India should firm up on Act East Policy

Finance Minister Arun Jaitley had stated that “The ‘Act East’ (ACEP) policy of the Government of India endeavours to cultivate extensive economic and strategic relations in South-East Asia. In order to catalyse investments from the Indian private sector in this region, a Project Development Company will, through separate Special Purpose Vehicles, set up manufacturing hubs in CLMV countries, namely, Cambodia, Myanmar, Laos and Vietnam.”

There was, however, no specific mention of progress in this regard, in his recent Union Budget (2015-16) speech or even in the latest Economic Survey. While the earlier `Look East` policy, in its re-incarnated form as ACEP, is under execution, the special economic drive towards CLMV countries is yet to gather adequate momentum as compared to the position prevailing at the end of the last financial year. The impact of ACEP on the north-eastern states has also not been significant on the ground or at operational levels towards generating significant outward flows of commodities and services with or without value added from the region to the CLMV or ASEAN countries.

Till about two years ago, 55 per cent of India’s investment in joint ventures in CLMV countries was in Vietnam. It is thus clear that Indian FDI is not evenly spread in these countries and much remains to be done in relation to the other three CLMV countries, i.e., Cambodia, Laos and Myanmar.
At the Third India-CLMV Enclave held in January 2016, the Commerce Minister, Nirmala Sitharaman, reiterated the importance of connectivity between India and CLMV countries within the framework of the Initiative for Integration and Narrowing Intra-Asia Development Gap and the Mekong-Ganga Cooperation Process.

Though approved recently, a Project Development Fund (for the Project Development Company referred to by the Finance Minister in his budget speech last year) with a corpus of Rs. 500 crore for CLMV countries is still to be operationalised. Unless India moves fast along the trajectory identified by the Finance Minister last year, opportunities in the fast-changing trans-Asian economic environment may not be available for long. The challenge for India may be greater in the wake of 12 Pacific Rim nations (including Vietnam) entering into the Trans-Pacific Partnership Agreement (TPP) in October 2015.

While pursuing its policies towards CLMV countries with a strategic objective, India has to ensure that the need for emphasis on the geopolitically closest peripheral country sharing a 1643 km long border, i.e., Myanmar, is neither lost sight of nor the benefits accruable to the north-eastern states left out of the reckoning. Moreover, economic cooperation with Myanmar needs to be directed particularly to its western region and north-western areas, considering the ramifications on the adjoining north-eastern areas of India. Thus, out of sheer compulsions of the national interest, India’s policies towards CLMV countries should necessarily factor in the developmental needs of the north-eastern states. But from existing policy formulations and profiles of implementation, it is not evident that this aspect is being suitably taken care of. To cite an example, while the development of air-links between India and CLMV countries is a part of the government’s initiative, intra-regional air-connectivity in the north-east is still to be put in place.

Though the new draft Indian Civil Aviation Policy (unveiled in the third quarter of 2015-16) factors in this intra-north-east regional need, the actual air-routes sanctioned and air-flights launched do not fill the intra-regional void. Thus, air-connectivity with CLMV countries may not concomitantly benefit the north-east. This may be deemed as one of the inherent gaps in the CLMV-oriented policy, which requires tweaking or amendment for appropriate outcomes.

A lot needs to be done to give a multi-dimensional and wholesome content to India’s policy approach on economic cooperation with CLMV countries as well as in respect of the Act East Policy.

The development process of the north-east states should also be geared up to ensure that it contributes to the trade and investment exchanges with CLMV countries and benefits from the resultant outcomes.
(The author is a sitting Member of Public Accounts Committee of Parliament).

Gautam Sen