Pratim Ranjan Bose
(India’s rising trade and
investment potential in Myanmar notwithstanding, the land border trade is
languishing at negligible levels. Considering its peaceful status can Mizoram
give the much needed fillip to the border trade?
With a population of 20,000, the district town of Champhai has a disproportionately large and thriving marketplace dotted with stores selling a wide range of household appliances, electrical wares, medicines, smart-phones, footwear and others.
Located a mere 28 km from the border gates at Zokhawthar; Champhai is one of the largest trading centres after the state capital Aizwal, and caters to the needs of the hilly North-Eastern state of Mizoram and the bordering Chin State in Myanmar.
But the disturbing fact is that the hustle and bustle are almost entirely driven by illegal or informal trade.
There are over 50 registered importers at Champhai, but only a few are active. Official trade is limited to the import of a single consignment of betel nut a week, and some occasional parcels of Burmese energy drink. There is no trace of exports from India.
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“There are nearly 15 major informal trading routes along the 510 km[1] unfenced border shared by Mizoram with Myanmar. Champhai is the biggest draw of them all,” says Export Commissioner of Mizoram C Lal Zirliana.
In short that is the problem and prospect of Zokhawthar-Rih (Myanmar) border that has long been identified as one of the most promising trade routes, after Moreh in Manipur that presently controls 99 percent of the $ 56 million[2] (2014-15) land trade with Myanmar.
There is surely a huge appetite for cross-border trade through Zokhawthar. But the challenge is to expand the scope of formal trade.
Open border and strategic advantage
A visit to the border gates presents a more vivid perspective of issues involved.
The 50 metre long Bailey bridge on the river Tiau – that marks the international border - is too narrow and weak, to allow movement of cargo-laden trucks. Goods are to be moved across the border, by head loads. Obviously that is not the prescribed infrastructure for the cross-border movement of bulk cargo.
The scene is reverse when it comes to the movement of people and informal trade. Excepting the names of two nations written on the archways on either side of the bridge, it’s an open border managed by local police.
There are some Assam Rifles Jawans standing guard at the Indian gate but more as onlookers. Mizoram remaining peaceful since 1986, Delhi maintains a skeletal presence of armed forces in this hilly State, when compared to a ‘disturbed’ Manipur.
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| Champhai town, in Mizoram, India |
Two years ago, there was a proposal to strengthen this border by deploying Border Security Forces (BSF). But it is yet to be implemented. Many in the know say the proposal was sent to the cold storage to appease ‘local sentiments’.
At the Indian side of the gate, two State police persons are issuing entry passes - a small piece of paper of the size of bus tickets - to ‘visitors’ from Myanmar. A similar procedure is followed on the other end of the Bridge at Rih in Myanmar.
As per local rule, people of either country are free to travel 16 m inside the foreign territories between 5 am to 5 pm without any formalities. Officially the limit has been reduced from the past. But there is every possibility that these rules are observed more in the breach, thanks to the social bonds between people and the limited border vigil.
Champhai banks on buyers from across the border. Myanmarese students attend Indian schools. And, senior State officials say there are at least 30,000 Burmese Chins in the State capital of Aizwal, offering cheap labour to relatively wealthy Mizos who refuse to label them as illegal immigrants.
Chins are a linguistic relation of Mizos in Mizoram and, the mainstay of the population in Chin State that is now leaving its disturbed past behind for peace and prosperity.
The movement is not one sided. Ask any Mizo, chances are he has travelled deep inside the foreign territories, if not for jobs – that is seldom available in a less developed Myanmar, especially the Western part of it – then for business or simply to socialise. Many or most of them have family relations in Myanmar.
Peaceful atmosphere and people-to-people contact are two major attributes to promote cross-border trade. Add locational advantage to it and you have a perfect recipe for thriving trade.
Zokhawthar is barely 50-60 km from two prominent towns Falam and Tiddim (also known as Tedim) in the Chin State. Travel a little further across the Magway division and, there is Kalemyo at the Southern end of Sagaing division of Myanmar.
Located barely 120-30 km from the Indian border, Kalemyo[3] is the largest consumption centre, complete with an airport and some industrial base, in this part of Myanmar. It is also the gateway to the more prosperous central Myanmar region that is now attracting FDIs from across the world.
The Indian government is keen to capitalise on the strategic advantages of Zokhawthar, but the effort has apparently hit a few logistical hurdles. The sloth decision-making may also be a reason for the lack of progress on this front.
The Indian plan to promote trade through Zokhawthar and the infrastructure gap
In its effort to enhance trade and investment opportunities in Myanmar, and most importantly to reach out to a more prosperous Vietnam market (Vietnam attracted nearly 68 per cent of India’s US$ 699.8 million investments[4] between April 1996 and March 2013 in the CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) region); India already built a highway from Moreh-Tamu border to Kalemyo.
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| Open border with Myanmar at Zokhawthar, India |
Connectivity between Zokhawthar and Kalemyo should, therefore, give the much-needed fillip to India’s trade ambitions in the region.
But there are infrastructure bottlenecks to reach this goal. According to a press communique issued by the Mizoram Trade and Commerce Department in March 2015, “the road from Zokhawthar-Rih border to Kalemyo via Tiddim-Falam is a bad grade single lane Kuchha road” unsuitable for bulk movement of goods.
In a recent move, the India government entered an agreement with Myanmar to upgrade this segment into a single-lane highway. According to the State government “a detailed project report entailing an investment of Rs 711.47 crore was also approved by Delhi” but the construction is yet to start.
Apart from being shorter in length than the Tamu-Kalemyo segment; the proposed Rih- Kalemyo road will also bypass the troubled northern part of the Sagaing division.
A similar (if not bigger) advantage is anticipated in the Indian side too. The Moreh-Tamu border is connected to Guwahati (for a further journey into the mainland India) by 587 km NH-39 that passes through the insurgency affected areas of Manipur and Nagaland.
According to K Lalhminthanga President of Mizoram Chamber of Industries, nearly 20-21 active insurgent groups of Nagaland (17) and Manipur (3 to 4) collect a total of Rs 50,000 extortion money from every import or export consignment that passes through that route.
In comparison, the journey from Zokhawthar to Guwahati is safer, as it enters Assam by passing volatile Manipur and Nagaland. The problem, if any, once again lies with infrastructure.
The 28 km road from Zokhawthar to Champhai is nothing better than a village road, unsuitable for movement of cargo. India is now upgrading it into a double-lane highway. The project is midway through implementation.
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| Champhai-Zokhawthar road is being upgraded |
The 194 km road from Champhai that meets NH-54 in Aizawl is in good shape but too narrow and has too many sharp bends for movement of large multi-axle carriers. The road is currently accessed by two-axle trucks.
According to Zirilana, there is a proposal for widening the Champhai-Aizwal road into a two-lane highway. But neither the State nor India government has taken up the project so far.
Prolonged delay to set up border trade infrastructure: A reason for thriving informal trade?
If the Mizoram government is to be believed, there was prolonged delay on the part of Government of India in setting up basic infrastructure to promote formal trade through Zokhawthar and other informal trade routes through the State.
According to a Mizoram Trade and Commerce department[5] publication, New Delhi noticed the strategic advantage of Zokhawthar way back in 1994, while entering the Border Trade Agreement with Myanmar. The decision to set up a Land Customs Station (LCS) at Zokhawthar was firmed up sometime in the last decade. The LCS was “ready to be inaugurated” in 2011. However for reasons better known to the State and Central authorities, the LCS was finally inaugurated in March 2015.
That doesn’t mean Zokhawthar LCS is fully operational. Most of the LCS officials operate from Champhai, as a parallel project to build Staff quarters near the gate is incomplete.
The proposed staff accommodation facility was sponsored through the recently scrapped ASIDE scheme (Assistance to States for Development of Export Infrastructure and Allied Activities). According to Zirilana, the project now stands abandoned due to lack of funding.
Also abandoned are projects to develop border trade infrastructures through ASIDE scheme in at least three other locations in Mizoram.
There are other issues too and some of them are highly confusing, if not contradictory in nature.
The Union ministry of Development of North Eastern region claims that normal trade is allowed[6] through Zokhawthar. However, according to LCS superintendent V Hangzo, only ‘Border Trade’ is allowed through this gate, thereby restricting import-export to 62 items[7] (at 5 per cent duty), to which traders have limited interest.
David Thangluia, the owner of Champhai based Zoland Pali Traders Pvt Ltd, feels even the designated Border Trade is difficult under the existing set of rules that caps the maximum value of an import consignment at $20,000 or (approximately Rs 12.5 lakh at current exchange). “The limit is a big hurdle for traders, as one truckload of areca nut usually costs $ 5500 (approximately Rs 35 lakh) or beyond,” he says.
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| At Rih market in Myanmar. |
So how do traders negotiate the hurdle? Simple there are routes to cross the border avoiding the LCS.
Indian Ambassador to Vietnam, Gautam Mukhopadhaya confirms hurdles in promoting land border trade with Myanmar. “Measures are under way to normalise and upgrade border trade facilities at both Zawkathar and Moreh, but it will take a little time,” he said in a emailed response.
“Trade will pick up once the border trade infrastructure is upgraded to handle normal trade, the road projects that we are engaged in Myanmar are completed in the next 2-3 years, and new infrastructure and investment measures in the North East bear fruit,” Mr Mukhopadhaya said.
How big is the land trade opportunity through Zokhawthar? Informal trade may leave some indication
India has a thriving $ 11 billion trade with CLMV countries as a whole, with balance in India’s favour. The trade with Vietnam is growing by 15-16 percent a year.
In comparison, India-Myanmar trade is stagnating in the range of $ 2 billion for the last couple of years. The balance is in favour of Myanmar due to heavy import[8] ($1.23 billion in 2014-15) of wood and wood products and edibles, especially pulses. From India, man-made fibre, pharmaceuticals and clothing accessories are the top three export[9] ($ 773 million in 2014-15) items.
When compared to Myanmar’s total trade of $ 27 billion[10] - including an import of $ 16.34 billion - India has failed to capitalise on its advantages so far.
According to Exim Bank, India has a respectable share in only a few major items imported by Myanmar. These include pharmaceutical products (37 percent share of total imports), cosmetics (6.6 percent), rubber and articles (6.2 percent), articles of iron or steel (5.6 percent), cotton (5.6 percent), and iron and steel (5.5 percent).
Officially, with a mere 0.02 per cent share in total trade, the land-border trade has a little contribution in India’s trade ambitions in the region. But a look at thriving informal trade through Mizoram, may force you to to change that opinion.
No one dares to guess the size of the informal trade. There is not much information with the Union Commerce Ministry either. But check any apparel, footwear or cigarette shops – most of the offerings are from Myanmar. When compared to Indian products, they are significantly cheaper.
A pack of 20 king size Chinese ‘FarStar’ cigarettes is available at Rs 40. A pack of 20 Winbody is Rs 25. In comparison, a pack of 10 regular India made Flake cigarettes cost Rs 50.
Consumer durables manufactured in Far Eastern countries like South Korea, China, and Malayasia are available freely. Be it an innocent tube light, spectacle frames or spares for the outdated Maruti-800 – the touch of Myanmar is all pervasive in the everyday life of a Mizo.
The ‘exports’ from India to Myanmar are no less impressive. Indian medicines, fertiliser (mostly urea), motorcycles, zarda a form of chewing tobacco), baby food, LPG, smartphones, mosquito repellents, pesticides, cycle parts, and solar gears fetch huge margins in Myanmar.
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| On the way from Rih market to Rih Dil. Majority of roads on this side of Myanmar are Kuchha |
The 14.2 kg LPG cylinders marketed in Indian at around Rs 460 (with subsidy) is reportedly lapped up by the Burmese at Rs 4000. One paracetamol tablet priced Rs 1.5 or less in India fetches Rs 5 at Tiddim.
According to Lalhinthanga, at least two truckloads of medicines (mostly analgesics, skin ointments and antibiotics) and five truckloads of fertiliser reach Myanmar every week, through Champhai (bypassing the Zokhawthar LCS). Lalminthanga is one of the earliest Mizo entrepreneurs with family links in Myanmar.
Interestingly, while the official India-Myanmar border trade of $56 million (2014-15) is in favour of Myanmar ($39.86 million in Indian imports), Lalminthanga says informal trade is in favour of India due to the export of relatively high-value items. Zirliana, however, feels the trade is evenly shared between the two nations.
But is it possible to ferry such huge volumes of goods across the border? Zirliana has an interesting anecdote to share. Like most of the Mizos he has relations in Myanmar. On a recent visit to Kalemyo, he noticed an India-made JCB earthmover. “The traders drove it through,” he says.
The question is if the border is so porous that trucks (or earthmovers) can ply freely between the nations, what is the incentive for formal trade? One may argue that creation of better road logistics and cost-efficient bulk movement of containerised cargo will throw smugglers out of business. But the argument is not full proof.
According to both Lalhmingthanga and Zirilana; informal trade through Mizoram is on the rise despite poor road logistics on the Myanmar side. A good percentage of the trade that was previously routed through Manipur now prefer Mizoram as a corridor. So much so that, Mizoram now shares approximately 30 percent of the total cross-border trade (including formal and informal), says Lalminthanga.
The bottom line is: Improved road infrastructure and a permissive society may end up widening the scope of informal trade in the region. And, the size of such trade may not be small. The $ 4 billion[11] (BSF estimates) cross-border cattle trade through porous West Bengal border is a case in point.
Economics may hold the key to success
There are debates over the effectiveness of border fencing especially in such hilly and inhospitable areas as in Mizoram, Manipur, Arunachal and Nagaland that shares 1643 km long land boundary with Myanmar.
But there is little doubt that the free movement of people (and goods) has made the region into a borderless territory, often misused for smuggling contraband. The concern has been expressed by both the former UPA and the current NDA[12] government.
Mizoram generally escapes this conversation due to its peaceful status. But it is a common knowledge with the State and Central authorities that lack of border vigil is making it a preferred[13] corridor for the movement of arms and drugs.
The issue has now come to the fore as India is hard pedalling on economic activity through the region. But a corrective measure is not easy to enforce, as there is strong socio-political resistance in Mizoram against strengthening border vigil. And the Indian government is understandably wary of disturbing peace in a fragile region.
Seen from this context, there are concerns that improvement in connectivity may open floodgates to third country imports and diversion of subsidised items, like Urea or LPG, to Myanmar.
Also, the success of formal trade depends on trade openness (measured by Trade-GDP ratio) of both the countries. Myanmar currently ranks the lowest in trade openness in the CLMV region. To optimise land trade potential, Naypyidaw has to make it a win-win for both the countries.
The balance may be struck by economics. Low on industrial activity, Mizoram economy is now largely dependent on huge fund flow from the Centre by virtue of its special tribal status. Nearly 95 percent of the State population of 11 lakh is Scheduled Tribes. Government jobs and contracts are the largest money churners here. Mizo entrepreneurship is mostly limited to shops and establishments.
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| Rih Dil in Myanmar. A popular tourist spot for Mizos from India |
But the economy of largesse is not sustainable. And, Mizoram has started facing the heat. The State is undergoing through financial crunch[14] for nearly a decade or more. To add to the problem, during the three decades of peace the State made rapid progress in education. In the absence of adequate employment opportunity, there is a surge in number of educated unemployed. Lalhmingthanga says the State is staring at a social crisis in five years.
For now the clannish Mizo society may turn the heat on ‘outsiders’ (as they refer non-Mizos). But that will not solve the problem, as most of them are already driven out of the State. Demands for more funds from the Centre are unlikely to be met either, in the strict fiscal management regime that is in force in the country.
The solution, if any, lies in greater economic activity and optimising the tax revenue potential (in the lines of the neighbouring State of Tripura). Mizoram is currently losing huge revenue potential from informal trade. The thriving sale of cheap Chinese cigarettes is a case in point. Cigarettes are generally a major source of tax revenue to the State governments.
There are indications that the realisation has finally dawned on Mizoram State government. In January this year, the State Government withdrew[15] a 17-year-old ban on liquor consumption ignoring opposition from Church. The initiative is yet to bear fruit as cheap foreign liquors are available aplenty, courtesy the informal trade. But the indication is clear: formal trade is emerging as a priority.
The move forward will not be easy. But the lure of money is also not easy to avoid. Probably Mizoram will respond to that and cooperate with the Centre to make formal trade initiatives a success.
***
(Conclusion: The thriving informal trade establishes the potential of Zokhawthar border with Myanmar. But a porous border, may pose a risk to the success of formal trade initiatives. Hopefully, the attraction of maximising the revenue potential will encourage Mizoram to help enhance the scope of formal trade through this land port.)
[1] http://mha.nic.in/hindi/sites/upload_files/mhahindi/files/pdf/BM_MAN-IN-MYAN(E).pdf
[2] http://www.mmtimes.com/index.php/business/15208-indian-gate-closed-for-unusually-long-time.html
[3] https://en.wikipedia.org/wiki/Kalaymyo
[4] “India’s trade and investment relations with Cambodia, Lao PDR, Myanmar, Vietnam: Enhancing economic cooperation” (2013), pg-19, Export-Import Bank of India.
[5] A Bird’s Eye View of Trade and Commerce (2011), pg 19.
[6] http://www.mdoner.gov.in/content/border-trade#e
[7] http://dgft.gov.in/Exim/2000/PN/PN12/pn3012.htm
[8] http://commerce.nic.in/eidb/Icntcom.asp
[9] http://commerce.nic.in/eidb/ecntcom.asp
[10] http://news.xinhuanet.com/english/2015-04/02/c_134119691.htm
[11] “The Great Barrier Grief” Business Line http://www.thehindubusinessline.com/news/the-great-barrier-grief/article4843585.ece
[12] “Myanmar border used for drugs and arms” The Tribune http://www.tribuneindia.com/news/myanmar-border-used-for-drugs-arms-rajnath/105583.html
[13] “Drugs and arms: Mizoram fights an uphill battle” Business Line http://www.thehindubusinessline.com/features/drugs-and-arms-mizoram-fights-an-uphill-battle/article7383679.ece
[14] “Mizoram Government is facing financial crunch” Business Line http://www.thehindubusinessline.com/news/states/mizoram-government-facing-financial-crunch/article4952688.ece
[15] Mizoram lifts 17 year-old ban on liquor sales” live mint http://www.livemint.com/Politics/5lT5IxCjdYPERI84dOHo2L/Mizoram-lifts-17yearold-liquor-ban.html
