By Prabir De
Faced with a major slowdown of India’s trade with Southeast Asia in 2014, the government responded by initiating far-reaching Act East Policy (AEP) aimed at greater economic integration with South, Southeast and East Asian nations. Political rhetoric apart, the AEP has gained a new momentum while acting on the east. Since its inception, the AEP has been pursued in a multi-faceted manner in wide-ranging areas in trade and connectivity.
India’s relations with its eastern neighbourhood have improved far-flung. India’s proactive role in building a common market with neighbouring Bangladesh, Bhutan and Nepal, on one side, and ASEAN (Association of Southeast Asian Nations), on the other, with an ambitious but realistic connectivity programme has been the key focus of the AEP. While the expectation is very high, the progress at the ground is slow but steady.
The North Eastern Region (NER) is surrounded by international borders, serving as India’s gateway to the east. NER’s geographical position, vast land border, rich nature and agro-climatic conditions, access to growing ASEAN market and presence of mineral and agro-horticulture resources largely explain why NER continues to play an important role in the AEP.
As against these strengths, there are weaknesses and threats to be sure, emanating to a large extent from the difficult terrain of the region and lack of quality infrastructure. There are downsides as well. For example, a good number of people in Northeast India go blind every year due to lack of sufficient nutrients in their diet. Many people across the region are deprived of basic healthcare, clean water and sanitation, and affordable energy. People in hills or forests or valleys face huge difficulties in accessing better hospitals in Guwahati or Kolkata or Imphal. Over a million people in NER stand facing floods or landslides every year. The region is also very vulnerable to natural disasters such as earthquakes. In general, ordinary people in NER face poverty, malnutrition and unemployment. Physical infrastructure such as electricity, communication, transportation, and banking and finance are very sporadic and unevenly distributed among urban and rural areas. Amenities are limited in nature, and the lack of economic opportunities encourages migration, particularly that of skilled resources to work and live in better developed and developing parts of India. Question is then in which way we shall drive our AEP to bring prosperity for the common people.
The biggest challenge is that NER suffers from economic isolation due mainly to the partition. The region imports almost every consumer goods from outside of the region. The absence of adequate institutional and physical infrastructure, both national and international, coupled with the insurgency in part have slowed down NER’s development process. This poses one of the greatest constraints to economic growth, nullifying NER’s border advantage. Transport and logistics bottlenecks and border barriers have long been identified as serious constraints to the growth of the NER.
Notwithstanding its strategic location, the NER can be developed as a thriving and essential base for India’s growing economic linkages, not only with Southeast Asia but also with Bangladesh, China, Japan and beyond. NER is the only part of India having the heft to counterbalance China’s Southwest and thus has gained serious attention of many countries across the world.
Assam government has opened a new department called “Act East Department” and set-up a new research centre on Southeast Asia at the Gauhati University. While this is an encouraging development, other Northeastern states except perhaps Tripura and Manipur are yet to initiate ‘big ticket’ measures to strengthen their Act East connect. If connectivity-driven AEP has to succeed, Northeast states have to improve the governance system along with strengthening the internal connectivity.
It is not to deny that more business dimensions have been gradually added in the connectivity-driven integration through AEP. Assam’s capital Guwahati, the hub of Northeast India, is back in business. Several industrial parks and clusters, townships, logistics centres, etc., are coming up in Assam and the rest of Northeast. Assam has become a new investment destination. Some of the companies that have invested in recent years are Tata, ITC, Patanjali, Dabur, NATCO Pharma, Sun Pharma, Dalmia Bharat Cement, Infinity, Mahindra, Spice Jet, Century Ply, etc. Guwahati is the new destination of India’s premier hospital chains; investments have come from Apollo, Sankar Netralaya, Narayana Health, Fortis, etc. International hotel chains like Taj Vivanta, Radisson Blu and Novotel have already opened branches. Hyatt is coming up. Similar surge of global hotel chains is also expected in other NER cities. Northeast, therefore, has been successful in restoring business confidence.
Neighbouring countries are also coming forward to support this new development. For example, Bangladesh and Bhutan have opened consulates in Guwahati and started issuing visas. Nepal and Myanmar are also planning to open the same in Guwahati. Bangladesh may consider opening consul office in Agartala, Myanmar in Imphal and Aizawl, Nepal in Siliguri. Singapore has opened a skill development centre in Guwahati. Thailand has also shown interest to open a consul office in Northeast. Besides, international organisations such as Asian Development Bank (ADB), World Bank, UNDP, etc., have been entrusted to work with the Northeastern states on AEP.
Japan has special interests in the NER. Several Japanese companies have been investing in the Bay of Bengal countries such as Bangladesh and Myanmar under the ‘BIG B’ initiative. For example, Honda Company’s new assembly plant in Bangladesh, Sumitomo’s construction of SEZ near Dhaka, Dhaka Metro, Japanese township and elevated expressway to Chittagong port in Bangladesh, JFE Steel Plant in Thilawa SEZ in Myanmar, Fujita Company’s mega real estate project in Yangon, Kajima Company’s urban development project in Yangon are some of the projects which are happening in the backyard of NER. Total Japanese development aid to Bangladesh has crossed US$ 25 billion. These projects offer sustainable business opportunities for the NER. For example, Northeast states can manufacture parts and components under the Make-in-India initiative, which then can feed into the manufacturing of automobiles in Bangladesh. This is the way a new value chain between NER and Bangladesh may emerge, leading to generate jobs and growth.
Japan-India Act East Forum is a right step forward, which has been aimed to assist the NER states to attract Japanese technology and investment, sharing of experiences through skill development, improvement of connectivity, among others. Japanese packaging technology and expertise may give a big push to agri-horticulture exports from the NER and also strengthen the supply chain competitiveness. Engaging Japanese private sector majors such as Mitsubishi, NEC Technologies, Toshiba, Sumitomo, Sony, Honda, etc., in the Northeast will pave the way towards connecting with larger markets in the region. Ahead of the annual summit between India and Japan this year, both the countries have agreed for deeper cooperation in various sectors including building infrastructure in the NER.
While acting on east, we should not miss Bangladesh, the fastest growing economy in South Asia. Bangladesh must be treated as an integral part of the AEP. The challenge before India’s AEP lies with the clinching of India-Bangladesh Corridor that will ensure a reduction of the price level and make production in Northeast competitive. Northeast has the potential to become a major educational destination, particularly for CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) countries (from schools to specialisation institutes).
The way forward for the development of the NER is through getting India, CLMV countries and ASEAN act together and supporting and complimenting each other for connectivity and human resource development, sustainability and inclusiveness.
[Author is Professor, ASEAN-India Centre (AIC), Research and Information System for Developing Countries (RIS), New Delhi. This is the first part of author’s commentary on the Act East-North East. Views are author’s own.]