regi

on.

Thes

e ec

onom

ies

othe

r th

an h

avin

g lo

catio

n pr

oxim

ity ca

n m

ake u

se o

f the

skill

ed la

bour

and

m

oder

n te

chno

logy

that

Indi

a ha

s to

offe

r in

exch

ange

for s

uppl

ying

it

high

qua

lity

woo

d pr

oduc

ts a

nd

timbe

r.Su

bstit

ute

Woo

d w

ith B

ambo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gr

een

solu

tion

espe

cial

ly f

or t

he

long

run

and

Cam

bodi

a, L

aos,

V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Impo

rt f

rom

Mal

aysi

a: I

ncre

ase

woo

d im

port

s fr

om M

alay

sia.

A

lthou

gh M

alay

sia

does

not

offe

r te

ak, I

ndia

n im

port

ers w

ill h

ave t

o m

ake d

o w

ith o

ther

kin

ds o

f woo

d.

Subs

titu

te W

ood

wit

h Ba

mbo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gr

een

solu

tion

espe

cial

ly f

or t

he

long

run

and

Cam

bodi

a, L

aos,

V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Impo

rt w

ood

prod

ucts

from

Vie

tnam

and

La

os in

the C

LMV

regi

on. T

hese

econ

omie

s ot

her

than

hav

ing

loca

tion

pro

xim

ity

can

mak

e us

e of

the

ski

lled

labo

ur a

nd

mod

ern

tech

nolo

gy th

at In

dia

has

to o

ffer

in e

xcha

nge

for

supp

lyin

g it

high

qua

lity

woo

d pr

oduc

ts a

nd ti

mbe

r.

Su

bst

itu

te W

oo

d w

ith

Bam

bo

o:

Subs

titut

ing

bam

boo

with

tim

ber

seem

s to

be

the

mos

t vi

able

and

gre

en s

olut

ion

espe

cial

ly fo

r the

long

run

and

Cam

bodi

a,

Laos

, V

ietn

am a

nd I

ndia

are

all

rich

in

bam

boo

supp

lies.

Min

ing

Incr

ease

inv

estm

ent

in th

is s

ecto

r to

tap

its

full

pote

ntia

l:go

ld, c

oppe

r an

d ba

se

met

als,

iro

n or

e an

d ot

her i

ndus

tria

l met

als

such

as

zirc

oniu

m,

grap

hite

and

tita

nium

Incr

ease

inve

stm

ent i

n th

is se

ctor

to

tap

its

ful

l po

tent

ial:

Iron

, al

umin

ium

, tin

and

cop

per

Incr

ease

inve

stm

ent i

n th

is se

ctor

to

tap

its fu

ll po

tent

ial:

chro

miu

m,

copp

er,

gold

, le

ad,

silv

er, t

in, t

ungs

ten,

and

zinc

; ind

ustr

ial m

iner

als,

suc

h as

ba

rite

, cla

ys, d

olom

ite, f

elds

par,

gyp

sum

, li

mes

tone

, p

reci

ous

ston

es, a

nd s

alt;

Hyd

roca

rbon

sIn

crea

se in

vest

men

t in

this

sect

or

to t

ap i

ts f

ull

pote

ntia

l: m

iner

al

fuel

s, su

ch a

s coa

l, na

tura

l gas

, and

cr

ude

petr

oleu

mSt

eel (

w.r.

t to

an

orde

r re

quir

ing

to

ann

ou

nce

th

e ap

ply

ing

st

an

da

rd

for

go

od

s in

th

e re

lev

ant

impo

rt c

ontr

act

for

cust

om

s cl

eara

nce)

Use

of

equa

l Ind

ian

stan

dard

s fo

r te

stin

g st

ainl

ess s

teel

man

ufac

ture

d in

Indi

a ca

n be

ad

opte

d an

d al

so re

ques

t acc

epta

nce o

f the

se

test

rep

orts

by

the

auth

oriti

es in

Vie

tnam

. A

lso,

Ind

ian

agen

cies

may

be

auth

oris

ed

to c

ondu

ct t

esti

ng a

nd c

erti

fica

tion

of

Indi

an m

anuf

actu

rer

impo

rter

in I

ndia

as

per s

tand

ards

pre

scri

bed

and

the

resu

lt be

ac

cept

ed u

nder

the

notifi

catio

n.

Sect

ors

with

Hor

izon

tal I

mpl

icat

ions

acr

oss

coun

trie

s1.

Ph

arm

a: I

ndia

sho

uld

cons

ider

org

anis

ing

a “C

LMV

-Indi

a H

ealth

Car

e Se

min

ar “

in v

enue

out

side

Indi

a (o

n th

e lin

e of

CLM

V c

oncl

ave

done

in In

dia)

to

get t

he p

artic

ipat

ion

of th

e re

gula

tors

and

take

the

agen

da o

f har

mon

isat

ion

of th

e he

alth

sec

tor f

orw

ard.

2.

Pr

oces

sed

Food

: APE

DA

sho

uld

take

the

lead

to p

ropo

se c

apac

ity b

uild

ing

prog

ram

for t

hese

cou

ntri

es to

evo

lve

thei

r reg

ulat

ory

syst

ems

whe

re th

e ES

CA

P/ A

DB

plat

form

can

als

o be

con

side

red

in a

reas

of o

rgan

ic e

xpor

t, Im

port

con

trol

sys

tem

s in

clud

ing

the

SPS/

TBT

prot

ocol

s et

c.3.

R

ubbe

r: R

ubbe

r Boa

rd s

houl

d ex

amin

e th

e po

ssib

ility

of i

nves

tmen

ts in

pla

ntat

ion

sect

or to

sou

rce

rubb

er fr

om C

LMV

esp

ecia

lly V

ietn

am k

eepi

ng in

m

ind

the

futu

re re

quir

emen

t of r

ubbe

r in

the

auto

indu

stry

.4.

Pr

ojec

t Exp

orts

: EX

IM b

ank

shou

ld ta

ke u

p pr

ojec

t exp

orts

als

o in

the

regi

on a

s th

ere

is n

ot m

uch

visi

ble

pres

ence

of I

ndia

in th

is re

gion

.

52

Table 22: Theme-Specific Policy Recommendations

Focus Sectors/ Areas for India Policy Recommendations

Trade in Goods

Prioritisation of areas in identified Sectors for trade: Leather, Textiles, Garments, Oil and Gas, EngineeringUse of equivalent Indian standards for testing stainless steel manufactured in India that can be adopted and also request acceptance of these test reports by the authorities in Vietnam. Also, Indian agencies may be authorized to conduct testing and certification of Indian manufacturer importer in India as per standards prescribed and the result be accepted under the notification.To combat the effect of ban on export of raw timber from Myanmar: Import wood from Malaysia, import wood products from Laos and Vietnam and substituting wood for bamboo and Cambodia, Laos, Vietnam and India are all rich in bamboo supplies.Utilizing China-ASEAN FTA: Detailed empirical exercise identified products at HS 6 digit level which if exported by manufacturing in CLMV to the Chinese market under the China-ASEAN FTA in goods, additional export expansion to the tune of uS$ 100 billion is feasible via normal track, sensitive track and highly sensitive track, combined. This can thus be an important component of overall strategy of India to integrate with the CLMV region especially harnessing the possibilities of manufacturing led exports from the CLMV region with the help of Indian OFDI. (Items that can be focused under this are identified as in Annexure 1)

Trade in Services

Relevant Service exports in the identified sectors: IT, especially in Myanmar, Offshore consultancy and onsite BPO, urban development related services, transport, energy, engineering, architectural, Mode of services: both offshore project design and onsite project implementation and Health services

O-FDI

Have a national level O-FDI strategy, address protective dimensions of CLMV FDI regimes, Investment security/protection, Mechanism: discussion with counterparts and bilateral treaties, create business forum, web-portal, visa facilitation.Sectors: Leather and Footwear, Infrastructure, Oil, Mining, Pharma, Textile, power, automobiles. Partnership Framework Development for Infrastructure in CLMV Countries: The concept of Project Development Company (PDC) for the CLMV is basically conceived to optimize on the existing Trade Institutions/infrastructure in these countries to get access to countries/ region where India does not have presence. India can also work on the space and opportunity which is being developed in these countries because of China moving out from the lower manufacturing segment. In addition, there are apprehensions about China in some of these countries on which India can capitalize because of its proximity to the region. The PDC can, therefore, anchor in these countries for the first mover advantage especially in trade and commerce sectors of potential interest to India in which we can integrate into the regional value chains. EXIM Bank should do a seminar with the identified sectors keeping the PDC contours in mind. The seminar can consider inviting the economic administrators from these countries to also familiarise them with the PDC project.

Skills

Capacity building and technical support: Efforts should be made to have a dedicated programme on capacity building for the CLMV countries’ officials, entrepreneurs and academia on various issues of international economic linkages and negotiations. Collaboration between Indian vocational training institutions and young workforce in CLMV countries also needs to be worked out to harness the full potential of creation of RVCs.


53

Abonyi, G. 2005. ‘Integrating SMEs into global and regional value chains: implications for sub regional cooperation in the Greater Mekong Sub region’. Paper prepared for uNESCAP: Bangkok.

Das, Ram upendra. 2009. ‘Imperatives of Regional Economic Integration in Asia in the Context of Developmental Asymmetries: Some Policy Suggestions.’ ADBI Working Paper 172, Tokyo: ADBI

Exim Bank. 2013.‘India’s Trade and Investment Relations with Cambodia, Lao PDR, Myanmar and Vietnam (CLMV): Enhancing Economic Cooperation’. Occasional Paper No. 161.

Gereffi, G., & Fernandez-Stark, K. 2011. ‘Global value chain analysis: a primer’. Center on Globalization, Governance & Competitiveness (CGGC), Duke University, North Carolina, USA.

Humphrey, J., & Schmitz, H. 2002. ‘How does insertion in global value chains affect upgrading in industrial clusters?’. Regional Studies, 36(9), 1017-1027.

Ishida, M. 2010. ‘Possibility of Relocation or Fragmentation from Advance ASEAN Countries to CLMV Countries: Summary of Survey Results’. In Banomyong, R. and M.Ishida (eds.): A Study on upgrading Industrial Structure of CLMV Countries. ERIA Research Project Report 2009-7-3, Jakarta: ERIA. Pp.421-470.

Investor.com. 2014. ‘Timber - Myanmar’s Log Export Ban Positive for Prices’. Investor.com .March.

Jones, R.W., and H. Kierzkowski. 1990. ‘The Role of Services in Production and International Trade: A Theoretical Framework’. In R.W. Jones and A. O. Krueger (eds.): The Political Economy of International Trade: Essays in Honour of Robert E. Baldwin. Oxford: Basil Blackwell.

Kimura, F., and A. Obashi. 2011. ‘Production Networks in East Asia: What We Know So Far’. ADBI Working Paper 320. Tokyo: Asian Development Bank Institute.

Myanmar B2B Management Magazine.2013. ACuMEN. September.

Myanmar Insider.2013. Vol. 1, Issue 1. November.

Myanmar Times. 2014.‘Timber trade reeks of corruption’. March.

The Economic Times. 2014. ‘Government rebuts World Bank’s report which places India at 134th place on ease of doing business’. 3 September. India.

WTO. 2014. ‘Trade Policy Review: Myanmar.’ March.

WTO. 2011. ‘Trade Policy Review: Cambodia.’ November.

WTO. 2013. ‘Trade Policy Review: Vietnam.’ September.

References

Annexures

Annexure 1Utilising China-ASEAN FTA through Manufacturing in CLMV

Table A.1: Accessing China via CLMV: Identification of Products where India can access these markets (Normal Track)

HS6 digit

Product Code

Product DescriptionIndia's exports to the World (uS$ Million)

China MFN duty 2011

Normal Track, 0%

in 2010 under China-

ASEAN FTA2011 2012

90122 -- Decaffeinated 0.96 0.04 15 090190 (1996-) - Other 1.74 1.27 20 0121299 -- Other 1.03 1.09 21 0151710 - Margarine, excluding liquid margarine 0.03 0.01 30 0170220 - Maple sugar and maple syrup 0.05 0 30 0190120 - Mixes and doughs for the preparation of bakers' 0.97 3.75 25 0190410 - Prepared foods obtained by the swelling or roast 18.9 16.44 25 0190420 (1996-) - Prepared foods obtained from unroasted c 3.81 5.26 30 0190490 - Other 12.4 9.89 30 0200110 - Cucumbers and gherkins 104.02 113.8 25 0200190 - Other 38.88 42.28 25 0200310 - Mushrooms of the genus Agaricus 26.12 12.15 25 0200490 - Other vegetables and mixtures of vegetables 15.26 17.17 25 0200551 -- Beans, shelled 0 0 25 0200559 -- Other 2.76 0.88 25 0200791 -- Citrus fruit 0.08 0.04 30 0200811 -- Ground-nuts 11.84 7.83 30 0200919 -- Other 0.1 0.04 30 0200950 - Tomato juice 0 0 30 0210120 - Extracts, essences and concentrates, of tea or m 34.76 36.64 32 0210130 - Roasted chicory and other roasted coffee substit 13.07 13.4 32 0210690 - Other 116.18 130.3 17.6 0220290 - Other 5.43 6.85 35 0220430 - Other grape must 0.23 0.04 30 0220590 - Other 0.07 0 65 0220710 - undenatured ethyl alcohol of an alcoholic streng 77.65 132.2 40 0220720 - Ethyl alcohol and other spirits, denatured, of a 24.66 17.92 5 0291612 -- Esters of acrylic acid 17.79 22.31 6.5 0291736 -- Terephthalic acid and its salts 13 1.94 6.5 0370231 -- For colour photography (polychrome) 0.05 0.27 5 0370251 (-2011) -- Of a width not exceeding 16 mm and of a 0.26 0 0370256 -- Of a width exceeding 35 mm 0.04 0.03 0390210 - Polypropylene 1187.2 39.73 6.5 0390319 -- Other 85.11 5.04 6.5 0390330 -Acrylonitrile-butadiene-styrene (ABS) copolymers 1.94 0.1 6.5 0

Table A.1: continued...

59


390410 - Poly(vinyl chloride), not mixed with any other s 0.86 18.78 6.5 0390421 -- Non-plasticised 13.09 0.29 6.5 0401199 -- Other 536.85 5.92 25 0401220 - used pneumatic tyres 1.55 0.73 25 0440410 - Coniferous 0 1.37 8 0440420 - Non-coniferous 0.38 0.05 8 0440500 Wood wool; wood flour. 0 0.39 8 0440810 - Coniferous 5.8 4.23 5 0440831 (1996-) -- Dark Red Meranti, Light Red Meranti and 4.52 4.96 5.5 0440839 (1996-) -- Other 2.74 7.27 5.5 0440890 - Other 1.06 2.03 3.25 0440910 - Coniferous 1.29 0.85 7.5 0441299 -- Other 14.3 0.05 8 0441300 Densified wood, in blocks, plates, strips or profi 0.49 14.27 6 0441510 - Cases, boxes, crates, drums and similar packing’s 7.14 15.25 7.5 0441820 - Doors and their frames and thresholds 7.03 0.32 4 0441890 - Other 0.25 0.23 4 0610210 - Of wool or fine animal hair 1.31 2.34 25 0610323 -- Of synthetic fibres 21.3 10.05 25 0610329 -- Of other textile materials 12.54 39.94 25 0610413 -- Of synthetic fibres 8.59 13.56 25 0610423 -- Of synthetic fibres 13.7 37.38 25 0670411 -- Complete wigs 0.01 282.2 25 0670419 -- Other 0.17 0.06 25 0670490 - Of other materials 0.11 2.37 25 0680911 -- Faced or reinforced with paper or paperboard on 0.09 2.23 28 0680990 - Other articles 0.42 0.09 25 0711319 -- Of other precious metal, whether or not plated 13659.9 923.99 30 0711320 - Of base metal clad with precious metal 1.72 17276.72 35 0711411 -- Of silver, whether or not plated or clad with o 44.74 0.91 35 0711419 -- Of other precious metal, whether or not plated 1333.79 2.23 35 0711420 - Of base metal clad with precious metal 264.51 1195.29 35 0711590 - Other 2.1 2.23 17.5 0711610 - Of natural or cultured pearls 0.08 0.82 35 0711620 - Of precious or semi-precious stones (natural, sy 4.73 0.02 35 0711711 -- Cuff-links and studs 0.55 4.52 35 0711790 - Other 167.13 116.46 35 0732490 - Other, including parts 4.75 1.2 15 0761010 - Doors, windows and their frames and thresholds f 3.99 2.25 25 0761290 - Other 19.3 12.95 21 0840810 - Marine propulsion engines 12.52 35.98 5 0840991 -- Suitable for use solely or principally with spa 209.42 25.6 4.33 0840999 -- Other 605.02 223.78 4.35 0841430 - Compressors of a kind used in refrigerating equi 25.6 2.16 9.57 0841840 - Freezers of the upright type, not exceeding 900 1.18 0.53 18 0841861 -- Heat pumps other than air conditioning machines 2.1 13 12.5 0


Table A.1: continued... 60

841911 -- Instantaneous gas water heaters 2.61 23.09 35 0841919 -- Other 15.18 2.67 35 0842810 - Lifts and skip hoists 6.44 4.42 7 0848210 - Ball bearings 44.34 257.56 8 0848250 - Other cylindrical roller bearings 40.92 8.09 8 0850110 -Motors of an output not exceeding 37.5 W 101.29 138.87 14.17 0850213 -- Of an output exceeding 375 kVA 40.15 35.31 10 0850431 -- Having a power handling capacity not exceeding 23.49 130.11 5 0850980 - Other appliances 1.34 20.43 21.67 0851010 - Shavers 0.24 11.64 15 0851020 - Hair clippers 0.03 0.91 30 0851621 -- Storage heating radiators 0.01 1.4 35 0851632 -- Other hair-dressing apparatus 0.23 0 35 0851640 - Electric smoothing irons 0.29 0.02 17 0851671 -- Coffee or tea makers 0.28 3.56 16 0851672 -- Toasters 0.09 0.4 32 0851679 -- Other 5.05 0.06 24 0852110 -Magnetic tape-type 3.85 1.66 25 0854411 -- Of copper 61.91 84.78 6 0870310 -Vehicles specially designed for travelling on sno 0.63 19.02 25 0870323 -- Of a cylinder capacity exceeding 1,500 cc but n 168.36 2634.2 25 0870333 -- Of a cylinder capacity exceeding 2,500 cc 10.60 19.35 25 0870490 - Other 31.7 1.03 25 0870600 Chassis fitted with engines, for the motor vehicle 248.72 30.64 13 0870892 -- Silencers (mufflers) and exhaust pipes; parts t 8.83 38.06 10 0870893 -- Clutches and parts thereof 23.52 16.05 8.86 0870894 -- Steering wheels, steering columns and steering 25.32 23.88 8.86 0870899 -- Other 1838.29 0.72 13.85 0871130 -With reciprocating internal combustion piston eng 14.44 1284.82 45 0871140 -With reciprocating internal combustion piston eng 0.46 27.51 40 0871190 - Other 0.35 0.09 45 0890110 - Cruise ships, excursion boats and similar vessel 255.7 15.24 6.5 0890190 - Other vessels for the transport of goods and oth 430.97 25.27 8.3 0890400 Tugs and pusher craft. 1251.88 0.01 9 0900651 -- With a through-the-lens viewfinder (single lens 0.02 0 25 0920790 - Other 4.45 0.01 30 0960200 Worked vegetable or mineral carving material and a 48.93 9.72 17.75 0960330 - Artists' brushes, writing brushes and similar br 12.29 1.52 23.33 0

Source: WITS uN COMTRADE accessed on 22 August 2014, ASEAN China FTA Notes: 1. Wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years.

2. Tariff lines placed by each Party in the Normal Track on its own accord shall have their respective applied MFN tariff rates gradually reduced and eliminated to 0% not later than 1 January 2010.


61

ANNEXuRES


Table A.2: Accessing China via CLMV: Identification of Products where India can access these markets (Sensitive Track)

HS6 Digit

Product Code

Product Description India's exports to the World (uS$

Million)

China MFN duty 2011

Sensitive Track,

0-5% in 2018

2011 2012

90111 -- Not decaffeinated 676.32 610.28 8 0-590112 -- Decaffeinated 0.02 0.03 8 0-590121 -- Not decaffeinated 2.07 0.8 15 0-590411 -- Neither crushed nor ground 147.17 95.05 20 0-590412 -- Crushed or ground 33.64 49.48 20 0-5100110 (-2011) - Durum wheat 67.84 610.6 65 0-5100190 (-2011) - Other 77.32 739.22 65 0-5100640 - Broken rice 64.79 286.4 65 0-5110319 -- Of other cereals 0.13 0.83 7.5 0-5200820 - Pineapples 0.08 0.05 15 0-5200899 -- Other 12.99 27.18 15.71 0-5200941 (2002-) -- Of a Brix value not exceeding 20 0 0.02 10 0-5200949 (2002-) -- Other 0.17 0.33 10 0-5200980 (-2011) - Juice of any other single fruit or veget 16.47 13.67 20 0-5240110 - Tobacco, not stemmed/stripped 81.91 90.41 10 0-5240120 - Tobacco, partly or wholly stemmed/stripped 479.5 598.9 10 0-5240130 - Tobacco refuse 9.54 10.33 10 0-5271011 (2002-2011) -- Light oils and preparations 20769.78 22147.84 5.2 0-5271019 (2002-) -- Other 33178.54 30189.09 4.73 0-5281511 -- Solid 32.67 39.29 10 0-5281512 -- In aqueous solution (soda lye or liquid soda) 1.18 1.08 8 0-5290250 - Styrene 10.28 29.37 2 0-5290315 -- Ethylene dichloride (ISO) (1,2-dichloroethane) 0.00 0.01 1 0-5290531 -- Ethylene glycol (ethanediol) 91.17 88.74 5.5 0-5292610 - Acrylonitrile 12.94 0.12 3 0-5293371 -- 6-Hexanelactam (epsilon-caprolactam) 47.17 21.17 7 0-5370110 - For X-ray 1.53 0.79 10 0-5370130 - Other plates and film, with any side exceeding 2 0.71 0.74 20 0-5370210 - For X-ray 0.13 0.05 10 0-5370254 -- Of a width exceeding 16 mm but not exceeding 35 0.01 0 0-5370255 -- Of a width exceeding 16 mm but not exceeding 35 0.05 0.01 0-5370310 - In rolls of a width exceeding 610 mm 0.02 0.06 18 0-5370320 - Other, for colour photography (polychrome) 0.02 0.06 26.5 0-5370390 - Other 0.1 0.01 26.5 0-5


62

390760 - Poly(ethylene terephthalate) 530.24 74.35 6.5 0-5400219 -- Other 10.54 11.58 7.5 0-5440810 - Coniferous 5.8 4.23 5 0-5440831 (1996-) -- Dark Red Meranti, Light Red Meranti and 4.52 4.96 5.5 0-5440839 (1996-) -- Other 2.74 7.27 5.5 0-5440890 - Other 1.06 2.03 3.25 0-5441520 - Pallets, box pallets and other load boards; pall 2.33 11.29 7.5 0-5441810 - Windows, French-windows and their frames 0.1 3.19 4 0-5480100 Newsprint, in rolls or sheets. 6.75 1.58 5 0-5480210 - Hand-made paper and paperboard 12.98 6.7 7.5 0-5480255 (2002-) -- Weighing 40 g/m² or more but not more t 51.82 3.52 5 0-5480256 (2002-) -- Weighing 40 g/m² or more but not more t 33.4 45.28 5 0-5480257 (2002-) -- Other, weighing 40 g/m² or more but not 99.92 36.75 5 0-5480258 (2002-) -- Weighing more than 150 g/m² 13.26 78.18 5 0-5480261 (2002-) -- In rolls 40.12 4.2 6.25 0-5480262 (2002-) -- In sheets with one side not exceeding 4 6.35 43.55 5 0-5480269 (2002-) -- Other 14.98 25.93 6.25 0-5480411 -- unbleached 1.49 10.38 5 0-5480419 -- Other 0.98 2.84 5 0-5480421 -- unbleached 0.4 0.41 5 0-5480429 -- Other 0.82 0.35 5 0-5480431 -- unbleached 2.13 0.73 2 0-5480439 -- Other 4.94 0.99 2 0-5480441 -- unbleached 0.06 4.74 2 0-5480449 -- Other 0.31 0.05 2 0-5480451 -- unbleached 1.02 0.29 2 0-5480459 -- Other 0.59 1.8 2 0-5480610 - Vegetable parchment 0.21 2.11 7.5 0-5480620 - Greaseproof papers 0.02 0.39 7.5 0-5480630 - Tracing papers 0.3 0.03 7.5 0-5480640 - Glassine and other glazed transparent or translu 0.24 0.44 5 0-5481013 (2002-) -- In rolls 10.2 0.72 5 0-5481014 (2002-) -- In sheets with one side not exceeding 4 0.56 8.5 5 0-5481019 (2002-) -- Other 49.16 0.13 5 0-5481022 (2002-) -- Light-weight coated paper 0.03 29.05 5 0-5481029 -- Other 2.28 0 5 0-5481031 -- Bleached uniformly throughout the mass and of w 0.06 1.05 5 0-5481032 -- Bleached uniformly throughout the mass and of w 0.01 0.01 5 0-5481039 -- Other 0.73 0.18 5 0-5481092 (2002-) -- Multi-ply 6.34 0.67 5 0-5



63

ANNEXuRES


481099 -- Other 69.59 12.95 7.5 0-5481110 -Tarred, bituminised or asphalted paper and paperb 0.28 48.78 7.5 0-5481141 (2002-) -- Self-adhesive 14.34 0.1 7.5 0-5481149 (2002-) -- Other 1.55 22.84 7.5 0-5481151 (2002-) -- Bleached, weighing more than 150 g/m² 0.41 1.61 4.25 0-5481159 (2002-) -- Other 20.86 0.88 7.5 0-5481160 (2002-) - Paper and paperboard, coated, impregnate 3.44 20.44 7.5 0-5481190 - Other paper, paperboard, cellulose wadding and w 38.5 3.19 7.5 0-5481410 (-2011) - “Ingrain” paper 0 2.29 7.5 0-5481420 -Wallpaper and similar wall coverings, consisting 0.11 0 7.5 0-5481490 - Other 1.16 0.05 7.5 0-5481710 - Envelopes 2.05 0.54 7.5 0-5481720 - Letter cards, plain postcards and correspondence 0.11 2.03 7.5 0-5481730 - Boxes, pouches, wallets and writing compendiums, 1.60 0.09 7.5 0-5481830 -Tablecloths and serviettes 1.27 0.15 7.5 0-5481910 - Cartons, boxes and cases, of corrugated paper or 26.04 1.97 5 0-5481920 - Folding cartons, boxes and cases, of non-corruga 33.13 30.9 5 0-5481940 - Other sacks and bags, including cones 2.19 1.3 7.5 0-5481950 - Other packing containers, including record sleev 8.6 2.68 7.5 0-5481960 - Box files, letter trays, storage boxes and simil 1.25 9.58 7.5 0-5482010 - Registers, account books, note books, order book 47.69 2.39 7.5 0-5482020 - Exercise books 39.53 52.67 7.5 0-5482030 - Binders (other than book covers), folders and fi 1.06 47.62 7.5 0-5482050 - Albums for samples or for collections 0.34 0.05 7.5 0-5482090 - Other 5.64 0.27 7.5 0-5482110 - Printed 12.55 5.31 7.5 0-5482190 - Other 6.3 16.24 7.5 0-5482210 - Of a kind used for winding textile yarn 0.7 7.78 7.5 0-5482290 - Other 2.42 0.42 7.5 0-5482340 - Rolls, sheets and dials, printed for self-record 0.57 0.55 7.5 0-5482370 -Moulded or pressed articles of paper pulp 3.02 3.09 7.5 0-5490700 unused postage, revenue or similar stamps of curre 43.76 1.4 3.75 0-5490810 - Transfers (decalcomanias), vitrifiable 0.67 4.9 7.5 0-5490890 - Other 0.43 0.2 7.5 0-5490900 Printed or illustrated postcards; printed cards be 5.26 0.45 7.5 0-5491000 Calendars of any kind, printed, including calendar 4 4.33 7.5 0-5491110 - Trade advertising material, commercial catalogue 6.48 3.76 3.75 0-5491191 -- Pictures, designs and photographs 0.48 11.08 7.5 0-5491199 -- Other 19.63 0.28 7.5 0-5510119 -- Other 0.61 19.16 38 0-5510129 -- Other 1.13 0.49 38 0-5



64

510310 - Noils of wool or of fine animal hair 7.11 0.21 23.5 0-5520100 Cotton, not carded or combed. 3388.97 0.17 0-5520542 -- Measuring per single yarn less than 714.29 deci 17.84 4.59 5 0-5520911 -- Plain weave 46.45 24.38 10 0-5540233 -- Of polyesters 537.08 1.07 5 0-5540251 -- Of nylon or other polyamides 3.65 0.51 5 0-5540252 -- Of polyesters 14.76 3.35 5 0-5550120 - Of polyesters 0.45 0.12 5 0-5550130 - Acrylic or modacrylic 23.99 0.28 5 0-5550320 - Of polyesters 294.78 0.14 5 0-5550330 - Acrylic or modacrylic 12.37 261.63 5 0-5550620 - Of polyesters 0.17 0.11 5 0-5550630 - Acrylic or modacrylic 1.54 0.03 5 0-5830120 - Locks of a kind used for motor vehicles 22.58 1.36 10 0-5840734 -- Of a cylinder capacity exceeding 1,000 cc 10.51 0.29 10 0-5840820 - Engines of a kind used for the propulsion of veh 55.07 7.66 17 0-5841520 (1996-) - Of a kind used for persons, in motor veh 0.66 7.21 10 0-5851220 - Other lighting or visual signalling equipment 38.35 2.38 10 0-5851230 - Sound signalling equipment 25.6 47.92 10 0-5851240 -Windscreen wipers, defrosters and demisters 6.26 19.94 10 0-5851531 -- Fully or partly automatic 2.77 1.35 10 0-5854430 - Ignition wiring sets and other wiring sets of a 98.78 29.93 7.5 0-5870120 - Road tractors for semi-trailers 12.31 0.64 6 0-5870290 - Other 4.75 231.66 25 0-5870422 -- g.v.w. exceeding 5 tonnes but not exceeding 20 123.50 325.63 20 0-5870423 -- g.v.w. exceeding 20 tonnes 44.23 175.33 15 0-5870431 -- g.v.w. not exceeding 5 tonnes 1.15 65.53 25 0-5870432 -- g.v.w. exceeding 5 tonnes 0.12 0.1 20 0-5870600 Chassis fitted with engines, for the motor vehicle 248.72 30.64 13 0-5870829 -- Other 41.06 5.23 10 0-5870840 - Gear boxes and parts thereof 189.05 115.78 9 0-5870850 - Drive-axles with differential, whether or not pr 95.25 201.85 9.21 0-5890120 -Tankers 24.5 229.02 7.91 0-5890190 - Other vessels for the transport of goods and oth 430.97 25.27 8.3 0-5890590 - Other 1851.64 622.05 5.5 0-5940120 - Seats of a kind used for motor vehicles 8.54 0.58 10 0-5940190 - Parts 17.48 5.36 3.33 0-5

Source: WITS uN COMTRADE accessed on 22 August 2014, ASEAN China FTA.

Notes: 1. Wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years. 2. ASEAN 6 and China shall reduce the applied MFN tariff rates of tariff lines placed in their respective Sensitive Lists to 20% not later than 1 January 2012. These tariff rates shall be subsequently reduced to 0-5% not later than 1 January 2018.


65

ANNEXuRES


Table A.3: Accessing China via CLMV: Identification of Products where India can access these markets (Highly Sensitive Track)

HS6 Digit

Product Code

Product Description

India's exports to the World (uS$

Million)

China MFN duty 2011

Highly Sensitive

Track, ≤50% in

20152011 2012

100510 - Seed 16.92 15.27 20 ≤50100590 - Other 1067.1 1117.29 65 ≤50100610 - Rice in the husk (paddy or rough) 23.8 85.61 65 ≤50100620 - Husked (brown) rice 1.43 45.63 65 ≤50100630 - Semi-milled or wholly milled rice, whether or no 3983.31 5710.32 65 ≤50110100 Wheat or meslin flour. 32.4 78.8 65 ≤50110220 - Maize (corn) flour 0.62 0.47 40 ≤50110311 -- Of wheat 0.46 0.8 65 ≤50110313 -- Of maize (corn) 13.16 12.27 65 ≤50110320 (2002-) - Pellets 0.32 0.24 42.5 ≤50110423 -- Of maize (corn) 0.55 1.13 65 ≤50150710 - Crude oil, whether or not degummed 13.08 0 9 ≤50150790 - Other 0.95 1.22 9 ≤50151190 - Other 1.67 0.27 8.67 ≤50151411 (2002-) -- Crude oil 0.03 0.04 9 ≤50151419 (2002-) -- Other 0.14 0.13 9 ≤50151491 (2002-) -- Crude oil 2.73 2.5 9 ≤50151499 (2002-) -- Other 0.64 0.56 9 ≤50170111 (-2011) -- Cane sugar 601.32 1008.7 50 ≤50170112 -- Beet sugar 4.95 2.3 50 ≤50170191 -- Containing added flavouring or colouring matter 15.65 10.71 50 ≤50170199 -- Other 1291.76 980.23 50 ≤50240210 - Cigars, cheroots and cigarillos, containing toba 2.2 0.86 25 ≤50240290 - Other 0.13 0.27 25 ≤50240310 (-2011) - Smoking tobacco, whether or not containi 22.43 24.7 57 ≤50240391 -- “Homogenised” or “reconstituted” tobacco 0 0.05 57 ≤50240399 -- Other 132.85 113.53 57 ≤50310210 - urea, whether or not in aqueous solution 8.33 20.32 50 ≤50

310530 - Diammonium hydrogenorthophosphate (diammonium ph 4.95 31.39 50 ≤50

370241 -- Of a width exceeding 610 mm and of a length exc 0.01 0.02 ≤50390110 - Polyethylene having a specific gravity of less t 62.98 0.37 6.5 ≤50390120 - Polyethylene having a specific gravity of 0.94 o 327.13 46.7 6.5 ≤50400110 - Natural rubber latex, whether or not pre-vulcani 50.27 409.95 ≤50400121 -- Smoked sheets 103.09 17.26 ≤50


66

400122 -- Technically specified natural rubber (TSNR) 5.45 19.72 ≤50400129 -- Other 22.85 2.36 20 ≤50441090 - Other 0.84 0.02 7.5 ≤50441400 Wooden frames for paintings, photographs, mirrors 11.46 1.76 20 ≤50441600 Casks, barrels, vats, tubs and other coopers' prod 0.22 1.87 16 ≤50441700 Tools, tool bodies, tool handles, broom or brush b 3.17 0.1 16 ≤50480220 - Paper and paperboard of a kind used as a base fo 6.69 10.33 6.25 ≤50480240 - Wallpaper base 1.11 6.5 7.5 ≤50480254 (2002-) -- Weighing less than 40 g/m² 4.03 0.03 7.5 ≤50480300 Toilet or facial tissue stock, towel or napkin sto 7.8 20.91 7.5 ≤50480511 (2002-) -- Semi-chemical fluting paper 0.03 0.74 7.5 ≤50480512 (2002-) -- Straw fluting paper 0.02 0.14 7.5 ≤50480519 (2002-) -- Other 0.24 0.04 7.5 ≤50480524 (2002-) -- Weighing 150 g/m² or less 0.19 0.76 7.5 ≤50480525 (2002-) -- Weighing more than 150 g/m² 0.1 0.1 7.5 ≤50480530 - Sulphite wrapping paper 0 0.01 7.5 ≤50480540 - Filter paper and paperboard 1.4 0 7.5 ≤50480550 - Felt paper and paperboard 0.04 1.03 7.5 ≤50480591 (2002-) -- Weighing 150 g/m² or less 7.96 0.04 7.5 ≤50480592 (2002-) -- Weighing more than 150 g/m² but less th 2.93 1.14 7.5 ≤50480593 (2002-) -- Weighing 225 g/m² or more 2.8 2.11 7.5 ≤50480700 (2002-) Composite paper and paperboard (made by st 0.75 0.22 7.5 ≤50480810 - Corrugated paper and paperboard, whether or not 0.27 1.15 7.5 ≤50480820 (-2011) - Sack kraft paper, creped or crinkled, wh 0.02 0.34 7.5 ≤50480830 (-2011) - Other kraft paper, creped or crinkled, w 0.63 0 7.5 ≤50480890 - Other 0.46 0.18 7.5 ≤50480920 - Self-copy paper 0.06 1.11 7.5 ≤50480990 - Other 0.6 0.22 7.5 ≤50481200 Filter blocks, slabs and plates, of paper pulp. 0.09 39.21 7.5 ≤50481310 - In the form of booklets or tubes 0.04 0.05 7.5 ≤50481320 - In rolls of a width not exceeding 5 cm 0.37 0.02 7.5 ≤50481390 - Other 2.31 1.11 7.5 ≤50481620 - Self-copy paper 3.67 0.16 7.5 ≤50481690 - Other 1.21 3.31 7.5 ≤50481810 -Toilet paper 1.81 1.45 7.5 ≤50481820 - Handkerchiefs, cleansing or facial tissues and t 0.1 3.48 7.5 ≤50481830 -Tablecloths and serviettes 1.27 0.15 7.5 ≤50481840 (-2011) - Sanitary towels and tampons, napkins and 3.41 1.29 7.5 ≤50481890 - Other 2.32 0.06 7.5 ≤50482320 - Filter paper and paperboard 0.81 0.66 7.5 ≤50482390 - Other 138.38 3.75 7.5 ≤50



67

ANNEXuRES


510510 - Carded wool 0.09 0.39 38 ≤50510521 -- Combed wool in fragments 0.08 0.01 38 ≤50510529 -- Other 56.78 0.03 38 ≤50520300 Cotton, carded or combed. 0.68 58.62 40 ≤50870210 -With compression-ignition internal combustion pis 228.48 784.81 19.75 ≤50870321 -- Of a cylinder capacity not exceeding 1,000 cc 1145.50 0.41 25 ≤50870322 -- Of a cylinder capacity exceeding 1,000 cc but n 2142.70 1135.02 25 ≤50870323 -- Of a cylinder capacity exceeding 1,500 cc but n 168.36 2634.2 25 ≤50870324 -- Of a cylinder capacity exceeding 3,000 cc 3.00 363.14 25 ≤50870331 -- Of a cylinder capacity not exceeding 1,500 cc 46.47 4.5 25 ≤50870332 -- Of a cylinder capacity exceeding 1,500 cc but n 56.50 39.18 25 ≤50870421 -- g.v.w. not exceeding 5 tonnes 182.27 710.99 25 ≤50


Notes: 1. Wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years.

2. The Parties shall reduce the applied MFN tariff rates of tariff lines placed in their respective Highly Sensitive Lists to not more than 50% not later than 1 January 2015 for ASEAN 6 and China, and 1 January 2018 for the newer ASEAN Member States.

Table A.4: Accessing China via CLMV: Identification of products where India can potentially access these markets (Normal Track)

HS6 Digit Product

codeProduct description China's MFN

Duty 2011

Normal Track, 0%

in 2010

200560 - Asparagus 25 0220510 - In containers holding 2 litres or less 65 0890130 - Refrigerated vessels, other than those of subheading 8901.20 9 0

890200 Fishing vessels; factory ships and other vessels for processing or preserving fishery products. 7.5 0


Notes: 1. wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years. 2. Tariff lines placed by each Party in the Normal Track on its own accord shall have their respective applied MFN tariff rates gradually reduced and eliminated to 0% not later than 1 January 2010.


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Table A.5: Accessing China via CLMV: Identification of products where India can potentially access these markets (Sensitive Track)

HS6 Digit Product

codeProduct description China's MFN

Duty 2011

Sensitive Track, 0-5%

in 2018

370293 (-2011) -- Of a width exceeding 16 mm but not exceeding 35 mm and of a length not exceeding 30m 0-5

370294 (-2011) -- Of a width exceeding 16 mm but not exceeding 35 mm and of a length exceeding 30m 0-5

480442-- Bleached uniformly throughout the mass and of which more than 95% by weight of the total fibre content consists of wood fibres obtained by a chemical process

5 0-5

480452-- Bleached uniformly throughout the mass and of which more than 95% by weight of the total fibre content consists of wood fibres obtained by a chemical process

5 0-5

510111 -- Shorn wool 38 0-5510121 -- Shorn wool 38 0-5510130 - Carbonised 38 0-5


Notes: 1.Wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years.2. ASEAN 6 and China shall reduce the applied MFN tariff rates of tariff lines placed in their respective Sensitive Lists to 20% not later than 1 January 2012. These tariff rates shall be subsequently reduced to 0-5% not later than 1 January 2018.

Table A.6: Accessing China via CLMV: Identification of products where India can potentially access these markets (Highly Sensitive Track)

HS6 Digit Product code Product description China's MFN

Duty 2011Highly Sensitive Track,

≤50% in 2015

151110 - Crude oil 9 ≤50310520 - Mineral or chemical fertilizers with Nitrogen 50 ≤50

access these markets (Highly Sensitive Track) Source: WITS uN COMTRADE accessed on 22 August 2014, ASEAN China FTA.

Notes: 1. wherever the level of exports is 0, it indicates a very small fraction since data is taken up to two decimal points. Figures are taken only for those products where exports have been made in both the years.

2. The Parties shall reduce the applied MFN tariff rates of tariff lines placed in their respective Highly Sensitive Lists to not more than 50% not later than 1 January 2015 for ASEAN 6 and China, and 1 January 2018 for the newer ASEAN Member States.

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ANNEXuRES

Cambodia1

Government of Cambodia has been taking several initiatives to expand market access through trade agreements and improve Cambodia’s international competitiveness. It grants MFN status to all of its trading partners. Cambodia was the first LDC to become member of the WTO via full accession process in October 2004.It has also been a member of ASEAN since 1999 in addition to being a beneficiary of the Generalised Scheme of Preferences (GSP) operated by developed economies.

Cambodian economy heavily relies on tourism and exports of garments and in order to diversify this narrow economic base, the government introduced a trade development agenda in 2008 known as Sector-Wide Approach (SWAp) to trade. The main aim of this approach is to focus on reforms and cross-cutting issues for trade development (legal reforms, trade facilitation, TBT and SPS regulation and practice); development of product and service sector export and capacity building for trade development. In addition, SWAp also serves as Cambodia’s Aid-for-Trade (AfT) strategy and has served to reinforce Cambodia’s ownership and management of AfT.

Cambodia has radically reformed its tariff structure (Cambodia has bound 100 per cent of tariff lines. The overall average bound duty rate is 20.1 per cent while the average applied rate of duty is 11.7 per cent) besides reducing the heavy dependence on trade-related taxes. In order to streamline and enhance the effectiveness of customs operations and to facilitate trade, Cambodia has been reforming its custom regime. This includes preparing way for fulfilling its commitments to ASEAN

to move to the Common Effective Preferential Tariff (CEPT) scheme, to adhere to the 1999 Revised Kyoto Convention, and to implement the WTO Agreement on Customs Valuation. It also includes establishing a TBT enquiry point and a drive for full SPS compliance. However, it is the intensity of efforts to reinforce and simplify the institutional framework for consistent policy making and to endorse export and market diversification which will determine the pace and sustainability of Cambodia’s economic growth in the long run.

Laos2

The Lao People’s Democratic Republic (PDR) gradually began its transition from a centrally planned to a market economy in 1986. Lao PDR is aiming to join the World Trade Organisation (WTO) in 2010 and further trade reforms associated with the country’s accession process continue. It is party to the Association of Southeast Asian Nations (ASEAN) free trade agreement (AFTA) and complies with the agenda of tariff elimination. Over three quarters of imports are sourced from its ASEAN neighbours, with 69 per cent from Thailand. Since the 2000s, the Lao PDR’s MFN applied simple average tariff has not changed much, and remained at 9.7 per cent in 2008, slightly above the East Asia Pacific (EAP) regional average (9.3 per cent) and below the average for low income countries. It ranks 101st of 181 countries, where 1st indicates the most open regime. When weighted by actual imports, the average tariff rises to 14.9 per cent. Agriculture receives significantly more protection than non-agricultural goods, with average tariffs of 19.4 and 8.3 per cent respectively. The maximum MFN applied tariff, excluding alcohol and tobacco, is relatively low at 40 per cent, compared to the EAP region and low-income

Annexure II

Trade Regime

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country group means of 136.1 per cent and 78.1 per cent respectively. Lao PDR submitted to the WTO an offer of market access to services in 2008. Services liberalisation in air transport, tourism, telecommunications, and healthcare is expected in the context of ASEAN’s agenda of services liberalisation in 2010, when members will be allowed to own 70 per cent of firms in these sectors

In order to cushion the impact of rising global prices for food, the government imposed a series of localised mechanisms whereby temporary rice export bans could be imposed at the province level. Rising prices for fuel also prompted the government to ease import tariffs by fixing the price at which duties are assessed for petroleum products at their April 2008 level. Due to the limited exposure of the financial system to global financial markets, Lao PDR has been less affected by the global financial crisis than its neighbouring countries. To cope with the impacts of the global recession and the expected decline in exports, the government increased tariffs on the imports of some luxury products, provided credit to boost output in the infrastructure sector, and temporarily decreased power charges for mining companies. Although most imports were subject to non-automatic licensing up to m id 2009, a new Prime Minister’s Decree was issued in July 2009 providing for automatic import licensing for all goods outside a negative list. A draft notification of the import prohibited and controlled lists reduces the number of items compared to the 2006 notification. Also in July 2009, the National Assembly approved a new investment law which merges separate foreign and domestic investment laws, provides for national treatment of domestic and foreign investors, and streamlines the investment approval process.

Myanmar3

Reforms since 2010 have paved the way for Myanmar’s reintegration into the international community, after having been isolated from

a large part of the global economy for many years. Consequently, real GDP growth has been rising; it was estimated at 5.9 per cent in 2011/12 and 6.4 per cent in 2012/13. Myanmar’s per capita GDP was around uS$900 at the end of March 2012.

Myanmar has embarked on a series of reforms in its macroeconomic policies. On 1 April 2012, the Central Bank of Myanmar replaced a pegged exchange rate (to the SDR) with a managed floating exchange rate for the national currency. Prior to the reform, Myanmar had a multiple exchange rate regime comprising both the official exchange rate and the informal parallel market exchange rates. Previously, monetary policy in Myanmar was determined by the financing needs of the fiscal deficit, which resulted in high inflation. With a view to providing greater operational autonomy to the Central Bank and improving the monetary transmission mechanism, the new Central Bank Law was enacted on 11 July 2013. The new law provides for Central Bank autonomy, enabling it to function independently of the Ministry of Finance.

Myanmar is an original member of the WTO and considers that the multilateral trading system can bring a wide range of opportunities for Myanmar’s exports and overcome its supply-side constraints. At the same time, Myanmar’s trade policy is strongly influenced by its participation in ASEAN, and ASEAN’s free-trade agreements with third countries. Myanmar expects to benefit from GSP schemes reinstated by the Eu and Norway. Myanmar has not been party to any dispute settlement proceeding at the WTO, as complainant, respondent, or third party.

In the context of economic reforms, the Government has adopted measures to open up the economy and has been revising trade-related legislation. Myanmar is preparing a competition law, a Consumer Protection Law, and comprehensive IPR legislation, among others. Recognising that the economy needs

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foreign capital and technology for continuous and sustainable development, the Government promulgated the new Foreign Investment Law in 2012, which generally allows FDI except in activities that are restricted or prohibited. under the Law, tax incentives are granted on profits accrued from exports, and foreign companies must employ a local workforce on the basis of increasing the share of local employees over time.

Myanmar has bound 18.5 per cent of its tariff lines at the HS eight-digit level. All agricultural lines (WTO definition) are bound, compared with only 5.7 per cent of non-agricultural lines. Final bound tariffs range from 0 per cent (e.g. electrical machinery and transport equipment) to 550 per cent (e.g. chemicals, beverages, and tobacco, and cereals and preparations). The average applied MFN tariff was 5.5 per cent in 2013. Myanmar grants at least MFN treatment to all its trading partners. Myanmar has not yet applied the provisions of the WTO Customs Valuation Agreement. It has no anti-dumping, countervailing, safeguards or subsidies legislation in Myanmar.

In 2012, Myanmar began to reform its non-automatic import licensing regime. Previously, importers of all merchandise required a non-automatic import licence before import, and it took several weeks to obtain an import licence. In April 2013, import licensing requirements for 166 products (over 1,928 tariff lines at the HS eight-digit level) were abolished. Myanmar does not impose tariff-rate quotas. Myanmar has not made a notification regarding its state-trading activities to the WTO. Myanmar is neither party to nor an observer of the WTO Agreement on Government Procurement.

Exporters of most products require an export licence. Recently, Myanmar began restructuring its export licensing regime, and from 2013, 152 types of goods no longer require export licences. Myanmar also reformed its export tax regime in 2011. Prior to the reform, exporters

had to pay commercial tax at a rate of 8 per cent, and income tax at a rate of 2 per cent before exporting goods. Currently, commercial tax is levied on exports of only five commodities (gem, gas, crude oil, teak, and timber).

Tax accounts for about 90 per cent of total government revenue, and the largest source is commercial tax. However, 70 items are exempt from commercial tax if produced domestically, while imports are subject to a 5 per cent tax, indicating different treatment for domestically produced and imported goods. According to the authorities, the private sector’s share in GDP was about 91 per cent in 2011/12. Currently, there are 41 state-owned economic enterprises.

Agriculture accounted for about 30 per cent of GDP in 2012/13. Labour productivity in agriculture is less than one third of the level in the rest of the economy, probably due to the high labour/low capital structure of the sector with small farms and few machines. Main crops include rice, maize, pulses and beans, sugarcane, and cotton. Myanmar is a net food exporter. Myanmar’s simple applied MFN tariffs on agricultural products (HS01-24) and industrial products (HS25-97) were 9.0 per cent and 4.8 per cent, respectively, in 2013.

Services account for about 38 per cent of Myanmar’s GDP. The main services activities included trade and transport/communications. Myanmar is a net importer of services. In the context of the General Agreement on Trade in Services, Myanmar made specific commitments in tourism and travel-related services, and transport services; it has not made horizontal commitments or listed any MFN exemptions. In general, services are characterised by state involvement through state-owned companies and restrictions on private-sector and foreign involvement. While FDI is not entirely prohibited, no foreign companies have been conducting banking or insurance businesses (except for representative offices of foreign banks). The Government is in the process of

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formally issuing two new nationwide basic telecommunications licences; the two licensees are to involve foreign companies. No exclusive rights are accorded to any company in civil aviation or maritime transport. Foreign direct investment, with foreign-equity participation up to 100 per cent, is allowed in the hotels and related businesses.

Vietnam4

Following its WTO accession, Vietnam experienced a surge in foreign direct investment. FDI inflows and the total value of licensed projects peaked in 2008 but the latter declined as a result of investors’ worries, while FDI outflows grew five-fold between 2007 and 2011. Nevertheless, the country remains an attractive destination for foreign investors and has long-term growth potential. The contribution of foreign-invested enterprises to GDP, employment, and exports as well as product and market diversification have been noteworthy, although state involvement in the economy in certain activities remains relatively high, albeit declining.

Vietnam went a long way in equalising the treatment accorded to Vietnamese and foreign investors with the promulgation of its enterprise and investment laws in 2005. However, some differences remain and may lead to differing interpretations, particularly when a foreign investor acquires a locally owned business. The establishment of a one stop shop system for business registration and investment licensing is a long-standing issue, and could help to address occasional allegations of inconsistent and uncoordinated implementation of laws and regulations by the responsible government agencies. Private ownership of land is not permitted in Vietnam, but land may be leased on long-term agreements. Private-public partnership projects have been implemented on a pilot basis since early 2011 to stimulate private investment in infrastructure.

Trade Policy FrameworkVietnam’s hierarchy of legal documents comprises 12 levels, determined by the type of legislation and the issuing institution. Legislation issued by a lower state organ must be consistent with the legal documents of higher state organs. However, it is not always evident whether new legislation abrogates or supplements existing legislation. Ministries continue to rely on official letters, notices, or guidelines to set policy and clarify implementation issues, although the law on promulgation of legal documents stipulates that such communications have no legal or binding effect.

The Ministry of Industry and Trade plays a leading role on international trade issues, although many other ministries and agencies also deal with trade-related matters. The National Committee for International Economic Co-operation serves as a coordinating body between the ministries and line agencies. Since Vietnam became a WTO Member, some 130 notifications have been submitted to the Secretariat in a number of areas. Notable gaps include agricultural and industrial subsidies, for which data remain unavailable (since 2007), and state trading, where Vietnam has provided no information despite the importance of the public sector in its economy. Concerns have been raised in the Committee on Import Licensing regarding the timeliness and completeness of information provided by Vietnam.

Vietnam joined ASEAN in 1995 and is thus part of its comprehensive framework for trade in goods, services, and investment. Vietnam pursues trade liberalisation in Asia and the Pacific together with its ASEAN partners complemented by additional bilateral initiatives. Vietnam has taken advantage of these agreements to boost exports of competitive product lines, e.g. in agriculture, fisheries, textiles, footwear, and furniture. Vietnam has

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been a full participant in the negotiations on a Trans-Pacific Partnership Agreement since November 2010, and is negotiating bilateral FTAs with the Eu, the members of EFTA, the customs union of Belarus, Kazakhstan, and the Russian Federation, and Korea.

Trade Policy DevelopmentsVietnam bound the entire tariff schedule in the context of its WTO accession, and mostly in the 0-40 per cent range. The simple average MFN tariff has declined significantly, from 18.5 per cent in 2007 to 10.4 per cent in 2013, as Vietnam has been phasing-in its tariff concessions. However, differences between bound and applied rates have left some scope for flexibility, and Vietnam has made use of this, inter alia, to reduce fluctuations in domestic energy prices, and to provide additional protection to selected industries since 2008. Tariff rate quotas regulate imports of eggs, sugar, unmanufactured tobacco and tobacco refuse, and salt.

A special consumption tax is levied on certain goods and services including cigarettes, alcoholic beverages, motor vehicles, motor cycles, and golf and gambling services. Tax rates were equalised on imported and domestically produced alcoholic beverages as a result of Vietnam’s WTO accession. Nevertheless, valuation differences in the tax base may provide an advantage to local producers. Vietnam introduced an environmental protection tax on five product categories with effect from 1 January 2012, in part replacing earlier surcharges on various fuels. Value-added tax, which is levied at a general rate of 10 per cent, constitutes almost one third of the Government’s total tax revenue, while trade taxes seem to account for one tenth.

As for non-tariff measures, Vietnam prohibits the importation of goods generally considered harmful to human health and safety, or national security. Import restrictions may be applied to comply with international treaties and conventions to which Vietnam is a party.

“Line management”, i.e. licences issued by the Ministry of Industry and Trade for imports regulated by other ministries, is applied to the importation of various goods. According to the authorities, the system includes automatic and non-automatic licensing procedures.

In 2008, Vietnam introduced what it considers to be automatic licensing for a wide range of consumer products and agricultural items. The product coverage was extended in 2010, reduced somewhat in 2011, and temporarily suspended as from September 2012. However, certain steel products are still affected by this measure. In April 2010, the Ministry of Industry and Trade issued a long list of “non-essential” imported commodities and consumer goods not encouraged for import, and the State Bank of Vietnam discourages the granting of loans by credit institutions to finance imports of such items. A requirement to channel all imports of wines, spirits, cosmetics, and mobile phones through three seaports only was in effect from May 2011 until the end of 2012.

Although Vietnam has legislation and institutions to conduct anti-dumping and countervailing investigations, no such action has been taken. An investigation into possible safeguard measures on imported float glass was terminated with no safeguards imposed in February 2010. In an ongoing investigation on certain imported vegetable oils, the imposition of a provisional safeguard measure (5 per cent additional duty) was announced in May 2013.

Standards and technical regulations are drawn up by technical committees with support from the Directorate for Standards, Metrology and Quality (STAMEQ), under the Ministry of Science and Technology. STAMEQ, which is the WTO TBT enquiry point, also represents Vietnam in a number of international and regional standards organisations and its subsidiary bodies are responsible for metrology, conformity assessment, quality assurance, and certification. Accreditation of laboratories is the responsibility of the Bureau

74

of Accreditation, also under the Ministry but not part of STAMEQ. At the end of 2012, Vietnam had 6,800 national standards, 40 per cent of which were harmonized with international, regional, or foreign standards, and 116 technical committees with plans to complete 813 standards in 2013.

A number of government ministries are responsible for sanitary and phytosanitary measures. The Ministry of Agriculture and Rural Development is the WTO SPS enquiry point. As is the case for standards and technical regulations, the legislation for SPS measures comprises a number of ordinances, laws, decisions, decrees, and circulars. The measures generally correspond to standards established by the OIE, Codex Alimentarius, and the IPPC; the official objective is to harmonize them fully, although no date has been set.

Among measures affecting exports, Vietnam levies export duties on certain products and royalties on certain natural resources. Export duties on scrap metal have been reduced by approximately 50 per cent since 2006, in accordance with Vietnam’s WTO commitments. Numerous other changes since 2006 have added or deleted items, and increased or eliminated tax rates. Some goods are subject to export controls. The Ministry of Industry and Trade does not appear to have applied legal provisions to regulate or monitor exports through automatic licences. However, other measures imposed by the authorities include quality standards and bans on exports of certain minerals.

Vietnam provides subsidies, mainly in the form of tax incentives, for example to encourage research and development; the development of infrastructure of special importance; to assist enterprises involved in education, training, and health care; and the establishment of businesses in geographically disadvantaged areas. The Vietnam Development Bank (VDB) finances infrastructure as well as business development. An interest rate support programme is available.

Support for trade promotion activities is modest and, according to the authorities, well below the level requested by Vietnamese businesses.

Nearly 300 industrial parks and export-processing zones account for a significant share of Vietnam’s industrial output, investment, exports, and employment. Although the performance of the industrial parks is highly uneven and the average occupancy rate has been falling in recent times, many new parks and zones are on the drawing board.

Although Vietnam has made no formal commitment to join the Agreement on Government Procurement, it currently has observer status. under existing legislation, preferences are available to local suppliers in international tenders, and imports are discouraged when machinery, equipment, and materials used in the procurement can be produced domestically.

Vietnam began the process of reforming its state-owned enterprises more than 20 years ago. Many enterprises have been privatised and further divestment of state holdings is foreseen. Nevertheless, the state-owned sector continues to account for 38 per cent of GDP, and the fundamental approach to state ownership is a mixture of renovation, preservation, and expansion. In 2005,

Vietnam began establishing pilot State Economic Groups, i.e. loose alliances of SOEs with similar business interests. The financial difficulties of one of these groups, exposed in 2010, revealed a number of structural weaknesses in large Vietnamese SOEs, including complex corporate structures, lack of effective oversight, and expansion well beyond the stated core business activities. A Steering Committee for the restructuring of SOEs was set up in 2011. Vietnam has also begun the process of legally separating state ownership rights from the State’s regulatory functions.

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Intellectual property protection is the focus of attention of Vietnam and many of its trading partners. Vietnam is party to a number of WIPO-related treaties and continues to integrate the IP-innovation-trade triangle in international and regional fora. Vietnam’s legislation was reviewed by the Council for TRIPS in 2008. The enforcement system in Vietnam is highly complex.

Regulation is provided through various legal and administrative texts, and the responsibilities for IPR enforcement are shared among a considerable number of central and local authorities. Issues such as counterfeited and pirated goods, and cable and satellite signal theft, remain matters of concern.

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Cambodia5

a) Investment Policies:

In order to attract FDI, the government of Cambodia has strengthened the country’s legal framework, bolstered its institutions and liberalized the relevant regulations in ways that are conducive to private sector investment and business activities in Cambodia. The government provides investors with a guarantee neither to nationalise foreign-owned assets, nor to establish price controls on goods produced and services rendered by investors, and to grant them the right to freely repatriate capital, interest and other financial obligations. Generally, there are no restrictions on the setting up of businesses. However, many businesses require a license or permit to operate, including areas such as banking and finance institutions, tour agencies, real estate agencies, telecommunication, industrial factories, etc. Investors can set up 100 per cent foreign-owned investment projects and employ skilled workers from overseas, in cases where these workers cannot be found in the domestic labour force. Attention is also accorded to private investment in Build-Operate-Transfer (BOT) projects, and private investment in infrastructure, including public utilities such as electricity, water supply and telecommunications.

In order to facilitate investors in their applications for investment approval, the government has established an institution to oversee investment policy and strategy called the Council for the Development of Cambodia (CDC). The Cambodian Investment Board (CIB), the operational arm of the CDC, has been designated as the major and one-stop service of the government, responsible for the evaluation of investment proposals and projects from all investors, both individual and corporate.

Foreigners are not authorised to acquire ownership rights in buildings located within 30 kilometers of the land borders of Cambodia, except in Special Economic Zones or other areas, as determined by the government.

b) Taxation6:

Most foreign investments and foreign investors are affected by the following taxes:

• Tax on Profit• Minimum Tax• Various withholding taxes (e.g. Tax on

profit withholding obligations)• Value Added Tax• Turnover Tax• Import Duties• Salary Tax on Cambodian and expatriate

employeesInvestment sectors in which special incentives

do not apply include the telecommunication sector, and the exploitation of natural resources, with the exception of oil and natural gas exploration. All fuels, lubricants and other petroleum-based products used as raw materials or intermediate goods are not eligible for exemptions from import duties.

c) Investment Incentives

The Law on Investment provides the following incentives to investment projects in Cambodia:

• A corporate income tax rate of 9per cent, except for the exploration and exploitation of natural resources, including timber, oil and gas, gold, and precious stones.

• 100 per cent import duty exemption on construction materials, means of production, equipment, intermediate goods, raw materials and spare parts used by:

Annexure IIIInvestment Regime in CLMV


- An export-oriented project with a minimum of 80 per cent of the production set apart for export

- Projects located in the designated Special Promotion Zone (SPZ)

• 100 per cent exemption of export tax, if any.

d) Investment Guarantees

- Equal treatment of all investors

- No nationalisation adversely affecting the property of investors

- No price controls on products or services produced by licensed investors

- Remittance of foreign currencies abroad

e) Sectors in which investment is encouraged:

• Pioneer and/or high-technology industries

• Job creation• Export-oriented industries• Tourism industry• Agro-industry and processing industry• Infrastructure and energy• Provincial and rural development• Environmental protection• Investment in the Special Promotion

Zone (SPZ)f) Business Environment

Cambodia ranked poorly (137th out of 189) in ease of doing business7 in Doing Business 2013 conducted by the World Bank and International Finance Corporation (IFC). However, according to World Economic Forum’s Global Competitiveness Index ranking8 2013-14, Cambodia was ranked 88 out of 148 countries.

Laos:a) Investment incentives9

Tax and Duty Incentives

The Department for Promotion and Management of Domestic and Foreign

Investment (DDFI) automatically awards all approved foreign investors an incentive tax rate of 20 per cent, compared to the general tax rate of 35 per cent. unlike most other countries, this 20 per cent rate applies to foreign investment in all sectors of the economy and does not depend on company or performance. Foreign investors must pay a 10 per cent dividend withholding tax. Foreign investors and expatriate personnel pay a flat 10 per cent personal income tax. There is a minimum tax on all companies (unless tax holidays are granted) of 1 per cent of turnover, i.e., foreign-owned companies pay either 20 per cent tax on profits or 1per cent tax on turnover, whichever is greater. In special cases, primarily for hydroelectric projects or resource-based development projects, tax holidays can be negotiated.

As an incentive to all foreign investors, a duty of only 1 per cent is charged for imports of capital equipment, spare parts, and other means of production. No duties or import turnover taxes are payable on any imported inputs for export production. Foreign investors whose products substitute for imports can negotiate incentive duties and turnover taxes on imported inputs on case by case basis.

At present, an administrative ruling of the Minister of Finance allows all imports subject to incentive duty rates to be free of turnover tax and excise tax. Producers, whose output is sold in both domestic and export markets, pay no duty on the inputs for export production and pay a negotiated rate on inputs for import substituting production.

In the future, however, the government may move to a system in which foreign investors face the same tax and tariff incentives as do domestic investors. under this system, investment in “promoted industries” would receive tax and duty reduction incent ives , but inves tment in o ther sectors would pay the normal corporate profit tax, turnover tax and duty rates.

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Non-tax incentives

The government provides the following incentives to all foreign investors:

• Permission to bring in foreign nationals to undertake investment feasibility studies.

• Permission to bring in foreign technicians, experts, and managers if qualified Lao nationals are not available to work on investment projects.

• Permission to lease land for up to 20 years from a Lao national and up to 50 years from the government.

• Permission to own all improvements and structures on the leased land, transfer leases to other entities, and permission to sell or remove improvements or structures.

• Facilitation of entry and exit visa facilities and work permits for expatriate personnel.

• The government also offers guarantees against nationalisation, expropriation, or requisition without compensation. under the Foreign Investment Law, the government does not offer incentives of import protection (in the form of increasing duties or banning imports) for import substituting investments and it does not provide measures to restrict further entry to reduce competition for current investors. Such a policy of not reducing market competition is not a feature of the foreign investment systems of most other countries, such as Thailand and Vietnam, in the region.

b) Sectors in which investment is encouraged:

• Hydroelectric Power• Mining• Tourism• Infrastructure

• Telecommunications• Manufacturing• Agro processing and Food processing• Pharmaceuticals and Healthcare• Education• Information Technology• Small and Medium Enterprises

c) TaxationThe Lao PDR government is seeking to encourage more foreign investment and maintains lower business tax rates for foreign companies than those applicable to domestic companies. Foreign investments subject to the Foreign Investment Law pay an annual profit tax at a rate of 10 per cent , 15 per cent, and 20 per cent according to the promotion zone (other investments are taxed at 35 per cent).

In highly exceptional cases, and by specific decision of the Lao Government, foreign investors may be granted special privileges and benefits which include a reduction in or exemption from the 20 per cent profit-tax rate. Such reductions are normally given if size of an investment is large and it’s expected to have significant positive impact upon the socioeconomic development of the Lao PDR.

The law places no limitations on foreign investors transferring after tax profits, income from technology transfer, initial capital, interest, wages and salaries, or other remittances to the company’s home country or third countries provided that they request approval from the Lao government.

d) Business EnvironmentLao PDR was ranked 159thin ease of doing business out of 189 countries. According to World Economic Forum’s Global Competitiveness Index ranking10 2013-14, Laos was ranked 81 out of 148 countries.

Myanmar11:a) Investment PoliciesThe Foreign Investment Law in Myanmar has no minimum capital requirement for

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foreign ownership, except for joint ventures in restricted sectors, although individual ownership requirements can be established by the Myanmar Investment Commission (MIC).Foreign investors may, depending on the type and value of investment, lease land for a period of up to 50 years and renewable for a further two 10 year periods. Investors can sub-lease or mortgage permitted leased land and building without changing type of investment with the permission of lessor. If the land is free land, fallow land and waste land, the permit from the Government shall be attached. Investors can sell and/or transfer of all shares to foreigners or local citizens. If foreigner possesses all shares, he can apply for company registration or can use existing company name with the approval of transfer or according to MCA 27(a).

Foreign investments shall be made in accordance with the following basic principles:

• Promotion and expansion of exports• Exploitation of natural resources which

require heavy investment• Acquisition of high technology• Supporting and assisting production and

services involving large capital• Opening up of more employment

opportunities• Development of works which would

save energy consumption• Regional development

Foreign investment may be made in any of the following forms:

• Investment made by a foreigner to the extent of 100 per cent foreign capital

• Joint-venture made between a foreigner and a citizen. If a joint-venture is formed then foreign capital shall be at least 35 per cent of the total capital.

• A sole proprietorship, a partnership and a limited company may be formed

b) Exemptions and Reliefs

The Commission shall, for the purpose of promoting foreign investments within the State, grant the investor exemption or relief from taxes. In addition the Commission may grant any or more than one or all of the remaining exemptions or reliefs from taxes:

• In respect of any enterprise for the production of goods or services, exemption from income-tax for a period extending to three consecutive years, inclusive of the year of commencement of production of goods or services;

• Exemption or relief from income tax on profits of the business if they are maintained in a reserve fund and re-invested therein within 1 year after the reserve is made;

• Right to accelerate depreciation in respect of machinery, equipment, building or other capital assets used in the business, at the rate fixed by the Commission;

• If the goods produced by any enterprise are exported, relief from income-tax up to 50 per cent on the profits accrued from the said export;

• Right of an investor to pay income tax payable to the State on behalf of foreigners who have come from abroad and are employed in the enterprise;

• Right to pay income-tax on the income of the above-mentioned foreigners at the rates applicable to the citizens residing within the country;

• Right to deduct from the assessable income, such expenses incurred in respect of research and development relating to the enterprise which are actually required and are carried out within the State;

• Exemption or relief from customs duty or other internal taxes or both on

80

machinery, equipment, instruments, machinery components, spare parts and materials used in the business, which are imported as they are actually required for use during the period of construction

• Exemption or relief from customs duty or other internal taxes or both on such raw materials imported for the first three years’ commercial production following the completion of construction

c) Investment Guarantees

• The Government guarantees that an economic enterprise formed under a permit shall not be nationalised during the term of the contract or during an extended term, if so extended

• On the expiry of the term of the contract, the Government guarantees an investor of foreign capital, the rights he is entitled to, in the foreign currency in which such investment was made

• Foreign investors have the right of remittance of foreign currency. Foreign investors are allowed to remit foreign currency overseas through banks which are authorized to conduct foreign banking business at the prevailing exchange rate.

d) Sectors in which investment is encouraged:

• Transport Infrastructure• Telecommunication services• Financial Services• Hydrocarbons• Healthcare• Oil and gas exploration• Agro-tech

e) TaxationAny enterprise operating under the Foreign Investment Law (FIL) or the Myanmar Companies Act must pay income tax at a 25 per cent tax rate.

f) Business Environment

Myanmar ranks at the bottom in terms of starting a new business and has a very difficult business environment with its rank of ease of doing business being 182 out of 189 countries.

According to World Economic Forum’s Global Competitiveness Index ranking12 2013-14, Myanmar is ranked 138 out of 148 countries.

Vietnam:a) Investment Policies

Foreign investors are beginning to regard Vietnam as a key strategic investment location to achieve cost effectiveness of their global supply chains. Vietnam is becoming more attractive with its tax incentives, low cost labour and long coastline with increasingly modern and sophisticated port infrastructure.

Forms of Investment

Foreign investors may invest in Vietnam in any of the following forms:

• Business co-operation on the basis of a business co-operation contract

• Joint venture enterprise

• Enterprise with 100 per cent foreign owned capital

b) Focus sectors for Investment

• High-tech production: high technology and modern equipment, bio-tech products, telecom, electronics, clean & green industries;

• Infrastructure

• Education and training, vocational training

• Healthcare: hospitals, pharmaceutical productions

• Environment: industrial water treatment, waste and rubbish treatment, other environment measures Supporting/

ANNEXuRES

81


Auxiliary industry: materials, supplies and spare parts for textile and garment, footwear, auto

• Manufacturing industry: to produce competitive products for export and domestic consumption.

Foreign participation in distribution services, including commission agents, wholesale and retail services, and franchising, opened to fully foreign owned businesses in 2009. Distribution of alcohol, cement and concrete, fertilizers, iron and steel, paper, tires, and audiovisual equipment opened to foreign investors in 2010. The sectors where certain conditions are applicable to foreign investors include telecommunications, postal networks, ports and airports, and other sectors as per Vietnam’s commitments under international and bilateral arrangements.

c) Investment Incentives

• Corporate Income tax (CIT) exemption and CIT reduction from the first profit making year

• Preferential CIT rate of 10-20 per cent

• Import duty exemption on imports of equipment, materials, means of transportation and other goods for implementation of investment projects in Vietnam in accordance with the law on Export and Import Duties

• Land rental exemption or reduction

• Accelerated depreciation of fixed assets

• Losses carry forward

Foreign investors are exempt from import duties on goods imported for their own use and which cannot be procured locally, including all equipment, machinery, vehicles, components and spare parts for machinery and equipment, raw materials, inputs for manufacturing and construction materials that cannot be produced domestically.

d) Taxation

Preferential tax treatment such as tax exemption, tax reduction and preferential rates are limited to:

• Encouraged sectors such as healthcare, education, high-tech, infrastructure development and software

• Encouraged special economic zones, or areas with difficult socioeconomic conditions

Vietnam does not tax profits remitted by foreign-invested companies. However, companies are required to fulfill their local tax and financial obligations before remitting profits overseas and are not permitted to accumulate losses.

e) Business Environment

The Doing Business 2013 conducted by the World Bank ranked Vietnam 99th in ease of doing business. According to World Economic Forum’s Global Competitiveness Index Ranking 2013-14, Vietnam was ranked 70 out of 148 countries.

Endnotes1. See also http://www.wto.org/english/tratop_e/

tpr_e/s253_sum_e.pdf2. Extracted from: http://info.worldbank.org/etools/

wti/docs/Lao%20PDR_brief.pdf3. See also http://www.wto.org/english/tratop_e/

tpr_e/s293_sum_e.pdf4. See also http://www.wto.org/english/tratop_e/

tpr_e/s287_sum_e.pdf.5. http://www.embassyofcambodia.org.nz/investment.

htm6. Exim Bank (2013).7. http://www.doingbusiness.org/rankings. Economies

are ranked on their ease of doing business, from 1 – 189. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm.

8. www.weforum.org/gc9. http://www.investlaos.gov.la/show_encontent.

php?contID=1610. www.weforum.org/gc11. Exim Bank (2013)12. www.weforum.org/gc

82

Ann

exur

e IV

Tabl

e A

.7: S

take

hold

ers’

Con

sulta

tions

in H

CM

City

and

Yan

gon

Stak

ehol

der C

onsu

ltatio

n in

HC

M C

ity a

nd y

ango

n: L

ist

S.N

o.N

ame

Des

igna

tion

Org

anis

atio

n

Mya

nmar

1Ti

n M

aung

Hta

yM

anag

ing

Dir

ecto

rSm

all a

nd M

ediu

m In

dust

rial

Dev

elop

men

t Ban

k, N

o. 1

02/1

04, P

anso

dan

St K

yauk

tda,

To

wns

hip,

yan

gon,

Mya

nmar

2D

r Myo

Lw

inM

anag

ing

Dir

ecto

rA

rkar

OO

Co.

, Ltd

, No.

124

, Wet

msu

tt W

un H

taut

St.,

Ind

ustr

ial T

hary

ar T

sp, y

ango

n M

yanm

ar3

Mr.

Thei

n Za

wC

hief

Eng

inee

r (Bu

ildin

g)M

inis

try

of C

onst

ruct

ion

Publ

ic W

orks

, Bui

ld N

o. 1

1, N

ay P

yi T

aw, M

yanm

ar4

Dr K

hin

Zaw

Win

Dir

ecto

rTa

mpa

dipa

Inst

itute

, 10

Mya

thid

a Ro

ad, P

yith

ayar

, Bau

ktaw

, yan

gon,

Mya

nmar

5u

Tha

ng D

o C

inD

eput

y D

irec

tor

Gen

eral

, Pl

anni

ng D

epar

tmen

tM

inis

try

of N

atio

nal P

lann

ing

and

Econ

omic

Dev

elop

men

t, N

o. 1

, Nay

Pyi

Taw

, Mya

nmar

6K

anti

Ram

anA

ttach

eEm

bass

y of

Indi

a, 5

45-5

47, M

erch

ant S

tree

t, ya

ngon

, Mya

nmar

, Pos

t Box

: 751

, Mya

nmar

7N

ares

h K

um

ar

Din

odiy

aM

anag

ing

Dir

ecto

rP.

L. G

loba

l Im

pex

Ptd

Ltd,

yan

gon,

Mya

nmar

V

ietn

am

8P

han

Ngo

c M

ai

Phuo

ng, M

DM

Vic

e Pr

esid

ent

Min

istr

y of

Pla

nnin

g an

d In

vest

men

t, D

evel

opm

ent S

trat

egy

Inst

itute

, 65

Van

Mie

u St

., H

a N

oi, V

ietn

am

9Bu

i Thi

Tha

nHan

Dep

uty

Dir

ecto

r G

ener

al,

He

ad

o

f V

ietr

ad

e R

epre

sent

ativ

e O

ffic

e in

H

CM

C

Min

istr

y of

Indu

stry

and

Tra

de, V

ietn

am T

rade

Pro

mto

ion

Age

ncy,

Rep

rese

ntat

ive

Offi

ce

in H

ochi

min

h ci

ty, 8

Nam

Ky

Kho

i Ngh

ia S

tr.,

4th

Floo

r, D

ist.

1, H

CM

C, V

ietn

am

10Tr

an D

uc D

ung

Cha

irm

anSt

rate

and

Impr

ove

your

bus

ines

s, S

IyB

HC

M B

usin

ess

Clu

b, S

IyB

uni

t, 69

Ngu

yen

Van

C

ong

St.,

GO

Vap

Dis

t., H

CM

City

, Vie

tnam

11V

.D. P

ani

Chi

ef R

epre

sent

ativ

eIn

dian

Ove

rsea

s Ban

k, N

o. 7

10, F

loor

7, M

e Lin

h Po

int T

ower

, 2 N

go D

uc K

e Str

eet,

Dis

tric

t 1,

Ho

Chi

Min

h C

ity, V

ietn

am

12Tr

an D

uc T

hein

Off

icia

l Tr

ade

Prom

otio

n D

epar

tmen

tPe

iple

's C

omm

ittee

of H

ochi

min

h C

ity, I

nves

tmen

t & T

rade

Pro

mot

ion

Cen

tre

(ITPC

), 51

D

inh

Tien

Hoa

ng S

t., D

ist.

1, H

o C

hi M

inh

City

, Vie

tnam

13V

u C

ao D

amD

eput

y D

irec

tor

Gen

eral

-E

nter

pri

se M

anag

emen

t D

ept.

Min

istr

y of

Tra

nspo

rt, E

nter

pris

e M

anag

emen

t Dep

artm

ent,

80 T

ran

Hun

g D

ao S

tr.,

Hoa

n K

iem

Dis

t., H

anoi

, Vie

tnam

14N

guye

n Th

e Hun

gD

eput

y D

irec

tor G

ener

alV

ietn

am C

ham

ber

of C

omm

erce

and

Indu

stry

, Hoc

him

inh

City

Bra

nch,

171

Vo

Thi S

au

Str.,

Dis

t. 3,

Hoc

him

inh

City

, Vie

tnam

ANNEXuRES

83


15A

. Sat

hyam

oort

hyG

ener

al M

anag

er (P

lant

)G

odre

j (V

ietn

am) C

o., L

td, 1

0 Tu

Do

Ave

nue,

Vie

tnam

Sin

gapo

re, I

ndus

tria

l Par

k, B

inh

Duo

ng V

ietn

am

16K

ersh

aw R

usto

mji

Man

agin

g D

irec

tor

God

rej (

Vie

tnam

) Co.

, Ltd

, 10

Tu D

o A

venu

e, V

ietn

am S

inga

pore

, Ind

ustr

ial P

ark,

Bin

h D

uong

Vie

tnam

17V

icto

r Lim

Dir

ecto

r(C

usto

mer

Ser

vice

D

ivis

ion)

Vie

tnam

sing

apor

e In

dust

rial

Par

k J.V

. Co.

, Ltd

, No.

8, D

ai L

o H

uu N

ghi,

VSI

P, T

huan

An

Tow

n Bi

nh D

uong

Pro

vinc

e, V

ietn

am

18Le

An

Hai

Dep

uty

Dir

ecto

r G

ener

al,

Asi

a-P

aci

fic

Ma

rket

D

epar

tmen

tM

inis

try

of In

dust

ry a

nd T

rade

, 54

Hai

Ba

Trun

g St

., H

oan

Kie

m H

anoi

, Vie

tnam

19V

. Sri

dhar

anPr

oduc

tion

Dir

ecto

rRa

ls In

tern

atio

nal V

ietn

am C

o., L

td. A

B To

wer

, uni

t 3, F

loor

16t

h, 7

6 Le

Lai

, Ben

Tha

nh

War

d, D

istr

ict 1

, Ho

Chi

Min

h C

ity, V

ietn

am

20Tr

an X

uan

Tran

gH

ead

of T

rade

Pro

mko

tion

Div

isio

nPe

iple

's C

omm

ittee

of H

ochi

min

h C

ity, I

nves

tmen

t & T

rade

Pro

mot

ion

Cen

tre

(ITPC

), 51

D

inh

Tien

Hoa

ng S

t., D

ist.

1, H

o C

hi M

inh

City

, Vie

tnam

21V

. Raj

umar

Cha

irm

anRa

ls In

tern

atio

nal V

ietn

am C

o., L

td. A

B To

wer

, uni

t 3, F

loor

16t

h, 7

6 Le

Lai

, Ben

Tha

nh

War

d, D

istr

ict 1

, Ho

Chi

Min

h C

ity, V

ietn

am

22Ja

y

Pra

ka

sh

Shri

ram

Me

mb

er,

B

oa

rd

of

Gov

erno

rs(I

nves

tmen

t &

Tr

ade)

Indi

an B

usin

ess C

ham

ber i

n V

ietn

am, R

oom

103

, 1st

Flo

or, S

eapr

odex

Bui

ldin

g, 2

-4-6

Don

g K

hoi S

tree

t, Be

n N

ghe

War

d D

istr

ict 1

, Ho

Chi

Min

h C

ity, V

ietn

am

23V

u V

an T

hanh

Dep

uty

Gen

eral

Dir

ecto

rH

oa S

en G

roup

, No.

9 T

hong

Nha

t Bou

leva

rd, S

ong

Than

II IP

., D

i An

Dis

t. D

i An

Tow

n,

Binh

Duo

ng P

ro.,

Vie

tnam

24Su

vend

u K

umar

Be

hera

Chi

ef R

epre

sent

ativ

eBa

nk o

f Ind

ia, 2

01-A

Hoa

Lam

Bui

ldin

g, 2

Thi

Sac

h St

reet

, Dis

tric

t 1, H

o C

hi M

inh

City

, S.

R. V

ietn

am

25D

o K

im H

ung

Hea

d o

f R

epre

sent

ativ

e O

ffice

Min

istr

y of

Indu

stry

and

Tra

de, A

genc

y fo

r Ind

ustr

ial P

rom

otio

n, 8

Nam

Ky

Kho

i Ngh

ia

St.,

(7 fl

oor)

, Ngu

yen

Thai

Bin

h W

ard,

Dis

t 1, V

ietn

am

26N

gu

yen

X

uan

Th

anh

Dir

ecto

rFu

lbri

ght E

cono

mic

s Te

achi

ng P

rogr

am, 2

32/6

Vo

Thi S

au, D

istr

ict 3

, Ho

Chi

Min

h ci

ty,

Vie

tnam

27D

an

g

Tu

an

Phuo

ng,

Inte

rnat

iona

l rel

atio

ns D

ept.

Vie

tnam

Cha

mbe

r of

Com

mer

ce a

nd In

dust

ry, H

ochi

min

h C

ity B

ranc

h, 1

71 V

o Th

i Sau

St

r., D

ist.

3, H

ochi

min

h C

ity, V

ietn

am

28M

ohan

Ram

esh

Ana

ndC

hair

man

Indi

an B

usin

ess C

ham

ber i

n V

ietn

am, R

oom

209,

2nd

Flo

or, S

eapr

odex

Bui

ldin

g, 2

-4-6

Don

g K

hoi S

tree

t, Be

n N

ghe

War

d D

istr

ict 1

, Ho

Chi

Min

h C

ity, V

ietn

am

29M

r Viv

ek Jo

shi

Chi

ef R

epre

sent

ativ

ePa

cific

Impe

x Pv

t Ltd

, Vie

tnam

offi

ce: 4

5D/9

, D5

Stre

et, W

ard

25, D

istr

ict-

Binh

Tha

nh, H

o C

hi M

inh

City

, Vie

tnam

30Tr

an T

hi Q

uynh

Th

anh

Mar

com

Offi

cer,

Mar

ketin

g D

epar

tmen

tV

ietn

am si

ngap

ore

Indu

stri

al P

ark

J.V. C

o., L

td, N

o. 8

, Dai

Lo

Huu

Ngh

i, V

SIP,

Thu

an A

n To

wn

Binh

Duo

ng P

rovi

nce,

Vie

tnam

84

Ann

exur

e V

Tabl

e A

.8: I

nput

s R

ecei

ved

Und

er In

ter-

Min

iste

rial

Inpu

t Tem

plat

e

Inpu

ts b

y M

inis

trie

sC

ounc

il fo

r Lea

ther

ex-

port

sM

inis

try

of R

oad

Tran

spor

t &

Hig

hway

sIn

dian

Cha

mbe

r of C

omm

erce

(for

Mya

nmar

)EE

PC IN

DIA

Prio

ritiz

a-tio

n of

are

as

in id

enti-

fied

Sect

ors

for t

rade

Dur

ing

the r

ecen

t vis

it of

Le

athe

r Ind

ustr

y D

eleg

a-tio

n to

Vie

tnam

, Jul

y 13

-17,

201

4 it

was

no-

ticed

that

ther

e is s

cope

fo

r exp

ort o

f fini

shed

le

athe

r and

foot

wea

r co

mpo

nent

s to

Vie

tnam

. Th

e fol

low

ing

are t

he

pote

ntia

l pro

duct

s (H

S 6

digi

t) fo

r exp

ort t

o V

ietn

am &

Cam

bodi

a:

6406

1010

Em

broi

dere

d up

pers

of t

extil

e mat

eri-

als

6406

1020

Le

athe

r u

pper

s (pr

epar

ed)

6406

1090

O

ther

Foo

t-w

ear C

ompo

nent

s41

0711

00 L

eath

er

furt

her o

f bov

ine

full

grai

ns u

nspl

it of

w

hole

hid

es/s

kins

4107

1200

Lea

ther

fu

rthe

r of b

ovin

e gr

ain

split

of w

hole

hi

des/

skin

s41

0719

00 O

ther

who

le

hide

s/sk

ins

4107

9100

Ful

l gra

ins

unsp

lit o

f oth

er h

ides

/sk

ins i

nclu

ding

sid

es41

0799

00 O

ther

/Hid

es/

skin

s inc

ludi

ng si

des

4112

0000

Lea

ther

furt

her

prep

ared

afte

r tan

ning

/cr

ust

leat

her o

f she

ep/

lam

b w

ithou

t woo

l w.o

.n.

split

411

3100

0 Le

athe

r fu

rthe

r of g

oats

/kid

s 41

1390

00 L

eath

er fu

rthe

r of

oth

er a

nim

als

4114

1000

M

etal

lised

leat

her.

Text

ile &

Gar

men

ts, P

har-

mac

eutic

als,

Oil

& G

asIn

puts

hav

e bee

n pr

ovid

ed

enco

mpa

ssin

g In

dia’

s pot

en-

tial

item

s of e

xpor

t to

CLM

V

for t

he E

ngin

eerin

g se

ctor

. 16

pro

duct

s at H

S6 d

igit

leve

l hav

e be

en id

entifi

ed

as p

oten

tial i

tem

s fo

r exp

ort

to C

LMV

regi

on. t

hey

have

id

entifi

ed p

riorit

y ar

eas f

or

trad

e am

ong

all C

LMV

cou

n-tr

ies

sepa

rate

ly b

y pr

ovid

ing

a lis

t of

100

prod

ucts

at

HS6

di

git l

evel

whi

ch In

dia

ex-

port

s to

the

wor

ld an

d C

am-

bodi

a, L

aos,

Mya

nmar

and

V

ietn

am im

port

s fro

m th

e w

orld

, res

pect

ivel

y. A

mon

g th

em, t

op 2

0 po

tent

ial p

rod-

ucts

whe

re In

dia

can

pen-

etra

te a

re g

iven

in w

ord

file,

at

tach

ed in

app

endi

x al

ong

with

the

met

hodo

logy

use

d.

ANNEXuRES

85

Tabl

e A.8

: con

tinue

d...


Rele

vant

Se

rvic

e ex

port

s in

th

e id

enti-

fied

sect

ors

Can

we h

ave

natio

nal

leve

l O-F

DI

stra

tegy

?1.

Info

rmat

ion

&

Com

mun

icat

ion-

Tech

nolo

gyPo

or co

nnec

tivity

is o

ne o

f th

e maj

or h

urdl

es f

acin

g M

yanm

ar. T

he c

ount

ry h

as

a lo

w m

obile

pen

etra

tion

rate

of j

ust

1.5%

(aro

und

800,

000

subs

crib

ers)

, and

an

Int

erne

t pen

etra

tion

rate

of 0

.2%

. Tel

ecom

-m

unic

atio

ns an

d In

tern

et

acce

ss a

re e

xpec

ted

to

beco

me m

ore

wid

espr

ead

with

in M

yanm

ar a

s the

go

vern

men

t see

ks to

de-

velo

p its

info

rmat

ion

and

com

mun

icat

ions

infr

a-st

ruct

ure.

The

Min

istr

y of

Com

mun

icat

ions

, Pos

t &

Tel

egra

phs h

as in

di-

cate

d pl

ans t

o re

leas

e fou

r m

ore

tele

com

mun

icat

ions

lic

ense

s for

bot

h do

mes

tic

and

fore

ign

inve

stor

s com

-pa

nies

eng

agin

g th

e gov

-er

nmen

t th

roug

h tr

aini

ng

and

advi

sory

supp

ort,

and

inve

stm

ent i

n te

leco

mm

u-ni

catio

ns i

nfra

stru

ctur

e.

The

deve

lopm

ent o

f the

se

ctor

will

pre

sent

furt

her

oppo

rtun

ities

in a

reas

such

as

wir

eles

s bro

adba

nd,

VoI

P (v

oice

ove

r int

erne

t pr

otoc

ol) s

ervi

ces,

& e

ven

info

rmat

ion

and

com

-m

unic

atio

ns te

chno

logy

tr

aini

ng &

edu

catio

n.

Indi

a is

lead

er in

IT &

ITES

an

d th

is c

erta

inly

is h

uge

oppo

rtun

ity fo

r Ind

ian

co.

with

pos

sibi

lity

of b

oth

off s

hore

con

sulta

ncy

and

onsi

te B

PO/

trai

ning

cen

-tr

e /

netw

ork

setti

ng u

p op

port

uniti

es. C

urre

ntly

th

ere

are

IT c

ompa

nies

of-

feri

ng tr

aini

ng se

rvic

es in

M

yanm

ar.

2.u

rban

dev

elop

-m

ent

Mya

nmar

is a

n ur

bani

sing

coun

try

and

seek

s a co

ncep

tual

m

aste

r pla

n to

man

age

the p

lann

ed g

row

th

of y

ango

n an

d ot

her

urba

n ar

eas.

At t

he

natio

nal l

evel

, a m

aste

r pl

an th

at in

corp

orat

es

tran

spor

t, en

ergy

and

br

oad-

leve

l eco

nom

ic

polic

ies i

s req

uire

d.W

hile

yan

gon

alre

ady

bene

fits f

rom

bei

ng

deve

lope

d on

an

or-

derly

gri

d pl

an, u

rban

de

velo

pmen

t pl

ans

are

need

ed a

t the

mu-

nici

pal l

evel

to a

void

th

e ex

cess

es o

f un

man

-ag

ed u

rban

isat

ion

seen

in

oth

er d

evel

opin

g ci

ties.

Mya

nmar

is a

gr

owin

g ec

onom

y an

d is

cur

rent

ly d

evel

opin

g its

citi

es; I

ndia

with

its

str

engt

h of

hig

hly

skill

ed p

rofe

ssio

nals

su

ch a

s con

stru

ctio

n en

-gi

neer

s, ar

chite

cts

and

tow

n pl

anne

rs c

erta

inly

ha

s op

port

uniti

es. I

ndia

ha

s its

ow

n na

tiona

l st

anda

rd G

RIH

A fo

r su

stai

nabl

e en

viro

n-m

ent f

riend

ly b

uild

ings

.M

ode

of S

ervi

ce -

both

be

offs

hore

pro

ject

de-

sign

and

ons

ite p

roje

ct

impl

emen

tatio

n.

3.H

ealth

Serv

ices

My-

anm

ar’s

heal

thca

rese

rvic

es se

ctor

of-

fers

opp

ortu

nitie

s fo

r fo

reig

n pa

rtne

red

heal

thca

re fa

cilit

ies

that

pr

esen

tly d

o no

t ex

ist i

n M

yanm

ar. D

ue to

the

lack

of

qual

ity h

ealth

-ca

re s

ervi

ces,

man

y w

ell t

o do

Mya

nmar

ci

tizen

s fr

eque

ntly

fly

out

to n

eigb

our-

ing

coun

trie

s su

ch a

s Th

aila

nd, M

alay

sia,

In

dia

and

Sing

apor

e fo

r med

ical

tre

atm

ents

. Th

aila

nd i

s mos

t pr

efer

red

choi

ce cu

r-re

ntly

ow

ing

to cl

ose

prox

imity

, che

aper

cos

t of

livi

ng a

nd s

imila

r cu

lture

s. Fo

r Th

aila

nd

Mya

nmar

is t

he 3

rd

larg

est m

arke

t w

ith

abou

t 20%

ann

ual

grow

th o

f pa

tient

s.Th

ere i

s hug

e infl

ux o

f m

edic

al p

atie

nts t

o In

dia

espe

cial

ly a

t fa

cilit

ies

in K

olka

ta/

Del

hi a

nd

othe

r lo

catio

ns. M

edic

al

tour

ism

as w

ell a

s Jo

int

vent

ures

with

med

ical

fa

cilit

ies a

t M

yanm

ar is

a

pote

ntia

l are

a fo

r Ind

ian

heal

th c

are

prov

ider

s.

EEPC

Indi

a be

lieve

s tha

t th

ere

shou

ld b

e a

natio

nal

leve

l O- F

DI i

n In

dia

to

enco

urag

e bu

sine

sses

who

ar

e in

tere

sted

to in

vest

in

the

CLM

V co

untr

ies.

The

adop

tion

of“L

ook

East

Pol

icy”

by

Indi

a in

199

2 w

as a

n in

i-tia

tive

tow

ards

dev

elop

ing

exte

nsiv

e ec

onom

ic a

nd

stra

tegi

c rel

atio

ns w

ith th

e A

SEA

N n

atio

ns. S

ince

then

In

dia

has p

rogr

esse

d fr

om

a di

alog

ue p

artn

er to

the

pres

ent s

tatu

s of a

stra

tegi

c pa

rtne

r. A

mon

g th

e C

LMV

co

untr

ies,

FDI i

nflow

s int

o V

ietn

am w

ere

the

high

est

at u

S$8.

4 bi

llion

in 2

012,

follo

wed

by

Mya

nmar

with

uS$

2.2

bi

llion

wor

th o

f infl

ows a

nd

Cam

bodi

a w

ith u

S$ 1

.6

billi

on.

86

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

How

to

mob

ilise

O

–FD

I?

Can

we h

ave

natio

nal

leve

l O-F

DI

stra

tegy

?To

hav

e a n

atio

nal l

evel

O

-FD

I str

ateg

y w

ill b

e a

posi

tive m

ove a

s thi

s will

en

cour

age I

ndia

n co

m-

pani

es to

esta

blis

h ba

se.

Chi

na a

lrea

dy h

as a

FD

I st

rate

gy a

nd h

as h

uge

inve

stm

ent i

n se

ctor

s suc

h as

Oil,

Inf

rast

ruct

ure,

etc

in M

yanm

ar.

Mya

nmar

’s2

larg

est i

nves

tors

are

C

hina

and

Tha

iland

, w

hich

toge

ther

acc

ount

fo

r uS$

25 b

illio

n w

orth

of

inve

stm

ents

. The

form

er is

bot

h M

yanm

ar’s

la

rges

t for

eign

inve

stor

an

d its

seco

nd la

rges

t fo

reig

n cr

edito

r. M

yanm

ar

FDI l

aw h

as a

lso

brou

ght

in th

e el

emen

t of p

rote

c-tio

n an

d al

so st

ates

thos

e se

ctor

s whe

re jo

int v

en-

ture

s with

loca

l com

pani

es

are

perm

itted

. Mya

nmar

al

low

s 100

% fo

reig

n in

vest

men

t in

proj

ects

ap-

prov

ed b

y th

e M

yanm

ar

Inve

stm

ent

Com

mis

sion

an

d m

anda

tes t

hat t

he

fore

ign

part

ner m

ust c

on-

trib

ute

at le

ast 3

5% o

f the

ca

pita

l.In

vest

men

t sec

urity

Con

-ce

rn: T

he M

yanm

ar F

DI

law

has

spec

ific p

rovi

sion

s th

at p

rote

ct fo

reig

n in

vest

-m

ent f

rom

nat

iona

lizat

ion

and

guar

ante

es re

patr

ia-

tion

of p

rofit

s and

secu

rity

of in

vest

ed ca

pita

l. Th

ese

prot

ectio

ns a

re in

add

ition

to

the

guar

ante

es a

n in

ves-

tor m

ay fi

nd in

the

seve

n bi

late

ral t

reat

ies M

yanm

ar

has w

ith o

ther

coun

trie

s (T

haila

nd, L

aos,

Vie

tnam

, Ph

ilipp

ines

, Chi

na, K

uwai

t an

d In

dia)

. Sim

ilar i

nves

tor

prot

ectio

n pr

ovis

ions

can

be fo

und

in th

e ne

wly

en-

acte

d M

yanm

ar S

EZ L

aw,

whi

ch is

app

licab

le in

3

SEZ

(Daw

ei, T

hila

wa

and

Kya

uk h

yu).

EEPC

Indi

a be

lieve

s tha

t th

ere

shou

ld b

e a

natio

nal

leve

l O- F

DI i

n In

dia

to

enco

urag

e bu

sine

sses

who

ar

e in

tere

sted

to in

vest

in

the

CLM

V co

untr

ies.

The

adop

tion

of“L

ook

East

Pol

icy”

by

Indi

a in

199

2 w

as a

n in

i-tia

tive

tow

ards

dev

elop

ing

exte

nsiv

e ec

onom

ic a

nd

stra

tegi

c rel

atio

ns w

ith th

e A

SEA

N n

atio

ns. S

ince

then

In

dia

has p

rogr

esse

d fr

om

a di

alog

ue p

artn

er to

the

pres

ent s

tatu

s of a

stra

tegi

c pa

rtne

r. A

mon

g th

e C

LMV

co

untr

ies,

FDI i

nflow

s int

o V

ietn

am w

ere

the

high

est

at u

S$8.

4 bi

llion

in 2

012,

follo

wed

by

Mya

nmar

with

uS$

2.2

bi

llion

wor

th o

f infl

ows a

nd

Cam

bodi

a w

ith u

S$ 1

.6

billi

on.

ANNEXuRES

87

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

Iden

tify

mec

hani

sms

to

faci

litat

es O

-FD

ITo

hav

e a

natio

nal l

evel

O

-FD

I str

ateg

y w

ill b

e a

posi

tive

mov

e as

this

w

ill e

ncou

rage

Indi

an

com

pani

es to

est

ablis

h ba

se. C

hina

alr

eady

has

a

FDI s

trat

egy

and

has

huge

inve

stm

ent i

n se

ctor

s su

ch a

s Oil,

Infr

astr

uctu

re,

etc

in M

yanm

ar.

Mya

n-m

ar’s

2 la

rges

t inv

esto

rs

are

Chi

na a

nd T

haila

nd,

whi

ch to

geth

er a

ccou

nt

for u

S$25

bill

ion

wor

th o

f in

vest

men

ts. T

he fo

rmer

is

bot

h M

yanm

ar’s

larg

-es

t for

eign

inve

stor

and

its

seco

nd la

rges

t for

eign

cr

edito

r. M

yanm

ar F

DI

law

has

als

o br

ough

t in

the

elem

ent o

f pro

tect

ion

and

also

stat

es th

ose

sect

ors

whe

re jo

int v

entu

res w

ith

loca

l com

pani

es a

re p

er-

mitt

ed. M

yanm

ar a

llow

s 10

0% fo

reig

n in

vest

men

t in

pro

ject

s app

rove

d by

th

e M

yanm

ar In

vest

-m

ent C

omm

issi

on a

nd

man

date

s tha

t the

fore

ign

part

ner m

ust c

ontr

ibut

e at

leas

t 35%

of t

he c

apita

l. In

vest

men

t sec

urity

Con

-ce

rn: T

he M

yanm

ar F

DI

law

has

spec

ific

prov

isio

ns

that

pro

tect

fore

ign

inve

st-

men

t fro

m n

atio

nalis

atio

n an

d gu

aran

tees

repa

tria

-tio

n of

pro

fits a

nd se

curi

ty

of in

vest

ed c

apita

l. Th

ese

prot

ectio

ns a

re in

add

ition

to

the

guar

ante

es a

n in

ves-

tor m

ay fi

nd in

the

seve

n bi

late

ral t

reat

ies M

yanm

ar

has w

ith o

ther

cou

ntri

es

(Tha

iland

, Lao

s, V

ietn

am,

Phili

ppin

es, C

hina

, Kuw

ait

and

Indi

a). S

imila

r inv

es-

tor p

rote

ctio

n pr

ovis

ions

ca

n be

foun

d in

the

new

ly

enac

ted

Mya

nmar

SEZ

La

w, w

hich

is a

pplic

able

in

3 S

EZ (D

awei

, Thi

law

a an

d K

yauk

hyu

).

EEPC

Indi

a be

lieve

s tha

t th

ere

shou

ld b

e a

natio

nal

leve

l O- F

DI i

n In

dia

to e

n-co

urag

e bu

sine

sses

who

are

in

tere

sted

to in

vest

in th

e C

LMV

cou

ntri

es. T

he a

dop-

tion

of “

Look

Eas

t Pol

icy”

by

Indi

a in

199

2 w

as a

n in

itiat

ive

tow

ards

dev

elop

-in

g ex

tens

ive

econ

omic

and

st

rate

gic

rela

tions

with

the

ASE

AN

nat

ions

. Sin

ce th

en

Indi

a ha

s pro

gres

sed

from

a

dial

ogue

par

tner

to th

e pr

esen

t sta

tus o

f a st

rate

gic

part

ner.

Am

ong

the

CLM

V

coun

trie

s, FD

I infl

ows i

nto

Vie

tnam

wer

e th

e hi

ghes

t at

uS$

8.4

bill

ion

in 2

012,

fo

llow

ed b

y M

yanm

ar w

ith

uS$

2.2

bill

ion

wor

th o

f in

flow

s and

Cam

bodi

a w

ith

uS$

1.6

bill

ion.

88

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

Iden

tify

mec

hani

sms

to

faci

litat

es O

-FD

IA

gov

ernm

ent i

nitia

tive

in

this

rega

rd w

ill h

elp

indu

s-tr

y as

Mya

nmar

Fin

anci

al

syst

em is

still

und

erde

vel-

oped

. Alth

ough

, Mya

nmar

re

cent

ly b

ecam

e a

full

mem

ber o

f Wor

ld B

ank’

s M

IGA

, whi

ch m

akes

dire

ct

fore

ign

inve

stm

ent i

nto

Mya

nmar

elig

ible

for t

he

agen

cy’s

inve

stm

ent g

uar-

ante

es (e

.g. c

over

ed ri

sks

incl

ude

expr

opria

tion,

br

each

of c

ontr

act,

tran

sfer

re

stric

tion,

failu

re to

hon

-ou

r fina

ncia

l obl

igat

ions

, or

war

/civ

il di

stur

banc

e).

Gov

ernm

ent l

ed In

tern

a-tio

nal t

reat

ies f

or se

ctor

s w

ill h

elp

to b

egin

with

an

d pr

ivat

e co

mpa

nies

m

ay th

en ta

ke fo

rwar

d.

Gov

t of M

yanm

ar a

nd it

s in

vest

men

t age

ncy

may

be

app

roac

hed

to d

iscu

ss

upon

aut

omat

ic ro

ute

or

gove

rnm

ent r

oute

for F

DI

in g

iven

sect

ors.

Cre

atio

n of

an

Indi

a –

CLM

V

busi

ness

foru

m is

nec

essa

ry

to fa

cilit

ate

O-F

DI f

rom

In-

dia

to th

e C

LMV

coun

trie

s. EE

PC In

dia

also

sugg

ests

de

velo

ping

a w

eb p

orta

l in

this

rega

rd. T

he w

eb p

orta

l sh

ould

cont

ain

follo

win

g in

form

atio

n:

a) S

ecto

ral o

ppor

tuni

ties

pres

ent i

n th

e C

LMV

coun

-tr

ies;

b)

Det

ails

of i

nves

tmen

t ru

les a

nd re

gula

tions

;c)

Ava

ilabl

e be

nefit

s for

the

inve

stor

s;d)

VIS

A ru

les.

To e

nsur

e sm

ooth

mov

e-m

ent o

f pro

fess

iona

ls a

nd

busi

ness

long

- ter

m V

ISA

is

the

need

of t

he h

our.

Sect

or

spec

ific t

rade

del

egat

ions

to

the

CLM

V co

untr

ies

follo

wed

by

Buye

r-Se

ller

mee

ts w

ill a

lso

faci

litat

e in

vest

men

t. EE

PC In

dia

also

be

lieve

s tha

t im

prov

emen

t of

phy

sica

l con

nect

ivity

be-

twee

n In

dia

and

the

CLM

V

coun

trie

s will

faci

litat

e in

vest

men

t. T

rilat

eral

In

dia-

Mya

nmar

-Tha

iland

H

ighw

ay P

roje

ct &

its e

xten

-si

on to

CLV

will

boo

st In

dia

– C

LMV

bila

tera

l tra

de &

in-

vest

men

t env

ironm

ent.

89

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

Sect

ors o

f prio

rity

for

O-F

DI

Scop

e fo

r est

ablis

hmen

t of

man

ufac

turin

g un

its

in V

ietn

am fo

r val

ue

adde

d le

athe

r pro

duct

s an

d fo

otw

ear.

Infr

astr

uctu

re, O

il, M

inin

g,

Phar

mac

eutic

als,

Text

ileA

t pre

sent

CLM

V c

ount

ries

ar

e em

phas

izin

g in

fras

truc

-tu

re d

evel

opm

ent.

Man

y of

our

maj

or c

onst

ruct

ion

com

pani

es c

an e

xplo

re th

is

oppo

rtun

ity.

Indi

an p

ower

com

pani

es

also

can

exp

lore

opp

ortu

ni-

ties i

n th

e C

LMV

cou

ntri

es

as th

e co

untr

ies a

re in

a

proc

ess o

f upg

radi

ng th

eir

exis

ting

pow

er g

ener

atio

n an

d tr

ansm

issi

on sy

stem

. In

dia’

s Tat

a Po

wer

Com

pa-

ny h

as w

on a

uS$

1.8

bill

ion

cont

ract

to b

uild

coa

l-fire

d th

erm

al p

ower

pla

nts i

n so

uthe

rnV

ietN

am.

Mya

nmar

is g

ivin

g im

por-

tanc

e to

enh

ance

its t

rans

-po

rt in

fra

and

offe

rs in

vest

-m

ent o

ppor

tuni

ty fo

r Ind

ian

auto

com

pani

es. T

ata

Mo-

tors

had

sign

ed a

turn

key

cont

ract

with

the

Mya

nmar

A

utom

obile

& D

iese

l Ind

us-

trie

s Lim

ited

(MA

DI),

an

ente

rpri

se u

nder

the

Gov

t. of

Mya

nmar

’s M

inis

try

of

Indu

stry

, for

setti

ng u

p a

heav

y tr

uck

asse

mbl

y pl

ant,

at M

agw

e, in

cen

tral

My-

anm

ar, f

unde

d by

a u

S$ 2

0 m

illio

n Li

ne o

f Cre

dit f

rom

th

e G

over

nmen

t of I

ndia

. Ta

ta M

otor

s alo

ng w

ith

its p

artn

er A

pex

Gre

ates

t In

dust

rial

Co.

Ltd

. (A

GI)

has r

ecen

tly la

unch

ed it

s fir

st fu

lly in

tegr

ated

3-S

C

omm

erci

al V

ehic

le D

eale

r-sh

ip in

yan

gon,

Mya

nmar

. M

yanm

ar is

hig

hly

depe

nd-

ent o

n tw

o-w

heel

ers,

ac-

coun

ting

for m

ore

than

80

per c

ent o

f the

mar

ket w

hile

pa

ssen

ger c

ars r

epre

sent

11

per

cen

t. M

eanw

hile

, tr

ucks

and

bus

es o

nly

mak

e up

3 p

er c

ent a

nd 1

per

ce

nt re

spec

tivel

y. T

here

is

a ri

sing

dem

and

of c

ars i

n M

yanm

ar. I

ndia

n ca

r man

u-fa

ctur

ers c

an e

xplo

re th

is

oppo

rtun

ity.

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

90

How

to

inte

grat

e th

e SM

Ein

volv

e-m

ent

in

RVC

s

Link

ing

SMEs

with

lar

ge

com

pani

es l

ocal

ly an

d th

e la

tter

gets

enga

ged

in O

-FD

I

Mya

nmar

is k

een

to w

ork

tow

ards

dev

elop

men

t of i

ts

own

SMEs

. Abo

ut 9

9.4%

of

reg

iste

red

ente

rpris

es

in M

yanm

ar a

re S

MEs

and

abou

t 88%

of t

hese

are

in

non-

form

al se

ctor

s. SM

Es

in M

yanm

ar a

re u

nabl

e to

wor

k w

ith fu

ll po

tent

ial

owin

g to

fina

ncia

l, sk

illed

la

bour

and

tech

nolo

gy

cons

trai

nts.

Regi

onal

In-

tegr

atio

n w

ill ce

rtai

nly

be o

f int

eres

t to

SMEs

in

Mya

nmar

as w

ell a

s res

t of

C

LMV

. Ind

ian

SMEs

may

be

link

ed b

y fo

rmin

g cl

us-

ters

/con

sort

ium

s at

SEZs

be

ing

deve

lope

d in

Mya

n-m

ar a

s lar

ge in

vest

men

ts

are

likel

y to

be

base

d in

th

ese

loca

tions

. Ser

vice

se

ctor

rela

ted

SMEs

can

be

enga

ged

thro

ugh

offs

hore

as

sign

men

ts a

s wel

l.

Link

ing

SMEs

with

M

NC

s in

CLM

VW

este

rn co

untr

ies a

nd

othe

r ASE

AN

coun

trie

s su

ch a

s Jap

an a

nd K

orea

ar

e inv

estin

g in

Mya

nmar

an

d ot

her

CLM

V co

untr

ies

in s

ecto

rs o

f int

eres

t to

Indi

a. T

his m

ay b

e se

en

as a

n op

port

unity

for

In-

dian

SM

Es to

conn

ect

with

M

NC

s. H

owev

er a

stu

dy

on su

ch p

oten

tial

inve

stor

s al

tern

ativ

ely

a he

lp d

esk

at

Indi

a H

igh

Com

mis

sion

w

ill h

elp

SMEs

to fi

nd

pote

ntia

l par

tner

s.

Link

ing

SMEs

on

a st

and-

alon

e ba

sis w

ith

thei

r co

unte

rpar

t s i

n C

LMV

Regi

onal

Inte

grat

ion

is t

he

need

of t

he h

our f

or S

MEs

to

dev

elop

and

to t

ake

adva

ntag

e of

inte

rnat

iona

l bu

sine

ss o

ppor

tuni

ties.

Mya

nmar

SM

Es w

ill ce

r-ta

inly

gai

n fr

om In

dian

SM

Es s

tren

gth

of te

chno

l-og

y an

d sk

illed

man

pow

er.

Onc

e ag

ain

we

reco

mm

end

a st

udy

or a

hel

p de

sk to

in

itiat

e su

ch re

gion

al in

te-

grat

ion.

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

91

Feas

ibil-

ity o

f tim

e fr

ame

Tim

e fra

me f

or l

aunc

h-in

g th

e ove

rall

stra

tegy

to

war

ds C

LMV

with

spe-

cial

emph

asis

on

RVC

s en

com

pass

ing

trad

e in

good

s, tr

ade i

n se

rvic

es

and

O-F

DI

: ON

E yE

AR.

Ti

me

Fram

e fo

r an

In-

terim

dra

ft St

rate

gy:

SIX

MO

NTH

S

Tran

spor

t an

d C

on-

nect

ivity

I. A

sian

Hig

hway

si.

2 A

sian

Hig

hway

s, vi

z., A

H1

(from

Ja-

pan

to th

e bo

rder

of

Bang

lade

sh) a

nd th

e A

H2

(from

Indo

nesi

a to

Iran

) are

pas

sing

th

roug

h In

dia.

AH

1 co

nnec

ts In

dia

with

Pa

kist

an,

Bang

lade

sh a

nd M

y-an

mar

. Ind

ia h

as p

ar-

ticip

ated

act

ivel

y in

th

e A

sian

Hig

hway

s pr

ogra

mm

e si

nce

its in

cept

ion

and

the

stan

dard

s of N

atio

nal

Hig

hway

s por

tions

of

Asi

an H

ighw

ays i

n In

dia

are

gene

rally

at

leas

t to

the

pres

crib

ed

min

imum

stan

dard

s of

the

Asi

an H

igh-

way

s.ii.

Out

of 1

1,69

0 km

A

sian

Hig

hway

rout

es

in In

dia,

abo

ut 6

,901

km

ha

s bee

n de

velo

ped

to

4-la

ne st

anda

rds u

nder

N

atio

nal H

ighw

ay

Dev

elop

men

t Pro

ject

(N

HD

P) a

nd 4

-lani

ng o

f ab

out 2

,254

km

leng

th

is u

nder

impl

emen

ta-

tion

unde

r NH

DP

and

Spec

ial A

ccel

erat

ed

Road

Dev

elop

men

t Pro

-gr

amm

e in

the

Nor

th

East

Sta

tes (

SARD

P-N

E).

II. N

orth

Ea

st –

Mya

nmar

Lan

d C

onne

ctiv

ity:u

nder

A

DB’

sSo

uth

Asi

a Su

b-

Regi

onal

Eco

-no

mic

Coo

pera

-tio

n (S

ASE

C)

Prog

ram

me,

A

DB

is fu

nd-

ing

stre

tche

s in

the

follo

win

g pr

ojec

ts in

In-

dian

side

whi

ch

wou

ld se

rve

as

links

for c

onne

ct-

ing

ASE

AN

mem

ber

coun

trie

s in

prox

imity

to

Nor

th-E

ast o

f In

dia

thro

ugh

Mya

nmar

and

St

reng

then

Indi

a’s

enga

gem

ent

with

thes

e co

untr

ies:

a) A

H-2

(Pan

i-ta

nki-N

axal

bari-

Shiv

man

dir-

Fulb

ari)

for 4

8.7

km le

ngth

.b)

AH

-48

(Jaig

aon-

Has

i-m

ara-

Telip

ara-

Mai

ngur

i-Cha

n-gr

aban

dha)

for

125.

6 km

leng

th.

c) Im

phal

-Mor

eh

(Indi

a-M

yanm

ar

Bord

er) –

126

km

; an

dd)

Brid

ge o

n M

echi

Riv

er

(Indi

a-N

epal

Bor

-de

r) –

0.6

km

.

III. B

us S

ervi

ces

with

Mya

nmar

: D

iscu

ssio

ns fo

r st

artin

g a

cros

s bo

rder

bus

ser-

vice

bet

wee

n Im

phal

and

Man

-da

lay

(Mya

nmar

) is

und

erw

ay.

The

bus s

ervi

ce a

gree

-m

ent h

as re

cent

ly

been

initi

aled

in

Mya

nmar

by

the

offic

ers o

f the

tw

o co

untr

ies.

Pr

otoc

ol o

f the

bu

s ser

vice

is

bein

g fin

aliz

ed

and

ther

eafte

r the

ag

reem

ent w

ill b

e si

gned

.

Poor

conn

ectiv

ity an

d In

fras

truc

ture

are m

ajor

hu

rdle

s in

Mya

nmar

Tabl

e A.8

: con

tinue

d...

Tabl

e A.8

: con

tinue

d...

92

Oth

er is

-su

esC

ambo

dia

and

Vie

tnam

ar

e maj

or e

xpor

ters

of

valu

e add

ed l

eath

er

prod

ucts

and

foot

wea

r an

d ar

e als

o co

mpe

titor

s fo

r In

dia.

yet

Sour

ce: V

arie

d So

urce

s

Tabl

e A.8

: con

tinue

d...

93

uS$ Million

Products Category

HS Code at 6 digit

India's Per centage share of exports to CLMV wrt World

India's exports share to CLMV

imports

ITC (HS) Code at 6 Digit % share in 2013 Value in 2013

Iron and Steel and Products 720810 0.35 0.97Iron and Steel and Products 720839 0.15 0.05Iron and Steel and Products 730820 0.12 0.36Iron and Steel and Products 720918 0.13 0.17Industrial Machinery 841990 0.17 0.19Industrial Machinery 842139 0.13 0.13Iron and Steel and Products 720827 0.11 0.17Miscellaneous- railway transport 860691 1.00 1.00Miscellaneous-Other construction machinery 842952 0.13 0.02Iron and Steel and Products 721914 0.12 0.48Electric Machinery and Equipment 850164 0.19 0.22

Industrial Machinery 843890 0.13 0.30

Iron and Steel and Products 721913 0.12 0.03Miscellaneous- railway transport 860400 0.98 0.80Iron and Steel and Products 720890 0.43 0.31

Electric Machinery and Equipment 853529 0.17 0.17

Source: ITC Trade Database.

Note: The codes are identified based on the following parameters:India’s export to World and India’s export to CLMV are takenIndia’s Exports to CLMV as on 2013 > 5 million- 38 codes (on HS 6 digit level) are takenIndia’s Per centage share of exports to CLMV w.r.t World (Only those share > 10% are taken)-further filtering to 16 codes.CLMV IIT Index for the respective codes is calculated.

Prioritisation of areas in identified Sectors for trade:The table below depicts the potential engineering product category, where India’s export to CLMV is greater than uS$5 million (as in 2013), and India’s share of exports to CLMV with respect to the World is greater than 10 per cent.

Among all engineering products at HS 6 digit level, the codes mentioned below are India’s potential products to CLMV.

It is also to be noted that among these 16 HS 6 digit engineering items, HS codes: 730820,720918 and 850164 are the foremost items where CLMV ‘s IIT index is close to 1 .i.e there exists intra industry trade, highlighting CLMV’s export and import demand.

India’s Strategy for CLMV

Case 1: Myanmar: Highlighting the top 20 items (among the 100 items identified -as given in the excel sheet), where India can penetrate

Codes Product label India's share of exports to Myanmar

870322 Automobiles w reciprocatg piston engine displacg > 1000 cc to 1500 cc 0.00870899 Motor vehicle parts nes 0.00871120 Motorcycles with reciprocatg piston engine displacg > 50 cc to 250 cc 0.00880330 Aircraft parts nes 0.00721049 Flat rolled prod,i/nas,plated or coated with zinc,>/=600mm wide, nes 0.04870190 Wheeled tractors nes 0.02848180 Taps, cocks, valves and similar appliances, nes 0.00890590 Floating docks and vessels which perform special functions 0.00870323 Automobiles w reciprocatg piston engine displacg > 1500 cc to 3000 cc 0.00732690 Articles, iron or steel, nes 0.00840999 Parts for diesel and semi-diesel engines 0.00890690 Vessels, incl. lifeboats (excl. warships, rowing boats and other vesse 0.00890510 Dredgers 0.00841480 Air or gas compressors, hoods 0.00730890 Structures&parts of structures,i/s (ex prefab bldgs of headg no.9406) 0.01721041 Flat rolled prod,i/nas,pltd or ctd w zinc,corrugated,>/=600m wide,nes 0.00870840 Tansmissions for motor vehicles 0.00731815 Bolts o screws nes,with o without their nuts o washers,iron o steel 0.00721070 Flat rolled prod,i/nas,painted,varnished or plast coated,>/=600mm wide 0.00843149 Parts of cranes,work-trucks,shovels,and other construction machinery 0.03


Note: The above codes signifies that there exists almost negligible trade between India and Myanmar, though India has potential to export abroad and Myanmar has adequate demand to import from the world, yet India’s export share to Myanmar is not even greater than 5 per cent.

The market size for India export potential and Myanmar’s import demand is taken to be over and above uS$ 10 million.

Identification of Prioritized areas for trade among all CLMV countries separately:

For every country under the CLMV region, we have identified the top potential engineering items at HS 6 digit level.

ANNEXuRES

95


Case 2: Vietnam: Highlighting the top 20 items (among the 100 items identified) where India can penetrate

Codes Product label India's share of exports to Vietnam

870322 Automobiles w reciprocatg piston engine displacg > 1000 cc to 1500 cc 0.00870899 Motor vehicle parts nes 0.00740311 Copper cathodes and sections of cathodes unwrought 0.01880240 Aircraft nes of an unladen weight exceeding 15,000 kg 0.00871120 Motorcycles with reciprocatg piston engine displacg > 50 cc to 250 cc 0.00870321 Automobiles w reciprocatg piston engine displacg not more than 1000 cc 0.00880330 Aircraft parts nes 0.00721049 Flat rolled prod,i/nas,plated or coated with zinc,>/=600mm wide, nes 0.00890400 Tugs and pusher craft 0.00732599 Articles of iron or steel, cast, nes 0.00870190 Wheeled tractors nes 0.00848180 Taps, cocks, valves and similar appliances, nes 0.01720810 Hot rolled iron/steel, coils, >600mm, relief pattern 0.35760110 Aluminium unwrought, not alloyed 0.05730511 Pipe,line,i/s,longitudinally subm arc wld,int/ext cc sect,dia >406.4mm 0.00890590 Floating docks and vessels which perform special functions 0.00870323 Automobiles w reciprocatg piston engine displacg > 1500 cc to 3000 cc 0.00732690 Articles, iron or steel, nes 0.00840999 Parts for diesel and semi-diesel engines 0.00840710 Aircraft engines, spark-ignition reciprocating or rotary type 0.00


Note: Other than HS Code: 720810 (Iron and Steel products)The above codes signifies that there exists almost negligible trade between India and Vietnam , where India’s export share to Vietnam is merely positive and not even greater than 5%.

The market size for India export potential and Vietnam’s import demand is taken to be over and above uS$10 million.

96

Case 3: Cambodia: Highlighting the top 20 items (among the 100 items identified), where India can penetrate

Codes Product label India's share of exports to Cambodia

870899 Motor vehicle parts nes 0.00

871120 Motorcycles with reciprocatg piston engine displacg > 50 cc to 250 cc 0.00

721049 Flat rolled prod,i/nas,plated or coated with zinc,>/=600mm wide, nes 0.00870190 Wheeled tractors nes 0.00848180 Taps, cocks, valves and similar appliances, nes 0.00870323 Automobiles w reciprocatg piston engine displacg > 1500 cc to 3000 cc 0.00732690 Articles, iron or steel, nes 0.00890190 Cargo vessels nes&oth vessels for the transport of both persons&goods 0.00730890 Structures&parts of structures,i/s (ex prefab bldgs of headg no.9406) 0.00731815 Bolts o screws nes,with o without their nuts o washers,iron o steel 0.00761699 Articles of aluminium, nes 0.00721070 Flat rolled prod,i/nas,painted,varnished or plast coated,>/=600mm wide 0.00870421 Diesel powered trucks with a GVW not exceeding five tonnes 0.00850300 Parts of electric motors,generators,generatg sets & rotary converters 0.00840890 Engines, diesel nes 0.00841370 Centrifugal pumps nes 0.00760612 Plate,sheet or strip,aluminium alloy,rect or sq,exceeding 0.2mm thick 0.00870422 Diesel powerd trucks w a GVW exc five tonnes but not exc twenty tonnes 0.00870410 Dump trucks designed for off-highway use 0.00850423 Liq dielectric transf havg a power handlg capacity exceedg 10,000 KVA 0.00


APPENDIX

97


CLMV Potential Demand

CLMV Cumulative Import s(2010 to 2012

(value in uS$ Million)

Electrical Machinery and

Equipments

Iron and Steel Products of Iron and Steel

Auto Components

parts)

Cambodia 416.04 238.32 228.76 25.03Laos** 456.15 548.80 428.49 129.00Myanmar** 1219.76 1473.79 2897.79 272.49Vietnam 13892.07 22043.80 6504.74 3196.05CLMV Total Import from World 15984.02 24304.71 10059.77 3622.57CLMV Import from India (% share w.r.t World)

214.60(1.34%)

217.51(0.89%)

79.61(0.79%)

7.44(0.21%)

CLMV Import from ASEAN (% share w.r.t World)

2391.00(14.96%)

1505.94(6.20%)

1028.58(10.22%)

971.61(26.82%)

**Myanmar’s import figures from India as well as from ASEAN are available only for 2010.Source: ITC Trade Database.

Case 4: Laos: Highlighting the top 20 items (among the 100 items identified) where India can penetrate

Codes Product label India's share of exports to Laos

870322 Automobiles w reciprocatg piston engine displacg > 1000 cc to 1500 cc 0.01870899 Motor vehicle parts nes 0.00871120 Motorcycles with reciprocatg piston engine displacg > 50 cc to 250 cc 0.00732599 Articles of iron or steel, cast, nes 0.00870190 Wheeled tractors nes 0.00848180 Taps, cocks, valves and similar appliances, nes 0.00870323 Automobiles w reciprocatg piston engine displacg > 1500 cc to 3000 cc 0.00732690 Articles, iron or steel, nes 0.00730890 Structures&parts of structures,i/s (ex prefab bldgs of headg no.9406) 0.00843149 Parts of cranes,work-trucks,shovels,and other construction machinery 0.00870421 Diesel powered trucks with a GVW not exceeding five tonnes 0.00850300 Parts of electric motors,generators,generatg sets & rotary converters 0.00730820 Towers and lattice masts, iron or steel 0.02840890 Engines, diesel nes 0.00854460 Electric conductors, for a voltage exceeding 1,000 V, nes 0.00841370 Centrifugal pumps nes 0.00843143 Parts of boring or sinking machinery, whether or not self-propelled 0.00870422 Diesel powerd trucks w a GVW exc five tonnes but not exc twenty tonnes 0.00880230 Aircraft nes of an unladen weight > 2,000 kg but not exceedg 15,000 kg 0.00870410 Dump trucks designed for off-highway use 0.00


Note: The above two cases for Cambodia and Laos highlights very few potential products of market size over and above US$ 10 million under India’s potential export matrix and Cambodia/Laos import matrix.

It is also to be noted that from the CLMV Potential Demand Matrix as given below, the Product Categories like Electrical Machinery and Iron and Steel have captured atleast 1% of their demand from India, where as the Auto components sector is lagging behind enormously.

98

1. Timber from Myanmar- A Special Case Study

Immediate ProvocationMyanmar’s Ministry of Environmental Conservation and Forestry implemented a ban on export of raw timber effective from 1 April 2014. This move was undertaken in keeping with Myanmar’s Forest Policy (1995) which focuses on addressing environmental protection and management, reforestation, forest industry and trade, forest research, institutional strengthening, and people’s participation and public awareness (Forest Legality Alliance).1 As per the official figures from the Ministry, almost three quarters of the timber trade has been illegal amounting to almost $6 billion. In an effort to conserve the country’s natural timber resources and layoff the illegal timber trade, the country has finally imposed a blanket ban on export of raw logs (Myanmar Times, 2014).

Implication of Regulation

Rapidly growing demand and paucity of domestic timber resources have made India one of the largest hardwood log importer in the world. up till now, India’s main source of teak imports was Myanmar which is the fifth largest tropical wood producer and exporter in Asia-Pacific region (Investor.com, 2014). However, the ban on exports of raw tree logs is expected to adversely affect the Indian wood industry, more so since India’s increasing need for imported wood fiber is expected to sustain for several decades.

Statistics show that the import from the Myanmar is about the 30 per cent of the total import of the logs covered under the Chapter No. 44 of HSN. Since Myanmar forms the part

of the Indian sub-continents, the climate and weather conditions are quite identical and hence the logs and timbers grown in Myanmar are quite suitable to Indian conditions. With the abrupt ban on the export of the logs from Myanmar, the Indian wood industry is in doldrums with the major impact being on Small and Medium Enterprises (SMEs). Even as the large corporate firms are encouraged to invest and build wood processing factories in Myanmar as an effect of this ban leading to a boost in exports of processed teak in the form of ply woods and veneers to India, the SME companies are finding it difficult to sustain their factories in the absence of the raw materials. Small saw mills and veneers and plywood units are on the verge of closure. Since Indian forests are still not open for harvest, it adds to the acute shortage of raw materials leading to closure of many SMEs, small joineries and carpentries which are directly dependent on the wood.

Further, these SMEs contribute a lot to the Indian exports as traditionally India has been an exporter of wood and wood product. The high skilled artisans and comparatively cheap and skilled labour have created the market for the Indian wood products world over. India caters extensively to markets such as the uS and Europe by exporting high quality of wood products. In fact, 40 per cent of the Indian wood exports go to Eu markets. These exports are directly affected with the ban of the logs export from Myanmar.

In addition, opening up of the border trade with Myanmar at Tamu and Moreh border point, Manipur is of crucial importance. In the past when this business was in operation, the timbers used to move from Manipur till Ahmadabad in Western India leading to generation of employment opportunities in

Annexure VI

Private Sector’s Inputs

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the North Eastern states. But this too has been suddenly closed causing closure of several plywood units in NE states.

The Way Forward

Import from Malaysia

• To combat the effect of the ban, India can increase its wood imports from Malaysia although Malaysia does not offer teak and Indian importers will have to make do with other kinds of wood.

Import from Laos and Vietnam• Another alternative would be to import

wood products from Vietnam and Laos in the CLMV region. Given that India heavily relies on imports to satisfy the country’s growing appetite for wood products and Vietnam and Laos are both net exporters catering to all big markets such as uS, Eu, China, etc. but not to India, highlights the untapped potential that exists for linking Vietnam and Laos with India. These economies other than having location proximity can make use of the skilled labour and modern technology that India has to offer in exchange for supplying it high quality wood products and timber.

Substitute Wood with Bamboo• In order to quench the demand growth

for wood, the strategies being explored suggest that relying on imports alone may not be the right recourse for India. Substituting bamboo with timber seems to be the most viable and green solution especially for the long run. From being able to replace wood in construction business to providing nutrition in the form of food, there are over 1500 uses of bamboo. Everything from its leaves to its root is of value and can be used in various forms. For instance, furniture; fuel-wood, matchsticks, agarbattis, toothpicks, earthquake-resistant and long-lasting conventional housing and buildings, pulp and paper, particle

board, MDF, handicrafts, bamboo shoots as food, leaves for medicinal uses, decorative and shuttering plywood, various board products such as wafer board, strip board, laminated boards, roofing sheets etc among various other products (National Bamboo Mission)2. With the use of modern industrial techniques, the spectrum of bamboo usage can be expanded in such a manner that it can easily substitute wood. Bamboo is the 21st century eco-friendly alternative to timber and Cambodia, Laos, Vietnam and India are all rich in bamboo supplies.

2. Steel from Vietnam- A Special Case StudyImmediate ProvocationThe Joint Circular No. 44/2013/TTLT-BCT-BKHCN dated 31 December 2013 (taking effect from 01 June 2014) issued by the Ministry of Industry and Trade and the Ministry of Science and Technology, Vietnam provides for management of domestically-produced and imported steel quality. According to it, organisations and individuals, who import steel, have to announce the applying standard (basic standards, national standards of Vietnam, standards of other countries, international standards and regional standards) for goods in the relevant import contract for customs clearance instead of only the origin of products and import contracts as done earlier (Vietnam News, 2014).3

Implication of Regulation India is currently the world’s fourth largest producer of crude steel after China, Japan and uS. Of the total exports of India to Vietnam in 2013-14, uS$5,441.94 million, iron and steel were the third largest exported commodities at uS$362.87 million.4 Indian stainless steel industry has been exporting against a tariff disadvantage as Vietnam enjoys a special status giving it a longer period to integrate onto ASEAN.

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Apart from this, iron and steel is also among the top 10 imported commodities by Vietnam. This is primarily because there are Limited mills in Vietnam and major proportion of demand is met through imports and that stainless steel industry in Vietnam not fully integrated and completely dependent on imports for their HR coils. Vietnam being the largest growing nation in South-east Asia, it is a key market for stainless steel flat products. The total share of iron and steel exports from India to Vietnam is continuously rising from 1.02 per cent in 2010-11 to 6.67 per cent in 2013-14.5 The new regulations on import of steel that act as a non-tariff barrier is likely to create problems such as:

• Quality confirmation checks-at source or evaluation as per batch of goods

• For batch tests there have been no guidelines from government on methods to draw and test samples from shipment and for Inspection at source. The number of mills that need inspection is very high and administrative problems are likely to cause delays.

• under the new regulation, enterprises have to register their product quality examined by management agencies. This work alone can take three to 20 days on average as only four institutions

have been authorised by the Ministry of Industry and Trade to examine quality. More complicated procedures will push up capital costs, slow down deliveries and therefore, weaken enterprises’ competitiveness.6

The Way ForwardThe use of equal Indian standards for testing stainless steel manufactured in India can be adopted and also request acceptance of these test reports by the authorities in Vietnam. Also, Indian agencies may be authorised to conduct testing and certification of Indian manufacturer importer in India as per standards prescribed and the result be accepted under the notification.

Endnotes1. http://risk.forestlegality.org/countries/652/laws

2. http://nbm.nic.in/grow_bamboo.html

3. http://vietnamnews.vn/economy/257048/secondary-steel-importers-in-trouble.html

4. Data extracted from Ministry of Commerce and Industry, Government of India, 2013-14

5. Data extracted from Ministry of Commerce and Industry, Government of India, 2013-14

6. http://english.vietnamnet.vn/fms/business/112636/new-steel-import-decree-not-helping-domestic-steel-manufacturers.html

ANNEXuRES

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About the Study

About the Author

Dr. Ram Upendra Das is Professor at Research and Information System

for Developing Countries (RIS), New Delhi.

Department of Commerce

Ministry of Commerce and Industry

Government of India

Historically, India and Cambodia, Laos, Myanmar and Vietnam (CLMV) region have had civilizational, cultural and economic relations since ancient times. People, goods, capital and ideas have travelled between India and the CLMV countries over a long period. However, these linkages today are characterized by untapped potential. It is noticed that while there is a developmental divide between the CLMV region and the rest of the ASEAN region, India's Look East or Act East policy has also not focused adequately enough in terms of India-CLMV economic integration.

The ASEAN region as a whole is characterized by the presence of strong production networks and Regional Value Chains (RVCs) both within and outside the ASEAN. On the other hand, India is almost left out of any signicant regional value chains in her neighbourhood. The regional value chains have somewhat bypassed the CLMV region too when compared to the rest of the ASEAN.

Considering that RVCs have emerged as important vehicles for regional economic integration, they need to be facilitated with adequate policy responses so as to achieve developmental imperatives of employment generation, poverty alleviation and improving quality of life.

The study in this context, by way of a major contribution to the subject, provides analytical and empirical basis for India's economic integration with the CLMV region and suggests certain policy steps that could harness the vast commercial and developmental potential that this relationship offers.

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