Atul Sarma, Saswati Choudhury (Eds.) - Mainstreaming The Northeast in India's Look and Act East Policy-Palgrave Macmillan (2018)

Mainstreaming
the Northeast
in India’s Look
and Act East
Policy
Edited by
Atul Sarma and Saswati Choudhury
Mainstreaming the Northeast in India’s Look
and Act East Policy
Atul Sarma • Saswati Choudhury
Editors
Mainstreaming the
Northeast in India’s
Look and Act East
Policy
Editors
Atul Sarma Saswati Choudhury
Honorary Visiting Professor OKD Institute of Social Change and
Institute for Human Development Development
New Delhi, India Guwahati, Assam
India
ISBN 978-981-10-5319-1 ISBN 978-981-10-5320-7 (eBook)

DOI 10.1007/978-981-10-5320-7
Library of Congress Control Number: 2017950813
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Acknowledgements
This volume is the outcome of the collective thoughts, ideas and efforts of
a constellation of scholars and policy-makers brought together at the
“International Conference on Look (Act) East Policy and North East
India” organized by the OKD Institute of Social Change and Develop-
ment, Guwahati on September 25–26, 2015 at Guwahati as the conclud-
ing event of the Institute’s Silver Jubilee Celebration.
Northeast India is continental gateway for India to access the emerging
economic frontiers of South East Asia. The proclamation of India’s Look
East Policy stimulated excitement that the region’s proximity to as well as
its historical linkages with South East Asian nations would help it to
establish strong cultural, social and economic ties. There was an under-
standing among the development experts from the region that such an
integration with South East Asia would transform the region as a hub of
international cooperation, trade and investment. Even so, the Northeast
perspective within the Look East Policy (LEP) framework found a place at
the official level only in October, 2007. However, the excitement con-
tinued to be mere rhetoric during the last two decades. It has always
intrigued me as to where Northeast India figures in the overall perspective
of India’s Look East Policy. It is with this concern that I proposed the idea
v
vi Acknowledgements
to the Institute to organize a conference as part of its Silver Jubilee

Celebration which would address two vital questions: What has been
the real status of Northeast India in the overall Look East Policy of
India? And what needs to be done to mainstream Northeast India in the
Look East Policy framework?
I express my gratitude to the Institute and esteemed members of the
Governing Body of the Institute and the Advisory Committee of the
Silver Jubilee Celebration of the Omeo Kumar Das Institute of Social
Change and Development (OKDISCD) for accepting my proposal for
organizing this conference which saw the participation of academics,
diplomats, bureaucrats, media representatives, and business and industry
representatives both from within the country and abroad.
Professor Bhupen Sarmah, Director OKDISCD, has been a strong
support behind this entire process and took a personal interest in the
conference. His engagement and support at every step had an imprint on
the success of the conference. Professor Sarmah has been keen that I bring
together and edit the deliberations and contributions of the participants in
the form of a book. I sincerely acknowledge the support I received from
him and the Institute in completing this work.
I would also like to express my gratitude to the publisher, Springer, for
accepting this book for publication. In particular I would like to thank
Sagarika Ghosh and Nupoor Singh for their editorial guidance and
Ms. Britta Ramaraj for production guidance. Their continuous support
at the Springer India office has finally made it possible to publish this
volume. I am grateful to the reviewers for recommending the manuscript
for publication.
I should explicitly acknowledge that Dr. Saswati Choudhury has shared a
heavy burden in bringing together the contributions into publishable form.
In the same breath, I would like to place on record my appreciation of
our young faculty, Mr. Akshay Jyoti Sarma, who was one of the coordi-
nators of the Conference and contributed immensely in the entire process
from its beginning. His contribution is no less than that of an editor.
I thank all the panellists including the discussants and session chairs
and other esteemed guests present during the Conference whose partici-
pation enriched the deliberations, and I express my sincere appreciation of
all the contributors who submitted their papers for this volume.
Acknowledgements vii
My esteemed friend, M. P. Bezbaruah, Former Member of the North

Eastern Council (NEC) and Former Secretary, Ministry of Tourism,
Government of India, who has been actively involved with the Northeast
region’s development issues, contributed to the conceptualization of the
Conference and also made a valuable contribution as a panellist. I am
grateful to Mr C. K. Das, Member of the NEC, whose goodwill and
support to the Institute is immense. Taking part in the deliberations and
discussions during the Conference, he raised many critical policy issues
that need to be addressed immediately for mainstreaming the Northeast
in the Look East Policy.
Shri K. V. Eapen, IAS, Additional Chief Secretary at the Planning and
Development Department, Government of Assam, played a very support-
ive and encouraging role and extended his guidance to the Institute at
various stages during the organization of the Conference and also made
valuable contributions. I also acknowledge the support received by the
Institute from the Planning and Development Department and its officials.
Mr Ameising Luikham, IAS, Former Secretary of the NEC, also took a
keen interest in the Conference and was instrumental in initiating the
process of extending financial support to the Institute from the NEC.
Later his successor, Shri Ram Muivah, IAS, extended his support. Shri
W. Synrem, IES, Economic Adviser (Evaluation and Monitoring) NEC,
and Shri Gautam Chintey, Adviser (Banking Industries and Tourism)
NEC, played an active role in extending financial support to the Institute
for organizing the Conference. I am also thankful to Shri D. Khound,
IES, Economic Adviser (HR) for his support and cooperation in obtaining
financial support.
I also express my sincere gratitude to the Ministry of Home Affairs and
Ministry of External Affairs, Government of India for extending the
necessary support in inviting scholars from South East Asian countries
to the Conference.
I must acknowledge the support and help received by the Institute from
Dr Alaka Srivastava National and International Seminar Division, Indian
Council of Social Science Research (ICSSR) New Delhi in obtaining
financial assistance from (ICSSR) to organize the Conference.
I also appreciate the support and encouragement received during this
entire process from Professor Indranee Dutta, Professor Kalyan Das,
viii Acknowledgements
Dr. Joydeep Baruah, Dr. Arunima Deka, Dr. Joseph K. Lalfakzuala and
Dr. Monjit Borthakur all members of the faculty, OKDISCD. I acknowl-
edge the support from the Administration of OKDISCD in completing this
entire task.
I extend my appreciation and thanks to the team of rapporteurs—
Dr. Arunima Deka, Assistant Professor OKDISCD, Ms. Upashana Khanikar
and Ms. Marilyn Varte, both Research Associates at OKDISCD who have
done a great job. Mr. Biswa Ranjan Sharma, Research Associate, OKDISCD
deserves appreciation for his help in formatting the different papers and
compiling them into one document.
I extend my sincere thanks to everyone who was a part of this Confer-
ence and contributed in various ways towards the successful completion of
the entire process, culminating in the publication of this volume.
Atul Sarma
Contents
1 Towards a Perspective on the Look (Act) East Policy and

Northeast India 1
1.1 Introduction 1
1.2 Northeast India and India’s Look East Policy 4
1.3 Mainstreaming Northeast India in the Look (Act) East
Policy of India 9
1.4 The Way Forward 11
1.5 Chapter Scheme 14
References 20
Part I Northeast India Under the Aegis of the Look East Policy 23
2 Integrating Northeast with South East Asia: Great

Expectations and Ground Realities 25
Atul Sarma
2.1 Introduction 25
2.2 How Does Market Integration Work? 27
ix
x Contents
2.3 Lessons from the Past Internationalization

of the Assam Economy 27
2.4 India’s Look East Policy and the Vision
for the Northeast 32
2.5 The Northeast to be a Gateway to East and
South East Asia 33
2.6 What Has the Look East Policy Meant to the
Northeast So Far? 36
2.7 Is the Northeast Ready? 37
References 43
3 Insider or an Outsider: Where Is the Northeast in India’s

Act East Policy? 45
Rakhee Bhattacharya
3.1 Introduction 45
3.2 Why Was LEP Formulated in India in the 1990s? 48
3.3 Was the Northeast Ever in This Policy Frame? 49
3.4 Are the Ground Realities for the Northeast Changing? 54
3.5 Is the Northeast Now Ready to Leverage from the
AEP? 56
References 61
4 Look East Policy and Northeast India: Is It a

Conjectured Vision 63
Gorky Chakraborty
4.1 Introduction 63
4.2 A “Borderless” World 65
4.3 From “Look East” to “Act East” Policy 67
4.4 Selected Macroeconomic Indicators of NEI 69
4.4.1 Composition of Net State Domestic Product
and Contribution of Labour 70
4.4.2 Regional Income 72
4.4.3 Formal Trade with Neighbouring Countries 72
4.4.4 Informal Trade with Neighbouring Countries 76
4.4.4.1 Myanmar 76
4.4.4.2 Bangladesh 77
Contents xi
4.4.5 Central Assistance to NEI 78

4.5 Related Economic Issues 81
4.6 Views from a Borderland 84
4.7 A Conjectured Vision 86
References 94
Part II Linking South East Asia Through Northeast India:

Trade Investment and Connectivity Aspects 99
5 Unlocking the Northeast Region of India: An ASEAN

Connectivity Perspective 101
Piti Srisangnam and Anupama Devendrakumar
5.1 Introduction 101
5.2 ASEAN–India Economic Relations 103
5.3 The Role of the Northeast Region in India’s Look
East Policy: ASEAN Perspectives 105
5.3.1 Importance and International Trade of the
Northeast Region 105
5.3.2 Connectivity Between Myanmar, Northeast
India and Mainland India 106
5.3.3 ASEAN Connectivity: The Experiences
of the Greater Mekong Sub-region (GMS) 106
5.4 Status of ASEAN Connectivity Development 108
5.5 Initiatives and Progress of ASEAN Connectivity 111
5.6 Lessons Learnt from the Experiences of the GMS 118
5.7 Lessons Learnt 119
5.8 ASEAN Connectivity: Future Challenges and
Significance for NER 121
5.8.1 Future Challenges 121
5.8.2 Look East India: ASEAN Connectivity
(Thailand–Myanmar–India Connectivity)/
Significance for the Northeastern Region 125
References 128
xii Contents
6 India’s Connectivity with ASEAN: What Role for Northeast

India? 131
Shankaran Nambiar
6.2 ASEAN Economic Community 133
6.3 ASEAN Connectivity 139
6.4 India’s Connectivity with ASEAN and
Northeast India 142
6.5 Positioning Northeast India 145
6.6 Some Policy Issues 151
6.7 Conclusion 153
References 155
7 Act East Policy and Northeast India: The Role of

Transaction Costs 159
Bhagirathi Panda
7.2 Phase I and Phase II of the Policy and NER 160
7.3 How Much Has NER Gained from This Policy? 162
7.4 Identification of Complementariness and
Establishment of Networked Production Centres 165
7.5 AEP and the Conceptualized Sequential Process
for Its Success 166
7.6 Transaction Costs 167
7.7 Transaction Costs, Economic Efficiency, AEP and
NER 168
7.8 Conclusion and Way Forward 173
References 174
8 Integration with Regional Blocks Through Intra-industry

Production Networks: Boosting the Growth Prospects of
Northeast India 177
Ashish Nath
8.2 The Economy of the States of NER 178
Contents xiii
8.3 Northeast India and Bordering Nations: Trade

and Business 190
8.4 Regional Cooperation: Northeast India and Its
Neighbouring Countries 201
8.5 Value Chain: The Way Forward for NER 206
References 207
Part III Look (Act) East Policy and India’s Multilateral

Engagements 211
9 Look East Policy, Sub-regional Connectivity Projects and

Northeast India 213
H. Srikanth
9.2 Road Connectivity, Trade and Economic
Development 216
9.3 Assumptions and Reality 218
9.3.1 LEP and NEI Are Not Synonymous 218
9.3.2 Better Road Connectivity Need Not Lead
to Improved Trade 219
9.3.3 Connectivity Costs and Benefits 220
9.3.4 Ethnic Militancy and Securing the Roads 222
9.3.5 Sino-Indian Rivalries and Connectivity
Projects 223
9.4 Conclusion 224
References 227
10 Look (Act) East Policy: With or Through the Northeast 233

Walter Fernandes
10.2 Ignoring the East 234
10.3 LEP and the Pattern of Development 235
10.4 Implications for LEP 237
10.5 LEP with an NEI Orientation 239
10.5.1 Infrastructure and People 239
xiv Contents
10.5.2 Changing the Approach 240

10.5.3 Subsistence Agriculture 241
10.5.4 Education and Health 243
10.6 Possible Follow-Up 244
10.6.1 Suggestions for Alternatives 244
10.6.2 How Can India Respond? 245
10.6.3 Limiting the Field 246
10.7 Conclusion 249
References 250
11 Rebel Camps in Myanmar: Will They Hamper

the Act East Policy? 253
Rajeev Bhattacharyya
11.2 The Camps 254
11.3 AEP and Myanmar 256
11.4 Promotion of Border Trade 259
11.5 Conclusion 260
References 262
Part IV Opportunities and Ways Forward in Building

Strategic Partnerships 265
12 A Unified Northeast Economy: The Road to Gainful

Economic Integration with South East Asia 267
Atul Sarma
12.2 The Region’s Strengths 268
12.3 Paradox of Widening Income Gap Despite Special
Dispensation 269
12.4 Explanatory Hypotheses for Persistent
Under-Development 271
12.5 New Paradigm of Development Perspective 273
12.6 Rationale for Unifying the Northeast Economy 274
Contents xv
12.7 How Does Market Integration Work? 276

12.8 What Facilitates a Unified Market? 277
12.9 What Should Be the Agenda? 277
12.10 Conclusion 278
13 Look (Act) East Policy and Northeast India: Challenges

and Opportunities in Building Strategic
Partnerships—The Way Forward 281
Sudhir Devare
13.2 Evolution of the Look East Policy 282
13.3 US and Chinese Plans in the Indo-Pacific 283
13.4 The Northeast and Neighbouring Countries:
The Way Forward 285
14 India’s Act East Policy Begins in Myanmar 287

Munmun Majumdar
14.2 Myanmar Is Crucial for India’s AEP 289
14.3 Conclusion 297
References 300
15 Locating Northeast India in the Look (Act) East Policy

of India 301
Saswati Choudhury
15.1 Introduction: India’s Asian Incarnation 301
15.2 Sub-Regional Cooperation: India and South
East Asia 304
15.3 NEI and the Look (Act) East Policy 309
15.4 NEI and the Look (Act) East Policy:
Complementarities in Partnership Building 314
15.5 Conclusion 318
References 320
Index 323
Abbreviations
ACIA ASEAN Comprehensive Agreement on Investment

ACU Asian Clearing Union
ADB Asian Development Bank
ADCs Autonomous District Councils
ADDM+ ASEAN Defence Ministers Meeting Plus
AEC ASEAN Economic Community
AEM ASEAN Economic Ministers
AEP Act East Policy
AFAFGIT ASEAN Framework Agreement on Facilitation of Goods in
Transit
AFAFIST ASEAN Framework Agreement on Facilitation of Inter-State
Transport
AFAMT ASEAN Framework Agreement on Multi-modal Transport
AFSPA Armed Forces Special Power Act
AFTA ASEAN Free Trade Area
AH Asian Highway
AHN ASEAN Highway Network
AIA ASEAN Investment Area
AICEA ASEAN–India Comprehensive Economic Agreement
AIDS Acquired Immune Deficiency Syndrome
AMM ASEAN Ministerial Meeting
APEC Asia–Pacific Economic Cooperation
xvii
xviii Abbreviations
APG ASEAN Power Grid

ARF ASEAN Regional Forum
ASAM ASEAN Single Aviation Market
ASEAN Association of South East Asian Nations
ASTP ASEAN Strategic Transport Plan
ASW ASEAN Single Window
BBIN Bangladesh, Bhutan, India, Nepal
BCIM Bangladesh–China–India–Myanmar Forum for Regional
Cooperation
BIMP- Brunei, Indonesia, Malaysia, Philippines–East ASEAN Growth
EAGA Area
BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and
Economic Cooperation
BOT Balance of Trade
BRICS Brazil, Russia, India, China, Sri Lanka
BTAC Bodoland Territorial Autonomous Council
CBI Cross-Border Infrastructure
CBTA Cross-Border Transport Agreement
CEC Comprehensive Economic Cooperation
CLMV Cambodia, Laos, Myanmar, Vietnam
CNF Chin National Front
CSO Central Statistical Organisation
CSS Centrally Sponsored Schemes
DEA Department of Economic Affairs
DFC Dedicated Freight Corridor
DGFT Director General of Foreign Trade
DMIC Delhi–Mumbai Industrial Corridor
DONER Development of the North East Region
EAS East Asia Summit
ERIA Economic Research Institute for ASEAN
ESCAP Economic and Social Commission for Asia and the Pacific
EU European Union
EWEC East–West Economic Corridor
FC Finance Commission
FDI Foreign Direct Investment
FICCI Federation of the Indian Chamber of Commerce and Industries
FTA Free Trade Agreement
GDP Gross Domestic Product
Abbreviations xix
GMS Greater Mekong Sub-region

GoI/GOI Government of India
GPN Global Production Network
GQ Golden Quadrilateral
HDI Human Development Index
HIV Human Immunodeficiency Virus
HLTF High Level Task Force
ICT Information and Communication Technology
IICBTA Initial Implementation of the Cross-Border Transport
Agreement
IIE Indian Institute of Entrepreneurship
IIFT Indian Institute of Foreign Trade
IIM Indian Institute of Management
ILP Inner Line Permit
IMT India–Myanmar–Thailand
IMTTH India–Myanmar–Thailand Trilateral Highway
IPN International Production Network
IPRs Intellectual Property Rights
ISEAS Institute of South East Asian Studies
KMTTP Kaladan Multimodal Transit Transport Project
KNA Kuki National Army
KSRL Kunming Singapore Rail Links
LAC Line of Actual Control
LC Land Customs
LCSs Land Custom Stations
LEP Look East Policy
MAAS Multilateral Agreement on Air Services
MAFLAFS Multilateral Agreement for Full Liberalization of Air Freight
Services
MAFLPAS Multilateral Agreement for Full Liberalization of Passenger Air
Services
MEA Ministry of External Affairs
MGC Mekong-Ganga Cooperation
MIEC Mekong–India Economic Corridor
MoDONER Ministry of Development of the North Eastern Region
MoU Memorandum of Understanding
MPAC Master Plan on ASEAN Connectivity
MPMCS Mendipathar Multipurpose Cooperative Society
xx Abbreviations
MRAs Mutual Recognition Arrangements

MVA Motor Vehicle Agreement
NAC National Advisory Council
NAM Non-Aligned Movement
NCAER National Council of Applied Economic Research
NDA National Democratic Alliance
NDFB National Democratic Front of Bodoland
NEC North Eastern Council
NEI Northeast India
NER Northeast Region
NHPC National Hydro Power Corporation
NLD National League for Democracy
NNC Naga National Council
NPA Non-Performing Assets
NSCN National Socialist Council of Nagaland
NSCN-IM National Socialist Council of Nagaland (Isaac-Muivah Group)
NSCN-K National Socialist Council of Nagaland (Khaplang Group)
NSDP Net State Domestic Product
NSEC North–South Economic Corridor
NSSO National Sample Survey Organization
NTB Non-Tariff Barriers
NTMs Non-Tariff Measures
NVA Net Value Added
OBOR One Belt One Road
ONGC Oil and Natural Gas Corporation
PLA People’s Liberation Army
PPP Public–Private Partnership
PREPAK People’s Republican Party of Kangleipak
RAP Restricted Area Permit
RBI Reserve Bank of India
RCEP Regional Comprehensive Economic Partnership
RIATS Roadmap for Integration of Air Travel Sector
RICMT Roadmap Towards an Integrated and Competitive Maritime
Transport in ASEAN
RIS Research Information Services
RTAs Regional Trade Agreements
SAARC South Asian Association for Regional Co-operation
SAFTA South Asian Free Trade Agreement
Abbreviations xxi
SAPTA South Asian Preferential Trade Agreement

SARDP–NE Special Accelerated Road Development Project—North East
SCS Special Category States
SHGs Self-Help Groups
SKRL Singapore–Kunming Rail Link
SME Small and Medium Enterprise
SPV Special Purpose Vehicle
SSI Single-Stop Inspection
SWI Single-Window Inspection
TCE Transaction Cost Economics
TGAP Trans-ASEAN Gas Pipeline
TH Trilateral Highway
TPP Trans-Pacific Partnership
ULFA United Liberation Front of Assam
UNCLOS United Nations Convention on the Law of the Seas
UNCTAD United Nations Conference on Trade and Development
UNESCAP United Nations Economic and Social Commission for Asia and
the Pacific
UNLF United National Liberation Front
UNLFWSEA United National Liberation Front of Western South East Asia
UWSA United Wa State Army
WTO World Trade Organization
ZRA Zomi Revolutionary Army
List of Figures
Fig. 4.1 NEI’s contribution to national income 72

Fig. 4.2 Expected transfer of financial resources to special category
states, 14th Finance Commission 81
Fig. 5.1 Interaction between ASEAN Connectivity and ASEAN
Community 114
Fig. 5.2 Singapore–Kunming rail link network and the missing link 115
Fig. 5.3 GMS economic corridors 117
Fig. 7.1 The conceptualized sequential process of the success of AEP 166
Fig. 7.2 Transaction costs in NER 169
Fig. 8.1 Share of Asian countries in Indian exports 200
Fig. 8.2 Share of Asian countries’ imports from India 200
xxiii
List of Tables
Table 2.1 Indo-Myanmar border trade (through Moreh Route)

(Rs. Millions) 38
Table 3.1 Growth rates of NSDP (%) 53
Table 3.2 Growth rates of per capita of NSDP (%) 53
Table 3.3 India’s trade with its eastern neighbours (Rs. crores) 56
Table 4.1 Contribution to NSDP and composition of labour in NER,
1993–94 to 2012–13 71
Table 4.2 Major export items from NEI to neighbouring countries
(Rs. crores) 73
Table 4.3 NEI’s share in India–Myanmar trade 74
Table 4.4 Value of trade in the Moreh–Tamu sector 74
Table 4.5 Volume of trade of NEI with Bangladesh 75
Table 4.6 Items exported to Bangladesh through LCS in NEI 75
Table 4.7 Items imported from Bangladesh through LCSs in NEI 76
Table 4.8 Share of centrally sponsored schemes in own revenue
receipts of states 79
Table 4.9 Share of central taxes and grants to special category states 80
Table 4.10 Land customs station NEI–Myanmar border 88
Table 4.11 Indo-Myanmar border trade items 89
Table 4.12 Expected transfer of financial resources to SCS during 14th
FC (Rs. in crore) 90
xxv
xxvi List of Tables
Table 5.1 ASEAN–India trade indicators 104

Table 5.2 ASEAN–India total trade, 1990–2010 (USD millions) 104
Table 5.3 Projected infrastructure requirements in developing ASEAN
economies 2010–20 by sector (USD millions) 124
Table 5.4 Private sector investments in ASEAN 1990–2008 (USD
millions) 124
Table 7.1 NER’s trade with Myanmar (USD millions) 163
Table 7.2 India and NER’s trade balance with Myanmar (USD
millions) 164
Table 7.3 NER’s trade with Myanmar in 2012–13 165
Table 8.1 State-wise length of international borders of NER (km) 179
Table 8.2 Economic indicators of selected Asian countries 181
Table 8.3 Selected indicators of the Northeast states of India 187
Table 8.4 Exports and imports of NER, 2012–13 191
Table 8.5 Exports and imports of selected Asian countries: 2012–13 196
Table 8.6 Potential sectors of NER 203
Table 8.7 Share of selected product groups in India’s exports (%) 204
1
Towards a Perspective on the Look (Act)
East Policy and Northeast India
1.1 Introduction
During the late 1980s at the behest of the then Prime Minister, Rajiv
Gandhi, India began reviving its relations with South East and East Asia.
The Annual Report of the Ministry of External Affairs (MEA) for
1995–96 noted that there were hardly any high level contacts between
India and the Association of South East Asian Nations (ASEAN) prior to
1985; however, a definite trend emerged since then which indicated that
ASEAN was interested in recuperating old relations with India with the
restoration of political dialogue. During the next five years, the Indian
A. Sarma (*)
Institute for Human Development, New Delhi, India
S. Choudhury
OKD Institute of Social Change and Development, Guwahati, Assam, India
© The Author(s) 2018 1

A. Sarma, S. Choudhury (eds.), Mainstreaming the Northeast in India’s Look
and Act East Policy, DOI 10.1007/978-981-10-5320-7_1
2 A. Sarma and S. Choudhury
Prime Minister visited Indonesia, Thailand, Myanmar (then known as

Burma), Vietnam and also China in December 1988. India also hosted
leaders from South East Asian countries like Suharto of Indonesia, Lee
Kuan Yew of Singapore, Mahathir Mohammad of Malaysia, Nguyen Van
Linh of Vietnam and Hun Sen of Kampuchea, as well as other ministers.
The political exchanges between India and South East Asian countries
during the eighties also focused on issues of trade and commerce, energy
sharing and cooperation in the field of science and technology. Global
political development at the end of the Cold War called for a pragmatic
approach in India’s foreign policy. The economic exigency following the
balance of payment crisis forced India to shelve its protective economic
policies and liberalize. Its eastern neighbours offered a promising area of
engagement. ASEAN, together with Japan, Korea and China, was eco-
nomically the fastest growing region not only in Asia but globally as well.
Business delegations led by the Federation of the Indian Chamber of
Commerce and Industry (FICCI) visited ASEAN countries. Singapore
became the focal point in India’s overseas investment promotion tours
undertaken by the Indian Finance Minister and the Minister of State for
Commerce in 1991. Singapore reciprocated and also actively supported
India’s effort to join ASEAN as a dialogue partner. India became a
Sectoral Dialogue Partner of ASEAN in 1992, a full ASEAN Dialogue
Partner in 1995, and a member of the ASEAN Regional Forum (ARF)
in 1996.
India’s engagement with East and South East Asian countries since the
1980s has largely been termed as Look East Policy although there is no
official policy document which lays down the guidelines and principles.
During his September 1994 visit to Singapore, the Indian Prime Minister,
Narasimha Rao delivered a lecture entitled “India and the Asia–Pacific:
Forging a New Relationship” at the Institute of South East Asian Studies
(ISEAS) in which he emphasized India’s eagerness to join the future
development path in the Asia–Pacific region in the post-Cold War period.
The term “Look East Policy” appeared in official records of India for the
first time in the Annual Report of the Ministry of External Affairs (MEA)
in 1995–96 and referred to India’s engagement in the ASEAN region
with emphasis on economic and institutional relations. Delivering the
14th Singapore lecture in April 2002, Prime Minister A. B. Vajpayee said,
1 Towards a Perspective on the Look (Act) East Policy. . . 3
“I speak today on ASEAN and the Asia–Pacific . . . This region is one of

the focal points of India’s foreign policy, strategic concerns and economic
interests . . . It is a fundamental fact of geography that India is in the
immediate neighbourhood of ASEAN” (ASEAN 2002). In December
2005 in his keynote address at the Special Leader’s Dialogue of ASEAN
Business Advisory Council in Kuala Lumpur, Malaysia, India’s Prime
Minister, Manmohan Singh stated that, since 1992, the Government of
India had launched a “Look East Policy” which was not merely an external
economic policy but also marked a strategic shift in India’s envisioned role
in the changing global economic scenario. It was an attempt to reach out
to India’s civilizational neighbours in South East and East Asia. At the
Ninth India–ASEAN summit in Bali, Prime Minister Manmohan Singh
stated that India’s partnership with ASEAN was a key feature of the
country’s foreign policy and the foundation of its Look East Policy
(LEP). India’s engagement with its eastern neighbours has also been
acknowledged by ASEAN. At the fourth India–ASEAN summit held at
Kuala Lumpur in December 2005, India’s support to the CLMV coun-
tries (Cambodia, Laos, Myanmar, Vietnam) in service sector, especially in
English language training, satellite based networking, telemedicine ser-
vices and super speciality health care facilities, was appreciated. LEP goes
beyond economic cooperation today and includes defence and strategic
partnership building as also regional cooperation for human resource
development.
India’s eastward move is perceived as recognition of its physical conti-
guity and cultural and social proximity with South East Asia. At the 12th
ASEAN–India Summit, Prime Minister of India, Narendra Modi
declared that, externally, India’s LEP had become the Act East Policy
(AEP). The thrust areas for the redefined regional engagement for India
with the countries in this region would primarily be (1) markets (liberal-
ization of foreign trade, direct investment, capital accounts and financial
systems); (2) policy (intergovernmental cooperation and development of
common institutions); (3) geopolitics (relationships between political
power and geographic space). Regional engagement is expected to expand
not only to the limits of production possibilities but also to facilitate the
flow of academic and scientific collaboration, technology sharing, service
growth and institutional cooperation. For the new government, renewing
cultural and spiritual connectivity with Asia is as important as physical

connectivity (Raja Mohan, 2015).
India’s renewed engagement with ASEAN since the nineties improved
economic relations and ASEAN became the fourth largest trading partner
of India. Annual trade had grown at an average rate of 22 per cent per
annum during the decade of 2000–11and stood at US$76.53 billion in
2014–15. Investment flows have been substantial both ways, with
ASEAN accounting for 12.5 per cent of investment flows into India
since 2000. Foreign direct investment (FDI) inflows into India from
ASEAN between April 2007 and March 2015 was US$32.44 billion,
while FDI outflows from India to ASEAN countries, from April 2007 to
March 2015, as per data maintained by the Department of Economic
Affairs (DEA), was US$38.672 billion.
1.2 Northeast India and India’s Look East

Policy
The articulation of LEP since the early 1990s raised the hope of a new
development perspective for the Northeast Region of India by placing it as
a gateway to the dynamic East and South East Asian economies. The
scholars and development experts working on Northeast India had argued
for a resurgence of the region by establishing trade links with the fast
growing South East Asian countries under the aegis of LEP. There were
apprehensions as well: the opening of the Northeast Region to South East
Asian countries would add to the insecurity in the region which had been
affected by cross-border conflicts and insurgency. While the Northeast
continued to be trapped in the debate of security issues versus economic
gains, India’s relations with ASEAN improved not only trade and busi-
ness but also cultural and strategic security issues.1 However, Northeast
India was left out of such engagements, even though it continentally
connects to the region through Myanmar and shares certain commonal-
ities in the economic and social spheres. Recognizing these shared com-
monalities and the physical contiguity, Government of India built the
“Friendship Road” to Myanmar in 1996 and, following its inauguration,
hosted the ASEAN car rally. Nothing much happened beyond the open-
ing of designated border trade points and the carrying on of a bare
minimum trade.
Though the potential for developing the resource rich Northeast
Region through economic complementarities with South East Asia and
Bangladesh is immense, the underdeveloped transport and communica-
tions network within the region contribute to high transportation costs
and a fragmented market. Within the region Assam serves as the main
connecting node through which others states of the region can be
accessed. The railways, which provide the cheapest mode of transport,
has a total route length of 2743 km, with Assam alone accounting for
89 per cent of the route length.2 The air connectivity within the region is
networked through 22 airports of which 12 are currently operational. The
region has only one international flight operation.3 To overcome the
remoteness in connectivity within the region, the Special Accelerated
Road Development Programme–North East (SARDP–NE) was adopted
in 2005 for developing the road length to 6418 km so as to improve the
connectivity of 88 district headquarters in the region by at least two lane
roads and improve road connectivity in border areas and access points to
neighbouring countries. Regional connectivity for developing a unified
region became particularly essential.
Besides connectivity, the economies of the states of the region are also
disparate. Except Assam, all other states are small in population size and
thus have a small market, each beset with their own rigidities. Such
rigidities can be overcome through the development of an integrated
market that could enable the states of the region to develop their econo-
mies according to their comparative advantage and thus enjoy the gains
from economies of scale and specialization. The hill economies of the
region and their subsistence nature are incompatible with the market-
driven economy, and the result has been underdeveloped product and
labour markets in the region. In order to break through the challenges in
region’s development, the Northeast perspective of the Look (Act) East
Policy was developed by the NEC in October 2007 under the aegis of the
Ministry of Development Of North Eastern Region (DONER) and was
incorporated within “Vision NER: 2020” with the basic objective “to
break the fetters of the geo-political isolation.”
The economic rationale behind this new vision was that the landlocked
Northeast would find wider market access with some of the fastest
growing countries in South East Asia and this in turn would induce
growth and development of the region. Three aspects of this policy have
emerged over the years with respect to Northeast India:
• Connectivity and physical infrastructure to facilitate trade;

• Trade and investment protocols;
• Bilateral/multilateral relationships, such as in tourism, and enhanced
people-to-people interaction through sports, culture, academia and
medical research.
The economic relation between Northeast India and South East Asia at
present centres around trade through borders with Myanmar (much of
which is not officially recorded) and the annual trade fairs in some of the
countries and the states in the region. Such engagements provide little
scope for accessing market benefits. There is a need for a systemic
understanding of the basic agrarian and production relations in the region
which would facilitate a policy direction for developing economic com-
plementarities within the region and with the economies of South East
Asia in a shared market framework.
With more than 45 million people, the Northeast Region has a fairly
large market and holds the potential to develop into India’s powerhouse
with large reserves of energy resources, that is oil, natural gas, coal,
limestone as well as India’s largest perennial water system (Sarma
2011). The region’s agro-climatic conditions have endowed it with the
strong potential to develop horticultural products, plantation crops, veg-
etables, spices, rare herbs and medicinal herbs. The region also holds the
potential for developing into an export hub for the agro-processed indus-
trial sector. With its rich cultural and natural bounties, unique performing
arts and varied cuisine and handicrafts, the region offers unlimited tour-
ism potential. The NER has been the hub of niche products in handicrafts
and handloom. To promote the local products in NER, “One Village One
Product” movement that was initiated in Japan in the late 1970s or the
One Tambon One Product (OTOP) promoted by Thailand in the recent
past can be emulated. Under this programme village/rural communities
specializing in particular craft or trade are encouraged to improve the

quality and marketing of the locally made products, including handicrafts,
cotton and silk garments, pottery, fashion accessories and ethnic items.
The OTOP programme, which is relevant for the NER, can lead to
promotion of both trade and tourism as in the cases of Thailand and
Japan (Expansion of North 2011).
The strong cultural and social linkages of the region with the countries
in the Mekong Ganga sub-region, that is Cambodia, Lao PDR, Thailand
and Vietnam, hold good prospects for developing strong bilateral rela-
tions. The completion of the India–Myanmar–Thailand Trilateral High-
way and its extension to Lao PDR and Cambodia, and the new highway
project connecting the Northeastern part of India to the Greater Mekong
sub-region (the so-called “Mekong–India Economic Corridor” MIEC
project), will “add greater momentum to the growing trade and invest-
ment linkages between ASEAN and India” (MEA 2012). The Kaladan
multimodal port once commissioned would provide access to sea routes
for trade. With the completion of the Trilateral Highway between India,
Myanmar and Thailand (under BIMSTEC) by 2016, and the Asian
Highway Network, Northeast India is expected to be connected to
South East Asia (for further elaboration see Juergens 2014).
India’s trade with its neighbouring countries of Nepal, Bhutan,
Bangladesh, Cambodia, Lao PDR, Myanmar, Thailand and Vietnam,
which have close geographical proximity to the Northeast Region, has
grown from Rs.81,385 crore in 2009–10 to Rs.184,687 crore in 2013–14
recording a compound annual growth rate (CAGR) of 23 per cent (FICCI
2014). Despite the physical proximity the share of the NER in trade with
these countries has been hovering only in the range of 1 to 2 per cent. The
share of exports from the states of the Northeast to Bangladesh, Myanmar
and Bhutan is 5 per cent only. This shows that most of the trade between
India and its eastern neighbours takes place from industries in regions
other than in the Northeast. An estimate (FICCI 2014) of the logistical
cost of exporting from different port towns in India shows that the total
cost of trade from Dhubri to Dhaka is $22.20 per metric tonne, $29.60
per metric tonne from Guwahati to Dhaka, and the rates from Vishakha-
patnam and Chennai to Dhaka are $31.48 and $32.40 per metric
tonne respectively. The same source also shows that the logistical cost of
transfer to Mandalay from different towns are estimated to be $59.80

from Tinsukia, $31.87 from Moreh, $68.77 from Vishakapatnam and
$69.16 from Chennai. This clearly drives home the fact that the cost of
trading through the Northeast Region with the neighbouring countries of
South East Asia is far more economical. This provides a strong argument
for the relocation of business enterprises in the region for those goods
which are traded between India and its neighbouring countries in the
region.
There are also good prospects for increasing regular trade of India with
Bangladesh through the states of Assam, Tripura Meghalaya and Mizo-
ram. Almost 15 per cent of imports of Bangladesh originate in India and
there is potential to expand the market for trade complementarities with
Bangladesh and the Northeast Region. Likewise, four refineries in Assam,
with an annual refining capacity of seven million tonnes of crude, can be
operated to their full capacity with crude oil and gas imports from
Myanmar which has rich petroleum and gas reserves. This could lead
to a sufficient surplus of refinery products for export from Assam. Refined
petroleum products could be exported back to Myanmar, where energy
needs are growing rapidly. The informal trade in kerosene between
Myanmar and India through Manipur in Northeast India could also be
regularized. Exporting these products to neighbouring countries makes
more economic sense than transporting the products to other parts of
India. Myanmar, with rich deposits of natural gas, will be a great advan-
tage to the Indian economy. The Oil and Natural Gas Corporation
(ONGC) is already involved in the exploration of natural gas in Myan-
mar, and pipelines can be laid through the Northeast Region. The gas
supply from Myanmar coupled with the Tripura gas reserves can be used
for thermal power generation and other industrial uses in the region as
well as in other parts of the country. In strictly geographical terms,
Northeast India should embrace the Look (Act) East Policy as part of its
enabling framework. Given the fact that resource endowment and its
harnessing in the states of the Northeast would involve considerable
engagement with neighbouring countries, the North Eastern Coun-
cil (NEC), which is the collective regional forum for the states of North-
east India under the Ministry of Development of the North East Region
(MoDONER), needs to play a pivotal role in cross-border cooperation
and mainstreaming the development frame for the region with the Look
(Act) East Policy.
1.3 Mainstreaming Northeast India

in the Look (Act) East Policy of India
Regional and sub-regional cooperation have emerged as the two big
drivers of international relations and cooperation. The enduring pursuit
of regionalism and sub-regionalism has an underpinning thrust on peace,
security and development through exploration, identification and the
gradual intensification of trade, economic and cultural ties between
countries (Singh 2000). The experience of Yunnan province in South
West China which was similarly landlocked testifies to the need for
forging regional cooperation. Yunnan, with its 4000 km borders with
the countries of Myanmar, Laos and Vietnam, positioned itself as the
bridgehead for South and South East Asia and became the driving force
behind the formation of the Greater Mekong Sub-region (GMS) group-
ing. The GMS with support from the Asian Development Bank (ADB)
has progressed at a fast pace in implementing the connectivity network
through roads, rail and waterways and has linked Yunnan with Cambodia,
Thailand, Laos and Vietnam in generating huge volumes of trade and
business in goods and services. Likewise the Bangladesh, China, India,
Myanmar (BCIM) sub-region (a Track II initiative), which took off in
August 1999, is one such sub-regional endeavour that holds the prospects
of cooperation by clustering parts or the whole of BCIM, specifically the
landlocked frontier areas (Singh 2000). The region is estimated to be one
of the richest in terms of natural, mineral and other resources, but major
challenges in the way are political economy factors relating to market
access, investment opportunities, connectivity issues and regulatory
frameworks (Rahman et al. 2007).
Though trade in goods and merchandise under the Look (Act) East
Policy has remained scanty in so far as Northeast India is concerned,
prospects with respect to sharing expertise in manpower resources has
remained unexplored. India has established strong relations with the
countries of the Mekong sub-region where there is demand for English

teaching. The hill states of the region with their large proportion of
English speaking educated youths perhaps have a definite niche, though
it all remains a conjecture in the absence of any systemic study. Given the
large unexplored domain of demography and economy of the region, it is
no surprise that even after a decade of envisioning Northeast India in the
Look East Policy frame, the region continues to be isolated, bounded and
landlocked. The region has been wrapped in political economy of care
(Das 2015). It is caught in the uncertainty of economic gains vis-a-vis the
security of the region, that casts doubt on the readiness of the economy of
the region to engage with the market-driven economy of South East
Asia. It is particularly so, in the absence of a policy framework specifying
the contours of the Look (Act) East Policy for Northeast India.
Mainstreaming Northeast India’s development issues within the Policy
will provide a development framework for the region, and it is important
to recognize that the region’s locational advantage and rich resource
endowment, including manpower, provides an ideal setting for making
Northeast India a central part of the Look (Act) East Policy instead of
being a mere gateway. Therefore, realigning the development exigencies
of Northeast India within the ambit of the Look (Act) East Policy and
centring India’s overland trade through the region is bound to open up
opportunities for developing a unified market in the sub-region.
The Master Plan on ASEAN Connectivity which outlines the frame-
work for ASEAN’s regional cooperation has three aspects, viz. physical,
institutional and people-to-people connectivity, and it complements the
three basic thrust areas of the NER Vision Document: 2020. This
complementarity requires prioritization of action, and the experience of
Thailand and the GMS has clearly demonstrated that people-to-people
interaction makes the best starting point for subsequent integration in
physical and institutional connectivity. The ASEAN India Vision State-
ment (MEA 2012) has agreed on cooperation and promotion of greater
people-to-people interaction including exchanges in culture, education,
youth, sports and human resource development. Northeast India, which
has a shared cultural history with some of the ASEAN countries, such as
Thailand, Lao PDR, Vietnam and Myanmar, enjoys comparative advan-
tage in promoting people-to-people contact and forging closer social ties
and diplomacy. The establishment of regional norms for strategic coop-

eration is more likely to play a role in advancing national interests via
economic and regulatory tools (Leonard 2015).
Northeast Region by developing its inherent strength can create the
necessary condition to access the South East Asian countries along inter-
national route via the India–Myanmar–Thailand Trilateral Highway and
its extension to Lao PDR and Cambodia or the MIEC and break through
its landlockedness. However, the challenge is to forge a deeper and
broader regional integration (led by people who understand and accept
the difference and diversity of each constituent unit) that would ensure
secure and peaceful societies in the sub-region. Viewed from the physio-
graphic location of India, one can easily see that the Northeast Region
stands as the central meeting point of the Indian subcontinent with that of
the South East Asian region. To put it succinctly, South East Asia begins
where Northeast India ends. Hence, the envisioning of the Look (Act) East
Policy needs to be refocused with the centrality of Northeast India within
the three aspects of economic, socio-cultural and political security, as
outlined in the Master Plan on ASEAN Connectivity and Vision
NER: 2020.
1.4 The Way Forward

To realize the vision of putting Northeast India into a regional framework,
it is imperative that the Look (Act) East Policy be envisioned as India’s
regional development framework with neighbouring countries by
mainstreaming the Northeast at the centre rather than taking the Policy
as India’s need to engage with its neighbours overwhelmingly driven by
geo-political and security considerations. This shift in perspective would
pave the way for the Northeast becoming ‘central’ instead of being a mere
gateway. There are five interconnected issues critical to such a shift in
perspective for Northeast India (OKDISCD 2015). First, the integration
of the economies within the region is fundamental for the proposed shift.
This will entail integration in terms of physical connectivity at one level
and the unification of markets within the region, at the other essentially to
reap the benefits of development on the basis of comparative advantage
and economies of scale. Second, the institutional diversities which are the
hallmark of the region lead to higher transaction costs. Therefore, elim-
inating such impediments is crucial for the region. Third, rationalization
and harmonization of various policies, rules and laws within the region is a
key policy issue towards lowering the relatively high transaction costs in
the region. This would facilitate relocating many business interest groups
to the region from the rest of India because the logistical cost of trading
through the Northeast would then be far more economical than from the
coastal exit points at Vishakhapatnam or Chennai. Fourth, there is an
impending need to identify areas of complementarities between the
Northeast Region and its neighbouring countries. Engagement with the
Asia–Pacific region is an integral component of Indian foreign policy with
a focus on the three Cs: commerce, connectivity and culture. The Look
(Act) East Policy has thus developed into a multi-pronged strategy involv-
ing many institutional mechanisms at the multilateral and bilateral levels.
The question of security and development is not mutually exclusive but is
intrinsically linked. It is therefore required to develop a growth synergy
that embodies within it traditional economic life and the market system.
The cultural proximity of the Northeast Region with neighbouring South
East Asian countries provides an opportunity for promoting cultural
tourism whose potential has remained untapped. Besides trade and busi-
ness, energy and service sectors (health and education) are two emerging
areas of cooperation between Northeast India and South East Asia. The
sectors that offer immediate scope for regional cooperation are energy,
tourism and education, where the states of the Northeast Region can play
a pivotal role. In this context, forging strategic partnerships, networking
and facilitating people-to-people contact for exchange of ideas and
improving mutual understanding between Northeast India and South
East Asia are particularly important. Fifth, to recast the Look (Act) East
Policy as a regional development framework by mainstreaming Northeast
India would demand moving beyond security and strategic considerations
only. It has to accommodate a greater role for the NEC along with other
key actors like the Ministry of Commerce and External Affairs on the
socio-economic and political issues where the Northeast states are
intricately linked with countries in the sub-region. That would facilitate
a holistic approach taking both external and domestic dimensions into

consideration.
There are but challenges to be surmounted.4 Notwithstanding these
challenges, regional neighbours have moved ahead. Bangladesh, Bhutan,
India, Nepal (BBIN) Motor Vehicle Agreement (MVA) is an example in
this direction. This would improve connectivity by enabling seamless
movement of vehicles across regional borders. India’s agreement on the
Dhaka–Shillong–Guwahati bus service and its protocol, the Agartala–
Dhaka–Kolkata bus service and its protocol, and the Memorandum of
Understanding (MoU) on the use of Chittagong and Mongla Ports offer
excellent scope for establishing external connectivity to landlocked North-
east India. At the Third India–CLMV Enclave held in January 2016,
the Indian Minister of Commerce, reiterated the importance of connectiv-
ity between the countries within the framework of the Initiative for
Integration and the Narrowing of the Intra-Asia Development Gap and
the Mekong–Ganga Cooperation Process. The Minister highlighted oppor-
tunities for economic cooperation in areas such as capacity-building pro-
jects, software development and training, entrepreneurship development,
English language-based skill enhancement and telemedicine services. It is in
this context that engagement of the states of Northeast India can provide an
impetus for forging closer ties with CLMV countries which have cultural
and social affinity with many communities living in Northeast India. It
could be expected that in the course of time the local conditions of the states
would be aligned to the requirements arising from the development
perspective within the framework of the Look (Act) East Policy. Northeast
India cannot be a mere gateway to the ASEAN nations. It merits being the
central point of convergence between India and ASEAN by bringing
dynamism into the relation not only between India and the ASEAN
members, but also by mainstreaming the states of Northeast India in the
regional growth process under the rubric of India’s Look (Act) East Policy.
1.5 Chapter Scheme

The present volume is the outcome of the two-day international confer-
ence entitled “The Look (Act) East Policy and Northeast India” held at
Guwahati on September 25–26, 2015 where scholars from South East
Asia, Northeast India and other parts of India participated and deliberated
on four key issues. The 14 chapters in this volume have been arranged
into four parts to make a thematic and yet comprehensive reading on the
subject. The first part, “Northeast India under the Aegis of the Look East
Policy”, comprising three chapters, provides a backdrop to the develop-
ments made over the last 20 years as well as the lost opportunities for the
states in the region in forging a synergy for regional cooperation with
South and South East Asia.
Chapter 2, “Integrating Northeast with South East Asia: Great Expec-
tations and Ground Realities” by Atul Sarma, provides a critical analysis of
the working of the Look (Act) East Policy and its relevance for Northeast
India. Sarma drives home the point that Northeast India has to address
itself first to remove the binding constraints on its economies in terms of
its initial conditions, infrastructure lag, insurgency, imperfection/distor-
tion in factor and product markets, and the indifferent governance which
result in high transaction costs and inefficiency. The introduction of LEP
articulated a new vision of development for Northeast India and there is
an urgent need to develop the region with policy harmonization among
the constituent states because this would benefit the regional economies
while serving as a preparatory step for reaping benefits from its integration
with East and South East Asian countries.
Chapter 3, “Insider or an Outsider: Where Is the Northeast in India’s
Act East Policy?” by Rakhee Bhattacharya, argues that India’s Northeast
has never been in the LEP frame. The policy was formulated in the early
1990s along with the country’s economic liberalization policy to meet the
pan-Indian economic challenges of a minimal foreign exchange reserve
and a huge balance of trade (BOT) problem. To a large extent, India
could meet those challenges through LEP and by extending its economic
engagement with ASEAN. Northeast India has hardly made a break-
through, primarily due to the lingering issue of internal security, minimal
physical infrastructure and low performing economic institutions like the

market. However, it is believed that the AEP now has stronger possibilities
to put Northeast India at the centre of the Policy by expanding regional
cooperation with South and South East Asia for greater geo-economic
stability and strength in this Asian sub-region.
Chapter 4, “Look East Policy and Northeast India: Is It a Conjectured
Vision” by Gorky Chakraborty, seeks to analyse the statist paradigm that
is seamlessly entwined with many different dimensions such as foreign
policy, trade, defence and security, to mention a few, in the name of LEP
and its interplay with the Northeast Region of India. Chakraborty ques-
tions whether an overwhelming ethnic space termed “Northeast India”
can be accommodated in the policy solely by economic imperatives, and
concludes that the policy so far has not dealt with such issues despite
playing the tune of people-to-people contact for the acceleration of trade
and commerce with neighbouring countries.
Part 2, “Linking South East Asia through Northeast India: Trade
Investment and Connectivity Aspects,” comprises four chapters which
delve into issues centring round trade complementarities among the states
of Northeast India and the countries of South and South East Asia and
various aspects of connectivity and linkages. Chapter 5, “Unlocking the
Northeast Region of India: An ASEAN Connectivity Perspective” by Piti
Srisangnam and Anupama D. Masali, argues that to release the landlocked
area of the “Eight Sisters States” of Northeast India and to gain the
maximum utilization of the ASEAN production network, people-to-people
connectivity and socio-cultural relations between Thailand, Myanmar and
India need to be fostered. Sharing experiences from the Thailand and GMS
connectivity, the authors argue that the Master Plan on Mekong–India
Connectivity needs to be designed with at least three aspects, namely
economic, socio-cultural and political securities.
Chapter 6, “India’s Connectivity with ASEAN: What Role for North-
east India?” by Shankaran Nambiar, emphasizes that, given India’s inter-
est in enhancing economic ties with ASEAN, which is one of the fastest
growing regions in the world, there is a need for serious engagement to
understand what role Northeast India can play in this context. This is so
because Northeast India lies in close geographical proximity to ASEAN
and can offer a window through which India can extend a connectivity
network and, by extension, economic development in this part of India.

Chapter 7, “Act East Policy and Northeast India: The Role of Transaction
Costs” by Bhagirathi Panda, argues that the high transaction costs in the
region—due to undefined property rights, information constraints and
asymmetry, negotiation costs, enforcement costs, transport costs, a weak
law and order and governance structure, rent seeking and corruption—
have contributed towards a sub-optimal level of economy and functioning
in the region. For a sustainable development policy for the Northeast
Region, the AEP and the development thrusts of the region can be dove-
tailed to address the specific impediments mentioned for reducing trans-
actions cost so that economic cooperation within the sub-region can
become a reality.
Chapter 8, “Integration with Regional Blocks Through Intra-Industry
Production Networks: Boosting the Growth Prospects of Northeast
India” by Ashish Nath, asserts that every state of the region is endowed
with horticultural products, plantation crops, vegetables, spices, herbs and
medicinal plants and enjoys a competitive advantage in one or more
products. There are ample opportunities for the states of Northeast
India to become involved in an intra-industry regional production net-
work through their major products for improving income and employ-
ment opportunities and increasing competitiveness and, hence, access to
markets.
Part 3, “Look (Act) East Policy and India’s Multilateral Engage-
ments,” contains three chapters which attempt to address diverse
regional and sub-regional multilateral initiatives—such as the Bay of
Bengal Initiative for Multi-Sectoral Technical and Economic Coopera-
tion (BIMSTEC), the Bangladesh–China–India–Myanmar Forum for
Regional Cooperation (BCIM) and the Mekong–Ganga Cooperation
(MGC)—by India with neighbouring countries and how these multi-
lateral forums provide the space and opportunity for strengthening
regional cooperation in social, cultural and economic fronts between
the contiguous regions of India’s Northeast, China’s South West,
Bangladesh and Myanmar.
Chapter 9, “Look East Policy, Sub-regional Connectivity Projects and
Northeast India” by H. Srikanth, emphasizes that landlocked regions
within nation states are the victims of various kinds of social, economic
and political handicaps. In Northeast India conflicting economic interests,

unresolved ethnic conflicts, poverty, rampant corruption, vested interests
and recession in state economies continue to pose impediments to the
successful execution of connectivity projects. Apart from these factors,
India’s attitude toward its neighbours, be it China, Nepal, Bangladesh or
Myanmar, are also important determinants for expanding regional coop-
eration with the states of Northeast India. Unless the relations between
the member countries are based on mutual trust, respect and equality, no
amount of investment in physical connectivity projects will bring the
nations and peoples across the borders together.
Chapter 10, by Walter Fernandes, entitled “Look (Act) East Policy:
With or Through the Northeast,” argues that India cannot improve its
trade through Northeast India because the major problem lies with the
poverty in the border areas where not many goods required for formal
exchanges are produced. Moreover, India’s bureaucratic approach gives
China an edge over India. For building the Northeast India focus into
LEP, it is important to deal with these issues. This in turn could link with
a Myanmar entry point into ASEAN, an integrated system in which trade
and the development of Northeast India and western Myanmar could go
hand in hand. All of this requires cooperation between civil society groups
and the governments of India and Myanmar so as to provide a new
orientation to LEP and lead to its success in Northeast India.
Chapter 11, “Rebel Camps in Myanmar: Will They Hamper the Act
East Policy?” by Rajeev Bhattacharyya, tries to assess whether these rebel
bases would act as a barrier to the AEP so assiduously pursued by the
Indian government. He argues that the active cooperation during the
Nehruvian era gave way to a brief interlude of frosty relations after New
Delhi supported the pro-democracy movement in Myanmar in the late
1980s. Though both neighbours have moved considerably closer in the
past few years, there are unresolved issues like the separatist insurgent
groups that continue to operate out of camps in the neighbouring country
and are active along the porous border between both countries. At the
same time, New Delhi has firmed up ambitious policies involving Myan-
mar, such as the AEP, that envisage gaining access to the fast growing
economies of South East Asia.
Part 4, “Opportunities and Ways Forward in Building Strategic Part-

nerships,” tries to drive home the point that with greater connectivity
there would be higher flows of goods, traffic and people across borders.
The importance of opening up the region for commercial linkages with
South East and South Asia will also throw up challenges within the region
to cope with the international market. The onus lies within the states of
the region to find their niche areas so as to realize the potential gains from
larger frameworks of regional integration.
Chapter 12, “A Unified Northeast Economy: The Road to Gainful
Economic Integration with South East Asia” by Atul Sarma, argues that
an integrated market in the Northeast Region will provide the benefit of a
larger market, which in turn will enable the states to develop their
economies according to their comparative advantage and thus enjoy the
gains from scale economies and specialization. This will create enabling
conditions for augmenting the gains from trade and economic exchange
with the countries neighbouring the Northeast Region that are intended
to be promoted under LEP.
Chapter 13, “Look (Act) East Policy and Northeast India: Challenges
and Opportunities in Building Strategic Partnerships—The Way Forward”
by Sudhir Devare, argues that the Look (Act) East Policy is a major thrust
of India’s foreign policy and that it inevitably involves several challenges
which need to be addressed and overcome. Notwithstanding the challenges,
there will also be at the same time opportunities which have to be seized.
The impediments that appear at the moment are related more to imple-
mentation than political will. Closer coordination between government,
academia and the corporate world could serve well in addressing the various
dimensions of the impediments.
Chapter 14, “India’s Act East Policy Begins in Myanmar” by Munmun
Majumdar, tries to argue that without a cooperative Myanmar, it would
be difficult to translate LEP into the AEP for India in the context of
opening continental connections through several points along the
1643 km international border between Myanmar and Northeast India.
There is no doubt that Myanmar is an important factor if the AEP is to
live up to its potential of becoming the Northeast’s road to peace and
prosperity. The critical test for the success of India’s policy for establishing
linkages between Northeast India and South East Asia lies, to a great
extent, on New Delhi’s ability to strengthen its ties with Myanmar.
Chapter 15, “Locating Northeast India in the Look (Act) East Policy of
India” by Saswati Choudhury, traces the emergence of LEP and how
Northeast India figures in the scheme. Choudhury tries to explore why
economic engagement remains largely unrealized, what potential lies within
the states of Northeast India that can help it to be at the centre stage of the
Look (Act) East Policy, and what could be the possible convergence in
regional cooperation between South East Asia and Northeast India.
Fourteen chapters, organized into four parts in the book, broadly
speaking, discuss the rationale for, progress and economic possibilities of
mainstreaming Northeast states in Look (Act) East policy. It argues how
the Northeast cannot be taken as a homogeneous entity, given its hetero-
geneity in physiographic conditions, population density, level of urbani-
zation, resource endowments and growth process among the constituent
states of the region. The book delves into the domains of spatiality,
culture and tradition, demography, governance and economy of the
region and brings out the features which need to be addressed to align
the development frame for the region within the contours of the Look
(Act) East Policy. It is argued that Northeast India cannot be a mere
gateway to the South East Asian nations but merits being the central point
of convergence between India and South East Asia. It argues persuasively
for making the Look (Act) East Policy a development frame for Northeast
India rather than India’s imperative to engage with its neighbours largely
because of geopolitical and strategic considerations. It is important to
recognize that the region’s locational advantage and rich resource endow-
ment including manpower make it an ideal setting and thus making a
strong case for mainstreaming the development framework of the region
within the ambit of the Look (Act) East Policy, rather than placing it as a
mere gateway to South East Asia.
Notes
1. The share of ASEAN trade with India has gone up from 8 per cent in
1997–98 to 10 per cent in 2014–15, and ASEAN FDI to India over the
last 25 years has increased by 22 per cent.
2. Assam has the longest railway route in the region (2434 km) followed by
Tripura (151 km), Nagaland (13 km), Arunachal Pradesh (12.73 km),
Mizoram (2 km) and Manipur (1 km).
3. This is operated by Druk Air with two flights a week (Paro–Guwahati–
Bangkok) and four flights a week (Paro–Bagdogra–Bangkok). The much
hyped Guwahati–Bangkok direct flight operated by Indian Airlines was
grounded on April 23, 2003, due to reasons of low seat occupancy in the
flight and the high cost of operation. Regional flight networks had been
mooted in September 2015 with Guwahati as the major hub.
4. Bilateral relations between Myanmar and Bangladesh are not cordial on
account of the Rohingya issue in Rakhine state; India and Bangladesh need
to resolve the Teesta river water sharing issue. There is simmering discon-
tent between Myanmar and Thailand* over the long border of 2400 km, of
which only 60 km is demarcated.
*The problem lies in the crux of the Burney Treaty which was signed in
1826 by Thailand and Britain after the British possession of Burma in
1824. This treaty established the current boundary between the two
countries. After the independence of Myanmar in 1948, Thailand refused
to abide by the demarcation, emphasizing that it had been an imposition
by the British. Since then problems like ethnic insurgency and illegal
immigration has often kept the border between the two nations in an
uneasy quiet.
References
ASEAN. (2002). Text of Singapore lecture in 2002. http://www.asean.org/2835.
htm. Available at http://www.cpd.org.bd/pub_attach/op64.pdf
Das, S. K. (2015). Governing India’s Northeast: Essays on insurgency, development
and culture of peace. New Delhi: Springer.
Expansion of North. (2011). East India’s trade and investment with Bangladesh and
Myanmar, an assessment of the opportunities and constraints. RIS Research and
Information System for Developing Countries Ministry of DONER.
FICCI. 2014. Gateway to the ASEAN: India’s Northeast Frontier, November,
p. 10.
Juergens, L. (2014). BCIM and BIMSTEC: Two competing initiatives for North-
east India? Institute of peace and conflict studies. http://www.ipcs.org/article/
india/bcim-and-bimstec-two-competing-initiatives-fornortheast-india-4454.htm
Leonard, M. (2015). Geo-economics: Seven challenges to globalisation. World Eco-

nomic Forum, January 2015, Geneva. Available at http://www3.weforum.org/
docs/WEFGeo-economics7 Challenges Globalization 2015 report.pdf
Ministry of External Affairs. (2012, December 20). Vision statement-ASEAN-
India commemorative summit. Available at http://www.mea.gov.in
OKDISCD. (2015). Look (Act) East policy and North East India. Conference
brief, September 25–26, 2015.
Rahman, M., Rahman, H., & Shadat, W. B. (2007). BCIM economic cooperation:
Prospects and challenges. Dhaka: Centre for Policy Dialogue (CPD).
Raja Mohan, C. (2015, January 29). From looking East to acting East. Ministry of
External Affairs, Government of India. http://www.mea.gov.in/infocus-article.
htm?24714
Sarma, A. (2011). Integrating North-East with South-East Asia: Great expectations
and ground realities, J B Ganguli Memorial Lecture delivered at Tripura
Central University on April 11, 2011.
Singh, L. R. (2000). The Kunming initiative: Prospects for sub-regional coop-
eration. The Asian Scholar. Available at http://www.asianscholarship.org.
Accessed 13 Apr 2016.
Atul Sarma is Chairman of the Omeo Kumar Das Institute of Social Change
and Development, Guwahati, and also Visiting Professor at the Institute for
Human Development, New Delhi. He was Head and Professor of Economics at
the Indian Statistical Institute, New Delhi, and also Vice Chancellor of Rajiv
Gandhi University. He was ICSSR National Fellow. Professor Sarma was Mem-
ber of the Thirteenth Finance Commission (2007–2009).
Saswati Choudhury is an Associate Professor at Omeo Kumar Das Institute of

Social Change and Development, an ICSSR Institute, at Guwahati.
Part I
Northeast India Under the Aegis of the Look
East Policy
The introduction of the Look East Policy (LEP) articulated a new vision
of development for Northeast India. There was an urgent need to develop
the region with policy harmonization among the constituent states
because this would benefit the regional economies while serving as a
preparatory step for reaping benefits from its integration with the East
and South East Asian countries. The policy was formulated in the early
1990s along with India’s economic liberalization policy to meet pan-
India’s economic challenges of a minimal foreign exchange reserve and a
huge balance of trade problem. To a large extent India could meet those
challenges through LEP and by extending its economic engagement with
ASEAN. Northeast India could hardly make any breakthrough primarily
due to its lingering issue of internal security, minimal physical infrastruc-
ture and low performing economic institutions.
2
Integrating Northeast with South East Asia:
Great Expectations and Ground Realities
Atul Sarma
2.1 Introduction
While Northeast India has received a good deal of attention from the
governments at the centre, development initiatives have lacked a well-
articulated policy framework (Sarma 2005). Two paradigms have domi-
nated the Government of India’s Northeast India policy. One relates to
overstress on security/strategic considerations rather than on efforts at a
development perspective. The other relates to the minimum intervention
in traditional systems and institutions of the hill economy, which has led
to their non-compatibility with the functioning of a market system. Since
The author gratefully acknowledges Dr Deepak Misra’s contributions in carrying out a partial
revision of the earlier version of this chapter, which is a substantially revised version of the
Presidential Address delivered at the Seventh Annual Conference of the North-Eastern Economic
Association held at Rajiv Gandhi (Arunachal) University, Rono Hills on October 21–22, 2006.
I wish to thank A. Mitra for helpful suggestions on the draft. Thanks are also due to my daughters,
Nitu and Loni, for their helpful editorial suggestions. An earlier version of this chapter appeared in
the journal Man and Development.
A. Sarma (*)

26 A. Sarma
the mid-1990s, however, uninterrupted disorder and its relation with the
persistent under-development of the Northeast began to find a place in
the mainstream collective psyche as reflected in growing national level
debates, deliberations and discourses as well as the pronouncement of
special economic packages for Northeast economic development.
With the articulation of a Look East Policy (LEP) in the early 1990s, a
new vision for the Northeast as a gateway to dynamic South East Asian
economies began to take shape. The underlying thrust on “A New Asia”
makes one think of “A New Northeast” too. A vision for Northeast India
is absolutely necessary, simply because there was none in the past. It is
now envisaged that “with the recent softening of geo-political rigidities
following understandings with China, Myanmar and, most especially,
with Bangladesh, the North-East is no more a burdensome peripheral
region somewhere out there, but is poised once again to resume its
dynamic role as a bridge to the booming economies of South-East Asia
and South-West China to mutual benefit” (GoI 1997: 8). The economic
rationale that lies behind this vision is that the landlocked Northeast in
the aftermath of partition will have wider market access to some of the
fastest growing South East Asian and East Asian economies. This market
integration would boost trade with those countries, with the Northeast
serving as the gateway. Trade would thus serve as a driver of rapid
economic development in the region.
A good deal of deliberation and discourse has followed in different
forums resulting in the emergence of a considerable literature in the past
few years. Policy-makers, economists, political scientists, journalists and
others have all made contributions on this issue. A cursory look at these
contributions suggests that, by and large, non-economists such as jour-
nalists and historians are rather excited about it, while economists seem a
little cautious in their expectation of a Northeast linkage with South East
Asia as a driver of its economic resurgence.
This chapter attempts to take a close look at the proposition of
Northeast India’s economic integration with the East and South East
Asian countries and the possible gains to the region. I will address the
following questions. How does market integration work? How did the
past internationalization of the Assam economy work and what lessons
could we learn from such experiences in the past? How have informal and
2 Integrating Northeast with South East Asia: Great Expectations. . . 27
formal trade flows with South East Asia in the recent past impacted on the
Northeast economies? What enabling policy environment and physical
infrastructure for trade linkage are required to yield gains? What initiatives
should the Northeast take to maximize the economic gains as and when
the vision of its economic integration with the South East Asian econo-
mies becomes a reality?
2.2 How Does Market Integration Work?

Market integration leads to both trade creation, that is the emergence of
new trade and industry, and trade destruction, that is the exit of inefficient
activities due to competition from more efficient competitors from the
integrating countries. This process stimulates specialization depending on
the respective region’s comparative advantage and eventually higher
growth and welfare through scale economies resulting from a larger
market linkage. This is the theoretical reasoning that has spurred regional
integration in different parts of the world. Notable examples are the
European Union and ASEAN. The inspired advocacy for the integration
of the Northeast Region with the dynamic South East Asian countries
could be anchored on this theoretical postulation. It is empirically true
that “opening up to international trade has helped many countries grow
far more quickly than they would otherwise have done. International
trade helps economic development when a country’s exports drive its
economic growth. Export-led growth was the centrepiece of the industrial
policy that enriched much of Asia and left millions of people there far
better off” (Stiglitz 2002: 4).
2.3 Lessons from the Past Internationalization

of the Assam Economy
Assam has a long history of internationalization. Broadly speaking, Assam,
or for that matter the Northeast, has passed through three phases of
internationalization of its economy and society: (1) ancient Assam up
28 A. Sarma
until the end of the Ahom rule; (2) the colonial period; and (3) the post-
independence period (with two sub-periods, the pre- and post-reform
(1991) periods). But the nature, characteristics and impact on the econ-
omy in these different phases were widely different.
The first phase began with the establishment of the Ahom kingdom by
Sukapha, the first Ahom conqueror of Assam (a Tai Shan from Burma) in
1228. Ahom rule continued uninterrupted for almost 600 years until the
British wrested it in 1826. This period was characterized by political stability.
Historical evidence suggests that, apart from the Patkai route through
which Sukapha with his men and materials entered Assam, there were
several other routes to China via Burma, Bhutan and Tibet, through
which ancient Assam had trade access. There were also many other passes
through the northern mountains of Assam which led to China, Afghan-
istan and the West through Bhutan and Tibet.1
The trade that took place through these routes was considerable. Ray
(2005) on the basis of historical evidence has summed up the degree of
openness of ancient Assam: “Assam’s and for that matter, North-East
India’s prosperity was closely related to the high level of development of
its local handicrafts, natural products, silk and other textile products,
forest products, etc. as well as its easy access to the different parts of
India in the west to Myanmar and South-West China in the east, to the
north through tribal intermediaries, and to the south through a direct sea
route” (Ray 2005: 57). “North-East India’s trade with Tibet was
disrupted whenever the Chinese asserted their role in the latter. Since
their occupation of Lasha, they closed Tibet to the inhabitants of India,
and the inhabitants of the neighbouring countries like Bhutan . . . Such
sanctions undermined border trade. Gradual expansion of the Muslim
rule to the northeastern part of India in the medieval period did the same
damage to trade” (ibid.: 63). It should be noted, however, that although
the Ahoms encouraged trade, political considerations received precedence.
In reality, external trade and its pattern were essentially governed by
absolute domestic requirement on the one hand and the isolationist policy
of Ahom rulers on the other (Barua 2005: 105).2
The second phase of internationalization began with the British
colonialization in 1826. The Charter of 1833 that stripped the East
India Company of its monopoly over British trade to China led to the
formation of “The Assam Company” which had a virtual monopoly over

tea production in Assam during the first decade. With the success of the
company in tea production and government patronage, tea plantations
received a huge boost. But the important point to underline is that the
growth and expansion of the tea industry was almost entirely dependent
on the external market.
Alongside the tea industry, a few other resource-based industries such
as coal, petroleum and plywood also came up. Infrastructure was essen-
tially built to give support to the modern industry sector, mostly catering
to the external market. For example, the railway system that was devel-
oped in the nineteenth century did not link many important centres of
habitation. Similarly, the total investment in the organized economic
sector of Assam was estimated at Rs.200 million during 1881–1901 and
the average annual investment at Rs.10 million (Guha 1968: 214). But
the investment and infrastructure that had arisen by the end of the
nineteenth century bypassed the traditional sector.
At another level, largely due to labour shortages in Assam and partly
due to the aversion of indigenous people to take up plantation-related
wage employment, the tea industry essentially had to rely “on the famine
stricken tribal areas of the rest of India for steady labour supply” (Guha
1968: 208). The inputs and other requirements for the plantation sector
were also procured from large suppliers from outside the state. The overall
result was that the tea and other resource-based modern industries of
Assam had little linkage with the domestic local commodity, factor and
money markets. In the process the tea industry that largely catered to the
international market induced little investment in forward and backward
linkage based industries in the state while the surplus accruing to the
industry was ploughed back into the industry or siphoned off elsewhere.
In essence, investment, consumption, output and employment multi-
pliers did not work to the advantage of the domestic economy since the
modern economic sector had little interaction with the traditional sector.
On the face of it, imports of cheap industrial products from Great Britain
undermined the indigenous handloom and handicraft industries, the
mainstay of the Assam economy.
The important point to stress is that the internationalization of the
Assam economy with the growth of the export-market oriented tea
30 A. Sarma
industry did not emerge as the driver of its growth and prosperity. The
other point to note is that this phase of internationalization of the Assam
economy was characterized by a basic difference from that of the earlier
phase. The earlier phase witnessed a much closer link of the pattern of
traded goods with the indigenous sectors of the state economy, while the
latter phase functioned almost in isolation from the traditional economic
activities of the state. As a result, the gains from trade were far more
perceptible in the earlier phase.
While this phase continued up until India’s independence and parti-
tion, the new phase began with the incalculable damage caused to the
Northeast Region by the disruption of its traditional transport and
communication links and the resultant trade links. As the Shukla Com-
mission noted, “partition further isolated an already geo-politically seques-
tered region. It was left with over 4500 km of external frontier with
Bhutan, China, Myanmar but no more than a 22 km connection with
the Indian heartland through the tenuous Siliguri corridor, the Gateway
to the North-East. The very considerable market disruption, socio-
economic distancing and retardation that resulted has not been adequately
appreciated or compensated” (GoI 1997: 1). With foreign countries on all
sides3 of the Northeast Region, one could expect robust trade ties with
neighbouring countries. But that depends on political relations and policy
environment. The erstwhile East Pakistan and now Bangladesh is crucially
important for the Northeast’s inland and surface transport links. But the
country’s political relations with it were one of overt or covert hostility,
except for a brief period following the independence of Bangladesh. More
importantly, Bangladesh poses a demographic threat to the region even if
it is not a security threat to India. On the Northeast border remains Tibet
(now the Tibet Autonomous Region of China) and Myanmar. The
McMahon line that the British drew as a boundary between British
India in the North-Eastern Frontier Tracts (Arunachal Pradesh) and
Tibet was never accepted by China. It still remains a bone of contention
between India and China. The 1962 India–China war brought into the
open the hostility of China towards India. India–Myanmar relations from
the beginning were friendly from the early 1950s. Even with the military
government (State Law and Order Revolutionary Council), India’s
relations with Myanmar have improved since 1993. Similarly, India’s

relations with Bhutan are friendly, the latter being India’s protectorate.
Given the political relationship with the neighbouring countries men-
tioned above, the actual realization of trade potentials is constrained.
There is a host of other constraints as well. The most important among
them are policy environment at home and enabling conditions such as
supporting trade infrastructure and transport and communication con-
nectivity with the possible trading partner.
The inward looking policy that India pursued in the post-
independence period never viewed trade as a driver of the economy.
The trade that took place during this period was mostly with developed
Western countries for the simple reason that India’s thrust was to develop
the key and basic heavy industries and the required plant and equipment
as well as basic raw materials which were to be imported from developed
countries. Not many trade possibilities were explored with the
neighbouring Asian countries during this period. Nevertheless, the
Northeast continued to have informal trade with its neighbours. For
example, the illegal border trade with Myanmar was said to comprise
goods like precious metals, wood, spices, vehicles, consumer goods such as
electronic goods and fabrics, and drugs.
The Northeast’s formal and informal trade with Bangladesh through
Assam (the Mankachar and Karimganj routes), Tripura (Agartala) and
Meghalaya (Western Meghalaya-Baghmara and Chibbari) largely com-
prised exports such as farm and animal husbandry products, agro-
processed products like sugar, and manufacturing products such as med-
icines, cosmetics, motor parts and bicycles, and imports from Bangladesh
such as jewellery, electronic goods and jute and cotton textiles.4 Interest-
ingly, very few of the manufacturing exports relate to products of local
origin. What is more, while the export of bicycles and bicycle parts to
Bangladesh was thriving, the only bicycle factory at Guwahati was closed
down and the export requirement was met from elsewhere despite high
transport costs. It is also noteworthy that some of these trade routes also
facilitated the informal import of hashish, heroin and other narcotic
drugs, foreign exchange and unskilled labour from Bangladesh.
32 A. Sarma
2.4 India’s Look East Policy and the Vision

for the Northeast
With the shift in policy framework towards a market driven system and
the integration of the Indian economy with the global economy in the
early 1990s, external trade came to play an important role. With it
followed the Narasimha Rao government’s articulation of the Look East
Policy (LEP). Successive Indian governments supported the policy and
built on it. It is in this process that a new vision was shaped for the
Northeast Region to serve as the gateway to South East and East Asia.
Jairam Ramesh has forcefully argued that “political integration with the
rest of India and economic integration with East and Southeast Asia
particularly is certainly one direction that this region must be looking to
as a new way of development” (Ramesh 2005a: 4).5
A number of bilateral and multilateral agreements have provided the
foundation for India’s growing sub-regional cooperation with South East
Asia. The Ganga–Mekong sub-region and the Bay of Bengal Initiative
for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC,
December 1997) are notable examples of multilateral relations. The
Kunming Initiative6 of 1999, in which ASEAN and India stressed deeper
integration of their economies, also led to the Bangladesh–China–India–
Myanmar Forum for Regional Cooperation (BCIM).
India is now one of the four summit level partners of ASEAN, the other
three being China, Japan and Korea. India has signed a free trade agree-
ment (FTA) with Thailand and Singapore. There are plans to do so with
Indonesia, Malaysia and Brunei by 2011 and with the remaining ASEAN
countries—namely the Philippines, Cambodia, Laos, Myanmar and
Vietnam—by 2016. Furthermore, Prime Minister Dr Manmohan
Singh made a proposal at the third ASEAN–India summit for an Asian
economic community, including ASEAN, China, Japan, Korea and India.
One significant bilateral relation from the perspective of cross-border
trade potential between the Northeast Region and its eastern neighbour is
that with Myanmar. A border trade agreement, which was signed on
January 21, 1994, came into effect on April 12, 1995 when border
trade was officially declared open at Moreh in Manipur. The 160 km
Tamu–Kalewa–Kalemyo road, constructed with Rs.90 crore by the Bor-

der Road Organisation as India’s gift to Myanmar, held out promise.
While inaugurating the road in 2001, the then Minister, External Affairs
observed that “the natural movement of goods, people and services for the
North East is not through Calcutta” and underlined the importance of
“opening up the natural outlet of the North East.” Expressing similar
enthusiasm, Myanmar’s construction Minister, Major General Saw Tun,
said that the “road will become a vital section of the designated Asian
Highway running from Singapore to Istanbul passing through Myanmar
and India.” Subsequently, the Indian government opened its second trade
route with Myanmar, the Zokhawthar–Rhi route located in Mizoram. In
December 2003 there was a meeting of the foreign ministers of Myanmar,
Thailand and India in Delhi to discuss the technical and funding issues
relating to a 1400 km transnational highway.7
But India has no such agreement yet with Bangladesh, which has a long
border with the Northeast. Economic cooperation with the former is
expected to benefit hugely the latter. The Indo-Bangla Joint Commission
has not been able to settle the thorny socio-political and border issues that
exist between the two countries and thus pave the way for economic
cooperation. The proposed Indo-Bangla Free Trade Agreement is
expected to strengthen economic cooperation between the two countries.
India has also improved its economic relations with China, the other
important neighbour of Northeast India.
2.5 The Northeast to be a Gateway to East

and South East Asia
It is against the above backdrop of the trading environment that the
prospects of Northeast India’s gains from LEP should be considered.
It is important to note, however, that, while a favourable trading envi-
ronment is an enabling condition, physical connectivity assumes a critical
role in the realization of gains from trade. The revolution in information
and communication technology (ICT) has drastically changed the very
concept of connectivity. It has reduced distances and made possible the
dispersion of business operations to take advantage of differentials in
34 A. Sarma
wages and natural and other resource endowments, thus bringing down
dramatically production costs.
Even so, physical connectivity has to accompany ICT connectivity, for
goods have to be shipped to their market destinations by water, road and
railway, or by air, rather by “intermodal transport,” to use the jargon of
the world of transportation to emphasize the integration of different
modes of the transportation system. For a landlocked Northeast, inter-
modal transport would require the integration of roads, railways, air and
water. It is envisaged that the reconstruction of the Stilwell Road (also
known as the Burma Road),8 constructed during the Second World War
period (1942–45) as the Trans-Asian Express Way, together with the
Trans-Asian Railway, could link Myanmar, south-west Chinese trading
centres and the entire South East Asian region.
Goswami and Gogoi (2005) elaborated the scheme as follows. The
Stilwell Road constructed during the Second World War period
(1942–45) connected India with Myanmar and China. It passed through
Ledo, Lekhapani and the Pangshu Pass in India, Myitkyina and Lashio in
Myanmar, and Kunming, the capital of the Yunnan province of South
China. The stretch from Ledo to Myitkyina, 160–232 km, requires
rebuilding while from Myitkyina to Kunming, it is well developed. Lashio
is well connected by rail and road with the provinces of south and central
Myanmar bordering Laos, Thailand, Malaysia and Singapore. Indian
exports by the Stilwell Road could move from the easternmost border of
Arunachal Pradesh to Kunming in South China (1736 km) in two days,
to Tangoon in Myanmar in two and a half days, to Bangkok in Thailand
in four days and to Singapore in six days. The Tamu–Kalewa–Kalemyo
road (160 km) that was opened in 2001 could also be extended by
250–300 km to join the Stillwell Road at Bhamo in Myanmar, which is
well connected with Kunming. This road could also be extended from
Manipur by 300 km through southern Assam to the Bangladesh border.9
If that happens, Chittagong port, as compared with Calcutta port, would
be within shorter distance from Agartala, Guwahati or Shillong.
If such connectivity could be put in place, the operationalization of the
South Asian Free Trade Area (SAFTA) from January 2006, as agreed
upon by the leaders of the South Asian Association for Regional
Co-operation (SAARC) in January 2004, would open up great
possibilities for the development of the Northeast. In such a scenario, the

region “could emerge as a business transit center for both the SAARC and
ASEAN groups of nations” (Goswami and Gogoi 2005: 461).
The above is a neat outline of the physical network that could enable
the Northeast to engage with the dynamic East and South East Asian
economies. Once rebuilt, the Stilwell Road could be advantageous to
India’s trade with China. Today, this trade makes a long and laborious
6000 km trip through the Straits of Malacca, while the Stilwell Road
could shorten the trip to less than one-third. But the fact is, as Jairam
Ramesh puts it, “the approximately 1700 km-long road (of which
about 60 km are in India, about 1000 km in Myanmar and the rest
in China) still exists but in a state of extreme dilapidation”
(Ramesh 2005b: 44). But there are also other hurdles, such as those
discussed below.
First of all, the Government of India’s commitment to the vision of the
Northeast’s economic integration with its geographically, historically and
ethnically closer East and South East Asian countries has to be firm for the
simple reason that the capital cost involved is enormous, leaving aside
several other hurdles. But India’s participation in the Asian Highway does
not reflect the centrality of the Northeast in its scheme of integration of
India with South East Asia and beyond. Nor does one see any initiatives
on the part of the Government of India to take up the reconstruction of
the Stilwell Road. On the contrary, the Government has shown greater
interest in building a 1360 km trilateral highway from Moreh in Manipur
to Mae Sot in Thailand via Bajan in Myanmar, “taking a more southern
route away from the emerging Yunnan–Northern Myanmar–Southeast
Asia corridor” (Barua 2004: 16).
The Indian Government’s hesitation to project the Northeast in its
LEP can be traced to five factors. First, an overstress on security/strategic
considerations rather than on a development perspective in development
efforts was all along one of the dominant paradigms of the Government in
dealing with the Northeast in the post-independence period.10 Second, a
prolonged and uninterrupted militancy led by groups like the National
Socialist Council of Nagaland (NSCN), the United Liberation Front of
Assam (ULFA), the People’s Liberation Army (PLA) and the National
Democratic Front of Bodoland (NDFB) weighs heavily on the rebuilding
36 A. Sarma
of the Stilwell Road across the thick hills and mountains of Myanmar.
This could turn out to be a haven for numerous militant groups of the
Northeast and thus involve high security risks. Third, the aggressive
economic expansion of China to South East Asian countries11 like Myan-
mar is perceived as a threat in terms of flooding the Indian market with
cheap Chinese goods. Fourth, it is also apprehended that the Road could
facilitate the import of vices such as drugs and Aids/HIV. Finally, main-
land India’s trade with South East Asian countries has traditionally been
by sea. Even now, it finds it cheaper and easier to trade with these
countries by sea rather than by land.
While some of these concerns are not entirely unfounded, long-run
gains from integrating the Northeast with East and South East Asia
heavily outweigh the risks involved. As well put by sociologist Anthony
Giddens: “The positive embrace of risk is the very essence of that energy
which creates wealth in a modern economy. Risk is the mobilizing
dynamic of a society bent on change, that wants to determine its own
future rather than leaving it to religion, tradition or the vagaries of nature”
(Giddens 1999).
2.6 What Has the Look East Policy Meant

to the Northeast So Far?
One can observe a wide divergence between the official rhetoric of the
Northeast as the centre in LEP and the facts that have unfolded them-
selves. Rajiv Sikri, former Secretary (East), Ministry of Foreign Affairs,
Government of India, observed that “the ‘Look East Policy’ envisages the
northeastern region not as the periphery of India, but as the center of a
thriving and integrated economic space linking two dynamic regions with
a network of highways, railways, pipelines, transmission lines criss-
crossing the region.”12 Against this enthusiastic formulation, one should
recall the GoI initiatives mentioned above and the trade statistics below.
With the outward looking policy, India’s foreign trade shot up to US
$140 billion by 2003 from less than US$40 billion in the early 1990s.
Foreign trade as a ratio to GDP rose to more than 23 per cent in 2003,
from 12 per cent in the early 1990s. With it also rose developing
countries’ as well as Asia’s share in India’s trade (Khanna 2004). About
one-quarter of India’s foreign trade is now with Asia. The Northeast
neighbours’ share in India’s trade has also more than trebled since
1992–93, though it is still very small and far below its potential. In
2015–16, the share of the Northeast neighbours has increased to 13 per
cent of India’s total foreign trade, but if we exclude China and Thailand it
is only around 2 per cent.
What is noteworthy is that, while India’s trade with the Northeast
neighbours witnessed a dramatic rise from 1.7 to 8 per cent (Khanna
2004), the trade through the Manipur–Myanmar route has remained
small and insignificant at a mere 0.49 per cent of India’s trade with
Myanmar in 2001–02, and it has not shown any remarkable change
since then (Table 2.1). This only suggests that the bulk of the increase
in trade has been shipped through traditional maritime routes. In other
words, India’s booming trade with its eastern neighbours in the wake of
the regime of Preferential Trade Arrangements with SAARC/SAPTA
members (50 per cent less custom duty levied on imports) in the 1990s
and FTAs with Nepal, Bangladesh, Sri Lanka, Myanmar and Thailand has
not been hindered13 by the non-opening up of more northeastern borders
or the non-development of continental trade routes with its neighbours
through the Northeast. In fact, it has almost bypassed the Northeast.
The regions that have gained are the hinterlands of Chennai, Vizag and
Calcutta port on the eastern side. It is hardly surprising that, with closed
borders and open ports and the absence of proper infrastructure and
connectivity, the Northeast is not part of India’s trade expansion strategy
with the East.14 This means that the possibility of the Northeast serving as
the entrepôt for the entire hinterland of India is nowhere in sight.
2.7 Is the Northeast Ready?

Having asked this, one could pose the following question: Assume for a
moment that the envisaged connectivity with South East Asia is put in
place. What does the Northeast trade in?
38 A. Sarma
Table 2.1 Indo-Myanmar border trade (through Moreh Route) (Rs. Millions)
Year Exports Imports Total
1995–96 4.6 53.9 58.5
1996–97 298 161.7 459.7
1997–98 251.7 371.9 623.6
1998–99 48.8 37.5 86.3
1999–2000 31.1 65.3 96.4
2000–01 55.3 34 89.3
2001–02 12.3 75.9 88.2
2002–03 49.6 118.3 167.9
2003–04 94 88.5 182.5
2004–05 64.9 53.8 118.7
2005–06 38.7 52.1 90.8
2006–07 621.3a 27 648.3
2007–08 30.9 134.7 165.6
2008–09 16 76.1 92.1
2009–10 21.5 83.1 104.6
Source: Land Custom Station, Moreh, reported in Priyoranjan (2013)
a
Includes defence purchases
We have discussed earlier that Assam, or for that matter the Northeast,
passed through three phases of the internationalization of its economy.
We observed that external trade did exist in Assam, even in its distant past.
Ancient Assam’s trade was governed by absolute domestic requirement on
the one hand, and the isolationist policy of Ahom rulers on the other. Yet
there was correspondence between the domestic production pattern and
external trade, yielding higher trade gains even in a non-expansionist
regime.
But the external trade from the region in the colonial period thrived in
isolation, and thus limited the gains to colonial producers such as the tea
planters. In the post-independence era, the export basket comprised
resource-based products like tea, as in the colonial period, and the
Northeast continued to have informal trade with the neighbouring coun-
tries. With the thrust on external integration of the Indian economy in the
reform period, trade with Asia recorded a huge expansion, but the
Northeast was only a marginal player.
Even the limited exports, particularly of industrial products from the
Northeast to its neighbouring countries through both formal and
informal channels, had little correspondence with its local production

pattern. Nor has such trade induced any perceptible growth impulses
apart from developing a few commercial centres near borders. This is
more so even with fast rising Indian aggregate exports to the East and
South East Asian countries in recent years. This means, therefore, that
static gains from trade to the Northeast are limited, though it could be
much larger if it emerges as an entrepôt. But the dynamic gains could be
enormous under a favourable environment.
It is generally argued that the Northeast’s exports could “emanate from
agricultural produce, mainly processed fruits, vegetables and spices; flori-
cultural produce (mainly flower and orchids); and a variety of handloom
and handicrafts in which the region has established a substantial produc-
tion base.”15 Similarly, it is argued that the Northeast’s biodiversity and
heritage sites could be of great tourist attraction. It is further pointed out
that, with regional cooperation with South East Asia, Assam’s age-old tea
industry could find new outlets for exports. The Northeast has also vast
hydropower potential. Once harnessed, this power could be exported to
neighbouring countries. As the Shukla Commission argued eloquently,
and as many more before and after it have: “The region is bountifully
endowed with bio-diversity, hydro-potential, oil and gas, coal, limestone
and forest wealth. It is ideally suited to produce and process a whole range
of plantation crops, spices, fruit and vegetables, flowers and herbs, much
of which could be processed and exported to the rest of the country and
worldwide” (GoI 1997: 2).
But the point to note is that such development potential that essentially
relates to the region’s natural endowments has not only existed but been
widely recognized for a long time. However, its trade is not booming nor
has its vast natural endowments become a great source of growth. On the
contrary, its growth has continued to decelerate. The per capita income of
Assam, for instance, slumped from its initial advantage of 4 per cent above
the nation’s average per capita income in 1951 to 45 per cent below it in
2004 and 39 per cent in 2012–13.16 Why is this so?
The discussion on development potential in terms of resource endow-
ments is based on the supply side of a market. But to release the
development process calls for creating enabling conditions, both for the
demand and supply sides, for a market to interact efficiently. At the same
40 A. Sarma
time, it should be recognized that harnessing resources involves huge

lumpy investment which is beyond the capacity of the Northeast states.
The level of investment that is required for harnessing hydropower genera-
tion potential, for example, can be gauged from the following. The National
Hydro Power Corporation (NHPC) has estimated the financial involvement
at Rs.100,000 crore for a power producing capacity of 25,000 MW. Assum-
ing the same average cost per MW, this would involve another Rs.128,
000 at 2003 prices if the remaining part of the estimated hydro-electric
power potential were to be utilized. This adds up to an investment of
Rs.228,000 crore for the full realization of the hydropower potential of the
region. No wonder, therefore, that the enormous hydropower potential and
similar such resource potentials have remained untapped and thus remain a
mere theoretical possibility. Recent developments in the hydropower sector
in Arunachal Pradesh confirm this. More than 150 MoUs have been signed
with various companies, but on the ground there has not been much progress
(Bisht 2010). Many of the companies have decided to withdraw from the
projects (Rajshekhar 2013).
In the same way, the development of infrastructure required to open up
a dynamic growth process in the region involves investment on a massive
scale. The High Level Commission estimated the indicative requirement
of funds at Rs.93619.01 crore at 1996–97 prices (GoI 1997: 87-A).
This estimate is very much on the lower side, as may be guessed from
the indicative level of investment required for harnessing the hydro-
electric power potential alone, as shown above.
On the other hand, despite special economic packages by successive
prime ministers since 1996, and the submission of the High Level
Commission to the Prime Minister on “Tackling Backlogs in Basic
Minimum Services and Infrastructural Needs,” the Northeast has not
witnessed any significant improvement in its infrastructure. A study17
ranked Assam 15th among the major states in 2004, - one place down
(16th) in 2005, while all six smaller states were at the bottom, among the
small states of the country. States are ranked in terms of composite index
calculated by taking various parameters such as budget and prosperity,
agriculture, consumer markets, primary education, primary health, law &
order, infrastructure and investment environment into consideration. In
terms of the Human Development Index (HDI), Assam ranked 26th
among 32 states and union territories, both in 1981 and 1991, while small
Northeast states, except for Arunachal Pradesh and Meghalaya, were

above the national average score (Planning Commission 2002). What it
suggests is that resource endowment by itself is not enough to release a
dynamic process of economic development. It is possible only if enabling
conditions are created.
It inevitably follows that the Northeast has to address itself first to
remove the binding constraints18 on its economies in terms of its initial
conditions, infrastructure lag, insurgency, imperfection/distortion in fac-
tor and product markets, and indifferent governance, for all these con-
straints result in high transaction costs and thus in huge inefficiency. Only
then will the Northeast have a chance to benefit from its possible inte-
gration with East and South East Asia. It should not lose sight of the fact
that these countries are highly efficient and competitive. Again, the flow
of current or past informal trade avoiding custom barriers and duties is no
indication of the viability of formal trade that would face custom duties or
barriers.
At another level, the Northeast, with 45 million people, larger than
many high-income countries in the world, must aim at unifying itself as a
common market with an efficient transport and communication network
as well as with policy harmonization among its states. This would benefit
the regional economies enormously while serving as a preparatory step for
reaping benefits from its integration with East and South East Asian
countries as and when it takes a concrete shape.
To conclude, the Northeast India’s engagement with South East and
East Asian countries is undoubtedly a great vision for this landlocked
region. But, for it to edge into reality would inevitably involve a consid-
erable time frame even if the Government of India were serious about
it. The right strategy would be to pursue this vision vigorously while the
states within the region individually and collectively focus on removing
market rigidities and other impediments within each constituent and
between them. This strategy would bring down the high transaction
costs of doing business and thus improve efficiency and the business
environment. It would yield higher growth in the immediate future
while ensuring better preparedness to take full advantage of market
integration. Without such preparedness, the Northeast will remain on
the periphery, even if the connectivity with the neighbouring countries
were put in place.
42 A. Sarma
Notes
1. For detailed historical records, see Ray (2005).
2. For further details, see Alokesh Barua, “The Rise and Decline of the
Ahom Dynastic Rule: A suggestive Interpretation” In Alokesh Barua
(Ed.), op. cit. p. I05.
3. Assam, Tripura and Meghalaya share a border with Bangladesh, while
Mizoram, Manipur and Nagaland share one with Myanmar. Assam has a
border with Bhutan, too. The Tibet region of China and Myanmar
border Arunachal Pradesh.
4. Based on a survey conducted by Srinath Barua in 1996. See also
N. Roy (2005).
5. For a critical discussion on the implications of LEP, see Das (2010).
6. This envisages investment and trade cooperation between Yunnan,
Bangladesh, Myanmar and India’s Northeast; however, it has not made
much progress yet.
7. Barua (2004).
8. The Stilwell Road which was built by Chinese labourers, Indian soldiers
and American engineers and named after the American General, Joe
Stilwell, provided a vital support to China’s besieged army as it fought
Japanese occupation. The road transported 50,000 tonnes of bullets,
guns and food in a brief period of ten months. This was once the
Southern Silk Route, taking jade, silk, amber, spices, tea and Buddhism
across ancient Asia. Times of India, September 18, 2005.
9. The governments of India and Bangladesh seem to have proposed this
recently.
10. For further explanation, see Sarma (2005: 12–14).
11. Eyeing the vast potential of the South Asian market, and trying to attract
investment to its south-west, China has already began to repair the old
Burma Road to turn the 679 km stretch from Kunming to Myanmar into
a six-lane highway and to help the latter to rebuild the road that lies
within its jurisdiction.
12. CENISEAS Forum, “Towards A New Asia, Transnationalism and
Northeast India,” held on September 10 and 11, 2004.
13. It is non-trade barriers like restrictions on transit, visas and custom
regulations that have hindered further expansion of trade with them.
14. For further elaboration, see Khanna (2004: 19).
15. Parliament of India, Rajya Sabha, Department Related Parliamentary
Standing Committee on Commerce (1998–99), 36th Report on
Development Potential of Commerce in the North Eastern Region,

4. See also, Goswami and Gogoi (2005: 462).
16. In 1993 two states of the Northeast region—Arunachal Pradesh and
Nagaland—had real per capita income (at 1993 prices) above the
all-India average. At the end of the decade, 1999–2000, the latest year
for which the data except for Mizoram are available, none of the states in
the region had a real per capita income above the national average, the gap
ranging from 13.32 per cent for Nagaland to 42.54 per cent for Assam.
17. India Today (2004). Also see, Ministry of Finance, Government of India,
Report of the Eleventh Finance Commission (2000–05), June 2000,
218.
18. For detailed discussion on how exactly these constraints have impeded the
economic development of the region, see Atul Sarma (2005).
References
Barua, S. (2004). The look east policy and North-East India. Guwahati:
CENISEAS, O. K. D. Institute for Social Change and Development.
Barua, A. (2005). The rise and decline of the Ahom dynastic rule: A suggestive
interpretation. In A. Barua (Ed.), India’s North-East developmental issues in a
historical perspective. Delhi: Manohar.
Bisht, M. (2010). Dams in Arunachal Pradesh: Between development debates
and strategic dimensions. Retrieved December 28, 2015, from http://www.
idsa.in/idsacomments/ DamsinArunachalPradesh_mbisht_010210
Das, S. K. (2010). India’s look east policy: Imagining a new geography of India’s
Northeast. India Quarterly: A Journal of International Affairs, 66(4), 343–358.
Giddens, A. (1999). Runaway, world: How globalisation is reshaping our lives, BBC
Reith Lectures. Lecture 2, “Risk”, Hong Kong as quoted in Barua (2004).
Goswami, H., & Gogoi, J. (2005). Trading across China Myanmar Bangladesh
and India impact on North East India. In A. Barua (Ed.), Indias North East
developmental issues in a historical perspective. New Delhi: Manohar.
Government of India. (1997). Transforming the North-East-tackling backlogs in
basic minimum services and infrastructural needs. High Level commission
Report to the Prime Minister, New Delhi, March 7, 1997.
Guha, A. (1968). A big push without a take-off: A case study of Assam 1871–
1901. The Indian Economic and Social History Review, 5(3), 199–221.
India Today. (2004, August 16). ‘India’s best and worst states’. India Today.
(Special issue).
44 A. Sarma
Khanna, S. (2004). Will ‘Look East’ policy Usher an Era of growth and prosperity?
Paper presented at SENISEAS Forum “Towards a New Asia: Transnational-
ism and North East India”. Guwahati, September 10–11.
Planning Commission. (2002). National human development report 2001. Plan-
ning Commission, Government of India, New Delhi.
Priyoranjan, C. H. (2013). Border trade in Manipur ground level survey and status
Report. Department of Economics, Manipur University. Available at http://eco
nomics.manipuruniv.ac.inpercent20Dorderpercent20Tradepercent20Report.
pdf. Accessed 25 Apr 2016.
Rajshekhar, M. (2013, April 30). Hydelgate: Why Arunachal Pradesh’s hydel
boom is going bust. Economic Times. New Delhi. Available at http://
articles.economictimes.indiatimes.com/2013-04-30/news/38930347_1_hydel-
arunachal-projects-jindal-power. Accessed 15 Apr 2016.
Ramesh, J. (2005a). North-East India in a New Asia. Gateway to the East-A
symposium on NE India and look East policy, Seminar 500, June.
Ramesh, J. (2005b). Making sense of Chindia, reflections on China and India.
Delhi: India Research Press.
Ray, H. (2005). The silk route from North-East India to China and the Bay of
Bengal: Some new lights. In A. Barua (Ed.), India’s North-East developmental
issues in a historical perspective (pp. 43–65). New Delhi: Manohar.
Roy, N. (2005). ‘Indo-Bangladesh trade through K Karimganj: Problems and
prospects’ (unpublished). Presented at the international seminar,
Indo-Bangladesh border trade, organized by ICSSR, Shillong on July, 12–13.
Sarma, A. (2005). Why the North-Eastern states continue to decelerate. Man and
Society, 2(1), 1–20.
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imprint of Penguin Books.
Atul Sarma is Chairman of the Omeo Kumar Das Institute of Social Change
and Development, Guwahati, and also Visiting Professor at the Institute
for Human Development, New Delhi. He was Head and Professor of Economics
at the Indian Statistical Institute, New Delhi, and also Vice Chancellor of Rajiv
Gandhi University. In addition, he was ICSSR National Fellow. Professor Sarma
was Member of the Thirteenth Finance Commission (2007–2009).
3
Insider or an Outsider: Where Is
the Northeast in India’s Act East Policy?
Rakhee Bhattacharya
3.1 Introduction
It has been a perpetual issue for many, cutting across academia, policy-
makers, civil society and the business class, to understand and locate
India’s Northeast Region in the frame of its Look East Policy (LEP),
which was renamed the Act East Policy (AEP) in the year 2014 with the
change in Union Government to National Democratic Alliance (NDA)
II. A number of conferences, dialogues and books have been organized
and released since the earlier version of LEP was introduced in the early
1990s, which came along with India’s economic liberalization policy at
In labour economics, the insider–outsider theory examines the behaviour of economic agents in
markets where some participants have more privileged positions than others. The theory was
developed by Assar Lindbeck and Dennis Snower at the beginning of 1984. The objective of
economic agents is to find new markets, which need a vibrant exchange of ideas, people and
products between players for skill adaptability and competition. The Look East Policy/Act East
Policy is one such policy agent, which is the opposite of inward-looking and insularity, and
encourages the workforce to take a global perspective and remain an “insider.”
R. Bhattacharya (*)
North East India Studies Programme, Jawaharlal Nehru University,
New Delhi, India

46 R. Bhattacharya
the same time. For scholars, the nodal argument always has evolved
around the question of positioning India’s Northeast and the economic
and strategic benefits that might arise out of this policy frame. These
arguments are mostly based on speculation and apprehension, as there was
never any concrete frame for Northeast India in this policy. Many of the
speculations have been around an economic resurgence in the Northeast
through LEP by proposing engagement across the borders with its East
and South East Asian neighbours, which have geographical proximity to
this region of India, and how tactically the region may be placed regarding
economic diplomacy and dialogue with these nations within the LEP
frame. On the other hand, much of the apprehension, always and legit-
imately, came from the security perspective, as Northeast India has been
one of the worst affected regions through cross-border conflicts and other
illegal activities. Thus, as far as Northeast India, as an isolated, bounded
and landlocked region, is concerned, the LEP for the last 25 years has been
stuck within the interplay of such an economic necessity and security
compulsion; and many still argue that the ground realities of the region
are not yet ready to leverage any benefit from such an open economic
policy by India. But amidst all the complexities of Northeast India, there
has been a push, primarily from the Union Government and to some
extent also from some states of the region’s political, academic and civil
society initiatives for a way forward. For economic development, this
forward looking group seriously seeks an alternative for the existing
landlocked region.
With the change in Union Government in 2014, as pointed out by
C. Raja Mohan, Indian diplomacy was put at the service of India’s
development, and in this context Asia with its economic dynamism has
become a major priority for the Foreign Office of India. So the 1990s’
LEP of the then Prime Minister Narasimha Rao to reconnect with Asia as
part of India’s economic globalization once again turned east to improve
India’s economic fortunes after nearly a quarter of a century. This was
explicitly sounded when the present Prime Minister Narendra Modi
announced his AEP at Nay Pyi Taw, Myanmar at the 12th ASEAN–India
Summit in November 2014. This injected new vigour and purpose into
India’s Asia policy (Raja Mohan 2015a). Since then both the Prime
Minister and the Foreign Minister of India have been travelling widely
3 Insider or an Outsider: Where Is the Northeast. . . 47
in this region of East and South East Asia, extending even as far as
Australia and Fiji, including Japan and China, to understand and explore
the need of this hour. The countries in reciprocation also have responded
quickly and positively to extend engagement with India under this new
vigour. For example, the latest visit of Japanese Prime Minister Shinzo
Abe to India pointed to “the synergy between India’s Act East Policy and
Japan’s Partnership for Quality Infrastructure (Raja Mohan 2015b).”
With such fresh initiatives of the new government taking a more nuanced
position of acknowledging the need to act in terms of implementation,
this has brought fresh hopes and debates to scholars of Northeast India
once again. The attempts and arguments have begun to relocate the
position of this region in this fresh policy initiative of acting towards the
east. On the other hand, the recent historic Myanmar general election
(held on November 8, 2015), which is expected to turn around the
destiny of this militarily ruled country for a democratic government, has
raised the pertinent question once again as to whether the ground realities
of India’s Northeast can be changed so as to leverage benefits from this
new change, or whether the old debate still continues. Modi’s statement
on “India’s Eastern Journey Begins on the Western Boundary of Myan-
mar” at the ASEAN–India Summit in November 20141 certainly carries
hope to the people of India’s Northeast, who are closest to this boundary.
Amidst these renewed strategies, the present chapter attempts to look for
more clarity of positioning Northeast India within the renamed policy
frame of the AEP. The four broad sections of the chapter evolve through
the questions:
• Why was LEP formulated in India in the 1990s?

• Was the Northeast ever in this policy frame?
• Are the ground realities for the Northeast changing?
• Is the Northeast now ready to leverage from the AEP?
48 R. Bhattacharya
3.2 Why Was LEP Formulated in India

in the 1990s?
LEP was the outcome of India’s political economy at a period when the
country was almost bankrupt, with its Licence Raj2 and Import Substitu-
tion Policy. Such policies were initiated in the post-independence period
with the nation-building process having more reliance on state intervention
and central planning. But by the late 1980s, the outcome of such policies
and shortcomings of state-led development have been reflected in very slow
economic growth rates, almost zero foreign exchange reserves (due to the
halting of export led growth), and the situation of the oil shock due to the
Gulf War. All these, along with state inefficiency, have invited a huge
balance of payment deficit, with India forced to make structural adjustment
by embracing the role of the market. Like many other developing nations,
as argued by John Rapley, such statist theory ran into severe problems, as it
was insufficiently attentive to issues of incentives and output and profit
maximization, as normally provided by market incentives. Thus free-
market ideology eventually found its way into the corridors of the Western
world’s donor agencies, in particular the World Bank and the International
Monetary Fund, and a new global political economic approach emerged. In
India, for example, the maximum import duty was cut from 250 to 50 per
cent, and economic growth started rolling in (Rapley 2007). Thus, while
transitioning from state to the market, the country embraced an economic
liberalization policy in the framework of the neoliberal market, both within
and across borders.
Rising East and South East Asian giants, which were by then the global
economy’s most significant and top ranking post-war developed nations,
were the viable partners to collaborate with; a policy called Look East was
conceptualized in the early 1990s. Meanwhile, along with the collapse of
the USSR, and the Western pressure of globalization through its neolib-
eral policy approach to a trade–GDP growth model promoted by institu-
tions like the World Bank, India was forced to open up its economy by
gradually moving away from a statist frame to a market institution. India
had to find its new geo-economic3 strategies with new partners in the
booming East and South East Asia. Policy liberalization, inviting foreign
direct investment (FDI) and triggering India’s exports, were the mecha-
nisms to save the nation’s economy as a whole. In this entire tectonic
policy shift, domestic regional perspective in general and locating the
Northeast in particular were too trivial an agenda. LEP was therefore
the outcome of pan-India’s economic needs, and any particular region or
state was not the priority here. But in this policy shift, the regions or states
in India which were smart enough and had stable governance, reasonable
tax policies and good infrastructure took advantage and added both to
their respective state domestic products and India’s foreign exchange
reserve. Thus western, southern and some parts of northern states of
India were the huge beneficiaries from South East Asian nations like
Singapore, Thailand, Malaysia and the Philippines, and FDI over time
has reflected with huge regional concentration. The other specific reason
for such a policy shift was the persistent rise of China, both in terms of its
economic and military power. By the 1990s, China’s economic liberali-
zation was booming and it was displaying its military might to South East
Asia and its other neighbours. So India, for both its economic and
strategic reasons, had to push itself towards this region, and it has been
reasonably successful in doing so, as LEP today is considered one of its
most fruitful policies.
3.3 Was the Northeast Ever in This Policy

Frame?
In this discourse, LEP never provided any concrete road map for India’s
Northeast, though various notional attempts were made through other
platforms to locate the region in this policy frame. The prime reason for
such notional attempts was the region’s geographical proximity to South
East and East Asia and its strong and traditional ethno-cultural and
economic linkages, which existed during the pre-colonial period. The
attempts and ideas to reconnect the region were therefore natural. But
the ground realities were completely different. In the 1990s—when India
was in its first phase of LEP and was moving ahead from a sectoral
dialogue partnership with ASEAN in 1992 towards a full-fledged dialogue
50 R. Bhattacharya
partnership in 1995, before joining the ASEAN Regional Forum in 1996,

the first phase being completed by early 2000—Northeast states were
passing through their most unstable period of internal conflict and
violence. Almost all states in the region were struggling for stability and
were negotiating a peace process amidst such conflict through a multi-
prong approach involving dialogue, governance, economic promises and
the application of security forces. As these states were violent, security was
obviously a top priority. In the case of Assam, Sanjoy Borbora writes that
during the “tumultuous period between 1996 and 2001, urban and rural
Assam were awash with reports of dead bodies being recovered in paddy
fields, drains and even on the streets. . . . Local media carried these routine
instances of (personalised) terror” (Borbora 2014). Subir Bhaumik writes,
between 1996 and 1998, that “the entire area, which presently is covered
by the Bodoland Territorial Autonomous Council witnessed violent riots
between Bodos and non-Bodos. Hundreds died and nearly a quarter of a
million people were displaced” (Bhaumik 2014a). In the case of Megha-
laya, between the 1980s and 1990s, the Khasi Student Union had been
involved in agitating the “natives of Meghalaya” around the core issues of
control of the economy, polity, land and education. The Inner Line
Regulation system was one of the strongest demands of this group,
which regularly instigated arson, death and the beatings of non-Khasis
and “outsiders” in the state (Nigam and Menon 2007). Similar was the
situation in Tripura, Manipur and Nagaland.
Amidst such turbulence, some big ideas on development through
connectivity were conceptualized at the level of the Union Government,
primarily to deal with such conflict and security issues. These included the
natural gas pipeline, the Asian Railway link and the Asian Highway; and
the geographical niche was the Imphal–Tamu Road. Moreh in Manipur
was seen as the pivot in LEP. An attempt was made to formalize the
border trade route between Moreh and Tamu in 1995. But all these
hardly had any resonance in reality as violence and impunity had engulfed
the region. Suffering and the disruption of normal life were great due to
such day-to-day security threats. Connectivity was a far distance dream, as
road blockades, the demand for Inner Line permits, bandhs, killings and
kidnappings were some of the strong forms of protest and disruption for
various intra-community and ethno-nationalist conflicts in the region.
Thus road blockades, which is almost a yearly phenomenon in the state of

Manipur, have been a major impediment: National Highway numbers
39 and 53 remain non-functional for about 100 days a year (on average),
which cuts off Manipur from the rest of India. In this regard, Subir
Bhaumik has made a detailed study and according to him:
• The (other) major road corridor to connect Myanmar through the

Northeast region passes through an area long devastated by ethnic
conflict and separatist violence. The NH No. 39 that enters Nagaland
from Assam, and passes through its main commercial town Dimapur
and capital Kohima to end further south to Manipur’s capital Imphal
and frontier town of Moreh thus has been regularly affected by block-
ades and violence. The other National Highway No. 53 enters Man-
ipur from Assam’s Barak Valley and goes to connect Imphal through
Jiribam, where the Naga tribes dominate both these highways. Since
talks began between the Indian government and the National Socialist
Council of Nagaland (NSCN) in 1997, the Manipur government has
steadfastly opposed the NSCN’s demand for inclusion of Naga-
dominated areas of the state into a “Greater Naga state.” Meitei groups
in the Valley have opposed this demand and their violent opposition to
the extension of the 1997 Naga ceasefire to Manipur forced Delhi to
back off and limit it to Nagaland. The Naga student-youth groups
under the United Naga Council which backs the NSCN’s “Greater
Nagaland” plan have regularly chosen to enforce long-duration road
blockades on both National Highway 39 and 53 to cut off Manipur
from the rest of the country. This has happened at regular intervals and
each time, it goes on for months, not just days. (Bhaumik 2014b)
All these put the region’s human security at jeopardy, and the devel-
opment agenda of the Union Government within the security frame
hardly made any impact in the region regarding negotiation within the
LEP frame. Most of the states were ruptured by fighting against many
such odds. There were few attempts and even scope for this region from
within to engage with LEP. So the big vision and attempts of the Union
Government have failed primarily for the reasons that:
52 R. Bhattacharya
• Policies of connectivity were framed from a top-level perspective with-

out gauging the ground realities;
• Local voices, their need and participation, were missing in such a policy
frame;
• Such policies for many were responses of the state to counter the
region’s long-standing security issues, but not for developing the
region per se.
As the region was fighting its own battle of positioning its role in Indian
democracy, its economy was shrunken by the withdrawal of investors, a
declining net state domestic product (NSDP) growth, confidence that was
lost, connectivity work being disrupted and governance that was topsy-
turvy with local versus mainstream administration difficulties. The region
is still within the prism of what Samir Das calls the “political economy of
care” with all kinds of special policies to cater to its exceptional condition
(Das 2015). A policy like LEP did not really fit into the structure of
protectionism and uncertainty. Tables 3.1 and 3.2 show clearly how the
Northeast region gradually fell away from the rest of India’s economic
progress.
On the other hand, the tough neighbours of Myanmar and Bangladesh
have also been constant sources of irritation for the region, were blocking
ways for its economy to grow through various illegal cross-border activi-
ties, and were supporting the Northeast’s insurgent groups. Economic
opening at that period with such volatile neighbours, and then going
beyond to East and South East Asia, thus remained unsuccessful. The
failure of such attempts can be seen from some basic estimates4 such as
border trade figures, which show that the volume of trade has gone down
from 87 crores in 1997–98 to 8 crores in 2006–07 to 4 crores in
2010–11. These estimates show that the total share of ASEAN trade
with India has increased from 8 per cent in 1997–98 to 10 per cent in
2014–15, and ASEAN FDI in India over the last 25 years is about 22 per
cent, with the growth in FDI in the first phase of LEP at 50.02 per cent,
while in the second phase it was 63.02 per cent. Singapore scores the
maximum share at around 78 per cent in the 1990s, 80 per cent in the
2000s and almost 95 per cent in the current decade of 2010s. But such
Table 3.1 Growth rates of NSDP (%)

1970–71 to 1980–81 to 1990–91 to 2000–01 to 2007–08 to
1980–81 1990–91 2000–01 2007–08 2013–14
Northeast 3.55 3.95 3.57 4.05 7.08
Region
Other small 6.02 6.98 8.25 9.12 15.47
states
BIMARU 3.08 4.57 4.05 5.45 16.07
Prosperous 3.72 4.54 6.22 8.07 13.07
states
All India 3.23 5.04 5.46 7.44 13.99
Notes: The “Northeast Region” consists of Assam, Arunachal Pradesh, Manipur,
Meghalaya, Mizoram, Nagaland, Tripura and Sikkim. Here, except for Assam, all
other states are small in terms of area and population. “Other small states”
consists of Delhi, Pondicherry and Goa. “BIMARU” consists of Bihar, Madhya
Pradesh, Rajasthan and Uttar Pradesh. “Prosperous states” consists of Punjab,
Himachal Pradesh, Gujarat, Kerala and West Bengal.
Source: Author’s estimates from Central Statistics Office (CSO) data. All NSDP data
are converted to 2004–05 prices. Decadal growth rates are estimated by the log
linear regression model
Table 3.2 Growth rates of per capita of NSDP (%)

1970–71 to 1980–81 to 1990–91 to 2000–01 to 2007–08 to
1980–81 1990–91 2000–01 2007–08 2013–14
Northeast 2.26 3.63 1.58 4.07 5.53
Region
Other small 2.91 2.79 5.90 6.25 11.83
states
BIMARU 0.03 2.30 2.54 3.75 15.06
Prosperous 1.60 2.62 4.04 6.59 11.74
states
All India 1.39 3.01 4.16 5.93 12.50
Source: Author’s estimates from CSO data. All Per Capital Net State Domestic
Product (PCNSDP) data are converted to 2004–05 prices. Decadal growth rates
are estimated by the log linear regression model
inflow did not reach the Northeast; the figures show that Assam, which
includes all states by the Department of Industrial Policy and Promotion
of Ministry of Commerce, accounts for 0 per cent of India’s total FDI and
that the Northeast in a true sense remained an outsider to LEP during the
1990s and after.
54 R. Bhattacharya
3.4 Are the Ground Realities for the Northeast

Changing?
Much later, when India was already at the zenith of its economic pros-
perity, and LEP was almost at the end of its second phase, in 2008 a
historic North East Region Vision Document 2020 was announced. This
document for the first time laid out a concrete road map for the region
within the LEP frame. The document also for the first time reflected the
people’s voice and their changing aspirations. About 40,000 people were
interviewed from the region to understand their needs and demands. This
group included the new middle class, emerging youths, political vision-
aries with renewed ideas for the region and entrepreneurs, all of whom
sought change. It was felt that prolonged conflict and the mechanism to
resolve it through sovereign policies and exceptional laws like the Armed
Forces Special Power Act (AFSPA) had shattered the region’s vibrancy
and people’s participation. The “political economy of care” had created a
persistent fund flow into the region which, instead of initiating any
solution through development, created a new political class simply by
such government funding and its diversions. This created multi-layered
issues of unaccounted economy, rising group inequalities and huge intra-
regional disparities. The formal economy on the other hand was being fast
depleted with the withdrawal of investment due to security sensitivity.
The pride of this region, the tea industry, was marginalized due to heavy
extortion from this sector by various insurgent groups. This space has
been fast occupied by an emerging informal economy, where a large
number of immigrant semi-skilled labourers have started contributing to
several petty economic activities. Also a systematic land alienation had
taken place due to market penetration and flaws in local governance.
Severe conflict of land and resources between the local population and
immigrants have further lowered growth prospects and the propensity for
investment. Furthermore, human security started to surface as a bigger
challenge. Thus when the National Sample Survey Organization (NSSO)
2009–10 data was released and the Planning Commission estimated
poverty ratios, most of the Northeast states are seen to have experienced
a remarkable increase in poverty, with Manipur at the top with 47.1 per
cent of the people below the poverty line, followed by Assam with 37.9
per cent as against 29.8 per cent for India as a whole.5 Intra-regional
disparity, food shortages, environmental degradation and rising unem-
ployment were the other main issues across the states.
There was an urgent need for change and for a viable economy. The
start-up began with infrastructure and the setting up of connectivity. In
2005, a huge road development programme of 6418 km, called the
Special Accelerated Road Development Project—North East (SARDP–
NE), was initiated by the Ministry of Road, Transport and Highway,
Government of India, with an estimated investment of Rs.33,500 crores.
The objective was:
• To improve connectivity for all 88 district headquarters of the North-

east Region by at least a two-lane road;
• To improve roads of strategic importance in the border area;
• To improve connectivity to neighbouring countries.6
Since then, the political dynamics of some states has also played a
positive role. Tripura is one such state which has made successful efforts
with a multi-pronged approach to end conflict, initiate development,
restore connectivity and encourage trade. This is now one of the best
governed states in India and recently in 2015 has been credited for
repealing the AFSPA. This may now help the state to promote internal
development and enhance human security. Mizoram and Sikkim have
shown a reasonable degree of political stability. Nagaland, Meghalaya and
Arunachal Pradesh are now relatively stable, apart from a few sporadic
instances. The outlier is still Manipur, and to some extent even Assam.
But encouragingly, troubled neighbours like Bangladesh and Myanmar
have also begun to embrace change and democratize. Such significant
steps and neighbourhood transition are certainly the way forward for
Northeast India to concretize plans and become the beneficiary in the
third phase of the policy, renamed as the Act East Policy. The region also
needs to push forward with other neighbours like Bhutan, China and
Nepal, and also the nearest South East Asian neighbours like Cambodia,
Thailand, Laos PDR and Vietnam. Table 3.3 shows that at present
56 R. Bhattacharya
Table 3.3 India’s trade with its eastern neighbours (Rs. crores)
Countries 2010 2011 2012 2013 2014 CAGR (%)
Nepal 11,916 16,089 19,629 21,792 24,696 20
Bhutan 1632 2266 2594 2383 2927 16
Bangladesh 16,131 22,138 26,250 34,706 39,599 25
Cambodia 304 450 640 745 924 32
Laos PDR 222 80 625 1005 847 40
Myanmar 8987 8030 11,559 11,744 13,082 10
Thailand 28,030 39,278 49,469 54,515 54,407 18
Vietnam 14,165 22,298 32,652 37,693 48,207 36
Total 81,385 110,628 143,419 164,583 184,687 23
Northeast trade 1628 1154 1643 2118 2615 1.3
% of Northeast 2 1 1 1 1 –
trade in total
Source: Gateway to the ASEAN: India’s North East frontier, FICCI 2014
Northeast India’s share in total trade with its eastern neighbouring

nations is very insignificant.
Such a situation, as reported by FICCI, needs to be assessed, as the
region is closest to all these neighbours. India and these countries that
share borders with the Northeast region constitute a market of about 2.81
billion people which is roughly 40 per cent of the world population. Thus
the role of market and trade can emerge as a strong force to transform
India’s Northeast. Given its geographical location, Northeast India needs
to capture a much larger share of this emerging market by increasing both
its level of productivity and its trade with countries with which it shares its
borders, such as Bangladesh, Myanmar and Bhutan, as these regions
present a ready-to-go market for the industrial base in the Northeast
(FICCI 2014).
3.5 Is the Northeast Now Ready to Leverage

from the AEP?
In this opportune moment of change, the political economy of the region
needs to find a viable path to leverage from the expanding scope of the
AEP of the Union Government. With an electoral mandate for “devel-
opment” and the desire to evolve a meaningful “neighbourhood first”
policy with a “greater sense of priority” for a “new economic journey,” it is

natural for the present Union Government to provide impetus to this
policy. India, as mentioned by Prime Minister Modi at Nay Pyi Taw
during the ASEAN–Indian Summit in November 2014, would now
provide space for infrastructure, manufacturing, trade, agriculture, skill
development, urban renewal and smart cities; therefore ASEAN–India
engagement has immense potential for future collaboration. After just one
year of this summit, in November 2015, at the 13th ASEAN–India
Summit, Modi reassured such an engagement at Kuala Lumpur. Amongst
the big projects, India is now pushing for a Regional Comprehensive
Economic Partnership Agreement that covers goods and services and
investment. Emphasis has been made on connectivity issues with the
promise of completion of the Trilateral Highway project by 2018. Here
Northeast India can position itself in a prominent way. India has
expressed zero tolerance on terrorism, and is expected to react strongly
in combating such issues along its Northeast frontier, as neighbourhood
stability is essential to move ahead. Thus Modi mentioned an “inclusive,
balanced, transparent and open regional architecture for security and
economic cooperation.”7
Though all these promises and statements are for building deeper
ASEAN–India relations through government-to-government engage-
ments without any emphasis on a particular region. Northeast India
may gain from this ongoing policy, since it is in an advantageous
position—as compared to the 1990s, when LEP was initiated—in terms
of neighbourhood stability, Union Government support and regional
internal stability. Thus with the Awami League Government, which
came to power in 2008, Bangladesh has become much more transparent
now than in the 1990s, and its proactive role in combating insurgency and
extending bilateral economic engagement, more specifically with India’s
Northeast, is commendable. India also is responding positively, and their
joint initiatives to settle maritime boundary and land boundary disputes
in 2015 are steps towards this. The opening up of more border haats, bus
routes, border trade and cultural exchanges is a gesture towards future
collaboration. India can also take advantage of the transition in Myanmar
with mature, sensitive and timely diplomatic action. Engaging with
neighbours and then moving to ASEAN and beyond can bring hope to
58 R. Bhattacharya
India’s Northeast. At the ASEAN–India summit at Kuala Lumpur in

November 2015, Prime Minister Modi announced a cultural connection
between Northeast India and ASEAN by opening an ASEAN studies
centre at North Eastern Hill University, Shillong. Much more needs to be
done by the Union Government through rebranding and renaming LEP,
as a competitor like China constantly searches for an expansion policy in
this entire region. Thus, China’s latest proposal on September 18, 2015
for a Nanning–Singapore Economic Corridor, made at the 12th China–
ASEAN Business and Investment Summit at the Nanning Consensus, is a
fresh mapping of the Maritime Silk Road. This proposed corridor would
connect ten major cities across the South China Sea area, covering all
major ASEAN partners for economic integration according to two trajec-
tories. One line will head towards Vietnam, and the other would expand
to the less developed Laos, Cambodia and Myanmar. Thus at the imple-
mentation level, this corridor will encourage labour-intensive manufactur-
ing industries to cascade towards Myanmar, Laos and Cambodia (Aneja
2015). This is a strategic move for China. India therefore needs to
intensify its regional economic diplomacy, most importantly in the region
of Laos, Cambodia, Myanmar and its Northeast frontier. The AEP of
India has already identified these countries for extending its support, as
special emphasis will be given to Cambodia, Laos, Myanmar and Vietnam
for capacity building and manufacturing. India also needs to focus more
on Japan as a reliable neighbouring nation.
This whole initiative of the present Indian government is also a
response to other shifting global geo-economic and geo-political strategies.
As pointed out by Mark Leonard, three global turning points for the last
decade (2007–08 to 2014–15) have been the global financial crisis,
declining oil prices and a wider spectrum of conflict in the Middle East.
All these are once again forcing global competitors in search of new
markets, new trading partners and a new geo-economic alignment. In
this entire fast changing scenario, a role for Asia, with Myanmar at the
epicentre, is inevitable. So the regions which are already at the periphery
may once again be under the strong influence of a single core region and
hence may lose out (Leonard 2015). A region like India’s Northeast,
which despite having strategic significance and being closest to Myanmar,
may once again lose out if its market is not integrated, connected and
expanded through spatial agglomeration. This small isolated region which

continues its struggle in a bounded and ethnicized space, with priority on
identity politics and security threats, needs to understand both its new
challenges as well as its new opportunities. After all, it is a journey
involving a population of more than two billion and not merely the
40 million of Northeast India. Climate change, environmental challenges,
terrorist threats and economic uncertainty need a much stronger regional
forum in which Northeast India is prevented from acting in isolation in a
bounded landlocked space. As the AEP is another milestone for a bigger
regional push of India and its development, the Northeast needs to be
land-linked now to prevent more asymmetry and the danger of falling into
another periphery.
Thus restoring the connectivity deficit and creating sustainable and
viable economic zones in this region along with the Northeast is necessary
to transform this land-locked region into a land-linked space. So the
Northeast can connect with ASEAN, the former needs to explore quickly
the Kolkata–Kunming Corridor, other highways passing through it,
impending overland routes for car and bus connectivity and more airways.
All the states of the Northeast Region need to come together in agreeable
terms to set the rules for trade and investment, which is desirable for the
whole region. Instead of perceiving it as an exclusionary and bounded
space, its right to development needs to be ascertained outside the security
frame and outside the frame of the political economy of care. This has to
happen within a frame of entitlement, enablement and empowerment of
the people of the region. For this, more power and autonomy needs to be
given to individual states for decision-making on major policy issues like
labour reforms, land issues, investment generation, skill development and
financial inclusion, which are prerequisites to opening up the economy for
fair competition, though mindful of legislative safeguards. The latter,
which some parts of the region are still pushing, like the Inner Line
Permit (ILP), may not be helpful at this time of such a fast changing
geo-economy. It would only push the region towards a more isolated
outlook and help to create more economic cartels within this bounded
space.8 Therefore a policy of fair competition is needed to increase the
scale and size of the market, which can promote local entrepreneurship,
investment and engage local labourers for generating employment.
60 R. Bhattacharya
Manufacturing has never leaped up in the region, so the Make in India

programme may penetrate the region, which could create its own pro-
duction and market hubs, though with the necessary environmental
safeguards. The region cannot be suitable for many industries, but could
be optimum for horticulture, floriculture, tea, health, indigenous knowl-
edge, education and the research sector. All these could operate in an
extended spatial market and be connected to the global market through
the necessary infrastructure like a cold storage chain and faster connectiv-
ity. This could break the economic isolation of the region and resonate
with AEP. The broad debate therefore should concern connecting AEP as
an impetus to economic and human security in the region. Therefore
more political and business representation from these states need to
happen within the various dialogue processes of Indo–ASEAN conclaves
to explore more possibilities to be equal partners and to become parts of a
mainstream beneficiary. The people of the region may not be looking for
achieving big goals at this time, like turning Moreh into one of the
100 smart cities, but some moderate expectations and basic development
rights need to be ensured outside the paradigm of security issues, so that
the rising crises of economic challenge in the region is taken care of and
the people of the Northeast gradually become “insiders” of such a policy-
making process.
Notes
1. Modi’s opening statement at the India–ASEAN 12th Summit at Nay Pyi
Taw, November 12, 2014. Press Information Bureau, Government of
India.
2. Licence Raj was a political economic system of Post-Independence India
where a large number of State policies of issuing licences were in place to
regulate private capital.
3. Geo-economics is the study and influence of the spatial, temporal and
political aspects of economies and resources in both domestic and inter-
national aspects.
4. Border trade figures are estimated from MDoNER data. ASEAN trade is
estimated from Directorate General of Commercial Intelligence and
Statistics (DGCI&S), Ministry of Commerce data for the relevant years.

For FDI estimates, data is taken from the Department of Industrial Policy
and Promotion, Ministry of Commerce, and Indiastat.
5. Press Notes of Poverty Estimates 2009–10, Planning Commission, Gov-
ernment of India, March 2012.
6. Press Information Bureau, Ministry of Road Transport & Highways,
Government of India, February, 2013.
7. Opening statement made by Mr. Narendra Modi at 10th East Asia
Summit at Kuala Lumpur, Press Information Bureau, Government of
India, 22nd November 2015.
8. In economics, a “cartel” is an agreement between a small number of
competing firms to control prices or exclude the entry of a new competitor
in a market. It is a formal organization of sellers or buyers that agree to fix
selling prices, purchase prices or reduce production using a variety of
tactics.
References
Aneja, A. (2015). ASEAN trade corridor could ease regional tensions. The Hindu,
September 20.
Bhaumik, S. (2014a). Look east through northeast: Challenges and prospects for
India’. Observer research foundation occasional paper no 51, June.
Bhaumik, S. (2014b). Look east through northeast: Challenges and prospects for
India’. Observer research foundation occasional paper no 51, June.
Borbora, S. (2014). Road to resentment: Impunity and its impacts on notions of
community in Assam. In P. Hoening & N. Singh (Eds.), Landscape of fear:
Understanding impunity in India (pp. 110–127). New Delhi: Zubban.
Das, S. K. (2015). Governing India’s northeast: Essays on insurgency, development
and culture of peace. New Delhi: Springer.
FICCI. (2014). Report, ‘gateway to the ASEAN: India’s north east frontier’.
New Delhi: FICCI.
Leonard, M. (2015). Geo-economics: Seven challenges to globalisation. World
Economic Forum, January, Geneva. Available at http://www3.weforum.org/
docs/WEF_Geoeconomics_7_Challenges_Globalization_2015_report.pdf
Nigam, A., & Menon, N. (2007). Power and contestation: India since 1989.
New Delhi: Zed books Ltd.
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Raja Mohan, C. (2015a). From looking east to acting east. Ministry of External
Affairs, Government of India. Available at http://www.mea.gov.in/in-focus-
article.htm?24714/From+Looking+East+to+Acting+East. Accessed 29 Jan 2015.
Raja Mohan, C. (2015b). A new way to act east. The Indian Express,
December 15.
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world (3rd ed. pp. 57–84). London: Lynne Rienner Publishers.
Rakhee Bhattacharya is currently Associate Professor at the North East India

Studies Programme at Jawaharlal Nehru University, New Delhi.
4
Look East Policy and Northeast India: Is It
a Conjectured Vision
Gorky Chakraborty
4.1 Introduction
“Space” can often be described as a historico-geographical expression,
where there is a simultaneous reflection of a historical process within a
territorial organization. While scholars may agree to this basic premise,
they differ in their analysis associated with the actualization of this dual
process related to space. To Marx (1973[1857]) space is both a historical
product and a geographical expression in which capitalism’s inherent
search for cheap raw material, new sources of labour and a market is
exemplified through its historical tendency of eliminating geographical
This chapter is a revised and updated version of my paper entitled “From ‘Look East’ to ‘Act East’
Policy: Continuing with an Obfuscated Vision for Northeast India,” Occasional Paper 54, Institute
of Development Studies Kolkata: Kolkata, March 2016.
G. Chakraborty (*)
Institute of Development Studies Kolkata (IDSK), Salt Lake, Kolkata, India

64 G. Chakraborty
barriers, which he exemplifies as “annihilation” of space by time. This, of

course, according to him is specific to each period of capitalist accumu-
lation. Harvey (2002), on the other hand, explains how spatial fixes are
inherently associated with the process of capitalism’s global surge and its
process of accumulation. To him, it is only through this relatively fixed and
immobile configuration of territorial organization that the accumulation
process is expedited, which he describes as a “compression” of space by
time. This process of compression is territorially manifested in spatial fixes
through which the turnover time of capital is expedited. Therefore, while
“annihilation” obliterates the spatial dimension through deterritorialization,
compression recreates it through reterritorialization. In other words,
“space” thereby is “one of the constitutive social dimensions, continually
constructed, deconstructed, and reconstructed through an historically spe-
cific, multi-scalar dialectic of de- and re-territorialisation” (Brenner 1999:
43). Contemporary globalization, as a part of the longue duree, is also a
manifestation of such capitalist spatiality.
Within such an understanding this chapter analyses a “space” identified
as Northeast India (NEI).1 Although spatial configuration and
reconfiguration has played an important part in defining contemporary
NEI,2 I restrict our discussion in this chapter to the contemporary policy
named the Look East Policy (LEP), recently renamed as the Act East
Policy (AEP). NEI has been viewed by the state and policy-makers
through varied prisms that determined the clichés attached to it, for
example from being an anthropologist’s paradise in the 1950s, the region
has been a stage for an encounter between India’s approach to nation
building and the prevailing different narrations of nationhood of the
communities in the region during the 1960s and beyond. Thereafter, as
India embarked on a process of liberalization and globalization, it pro-
vided a major break towards the close of the twentieth century and NEI,
which otherwise remained entrapped within international boundaries,
caught the fancy of the Indian state as a “gateway of fortune” to connect
to the outside world. This was showcased to the people in the region as an
opportunity for escaping the post-partition (1947) “economic imprison-
ment” as well as a way to global capital as a “bridgehead” for trade and
commerce with their immediate neighbours in particular and South East
Asia in general. Thus, once seen as a sensitive border region, NEI became
4 Look East Policy and Northeast India: Is It a Conjectured. . . 65
a prospective economic region under globalization. Opening the region

thereby appeared to be the most efficient trajectory to usher in peace,
progress and prosperity and that had eluded NEI during the pre-liberal-
ization era (Chakraborty and Ray 2015a). Thus, LEP became the pre-
scribed path for bringing about such an order.
This chapter questions this “prescribed path” by relating the present
scenario in NEI with the expectations of LEP. In this regard, the con-
temporary macroeconomic fundamentals, the trade pattern, aspects
related to liberalization and the integration of markets are discussed. In
the process, we also look at the perception of the people towards LEP in
the borderlands of the region. In the next section, I deal with the issues of
a “borderless” world in an era of globalization, an understanding of which
provides a prelude to contextualizing LEP vis-a-vis NEI.
4.2 A “Borderless” World

Interpretations and analyses of globalization and borders are varied and
the differences sometimes are more apparent amongst economists (as well
as cyber scholars) and other social science practitioners such as geogra-
phers, political scientists, sociologists and legal practitioners. While there
appears to be an agreement that borders are becoming more permeable
under globalization, differences emerge amongst the scholars of various
social science disciplines about the role and relevance of territoriality and
nation states in the globalized order (Newman and Passi 2002). Whereas a
technocratic analysis of global networks under globalization enables econ-
omists to assume that “nation states have already lost their role as mean-
ingful units of participation in the global economy of today’s borderless
world” (Newman and Passi 2002: 192), where the nation state becomes a
“nostalgic fiction” (Ohmae 1995), “geographers, political scientists, soci-
ologists and international lawyers” on the other hand remain “more
skeptical” (Newman 2006: 146). Thus within the discourse on globali-
zation, borders continue to occupy a significant and varied position.3
The LEP which views NEI with the imperative of economic space
versus ethnic space has an imprint of the contradiction mentioned above
and in this regard Ohmae’s concept of a region state which subscribes to
66 G. Chakraborty
the “borderless” debate can be a point of reference in the case of NEI. A

brief analysis of the characteristics of a region state is therefore provided in
this section.
In the globalization framework, the territoriality principle transcends
the cartographic boundaries as a mechanism for capital and market
expansion. The region state, which is overwhelmingly driven by the
logic of capital, is its geographical manifestation. According to Ohmae
(1993), a region state is a natural economic zone which may engulf the
space of more than one nation. But they must be of adequate size to justify
the transport and communication infrastructure necessary to participate
economically at the global scale. This process, usually of supranational
formation, is not imposed by political fiat; they are drawn by the deft but
invisible hand of the global market. The primary linkage of such a region
state is with the global economy and not with their host nations. More-
over, the region states are defined not by their economies of scale in
production but by their having reached efficient economies of scale in
their consumption, infrastructure and professional services (Ohmae
1993).
In such a region state, as Ohmae explains, where true economies of
service exist, religious, ethnic and racial distinctions are not important as
commercial prosperity creates sufficient affluence for all. Whereas nation
states require a domestic political focus, region states are ensconced in the
global economy; welcome foreign investment and ownership seek access
of the people to the best and cheapest products. With such characteristics,
region states have a spillover effect in adjacent regions within the same
political confederation. So, the region state–international interface
replaces the traditional nation state–international organization interface.
Above all, the role of government in the region state is therefore to create
“untraded interdependencies” or positive locational advantages whereby
the policies are aimed towards wealth creation instead of income distri-
bution (Ohmae 1993). Under such a globalized order, a region state
becomes the dynamic motor of the global economic order.
While dealing with the task ahead for activating LEP in NEI, the NER
Vision 2020 rightly states that “liberation from economic imprisonment”
(NER Vision 2020, 2008: 260) is critical to the development of the
region and in the process highlights the importance of trade and
commerce with neighbouring countries and South East Asia as a way out
for achieving the goal. But the eight recommendations suggested for the
region to activate LEP maintains a selective amnesia about the ethnic
dimension associated with NEI. Taking a cue from Ohmae’s region state
(as mentioned earlier), does this suggest that, once the true economies of
economic services are provided and commercial prosperity is guaranteed,
it will automatically lead to the blurring of religious, ethnic and racial
distinctions in NEI?
4.3 From “Look East” to “Act East” Policy

LEP4 has been India’s effort for a global convergence of its geo-politics
with geo-economic interests in the post-Soviet world order. As India
embarked on a process of “opening up to the world,” LEP became
instrumental for dealing with the new world order. LEP has been a policy,
without a white paper, officially articulated by the then Prime Minister
Narasimha Rao in September 1994 in his Singapore Lecture. The stress
was on building India’s long term cooperation with South East Asia with
whom it had a legacy of strong historical, cultural and civilizational
relations (Muni 2011). India tended to come closer to South East Asia
through improving her relations both at the multilateral level with
ASEAN and at the bilateral level with each of the member nations of
the Association and other Asian nations as well, for example Thailand,
Malaysia, Singapore, South Korea, Indonesia and Japan (Mezard 2006).
The policy looked forward to private-sector-led market oriented
growth. This gave the rationale for building connectivity for trade expan-
sion and natural resource flow. It was a package primarily aimed at
promoting trade, inducing foreign direct investment (FDI) and engaging
regional and sub-regional partners for investment. In this regard, the
World Bank (2010) highlighted the prospect of integration with South
Asia and East Asia, which is seen as the new playing field of global finance.
NEI was also intended to be a part of this through this policy.
On the other hand, as a foreign policy initiative, the scope of LEP was
catapulted from a regional focus towards a new horizon for the global
economy. Chatterjee (2007) presents three different articulations of LEP,
68 G. Chakraborty
“each underpinned by a different conceptual orientation.” First, “the

policy can be conceived as a geo-strategy for security to protect India’s
legitimate power against growing Chinese domination in the region”;
second, as a communitarian reading of the Look East venture, interpreting
it in terms of sub-nationalism and “soft border exercises”; and third, as the
strategic place for economic cooperation. Programmatically, NEI offered
the space for realizing these aspirations. It is noteworthy that, although the
policy in its present form was initiated with the advent of liberalization in
the early 1990s, it was only in 2008 that NEI gained prominence with the
launch of the NER Vision Document 2020. This document identified the
problems of the region with the post-partition peripheralization which
isolated and exacerbated its socio-economic backwardness vis-a-vis main-
land India. This document thereby became the animated version of LEP
in NEI.
Infrastructure development, border trade and proper governance were
highlighted in the document as the means for ushering in inclusive growth
in the region. The document emphasized six development components,
namely self-governance and participatory development, the creation of
development opportunities, developing sectors with comparative advan-
tage, the capacity building of people and institutions, creating a hospitable
climate for investment, and building infrastructure through public invest-
ment. The Vision Document also emphasized an increase in connectivity
and in employment opportunities through state investment in infrastruc-
ture. It highlighted that LEP should focus on NEI, showcasing the fact
that South East Asia adjoins this region.
The opening up of trade routes would expand economic opportunities
for the region and accelerate its growth process by building connectivity
through road, rail, telecommunication and so on, connecting NEI with its
closest eastern neighbours, like Bangladesh and Myanmar, and even
beyond, with the other countries of East and South East Asia. The
geographical proximity of NEI to South East Asia has been presented as
the gateway to the outside world. The implications of LEP are therefore
diverse and multi-dimensional and include security, strategy, foreign
policy and administration other than the economic imperative that is
otherwise dominant in its orientation.
When the National Democratic Alliance (NDA) government took

office in 2014, LEP was rebranded as the Act East Policy (AEP)5 to
bring back some sense of urgency to the policy discourse. In the reframed
policy, although the thrust and vision remain similar, there is a greater
emphasis on building roads and connectivity as well as strategic (read
“defence”) partnership. The sub-regional initiatives, namely the BBIN
(Bangladesh–Bhutan–India–Nepal) Initiative and the IMT (India–
Myanmar–Thailand) Initiative, are given maximum emphasis in AEP.
Both Initiatives highlight the uninterrupted movement of cargo and
passenger and private vehicles to boost economic activity in the respective
countries. Similarly, there has been greater cooperation in defence with
countries in the South China Sea, namely Vietnam, Singapore and
Malaysia. In this regard, India has also signed an agreement with
Australia for greater security cooperation. Although qualitatively there is
not much to differentiate between LEP and AEP, the thrust in the latter
has been certainly more on fostering connectivity and strategic coopera-
tion with the immediate neighbours and countries in the Far East.
4.4 Selected Macroeconomic Indicators of NEI

With India joining the globalization bandwagon, the peripheral regions of
NEI suddenly became economically and commercially significant in the
understanding of the Indian state. Through the market economy the
region was to be given new meaning, where economic imperatives foster-
ing regional integration seemed paramount. In this regard, the contem-
porary macroeconomic fundamentals of the region should be understood
before activating a process of integration. This will be highlighted in this
section by focusing on the sectoral composition of the economy and the
contribution of labour in the region, regional income and above all aspects
related to trade which has been emphasized in the NER Vision document.
The levels of dependence of NEI on Union grants and the likelihood of a
changed scenario during the tenure of the 14th Finance Commission
(FC) (2015–20) will also be discussed in this section.
70 G. Chakraborty
4.4.1 Composition of Net State Domestic Product

and Contribution of Labour
There has been a decline in the contribution of the primary sector to the
regional income, though the workforce engaged in this sector has not
declined commensurately. More than 62 per cent of the rural and 13 per
cent of the urban workforce continue to be engaged in this sector,
contributing less than a quarter to the regional income. This indicates
both inefficient agriculture as well as the presence of disguised unemploy-
ment in the rural areas of NEI.
The secondary sector has contributed to regional income and employ-
ment albeit marginally. Within this sector only construction has contrib-
uted significantly both in terms of income and employment generation.
Manufacturing, on the other hand, shows a declining trend in terms of
income and a marginal change in employment generation. It is observed
that both the construction and manufacturing sub-sectors contributed
equally during 1993–94 but thereafter there has been a consistent decel-
eration in manufacturing, which has been overtaken by construction. Is
this in harmony with the expected gains from LEP? On the other hand,
while the contribution of the tertiary sector has increased substantially, it
has not failed to engage the workforce commensurately. Although it
remains the largest source of employment generation in urban areas,
there has been a decline (Table 4.1). A further analysis of the data reveals
that the shares of employment generated in wholesale, retail trade and
services have increased substantially in both rural and urban areas of the
region, while the sub-category of public administration and others showed
a negative trend in terms of employment generation. This shows that
there has been growing informalization in the region as well as a shift from
state led employment to a market led pattern; however, this remains
“petty” in its orientation. Under this scenario, the question remains as
to how the region, with these macroeconomic fundamentals, might
integrate with its neighbouring countries as focused on in LEP.
4
Table 4.1 Contribution to NSDP and composition of labour in NER, 1993–94 to 2012–13
Year Agriculture & Allied Rural Urban Industry Rural Urban Services Rural Urban
1993–94 39.51 75.6 15.3 17.43 6.2 14.7 43.07 18.2 70.2
2012–13 23.15 62.15 13.10 23.79 17.89 18.55 53.06 19.96 68.35
Source: Author’s calculation from CSO and NSSO data, various rounds
Look East Policy and Northeast India: Is It a Conjectured. . .
71
72 G. Chakraborty
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
1999–2000
1980–81
1981–82
1982–83
1983–84
1984–85
1985–86
1986–87
1987–88
1988–89
1989–90
1990–91
1991–92
1992–93
1993–94
1994–95
1995–96
1996–97
1997–98
1998–99
2000–01
2001–02
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
2010–11
2011–12
2012–13
Fig. 4.1 NEI’s contribution to national income (Source: Author’s calculation from
CSO)
4.4.2 Regional Income
The overall growth rate of NEI has never been at par with the Indian
growth story. For a period of more than 30 years (1980–81 to 2012–13)
the contribution of the region to India’s national income has exhibited a
falling trend (Fig. 4.1).
Within NEI, the contributions of individual states also vary, with a
clear trend of a declining contribution by Assam vis-a-vis other states in
the region.6
4.4.3 Formal Trade with Neighbouring Countries
According to the estimates of the Planning Commission during 1997–98

to 2005–06, the average value of trade of NEI with neighbouring coun-
tries (mainly Bangladesh and Myanmar) has been estimated to be Rs.406
crores. The balance of trade has been heavily in favour of NEI which is
mainly due to exports of primary commodities from Meghalaya. In
1997–98, exports constituted more than 88 per cent of the total trade
while imports were just over 11 per cent. The pattern of trade remained
similar during 2005–06 too. The same report also indicates that the
region mainly exports primary products, for example boulder stone,
Table 4.2 Major export items from NEI to neighbouring countries (Rs. crores)
Items 1999–00 % 2004–05 %
Tea 219.59 55.47 188.65 48.12
Coal 105.62 26.68 175.08 44.66
Limestone 29.2 7.38 9.24 2.36
Boulder 3.99 1.01 0.65 0.17
Ginger 2.27 0.57 3.63 0.93
Fruits 0.56 0.14 1.26 0.32
Vegetables 0.05 0.01 0.16 0.04
Perfumery 0.03 0.01 0.87 0.22
Soyabari 2.24 0.57 1.53 0.39
Cumin 0.13 0.03 1.04 0.27
Flour 0.77 0.19 1.7 0.43
Others 31.45 7.94 8.24 2.10
Total 395.9 100 392.04 100.00
Source: http://megplanning.gov.in/report/Task_Force_Report.pdf
limestone, tea and coal, which have remained similar over the years
(Table 4.2).
To facilitate official trade the Indo-Myanmar Border Trade Agreement
was signed on January 21, 1994. Accordingly, Moreh (Manipur) was
transformed into a Land custom station (LCS) on April 12, 1995. This
Trade Agreement introduced a three-tier trade system.7 Four LCSs,
located in Arunachal Pradesh, Manipur, Mizoram and Nagaland, are
designated for trade with Myanmar.8 But to date, trade is mainly limited
to Moreh. Trade through Zokhawthar LCS in Mizoram, which is other-
wise marked as functional, carries an insignificant share of the total trade.
However, in the overall analysis, NEI’s contribution to the total trade
between India and Myanmar is yet to show any encouraging signs
(Table 4.3).
The Moreh–Tamu trade, which continues to be the main constituent
of NEI–Myanmar trade, exhibits a similar trend. Analyses of trade related
data reveals that, after the initial spurt in trading, activities indicate a sharp
fall in volume. There is also a lack of diversified trade in terms of
commodities. Soyabari (soya chunks) and cumin seed are the two major
items exported; betel nuts, ginger and pulses are the major imports from
Myanmar through the Moreh LCS (Table 4.4). Presently, there are
33 LCSs along the NEI–Bangladesh border, among them 15 are
74 G. Chakraborty
Table 4.3 NEI’s share in India–Myanmar trade

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports 2.56 0.49 1.44 2.35 1.37 0.79 10.18 0.43 0.5 0.7
Imports 1.53 0.81 0.7 0.49 0.3 0.24 0.08 0.41 0.2 0.18
Source: RIS (2011)
Table 4.4 Value of trade in the Moreh–Tamu sector

Year Exports (from India) Imports (from Myanmar) Total trade
1995–96 10.45 5.39 15.84
1996–97 29.79 16.7 46.49
1997–98 25.16 37.19 62.35
1998–99 4.88 3.74 8.62
1999–00 3.31 6.52 9.83
2000–01 5.68 12.41 18.09
2001–02 1.29 8.13 9.42
2002–03 3.84 11.9 15.74
2003–04 9.45 8.85 18.3
2004–05 6.22 4.12 10.34
2005–06 7.89 6.22 14.11
2006–07 4.11 5.21 9.32
2007–08 3.22 6.33 9.55
2008–09 4.12 5.24 9.36
2009–10 3.86 6.04 9.9
2010–11 4.02 5.87 9.89
Source: Office of the Commissioner of Customs, Shillong
non-functional. During 1999–00 to 2010–11, average trade between

NER and Bangladesh was Rs.260.41 crores, average exports were
Rs.233.30 crores and imports Rs.27.05 crores. NEI enjoyed a trade
surplus during this period (Table 4.5).
Among the items exported during 1996–97, mineral products com-
prised 90 per cent and horticultural products a little over 5 per cent. The
rest consisted of agro-horticultural products from outside the region but
exported through the LCSs. The pattern has remained similar with
mineral products now comprising more than 98 per cent of the total
exports in 2010–11. Minerals mainly comprising coal and limestone were
supplied from Meghalaya to meet the demand of industrial units such as
cement plants (the Lafarge cement factory in Bangladesh has a 17 km long
conveyor belt that carries coal from Meghalaya to the plant), jute mills,
Table 4.5 Volume of trade of NEI with Bangladesh

Year Exports (to Bangladesh) Imports (from Bangladesh) Total trade
1999–00 169.81 9.44 179.25
2000–01 151.27 7.19 158.42
2001–02 186.13 5.5 191.39
2002–03 201.99 6.1 208.09
2003–04 239.01 11.51 251.52
2004–05 190.43 19.59 210.01
2005–06 215.93 45.64 261.57
2006–07 269.77 48.67 318.44
2007–08 293.56 39.45 333.01
2008–09 256.24 47.49 303.73
2009–10 301.12 40.77 341.89
2010–11 324.33 43.27 367.6
Table 4.6 Items exported to Bangladesh through LCS in NEI

LCS 2000–01 % 2010–11 %
Shillong division 92.38 61.10 249.47 76.92
Karimganj division 20.74 13.72 34.12 10.52
Agartala division 0.65 0.43 1.59 0.49
Guwahati division 25.26 16.71 37.22 11.48
Dhubri division 12.19 8.06 1.93 0.60
Total 151.2 100.00 324.33 100.00
brick kilns and tea gardens in Bangladesh. Almost all the items exported
from the region were without any value addition.
This is amply reflected in the export profile of the LCS in NEI. Shillong
division handled over 61 per cent of the total value of exports from the
region in 2000–01, which increased to 77 per cent during 2010–11. The
share of other divisions has declined (Table 4.6). On the other hand,
imports take place mainly through the Agartala division, although in
terms of value they show a declining trend. Other sections have registered
an increase, the highest being in the Karimganj section (Table 4.7). Items
of imports which are consistently found over the years comprise raw and
processed items such as hilsa fish and dry fish. A host of other items
including electronics goods, confectionary, soft drinks and garments,
appear sporadically.
76 G. Chakraborty
Table 4.7 Items imported from Bangladesh through LCSs in NEI

LCS 2000–01 % 2010–11 %
Shillong division 0.0039 0.05 1.87 4.32
Karimganj division 0.9021 12.55 15.27 35.29
Agartala division 6.16 85.67 25.87 59.79
Dhubri division 0 0.00 0.26 0.60
Total 7.19 100.00 43.27 100.00
4.4.4 Informal Trade with Neighbouring Countries
Several studies indicate that the volume and variety of informal trade
between NEI and neighbouring countries far exceed that of formal trade.
There are both economic and non-economic reasons for the flourishing
informal trade, the discussion of which is beyond the scope of this chapter.
But a look at the quantity will indicate the scope of this pattern existent in
the region.
4.4.4.1 Myanmar
Informal trade along the Indo-Myanmar border is a huge business.

Although Myanmar has borders with four Northeast states informal
trade takes place mainly through Manipur (Moreh) and partly through
Mizoram (Champai). During 2003–04, composition of imports from
Myanmar comprised about 50 per cent electronics and electrical equip-
ment. Textiles and footwear (17 per cent) were the second biggest items of
imports. In this regard, it is interesting to note that there was a difference
in the import profile among the two states—Manipur and Mizoram—
where informal trade was rampant. In Manipur electronics and electrical
items comprised the largest component of imports, along with generator
sets, inverters and inverter batteries, mainly to meet local requirements in
the state where power shortages are a severe menace. On the other hand, a
better-off state like Mizoram shows preference for textiles and footwear. It
is also observed that recently Mizoram is slowly becoming the preferred
route for informal imports vis-a-vis Manipur because of the prevailing
adverse law and order situation in the latter. On the other hand, informal
exports to Myanmar include manufactured items such as motor cycles,

bicycles, agricultural implements, paints, baby food, medicines and fuel.
Chemicals used as inputs for producing narcotics also comprise an impor-
tant item of informal exports from the Northeast (Bezbaruah 2013).
A recent interview with the customs official at Aizawl also highlighted a
similar condition. The excerpts from the interview highlighting informal
trade are provided in Box 4.1.
Box 4.1 Excerpts from Interview with Commissioner of Customs,

Aizawl, March 30, 2015
“Informal trade is a major issue at the Mizoram–Myanmar border. It not only
includes goods and commodities but also consists of huge quantities of drugs
and narcotics smuggled into Mizoram from Myanmar. Citing from the cus-
toms seizure data, the Commissioner of Customs stated that there is wide
fluctuation from one year to another in terms of the number of cases and
value of goods seized. But whatever the quantity of seizure, narcotics and
drugs are always much higher in value terms than other seized goods and
commodities. During 2013–14, while 91 cases of goods seizure was worth
Rs.14,491,611 during the same year, four cases of narcotic and drugs seizures
amounted to Rs.50,322,714. Similarly, during 2014–15, there were 67 cases of
goods seizures worth Rs.72,81,169 while only three cases of narcotic seizures
were worth Rs.10,030,000”.
4.4.4.2 Bangladesh
The National Council of Applied Economic Research (NCAER) (1995)

found sugar to be the single most important commodity of informal
trade9 followed by printed saris along the Karimganj sector in Assam. In
other districts of Assam and Tripura, wood and timber-based products
were the major commodities informally exported to Bangladesh. In terms
of groups of commodities, food and live animals comprised 40 per cent
from Assam, while in Tripura forest products comprised more than 52 per
cent of all the commodities exported informally. RIS (1996) found that in
NEI informal exports were higher through Mizoram and Meghalaya,
whereas through Assam and Tripura imports were prominent. Tripura
78 G. Chakraborty
and Assam were the two important states through which informal trade
was largely practised.
In another detailed study highlighting the composition of informal
trade between NER and Bangladesh, it was found that spices (23 per
cent), textiles (13 per cent), sugar (12 per cent), pharmaceutical products
(10 per cent), processed food (9 per cent), cereals (8 per cent), fish (6 per
cent) and fruits (3 per cent) comprised the major chunk of informal
exports. Informal imports from Bangladesh comprised mainly electronic
items (20 per cent), jute (15 per cent), plastic products (10 per cent), palm
oil (7 per cent), spices (4 per cent), textiles and fish (4 per cent each)
(Halder 2008).
On the other hand, if the seizure criterion is applied to ascertain the
volume of informal trade then estimates suggest that during 2000–01 to
2011–12 there were 84,186 cases of seizure in NEI where the total value
involved amounted to Rs.123.80 crores. The number of cases has shown a
declining trend, although there has been a steep rise in value terms of the
goods seized. This indicates a rise in the trading of valuable goods in
informal trade activities.
4.4.5 Central Assistance to NEI
To bridge the development deficit of NEI versus mainland India, a

plethora of agencies, schemes and assistance programmes have been
initiated at various points of time, for example the formation of the
North Eastern Council (NEC), the special category status, the
non-lapsable central pool of resources (operationalized during 1998–99)
and the Department of Development of the North East Region (DONER
2001). Higher levels of central assistance to state plans have been an
inseparable part of public finance due to the lack of revenue generation
potential in the region.
The Tenth Plan document stated that for 2001–02 the average per
capita central assistance for state plans for all the states in the region taken
together was Rs.1546, compared to Rs.356 for the country as a whole,
which increased to Rs.2574.98 for NEI as against the all-India average of
Rs.683.94 during 2006–07 (these figures are arrived at without taking
Table 4.8 Share of centrally sponsored schemes in own revenue receipts of states
Year NE total NE (excluding Assam) Special category states
2012–13 115.00 233.18 69.41
2013–14 103.80 193.02 65.98
2014–15 114.37 206.64 78.03
Source: Author’s calculation from the 13th FC, Annex 7.7
into account the special arrangements and initiatives routed through the
NEC and/or DONER) (Chakraborty 2016: 178). The level of depen-
dence of the states in the region on centrally sponsored schemes, which
when calculated excluding Assam, is more than 200 per cent of the state’s
revenue receipts vis-a-vis all special category states taken together. This
dependence of the states in the region on central funds has continued
unabated. Does this create a condition for the near absence of a “con-
structive” regional voice in the region (Table 4.8)?
There is another interesting aspect that is emerging in this saga of
financial dependence of the NEI on central resources. The 14th FC
covering the period 2015–20 has recommended an increase by 10 per-
centage points (from 32 to 42) in the share of the states from the divisible
pool of central taxes, which it proclaims will increase the financial auton-
omy of the states. However, for Assam, Himachal Pradesh and
Uttarakhand—all Special Category States (SCS)—there has been a
decline in the proposed share of central taxes compared to the 13th FC
(see Table 4.9).
Simultaneously, if one also takes into consideration the fact that during
this period there has also been the abolition of the Planning Commission,
which thereby has created an uncertainty regarding plan allocation and
transfer of other discretionary grants provided to SCSs, the situation
becomes critical. Moreover, if one also takes into account the fact that
the funds allocated to the central ministries under SCSs has also been
slashed, the burden on states, especially SCSs, will be substantially higher.
In such a scenario, if we attempt to simulate the different scenarios of fund
transfers from the Union to SCSs during the period of the 14th FC,
certain interesting trends emerge.
Let’s consider three scenarios10: “A” which considers the funds that will
be transferred to the states as per the recommendation of the 14th FC; “B”
80 G. Chakraborty
Table 4.9 Share of central taxes and grants to special category states
State share in Finance Commission
transfers (%)
Special category states 13th FC 14th FC
Arunachal Pradesh 0.33 1.37
Assam 3.63 3.31
Himachal Pradesh 0.78 0.71
Jammu and Kashmir 1.55 1.85
Manipur 0.45 0.62
Meghalaya 0.41 0.64
Mizoram 0.27 0.46
Nagaland 0.31 0.5
Sikkim 0.24 0.37
Tripura 0.51 0.64
Uttarakhand 1.12 1.05
which includes the net tax share to states and aid grants without CSS; and
scenario “C” where it is assumed that the transfers and CSS of the 13th
FC are continued during the period of the 14th FC (calculated by
maintaining the actual rate of growth of both tax share and grants as
well as CSS during 2010–13). Under these assumptions, if we plot
scenarios A, B and C for the period 2015–16 to 2019–20, it appears
that for SCS initially the transfers from the 14th FC compared to the 13th
FC are higher, which thereafter is reversed after 2017–18 and declines as
they progress to 2019–20. This simulation indicates that, without CSS
and the uncertainty regarding plan and discretionary grants, the 10 per
cent increase in the transfer of financial resources under the 14th FC may
not fetch proportionately higher receipts for three SCS (Assam, Himachal
and Uttarakhand), which due to their overall weight in the total makes the
situation worse for SCS at an aggregate level. In this regard, Assam may be
the worst off considering its lower per capita income compared to the
other two states. However, for other Northeast states (including Sikkim)
this means a higher transfer of resources from the Union. What will be the
ramifications for the region, if the state with the largest economy (Assam)
in NEI is adversely affected, remains a matter for further enquiry
(Fig. 4.2).
250000
A.
Total Tax Share to
States and Grants in
200000 Aid as of 14th FC
(Rs. Crore)
150000
in Rs. crore
B. Net Total Tax

Share to States and
Grants in Aid as of
14th FC, in Case of
100000 No CSS (Rs. Crore)
50000 C. Total Tax Share to

States, Grants in Aid,
and CSS as of 13th
FC
0
2015–16 2016–17 2017–18 2018–19 2019–20
Fig. 4.2 Expected transfer of financial resources to special category states, 14th
Finance Commission
The macroeconomic picture of NEI discussed so far clearly shows that,

on the one hand, there is a drain of primary commodities from NEI in the
name of exports, and on the other, a severe dependence on the transfer of
resources from the Union Government in terms of finance.
4.5 Related Economic Issues

NEI, which lies on a tribal–feudal continuum, exhibits three different
modes, namely domestic, intermediary and capitalist, where the interme-
diary is a place of exchange, that is a meeting ground, for the other two
modes in the region.11 While the domestic mode generates petty produc-
tion and minimal surplus, the capitalist mode is the site for the location of
extractive industries and services, which remained subsumed within the
national space prior to globalization. Now, with globalization, the inher-
ent drive of capital will seek to entangle or, one might say, subsume the
capitalist mode (percolating to the other modes as well) into the global
market space. The question remains as to how the region might situate
itself in such an order.
82 G. Chakraborty
In this regard, although the intention of LEP looks pious, it still bears a
question mark when one compares the same with the macroeconomic
fundamentals of the region. The extractive nature of the region’s economy
and very high levels of dependence upon the Union, NEI seems to be less
prepared to contribute gainfully to the process of international trade and
commerce. In such a situation, with an over-emphasis on infrastructure
building to connect the region to the global market, will NEI be some-
what akin to what Ohmae describes, in his “The Rise of the Region State,”
as a region “not defined by their economies of scale (in production) but
rather by their having reached efficient economies of scale in their con-
sumption, infrastructure and professional services” (Ohmae 1993: 80)?
Will NEI be a contributor to the production process (both exogenous and
endogenous) or a consumer of global products under such a scenario?
As differing modes of production exist in the region, there has been a
hiatus between the lived space of the communities (in the domestic mode)
and the spaces that existed in the other two modes (domestic and
capitalist). In these conditions, as the state emerged as the sole arbitrator
in the region (particularly during the post-colonial phase), the hiatus has
been between the appropriating state vis-a-vis the lived spaces of the
indigenous communities. This resulted in the somatic detachment of the
communities from their lived space. This was sought to be minimized by
constitutional provisions such as the Sixth Schedule of the Indian Con-
stitution. Now, as the region moves into the globalized space, this process
of detachment enters a new and perhaps more critical juncture, where the
threat of extinction becomes apparent. In other words, globalization bears
the threat of extinction of the hitherto existing somatic proximity of
ethnic communities and their embeddedness within their community
resources. Will the existing traditional authority structure under the
Sixth Scheduled be able to negotiate with such a situation? If one goes
by the performances of the functioning of these traditional institutions in
the region, the likelihood of the creation of unbridled opportunities for
global capital (of course in connivance with local power brokers) for
resource extraction and thereby capital accumulation from NEI seems
to be strong.
This scenario gets further complicated due to information asymmetry
and undefined property rights on land in the region, mainly in the hill
areas. To any observer of NEI, it is evident that land markets along with
the leasing of land are rampant.12 But in the absence of formal titles and
mechanisms for registration, the scope for usurpation by de facto owners
to become de jure owners with the connivance of the state apparatus
becomes easier. So neither community land nor community resources
continue to remain embedded within the socio-cultural control of the
community but become a source for usurpation by elites, either in the
name of community control or of preserving the identity of a population
group against “outsiders.” Amongst all the states in the region, especially
amongst the highlanders, the issues of landlessness, lack of access for the
ordinary tribal masses over community resources, indebtedness and so on
have become a norm in today’s world.12 Do such an unequal order
thriving on informalization (since formally resources are community
owned and managed by customary laws) and the lack of proper institu-
tions augur well for the ordinary tribal in NEI in its push towards
globalization? Moreover, the constricted size of the market in the region
itself poses a question mark on the success of the logic of globalization.
This then poses a question mark about the existence of the competitive
equilibrium in market relations. Even if, for the sake of argument, one
assumes that this equilibrium exists, can it be a Pareto-efficient one?13 In
such a situation, how will the forces of globalization deal with the
commodity, money and labour markets in the region? Will it lead through
market successes or market failures? This remains an important question
concerning the region.
Alternatively, can internal integration of the region be one of the
alternative possibilities for development? Presently, a lack of synchroniza-
tion due to the absence of common policies pertaining to NEI results in a
lack of common strategy for dealing with development in the region. In
policy terms, one can of course site the example of Northeast Investment
and Industrial Policy to counter this experience. But the experience of the
North East Industrial Policy, 1997, shows that the disbursed incentive
and revenue forgone for all the individual states in the region has been
Rs.1664.76 crores for a total investment of Rs.1067.28 crores (Planning
Commission 2006). This is surely a case of lack of synchronization in the
development agenda. It is understood that as the development of one state
in isolation is pretty difficult to materialize, synchronization and
84 G. Chakraborty
unification of the markets in NEIs can be an option towards a successful

trade based process of industrialization (Barua 2005). Should it be
attempted prior to external integration of the region with its immediate
neighbours?
Similarly, internal trade liberalization vis-a-vis international trade can
be another option for an integrated approach for NEI. Data suggest that
trade liberalization (in terms of international trade) does not have a
universal positive effect for all areas. District level analysis in India
shows insignificant benefits of liberalization with respect to poverty
reduction for districts with more exposure to potential foreign competi-
tion (Topolova). Should then easing of internal trade be an alternative
option? In this regard, can there be efforts to link all the states with Assam,
which is not only the sole gateway to the Indian mainland but also the
only pathway to travel from one state to another and even in some cases
within the state itself?14 Will not an economic integration of the market
bring about the much deserved unity of the region which has been
otherwise affected by a process of political disintegration? This leads to
the next question: Which institution leads to the convergence of the
development agenda and integration of the region—the archaic NEC
and/or the bureaucratic MDONER, or any other player? This requires
serious consideration.
With these economic issues in perspective, in our next section I deal
with the perception of the communities in one of the borderlands of NEI
vis-a-vis that of the state through policy initiatives such as LEP.
4.6 Views from a Borderland

Do the policies framed for the development of NEI reflect the aspiration
of the people in the region? Or are they ulterior to people’s expectations?
To deal with these issues one requires an enormous amount of effort and
therefore they have not been dealt with in detail here. However, I address
this question with one of our studies15 on LEP in the Mizoram–Myanmar
borderland.
Our survey reveals that the continental-container trade content of LEP
(mainly in NER Vision 2020) often highlighted as a panacea for bringing
about development in NEI stands isolated when the perception of the

communities to trade in the borderland is taken into account. To these
communities comprising several tribes, the meaning of trade continues to
be petty and informal, one that is rooted in the communitarian ethos of
economic as well as non-economic gains accruing to communities. On the
other hand, trade for the state is strictly pan-regional and/or international,
the gains from which are essentially economic. For the state, it is only
those commodities and services that are routed through LCS which are
considered as trade. But the borderland people perceive trade as an “inter”
(if not “intra”) community petty trade where the ethnic communities
participate for livelihood and intra/inter-ethnic cooperation. In other
words, due to such a perception of trade, the communities (who are
otherwise involved in trade) are sceptical about the expected gains accru-
ing to them from continental trade. While they agree that any effort to
develop the infrastructure in these areas is welcome in the name of
development of trade, three-fourths of the respondents had the apprehen-
sion that continental trade would benefit the “Vais” (non-Mizo or out-
siders) to their exclusion.
Similarly, although the community and now the state aspire to a more
open border with Myanmar, their perceptions are embedded in varied
understandings. During our survey, it was recorded that the communities
had long welcomed an open border with Myanmar, with an expectation
of both for economic and non-economic benefits. For them economic
gains meant relatively easier availability of petty goods and food grains
from across the border, which often were disturbed due to natural and
manmade causes. The non-economic gains are identified as trans-ethnic
cooperation. The majority of the respondents in the borderland consid-
ered the Myanmarese migrants as their kinsmen from whom they faced
little threat. The communities in Champai district and even beyond
identified the migrant Myanmarese as a source of cheap labour. The
Myanmarese, on the other hand, identified their migration to India
with better livelihood options. This process of mutual benefit is cemented
by clan patronage since they identified each other as ethnic brothers
separated by international borders. However, the state identified the
borders only as “gateways” for trade while maintaining a lip service for
the communities in these borderlands.
86 G. Chakraborty
In dealing with spaces where the capitalist relations of production are

yet to attain a singularly dominant position, applying only an economic
imperative to understanding such spaces can lead to various misgivings.
Our survey reveals that the case regarding NEI is similar, where a hiatus
appears to be due to a difference in the interpretation of the region
between the state and the communities in NEI. While the state by
means of its policies and development programmes (LEP included) wishes
to analyse the region using solely economic imperatives, the communities,
on the other hand, use an anthropological construct where socio-cultural
imperatives play a dominant role in interpreting the “space” they inhabit.
This leads to a hiatus between the state and the communities, which gives
rise to differences in perspectives both with policies and their practices in
developing the region. So for the communities trade continues to be a
petty community trade, which occurs in social space, a space that sub-
sumes economic space. In other words, trade for the community is with
an ideational function, whereas the markets in the borderlands are pri-
marily social spaces for community exchange along with an economic
space for commodity exchange. A reading of the policies of the state, such
as LEP, concerning NEI gives us an impression that it misses the former
while over-emphasizing the latter. This hiatus thereby places a question
mark over the development pattern.
4.7 A Conjectured Vision

Two probable trends are apparent today in the horizon of NEI vis-a-vis
LEP. While one seems to be more visible, the other appears to be
conjectural; one seems to be dominant while the other seems to be veiled
in emerging history; one is driven by capital, the other is embedded in a
communitarian ethos. The question remains as to how these two probable
trends will play each other. Do they overlap or engulf each other, or
continue as a simultaneous process? In this section, I will deal with
understanding such a scenario.
The first trend points towards a harmonization with the process of
annihilation of space by time, a process presently initiated by the state as a
policy initiative for augmenting the scope of capital. LEP/AEP and its
interpretation of NEI appear to be an effort in this direction. The policy
document accepts that NEI is under “economic imprisonment within its
international frontiers” and mentions that “peace and development of the
region critically depends on liberation from this economic imprisonment”
(NER Vision 2020, 2008: 260). Globalization provides the alibi for the
state to accept this oft forgotten historical fact, albeit at the behest of
global capital. It is this alibi that suddenly makes the state realize that the
geo-economic and geo-political potentials attached to the region appear to
be converging. The international borders of NEI are therefore to be
transformed into a “bridge” for connecting India to countries near and
far in South East Asia. In this framework the region is supposed to play the
role of an “arrowhead.” But the question remains as to whose load this
arrow will carry? Its own, or mainland India? With the present macroeco-
nomic fundamentals, as our analysis in this chapter suggests, the region
remains a supplier of primary commodities and intermediate goods pro-
duced outside the region. In what way can NEI be a partner in the
proposed trade regime? Our analysis suggests that until and unless the
productive capacity of the region is harnessed, only the pumping of
finance for the construction of infrastructure may lead to a dysfunctional
development where NEI continues to be a mere pathway for trade and
commerce. On the other hand, making NEI a part of various sub-regional
groupings could have some benefits for opening up the horizons of travel
and provide a semblance of the “nearby outside” world16 beyond the
cartographic domain, though it falls short of accruing substantial benefits
to the inhabitants of the borderlands due to the perceptual hiatus between
the communities and the state as highlighted in this chapter.
The second trend indicates that, as LEP/AEP reimagines NEI as a space
not bounded merely by the present cartographic rigidities, it gives rise to
geographical imaginaries, where the imagined space is often termed as the
“extended” Northeast (Das 2012). The conjecture remains as to whether
this extended space, which is essentially described as an economic space,
in the policy can have simultaneous socio-ethnic spillover as well. It is
noteworthy that an extended NEI which is now fancied by the state has
historically been a part of the people’s imagination, including several
88 G. Chakraborty
Table 4.10 Land customs station NEI–Myanmar border

Name of Name in neigh. Neigh.
State LCS country country Status
Arunachal Pradesh Nampong Pangsu Myanmar NF
Manipur Moreha Tamu Myanmar F
Mizoram Zowkhatara Rangamati Myanmar F
Nagaland Avankhu Somara Myanmar NF
Note: There are four LCS at the NEI–Myanmar border and amongst them only two
are functional
F: Functional; NF: Non-Functional
a
indicates in Mizoram
insurgent groups as they “struggle” to forge together the erstwhile ethnic

space (either imagined or real) that was fractured during colonial rule (and
during the post-colonial period as well). The politico-administrative
boundaries that were created by the state at different points of time to
suit its political, strategic and commercial purposes cut across numerous
clan spaces in the region, “embers” of repercussion against such acts that
have simmered on into the present era. Now, once again the clan spaces of
these communities on which the edifice of their economy, culture and
literature are anchored become facile in the neoliberal order, and the
likelihood of ethnic backlash by stoking the simmering embers remains
palpable. This may also result in inter-ethnic confabulations. Will this
lead to ethnic reterritorialization in the extended NEI?
Will it lead to the creation of newer “ethnic” spatial fixes? Experiences of
secessions and partitions in the twentieth century suggests that “new
international boundaries were not drawn based on military conquest but
overwhelmingly on the principle of prior historical formation, specifically
previous internal boundaries” (Geomans 2013: 51). Does such likelihood
“restrict” policy-makers from making any socio-cultural recommenda-
tions for LEP/AEP other than those related to trade and commerce
(NER Vision 2020: 276)?
Table 4.11 Indo-Myanmar border trade items

Old items Additional items
(DGFT public Additional items (Commissioner of
notice no. 289 (DGFT public notice Customs public
(PN)/92–97 no. 106 (RE-2008)/ notice no. 30/2012
Serial dated October Serial 2004–2009 dated Serial dated November
Number 4, 1995) Number November 7, 2008) Number 16, 2012)
1. Mustard/rape 1. Bicycle spare parts 1. Agricultural
seeds machinery
2. Pulses and 2. Lifesaving drugs 2. Bicycles
beans
3. Fresh 3. Fertilizer 3. Bleaching powder
vegetables
4. Fruits 4. Insecticide 4. Coal
5. Garlic 5. Cotton fabrics 5. Edible oil
6. Onions 6. Stainless steel 6. Electric and electri-
utensils cal appliances
7. Chillies 7. Menthol 7. Fabricated steel
products
8. Spices (exclud- 8. Agarbatti 8. Garments/ready-
ing nutmeg, made/cloths
mace, cloves
and cassia)
9. Bamboo 9. Spices 9. Handlooms and
handicrafts
10. Minor forest 10. Cosmetics 10. Hardware/minor
produce construction
(excluding materials and
teak) electrical fittings
11. Betel nuts and 11. Leather footwear 11. Limes
leaves
12. Food items for 12. Paints and varnishes 12. Medicines
local
consumption
13. Tobacco 13. Sugar and salt 13. Milk powder, tea,
edible oil,
beverages
14. Tomatoes 14. Mosquito coil 14. Motorcycles and
spare parts
15. Reed broom 15. Bulbs 15. Electronic/musical
instruments, sta-
tionery items,
torch lights
16. Sesame 16. Blades 16. Plastic items,
water tanks,
buckets, chairs,
plastic pipes and
briefcases
(continued )
90 G. Chakraborty
Table 4.11 (continued)

Old items Additional items
(DGFT public Additional items (Commissioner of
notice no. 289 (DGFT public notice Customs public
(PN)/92–97 no. 106 (RE-2008)/ notice no. 30/2012
Serial dated October Serial 2004–2009 dated Serial dated November
Number 4, 1995) Number November 7, 2008) Number 16, 2012)
17. Resin 17. X-ray paper and 17. Rice, wheat,
photo paper maize, millet
and oats
18. Coriander 18. Imitation jewellery 18. Scented tobacco
seeds
19. Soya bean 19. Semi-precious
stones
20. Roasted sun- 20. Sewing machines
flower seeds
21. Katha 21. Textile fabrics
22. Ginger 22. Three wheelers,
cars below
100 cc
Source: http://www.mdoner.gov.in/content/border-trade#d, accessed November
5, 2015
Table 4.12 Expected transfer of financial resources to SCS during 14th FC (Rs. in
crore)
SCS scenario
Year A B C
2015–16 115,616 69,717 108,743
2016–17 133,080 80,247 130,209
2017–18 151,480 91,342 155,913
2018–19 173,817 104,812 186,690
2019–20 202,184 121,917 223,542
A: total tax share to states and aid grants as of 14th FC
B: net tax share to states and aid grants as of 14th FC in the case of no CSS
C: total tax share to states, aid Grants and CSS as of 13th FC
Notes
1. In this chapter I have used the term Northeast India (NEI) to include
Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland
and Tripura. Sikkim is not referred here under NEI except when men-
tioned separately.
2. Spatial analysis of NEI is more than a hermeneutic exercise, as an
understanding of space helps us to analyse the region beyond its carto-
graphic limitations. The economic and social imperatives associated with
space, which is highlighted by different stakeholders at different points in
history for respective gains, throw relevant light related with NEI. For a
spatial analysis of NEI through different phases of history and the
contemporary era, see Chakraborty and Ray (2015a).
3. Within the border versus borderless debate under globalization there is
another trend termed “polycentricity,” particularly with respect to
Europe and the European Union (EU), where expansion of borders and
reinforcement of existing borders of power centres continue simulta-
neously. Briefly, “polycentricity refers to the form of non-territorial
politics, which emanate from a multiplicity of sites and which cannot
be reduced to a single centre” (Rumford 2006). In other words, as the
“division of borders between East and West got amalgamated in Europe
and the peripheries of EU got extended, the power centers of the EU like
Brussels, Luxembourg, Strasbourg and Frankfurt continued to remain
intact.” So the related point here is that “borders in Europe have lost their
actual relevance but the power center/decision points inside the EU
remain unbroken” (Tripathi 2015). This process of dismantling/mini-
mizing the border has in itself given rise to a new kind of border.
4. There are varied interpretations of the historicity of the “idea” of Look
East (Chakraborty and Ray 2014). It is agreed that as a policy Look East
was initiated just after the inception of liberalization and globalization
during the early 1990s (Mezard 2006; Muni 2011). In concrete terms
NEI became a part of LEP when the North East Region Vision 2020 was
launched in 2008. Recently with the change of regime in New Delhi, the
policy has been reframed AEP.
5. Actually the change in the name of the policy from LEP to AEP is
associated with the then US Secretary of State Hillary Clinton. It is
reported that during her visit to India in 2011, in a speech at Chennai,
she urged India to “not just Look East but to Engage East and Act East.”
92 G. Chakraborty
“Act East” was supposed to build on “Look East,” which she described as
“the foreign policy stance India adopted in the 1990s when it opened up
its economy to the world.” For details see Roche (2015).
6. Within the region, Assam’s contribution to the regional economy shows
a declining trend. In 1980–81, Assam contributed 77 per cent to the
regional income which declined to 60 per cent in 2012–13.
7. The Third tier is Normal Trade, where trade is allowed under Letter of
Credit under the EXIM Policy or Foreign Trade Policy. Traditional free
exchange, where locally produced items up to USD1000 are allowed to be
exchanged between the indigenous people residing up to 40 km on either
side of the border with simple documentation without any Guaranteed
Remittances (GR) formalities. Barter Trade, where 22 agreed items
(which now include 62 items, see Table 4.11) up to USD20,000 can
be traded with GR formalities and payment of customs duties. The items
include locally produced agricultural items and minor forest produces.
(see Table 4.11 for list of items.)
8. There are four LCSs at the NEI–Myanmar border; amongst them two are
functional (see Table 4.10).
9. Estimates regarding informal trade between NEI and Myanmar vary
between different scholars. The NCAER (1995) studied three districts
each from Assam and Tripura (other than nine districts of West Bengal)
and estimated informal trade at the state level. The value of informal trade
in Assam was Rs 35.50 crore, while in Tripura it was Rs 8.10 crore. RIS
(1996) conducted a study titled ‘India’s Border Trade with Select
Neighbouring Countries’ and quantified the value of exports at Rs
42.01 crore and imports at Rs 13.16 crore. Bakht (1996) estimated
that informal exports to India were at least six times higher than legal
exports, thereby showing a huge quantum of informal trade. He stated
that illegal exports from Bangladesh to the NER limited to a few high-
value items such as gold. Halder (2008) estimated the ratio of legal to
illegal import from India at 1:1.5. Similarly, Indian Institute of Foreign
Trade (IIFT) estimated the annual volume of trade in 1995 to be Rs 2200
crore, with the Moreh-Tamu sector contributing Rs 1600 crore,
Champhai Rs 500 crore and Lungwa Rs 100 crore. Indian Institute of
Entrepreneurship (IIE), Guwahati, estimated the volume of informal
trade based on custom seizure data in 2000–01 to be Rs 224.90 crore,
with 86.88 per cent of the same routed through Manipur and the rest
through Mizoram. If we take the value of trade as calculated by IIE, the
estimates for informal trade is ten times more than the formal trade in the
Manipur sector. Based on this model, Bezbaruah (2003–04) calculated
the volume of informal trade at Rs 227.73 crore, thereby making the
volume of informal trade 12 times higher than formal trade.
10. The simulated exercise has been undertaken with data support from
Dr. Amit Sadhukhan, post-doctoral fellow, Institute of Development
Studies Kolkata, Kolkata.
11. For a detailed discussion on the three modes of production in NEI, see
Ahmad and Biswas (2004), Chakraborty and Ray (2014).
12. For socio-economic differentiation, landlessness, indebtedness and so on
amongst the tribal societies in NEI, see Dutta and Karna (1987), Karna
(1990), Datta (1992), Baruah (2005), Fernandes and Bharali (2005),
D’Souza and Christina (2005).
13. Amiya Kumar Bagchi states that capitalist colonialism works by intro-
ducing and exploiting markets. But the structure of colonial power is
essentially political and not just a passive reflection of imperatives dictated
by an impersonal market. Hence, market failures—deliberately
engineered or systematically generated—are as much a component of
the working system as market successes. For an insight see Bagchi (2010).
14. In states like Arunachal Pradesh in NEI, travelling from one end of the
state to the other is possible only by passing through Assam. Internal
integration of the region thereby seems to be very important for forging
together connectivity as well as the segregated markets. On the other
hand, there are sufficient benefits too if trade and transport is allowed
through the neighbouring countries, for example through Bangladesh.
Huge benefits that will accrue to both India and Bangladesh if they focus
on trade facilitation based on opportunity cost pricing—it is argued that
Assam holds the key to the success of this mechanism. For further details
on benefits from trade and transportation for NEI with transit through
Bangladesh see Murshid (2011), Das (2012).
15. A study was undertaken in the Champai (Mizoram)–Myanmar border
related to the perception of communities inhabiting the borderlands
about LEP and the differences, if any, between the communities and
the policy-makers. The results show that more than 54 per cent of the
respondents had never heard about LEP; amongst those who had heard
about the policy, some related it to trade and infrastructure, while others
associated it with security measures. The respondents were of the view
that the policy was not meant for involving local traders and it is the Vai
94 G. Chakraborty
(outsider) who will reap the benefit. They also perceived that there is a
difference between what they understand as trade and what it is associated
with by policy-makers. The survey also shows that the communities in
the borderlands do not perceive the communities on the other side of the
border in Myanmar as foreigners and they preferred a more porous border
for greater interaction between the people whom they mentioned as
“belonging to the same ethnic stock.” But this perception was not shared
by the organizations in Aizawl. For details, see Chakraborty and Ray
(2015b).
16. By the term “nearby outside” world I mean access to the immediate
neighbourhood shared by the same ethnic groups divided by political
boundaries which happen to be international borders. There are many
tribes—for example Konyak, Nocte, Tangsa and Wangchoo in Arunachal
Pradesh; Kuki, Paite and Tangkhul in Manipur; Garo, Khasi and Jayantia
in Meghalaya; Mizo, Paite and Chin in Mizoram; and Chakesang,
Sangtam, Khyaniungam and Konyak in Nagaland, to name a few—
who are separated by international borders. Similarly, access to goods
and services including food grains may improve in many of these other-
wise “remote” areas/pockets in the borderland if connectivity is enhanced.
Here border haats can play an important role. But border haats too have
to shed off their character of being a statist/administrative construct to be
more beneficial to the communities in the borderland. Experiences of
existing border haats in the region points towards such a realization.
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opment Studies Kolkata.
Part II
Linking South East Asia Through
Northeast India: Trade Investment
and Connectivity Aspects
Given India’s interest in enhancing economic ties with ASEAN, which is

one of the fastest growing regions in the world, there is a need for serious
engagement to understand what role Northeast India can play in this
context. This is so because Northeast India lies in close geographical
proximity to ASEAN and the region offers a window through which
India can extend a connectivity network with it and, by extension,
generate economic development in this part of India. For a sustainable
development policy for the Northeast Region, the Act East Policy and the
development thrusts of the region can be dovetailed to address the
impediments. This would help in reducing transaction costs so that
economic cooperation within the sub-region can become a reality.
5
Unlocking the Northeast Region of India:
An ASEAN Connectivity Perspective
Piti Srisangnam and Anupama Devendrakumar
5.1 Introduction
Since its establishment in 1967, ASEAN has developed into an effective
instrument for peace and socio-economic progress not only in Southeast
Asia but also in the larger Asia-Pacific region. Presently, its ten econo-
mies—Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam—have achieved a major
milestone in the regional economic integration agenda with the establish-
ment of the ASEAN Economic Community (AEC) in 2015. Consistent
with the development of the grouping, it is now also thinking beyond the
AEC, given its relationships with dialogue partners which have strength-
ened over the years. In a rapidly changing global and regional environ-
ment in particular, the uncertainty in Europe and the slow growth in
North America, the emerging ASEAN has set important challenges for
itself. Among these, mitigating risks and exploring new opportunities
remain important on its agenda for the years to come. ASEAN is
P. Srisangnam (*) • A. Devendrakumar

Faculty of Economics, Chulalongkorn University, Bangkok, Thailand

102 P. Srisangnam and A. Devendrakumar
strategically located to link with the whole Asian region. If it were

combined into a single market, it would stand as the world’s seventh
largest economy, which is growing at a fast pace. There is no doubt that,
with the establishment of AEC, it will be well placed to make enormous
gains from a larger market, better resource allocation and a new landscape
of regional specialization.
At present, however, there is great disparity among individual member
countries of ASEAN. Top on its agenda, therefore, is for the whole
grouping to move towards inclusive growth and reduce its development
gaps. It has been pursuing this with programmes like the Hanoi Action
Plan and the Blueprint of the AEC to reduce disparities in basic infra-
structure, improve competitiveness, technology and productivity, among
others. Many South East Asian countries lack proper road transport, sea
ports and airports, which slows their development.
The Master Plan on ASEAN Connectivity (MPAC) is a response to its
infrastructure bottlenecks and is the economic pillar of the ASEAN
Community. Investments in infrastructure to improve connectivity
within ASEAN will bring people closer and help it to become a truly
economic community. Reaching this goal will require it to invest close to
USD1 trillion over the next one to two decades. The regional landscape of
ASEAN connectivity is evolving with the growing influence of China,
India's regional connectivity initiatives and active participation of Japan
and South Korea. Now, it also includes the USA, with the recent shift in
this country’s foreign policy on South East Asia. The future of ASEAN
connectivity must also be understood from the perspective of infrastruc-
ture development on the mainland and the archipelago of South East Asia,
the Greater Mekong Sub-region (GMS) and BIMP-EAGA. The Regional
economic integration of ASEAN is not a choice but a necessity for it to
develop into a well-connected region that will increasingly integrate Asia
and intensify the global economy. What should ASEAN countries do to
connect India from the perspective of the region? This chapter sets out the
themes involved and discusses them in the light of the recent develop-
ments in the region and future challenges that remain to be tackled for a
better promotion of ASEAN–India economic integration.
5 Unlocking the Northeast Region of India: An ASEAN Connectivity. . . 103
5.2 ASEAN–India Economic Relations

Trade between ASEAN and India has been increasing enormously. For
instance, the total trade growth of ASEAN and India with each other
stood at 37.60 and 27.55 per cent respectively in 2010. The trade share of
ASEAN with India has increased from 1.02 per cent in 1990, to 2.83 per
cent in 2010, and that of India with ASEAN increased from 5.7 to 9.19
per cent. During the last decade (2000–2010), ASEAN’s export growth
to India more than doubled, whereas for India the figure remained
insignificant. Contrary to export performance (as indicated in
Table 5.1) which remained positive, ASEAN’s import growth decreased,
though in the case of India it increased from the significant negative
growth in 2000. However, the general trend of export share and import
share of both ASEAN and India has increased significantly (nearly dou-
bled) in 2000–2010, compared to 1990–2000.
In absolute value terms the increase in trade volume is substantial (see
Table 5.2). In the 1990s, trade between India and ASEAN was limited.
With the beginning of market-oriented policy reforms in India, the
ASEAN–India partnership grew rapidly from a sectoral dialogue partner-
ship in 1992, to a full dialogue partnership in December 1995. The
relationship received a further fillip with the convening of the ASEAN–-
India Summit in 2002 at Phnom Penh, in Cambodia. The total trade
between ASEAN and India that stood at USD3151 million in 1990
reached USD56,789.33 million in 2010, crossing the USD50 billion mark.
The Asian International Production Network (IPN) has emerged and
evolved rapidly leading to the coining of the term “Factory Asia,” with
China developing as the “global assembly centre.” ASEAN has facilitated
the production network by increasingly involving itself in the international
supply chain and developing associated activities like foreign outsourcing
and offshoring. ASEAN along with East Asian economies supplies inputs
for China’s exports to the rest of the world (Anuboonwattaka 2011).
Referring to Fukunari Kimura’s (2007) framework of industrial devel-
opment through utilizing IPNs, India will probably be characterized as
having entered the first phase of integrating into IPNs (Sen and Srivastava,
2011). India’s contribution to global exports of manufacturing parts and
Table 5.1 ASEAN–India trade indicators

ASEAN India
Indicators 1990 2000 2010 1990 2000 (%) 2010
1
Export growth N/A 11.92% 36.41% N/A 31.81 32.51%
Import growth2 N/A 44.54% 39.92% N/A 10.45 23.96%
Export share3 1.23% 1.59% 3.51% 4.27% 6.45 10.32%
Import share4 0.85% 0.91% 2.09% 6.77% 8.70 8.46%
Total trade growth5 N/A 20.96% 37.60% N/A 2.18 27.55%
Trade share6 1.02% 1.28% 2.83% 5.70% 7.67 9.19%
Trade intensity index7 1.62 1.78 1.48 1.36 1.24 1.40
Source: IMF Directions of Trade Statistics, retrieved at Integration Indicators, Asia
Regional Integration Centre (ARIC), ADB
1
Export growth is the percentage change in the value of exports relative to the
previous year
2
Import growth is the percentage change in the value of imports relative to the
previous year
3
Export share is the percentage of exports going to a partner to total exports of a
country/region. A higher share indicates a higher degree of integration between
partner countries/region
4
Import share is the percentage of imports from a partner to total imports of a
country/region. A higher share indicates a higher degree of integration between
partner countries/regions
5
Total trade growth is the percentage change in the value of total trade (exports
plus imports) relative to the previous year
6
Trade share is the percentage of trade with a partner to total trade of a country/
region. A higher share indicates a higher degree of integration between parnter
countries/regions
7
Trade intensity index is the ratio of trade share of a country/region to the trade
share of world trade with a partner. An index of more than one indicates that
trade flow between countries/regions is larger than expected given their impor-
tance in world trade
Table 5.2 ASEAN–India total trade, 1990–2010 (USD millions)

1990 2000 2010
ASEAN 3151.0 10148.99 56789.33
India 2383.87 7131.05 52699.88
Source: IMF Directions of Trade Statistics, retrieved at Integration Indicators, ARIC, ADB
components, worth USD1118 billion, was only about 0.8 per cent,
which is minimal compared to major ASEAN economies; on the other
hand it contributed about 1.5 per cent to world imports of the same
(Athukorala 2010).
5.3 The Role of the Northeast Region in India’s

Look East Policy: ASEAN Perspectives
5.3.1 Importance and International Trade
of the Northeast Region
The Northeast Region (NER) was deprived of a market share on account of

the disruption of old trade routes by the British, India’s import substitution
economy after 1947 and the 1971 Bangladesh war (Haokip 2010). NER,
though rich in terms of natural resources, remains underdeveloped and
politically unstable because of poor connectivity with mainland India and
neighbouring countries (Bhattacharya and De 2006). India–Myanmar
relations received a major boost after the adoption of the Look East Policy
(LEP) in the early 1990s.
NER region shares borders with China in the north, Bangladesh in the
south-west, Bhutan in the north-west and Myanmar in the east. Myanmar
is the land bridge that connects the world’s two largest markets, that is
South and South East Asia (RIS 2011). Likewise, NER’s trade with
Myanmar is reported to be less than 1 per cent of India’s total trade
with Myanmar; between 2000 and 2009, NER’s average annual exports
to Myanmar was about USD2.36 million and imports from Myanmar
was USD1.88 million. NER contributed 2.08 and 0.49 per cent, respec-
tively, of India’s total export to and import from Myanmar during
2000–2009 (RIS 2011).
A very important observation is that Myanmar and India’s NER share
similar conditions when compared to ASEAN and mainland India respec-
tively. They are endowed with natural resources, dependent on agricul-
ture, economically backward and poorly connected. Though the region is
marginalized, yet when looked at from a broader perspective, given their
strategic significance amid the major economic entities of China, India
and ASEAN, they emerge as the central nodes in ASEAN–India connec-
tivity (ERIA 2010). Therefore, their physical connectivity has potential
economic implications and is, therefore, a critical aspect in strengthening
the ASEAN–India partnership.
5.3.2 Connectivity Between Myanmar, Northeast

India and Mainland India
Due to very weak connectivity between Myanmar and Northeast India,

and Northeast India and mainland India, the vision of a well-connected
ASEAN–India remains blurred. Because of the geographical setting (most
of the lengthy borders are mountainous and porous) and a conflict-ridden
atmosphere along the borders, arising from separatist tendencies, the
progress of connectivity initiatives has been very slow.
Three routes between Myanmar and Northeast India are identified to
be critical in this endeavour: Moreh–Tamu, Zolkawtar–Rhee and
Nampong–Pangsu route, which is known as Stilwell Road.
Of late, the Government of India (GoI) has taken up a number of
initiatives to bridge this developmental gap by encouraging investment in
this area. The Kaladan Multimodal Transit Transport Project (KMTT) is
one such initiative designed to open up an alternative access route
connecting Northeast India and mainland India through Chin and
Rakhin in Myanmar (Kimura 2007).
Unfortunately, the project which was finalized after years of tough
negotiations, incurring cost overruns and delays, fell into controversy
over allegations of irregularities in government departments which were
reported to have been “working at cross purposes”. Originally, the project
was scheduled to be completed by 2014, but was rescheduled to be
completed and fully operational by 2016 (Singh 2014). The project is
yet to see the light of the day.
5.3.3 ASEAN Connectivity: The Experiences

of the Greater Mekong Sub-region (GMS)
The whole South East Asian region has adopted sometimes the ASEAN
Free Trade Area (AFTA)1 and sometimes ASEAN Vision 20202 for
integrating economies into a single production base, creating a regional
market and changing ASEAN into a resilient, prosperous and highly
competitive region. More recently, all ASEAN countries established the

ASEAN Community as well as the ASEAN Economic Community
(AEC) in 2015, with a single market and production base, a globally
competitive and integrated region, and equitable economic development.
Such important policy challenges and implementation proves in itself
ASEAN is ready to move to the next stage of regional integration.
In order to achieve such a goal, the launching of ASEAN as a “Commu-
nity of Connectivity” to complement the proposed “Community of
Action” and “Community of People” was a decisive step and seen as
supportive of development features of the region’s future. This initiative
was led by the former Prime Minister of Thailand, Abhisit Vejjajiva, as
Chair of ASEAN, and announced at the 42nd ASEAN Ministerial Meeting
(AMM) in Phuket in 2009. The establishment of the High Level Task
Force (HLTF) on ASEAN Connectivity was followed and mandated at the
ASEAN 15th Summit in 2009. As such, the HLTF was created early in
2010 to draft the Master Plan that would “bring it all together” for ASEAN,
in the area of connectivity (Pibulsonggram 2010, p. 9). MPAC was
proposed and adopted by the ASEAN 17th Summit in Hanoi in 2010.
Since then, the idea of ASEAN connectivity has become essential to
understanding the ASEAN infrastructure development that would help
realize ASEAN’s goal of economic integration as well as its own future
success.
In view of many under-developed areas in individual ASEAN countries
and due to the ongoing global financial crisis, ASEAN infrastructure
development needs to be enhanced at all levels. This concerns physical
connectivity to encourage resource pooling for rebalancing growth towards
increased intra-regional trade and regional demand, or soft connectivity to
encourage people on knowledge sharing and move towards border and
across-border economic liberalization. This will help in improvement in
labour productivity and using resources more effectively and improve
countries’ productivity and competitiveness, and raise domestic output. It
is essential for ASEAN to be connected through improved and integrated
roads, railways, airways, ports, energy and telecommunication networks
(ICT) (Bhattacharyay 2010a, p. 200).
5.4 Status of ASEAN Connectivity

Development
At the end of the Cold War in the early 1990s, no region, or country, was
quick to realize that they could sheild themselves from such a new wave of
intense globalization. The idea of a borderless world of regions and coun-
tries was widely discussed and starting to take shape in the policy agenda of
most countries including the ASEAN region. Examples of growth triangles,
economic corridors and sub-regional development, for instance the GMS,
are now well known. International institutions such as the World Bank or
the ADB have also played a great role in helping and carving out such a
policy agenda. The whole ASEAN region is no exception to the above
mentioned trend, but has to respond with a proper policy challenge.
With the outbreak of the recent global financial crisis in 2008–09, there
is an even more serious need to discuss this issue which seems to focus
increasingly on infrastructure development or connectivity among the
regions and countries involved. In the case of ASEAN, such a connectivity
development is closely linked to this trend towards a more inter-connected
Asia. With the economic slowdown to a “new normal” in the USA and
Europe for some years now, ASEAN with the rest of Asia is starting to feel
the necessity to shift towards a system of not only production networks
increasingly developed at the regional level, but also of consumption
increase to allow demand for goods and services to be developed as well
in the region. To respond to such a changing trend, infrastructure connec-
tivity within ASEAN as well as between ASEAN and the rest of Asia has to
be rethought, redesigned and implemented at another level.
In order to understand ASEAN’s further challenges on connectivity, it
is important to understand the development status3 of roads, railways,
maritime and air transport, which will also include ASEAN energy pro-
jects and ICT development.
The network of roads in ASEAN countries is around 1.18 million km.
Though the total length increased among the ten ASEAN countries, but the
rates varied. Brunei, Lao PDR and Thailand saw their total road network
grow by more than 2.5 times over the past two decades. Cambodia and
Myanmar marked the lowest rate with less than 10 per cent during the same
period. Road density also shows great disparity among countries with
Singapore ranked top with 4750 km per thousand sq. km, and Myanmar
the lowest with 40 km per thousand sq. km. Due to geographical differences
and country development level, ASEAN has low levels of road density
relative to other emerging East Asia countries. A wide disparity of road
quality and networks also exists among ASEAN countries. For instance,
Malaysia, Singapore and Thailand have a high ratio of paved roads as
compared to Cambodia, Lao PDR, Myanmar and the Philippines; so it
seems much investment is needed for the improvement of road quality and
the network.
Except Brunei, Lao PDR, Myanmar and Singapore, six other ASEAN
countries saw their rail network decline by 10 per cent over the last two
decades. All ASEAN countries have low railway density indicators, thus
rail networks have the potential to expand in the near future. Looking
from the cargo transport perspective, railways have an advantage in the
middle range of distance, around 100–500 km, over other modes of
transport. In most ASEAN countries, rail transport is mostly substituted
by road transport because of limited rail network and existing infrastruc-
ture. However, an increasing development of regional production net-
works will require better developed rail transport which could be efficient
and less costly if properly developed to serve a number of industries such
as mining, cement, chemicals and auto manufacturing.
Considering the geography of ASEAN, its varied mainland and vast
maritime transport, air transport has always been a regional priority and
was included as a policy agenda among ASEAN member countries. Apart
from helping travelling passengers to connect more easily within the
region, air transport is also a key to reducing transportation time and
logistical costs to a manageable level for those products high in value
added. No doubt that with the demand for air transport both freight and
passengers has risen rapidly in the past two decades. Air transport infra-
structure also has to keep up with such a rapid pace of development. From
a more developed infrastructure like the international airports of Malaysia,
Singapore and Thailand, other ASEAN countries have also been trying to
improve their infrastructure and facilities to cater to a new arising
demand. Deregulation and the open sky policy have also helped
ASEAN policy-makers to transform their policy agenda and to respond to

the business needs of the region.
Energy infrastructure is another priority area of concern for the coun-
tries desirous to have a stable supply for economic development. For this,
ASEAN countries have succeeded in generating electricity supply during
the past two decades, with Cambodia and Vietnam seeing theirs increase
8.4 and 7.5 times respectively, while the rest of ASEAN countries saw
theirs more than double. Despite this success, energy disparity remains in
ASEAN and this represents policy challenges as long as regional develop-
ment gaps persist. To be sure, there have been fundamental changes in the
use of fuel types to generate electricity in ASEAN over the past two
decades, with increase in natural gas and coal and decrease in oil and
hydropower. Singapore saw the greatest increase in natural gas use from
0 to 80 per cent. Malaysia, the Philippines, Thailand and Vietnam saw
their share of natural gas use in power generation increase by 30–40 per
cent, on average. Regional gas supply has been implemented successfully
to supply the new demand particularly for metropolitan and industrial
use. Coal use in electricity generation has also greatly increased due to
technology progress in coal-fired power plants, coal mining development
in Australia and the appropriate infrastructure implementation. However,
new development in hydropower projects in the GMS has faced strong
criticism due to environmental concerns, in particular the hydropower
plants designed along the Mekong river that are still subject to increasing
debate regarding their future development.
Finally, ICT is also another important priority for policy-makers in
ASEAN as its infrastructure reflects how the countries’ development is
moving forward and how people might embrace economic globalization.
Policy coordination had been thought out in the formulation of the
ASEAN ICT Master Plan and adopted by the ASEAN Summit in
2010. A wide-ranging implementation plan has been designed to upgrade
the ICT network in the ASEAN region by 2015. The Master Plan
recognizes such an important development, where ICT in the ASEAN
employs more than 11.7 million people and contributes more than
3 percent of GDP of ASEAN. The progress of ICT has been very
impressive in the ASEAN nations with more than 78 percent of the

people using ICT and in at least five ASEAN nations mobile penetration
has reached the 100 percent mark with other member states making rapid
progress to reach the cent percet coverage. Future ICT development is
intricately linked to the region’s competitiveness, as productivity could be
improved through a well-implemented infrastructure of ICT. Digital
divide is also a matter of technological access for the population and an
important basis for the education of young people. Data available seems to
support such a plan with telephone and mobile phone penetration
reaching its peak; meanwhile broadband internet penetration is seemingly
low in comparison to other more developed Asian countries (ASEAN
Secretariat 2011a, b).
5.5 Initiatives and Progress of ASEAN

Connectivity
Although the idea of connectivity among the countries in and around
ASEAN has been mooted since 2008–09, bringing it all together in a
coherent and holistic manner within the region emerged as the main
challenge. The initiatives of MPAC was such a response to the increasing
needs of the region to connect together. The ASEAN heads of nations and
other leaders met to adopt such a plan at the 17th ASEAN Summit in
2010 as they recognized MPAC as crucial to reaching the goal of a
competitive region.
MPAC provides a blueprint for the ASEAN countries. After the Cold
War, new members in the ASEAN joined together to make a community
of ten countries in the late 1990s. The idea was to create a “Community of
Connectivity” to complement the “Community of Peoples”. Based on
existing undertakings and projects in various sectors such as the GMS
initiatives and other policy commitments, MPAC has been drawn up to
cover a wide range of issues (see Box 5.1).
Box 5.1 Master Plan on ASEAN Connectivity

The Master Plan on ASEAN Connectivity (MPAC) was adopted by ASEAN
leaders at the 17th ASEAN Summit in Hanoi on October 28, 2010. MPAC
establishes long-term targets and addresses the strategic issues which cover
three main areas of connectivity:
I. Physical Connectivity
This focuses mainly on the construction of new and upgraded existing
infrastructure, especially logistics facilities. Beside the logistics, ICT infrastruc-
ture as well as an energy security framework are also mentioned under this
pillar. MPAC identifies the following projects as the highest priorities under
physical connectivity:
• Completion of the ASEAN Highway Network (AHN) missing links;

• Completion of the Singapore–Kunming Rail Link (SKRL) missing links;
• Establishment of the ASEAN Broadband Corridor;
• Melaka–Pekan Baru Interconnection (ASEAN Power Grid, Indonesia-
Malaysia-Thailand Growth Triangle: IMT–GT);
• West Kalimantan–Sarawak Interconnection (ASEAN Power Grid, BIMP-
EAGA).
II. Institution Connectivity

Focuses mainly on the so-called “soft policies” to facilitate the movements
of goods, services, capital and skilled labour across borders. The harmoniza-
tion of rules and regulations such as the international traffic laws and trade
facilities such as the ASEAN Single Window are good examples of the con-
nectivity projects under this pillar. MPAC identifies the following projects as
the highest priorities under institution connectivity:
• Operationalizing Mutual Recognition Arrangements;

• Common rules for standards and conformity assessment procedures;
• Operationalizing all National Single Windows by 2012;
• Phased reduction and elimination of investment restrictions and
impediments;
• Operationalizing ASEAN Agreement on transport facilitation.
III. People-to-People Connectivity

Deeper social and cultural interaction, education and capacity building
programmes and tourism promotion via the relaxation of visa requirements
for intra-ASEAN people movements are the major strategies to ensure link-
age among the three pillars of an ASEAN Community. MPAC identifies the
(continued)
Box 5.1 (continued)

following projects as the highest priorities under the People-to-People
connectivity:
• Easing visa requirements for ASEAN nationals;

• Development of ASEAN Virtual Learning Resources Centres;
• Development of ICT skill standards;
• ASEAN Community Building Programme.
Source: Master Plan on ASEAN Connectivity, http://www.aseansec.org/doc

uments/MPAC.pdf
MPAC has made it clear what it expects from the three pillars, namely
physical connectivity, institutional connectivity and people-to-people
connectivity (see Fig. 5.1). First, physical infrastructure (or hardware
connectivity) involves the physical development of traditional infrastruc-
ture though transport, ICT and energy security. Enhanced physical
infrastructure among the ASEAN countries is crucial to ensure compet-
itiveness in coming years. Second, institutional connectivity (or software
connectivity) requires institutional reforms and regulation standards and
conformance. This will require regulatory changes to facilitate trade and
investment and to formulate a single approach for regional infrastructural
services such as ASEAN single windows and the Cross ASEAN Agreement
on transport facilitation. Third, people-to-people connectivity involves
deeper interactions among people though community building efforts to
support a united and harmonious ASEAN.
It is nevertheless important to state ideas and principles that provide the
basic underpinnings for MPAC (Pibulsonggram 2010, pp. 11–13). First,
the blueprint seeks to put in place a comprehensive policy framework that
would guide the development of enhanced ASEAN connectivity in all
aspects. Second, it should bring all of ASEAN closer and make all
stakeholders active in this initiative. Third, connectivity must be accom-
panied by economic activity; this leads to economic empowerment of
communities. Fourth, it must lay the groundwork for developing neces-
sary safeguards to protect people and countries from inherent risks of
enhanced connectivity. Fifth, it should see enhanced ASEAN connectivity
ASEAN Political-Security Community ASEAN Economic Community ASEAN Socio-Cultural Community
ASEAN Community Building
Enhance Enhance the well-

Enhance rules and
integration and being and
good governance
competitiveness of livelihood of
for ASEAN
ASEAN ASEAN peoples
Narrowing the Development Gaps
People-to-People
connectivity
Tourism
Education
Culture
Physical connectivity Institutional connectivity

Hard infrastructure Soft infrastructure
Transport: Air, Road, Rail, Maritime, Trade liberalisation facilitation: ASEAN Trade in
Port Facilities, Logistics Services Facilities Goods Agreement; standards, ASEAN Single
Information Communications Technology: OPtical Window, Customs integration
Fiber Network Investment Liberalisation and facilitation:ASEAN
Energy: ASEAN Power Grid Comprehensive Investment Agrrement
Trans-ASEAN Gas Pipeline Services Liberalisation, MRAs
Special Economics Zones Regional transport agreements
Capacity building programs
Resource Mobilisation
ASEAN Resources
Multilateral Development Banks
Dialogue Partners
Private Sector
ASEAN Connectivity
Fig. 5.1 Interaction between ASEAN Connectivity and ASEAN Community (Source:
Master Plan on ASEAN Connectivity 2010)
as the first step to a broader regional and global connectivity. Sixth, secure
funding is important to realize enhanced ASEAN connectivity. In sum, a
more connected ASEAN with a more connected Asia–Pacific region will
ensure ASEAN as a stable region and help its progress.
The MPAC has been drafted with the assistance of a task force in
response to the mandates given by the ASEAN summit in 2009. A HLTF
was coordinated by the ASEAN Secretariat, with the participation of

relevant agencies like ADB, ERIA,4 ESCAP and the World Bank. Within
the pillar of improved physical connectivity, MPAC defined seven strat-
egies. The first two are to ensure the completion of the AHN and the
KSRL. There was also the plan to build a truck line highway as adopted by
the ASEAN Transport Minister in 1999. However, there is a missing link
of 227 km (mainly in Myanmar) and a low-grade (class III standard)
stretch of 5300 km in six countries (class III indicates a single lane of
traffic and no pavement of asphalt or concrete). KSRL was adopted during
the Fifth ASEAN Summit. Also, MPAC notes there is a missing link of
1285 km in seven countries (see Fig. 5.2). MPAC emphasized on a
strategy for the seamless operation of KSRL to complete the link. These
undertakings are deemed flagship projects that would increase connectiv-
ity on land. Following highway and railway goals, MPAC also defined
strategies for inland waterway networks and maritime transport as
Fig. 5.2 Singapore–Kunming rail link network and the missing link (Source:
Adapted from Master Plan on ASEAN Connectivity, 2010)
ASEAN has around 51,000 km of navigable waterways, but its use is still
very low. Substantial investment in infrastructure is needed to improve
such waterways, river ports and intermodal connectivity as well as the
rules and management needed that would follow.
Growth in maritime transport is another important agenda as most
gateway ports are running at near full capacity, thus investment in
infrastructure is actually needed to cater for its future expansion.
Under the strategy of multimodal transport systems, MPAC places its
priority on the GMS economic corridors development, such as the East–
West Economic Corridor (EWEC) and the Mekong–India Economic
Corridor (MIEC) (see Fig. 5.3). There corridors have helped to link
Cambodia, Laos PDR, Myanmar, Thailand and Vietnam where logistic
activities are expected to grow rapidly with crossroads linking to China
and India. These corridors are detrimental to CLMV countries unlocking
their under-developed regions by opening up to new opportunities for
further development. ICT infrastructure and energy development are also
part of physical connectivity. For example, MPAC identified priority
projects like the ASEAN Broadband Corridor, the Internet Exchange
Network, Information Security and the ASEAN single telecom market.
For energy connectivity, MPAC has emphasized on developing the Trans-
ASEAN Gas Pipeline (TGAP) and the ASEAN Power Grid (APG). As
noted earlier, the use of natural gas for electricity generation is one of the
most significant changes that have taken place in ASEAN in the past two
decades, so the progress on TGAP could become an important aspect of
the future regional landscape. It may also be observed for undertaking
APG to look to benefits for the countries involved due to time differences
in peak electricity demand.
For institutional connectivity (see Fig. 5.1), MPAC identified ten
specific areas of priority. For instance, ASEAN countries have concluded
trade facilitation agreements and involved protocols which provide a
common framework for ASEAN countries involved in such a plan.
MPAC has addressed important issues related to interstate passenger
land transportation, such as restrictions to be lifted on the entry of
motor vehicles and customs inspection procedures to be coordinated
among the countries concerned. Indeed, the issues need to be attuned
Fig. 5.3 GMS economic corridors (Source: Asian Development Bank, www.gms-
eoc.org/uploads/map/archives/map/GMS-TransportCorridor_30.jpg)
in response to the momentum gained from the way ASEAN had moved to
be the AEC in 2015.
Institutional connectivity is also related to other regulatory issues—
such as non-tariff measures (NTMs), regional standards and legal frame-
works for Mutual Recognition Arrangements—and the elimination of
restrictions on logistical services. With the introduction of ASEAN Single
Window (ASW) in 2015, trade procedures in the region became much
more simplified. Border management capacity is also a matter of priority
as defined by MPAC that would to phase out the reduction and elimina-
tion of investment restrictions. The issue of strengthening institutional
capacity is also an important strategy, particularly for the CLMV coun-
tries that seem to require technical assistance in this area of cooperation.
Finally, for people-to-people connectivity (see Fig. 5.1), MPAC defines
two strategies: the promotion of deeper social and cultural understanding
and greater intra-ASEAN people mobility. To facilitate such a social and
cultural understanding, educational and cultural cooperation is needed to
address this issue with the intent to develop ASEAN education modules.
Indeed, ASEAN historical understanding and school curricula form an
integral part of such a strategy with ICT support to facilitate such a
programme. MPAC however does not include a framework for building
social and cultural understanding as foundation for building the ASEAN
Community, but the focus on such programmes will be the key for the
whole region in the coming years.
5.6 Lessons Learnt from the Experiences

of the GMS
The idea of ASEAN connectivity starts from the central argument that
efforts to expand and enhance infrastructure services will reduce the costs
of doing business and international trade. This in turn will help to
maximize the growth of countries and the regions or sub-regions involved,
thus creating benefits to regional trade and investment integration. After
years of going through the ASEAN infrastructure development and
implementing different projects, numerous studies particularly the ones
done by ADB (Brooks and Menon 2008) have found that infrastructure
investment and intervention to reduce trade costs are important contrib-

uting factors that stimulate closer trading and investment linkages.
Factors affecting the time and delivery required to move goods across
borders under the scope of trade facilitation are also important determinants,
as this would relate directly to logistic and supply chain enhancement for
sub-regional development, with the GMS often stated as a case in point. Of
course, economists have different ways and methods that are used to examine
and measure the economic effects of such infrastructure development and
connectivity that would follow and facilitate trade, investment and overall
development. Of particular importance, the effects of the infrastructure on
trade and economic growth depend on the mode of financing chosen and the
investing country’s initial conditions, particularly in the CLMV countries of
the GMS.
Regarding regional integration in the GMS, findings suggest that
improved quality of road infrastructure in border areas has a positive impact
on trade flows between neighbouring countries (Brooks and Menon 2008).
In the case of road development in Lao PDR, findings show that reducing
transport costs through rural road improvement generates significant reduc-
tions in poverty incidence (Menon and Warr 2008). A number of studies on
the soft infrastructure’s contribution to reducing trade costs and strengthen-
ing regional integration in developing ASEAN countries have also shown that
improvements in soft infrastructure negatively correlated with trade costs.
In sum, all these studies help to confirm that changes in tariffs, transport
costs and infrastructure facilities have a significant influence on regional
trade flows among the countries and sub-regions involved. Alternatively,
higher tariffs and transport costs and poorer quality of infrastructure have
negative impacts on trade and regional development. As shown earlier,
MPAC has become the blueprint for any future infrastructure development
of ASEAN, thus the plan merits greater attention so as to mitigate future
challenges by drawing from earlier experiences.
5.7 Lessons Learnt

The very first lesson learnt, years before the recent plan for ASEAN
connectivity, was close to the end of the Cold War when Thailand
announced the policy “Turn the Battlefield to the Marketplace” with
CLMV countries in 1988. Physical connectivity through cross-border

infrastructure (CBI) development had helped to enhance the regional
cooperation of these countries with ASEAN, thus to promote further
economic integration and ensure regional peace. The first Mekong interna-
tional bridge linking the Laos PDR–Thailand borders was indeed signifi-
cant and truly symbolic of the very first linkage before talks started about
infrastructure development among GMS countries. This First Thai-Lao
Friendship Bridge, opened on April 8, 1994, is a bridge over the Mekong
river, connecting Nong Khai province in Thailand with Vientiane Prefec-
ture in Laos PDR. The cost was about GBP19 million and was funded by
the Australian Government as development aid for Laos PDR. (Srisangnam
2013).
The second lesson was learnt when the GMS started at the beginning of
the 1990s. Indeed, the GMS programmes sponsored mainly by the ADB
were among many other projects to encourage growth areas in ASEAN. In
order to develop “land-locked” sub-regions, a clear plan for “land-linked”
projects had been created. It has to be said that the ADB laid out the
master plan for regional development in consultation with the govern-
ments involved. The process involved rigorous coordination exercises
between the ADB, governments and other development agencies. In a
way, this was a very important change and practice for creating a new
understanding among stakeholders, especially on how to develop a new
regional landscape for regional infrastructure development (Srisangnam
2013). During this phase, lessons were learnt about the real beginnings of
the major economic corridors, like the East–West Economic Corridor
(EWEC, R2) and the North–South Economic Corridor (NSEC, R3).
So the third lesson was learnt when GMS countries began to see the
realization of infrastructure development and its important role in promot-
ing economic growth and making this growth more inclusive. This led to
sharing the benefits with poorer groups and communities, particularly in
remote and isolated areas and small and landlocked countries (Srisangnam
2013). A number of empirical studies also supported the importance of
infrastructure in promoting growth and poverty reduction (UNESCAP
2006). During this phase, governments started to involve a large portion
of the national infrastructure—such as airports, sea/river ports, roads, ICT
and energy—that can be considered as a CBI and is the building bloc for
cross-border or regional connectivity. The lesson learnt during this period,

starting from around the turn of the twentieth century up to the present, is
one which has seen the strong involvement of both government agencies
and international organizations as the main actors in providing for extended
connectivity in the region, unlike the early period of the 1990s (Srisangnam
2013).
Last, but not least, the fourth lesson learnt relates to the present period
covered by ASEAN and its latest MPAC. Confidence building over more
than two decades has now made ASEAN countries realize that the way to
develop the region in the future is not limited to ASEAN only. More
could be done to link ASEAN region with the global economy to enhance
the former’s future competitiveness. The global financial uncertainty
further necessiates the rationale of regional connectivity to promote
intra-regional trade, investment and development (Srisangnam 2013).
Achieving integration of the regional infrastructure has become one of
ASEAN’s most challenging tasks given the region’s geographic, size and
economic and social diversity. During this phase, ASEAN launched a
much more comprehensive plan of connectivity as outlined clearly by
MPAC (Srisangnam 2013).
5.8 ASEAN Connectivity: Future Challenges

and Significance for NER
5.8.1 Future Challenges
The ASEAN integration has primarily been market-driven through trade

and investment. However, such integration has now reached a critical
stage that will require the involvement of region-wide institutions. A
top-down, government-led and market-creating approach, together with
bottom-up, market-driven initiatives, seems to be more appropriate at this
stage of developing and implementing ASEAN connectivity (Srisangnam
2013). In view of such diversity, a multi-track and multi-speed approach
should be the way to go forward in ensuring ASEAN infrastructure
development (Bhattacharyay 2010a, p. 202). There will be a need for
effective coordination among various stakeholders at all levels, both public

and private, and civil society, and between the countries and regions
involved. Much work still remains to be done national, regional and
sub-regional infrastructure planning, financing and implementation
(Srisangnam 2013).
Next, for any future building up of its infrastructure, ASEAN members
would have to depend more on own national resources instead of external
assistance. ASEAN’s role and governance (Srisangnam 2013), is to ensure
the smooth functioning of the cooperation and coordination of its mem-
bers’ infrastructure projects (ASEAN 2008 cited by Bhattacharyay 2010a,
p. 202). This would help to harness shared resources in labour, capital,
services and technology; harmonize cross-border rules and regulations;
and facilitate exchange of institutional and policy best practices. Such
cooperation can potentially put in place a two-track approach, namely
cooperation in building and operating cross-border infrastructure, and
cooperation in financing infrastructure development (Bhattacharyay
2010a, p. 202). To enhance ASEAN connectivity through CBI would
require strong commitment and cooperation among ASEAN participant
countries. Along the way, all stakeholders need to assess and manage
negative socio-economic and environmental impacts that these projects
could cause for people, migration, diseases, smuggling, pollution, green-
house gas and even for simple transport accidents (Srisangnam 2013).
Third, it is clear that the future path of growth in ASEAN will remain
vibrant and strong, and that this growth could also strain the existing
infrastructure that is still under-developed in many parts and sub-regions
of ASEAN. A large imbalance in infrastructure still exists among ASEAN
countries that would require more involvement of national government,
their interconnections with ASEAN, particularly in the CLMV countries.
Any future infrastructure connectivity development will play a crucial role
in integrating and deepening regional production networks through
reductions of trade and logistical costs, thus allowing more involvement
of sub-regions (Srisangnam 2013).
Evidently, potential trade and FDI flows in ASEAN have always been
encouraged by outward-oriented policies, sufficient infrastructure and
efficient institutional framework, in order to conduct the formation of
production networks and supply chains produced by Asian firms and
worldwide multinational corporations. More than half of Asia’s exports

are intra-regional, and the rise of China and India is expected to further
boost intra-regional trade (Brooks 2008 cited by Bhattacharyay 2010a,
p. 203; Srisangnam 2013). With tariff rates low under the AFTA agree-
ment, ASEAN could not allow to continue the poor quality of hard
infrastructure connectivity and soft infrastructure, such as
non-transparent legal and regulatory frameworks, as well as unfriendly
customs procedures and cross-border regulations and controls
(Srisangnam 2013). A clear path must be to develop ASEAN economic
integration by enhancing resource sharing and efficiency which will
require a commonly interlinked connectivity and enlarge markets and
resources, and which thus could be reached by the reductions in transport
and trade costs, as well as by establishing linkages with regional and global
production networks and supply chains, while facilitating further and
deepened regional integration.
Fourth, another major challenge for ASEAN connectivity can be
observed from the experiences of GMS development, particularly through
its functional areas, viz. trade, infrastructure, transport, energy and ICT
(Srisangnam 2013). As stated earlier, for transport infrastructure develop-
ment, cooperation in energy and ICT started since the beginning of the
1990s, particularly in the case of Laos PDR and Thailand with power
transmission lines linking both countries. This cooperation is still vital for
both countries’ infrastructure development. Over time there were count-
less efforts to develop linkages through economic corridors. Until the
main structure of economic corridors is more developed in the regional
landscape, further efforts are actually needed (Srisangnam 2013). In 2008
the GMS Cross-Border Transport Agreement (CBTA) was signed and
ratified by participating countries and covers all relevant aspects related to
cross-border facilitation. This includes single-stop/single-window custom
inspections, cross-border movement of people, transit traffic, require-
ments for vehicles making cross-border trips, exchange of commercial
traffic rights, and issues related to road and bridge design standards, road
signs and signals (ADB 2008). These functional areas of infrastructure
development have helped to meet the needs of not only the countries
involved but also connect the sub-regions together for a better future.
Last, but not least, ASEAN investment in infrastructure has become

an important feature in future growth and development of the region
(Srisangnam 2013). The region needs to address the shortfalls in quantity
and quality of infrastructure and the development gap in infrastructure
among members. Addressing these issues for meeting additional require-
ments to support future growth and development would require substan-
tial investment from ASEAN during this decade (Srisangnam 2013).
According to studies by Asian Development Bank Institute-ADBI (see
Table 5.3), ASEAN countries will require infrastructure investment
amounting to around USD1.08 trillion during 2010–20, which is an
average close to USD100 billion per year. This figure is around six times
higher than the actual amount invested by the private sector during
1990–2008 (see Table 5.4). Of the total estimated investment, more
would be needed for new projects, while the rest would go towards
maintenance of the existing infrastructure. Meeting such huge financial
Table 5.3 Projected infrastructure requirements in developing ASEAN economies

2010–20 by sector (USD millions)
Sector New capacity Maintenance Total
Transport 317,273.3 133,320.9 450,594.3
Electricity 331,147.0 78,090.9 409,237.9
ICT 56,804.0 104,820.5 161,624.5
Water/sanitation 26,421.3 35,362.4 61,783.7
Total 731,645.6 351,594.7 1,083,240.3
Source: Bhattacharyay (2010b) and ADB (2011) cited by Bhattacharyay (2010a)
Table 5.4 Private sector investments in ASEAN 1990–2008 (USD millions)

Country Transport Energy ICT Water/sanitation Total
Cambodia 445.30 920.90 474.50 1840.70
Indonesia 3219.40 14,012.40 18,962.40 1020.20 37,214.40
Laos PDR 3250.50 197.80 3448.30
Malaysia 11,310.40 14,312.50 7972.70 7802.70 41,398.30
Myanmar 50.00 1275.10 1325.10
Philippines 2957.90 18,912.90 14,279.50 3533.50 39,683.80
Thailand 2943.80 14,584.50 15,690.90 807.50 34,026.70
Vietnam 880.00 3083.10 2012.70 58.80 6034.60
Total 21,806.80 70,351.90 59,590.50 13,222.70 164,971.90
Source: Public–Private Infrastructure Advisory Facility (PPIAF) (2010)
requirements would require ASEAN to coordinate more vigor-

ously between the public and private sectors and, to a certain extent also
involve civil society as well. More recently, the ASEAN Infrastructure
Fund has been created to support such an MPAC initiative. This requires
a more active role of the private sector through greater involvement and
coordination with the use of public–private partnerships in infrastructure
development (Srisangnam 2013).
In sum, ASEAN countries have learnt many lessons from past experi-
ence in infrastructure development in order to foster regional economic
integration before they recently reached a matured stage and put in place
MPAC. Thus, MPAC is a result of years of experience in ASEAN
connectivity, from the very beginning, before they concluded the blue-
print of moving ahead altogether. Interestingly, all strategies addressed by
MPAC, whether it is physical connectivity, institutional connectivity or
people-to-people connectivity, are all interrelated, and well defined
(Srisangnam 2013). More importantly, addressing a more integrated
ASEAN as a whole and a way to narrowing development gaps will remain
key for ASEAN, as infrastructure development and investment will allow
the unlocking of areas and sub-regions that need to connect with the rest,
thus enabling better market sharing and resource pooling. Due to Asia’s
enormous economic potential and global financial crisis, ASEAN connec-
tivity is at its best time for building efficient and seamless connections
across Asia and with the rest of world for a more competitive, prosperous
and integrated region.
5.8.2 Look East India: ASEAN Connectivity (Thailand–

Myanmar–India Connectivity)/Significance
for the Northeastern Region
According to the Master Plan on ASEAN Connectivity, the three aspects

of connectivity which are physical, institutional and people-to-people are
the most important for realizing the goal of economic integration and
sustainability development. However, the more important question to be
asked is the following. Due to resource constraint, among the three pillars,
what is the most promising pillar to be realized at the very first stage? One
of the most important lessons learnt from the case of Thailand and GMS
connectivity is that the initiation of all connectivity from the pillar of
people-to-people seems to be the best start (Srisangnam 2013). Under-
standing participants will be the pull factor for both the proper direction
of hardware development and the easing in of business friendly software
connectivity.
People-to-people connectivity, not only in terms of economic relations
but socio-cultural relations between Thailand, Myanmar and India, can
be traced back through history. So many symbols and structures
representing civilization bonds among the three countries, including
Sukhothai Historical Park in Thailand and Bagan in Myanmar, are the
proof of these relations apart from international trade and investment, as
described above. Hence strengthening good relations (the first lesson
learnt from Thailand and CLMV connectivity after the end of the Cold
War) and making the effort to preserve, protect and restore these ancient
symbols and structures as well as socio-cultural cooperation to promote
greater people-to-people interaction, including exchanges in culture, edu-
cation, youth, sports and human resource development, can all be utilized
(Srisangnam 2013). Fortunately, ASEAN and Indian leaders have already
adopted these frameworks of cooperation as the Vision Statement made
during the latest 2012 ASEAN–India Commemorative Summit in New
Delhi, India (ASEAN India Team 2012). The realization of the Indian
Look East Policy and ASEAN Connectivity can be developed only when
the people of the two regions reach maximum understanding of each
other; only then may all measures be sincerely implemented (Srisangnam
2013).
Parallel to the people-to-people connectivity of the Vision Statement,
the leaders of ASEAN–India member states also committed to assisting
the completion of the India–Myanmar–Thailand Trilateral Highway and
its extension to Laos PDR and Cambodia and the new highway project
connecting the Northeast part of India to the GMS or the so-called MIEC
project in order to “add greater momentum to the growing trade and
investment linkages between ASEAN and India” (ASEAN India Team
2012). In terms of physical connectivity, the region needs both to address
the shortfalls in the quantity and quality of infrastructure and pay atten-
tion to the development gap in infrastructure among members
(Srisangnam 2013). India, Myanmar and Thailand will require a tremen-

dous budget for infrastructure investment. This total budget would be
needed for investment in new projects as well as to maintain the existing
infrastructure. As such, meeting such huge financing needs will require
both member states and external sources of funds, such as the Asian
Infrastructure Investment Bank, the ADB and the New Development
Bank (BRICS Development Bank), to coordinate much more, in partic-
ular in three dimensions. The first dimension is coordination among the
three countries and the outside investors (normally the major dialogue
partners of ASEAN, especially Japan, China and Korea). The second
dimension is the cooperation between public and private sectors. The
third is the involvement of civil society as it is at the receiving end
(Srisangnam 2013).
Like a personal computer, the jobs can’t be done if there is no software
installed to work with the hardware. Physical connectivity, especially the
highway route to connect India, Myanmar and Thailand, cannot be
utilized to maximum capacity if there is no institutional connectivity.
The Initial Implementation of the Cross-Border Transport Agreement
(IICBTA) among Thailand, Laos PDR and Vietnam should be studied
and adapted to facilitate multi-model transportation along this important
route. “The objective of this IICBTA is to accelerate CBTA by allowing
the early identification of key issues and the early realization of benefits
from improved transport facilitation” (ADB 2011). While the more
difficult annexes and protocols are being negotiated under the framework
of the ASEAN Agreement on Transportation, the IICBTA can be con-
sidered an Early Harvest Scheme as it is designed to allow the transpor-
tation to take place (Srisangnam and Sermcheep 2011). Moreover, this
IICBTA agreement is also designed to focus on the self-executing CBTA
articles as well as annexes and protocols that have been finalized or are
about to be finalized, including those pertaining to Single-Stop Inspection
(SSI) and Single-Window Inspection (SWI). The IICBTA involves
interim measures that will utilize existing bilateral agreements, for exam-
ple exchange of traffic rights, until such time that the relevant annexes or
protocols are entered into force (ADB 2011).
Finally, to release the landlocked area of the “Eight Sisters States” of
Northeast India as well as to utilize efficiently the fertile natural resources
in Myanmar and to gain the maximum utilization of the ASEAN
production network in Thailand and other GMS countries, the interna-

tional trading route via the India–Myanmar–Thailand Trilateral Highway
and its extension to Laos PDR and Cambodia or MIEC are the inevitable
necessary and sufficient conditions. Further, deeper and broader eco-
nomic integration (led by people who understand and accept the differ-
ence and diversity of each ethnic) will ensure secure and peaceful societies.
Hence, the Master Plan on Mekong–India Connectivity needs to be
designed with at least three aspects, namely economic, socio-cultural
and political-security. However, as mentioned above, to implement this
kind of master plan and agreements with the high hope of bypassing all
barriers in international trade and transportation among the three coun-
tries to fulfil the final target of the real economic and sustainability
development corridors, the hearts of the Indian, Myanmar and Thai
people are the most important requirement (Srisangnam 2013).
Notes
1. AFTA was adopted by Brunei, Indonesia, Malaysia, the Philippines,
Singapore and Thailand in 1992.
2. ASEAN Vision 2020 was adopted by ASEAN member states in 1997.
3. The following development status of the ASEAN transportation system,
ASEAN energy projects and ICT development are derived from the 2010
Master Plan on ASEAN Connectivity (ASEAN Secretariat 2011).
4. ERIA is an international organization established in Jakarta, Indonesia in
2008 by a formal agreement among the leaders of 16 countries in the East
Asian region to conduct research activities and make policy recommenda-
tions for further economic integration.
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Piti Srisangnam is currently Director of Academic Affairs, ASEAN Studies

Center at Chulalongkorn University, Bangkok.
Anupama Devendrakumar is with the ASEAN Studies Center, Chulalongkorn

University, Thailand.
6
India’s Connectivity with ASEAN: What
Role for Northeast India?
Shankaran Nambiar
6.1 Introduction
The India–ASEAN relationship stretches back over 30 years. India
became a sectoral partner of ASEAN in 1992, a dialogue partner in
1996 and a summit-level partner in 2002. In 2012 India’s partnership
with ASEAN was elevated to that of a strategic partnership level. The
ASEAN–India strategic partnership is indicative of stronger bilateral
relations. As a Strategic Partner of ASEAN, India is actively involved
with various ASEAN fora that include the East Asia Summit (EAS), the
ASEAN Regional Forum, ADDMþ (ASEAN Defence Ministers Meeting
Plus) and the Expanded ASEAN Maritime Forum.
The Look East Policy (LEP) and the Act East Policy (AEP) are,
patently, not totally new concepts. India’s LEP was announced almost
20 years ago and was meant to strengthen economic and strategic relations
S. Nambiar (*)
Malaysian Institute of Economic Research (MIER), Kuala Lumpur, Malaysia

132 S. Nambiar
with South East and East Asian countries (Anand 2009). This policy has
taken more concrete shape with the present government which has
enunciated LEP and AEP. India’s participation in South East and East
Asia has increased over the past two decades. For one, trade between India
and South East and East Asia has increased but mutual investment flows
have not been correspondingly high. Notwithstanding these develop-
ments, cooperation in many areas has been rather weak. One constraint
has been the rather weak connectivity of India’s Northeast with the rest of
the country and neighbouring countries. This has restricted India’s
engagement with the East. The recently unveiled AEP is an effort to
intensify engagement with South East and East Asia.
India has been increasingly forming trade agreements with ASEAN
member states. It has signed a partial FTA with Thailand and the
Comprehensive Economic Cooperation Agreement (CEC) with Singa-
pore as well as an FTA with Malaysia. India’s FTA with ASEAN was
signed on August 13, 2009.1 An economic corridor that runs from India
right through ASEAN will create economic opportunities for ASEAN
member states such as Myanmar, Thailand, Cambodia and Vietnam. This
will build a strong economic and industrial base. The corridor will enable
these economies to integrate further. India is also a partner of the Regional
Comprehensive Economic Partnership (RCEP), which is a comprehen-
sive FTA being negotiated between the ten ASEAN members and
ASEAN’s FTA partners, namely, Australia, China, India, Japan, Korea
and New Zealand.
India’s regional connectivity with South East Asia has two approaches:
(1) soft connectivity and (2) hard connectivity, such as the Trilateral
Transit Transport Agreement. The latter includes the Trilateral Highway
(TH) and the Mekong–India Economic Corridor (MIEC), and will
promote seamless trade. India’s connectivity with South East Asia has
been based on its national connectivity. The Golden Quadrilateral
(GQ) projects, the Delhi–Mumbai Industrial Corridor (DMIC) and the
Dedicated Freight Corridor (DFC) fall within the range of national
connectivity projects. Regional connectivity is based on the TH and
MIEC. India’s regional connectivity with South East Asia has two path-
ways with NEI and south India being the hubs. India’s connectivity with
6 India’s Connectivity with ASEAN: What Role for Northeast India? 133
South East Asia through the Northeast and South India is rather nascent,
but they have the potential to occupy an important position in the near
future. The importance of India’s connectivity with ASEAN carries with
it the advantage of linking a growing India with a fast developing region.
A further impetus for strengthening India’s connectivity with ASEAN
lies in the opportunity of being able to form links with China’s connec-
tivity projects, the Singapore–Kunming Rail Link (SKRL) being a case
in point.
The advantages of India’s integration with South East Asia are obvious.
Combined, this region has a population of 1.8 billion people and an
economic size of USD3.8 trillion. Further both have substantial resources,
natural and economic. The creation of an economic space was initiated
with the signing of an FTA in goods in 2010. This marks a major step
towards creating an ASEAN–India regional trade and investment area,
though it requires solid connectivity to lead to greater integration.2
Building a common market may be achieved provided trade liberaliza-
tion is adequately complemented by effective trade facilitation and
connectivity.
The development of connectivity will trigger the generation of new
economic activities. But in order to unlock the huge trade potential
between India and ASEAN it is necessary to remove the impediments
to trade and investment. This is an area in which India has to take great
strides and to reduce tariffs, non-tariff barriers (NTBs), lack of connec-
tivity (physical, digital, social) and regulatory barriers. Better trade facil-
itation and the setting up of a national single window are other steps that
have to be taken. These efforts, besides improving trade and investment,
will help India to strengthen its manufacturing sector.
6.2 ASEAN Economic Community

The ASEAN Economic Community (AEC) came into being as an
extension of the ASEAN Community vision. AEC is meant to establish
more than economic integration within the community. As with all
communities, AEC is expected to have broader dimensions, with the
notion of an economic community being one strand, the others being
134 S. Nambiar
the political-security and socio-cultural dimensions. In accordance with

this line of thinking, ASEAN set out a roadmap. This was articulated at
the Cha-am Hua Hin Declaration and a time-frame articulated for the
period 2009–15 (see ASEAN 2009). In general, AEC aims to integrate
ASEAN into the global economy and create a single market and produc-
tion base where goods, services, capital and labour flow freely, so that
equitable development can be realized within the region (see Das et al.
2013).
A delineation of the concept was spelt out in the ASEAN Economic
Community Blueprint (ASEAN 2008). This document provides an
understanding as to what constitutes the AEC, explaining the goals and
the broad scope of the community. It also provides the plan of action
associated with each of the identified elements. In any case, the AEC
Blueprint (ASEAN 2008) is based on achieving the following:
1. Single market and production base;

2. Competitive economic region;
3. Equitable development;
4. Integration into the global economy.
Taken as a whole, the AEC agenda is to propagate the free movement

of resources across borders within South East Asia and among the member
countries of ASEAN. The notion of a single market resides in creating a
European Union-type environment where national borders do not restrict
the flow of goods, services, labour, capital and investment within the
community. Nonetheless, it must be added that ASEAN does not intend
to replicate the EU model since it does not believe in promoting common
institutions or a common currency.
Promoting a single market and production base has necessitated
changes in rules and the regulatory framework. This has meant the
elimination of tariffs and non-tariff measures. The former has been the
main focus in recent years. Countries like Singapore and Malaysia have
achieved considerable success in these areas. However, issues such as rules
of origin, trade facilitation and standards and conformance receive ongo-
ing attention. While some of the more developed ASEAN countries have
achieved considerable progress in customs and trade facilitation, this
cannot be said for all member states which, in any case, have differing
levels of development. Interest in customs and trade facilitation is depen-
dent on a country’s participation in trade and integration in the global
economy, yet they are essential if a single market is to be developed.
Establishing a single market and production base implies achieving
the free flow of goods, services and investment, and the freer flow of
capital. The free flow of goods necessitates the elimination of tariffs and
NTBs, the harmonization and rationalization of rules of origin, trade
facilitation, customs integration (including the ASEAN Single Window),
harmonizing standards and removing technical barriers to trade (including
mutual recognition arrangements, or MRAs).3 Trade in goods has, typi-
cally, received the most attention, in part because it includes areas relevant
to the entire AEC project (such as customs and other areas of trade
facilitation).
Some of the more contentious issues in the creation of a single market
are the free flow of investment, services and the freer flow of capital. The
freer flow of capital can be supported with financial services liberalization,
but this is an issue that is sensitive because it has repercussions on a
country’s financial system. Besides, many developing countries do not
have the right safeguards and institutions that allow financial liberaliza-
tion. In the absence of these measures financial stability is at stake.
Many ASEAN member states are keen to attract FDI, thus the free
flow of investment, particularly FDI, is important. There are two
initiatives that were taken by ASEAN to encourage the flow of invest-
ment. The first arrangement was the ASEAN Comprehensive Agree-
ment on Investment (ACIA). This was followed by the ASEAN
Investment Area (AIA) initiative. Under ACIA, AEC will integrate
several agreements pertinent to FDI, such as investment protection,
and emphasize the cornerstones of the AIA (i.e. national treatment,
investment facilitation and cooperation, and promotion).4 One of the
pillars of AEC is financial liberalization. The freer flow of capital is the
corner stone of financial liberalization.5 The freer flow of capital is
necessary to strengthen ASEAN capital market development, which
requires the harmonization of capital market standards and practices in
order to facilitate cross-border transactions. It also envisions greater
136 S. Nambiar
capital mobility and liberalization, through an emphasis on orderly

processes and guarantees of safeguards to maintain stability.
The free flow of services is a more challenging objective.6 ASEAN seeks
to achieve the free flow of services through a progressive increase in
sectoral coverage and a commitment to advance the mutual recognition
of professional qualifications and services. Perhaps the most demanding
objective that requires more will to accomplish is financial services liber-
alization. Aside from the freer flow of capital, another contentious issue is
the free flow of skilled labour. The AEC brings to the fore the problem of
the movement of skilled labour. Needless to say it is necessary to facilitate
FDI and trade in services. However, this requires sustained efforts through
MRAs and concordance of skills and qualifications.7
The second pillar of the AEC is to establish a competitive economic
region.8 This implies, in turn, establishing several institutional reforms.
One of them is the establishment of a clear competition policy to ensure
a level playing field in the integrated ASEAN market. Competition
policy is meant to ensure that firms do not unfairly use their monopoly
power and also to provide consumers with a wide range of choice at
competitive prices.9 Thus, this objective includes consumer protection
and the creation of an ASEAN Coordinating Committee on Consumer
Protection. Other initiatives under this pillar to create a competitive
region include regional commitments in IPRs protection, based on the
ASEAN IPR Action Plan (2004–10) and accession to the Madrid
Protocol. Further efforts encompass infrastructure development to
enhance regional transport links and cooperation in energy and mining.
Infrastructure under this scheme is not limited to physical infrastructure
but also includes information infrastructure. As an extension, integrated
approaches to e-commerce are envisaged through the e-ASEAN Frame-
work Agreement.
The issue of addressing equitable economic development is concep-
tualized through a two-pronged approach. At a national level it takes
into account development gaps between the original six ASEAN mem-
bers and the newer members (CLMV). The attempt here is to reduce the
developmental differences within ASEAN member states. At a more
micro-level, AEC is targeted at fostering SME development in the
region.
Finally, AEC, in keeping with the principle of achieving ASEAN

centrality, intends to integrate the region into the global economy.
The purpose of this is to enhance trade and investment. This has several
aspects to it, the primary one being to establish FTAs and preferential
arrangements with non-partners. Another aspect of being more closely
integrated with global trade and investment is to participate more actively
in global production networks. It is in keeping with these principles that
RCEP has been proposed (Intal et al. 2014).
The RCEP initiative was first proposed under the ASEAN Framework
for RCEP. Two documents outline the RCEP initiative: the ASEAN
Framework for RCEP,10 which explains the agreement’s principles, and
the Guiding Principles and Objectives for Negotiating the RCEP,11
which has played a guiding role throughout negotiations. Both docu-
ments clearly suggest that the purpose of RCEP is to build a “modern,
comprehensive, high-quality and mutually-beneficial FTA” through the
consolidation of the five ASEAN-centred “10þ1” FTAs.
The RCEP framework that was endorsed by national leaders at the
19th ASEAN Summit in November 2011 in Bali aims at “establishing an
ASEAN-led process by setting principles.”12 The principles defined in the
document call for more extensive interaction with current FTA partners
and advances in existing FTA/CEP. These principles outline the frame-
work for future regional cooperation agreements. Rough as this frame-
work is, it acts as a strong guiding force for establishing future regional
partnerships.
The Guiding Principles and Objectives for Negotiating the RCEP was
endorsed at the 44th ASEAN Economic Ministers’ (AEM) Meeting in
August 2012 in Siem Reap, Cambodia. This marked an important step in
the building of RCEP. The objective of RCEP is to attain a comprehen-
sive and mutually beneficial economic partnership agreement that
involves deeper engagement than the existing ASEAN FTAs.13 RCEP is
a trading arrangement among ASEAN member states and its main trading
partners. The latter that are a part of RCEP are China, Japan, South
Korea, India, Australia and New Zealand. Initially, it was planned that
RCEP would be launched in early 2013 and completed by the end of
2015. After several postponements, it is now expected that the agreement
will be finalized by 2017. RCEP is intended to encompass trade in goods
138 S. Nambiar
and services, investment, economic and technical cooperation, intellectual

property, competition and dispute-settlement. RCEP is expected to help
entrench ASEAN centrality,14 which is challenged by the economic
cooperation arrangements rapidly evolving in the region.
RCEP aims to eliminate progressively tariff and non-tariff barriers on
all trade in goods in order to establish a free-trade area. With regards to
trade in services, it will substantially eliminate restrictions and/or discrim-
inatory measures between RCEP participating countries. RCEP seeks to
create a liberal, facilitative and competitive investment environment in the
region. It could also benefit members through improved trade facilitation,
services liberalization and NTBs.15 It further states that negotiations for
investment under RCEP will cover the following four pillars: promotion,
protection, facilitation and liberalization. RCEP will build upon existing
economic cooperation arrangements between ASEAN and ASEAN’s
FTA partners that plan to participate. Other areas that the regional
arrangement can work on include e-commerce16 and intellectual property
rights.17
Moreover, RCEP will include a dispute-settlement mechanism
while also including other issues covered by FTAs among participating
countries. These issues may be identified and mutually agreed upon
throughout the course of negotiations, and they will take into account
new and emerging issues relevant to the business realities of today’s
world.
RCEP should address the central issue of market access, but without
ignoring the fact that ASEAN’s members and its trade partners are at
different stages of economic development. ASEAN adopts a consensual,
flexible approach. This might be criticized as moving too slowly, but it has
the advantage of making a start. The AEC Blueprint envisages the
formation of an AEC by 2015 and going beyond; RCEP is an integral
part of this process. As such, it potentially opens new doors for India to
ASEAN. However, there is considerable opposition to India signing
RCEP, which has a domestic origin.18 At the same time, there is also
criticism that India is holding back RCEP.19 Notwithstanding the objec-
tions to the country joining the arrangement, one could argue, as is being
done in this chapter, that India could benefit in some ways from further
engagement with ASEAN.
6.3 ASEAN Connectivity

ASEAN has to have its connectivity well-established if it is to proceed
smoothly towards achieving the goal of an integrated and competitive
ASEAN. Connectivity is central to creating ASEAN as a production base;
it is also necessary for a more unified ASEAN market. It is in this context
that ASEAN has developed the Master Plan on ASEAN Connectivity
(MPAC). This plan has a three-pronged strategy of “enhanced physical
infrastructure development (physical connectivity), effective institutions,
mechanisms and processes (institutional connectivity) and empowered
people (people-to-people connectivity)” (ASEAN 2011a, b, p. i). It is
necessary, along with liberalization, trade facilitation and the removal of
trade barriers, to institute strong connectivity. MPAC conceives of greater
connectivity in ASEAN as consisting of physical infrastructure for phys-
ical connectivity, air and maritime transport services for transport facili-
tation, and movement of skilled labour within the region.
Several strategies have been planned in order to execute the ASEAN
connectivity roadmap. The ASEAN Strategic Transport Plan (ASTP)
2011–15 is a pivotal plan that provides a comprehensive framework and
detailed plan towards seamless physical and transport connectivity into
2015 as well as the key strategies beyond (ERIA 2010). The Plan under-
pins the priorities on physical connectivity that are in MPAC. As ASTP
has emphasized, ASEAN’s supply chain network has to be strengthened,
and this can only be done against the background of a solid connectivity
network (ERIA 2010).
In order to facilitate transport connectivity within ASEAN, several
arrangements have been made, and these include: (1) the ASEAN Frame-
work Agreement on the Facilitation of Goods in Transit (AFAFGIT),
(2) the ASEAN Framework Agreement on Multi-Modal Transport
(AFAMT), (3) the ASEAN Framework Agreement on the Facilitation
of Inter-State Transport (AFAFIST), (4) the Roadmap for Integration of
Air Travel Sector (RIATS), and (5) the Roadmap Towards an Integrated
and Competitive Maritime Transport in ASEAN (RICMT).20 The
transport facilitation agreements are essential for seamless transport con-
nectivity. They will help substantially reduce the costs and time for
border-crossing for trucks in ASEAN.
140 S. Nambiar
The completion of the missing links and upgrading of “below class 3”

roads of the ASEAN Highway will likely go beyond 2015, primarily in
Myanmar; the upgrading of class 2 and 3 roads with high traffic volume in
the ASEAN Highway system would have to be done in ASEAN member
states (AMS).21 The completed ASEAN highways and SKRL network will
be the main skeleton of land transport for ASEAN. For greater accessibil-
ity of the hinterlands and to engender further inclusiveness, it is important
to develop at the national level feeder and distribution networks linked to
the ASEAN Highway (ERIA 2010). Additionally, AFAFGIT, AFAFIST
and AFAMT would need to be fully functioning in order for all the
investment in physical infrastructure to lead to significant benefits to
firms and people. Finally, ASEAN aims to establish itself as the transport
hub of the world’s growth corridor from India through ASEAN thence to
Northeast Asia or to Australia–New Zealand (MPAC strategy 5). This
would happen through the development of “land bridges” or corridors like
the Mekong–India Economic Corridor or East–West Economic
Corridor.
Connectivity through air transport is necessary for ASEAN which is a
region that is geographically spread. ASEAN does aim to introduce good
air transport connectivity. The ultimate goal is to have an ASEAN Single
Aviation Market (ASAM). ASEAN has RIATS, which includes three
major agreements and their implementing protocols, that is the Multilat-
eral Agreement on Air Services (MAAS), the Multilateral Agreement for
Full Liberalization of Passenger Air Services (MAFLPAS) and the Multi-
lateral Agreement for Full Liberalization of Air Freight Services
(MAFLAFS).22 Although all three multilateral agreements are in force,
they are not binding in so far as those member states that do not want to
participate are free to make that choice. Unfortunately, Indonesia is not a
keen partner in MAAS, MAFLPAS and MAFLAFS. Its absence is a severe
shortcoming since it has the largest population and economy in
ASEAN.23 It also has the potential to develop a large air travel market.
Its absence threatens to limit the aspiration of a single aviation market.
Nonetheless, there are positive signs that ASEAN is moving forward
towards a more integrated ASEAN air travel sector.24 First, Indonesian
carriers such as Lion and Garuda are expanding aggressively throughout
ASEAN. As Indonesia gains confidence in its ability to compete in a freer
market, the current objections of Indonesian air carriers to the relevant

protocols of the multilateral agreements in ASEAN are likely to diminish.
It is likely that there will be pressure from provincial and local govern-
ments, tourism authorities and the business community to open up air
travel. This is likely to emerge in Indonesia and other ASEAN member
states because many stakeholders will benefit from growing tourism and
business travel in the region. It is for similar reasons that the partial open
skies policy in the Philippines has come about. There could be pressure
from carriers outside the region, such as China, that will benefit from
ASEAN’s agreements.
ASEAN contains two of the world’s largest archipelagos. It also
includes one of the most important sea ways in the world, that is the
Malacca Straits, as well as having some of its member states as claimants
to the South China Sea. This makes maritime transport a core element
of ASEAN connectivity. Indeed, ASEAN aims to establish an integrated,
efficient, competitive and safe maritime transport system (MPAC
Strategy 4). ASEAN’s “Roadmap Towards an Integrated and Competitive
Maritime Transport in ASEAN” which was adopted in 2008 aims to
promote the progressive liberalization of maritime transport services in the
region.25
Virtually all the planned actions on maritime transport in MPAC and
ASTP can be expected to be implemented largely after 2015. ASEAN
seeks to achieve a single shipping market. In working towards this goal,
there are plans to improve the performance and capacity of the 47 desig-
nated ports in the ASEAN maritime integration programme. It is also
necessary to establish efficient and reliable shipping routes. The develop-
ment of human resources cannot be understated because it is vital for
strengthening ports and shipping operations. ASTP and MPAC have clear
strategic actions to develop ASEAN connectivity. The challenge into
2015 and beyond is essentially one of implementation.
Quite simply, ASEAN aims to strengthen its connectivity. In the
ASEAN context, connectivity is not restricted to physical connectivity,
but extends to ICT and people-to-people connectivity. While ASEAN has
strategies to enhance its land, air and maritime connectivity, land con-
nectivity is most relevant and crucial to NEI. The plans to improve
142 S. Nambiar
connectivity along all lines indicates the seriousness of purpose that

ASEAN takes in developing its connectivity programme. Building
ASEAN centrality and establishing AEC cannot be achieved without
adequate connectivity. The importance of these initiatives underlies the
gravity of connectivity and why India needs to position its connectivity
projects with ASEAN in mind. NEI has a special purpose in the scheme of
improving India’s land links with ASEAN.
6.4 India’s Connectivity with ASEAN

and Northeast India
India has recently announced plans to connect with ASEAN.26 This is
imperative because China has launched very ambitious projects to
enhance connectivity throughout South East Asia, even extending to
Central Asia. By comparison India lags behind China. In view of
China’s initiatives India needs to redouble its efforts in creating connec-
tivity with ASEAN.27 The newly launched AEP is a significant plan for
building economic corridors linking India with South East Asia and
China. For example, the Government of India has been working with
ASEAN to enhance physical connectivity via India’s Northeast and its
eastern seaboard, with the India–Myanmar–Thailand TH being a striking
example of such efforts. This is a good instance of a project which will
reduce travel time and create cross-border opportunities for trade and
investment (De 2011). Industrial clusters located along the connectivity
corridor could emerge as economic nodes. Indeed, economic integration
in the Asia–Pacific region will be of great benefit to the region as a whole
(ESCAP 2012).
With the development of the infrastructure projects it can be expected
that this will spawn economic activity. Invariably, there will be more trade
between India and ASEAN, particularly around the towns that are being
linked. This could also extend to trading centres as well as the flourishing
of SMEs. This would include food parks (e.g. at the outskirts of Imphal)
and special economic zones (e.g. Thoubal, Manipur). Agricultural and
food processing centres will also arise. In time, it is conceivable that light
manufacturing could emerge along the connectivity routes.
SMEs are a motivating force for business both within and across
borders. They can, and should, form the backdrop for India–ASEAN
integration. Under AEP, special focus has been given to SMEs. It is
obvious that they can benefit from better connectivity. In order that
Indian SMEs can engage with their counterparts in ASEAN and build
effective business networks across borders it is imperative that connectiv-
ity be developed. As an essential step in the process India has announced
the creation of a Special Facility for project financing and quick imple-
mentation of connectivity projects with ASEAN. The Special Purpose
Vehicle (SPV) seeks to provide a framework whereby Indian industry
could receive government support for investment in the connectivity
projects with the ASEAN region, including the building of back-end
linkages in India’s Northeast and along the eastern coast to create a
symbiotic market model of economic development in the region. This
initiative is expected to encourage trade and investment as well as to
integrate Indian producers and manufacturers in regional value chains
that stretch to ASEAN.
Several prominent highways have been planned to extend India land
connectivity with ASEAN. Some of these have great significance for the
Northeast. The following are particularly noteworthy because they stra-
tegically involve NEI (see ERIA 2010; De 2014; RIS 2012):
• The India–Myanmar–Thailand TH (IMTTH) links Moreh with Mae

Sot through Bagan and Mandalay in Myanmar. This cross-border
network is financed by the governments of India, Myanmar and
Thailand. The Indian government has extended the road from the
Northeast border to the Tamu–Kalewa–Kalemyo section in Myanmar.
The route of the IMTTH is 1360 km and passes through Tamu,
Kalewa, Yargi, Monywa, Mandalay, Meiktila, Nay Pyi Taw, Taungoo,
Oktwin, Payagyi, Theinzayat, Thaton, Hypaan, Kawkareik and
Myawaddy.
• The Delhi–Hanoi Railway Link. The Indian government is planning
to connect Delhi with Hanoi by one of two proposed routes. Both
routes will begin with a route from Silchar to Thanbyuzayat. Thereaf-
ter, one will connect Delhi with Hanoi through Myanmar, Thailand
and Cambodia; the other proposed route is through Ye and Dawei
144 S. Nambiar
(Myanmar), Bangkok, through Thailand and Laos PDR and, finally, to

Hanoi.
• The Kaladan Multi-Modal Transit Transport Project. This project is
centred around the Kaladan River. It involves the development of the
port and inland water transport between Sittwe and Kaletwa. Further,
there is a 129 km highway between Kaletwa to the India–Myanmar
border along Mizoram. This project will connect Indian ports and
Sittwe as well as road and inland waterway links between Sittwe and
Northeast India. This project will provide transportation between
Northeast India and Myanmar and facilitate the transportation of
goods.
• The Mekong–India Economic Corridor (MIEC) connects Ho Chi
Minh City with Dawei in Myanmar. MIEC passes through Bangkok,
Phnom Penh and Chennai, through the Cambodia–Vietnam,
Cambodia–Thailand and Thailand–Myanmar borders. This project
integrates India with four ASEAN countries in the Mekong region.
On the India side, the key link for this project is Chennai because the
port there will link up with the Myanmar port of Dawei.
• Stilwell Road connects India with the People’s Republic of China,
linking Ledo in Assam with Kunming. The road is more than 1000 km
and has a long stretch passing through Myanmar, with two lines
bifurcating in Myitkyina, where the northern line begins; it ends at
Tengchong. The southern line turns south from Myitkyina and reaches
Ruili via Bhamo.
• Tiddim–Rih–Falam Road. This route connects the Northeast states
with Myanmar, starting with Zokhawthar LCS, on the Indian side, and
linking Rih in Myanmar. There are two road components, Rih–
Tiddim and Rih–Falam. The latter is a 151 km stretch, and the former
has a length of 80 km.
• India–Myanmar–Laos PDR–Vietnam Corridor and Sittwe Industrial
Zone. There is a proposed route between India and Vietnam through
Myanmar and Laos PDR. This route connects Moreh and Kolkata
with Hanoi and Da Nang. This is part of the Ayeyawady–Chao
Phraya–Mekong Economic Cooperation Strategy and goes through
Myanmar (Yangon, Meikhtila, Tarlay, Kenglap), Laos PDR (Xieng

Kok, Loungnamtha, Oudomxay, Deptaechang) and Vietnam (Tay
Trang and Hanoi). Through this route India will be connected with
the Sittwe industrial park and the port in Sittwe.
• The Mekong–India Economic Corridor (MIEC) involves integrating
the four Greater Mekong Countries, that is Myanmar, Thailand,
Cambodia and Vietnam (hereafter referred to as the Mekong Countries
of MIEC), with India through its east coast. It is proposed to connect
Ho Chi Minh City (Vietnam) with Dawei (Myanmar) via Bangkok
(Thailand) and Phnom Penh (Cambodia) and further linking to Chen-
nai in India.
6.5 Positioning Northeast India

The annual compound growth rate of the Gross State Domestic Product
(GSDP) of NEI has been improving over the years, with more of the
component countries showing better performance as the years progress. In
the 1980s it was reported that Arunachal Pradesh and Nagaland had growth
rates that were higher than the national level. In the following decade,
Meghalaya, Nagaland and Tripura showed clear signs of improvement,
with their growth increasing rapidly. Two states, Manipul and Assam,
have had growth rates that were lower than the national average, but since
the 1990s they have been accelerating.
As far as the Human Development Index (HDI) is concerned, Mizo-
ram falls into the high category; Manipur, Nagaland and Sikkim are
classified as high middle; Arunachal Pradesh, Meghalaya and Tripura
are middle states; and Assam is a lower middle state. Overall, this is a
reasonable record, although obviously more can be done. There is no
doubt that Assam’s condition definitely deserves more attention. The
commendable performance of the Northeast states on the HDI is attrib-
uted to their success in the education dimension. Some of the states in
NEI have high literacy rates that are ahead of the national average.
However, Arunachal Pradesh, Assam and Meghalaya have literacy rates
that are below the national average.
146 S. Nambiar
There is a problem with the structure of the economies in the North-

east arising from the predominance of agriculture. This is because in these
states agriculture contributes more than 40 per cent of income. The
agriculture sector is also the main source of employment at about
70 per cent of the total working population. Given the importance of
the sector and its nature, unemployment does pose a problem. States like
Tripura and Assam have high unemployment rates (per 1000) among
males in the urban areas; these are also the states that have high rural
employment. Singh (2006) notes that unemployment in the Northeast is
increasing in absolute terms, particularly since the 1990s. This is defi-
nitely an issue in the absence of a strong industrial sector that can generate
employment.
Poverty is another issue in NEI that has to be resolved. In 2011–12,
Arunachal Pradesh (9.2 per cent) and Sikkim (8.2 per cent) had poverty
rates that were below the national average (21.9 per cent). Poverty in
2011–12 as compared to 2004–05 increased in Arunachal Pradesh (3.6
per cent), Mizoram (5.1 per cent) and Nagaland (9.9 per cent). However,
Sikkim (22.9 per cent) and Tripura witnessed impressive declines in
poverty over the same period, recording decreases of 22.9 and 26.5 per
cent, respectively. Assam, Manipur and Mizoram had poverty rates that
were much higher than the national average. While in Assam 32 per cent
of the population was below the poverty line, it was 36.9 per cent for
Manipur and 20.4 per cent for Mizoram, which was far in excess of the
national average of 21.9 per cent in that period.
The most disconcerting feature of NEI is the lack of good infrastruc-
tural facilities. This is evidenced by the fact that all Northeast states fall
within the low category of the infrastructure index. Prabhakara (2004)
notes that the states in the region are internally locked and lock out their
neighbours. This sentiment is echoed by Singh (2006) who emphatically
states that the lack of infrastructure has “crippled the free flow of factors as
well as products,” making it difficult to attract FDI into the region and to
benefit from globalization. The importance of infrastructure and connec-
tivity cannot be overemphasized. It is only with infrastructure and con-
nectivity that the growth of the region can be improved. Further, if the
Northeast is to be the window to ASEAN, then there is no doubt that the
solution lies in the development of infrastructure in these states.
Although the infrastructure index of the NER is low, there is seemingly

conflicting evidence in that the road density per 1000 sq. km and per
1000 population is high for some states in the region as compared to the
national average. The road density per 1000 sq. km is much higher than
the national average for Assam, Nagaland and Tripura, but lower for the
other Northeast states. However, the road density per 1000 population is
higher for all Northeast states, with that of Arunachal and Nagaland being
very much higher than the national statistic, and that for Assam, Manipur
and Tripura being more than double. But this outcome is to be expected
given the low density of population and hilly terrain of the region. The
Ministry of Road Transport and Highways is aware of this problem and
has claimed to be committed to paying special attention to the develop-
ment of national highways in the region.
While railways may be an excellent mode of transportation, the hilly
terrain in NER, again, will not allow its extensive use. Hilly states like
Arunachal Pradesh, Manipur, Meghalaya and Mizoram because of their
geographical characteristics are not suited to a network of railway lines.
Nevertheless, there is increasing allocation in the Rail Budget for the
extension of railway lines in the Northeast states. At present only two
state capitals in the region are connected by railway. The Railway Ministry
has announced its intention of connecting all state capitals in the region.
Clearly, there is strong government commitment to improving rail con-
nectivity in the region. It is reported that substantial progress has been
made in achieving the stipulated objectives (Kashyap 2016; Singh 2017).
The importance of air connectivity in NER is recognized, but its devel-
opment is rather slow. There is only one international airport in the region,
that is Guwahati (Assam). Assam has five other domestic airports. Mizoram
and Meghalaya have one airport each, with another (Baljek) under construc-
tion in the latter state as well as in Sikkim (Pakyong). An airport has been
proposed for Arunachal Pradesh near its capital, Itanagar. Air connectivity
will not only improve intra-regional links, but will also improve the region’s
connectivity with ASEAN.
There are good reasons why it is important to improve connectivity
within NER. One convincing reason lies within India’s security consid-
erations. Shivananda (2011) argues that India’s transport infrastructure
leaves strategic weaknesses on the eastern front. Adducing evidence of
China’s rapid infrastructure development along the Line of Actual
148 S. Nambiar
Control (LAC), he points out that India’s increased military deployments

in the eastern sector do not match China’s efforts, which include
improved transport infrastructure and capabilities to mobilize military
forces along the LAC. This raises several considerations: the lack of
transport infrastructure in the NER and the necessity of such infrastruc-
ture for strategic reasons. Indeed, if India is to pursue the Northeast as a
window to ASEAN, infrastructure is crucial as a link to ASEAN, without
losing sight of the necessity of security considerations that will maintain
peace and stability in the region. The latter is an important precondition
for greater trade and investment to occur in a stable manner.
There are several reasons why the development of infrastructure is
imperative from an economic perspective. First, it is necessary to have a
good domestic infrastructure network that can support connectivity
networks that are set to connect India with ASEAN. In the absence of
local roads, railways and air travel networks India–ASEAN connectivity
projects will be isolated and will not be able to deliver the full benefits
that can be accrued from them. This is the most important and
foundational reason why it is necessary to improve on infrastructure
facilities in NEI.
Second, with better supporting connectivity NEI states will have better
access to markets both internally and also with neighbouring ASEAN
states. This will increase trade and investment. LEP, which was launched
in 1991, did not take off adequately, causing NEI states to remain in
isolation. It also worked as a constraint for the Northeast to play a bigger
role in the development of the country. Better infrastructure would allow
industries in the rest of India to use the Northeast region as a conduit for
the transport of their goods to ASEAN (PWC 2014). It is, therefore,
necessary to introduce the necessary supporting infrastructure so that the
notion of the Northeast being a window to ASEAN does not remain an
empty slogan.
A third reason, which like the second is also of a derived nature, relates
to the growth of economic activities in NEI that would be facilitated
through better connectivity between it and the rest of the country. Better
domestic connectivity, besides supporting India’s quest to position the
Northeast as a window to ASEAN, would also encourage companies to
take advantage of the region’s rich endowments in oil, natural gas, coal,
limestone, dolomite, graphite and other minerals. The hydropower of

the region could be better harnessed to serve the country’s energy needs.
By encouraging more resource-based industries in the Northeast, India
will stand to benefit from its connectivity with ASEAN via the region
(PWC 2013).
Needless to say, the Northeast has tremendous potential as a hub for
tourism (Bezbaruah 2015), which could be fully exploited both in the
Indian market and in that of ASEAN if there is better connectivity. The
biodiversity of the region, its climate, forests and tea gardens, make it
suitable for the growth of tourism, which could open up cultures to
exploitation, but if carefully managed could also be a source of revenue.
Tourism can also help in the growth of human capital, as well as encour-
aging the growth of the handicraft industry and other arts and crafts that
are special to each state. This will improve the incomes of home-based
artisans and cottage industries.
Having established the importance of improving the infrastructure
network within NER, we now turn to other challenges that the region
faces. Perhaps the most crucial problem is that of ensuring law and order.
The Northeast has come to be associated with insurgency movements
(Singh 2006). Although attempts have been made to tackle the problem
of insurgency, it has not been solved, and there are still some groups that
are active. Militants and underground groups pose a threat since the fear
of extortion, kidnapping and the murder of businessmen continues to be a
genuine concern. Companies, including multinationals, have to pay
protection money to these groups, and that does not make the region
attractive to investors.
Another challenge that has to be overcome is the geographically disad-
vantageous position of the region. The Northeast is landlocked and shares
less than 2 per cent of its borders with India, with the rest being shared
with Bhutan, Bangladesh, Myanmar and China (Tibet). This creates
issues relating to border security (Bhaumik 2014). There are, of course,
difficulties due to cross-border trade, which is not always legal. This has to
be overcome by opening up the region and by creating the right infra-
structure so that the free and unimpeded movement of goods is possible.
There are, of course, vested interests, such as corrupt public officers,
middlemen and underground groups, who would like to see illegal trade
150 S. Nambiar
thrive. Without denying the difficulties involved, it would help to encour-

age cross-border trade. This can be done by reducing the list of restricted
items that can cross the borders, and perhaps confining them to arms,
weapons and drugs. Also, drastically reducing the number of check posts
will help reduce corruption.
Two outstanding issues that deserve urgent attention are good gover-
nance and undertaking people-centred economic transformation. The
government has realized that top-down development planning has its
limits with NER. Accordingly, the NER Vision 2020 refers to participa-
tory planning and responding to the felt needs of the people. Thus, the
Planning Commission has shifted its discourse from “planning for the
North East to planning with the North East.” In line with this thinking,
Vision 2020 seeks to address the following:
1. Participatory development through grass roots planning andcapacity

development with targeted groups in mind;
2. Improving infrastructure, particularly connectivity and transport,
andadequate public investment in infrastructure along with private
participation;
3. Transforming governance to ensure a corruption-free administration,
with the intention, among other things, of resolving the issue of
insurgency.
The NER Vision 2020, thus, clearly addresses both participatory

planning as well as good governance.
The government’s strategy of employing a more participatory approach
to planning is, certainly, a worthwhile one; and it will be well-received by
NER. But, public investment must be coupled with private investment.
In other words, a public–private partnership is necessary for the develop-
ment of NEI. Business organizations in the country should explore the
potential that the region has, particularly in the context of the bridge that
the Northeast can form with ASEAN and its markets. The Confederation
of Indian Industry, the Bengal Chamber of Commerce and Industry, and
the Federation of Indian Chambers of Commerce and Industry have
shown some interest in the region. However, certain preconditions have
to be met to make the region more conducive for investment.
First, it has to be made clear that public–private partnerships are within

the scope of the government’s agenda for the development of the region.
Central government has to signal its willingness to facilitate the partici-
pation of the private sector to invest in NEI. Second, the region should
show signs of being wholly integrated within the national economy.
Towards this end there should be active efforts to attract investors from
other parts of India, and the state governments in NEI should assist
investors in setting up their operations in the respective states. Third,
the state and central governments should work with investors in order to
overcome the constraints faced by the latter. This includes efforts to
reform land policy and the movement of natural persons to ease the
labour shortage. Private companies will find it difficult to invest in NEI
if the ease of owning land is a stumbling block. Similarly, apprehensions
regarding the inflow of domestic migrant labour should be overcome.
6.6 Some Policy Issues

There are two components to the problematic of India wishing to “Look
East” or “Act East.” At the broader level, this implies that India intends to
engage with ASEAN comprehensively, and in a multitude of ways. This
means that India looks to more economic, security, defence and cultural
cooperation with ASEAN. With the larger objective having been defined,
there is, then, the next level to contend with: how the wider objective will
be achieved, or what strategies will be employed to make this possible.
The latter is particularly relevant in the case of NEI.
Within the economic realm, there is tremendous scope for mutual
benefit to both India and ASEAN and that can be obtained through
trade and investment. But as a facilitating factor, there obviously has to be
better connectivity between India and ASEAN. NEI is well-poised to be a
window to ASEAN, and a prominent one too.
There are several preconditions that NEI has to satisfy in order that it
be a satisfactory link with ASEAN. Without doubt connectivity is one of
the components, and, perhaps, the first one that has to be attended
to. There are other dimensions to connectivity, ICT and people-to-people
connectivity being other key elements. However, physical connectivity
152 S. Nambiar
takes precedence as it forms the most convenient and essential starting

point in establishing the other connectivities. The importance of road
connectivity has been stressed above, but that is not to underplay the
significance of other forms of connectivity. The Northeast, by virtue of its
excellent geographical location, is best suited to be a hub for connectivity
by land with ASEAN.
In order that this link be satisfactorily executed, aside from the con-
struction of the physical infrastructure, other supporting conditions have
to be satisfied. Barua and Das (2008) and Singh (2006) mention various
challenges to the Northeast; within the context of connectivity to the
South East the following are worthy of attention:
• The HDI is a summary statistic that includes life expectancy, education

and income. A backward Northeast, or one that has poor human
capital, will not be able to take advantage of the physical links. Neither
will companies that are located in NEI be able to take advantage of the
infrastructure if the human capital is of low quality.
• Ease of doing business. The primary purpose of developing connectiv-
ity between India and ASEAN through NEI is to promote trade and
investment between the two entities. It would, therefore, defeat the
whole purpose if the conditions in the Northeast were not conducive to
doing business. This point rests on the premise that the Northeast will
be home to companies that will have business links with ASEAN. At
least two points can be made about improving the ease of doing
business. First, the processes and procedures that companies have to
go through in order to set up business and to conduct their activities
can be simplified and made more transparent. Second, the government
can facilitate the conduct of doing business.
• Good governance. The World Bank has developed a set of indicators to
capture good governance. In essence, good governance is achieved if
the principles of democracy and freedom are practised, violence and
coercion are absent, people are secure, there is no corruption, the rule
of law is observed, and public services and goods are effectively deliv-
ered. There should be political will to maintain greater governance
in NEI.
• Entrepreneurial development. This is concerned with the development

and growth of SMEs. It also refers to micro-finance for micro-
entrepreneurs. The purpose of these efforts should be to encourage
entrepreneurship among households, cottage industries as well as small
enterprises.
With the development of high human capital and well-being

(as captured by the HDI) and with a conducive environment for doing
business, which does not disregard small businesses, there will be a
suitable ecosystem in NEI which is able to harness the opportunities
that will be offered by the improvement of physical connectivity in the
region. This will be the first step towards the enhancement of other forms
of connectivity between the Northeast and ASEAN.
6.7 Conclusion
India has announced its intention to engage with ASEAN. The impetus for
this initiative is significant in the light of ASEAN’s rise in the global stage
and its desire to achieve centrality. Given ASEAN’s strong economic
growth and its determination to work towards greater regional integration,
India’s ambitions are apt and timely. Within the scope of these develop-
ments, there are various strategies that can be pursued to achieved the
proposed engagement. However, an important step towards seeking greater
trade and investment with ASEAN can be achieved with NEI as a portal.
Connectivity is a key element in facilitating the proposed link between
India and ASEAN. While connectivity can take various forms, physical
connectivity is a good first step in establishing better integration with the
region. In this context, a land-based network, particularly good roads, are
essential. ASEAN, as part of its wider agenda, proposes to integrate with the
world, and improved connectivity with India, through the Northeast, is
vital. ASEAN has its own Master Plan on Connectivity. It is, thus, appro-
priate that India should tie in its own efforts with ASEAN’s plans. India has
identified the Northeast as a bridge between itself and ASEAN, a plan that
stands to reason in view of NEI’s geographical proximity with the region.
154 S. Nambiar
As has been argued, it is in India’s best interests to strengthen the

economic and entrepreneurial ecosystem in the region. This will position
NEI in such a manner as to be able to take advantage of the newly
established connectivity projects. Infrastructure within the context of an
under-developed region (i.e. the Northeast) will not be to India’s benefit.
Serious policy measures and strategies have to be designed and
implemented so that the right preconditions are achieved in the North-
east. Alongside efforts to improve connectivity, the supporting environ-
ment has to be created in NEI, and this must be undertaken as an urgent
exercise if the full benefits of linking connectivity with ASEAN are to be
reaped.
Notes
1. For details see Nambiar (2010).
2. Nambiar (2011, 2016) argues that India has potential for greater eco-
nomic ties with ASEAN that go beyond trade.
3. ERIA (2014), discusses some of these areas.
4. See Intal et al. (2014) for the challenges posed by investment liberaliza-
tion within the AEC context.
5. Almekinders et al. (2015) points out the importance and policy imper-
atives of financial liberalization for ASEAN and the AEC.
6. See Dee (2015) for some issues on this area.
7. For elaboration see Fukunaga (2015).
8. An investor-friendly view of what this means is to be found at: http://
investasean.asean.org/index.php/page/view/asean-economic-community/
view/670/newsid/759/competitive-economic-region.html
9. Lee and Fukunaga (2013) argue that regional cooperation on competi-
tion policy is possible.
10. For details see the document given in reference ASEAN (2011b).
11. For details see the document given in reference ASEAN (2016).
12. For details see the document given in reference ASEAN (2011b).
13. For an overview of RCEP, see Guiding.
14. Intal et al. (2014) discuss the concept of ASEAN “centrality.”
15. For details see the document given in reference Intal et al. (2014).
16. For details see the document given in reference Asian Trade Centre
(2016a, 2017).
17. For details see the document given in reference Asian Trade Centre
(2016b).
18. For details see the document given in reference Financial Express (2017).
19. For details see the document given in reference Economic Times (2017).
20. For details see the document given in reference ASEAN (2011a, b), p. 18.
21. For a comprehensive account of the transport sector in ASEAN see
ERIA (2010).
22. For details see the document given in reference ASEAN (2011a, b), p. 19.
23. Tan (2013) discusses some interesting issues regarding the aviation
industry in ASEAN.
24. ERIA (2010) has a comprehensive treatment of developments regarding
connectivity (air, sea and land) in ASEAN.
25. For details see the document given in reference ERIA (2010).
26. Kimura and Umezaki (2011), especially chapters 1 and 3.
27. As pointed out by Nambiar (2015), India can deepen its relationship with
ASEAN, with its current trade and investment in ASEAN not being as
extensive as possible.
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Economic Research (MIER).
7
Act East Policy and Northeast India: The
Role of Transaction Costs
Bhagirathi Panda
7.1 Introduction
Post-Independence, India’s economic and social development policy in
the mid-twentieth century was held hostage to its lack of pragmatism. It
advocated a distorted lofty Asian development approach which had its
origin partly in its sufferings during colonial rule and its genuine distrust
and disapproval of Western individualistic societal value systems and
partly to its self-assumption that South East Asian and some parts of
East Asian society were only extensions of typical Indian culture. This
explicit advocacy of an alternative development model rooted, modelled
and differentiated in terms of India’s Hindu-centric cultural values (often
called “Oriental”) mingled with its deliberate accommodation of and
engagement with the Chinese; this allowed South East Asia, Japan and
B. Panda (*)
Department of Economics, North Eastern Hill University, Shillong, India

160 B. Panda
the West to look at it with suspicion. Subsequently Chinese aggression in

1962, the Indo-Pakistani War 1971, India’s disengagement with South
East Asia and its inward looking economic policy compelled India to
become entangled in the Cold War environment. Its dream of a pan-Asian
economy and society, to be led and guided by it, was shattered and it was
left isolated in Asia. The lack of pragmatism was conspicuous when it
could not economically cash in on its age-old cultural ties (or cultural
capital) with South East and East Asia, because of its excessive stress on
self-sufficiency and presumed perception of auto-cultural convergence
leading to economic cooperation.
However, in the late 1980s—at the end of the Cold War—India’s
sluggish domestic economic growth vis-a-vis the economic boom in South
East Asia and China, its precarious balance of payments situation, the rise
of Chinese economy, the success of trade regionalism, the changing
economic and demographic profile of the world, and above all the
non-realization of its assumed auto-cultural convergence, have all
prevailed upon India to reach out to its civilizational Asian neighbours.
Thus was born the Look East Policy (LEP) of the Government of India,
which almost coincided with the timing of economic liberalization of the
Indian economy in 1991 (Sarma 2006). The ultimate objective of this
policy is to have an effective Asian Economic Community, through
regional economic, political and cultural integration, that would usher
in an era of development for India, South East Asia and East Asia initially
and then to the whole of Asia gradually.
7.2 Phase I and Phase II of the Policy and NER

The first phase of this policy covers the period from 1991 to 2003. This
phase emphasized improvements in trade and investment linkages with
members of ASEAN. The second phase of the policy covers the period
from 2003 to the present. Encouraged by the positive results of the first
phase, phase II expanded both the content and context of the policy. The
context was expanded with the inclusion of non-ASEAN members, that is
Japan, China and South Korea. The content was expanded with the
inclusion of strategic relations in its ambit. As fallout of this policy,
7 Act East Policy and Northeast India: The Role of Transaction. . . 161
India’s strategic and economic engagements with its South East and East
Asian neighbours have improved over time. During the period, that is
1992 to 2015, through a gradual process, India has become a summit level
partner of ASEAN and a member of the East Asian Summit. It has also
been actively engaged in regional initiatives such as BIMSTEC and the
Mekong–Ganga Cooperation. As an outcome of this policy, trade and
investment between India and ASEAN has significantly increased. The
value of India’s trade with ASEAN in 1993 was USD2.9 billion which
increased to USD67.7 billion in 2014. India’s exports to ASEAN coun-
tries increased from USD10.41 billion in 2005–06 to USD33.13 billion
in 2013–14. India’s imports from ASEAN countries increased from
USD10.88 billion in 2005–06 to USD43.34 billion in 2013–14.
ASEAN accounted for 9.08 per cent of India’s imports and 11.25 per
cent of India’s exports during 2013. India has been able to attract a
considerable proportion of FDI from ASEAN. In 2013–14, Singapore
was the second largest FDI equity investor in India. Another sector that
has really received a boost from this increased integration is tourism. The
total number of tourists from ASEAN countries visiting India during
2014 was 685,805.Similarly the total number of tourists from India
visiting ASEAN countries was 2,983,154.
All these bear testimony to the fact that the first and the second phase of
LEP have borne fruit and that India had been able to regain a considerable
extent (for a variety of factors), the confidence of ASEAN in general and
many of the individual South East Asian countries in particular. At the
end of phase I of the policy, it was realized that the Northeastern Region
(NER) had been sidestepped in terms of tangible benefits, although this
region was in the proximity of South East and East Asian countries (NEC
2007). The maximum benefits of trade, investment, technology transfer
and tourism accrued to the southern states of the country. In the course of
these years’ engagements with ASEAN +3 per se and the individual
countries of this grouping, it was belatedly realized by the Government
of India that, without integrating NER with South East and East Asia,
such envisaged economic and strategic integration would not be complete
and sustainable. The inkling of such a realization became apparent when
the strategically located Myanmar was admitted to the ASEAN grouping
in 1997. Its strategic location between India and China provides an
162 B. Panda
alternative way for India to reach out to the East and South East Asian
markets. Further, the continuous failure of the “old development para-
digm” based on the centre–periphery model, provided an opportunity to
many in the centre (Delhi) and in NER to envisage and advocate LEP
(and now AEP) as a viable alternative strategy for development in the
region. The efforts of the Government of India for the past decade and
more to invite debate and to interact with important stakeholders, includ-
ing the wider civil society in NER, has created some enthusiasm but also
anxiety in the minds of the general public. While many in government
and academia see it as a fair opportunity for the development of NER,
there are equally dissenting voices, mostly heard from wider civil society
but including the media and academia. As understood in its present
evolving state, this policy has implications for NER in terms of trade,
tourism, migration, cultural exchange, security, livelihood, and above all
the rights of the indigenous people over resources and the environment.
At the beginning of phase II of this policy, it was advocated and rightly so
that it was an opportunity to undo the negative impacts of the partition of
the country on the economic and social life of the people of this region.
After 12 more years, the situation is still in a hazy state.
7.3 How Much Has NER Gained from This

Policy?
Once a conscious decision has been taken to leverage this policy as the core
approach of development for NER, the most important criterion on which
the success of this policy should be assessed is the realized economic benefits.
These economic benefits are to be contextual to the immediate economic
and developmental requirements of the region. The biggest challenge to the
economy of NER in the 1980s and 1990s was economic growth and
employment. Post-2000, economic growth picked up. However, this
growth has not resulted in the growth of employment. Overall employment
growth in NER has almost remained stagnant at 0.13 per cent during
2005–12. The youth unemployment rate in NER at 2009–10 at the rate
of 10.24 per cent was more than double the youth unemployment rate of
the country. AEP can actually be dovetailed with the development model of
NER provided the region has improved upon its capability in terms of
economic competitiveness and strategic positioning. Expanded trade in
goods and services with the countries of South East Asia and East Asia,
including Bangladesh, is being suggested (and rightly so) as one of the most
important components of this policy. However, when we analyse the
growth and magnitude of trade for this region with these countries (except
Bangladesh), there is not much to cheer. This region shares borders with five
countries, that is Myanmar, Bhutan, Bangladesh, Nepal and China. Among
all these, Myanmar stands out in terms of its strategic location as a gateway
to the rest of the South East and East Asian countries. Both India and
Myanmar share a common boarder stretching up to 1643 km. Four states of
NER, that is Arunachal Pradesh, Manipur, Mizoram and Nagaland, share
that international border. At present there are four land customs stations
(LCSs), that is Moreh (Manipur), Zokhawthar (Mizoram), Nampong
(Arunachal Pradesh) and Avangkhu (Nagaland), through which formal
border trade takes place between NER and Mynamar. Trade through the
last three LCSs is virtually a non-starter. It is only through the Moreh LCS
that more than 98 per cent of overland trade takes place.
An appraisal of the trade situation shows the insignificance of the
volume of border trade between NER and Myanmar (Table 7.1).
Table 7.1 NER’s trade with Myanmar (USD millions)
Indian NER share as

Indian imports NER NER imports percentage of
exports to from exports to from India’s total
Year Myanmar Myanmar Myanmar Myanmar Exports Imports
2005–06 132.72 718.40 4.13 11.28 3.11 1.57
2006–07 174.02 802.79 4.75 11.02 2.72 1.37
2007–08 212.23 893.52 3.92 10.91 1.84 1.22
2008–09 209.78 1195.26 4.43 5.49 2.11 0.45
2009–10 207.97 1289.80 5.95 7.79 2.86 0.60
2010–11 320.62 1017.67 4.50 8.30 1.40 0.82
2011–12 545.38 1381.15 6.54 8.87 1.20 0.64
2012–13 544.66 1412.69 11.67 26.96 2.14 1.91
2013–14 787.01 1395.67 17.71 30.92 2.25 2.22
Source: http://www.indiaembassyyangon.net/index.php?option¼com_content&
view¼category&layout¼blog&id¼21&Itemid¼122&lang¼en
164 B. Panda
NER’s exports to Myanmar expressed as a percentage of total Indian

exports to Myanmar during the period 2006–07 to 2012–13 consistently
remained below 3 per cent. Similarly during this period, NER’s imports
from Myanmar expressed as a percentage of total Indian imports from
Myanmar remained below 2 per cent except for the year 2012–13 when it
marginally crossed this mark. This explains why NER as a region having
such a huge international border with Myanmar has not been able to
leverage AEP for increased overland trade with Myanmar. Further, the
trade deficit between this region and Myanmar has always been negative.
An interesting development in the form of increased volume of trade is
noticed for the year 2012–13 and 2013–14. The average imports of NER
from Myanmar for the period 2005–06 to 2011–12 was USD9.09
million. This has increased by more than three times in 2013–14.
Similarly, the average exports from NER to Myanmar during the same
period also increased by more than three times in 2013–14. However,
along with this increase in imports and exports, the trade deficit of NER
with Myanmar also increased as is evident from the figures of 2012–13
and 2014–15 (Table 7.2). Further, when one looks at the major com-
modities (Table 7.3) that were exported from NER to Myanmar in
2012–13 through border trade in Moreh, none of these commodities
has a production base in the region. This implies that trade between NER
and Myanmar, from the NER point of view, has been basically transit
Table 7.2 India and NER’s trade balance with Myanmar (USD millions)
Indian NER NER
Indian imports India’s exports imports NER’s
exports to from trade to from trade
Year Myanmar Myanmar balance Myanmar Myanmar balance
2005–06 132.72 718.40 585.68 4.13 11.28 7.15
2006–07 174.02 802.79 628.77 4.75 11.02 6.27
2007–08 212.23 893.52 681.29 3.92 10.91 6.99
2008–09 209.78 1195.26 985.48 4.43 5.49 1.06
2009–10 207.97 1289.80 1081.83 5.95 7.79 1.84
2010–11 320.62 1017.67 697.05 4.50 8.30 3.80
2011–12 545.38 1381.15 835.77 6.54 8.87 2.33
2012–13 544.66 1412.69 868.03 11.67 26.96 15.29
2013–14 787.01 1395.67 608.66 17.71 30.92 13.21
Source: Author’s calculation based on data from DGFT, GOI
Table 7.3 NER’s trade with Myanmar in 2012–13

Major commodities traded
Exports Imports
Moreh LCS Cumin seed, cotton yarn, auto Betel nuts, dry ginger, green
parts, soya bean meal, wheat mung beans, black matpe
flour and pharmaceuticals beans, turmeric roots, resin
and medicinal herbs
Source: De and Mazumdar (2014)
trade. Its exports are not based on the resources and product base of NER.
Similarly its imports also do not confirm to the resource-industry linkage
between the region and Myanmar.
7.4 Identification of Complementariness

and Establishment of Networked
Production Centres
If international trade is to be an engine of growth and employment in
NER, then complementarities in the field of goods and services need to be
identified between NER and Myanmar, leading to the emergence of
production centres in a networked and fragmented arrangement. As it
stands today, the scope of having such networked and fragmented pro-
duction centres is visible in industries like: (1) pharmaceuticals, including
herbal products; (2) bamboo and wood products; (3) cement; (4) agro-
processing; (5) textiles; (6) refined petroleum products; (7) other
non-metallic mineral products; (8) rubber products; and (9) horticulture.
Electronics, handlooms and handicrafts and leather products also are
potential products around which production networks can emerge. At
the front of services, tourism, health, medical, education and transporta-
tion are the identified services which have the potential for development
through the fragmented networks approach.
These envisaged production centres are required to be adequately
serviced with all kinds of connecting and in-place infrastructures like
roads, railway lines, air services, inland water transportation, uninterrupted
power supplies, internet and telecommunication services, efficient man-
power, adequate hospitality and recreation centres, and efficient governance
166 B. Panda
including law and order so as to reduce transportation and transaction costs

and facilitate the production of goods and different types of services includ-
ing tourism, education, health, banking and insurance. At the present
juncture, the ground situation in NER is that it has not been able to develop
such visible fragmented production centres and network them in terms of
communications and infrastructure.
7.5 AEP and the Conceptualized Sequential

Process for Its Success
The success and effective continuity of AEP depends on across-the-board
acceptance by the people of the Northeast. Such an acceptance is contin-
gent on, inter alia, linking it up with the expansion of the livelihood and
employment opportunities of its people, particularly the youth. Expan-
sion of these opportunities depends on the emergence of a strong regional
and local economic base led by networked industry and a high end
services sector. This finally is dependent on reducing the present level of
high transaction costs (the expanded version). Therefore, the success of
AEP considerably, at the core, depends on the extent and rate of reduction
in transaction costs. Figure 7.1 shows such a sequential process.
Sucess of Act East Policy
Acceptance by People of NER
Expansion in Livelihood and Employment Opportunities
Strong Economic Base : Networked Industry and High End Services
Reducing High Transaction Costs
Fig. 7.1 The conceptualized sequential process of the success of AEP

7.6 Transaction Costs

Transaction costs as a concept owes its systematic origin to the works of
Ronald Coase (1937, 1960), although in his first work “On the Nature of
the Firm” he did not explicitly mention it. Coase discussed it in the
context of the efficiency of the firm in relation to market transactions
with a number of examples. His transaction costs basically includes three
types: (1) search and information costs, (2) bargaining and decision costs
(i.e. negotiation and contract closure) and (3) policing and enforcement
costs. This concept of transaction costs was further analysed by Coase
within the property rights framework in “The Problem of Social Cost” in
1960. It is in this publication that Coase clearly establishes the link
between transaction costs and property rights. However, it was Cheung
(1969) who made use of this concept and made it specific and contextual
to contracts and their choice. Subsequently Williamson (1975, 1985)
technically expanded Coase’s concept by bringing in the costs arising
from inefficiencies in the selection of the adequate institutional arrange-
ments of a firm. It essentially means a comparison between different
modes of contracting under different institutional arrangements. This
view of Williamson, better known as traditional transaction cost econom-
ics (TCE), could provide an explanation of the situations which were
earlier considered by the neo-classical school as atypical contracting prac-
tices and industrial structures. However, Williamson’s analysis of the
scope of transaction costs was subsequently felt to be limited and inade-
quate particularly with respect to the situations in developing countries. In
these countries, the macro-institutional environment always impacts on
transaction costs by affecting the micro-institutional arrangements of the
traditional TCE approach of Williamson (1991) and the three important
dimensions of this TCE, that is asset specificity, uncertainty and fre-
quency (Saravia and Dietrich 2006). This takes us to North’s approach
to transaction costs. North (1990) puts the transaction cost analysis in the
framework of economics of development by linking it with the complex
institutional structure of developing countries. He explains that transac-
tion costs are affected by the formal and informal institutions as well as the
organizations of a society. Institutions to him are the rules of the game and
organizations are the mechanisms through which these rules are created,
168 B. Panda
enforced and confirmed. Institutions can play a positive role in controlling

uncertainty and they can also play a negative role in increasing transaction
costs. He explains how powerful firms/industries/organizations can also
create institutions to promote their self-interests by creating an environ-
ment of institutional lock-in and path dependency. To sum up, with the
addition of North’s institutional approach, the transaction cost analysis
propounded by Coase and Williamson became a very dynamic model to
explain the state and process of under-development in developing coun-
tries in general and the efficiency status of firms, industries in the field of
production and trade in particular. As explained in the previous section,
the success of AEP depends to a great extent on the reduction of transac-
tion costs and, as evidenced at present, there exists huge transaction costs
in the economy of NER that prevent economic efficiency from being
realized, networked industrial centres to emerge and trade competitiveness
to be obtained.
7.7 Transaction Costs, Economic Efficiency,

AEP and NER
It is a fact that some visible improvements have been made to the
infrastructure and industrialization post-2000 in NER. Roads, railways,
water transportation and telecommunication facilities have all improved
across the states in the region. However, the region comparatively lags
behind the country when it comes to infrastructure like railways, power
and inland water transportation. Other areas where it does poorly are in
the fields of logistics and trade facilitation. Trade cost incidence to NER is
very high compared to other developing countries (De and Mazumdar
2014). Although road infrastructure has increased at a faster pace com-
pared to other modes of travel in the region, the quality of roads and their
maintenance is a matter of concern. Having better connectivity is impor-
tant. However, what is now more challenging for the success of AEP is the
efficiency with which the region makes use of this critical connectivity. As
mentioned earlier, the existence of high transaction costs in NER is the most
important stumbling block to realizing networked production centres and
economic efficiency. Figure 7.2 provides a list of such components of
7
High Transactions Cost in NER
Coase’s and Williamson’s Transaction Costs (TCE) North’s Transaction Cost
Unde Infor Negoti Enforc Select Trans Law and Rent Sub-
fined matio ation ement micro- port order and Seeking and optimal
prop nal Costs Costs governa Costs governance Corruption Economic
erty Const nce integration
rights raints
Fig. 7.2 Transaction costs in NER

Act East Policy and Northeast India: The Role of Transaction. . .
169
170 B. Panda
transaction costs in the framework of the transaction cost analysis of Coase,

Williamson and North discussed in the previous section.
One of the important visible components of transactions costs in NER
is the issue of property rights. A relevant area where this issue comes up
poignantly is the tradability of land and its acquisition for construction of
infrastructure and the establishment of firms and industries. There are
issues with respect to its ownership and tradability which have their
origins in the societal norms of different regions of NER. Here we find a
criss-cross between Coase’s and North’s version of transaction costs. Appar-
ently the manifestation of a Coase-type transaction cost has its origin and
continuity in the institutional plane that North so explicitly explains. This
has a Williamson angle to it too and that is all about choosing and
continuing with a societal governance structure for vested interests.
The next component is the negotiation and enforcement costs. Nego-
tiation becomes costly because of the presence of multiple stakeholders. Let
us take the case of cross-border trade in Moreh in Manipur. At the firm
level, implementation of any policy becomes costly and sometimes difficult
because it involves engagement with the state government, insurgent and
underground elements, the Indian Army, relevant central institutions
and so on. In many states, there are multiple formal and informal author-
ities which have their respective rules, norms and stipulations on acquiring
properties, obtaining licences, doing business and so on. One has to
negotiate with central government, state government, autonomous district
councils (ADCs, where they exist), local traditional institutions, under-
ground elements and extortionists. Similarly, the existence of such multiple
stakeholders, formal rules, informal norms and practices, and the
non-existence of an independent judiciary in a few states at the district
and sub-district levels make the cost of enforcement of contracts very high.
Another component of transaction costs put forth by Williamson is the
arrangement of working under a constrained micro-governance structure.
The earlier case of working under the dual exchange rate with respect to
border trade at Moreh was such a classic example. The official currency
exchange rate of Myanmar was highly overvalued, whereas there was an
unofficial market-determined rate which was more realistic. This situation
encouraged exporters from India to avail themselves of the unofficial

channel of informal trade. This also had a dampening impact on the
incentive of banks to operate at Moreh as they used to lose opportunities
to deal in foreign exchange and earn commissions. The situation has now,
of course, improved with the economic reforms of 2012 in Myanmar.
One more factor that increases the transaction costs is the high transpor-
tation cost due to poor connectivity, the bad condition of roads, frequent
bandhs1 and road blockades in Manipur and other parts of NER. For
example, as per a statement made by the then Chief Minister of Manipur
in the Manipur assembly in July 2010, the state witnessed 628 bandhs and
blockades during the 15-year period from 1995 to June 2010 with a
combined loss of Rs.2828 crore to the state exchequer. As per an estimate
of the Department of Economics, Manipur University, during the infa-
mous 120 days, prolonged bandhs and economic blockades of National
Highway No 2 (NH 2) and National Highway No 37 (NH 37) in 2011,
Manipur suffered a loss of Rs.245.64 crore at a rate of Rs.2.67 crore
per day.
Finally, let us have a look at the prevalence of North’s specified
transaction costs, which basically arise because of macro-institutional
factors. One of the important macro-institutional variables that affect
transaction costs in the region is the deficient law and order situation
and governance. This is reflected as mentioned earlier in frequent bandhs
and blockades, extortions, smuggling across borders, collection of illegal
fees and lack of an effective mechanism to resolve conflicts. Rent seeking
and corruption are two other North-specified macro-institutional vari-
ables that have significant implications in terms of increased transaction
costs. Rent seeking is basically to employ any individual or organization’s
office and resources to obtain economic gain without contributing
directly to the society in terms of actual wealth creation. This therefore
includes all kinds of bribery, lobbying, intimidation, pressure tactics used
by individuals, groups or organizations including the government to
exploit its resources/position to gain economic benefits/resources without
contributing to the direct production of goods and services. Rent seeking
in different forms is widespread in NER. There are individuals and
elements in government, community and society who have made it a
habit. All kinds of bribery at different levels of government, extortions by
172 B. Panda
individuals, groups and organizations by exercise of their position and

powers through explicit or implicit coercion and threat have contributed
to this rent seeking culture and in the process have increased the transac-
tion costs of undertaking productive activities as an entrepreneur. As
Murphy, Shleifer and Vishny (1993) have stated:
In situations where the gains from rent-seeking or predation are greater than
the returns of production, entrepreneurial talent is more likely to engage in
rent-seeking and corruption. To reiterate, this is more likely in societies with
poor governance, and where there is more to loot due to the presence of
natural resource revenues, privatized enterprises, or where great transforma-
tion is in train. In countries where more talents are allocated to rent-seeking
rather than production, growth and regulatory failure will eventually ensue.
Post-partition, when a patron–client type of development model was

unleashed in this part of the country, rent seeking gradually emerged and
became consolidated over the last seven decades. This has largely killed the
native entrepreneurial urge for undertaking productive activities by
increasing transaction costs.
Last but not least, NER is yet to emerge as an integrated economic
entity. Although the states were created here on ethnic and political lines,
today the developmental imperatives require that they have to emerge as a
single economic entity. The working of firms and economic agents under
such a sub-optimal regional economic arrangement increases the transac-
tion costs. Agents can significantly reduce their transportation costs and
realize more vertical production integration if intra-regional physical and
governance communications become considerably improved. This kind
of integration would lead to a reduction in market related transaction
costs including the costs of negotiation and enforcement of contracts. For
example, efficiency in exports and imports of commodities and services
requires a critical scale of production and demand respectively. Many
times individual states on their own are not able to realize this, but they
can do so if they come together.
7.8 Conclusion and Way Forward

The plan of explicitly dovetailing LEP, or its present version AEP, with
the development philosophy and strategy for NER is, although a little
belated, extremely significant. However, currently, there exists a huge gap
between the relevance and potential economic benefits of the policy and
its actualization. In a democratic polity like India’s, the success of this
kind of an approach for NER depends on the acceptability of this policy
and its attributes and overtones by the people at large. One important
actualization that would lead to its across-the-board acceptability is
expansion in the livelihood and employment opportunities for the people
and particularly the youth. The envisaged economic integration objective
of this policy with the South East Asian and East Asian economies
depends on the degree of such livelihood and job expansion without
fundamentally changing the core cultural and societal values of the people.
This economic integration fundamentally requires increased trade expan-
sion between NER and the South East Asian economies; and this is again
contingent on the development of the appropriate production of goods
and service networks in the region. My argument in this chapter is that,
without reducing substantially the prevalent high transaction costs in the
region, we cannot make any headway. The Government of India has
already promoted the required critical strategic integration through a
number of regional and multilateral collaborations and institutional
reforms such as an FTA with ASEAN, transnational physical connectivity
through construction of roads and rail links, strengthening Indo-
BIMSTEC, Indo-ASEAN, and Indo-BCIM relationships. However, the
subsequent relevance, scaling up, continuity and sustainability of this
policy and its dovetailing with the development requirements of NER
depends on how quickly and efficiently the all-pervasive high transaction
costs are reduced. This requires a critical convergence in the establishment
space in development and, to be specific, across the four important
components therein, that is the government, the market, the community
and civil society. Presently, the establishment space in development in
NER exhibits disproportionate parallelism. This parallelism (which is
nothing but the manifestation of the macro-institutions of North) causes
174 B. Panda
disconnect, creates unwanted conflicts and takes away the potential

complementariness across the different establishments which is critical
to the endeavour of reducing high transaction costs and the ultimate
success of AEP in its NER edition and mandate. The sooner the region
finds and realizes this critical convergence in its development space, the
better would be the situation for transaction costs and calibrated
development.
Note
1. Bandhs refers to a kind of shut down notice of business establishments and
all other establishments by any group of people protesting against any
decision or policy of the government or in protest against any event. It’s a
kind of forcible no work demonstration to be observed by establishments in
response to a call for such a demonstration by a group of people opposing a
government decision/action or in protest against any event.
References
Cheung, S. N. S. (1969). The theory of share tenancy. Chicago: UCP.
Coase, R. (1937). On the nature of the firm. Economica, 4, 386–405.
Coase, R. (1960). The problem of social cost. Journal of Law and Economics, 3,
1–44.
De, P., & Mazumdar, M. (2014). Developing cross-border production networks
between North Eastern Region of India, Bangladesh and Myanmar: A preliminary
assessment. New Delhi: RIS.
Murphy, K., Shleifer, A., & Vishny, R. (1993). Why is rent-seeking so costly to
growth? American Economic Review, 83(2), 409–414.
NEC. (2007). Northeastern Region: Vision 2020. Shillong: North Eastern Coun-
cil (NEC), Ministry of Development of North Eastern Region.
North, D. (1990). Institutions, institutional change and economic performance.
Cambridge: Cambridge University Press.
Saravia, S., & Dietrich, M. (2006). Emergence and impact of transaction costs in
developing economies: The case of the Nicaraguan coffee industry during the
Sandinista regime (1979–1990). Sheffield: University of Sheffield.
Sarma, A. (2006, June). The North-East as a gateway to Southeast Asia: Big
dream and home truths. Man and Development, pp. 35–50.
Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust impli-

cations. New York: Free press.
Williamson, O. E. (1985). The economic instituions of capitalism. New York: Free
press.
Williamson, O. W. (1991). The nature of the firm: Origins, evolution, and
development. Oxford/New York: Oxford University Press.
Bhagirathi Panda is currently Professor of Economics at North Eastern Hill

University, (NEHU) Shillong.
8
Integration with Regional Blocks Through
Intra-industry Production Networks:
Boosting the Growth Prospects
of Northeast India
Ashish Nath
8.1 Introduction
The last two decades have witnessed unprecedented changes in the nature
and composition of international trade in goods and services. Economies
throughout the world have entered into bilateral and multilateral negoti-
ations in order to increase trade intensity both in terms of goods and
services as well as through investment flows. Countries, especially the
emerging economies, are focussing on new production and export strat-
egies to increase competitiveness and internationalization. The nature and
value of production are changing as economies try to increase the value of
the products by engaging themselves in cross-border intra-industry pro-
duction processes. This is reshaping the growth process of the economies.
Trade in intermediate commodities increased, and developed countries
create more than half of the value in the global chain (UNIDO 2015).
The role of regional trade blocks in adding value to a product through
A. Nath (*)
Department of Economics, Tripura Central University, Agartala, India

178 A. Nath
supply chains has increased. The Asian economies are one of the fastest
growing regions of the world and its success to a large extent can be
attributed to the cooperation among them through intra-industry pro-
duction networks for value addition. Many economies of Asia share
international boundaries with one or more of the states of the Northeast
Region (NER)1 of India as well. NER shares trade in addition to ethnic,
blood and cultural relationships with one or more countries of the Asian
region. Nevertheless, the region has always lagged behind the Indian
national scenario for growth and development.
However, understanding that not only neighbouring countries of NER
but also other Asian countries can play a vital and strategic role in the
growth and development process of India, the Government of India (GOI)
initiated the Look East Policy (LEP) for improving the trade and invest-
ment opportunities with Asian countries. This policy provides an opportu-
nity to the lagging NER for economic transformation and growth for its
strategic location with respect to neighbouring countries. LEP, on the part
of GOI, is a serious initiative for improving the economic and strategic
relationships with neighbouring countries on the one hand and the growth
and development process including infrastructure of NER on the other
hand. Consequently, several other bilateral and multilateral agreements
have also been signed with neighbouring as well as other Asian countries
in this respect. The present chapter attempts to explain the scope of trade
relationships between the Northeast states of India and neighbouring
countries. The chapter is organized as follows. The economic structure of
NER along with that of neighbouring countries is dealt with in Sect. 8.2.
The existing composition of trade between the two sides is discussed in
Sect. 8.3. The different sectors in which NER can be augmented with the
supply chain of a product to increase value are discussed in Sect. 8.4.
Summary and conclusions are presented in the last section.
8.2 The Economy of the States of NER

The growth of the Indian economy during the first three and half decades
of independence was relatively slow and the average standard of living
across the states was low as well. This scenario changed and the economy
received impetus to growth due to the introduction of sweeping reforms
8 Integration with Regional Blocks Through Intra-industry. . . 179
initiated by GOI in the 1990s. The success of the Indian economy is

attributed largely to deregulation mainly through its opening to foreign
investment and liberalizing both the current and capital accounts of the
balance of payments. However, growth did not trickle down and the
benefits have been grabbed by a handful of states only. There has been a
paradigm shift in terms of growth trajectory in favour of the states which
were successful in implementing the policy and trade reforms. One of the
regions which remained slow and below the national growth story is NER.
India shares a land border with seven countries, but five of these share
borders with NER, which represents about 33 per cent of the country’s
total international land borders. The states of NER share land borders
(Table 8.1) with Bangladesh, Bhutan, China, Myanmar and Nepal and
have signed agreements to trade with these countries through land custom
stations (LCSs). The geographical location of the eight Northeast states of
India is such that their boundaries are associated more with neighbouring
Asian countries (5437.15 km of international border) than with the
mainland of India. The region is connected to the rest of India through
a narrow corridor of approximately 27 km (De and Majumder 2014).
Consequently, the region has become strategic not only to India but also
for Asian countries, especially the East and south Asian ones, both for
political and economic reasons. This region could become the gateway for
India to expand its economic opportunities in the growing Asian market
and, on the other hand, the South and East Asian countries have the
opportunity to enter the vast and growing Indian market through this
Table 8.1 State-wise length of international borders of NER (km)

State Bangladesh Bhutan China Myanmar Nepal Total
Arunachal 0 217 1080 520 0 1817
Pradesh
Assam 263 267 0 0 0 530
Manipur 0 0 0 398 0 398
Meghalaya 443 0 0 0 0 443
Mizoram 318 0 0 510 0 828
Nagaland 0 0 0 215 0 215
Sikkim 0 32 220.35 0 97.80 350.15
Tripura 856 0 0 0 0 856
Total 1880 516 1300.35 1643 97.8 5437.15
Source: Ministry of DONER, GOI
180 A. Nath
region as well. Border trade2 agreements have been enacted with China
and Myanmar, and the South Asia Free Trade Agreement (SAFTA) for
trading through LCSs with Bangladesh and Bhutan.
Almost every state of NER shares an international border with one or
more of the Asian countries. Arunachal Pradesh and Sikkim are the only
two states of NER which share a border with three countries. Arunachal
Pradesh shares a long border (1817 km) with Bhutan, Myanmar and
China, among which the longest is with China. Sikkim shares only
about 350 km with Bhutan, China and Nepal. Assam shares 530 km
with Bangladesh and Bhutan, while Mizoram shares 828 km with
Bangladesh and Myanmar. However, Manipur, Meghalaya, Nagaland
and Tripura share 398, 443, 215 and 856 km respectively with a single
country. Thus, each and every state of the region shares an international
boundary with one or more of the Asian countries.
Five Asian countries share more than 5437 km of their international
border with one of the most strategic and potential economic regions of
India. Bangladesh and Myanmar share a border with four NER states
while Bhutan shares three, China with two and Nepal with only one.
Though China is the only border sharing country which has a substantial
impact on the world trade scenario, nevertheless other emerging and
innovative Asian economies have close proximity to NER as well. The
collaboration of NER with the emerging and innovative Asian economies
in mutually beneficial economic and social sectors can play an effective
role in boosting the growth and development process of the NE region of
India. However, the Asian countries have a wide diversity among them-
selves in terms of social and economic indicators. Some of them rank high
in the world in growth performance, while some are the worst performers.
There are wide variations among the Asian economies in terms of major
macroeconomic indicators (see Table 8.2). Singapore per capita GDP
(PPP) in 2013 was as high as USD62,400 whereas that of Nepal was only
USD1500 during the same period. This disparity is visible in the literacy
rate, GDP composition, labour force by occupation, innovation, R&D
expenditure and other indicators also. China has a per capita GDP (PPP)
of USD9800 in 2013, the highest among the countries sharing a border
with NER. Again, except China, major industries of the countries sharing
a border with NER relate to bulk and low value addition industries.
Table 8.2 Economic indicators of selected Asian countries
Literacy rate Stock of
Per capita (above direct foreign Labour force GDP
8
GDP (PPP) 15 years) investment-at home Major industries (by value of (by occupation) composition
Country (2013) (%) (December 31, 2013) annual output) (2012) (%) (2013) (%)
Bangladesh USD2100 57.7 (2011) USD7.04 Jute, cotton, garments, paper, Agriculture: Agriculture:
billion leather, fertilizer, iron and 47.0 17.2
steel, cement, petroleum Industry: 13.0 Industry:
products, tobacco, drugs Services: 40.0 28.9
and pharmaceuticals, (2010) Services:
ceramics, tea, salt, sugar, 53.9
edible oils, soap and deter-
gent, fabricated metal
products, electricity and
natural gas
Bhutan USD7000 52.8 (2005) USD63.5 Cement, wood products, Agriculture: Agriculture:
million processed fruits, alcoholic 62.0 13.8
beverages, calcium carbide Industry: 19.0 Industry:
and tourism. Services: 19.0 41.2
Services:
45.0
Burma USD1700 92.7 (2011) – Agricultural processing, wood Agriculture: Agriculture:
and wood products, copper, 70.0 38.0
tin, tungsten, iron, cement, Industry: 07.0 Industry:
construction materials, Services: 23.0 20.3
pharmaceuticals, fertilizer, (2001) Services:
oil and natural gas, gar- 41.7
Integration with Regional Blocks Through Intra-industry. . .
ments, jade and gems

(continued )
181
182

China USD9800 95.1 (2010) USD1.344 trillion World leader in gross value of Agriculture: Agriculture:
A. Nath
(December 31, industrial output, mining 33.6 10.0

2012) and ore processing, iron, Industry: 30.3 Industry:
steel, aluminium, and other Services: 36.1 43.9
metals, coal, machine build- Services:
ing, armaments, textiles and 46.1
apparel, petroleum, cement,
chemicals, fertilizers, con-
sumer products including
footwear, toys, and elec-
tronics; food processing;
transportation equipment
including automobiles, rail
cars and locomotives, ships,
and aircraft; telecommuni-
cations equipment, com-
mercial space launch
vehicles and satellites
Hong Kong USD52,700 93.5 (2002) USD1.502 trillion Textiles, clothing, tourism, Manufacturing: Agriculture:
banking, shipping, electron- 3.8 0.0
ics, plastics, toys, watches Construction: Industry:
and clocks 2.8 6.9
Services: 93.0 Services:
(2013) 93.0
India USD4000 62.8 (2006) USD310 billion Textiles, chemicals, food Agriculture: Agriculture:
processing, steel, transpor- 49.0 17.4
tation equipment, cement, Industry: 20.0 Industry:
8
mining, petroleum, machin- Services: 31.0 25.8

ery, software and Services:
pharmaceuticals 56.9
Indonesia USD5200 92.8 (2011) USD207.2 billion Petroleum, natural gas, tex- Agriculture: Agriculture:
tiles, automotive, electrical 38.9 14.3
appliances, apparel, foot- Industry: 13.2 Industry:
wear, mining, cement, med- Services: 47.9 46.6
ical instruments and Services:
appliances, handicrafts, 39.1
chemical fertilizers, ply-
wood, rubber, processed
food, jewellery and tourism
Japan USD37,100 99.0 (2002) USD231.2 billion Among world’s largest and Agriculture: 3.9 Agriculture:
technologically advanced Industry: 26.2 1.1
producers of motor vehicles, Services: 69.8 Industry:
electronic equipment, (2010) 25.6
machine tools, steel and Services:
non-ferrous metals, ships, 73.2
chemicals, textiles and
processed foods
North USD1800 100 (2008) – Military products, machine Agriculture: Agriculture:
Korea (2011) building, electric power, 35.0 23.4
chemicals, mining (coal, iron Industry and Industry:
ore, limestone, magenesite, Services: 65.0 47.2
graphite, copper, zinc, lead (2008) Services:

and precious metals), metal- 29.4 (2012)
lurgy, textiles, food
processing and tourism
183
(continued )
184

South USD33,200 97.9 (2002) USD152.3 billion Electronics, telecommunica- Agriculture: 6.9 Agriculture:
A. Nath
Korea tions, automobile produc- Industry: 23.6 2.6

tion, chemicals, shipbuilding Services: 69.4 Industry:
and steel (October 39.2
2013) Services:
58.2
Malaysia USD17,500 93.1 (2010) USD143.4 billion Rubber and oil palm Agriculture: Agriculture:
processing and manufactur- 11.1 11.2
ing, petroleum and natural Industry: 36.0 Industry:
gas, light manufacturing, Services: 53.5 40.6
pharmaceuticals, medical Services:
technology, electronics and 48.1
semi-conductors, timber
processing, Sabah-logging,
Sarawak-agriculture
processing, petroleum and
natural gas production and
logging
Nepal USD1500 57.4 (2011) – Tourism, carpets, textiles, Agriculture: Agriculture:
small rice, jute sugar and 75.0 36.8
oilseed mills, cigarettes, Industry: 7.0 Industry:
cement and brick Services: 18.0 14.5
production (2010) Services:
48.7
Philippines USD4700 95.4 (2008) USD33.28 billion Electronics assembly, gar- Agriculture: Agriculture:
ments, footwear, pharma- 32.0 11.2
ceuticals, chemicals, wood Industry: 15.0 Industry:
8
products, food processing, Services: 53.0 31.6

petroleum refining and Services:
fishing 57.2
Singapore USD62,400 95.9 (2010) USD585.8 billion Electronics, chemicals, finan- Agriculture: 1.3 Agriculture:
(December 31, cial services, oil drilling Industry: 18.6 0.0
2012) equipment, petroleum Services: 80.1 Industry:
refining, rubber processing (2011) 29.4
and rubber products, Services:
processed food and bever- 70.6
ages, ship repair, offshore
platform construction, life
sciences and entrepôt trade
Thailand USD9900 93.5 (2005) $193.7 billion Tourism, textiles and gar- Agriculture: Agriculture:
ments, agricultural 38.2 12.1
processing, beverages, Industry: 13.6 Industry:
tobacco, cement, light Services: 48.2 43.6
manufacturing such as jew- (2011) Services:
ellery and electric appli- 44.2
ances, computers and parts,
integrated circuits, furni-
ture, plastics, automobiles
and automotive parts;
world’s second-largest
tungsten producer and
third-largest tin producer

Source: The World Factbook 2016, CIA
(year) indicates year-specific figure
185
186 A. Nath
However, other Asian industrial countries like Hong Kong, Indonesia,

North Korea, South Korea, Malaysia, the Philippines, Singapore and
Thailand mainly specialize in medium and high value addition
manufacturing industries. Interestingly, these other Asian countries
along with China have a literacy rate (above 15 years) of more than
95 per cent.
A cross-tabulation of composition of GDP by sectors and sector-wise
labour force engagement show that Hong Kong, Japan, North Korea,
South Korea, Malaysia and Singapore are the only countries where the
participation of the labour force is relatively in accordance with GDP
composition. This implies that these countries have relatively less unem-
ployment or under-employment problems, a situation encountered by the
majority of the countries of the world. This is true for India as well and the
situation is more pronounced in NER.
The Northeast states of India are almost land-locked and are always
lagging behind the national scenario in terms of growth and development.
The region shares 98 per cent of its boundary with international borders
and is connected to the rest of India by a narrow land corridor that borders
Bangladesh. The macro-economic data on NER shows that the state
domestic product for the region has been consistently lower than the
national average, except for a few years. However, there are inter-regional
differences in income as well as in the structure of economic activities, and
a few states performed better than the all-India average. The structure of
the state income of the region is characterized by low levels of manufactur-
ing and non-governmental activities which has resulted in a large depen-
dence of the population on the agriculture sector. Though competitive
forces brought about by the liberalization of the economy after the 1990s
has forced the states including domestic producers to become more
efficient by modernizing and increasing R&D intensity of their products,
though the same did not happen in the case of NER. Consequently, poor
infrastructure and governance along with low productivity and market
access have made the development of the region low. Selected economic
indicators for the states of NER are shown in Table 8.3. Source:
Compiled from Basic Statistics for NER 2015, RBI publications and
Data-book compiled for use of Planning Commission, GOI.* Reference
Period: 2012-13
Table 8.3 Selected indicators of the Northeast states of India
State per
State capita Credit- Government
8
Domestic income Deposit expenditure Banking

Product at at Own ratio on education University services Gross State
current current revenue/ (March as ratio of and availed by Domestic Product
prices (INR prices Literacy revenue 2013) aggregate technical households by industry of
in lakhs) (INR) rate (%) expenditure as per expenditure institutes (%) origin (%)
(2013–14) (2013–14) (2011) (2011–12) sanction (2011–12) (2014–15) (2011) (2012–13)
Arunachal 1,349,103 84,869 65.38 15.4 21.2 11.4 10 53.0 Agriculture: 15.90
Pradesh Manufacturing:
2.21
Services: 38.32
Assam 16,265,224 46,354 72.19 39.6 36.8 20.3 34 44.1 Agriculture: 18.01
Manufacturing:
7.61
Services: 56.88
Manipur 1,248,423* 36,937* 79.21 13.6 27.4 10.6 05 29.6 Agriculture: 15.40
Manufacturing (R):
-
Services: 52.77
Meghalaya 2,104,460 58,522 74.43 22.0 23.4 17.3 13 37.5 Agriculture: 11.74
Manufacturing:
6.69
Services: 52.91
Mizoram 836,292* 63,413* 91.33 9.3 35.2 15.7 05 54.9 Agriculture: 14.13
Manufacturing:
1.58
Services: 64.09
Nagaland 1,774,932 77,529 79.55 11.0 27.9 12.1 09 34.9 Agriculture: 20.22
Manufacturing:
1.74
Services: 60.51
187
Sikkim 1,237,669 176,491 81.42 41.4 32.5 14.0 09 67.5 Agriculture: 9.25
(continued )
188
State per
State capita Credit- Government
Domestic income Deposit expenditure Banking
Product at at Own ratio on education University services Gross State
current current revenue/ (March as ratio of and availed by Domestic Product
prices (INR prices Literacy revenue 2013) aggregate technical households by industry of
A. Nath
in lakhs) (INR) rate (%) expenditure as per expenditure institutes (%) origin (%)
(2013–14) (2013–14) (2011) (2011–12) sanction (2011–12) (2014–15) (2011) (2012–13)
Manufacturing:
35.37
Services: 30.34
Tripura 2,385,470* 60,963* 87.22 22.3 27.0 17.0 06 79.2 Agriculture: 17.32
Manufacturing:
4.62
Services: 55.37
NER 22,731,388 49,959 74.48 33.1 91
All India 9,388,876 68,747 74.04 61.1 78.1 16.3 4451 58.7 Agriculture: 11.85
Manufacturing:
15.76
Services: 58.79
Source: Compiled from Basic Statistics for NER 2015, RBI publications and Data-book compiled for use of Planning
Commission, GOI
* Reference Period: 2012–13
The majority of the states of NER have high literacy rates but the same
is not transformed into improving competitiveness for the respective states
through product and process innovation. The overall business environ-
ment is low and this has led to low investment. This is reflected in the low
proportion of households availing themselves of banking services and low
credit–deposit ratios. NER is endowed with natural resources, gas, crude
oil, coal, limestone and other forest and agricultural products. In spite of
such richness, the region has remained under-developed and, conse-
quently, the per capita income has remained below the national average
over the years except for a few states. In fact, the region has entered into a
vicious circle of under-development in which a low level of infrastructure
has resulted in a low manufacturing base, which again has resulted in a
lower inflow of private investment and low capital formation and hence
low growth of the region. This has resulted in the high dependence of the
population on the agricultural sector where productivity is low; this has
created large unemployment and under-employment. Here, it is impor-
tant to note that there is great disparity among the Indian states in terms
of developmental activities. The states which have identified factors for
growth have succeeded in achieving high rates. These states have managed
to differ themselves in terms of technological trajectories. The innovative
activities of these states have resulted in paradigm shifts in technology.
The role of technology and knowledge is increasing in the growth process
of many Indian states but the role is almost negligible for NER.
The above paragraphs on the economic structure of the Asian countries
and NER shows that, though the countries sharing international borders
with NER have many things in common, many countries like China
along with other emerging Asian economies have established themselves
in the knowledge and technology intensive industrial sectors as well.
However, these countries have ethnic and social relations with many
states of NER and consequently it could develop the opportunity for
cross-border markets for its potential products through innovative prod-
uct and process techniques as well as through participation in Asian intra-
industry production networks.
190 A. Nath
8.3 Northeast India and Bordering Nations:

Trade and Business
The pattern of international trade is an important gauge for analysing the
comparative advantage of the products traded by nations. The direction of
trade shows the demand for commodities across various countries. Like
any other region, NER is also engaged in international trade. The infor-
mation on the trade of NER shows that the region is mainly engaged in
the border trade of commodities with the countries sharing borders with
the region. Table 8.4 depicts exports and imports through different LCSs
of different states of NER.
The table shows that four out of eight Northeast states of India
undertake trade through the LCSs with the countries sharing borders
during 2012–13. Assam engages in trade with Bangladesh only and the
major products exported relate to low value added primary and agricul-
tural products. Manipur is also engaged in trade through the Moreh
border with Myanmar, though very few agricultural products are exported
and imported. Meghalaya exports through four LCSs but exports are
restricted to coal, boulder stone and limestone. Similar is the case with
Tripura which mainly exports fresh products to Bangladesh. Exports from
the states of the region mainly consist of primary and agricultural products
with low value addition. No product and process innovation through
R&D is observed in the case of exportable products. Here it is important
to note that these states of NER have developed informal channels of trade
(Nath 2012) along with a formal channel with neighbouring countries
over the years. The volume and composition of commodities traded
informally is substantially more than the formal channel of trade (Nath
2012) and have significant impact on the livelihood pattern of the
population living along the international border areas.
The international border of NER is shared by five countries, but the
region imports mainly from Bangladesh and negligible amounts from
Myanmar. Bangladesh shares a border with four Northeast states of
India; three states import from Bangladesh through LCSs. However, we
find that Bangladesh exports a variety of manufactured products ranging
from drinks and juice to plastic household items of various kinds through
Table 8.4 Exports and imports of NER, 2012–13
Value Value
of of
8
exports imports
Neighbouring (INR in (INR in
State country Major export items crores) Major import items crores)
Arunachal Bhutan – – – –
Pradesh China
Myanmar
Assam Bangladesh Tea, fresh ginger, betel leaf, dry 649.97 Sandal and furniture, hotel furni- 79.56
fish, fresh fruits, oranges, coal, ture, porcelain tiles, articles of
cement, tomatoes, boulder stone aluminium, digital broadcast set
up boxes, Indonesian dramar
buta, printed paper sacks, gym
equipment, cotton waste,
cement, synthetic drinks, laundry
soap, misc. food items, dry cell
batteries, hilsha fish, hand pumps
for tube wells, household articles
of plastic and plastic furniture,
porcelain tableware, ready-made
garments, tissue paper, kopi
lamps, mosquito nets, hydrogen
peroxide, molasses, other metal
and wooden furniture, variety of
fresh fish, melamine tableware,

caustic soda, flush doors, foreign
liquor, glass bends, mobile hand-
sets, television sets, GPS
191
(continued )
192
Value Value
of of
exports imports
A. Nath
handsets, micro SD, ultrasonic

processors, shoes/blankets,
printed books, calendars, mela-
mine, religious books, chakra ball
soap
Bhutan Rectified spirit, SKO (kerosene), 107.78 Extra natural alcohol, plywood/ 2.58
HSDO (high speed diesel oil), block board, dried grain
empty bottles, bricks, LPG
(liquefied petroleum gas), rice,
oranges
Manipur Myanmar Cumin seed, wheat flour, betel 5.56 Betel nut, dry ginger 20.56
nuts, bleaching powder
Meghalaya Bangladesh Coal, fresh ginger, betel nuts, dry 863.79 Synthetic net fabrics, cotton waste, 12.20
fish, tamarind, boulder stone, melamine, chakra ball soap, ver-
limestone, raw hides and skin micelli, sarees, plastic doors,
cement, Tangai tat sari, Pran
mango drink, Pran Ice Pop drink,
Pran family toast, Pran products,
tissue paper, potato crackers,
plastic furniture, household plas-
tic articles, biscuits, laundry soap,
PVC doors, lollipops
Mizoram Bangladesh – – – –
Myanmar
Nagaland Myanmar – – – –
Sikkim Bhutan – – – –
8
China
Nepal
Tripura Bangladesh Flavoured drink, fresh citrus, dry 0.40 Broken or crushed stone, cement, 252.07
fish, cullet, bananas, fresh other articles of plastics, PVC
pineapples pipes and tubes, plastic furniture,
small fish, hilsha fish, dry fish,
wooden/metal furniture, cotton
waste, float glass, flavoured
drinks, brick crusher machines,
ceramic tiles, plastic doors and
frames, quicklime, PVC door
sheets, plastic sheets of polymer,
hospital beds, cotton ganji, nuts
and bolts, parts of hand pumps,
stainless steel pipes and tubes,
synthetic pyzama, laundry soap,
molasses, ropes of jute,
prefabricated iron and steel,
cashew nuts, other knitted and
crocheted fabrics, aluminium
profiles, synthetic fibre yarn,
fishing nets, melamine, gangi of
cotton other than hand
crocheted, other footwear with

outers and uppers of plastic,
windcheaters, other knitted and
(continued )
193
194
Value Value
of of
exports imports
A. Nath
synthetic fabrics, variety of fish,

synthetic drinks, household arti-
cles of plastics, variety of fresh
fish, Pran beverages, plastic
goods/doors, Pran sweets/toasts,
Pran magic cup, Pran edible
items, articles of plastics, oil
crackers, fit crackers, footwear,
plastic sheets of polymers, other
threshing machines, washing
power, mild steel (MS) billets,
pumps, sawing machines, MS
angles and bars, oil cakes, coal,
MS angle bars and MS deformed
iron rods
Source: Basic statistics of North Eastern Region 2015
LCSs to the Northeast states. The pattern of trade between NER and
neighbouring countries shows that the volume of trade is at very low level
and that the composition of exports from the former is substantially less
than that of imports from Bangladesh. The composition shows that,
although NER mainly exports low value addition primary and fresh
products, imports from Bangladesh range from primary products to
basic household products. This shows that the economy of the states of
NER depend more on neighbouring countries than on mainland India
(Table 8.5).
The pattern of trade differs significantly among the Asian countries
with respect to composition and major partners of trade. Though few
show some similar trade pattern, the composition differs vastly among
them. Except China, the majority of countries sharing borders with NER
export mainly primary products along with a few semi-industrial items
and import machinery and equipment. However, China, Hong Kong,
Japan, South Korea, Malaysia, the Philippines, Singapore and Thailand
are involved in both the export and import of industrial products, mainly
with emerging and developed countries. Interestingly, India is a major
trading partner with only Burma, Indonesia, North Korea, Malaysia and
Nepal and not with the developed and innovative Asian countries. Given
the geographical position of the states of NER, there seem to be oppor-
tunities that can be developed for trading with the major economies of
Asia or to integrate in a production network for harnessing the trade
potential of the relevant products of NER.
India’s foreign trade during the last few decades has undergone signif-
icant changes. The direction of its exports has moved significantly towards
Asian countries, especially China, Singapore, Indonesia, South Korea,
Hong Kong and Thailand (Fig. 8.1). However, India has shown less
diversification on the products exported, and the bundle mainly consists
of refined petroleum products, agricultural and allied primary products,
engineering goods, and gems and jewellery. This is mainly due to increas-
ing demand from developing countries, especially Asian countries.
Exports to the south Asian region has increased consistently over the
years (Figs. 8.1 and 8.2).
The change in the direction of trade is observed in the case of imports as
well. Crude petroleum and products, ores, iron and steel, capital goods are
Table 8.5 Exports and imports of selected Asian countries: 2012–13
196
Major export Value of Major import Value of

Country partners (per cent) Major export items exports partners (per cent) Major import items imports
Bangladesh USA (16.6), Germany Garments, knitwear, USD24.92 China (17.8), India Machinery and USD32.29
(13.4), UK (8.6), agricultural products, billion (13.8), Malaysia (5), equipment, billion
France (5.2) (2012) frozen food (fish and (2012) Singapore (4.6), chemicals, iron and (2012)
seafood), jute and South Korea (4.4) steel, textiles, food-
A. Nath
jute goods, leather (2012) stuffs, petroleum

products, cement
Bhutan – Electricity (to India), USD721.8 – Fuel and lubricants, USD1.28
ferrosilicon, cement, million passenger cars, billion
calcium, carbide, cop- (2012) machinery and (2012)
per wire, manganese, parts, fabrics, rice
vegetable oil
Burma Thailand (40.7), India Natural gas, wood USD7.82a China (36.9), Thailand Fabric, petroleum USD7.998
(14.8), China (14.3), products, pulses, billion (20.2), Singapore products, fertilizer, billion
Japan (7.4) beans, fish, rice, (2012) (8.7), South Korea plastics, machinery, (2012)
(2012) clothing, jade and (8.7), Japan (8.2), transport equip-
gems Malaysia (4.6) ment, cement, con-
(2012) struction materials,
crude oil, food
products, edible oil
China USA (17.2), Hong Kong Electrical and other USD1.971 Japan (9.8), South Electrical and other USD1.653
(15.8), Japan (7.4), machinery, including trillion Korea (9.2), USA machinery, oil and trillion
South Korea (4.3) data processing (2012) (7.1), Germany mineral fuels, opti- (2012)
(2012) equipment, apparel, (5.1), Australia (4.3) cal and medical
radio telephone (2012) equipment, metal
handsets, textiles, ores, motor vehicles
integrated circuits
Hong Kong China (54.1), USA (9.9), Electrical machinery USD466 China (46.9), Japan Raw materials and USD487.4
Japan (4.2) and appliances, tex- billion (8.4), Taiwan (7.5), semi-manufactures, billion
(2012) tiles, apparel, foot- (2012) South Korea (5), consumer goods, (2012)
8
wear, watches and USA (4.7) capital goods,

clocks, toys, plastics, (2012) foodstuffs, fuel
precious stones, (most is
printed material re-exported)
India UAE (12.3), USA (12.2), Petroleum products, USD301.9 China (10.7), UAE Crude oil, precious USD503.5
China (5), Singapore precious stones, billion (7.8), Saudi Arabia stones, machinery, billion
(4.9), Hong Kong (4.1) machinery, iron and (2012) (6.8), Switzerland fertilizer, iron and (2012)
(2012) steel, chemicals, vehi- (6.2), USA (5.1) steel, chemicals
cles, apparel (2012)
Indonesia Japan (15.9), China Oil and gas, electrical USD187.3 China (15.3), Singa- Machinery and USD178.7
(11.4), Singapore (9), appliances, plywood, billion pore (13.6), Japan equipment, billion
South Korea (7.9), textiles, rubber (2012) (11.9), Malaysia chemicals, fuels, (2012)
USA (7.8), India (6.6), (6.4), South Korea foodstuffs
Malaysia (5.9) (6.2), USA (6.1),
(2012) Thailand (6)
(2012)
Japan China (18.1), USA Motor vehicles, semi- USD776.6 China (21.3), USA Petroleum, liquid USD830.1
(17.8), South Korea conductors, iron and billion (8.8), Australia (6.4), natural gas, cloth- billion
(7.7), Thailand (5.5), steel products, auto (2012) Saudi Arabia (6.2), ing, semi conduc- (2012)
Hong Kong (5.1) parts, plastic mate- UAE (5), South tors, coal, audio and
(2012) rials, power generat- Korea (4.6), Qatar visual apparatus
ing machinery (4) (2012) (2011)
North China (67.2), South Minerals, metallurgical USD4.707 China (61.6), South Petroleum, coking USD4.33
Korea Korea (19.4), India products, manufac- billion Korea (20), coal, machinery and billion
(3.6) turers (including (2011) European Union equipment, textiles, (2011)
(2011) armaments), textiles, (4) (2011) grain
agricultural and fish-

ery products
South Semiconductors, wire- China (16.5), Japan Machinery, electron-
Korea less (13), USA (8.5), ics and electronic
197
(continued )
198
Major export Value of Major import Value of

Country partners (per cent) Major export items exports partners (per cent) Major import items imports
China (24.4), USA telecommunications USD552.7 Saudi Arabia (7.1), equipment, oil, USD514.2
(10.1), Japan (7.1). equipment, motor billion Australia (5) steel, transport billion
(2011) vehicles, computers, (2012) (2011) equipment, organic (2012)
steel, ships, chemicals, plastics
A. Nath
petrochemicals
Malaysia Singapore (13.6), China Semiconductors and USD227.7 China (15.1), Singa- Electronics, machin- USD186.9
(12.6), Japan (11.8), electronic equip- billion pore (13.3), Japan ery, petroleum billion
USA (8.7), Thailand ment, palm oil, (2012) (10.3), USA (8.1), products, plastics, (2012)
(5.4), Hong Kong petroleum and lique- Thailand (6), Indo- vehicles, iron and
(4.3), India (4.2), fied natural gas, nesia (5.1), South steel products,
Australia (4.1) wood and wood Korea (4.1) chemicals
(2012) products, rubber, (2012)
textiles, chemicals,
solar panels
Nepal India (59.1), USA (9.3), Clothing, pulses, car- USD1.004 India (52.3), China Petroleum products, USD5.951
Germany (4.1) pets, textiles, juice, billion (33.6) machinery and billion
(2012) pashima, jute (2012) (2012) equipment, gold, (2012)
products electrical goods,
medicine
Philippines Japan (19), USA (14.2), Semiconductors and USD46.28 USA (11.5), China Electronic products, USD61.49
China (11.8), Singa- electronic products, billion (10.8), Japan (10.4), mineral fuels, billion
pore (9.3), Hong transport equipment, (2012) South Korea (7.3), machinery and (2012)
Kong (9.2), South garments, copper Singapore (7.1), transport equip-
Korea (5.5), Thailand products, petroleum Thailand (5.6), ment, iron and
(4.7) products, coconut oil, Saudi Arabia (5.6), steel, textile fabrics,
(2012) fruits Indonesia (4.4), grains, chemicals,
Malaysia (4) plastic
(2012)
Singapore Malaysia (12.3), Hong Machinery and equip- USD435.8 Malaysia (10.6), China Machinery and USD374.9
Kong (10.9), China ment (including elec- billion (10.3), USA (10.2), equipment, mineral billion
(10.8), Indonesia tronics and (2012) South Korea (6.8), fuels, chemicals, (2012)
8
(10.6), USA (5.5), telecommunications), Japan (6.2), Indone- foodstuffs, con-

Japan (4.6), Australia pharmaceuticals and sia (5.3), Saudi Ara- sumer goods
(4.2), South Korea (4). other chemicals, bia (4.5), UAE (4.1)
(2012) refined petroleum (2012)
products
Thailand China (11.7), Japan Electronics, computer USD226.1 Japan (20), China Capital goods, inter- USD217.8
(10.2), USA (9.9), parts, automobiles billion (14.9), UAE (6.3), mediate goods and billion
Hong Kong (5.7), and parts, electrical (2012) Malaysia (5.3), USA raw materials, con- (2012)
Malaysia (5.4), Indo- appliances, machin- (5.3). sumer goods, fuels
nesia (4.9), Singapore ery and equipment, (2012)
(4.7), Australia (4.3) textiles and foot-
(2012) wear, fishery prod-
ucts, rice, rubber
Source: The World Factbook 2016, CIA
a
Official export figures are grossly underestimated due to the value of timber, gems, narcotics, rice and other products
smuggled to Thailand, China and Bangladesh
199
200 A. Nath
18.5
West Asia- GCC
16.5
14.5
NE Asia
Share in Total Exports
12.5
ASEAN
10.5
8.5
South Asia
6.5
4.5
Other West Asia
2.5
East Asia (Oceania)
0.5
2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
Fig. 8.1 Share of Asian countries in Indian exports (Source: Export-import data
bank, Ministry of Commerce, Government of India)
18.5
16.5
West Asia- GCC
14.5
Share in Total Imports
NE Asia
12.5
10.5 ASEAN
8.5
6.5 South Asia
4.5 Other West Asia
2.5
East Asia (Oceania)
0.5
2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
Fig. 8.2 Share of Asian countries’ imports from India
the major items in the composition of import basket. Many Asian

countries have become important sources of imports over the years.
Though there were fluctuations in trade with respect to different Asian
regions but trade with south Asian region increased consistently during
the last couple of years. Though there has been an increase in trade
between India and the Asian countries but sufficient data is not available
to substantiate that these are part of the intra-industry production

network.
Thus there have been significant changes in India’s direction and
composition of trade and many Asian countries have become important
trade partners. This may be either due to the trade reforms initiated and
agreements made by GOI or greater emphasis on LEP through strength-
ening trade relations or a combination of both. These have deeper
implications for the laggard NER to boost its growth and development
process by integrating the region with the regional production and trade
network.
8.4 Regional Cooperation: Northeast India

and Its Neighbouring Countries
The last two decades have witnessed major changes in the structure and
strategies of countries to boost trade, especially the developed and emerg-
ing countries. Value chain or cross-border intra-industry production
networks have gained importance in the growth process of many countries
as they are considered new dimensions of trade. The value chain is a spear
heading the global manufacturing scenario; the proportion of trade in
intermediate products has increased. According to UNCTAD (2013)
about 60 per cent of global trade consists of that in intermediate goods
and services that are incorporated at different stages of production pro-
cesses of goods and services for final consumption. The value chain is
mainly developed to access locational advantage and develop export
corridors for local products. The fragmentation of production helps to
reduce the cost of the final products and then compete with the products
of other regions or countries. Countries are entering and redefining
regional trade agreements (RTAs) to take advantage of trade (Banga
2015). Asia’s success during the last one and half decades can be attrib-
uted to a large extent to intra-industry production networks of the
regional supply chain. Regional supply chain production has been the
outcome of high and increasing levels of economic integration, marked by
202 A. Nath
high and increasing levels of intra-regional trade in general and of trade in

intermediate goods in particular.
Value chains emerged as supply chains in East Asia where countries
especially Japanese firms had taken the lead through investment and trade.
Generally, it is observed that a single product assembled and exported
from China is likely to embody knowledge-intensive designs from Japan,
raw materials or inputs produced from capital or skill intensive production
processes in South Korea, Taiwan, Hong-Kong or Singapore, and inputs
produced from more labour-intensive methods in one or more of coun-
tries such as Indonesia, Malaysia, the Philippines and Thailand (Serieux
2012). This shows that the products of the region gain competitiveness by
utilizing the best potential resources of the respective countries by involv-
ing them in the value chain network. This not only increases the com-
petitiveness of the products but also of the markets for the products
as well.
NER is rich in natural resources, minerals and ores, crude oil and
natural gas (Table 8.6). Every state of the region is endowed with
horticultural products, plantation crops, vegetables, spices, herbs and
medicinal plants and governs a competitive advantage in one or more
products. Generally these products are low in value addition but if
properly pooled within a value chain as an intermediate input or product
have the potential to increase competitiveness and, hence, access to
markets.
The major and potential products as presented in Table 8.6 can be
utilized gainfully as part of value chains in terms of intra-industry pro-
duction networks with Asian economies. This will be beneficial to both
sides as Asian economies will obtain a cheap supply of primary products
and the states of NER will receive an opportunity to add value to its
products. For example, the primary products of the region can use the
technological capability of Japan, South Korea and other Asian countries
for process innovations to add value to them. The different primary
products of the states can be used as intermediate products of a supply
chain for value addition of a particular product chain. Specifically, Tripura
has the potential to became a centre for rubber related products, tourism,
food processing and bamboo. Now, if the proper supply chain is identified
for these products then the value can be increased through steps like
Table 8.6 Potential sectors of NER

Highest comparative
advantage for
Major products products
Arunachal Food grain and vegetable items, tea, gar- Small millet, maize,
Pradesh lic, onions, mushrooms, spices, fodder ginger, pineapples
for cattle, medicinal plants, bamboo and
bamboo products, chillies, handicrafts,
kiwis
Assam Tea, ginger, coal, perfumery compounds, Tea, rapeseed and
stainless steel, incense stick powder, mustard, sugar cane
marble slabs, quicklime, oranges, fish,
motor spirit, chillies
Manipur Cement, engineering goods, transport Chillies, rice, ginger,
equipment, motor cycles, iron and steel, pineapples
medicinal plants, chemicals and allied
products, cotton yarn
Meghalaya Limestone, coal, cement, boulder stone, Ginger, potatoes,
ginger, crushed stone, stone chips and sesame, pineapples
oranges
Mizoram Fruits of various types, ginger, mush- Ginger, maize and
rooms, medicinal plants sesame
Nagaland Forest products, chillies, cotton, jute Small millet, maize
Sikkim Tea, medicinal plants, cardamom, ginger, Ginger
honey, handicrafts
Tripura Fresh fruit, fish, ginger, bamboo, rubber, Natural rubber,
potatoes, raw hides and skin and other coconut, bananas,
local agricultural goods pineapples
Source: Compiled from NER vision document 2020 and economic review of the
respective states
product development, identifying markets and packaging, and hence the

probability of a particular product to increase its competitiveness in any
market increases. Similarly, Assam and Sikkim are also bestowed with rich
tea and medicinal plants respectively and can significantly contribute to
intra-industry regional production networks. The innovative process
technologies of Japan and South Korea can be applied to tea and other
plantation crops to increase value addition and can be assembled in other
specialized countries for final production for packing and so on in order to
penetrate high value markets. Similarly, spices also offer vast scope
through organic farming and high value addition. The minerals of
204 A. Nath
Table 8.7 Share of selected product groups in India’s exports (%)

Items/groups 2000–01 2005–06 2010–11 2014–15
Vegetable products 7.0037 4.7498 3.9602 6.3845
Mineral products 6.3665 16.7108 19.7148 19.4635
Pulp of wood, recovered paper, paper 0.5410 0.5392 0.4346 0.4610
and paperboard
Total 13.9112 21.9998 24.1096 26.3090
Source: Compiled from Ministry of Commerce, Government of India
Meghalaya and Manipur can be used for sophisticated industrial products

through product and process development by identifying proper value
chains within the region. The value chain view of global economic
integration highlights that for many industries access to international
markets is not achieved merely through designing, making and marketing
new products, but involves gaining entry into international design, pro-
duction, logistics and marketing networks consisting of many different
firms (Brunner 2010).
In this context it is important to note that primary products (Table 8.7)
play a significant role in the export basket of India and that the share has
been increasing over the years. The contention is that many of the
sub-categories of products like rice, cereals, coal and limestone are avail-
able in NER and that these products are not accounted for in the export
basket of India. Trade with Asian countries has increased during the last
decade but the share of the states of NER in this trade basket is negligible
due to the simple reason that many potential primary products are not
harnessed commercially to take advantage of the trade.
Thus, the primary products from NER can easily become a part of the
export basket that already consists of many other primary products. The
locational advantage of NER and its abundant natural and mineral
resources can be used as a strategic base for investors for intra-industry
production networks with Asian economies for increased value addition of
the products of the region. However, this will call for significant role of
special economic zones which are at present lacking in the region. This
will not only help the overall region to grow but it will also open new
routes for gainful employment opportunities.
The role of the service sector in national income has increased globally,
especially among the developed countries, during recent years. India is
also not an exception and is one of the major exporters of services. The
contribution of the services sector is more than the manufacturing sector
(Eichengreen and Gupta 2010) and has a significant share in FDI inflows
as well as outflows. The states of NER have a significantly high share of
the service sector in state income as well. Given the dominance of NER in
the service sector, the region can identify its potential services that will
benefit the region not only in terms of exports but through FDI as well.
One of the potential sectors could be tourism. NER offers unique natural
beauty combined with flora and fauna for tourism. It can offer ample
tourism opportunities by collaborating with South and other
neighbouring Asian countries for religious sites and places depicting
ancient culture, sculpture, and so on. The development of proper
human capital is important for the development of NER. Though the
literacy rate of NER is high, there is a lack of technical and managerial
manpower in skill-intensive activities (Nath 2013). Therefore, involve-
ment of local populations in skill formation activities is important from
both the perspective of the capacity of local economic activities and
employment.
Over the next few years, it is expected that Asia will become the fastest
growing consumer market in the world. The rising income of people will
not only boost intra-regional trade but global trade as well. The GDP of
the region is expected to grow more than many developed countries like
the USA and the eurozone. Exports from most of the individual
Asian countries are expected to grow by double digits over the next few
years. Bloomberg’s survey finds that 7 out of 22 emerging markets in
2014 are from Asian economies; South Korea and Japan lead the world in
innovation as well. Therefore, increasing cooperation with these econo-
mies will boost the growth and development process of not only India but
NER as well. There are many product groups and services in NER which
can be used as intermediate products in the value chain network of the
Asian region to increase the value addition of products. The cooperation
of NER with the rapidly growing Asian economies will help the region in
particular and India in general to grow both economically and
strategically.
206 A. Nath
8.5 Value Chain: The Way Forward for NER

The policy and strategy for increasing the competitiveness of products
have changed and the value chain has emerged as one of the significant
intra-industry production networks for enhancing the value of products.
The success of the Asian region during the last one and half decades shows
how products or services from different countries (depending on the
respective country’s comparative advantage or potentiality) can be assem-
bled in a single country to increase the competitiveness of a product.
Although India’s trade with Asian countries has increased and a number
of primary products are exported to these Asian countries, sufficient data
are not yet available to support India as also being part of the regional
supply chain network. In spite of NER sharing more borders with foreign
countries than with mainland India, the region still remains characterized
by low levels of manufacturing, non-governmental activities, a large
dependence of the population on the agriculture sector, poor infrastruc-
ture and governance, low productivity and poor market accessibility. This
shows that NER has scope to develop its growth prospects but that, due to
the non-utilization and/or under-utilization of resources as well as its
inability to engage with the recent production network, the growth of
the region has remained bleak over the years.
NER has an abundant supply of natural resources which can be utilized
to boost the economy of the states. Given the importance of RTAs in
enhancing the economy of the Asian economies, there are ample oppor-
tunities for NER to become involved in the intra-industry regional
production network through its major products for improving its income
and employment opportunities. However, these need the proper identi-
fication of the products and services that NER can use to build a
comparative advantage. Once NER identifies the products which can be
part of a supply chain network and which are of great demand in
neighbouring Asian countries then the investment opportunities will
also grow considerably. However, this may call for smooth and hassle-
free logistics and other infrastructural services for promoting trade.
Though GOI has undertaken ambitious projects for linking NER with
the Asian region as part of LEP, results are yet to be recorded. The
development of NER over the years has remained dependent on the

strong and increased funding role of the government. This developmental
strategy needs to be changed towards a market driven strategy in order to
increase the competitiveness of NER.
Notes
1. NER consists of eight states, namely Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.
2. Border trade is overland trade by way of the “exchange of commodities”
from a bilaterally agreed list by people living along both sides of the
international border.
References
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University, Agartala.
Part III
Look (Act) East Policy and India’s
Multilateral Engagements
In Northeast India, conflicting economic interests, unresolved ethnic

conflicts, poverty, rampant corruption, vested interests and recession in
the state economies continue to act as deterrents to the successful execu-
tion of connectivity projects. Apart from these factors, India’s attitude
towards its neighbours, be it China, Nepal, Bangladesh or Myanmar, are
also important determinants for expanding regional cooperation with the
states of Northeast India. All of these require cooperation between civil
society groups and the Governments of India and Myanmar so as to give a
new orientation to the Look (Act) East Policy and lead to its success in
Northeast India.
9
Look East Policy, Sub-regional Connectivity
Projects and Northeast India
H. Srikanth
9.1 Introduction
Several national and international developments have compelled India to
proclaim and pursue the Look East Policy (LEP), now rechristened the
Act East Policy (AEP). Developments like the collapse of the Soviet
Union, the reassertion of market forces, India’s foreign exchange crisis
of the early 1990s, the continuing recession in the USA and the European
economy, the rise of China as an economic power, the expansion of
ASEAN and the failure of India to steer the SAARC, and so on have
forced India to look eastwards for protecting, consolidating and
expanding its economic interests (Symbiosis International University
Originally entitled “Interrogating the Look East Policy,” the draft of this chapter was submitted to
the International Conference “Look (Act) East Policy and North East India,” organized by the
Omeo Kumar Das Institute of Social Change and Development, Guwahati, September
25–26, 2015.
H. Srikanth (*)
Department of Political Science, North Eastern Hill University, Shillong,
India

214 H. Srikanth
2014; Mishra 2014; Bhattacharya 2011; Chakraborty and Ray 2014;

Haokip 2015). LEA was conceived more as a national policy for
promoting trade, technology and investment opportunities; the develop-
ment of Northeast states was not its primary concern. It is after the
initiation of sub-regional forums like the Bay of Bengal Initiative for
Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the
Bangladesh–China–India–Myanmar Forum for Regional Cooperation
(BCIM) and the Mekong–Ganga Cooperation (MGC), that Northeast
India was projected as a gateway to East and South East Asia. Different
economic corridors and connectivity projects proposed and planned by
the sub-regional forums and also the ambitious Asian Highways—AH1
and AH2—endorsed by the UN Economic and Social Commission for
Asia and the Pacific (UNESCAP) pass through Northeast states
(UNESCAP 2003). Citing these connectivity projects, the Indian
government has given the impression that once these projects become
operational, the Northeast Region (NER) would be able to break the
shackles of landlocked status and move on to the path of development.
It is held that the increased connectivity would link the landlocked
regions with neighbouring countries and develop business and trade
between the countries and the regions by reducing time, distance
and travel costs (Shepherd et al. 2011; Krist 2014; Braconier and
Pisu 2013; Ivanov and Matov 2013; Aggarwal 2015; Mukherjee
2015). It is also assumed that these initiatives would help the people
of the region to overcome the problems of poverty, unemployment and
under-development.
Complementing the government’s endeavours to facilitate trade and
business, indigenous scholars have come out with studies that have
retraced the cultural, economic and racial linkages that the region, now
referred to as Northeast India (NEI), had with China, Bhutan, Burma and
Bengal (Bhattacharjee 2000; Baruah 2003; Misra 2011). The decision of
the British to separate Burma from British India in 1935 and later the
partition of British India into India and Pakistan in 1947 severed the
natural links that the region has with the people living in the neighbouring
regions. Strategic concerns of the colonial and post-colonial regimes kept
9 Look East Policy, Sub-egional Connectivity Projects. . . 215
the region landlocked and peripheral. The studies attribute different

problems to NEI—poverty, under-development, regional inequalities,
insurgency, ethnic conflicts, xenophobia, and so on—to colonial and
post-colonial policies. Of course, after India became independent the
national elite tried to address the problems of the region within the
framework of the nation state. Apart from using armed forces to quell
secessionist forces, the Indian government also made recourse to consti-
tutional, legal, economic and political interventions such as the formation
of autonomous councils of different types, the creation of new states, the
granting of special status for Northeast states, the pumping in of more
funds and the initiating peace talks with militant groups (Upadhyay 2009;
Oinam 2008; Srikanth 2005). These initiatives did help in mitigating the
tensions to some extent, but they are found inadequate to address the
problems of the stagnant landlocked region. As developing the peripheral
regions within the bounds of the capitalist nation state is difficult, more
radical steps are indeed necessary to break out of unchanging, stagnant,
traditional, subsistence economies. Some indigenous militant organiza-
tions in the region advocated secession from the Indian Union as a panacea
for the Northeast. But with most indigenous movements for self-
determination degenerating into self-defeating xenophobic inter-ethnic
conflicts, international public opinion has now turned against all seces-
sionist movements, making secession a difficult option. It is in this context
that the Look (Act) East Policy initiated by GOI has come to be seen by
many insiders as well as outsiders as a more pragmatic and viable strategy
for peace and development in NER. Since the policy has caught the
imagination of the policy-makers as well as the people of the region,
there is a need to interrogate the Look (Act) East Policy to see how far
the assumptions on which this policy is based would be able to address the
problems of a landlocked periphery. Keeping the objective in mind, an
attempt is made in this chapter to examine whether improving physical
connectivity with neighbouring countries through the construction of
better roads, railway networks and waterways would help NEI to overcome
the problems of under-development.
216 H. Srikanth
9.2 Road Connectivity, Trade and Economic

Development
Ancient and medieval history shows that many kingdoms and empires in
India had thriving trade relations with other countries. Traders from far
off places came to trade with India as they found the goods produced had
a good market in other countries. India had brisk trade with the Middle
East, South East Asia and European countries. Its fine cotton and silk
fabric, spices, indigo, sugar, drugs, precious stones and artefacts were in
demand (Chakravarti 2001; Chawla 2006). Traders then used to travel
long distances for days and months using difficult land and sea routes.
Economic prosperity and trade led to the construction of roads and
waterways, facilitating the movements of other sections of peoples such
as scholars, religious preachers, artisans and tourists. Connectivity was
important even then, but usually it was corollary to the development of
trade and the economy. Later nation states that came into existence in the
wake of the development of capitalism developed roads and railways with
the aim of creating national markets. But in colonies and semi-colonies
the occupying powers built railways primarily to exploit the peoples and
their resources (Marx 1974: 494–498; Desai 2005: 120; Hurd and Kerr
2012: 3–4, 9–10; Foreign and Commonwealth Office 2015). In contrast,
the governments in all sovereign welfare states took the responsibility of
building roads and railway networks to link the places and the peoples.
After independence, the Indian government also took steps to build/
expand transport networks linking villages to towns, and towns to cities.
This model of connectivity, pursued in the name of uniting the people
and achieving national development, is now somewhat distorted in the
present neo-liberal regime with modern states investing heavily in the
construction of highways and railways on the presumption that better
connectivity between major cities within and outside the country pro-
motes trade and development. The roads are built not so much to connect
villages, towns and cities, but to facilitate the speedy movement of goods
and services within and across countries via the shortest road and train
routes possible, linking cities with industrial corridors, sea ports and
airports. It is assumed that the construction of roads would stimulate
the economy by spurring a spate of economic activity such as real estate,

development of transport, growth of industries, and promotion of trade
and business. This new model of connectivity is conceived not only
within countries, but also across countries. It is held that sub-regional
connectivity linking different countries would help landlocked peripheral
regions to overcome their handicaps by connecting themselves to the
economies of neighbouring countries. The experience of the European
Union has been cited to obtain economic integration with better connec-
tivity. In recent decades China has been aggressively pursuing this type of
strategy in the name of developing landlocked and economically backward
regions. It is also providing financial and technical support to its
neighbouring countries like Myanmar, Thailand and Mongolia to build
road and train connectivity with its own landlocked backward regions.
With the help of the Asian Development Bank (ADB) and other financial
institutions, China has been taking active interest in major connectivity
projects like the Asian Highways and the One Belt One Road (OBOR)
that seek to link it not only with other Asian countries but also to the
European nations (Holslag 2010; Kennedy and Parker 2005). Similar
projects are proposed and pursued by ASEAN (ASEAN 2011).
Taking a cue from the experiences of China and ASEAN, India has also
become interested in inter/sub-regional forums like ASEAN, BIMSTEC,
BCIM and MGC. The Indian government approved the proposals for
economic corridors and connectivity projects mooted by these forums. It
helped Myanmar in completing 160 km of the Tamu–Kalewa–Kalemyo
sector of the proposed Trilateral Highway that seeks to link India,
Myanmar and Thailand. Apart from building the road, it has taken the
responsibility of upgrading old bridges on the Trilateral Highway (Chand
2014b; Ministry of External Affairs 2014b). Likewise, by pursuing the
India–Mekong Economic Corridor project India has sought to obtain
access to Laos, Cambodia and Vietnam as well (ASEAN 2012; De and
Singh 2015). Similarly, in pursuit of the objectives of the BCIM Eco-
nomic Corridor, a highway linking Kolkata in India to Kunming in the
Yunnan province of China has been proposed. The highway passes
through Dhaka and Chittagong in Bangladesh, India’s Northeast states
of Manipur and Assam, and Mandalay and the northern provinces
in Myanmar. The corridor touches Silchar, Imphal and Moreh in NEI
218 H. Srikanth
(Rana and Oberoi 2012; Juergens 2014). The KMTTP linking Mizoram
to Paletwa in Myanmar by road and from there to Sittwe through Kaladan
River and from Sittwe to Kolkata via a sea route is also in the pipeline.
India has also taken the responsibility of building the National Highway
linking Mizoram with Paletwa (Shah 2014; Ministry of External Affairs
2014a; Mishra 2014),1 and has entered into bilateral agreements with
Bangladesh to revive old land and train routes linking NEI to Dhaka and
from there to Kolkata. Negotiations are in hand to seek access to sea ports
in Bangladesh that would link the Northeast to South East Asian coun-
tries and also to mainland India (Chatterji and Chaudhury 2015). It is
argued that these projects would enable NEI to have access to sea ports in
Myanmar and Bangladesh, and considerably reduce the distance and time
for the movement of people and goods. It is therefore natural that policy-
makers, businessmen and academics in the Northeast are looking forward
to these projects with considerable expectation.
9.3 Assumptions and Reality

All the above mentioned inter/sub-regional connectivity projects are yet to
take off. While some of them are still in the stage of conception and
planning, for others only the ground work has been completed. Construc-
tion and renovation of roads are not addressed in many areas. At the
moment, it is not clear when the projects will finally become operational,
and even when they are it is not clear whether they would expand trade
between countries and contribute to the economic development of land-
locked and peripheral regions like NEI. Success of the connectivity projects
is dependent on how far the assumptions on which the projects are based
are realistic. Interrogation of these assumptions is therefore necessary.
9.3.1 LEP and NEI Are Not Synonymous
It is true that some of the proposed connectivity projects pass through

Northeast states. But the Look (Act) East policy of GOI is much more
than the Trilateral Highway, the BCIM Corridor, the KMTTP or the
MIEC. Looking to the East via the Northeast is only one of the several
options that the Indian state exercises. The assumption that NEI is
indispensable for the Look (Act) East policy because the Northeast states
bordering the East and South East Asian countries have racial and cultural
similarities with these countries is faulty. China and the USA have few
cultural similarities and are thousands of miles away from each other; yet
there has been brisk trade and business activities between the two. It may
be noted that Gujarat, located far away from the Northeast, receives a
major chunk of Chinese investments in India (Pandit 2014).2 States like
Tamilnadu, Andhra Pradesh and Telangana have developed better links
with East and South East Asian countries. Recently China, Singapore and
Japan agreed to invest and provide technical support to build Amaravathi,
the capital city of the residuary state of Andhra Pradesh—geographical
proximity and cultural similarities do not mean much in the age of
globalization.
9.3.2 Better Road Connectivity Need Not Lead

to Improved Trade
High expectations about the construction of multi-modal transport sys-

tems linking the Northeast with the interiors of Myanmar, China and
Thailand also appear to be somewhat misplaced. Highways and railways
are no doubt required for trade and business; but they alone cannot ensure
economic development (Raghav 2014; Ram Singh 2011).3 As stated
earlier, even in ancient and medieval periods India had brisk trade with
Greece, Persia, China and South East Asia, even though the land routes
were in bad condition and the shipping industry was under-developed. If
there is a market, that is if there is a demand for goods and services, they
somehow find a way, despite all odds. Good connectivity no doubt
ensures speedy delivery of goods and services and to an extent reduces
transport costs; but it does not create demand for the goods and services. If
connectivity and advanced technologies are adequate conditions for eco-
nomic development, one should ask why the developed capitalist coun-
tries are also reeling from recession despite having better connectivity and
technologies at their disposal. When the economy is booming,
220 H. Srikanth
connectivity facilitates the growth of trade and business. But when there is
a recession, there is little that highways and multi-modal transport can do
to boost trade and commerce. Greater connectivity among Asian coun-
tries was mooted to counter recessionary trends in the West and find new
markets for the industries that sufferd due to falling demand at home
markets. But in the first quarter of 2016, even China’s economy has
slowed down, adversely affecting stock markets across the globe. How far
would inter/sub regional connectivity be of any help in overcoming the
economic downturn is a matter of speculation (Bhattacharyay 2009).
Further, one should not forget that better connectivity and improved
technologies can be misused. Better connectivity can promote not only
legal trade, but also prop up illegal trade in drugs, small arms and human
trafficking (Williams 2001; Andreas 2002; Viano 2009–10). Trade and
business, not connected to the lives and to the day-to-day needs of the
people, may prove to be counter-productive.
9.3.3 Connectivity Costs and Benefits
Another important issue of concern in the debate on connectivity and

sub-regional trade is the costs involved in the construction of the proposed
long and wide roads. China, which has taken the capitalist path, has
succeeded to a considerable extent in building roads that connect the
landlocked and backward regions within the country with neighbouring
countries. Being economically rich and politically powerful, China has
some ability to influence financial institutions like the ADB and to start its
own institutional network to finance and build roads across borders.
Despite the advantages it has, even in China native and foreign scholars
have expressed doubts about the viability of massive investments on
connectivity projects outside China (Banerjee et al. 2012; Huang 2008;
Kennedy and Parker 2005). Undertaking ambitious projects like OBOR
may prove to be a gamble, as it is not easy for China to predict, control
and influence the developments in different countries through which the
proposed routes will pass through. Can India succeed at that which even
China might find it difficult to do?
India has been undertaking massive highway road construction projects
like the Golden Quadrilateral, the North–South and East–West Corridor,
and the Mago–Thingbu–Vijaynagar Border Highway. Although there are

government projects for constructing roads for villages, the amount
allocated is small compared to the mega-connectivity projects that link
big cities, ports and industrial corridors.4 In NEI the conditions of the
roads connecting towns and villages are not good. Hundreds of villages in
remote and hilly areas of the Northeast are still not connected by
tarmacked roads. Barring Guwahati, other state capitals in the Northeast
are not connected to each other by rail or air. In poor countries the
construction and maintenance of roads that meet international standards
is indeed a big burden on the state exchequer. GOI has been able to pump
money into such projects both within and outside the country. But that is
something that poor and under-developed countries like Bangladesh and
Myanmar may not be able to do. For the BCIM corridor or the Trilateral
Highway to materialize, these countries will have to divert their meagre
resources from the construction and maintenance of a giant infrastructure.
Or else they will have to accept help from their richer neighbours or from
international banks, in return for which they will have to make conces-
sions in different forms. India assisted in constructing 160 km of the
“Friendship Highway” to Kalemyo in Myanmar. But many roads
connecting important cities like Monwya, Mandalay and Bagan are still
in bad condition (Symbiosis International University 2014: 33–35).
Many interior and peripheral areas in Myanmar are not connected by
roads. The country will have to decide whether it should give priority to
the construction of sub-regional highways or to spend money on roads
linking remote villages and towns within the country. Further, even when
the sub-regional connectivity projects are completed, one is not sure
whether they would be of much help to the common people. As of
now, all the sub-regional initiatives, like BCIM, BIMSTEC or MGC,
are basically conceived from the viewpoint of big industrialists, business-
men and contractors, and not from the needs of the poor peasants, tribals,
small entrepreneurs and semi-skilled labourers, who constitute the major-
ity of the peoples of these countries. Naturally one may be tempted to ask
how such ambitious projects would benefit the people in peripheral
regions like NEI, if Tata makes use of these corridors to transport their
cars all the way from Gujarat to Vietnam, or the Chinese export their
cheap goods from Yunnan to Guwahati, Kolkata and Delhi.
222 H. Srikanth
9.3.4 Ethnic Militancy and Securing the Roads
It is simplistic to assume that trade would automatically develop once the

proposed highways and railway tracks are constructed. Maintenance of
the routes requires not only money and technology, but also adequate
security. Almost all the corridors proposed as part of the sub-regional
initiatives will pass through ethnically volatile and militantly prone areas.
On the Indian side, the roads will pass through areas where the ULFA,
Naga, Kuki and Meitei militants are operating (Bhaumik 2014). In
Myanmar they touch Rakhine State which was witness to violent com-
munal clashes between ethnic Buddhists and Rohingya Muslims. On its
south-eastern side bordering Thailand, the proposed Trilateral Highway
and Asian Highway will pass through Karen and Kaya States where ethnic
militant organizations like the Karen National Union and the Karenni
National Progressive Party have a presence. The proposed BCIM Corri-
dor enters China through the Kachin and Shan states of Myanmar, where
the Kachin and Wa militant groups are active. Some of these ethnic
militant groups in Myanmar have ceasefire agreements with the Myanmar
government and have secured special region status (Than 2013; Routray
2013).5 In these areas different militant groups control the trade routes
and pursue both legal and illegal business. Much has been written about
how these groups control the border town of Moreh in Manipur (Nag
2010). The situation is not different in Myanmar, which has so many
ethnic militant organizations. It is true that some militant outfits in India
and Myanmar may not obstruct the movements of vehicles if they are able
to collect money from illegal check posts. But the problems arise not just
from the militant groups, but also from ethnic organizations of different
types inhabiting the villages and towns situated alongside the roads. In the
Northeast, for big and small issues, one or the other ethnic organization
has road blockades or stop the movement of people and vehicles to collect
“donations” or “taxes” for their own purposes. There is no guarantee that
such blockades will not take place on the roads proposed as part of the
BCIM and BIMSTEC Corridors. It is obvious that the much publicized
BCIM and ASEAN car rallies only take place because of the military
protection provided all along the routes. When a car rally cannot take
place without military protection, how can anyone ensure free move-
ment of trucks from Kunming to Kolkata, or from Moreh to Mae Sot?
Realizing the ground realities, even China is asking for security treaties
(Aneja 2015). At this juncture it is probably difficult to imagine the
financial and social costs and consequences of securitization of the pro-
posed road and railway routes.
9.3.5 Sino-Indian Rivalries and Connectivity Projects
On paper, every country party to the proposed sub-regional initiatives for

trade and development promises to abide by the stated objectives. But
when it comes to implementation, each country retains several options.
India is not an exception. As indicated earlier, one of the reasons that
compels India to look towards the East is the failure of Indian diplomacy
in SAARC, partly due to continuous opposition from Pakistan and partly
because of the big-brotherly attitude of India (Sridharan 2008; Kelegama
2007). Realizing the limitations of SAARC, India is compelled to befriend
China and ASEAN, and constitute new sub-regional forums like
BIMSTEC or BCIM that exclude Pakistan and include the countries
bordering its eastern and south-eastern boundaries. Indian policy-makers
and businessmen have found it beneficial to do business with China ever
since it dumped the socialist path of development and adopted market
friendly policies. India’s economic interests in China will not allow it to
antagonize China. But at the same time, India finds it difficult to over-
come its Sino-phobia and continues to view China as a rival and compet-
itor. Some of the policy-makers in India contend that China would lend
support to ethnic militant groups in the Northeast and access Indian
markets to dump its products there (Mishra 2015; Juergens 2014).
Consequently, India finds itself in a catch-22 situation. It does not reject
the BCIM proposal, but at the same time it will not own the project
whole-heartedly. The anti-China lobby in India discourages the govern-
ment’s pursuit of initiatives like the BCIM. Instead, it insists on pursuing
BIMSTEC, in which China is not a member. It is contended that in
BIMSTEC India apparently has an advantage over other countries, as all
other member countries barring Thailand are small powers and are
224 H. Srikanth
dependent on India (Yhome 2014; Chand 2014a). But here India seems
to forget that BIMSTEC cannot become a reality if all member states are
weak and dependent on it. India is not as resourceful and hegemonic as
China. BIMSTEC cannot become functional if all other member states
remain weak and passive. True, Thailand is economically a force to reckon
with; but it is so engulfed in its own internal political problems that it has
not been able to contribute much to the cause of BIMSTEC. Internal
turmoil and other priorities do not allow other small and weak member
countries to give as much attention as India expects. In such a situation it
is not going to be easy to materialize the 65 proposed BIMSTEC con-
nectivity projects costing over USD20 billion (Symbiosis International
University 2014: 6).
9.4 Conclusion
Peripheral and landlocked regions located within nation states are victims
of various kinds of social, economic and political handicaps. Since their
problems cannot be adequately addressed within the nation state frame-
work, it makes sense to explore the possibilities of sub-regional coopera-
tion with neighbouring countries. Seen from this angle, sub-regional
connectivity projects approved by GOI as part of its Look (Act) East
Policy seem logical and necessary for the development of India’s land-
locked NER. The sub-regional connectivity projects proposed by forums
like BIMSTEC, BCIM and MGC have aroused considerable public
expectations in the Northeast. However, whether or not these road
connectivity projects materialize depends on several internal and external
factors. Physical connectivity through better roads, railways and water-
ways will no doubt help in the speedy movement of goods and services
across the countries. But they are not adequate for the development of
trade and business between the nations. Heavy investment in physical
infrastructure such as transnational highways generate artificial stimula-
tion to the economy, but in the absence of effective physical connectivity
linking the villages, towns and cities within the peripheral regions, their
impact on local economies remains limited. Further, to date, the proposed
sub-regional corridors only touch parts of the Northeast. Heavy
investment in building economic corridors with international standards

may not be of much benefit to the region and its people, if other parts of
NEI are left unconnected and under-developed. As long as the peripheral
economies remain under-developed and the purchasing power of the local
people remains stagnant, the proposed transnational connectivity projects
will only act as corridors for the transport of goods and services of the big
business groups of the member countries.
Often seeking to camouflage the interests of big business and MNCs,
policy-makers tend to project the ambitious sub-regional physical con-
nectivity projects as a means to connect peoples across the borders. No
doubt roads and railways will facilitate the movement of people as well.
But better physical connectivity helps in connecting people only when
such projects go hand in hand with efforts to promote people-to-people
unity. Although policy-makers pay lip service to the idea of people-to-
people unity, very often economic and political considerations overrule
social concerns. Persisting xenophobia, conflicting economic interests,
unresolved ethnic conflicts, poverty, rampant corruption, vested interests
and recessions in the economy continue to pose obstacles to the successful
execution of connectivity projects. Apart from these factors, the success of
the proposed sub-regional connectivity projects depends also on whether
India overcomes its Sino-phobia and gives up its big-brotherly attitude
towards its weaker neighbours, be it Nepal, Bangladesh or Myanmar.
Unless the relations between the member countries are based on mutual
trust, respect and equality, no amount of investment in physical connec-
tivity projects will bring the nations and peoples together. LEP has been
discussed for the last 20 years. If the ground realities remain unchanged,
we will still be talking about it in another 20 years or so.
Notes
1. Anupam Shah, Keynote address by Secretary (East) in the ASEAN Ambas-
sadors Interactive Roundtable Forum in New Delhi, September 18, 2014,
http://www.mea.gov.in/Speeches-Statements.htm?dtl/24015/Keynote
+address+by+Secretary+East+in+the+ASEAN+Ambassadors+Interactive
+Roundtable+Fourm+in+New+Delhi+September+18+2014, accessed on
226 H. Srikanth
November 8, 2015; Inaugural Address by External Affairs Minister at the

3rd Roundtable of ASEAN India Network of Think Tanks, August
25, 2014, http://www.mea.gov.in/Speeches-Statements.htm?dtl/23948/
Inaugural+Address+by+External+Affairs+Minister+at+the+3rd+Roundtable
+of+ASEAN+India+Network+of+Think+Tanks, accessed on November
22, 2015; Rahul Mishra, “From Look East to Act East: Transitions in
India’s Eastward Engagement,” Indian Council of World Affairs, http://
www.theasanforum.org/from-look-east-to-act-east-transitions-in-indias-
eastward-engagement/, accessed on November 23, 2015.
2. See, “Chinese Cos Plan to Invest $1 bn in Gujarat This Year”, The Hindu:
Business Line, www.thehindubusinessline.com/economy/chinese-cos-plan-
to-invest-1-bn-in-gujrat-this-year/article609710.ece, accessed on February
3, 2016; also other news reports, “Gujarat Bags Bulk of Investment from
Modi’s China Trip”, www.india-briefing.com/news/gujarat-bags-bulk-invest
ment-modis-china-trip-10830.html/, accessed on February 3, 2016.; “China
to Invest Rs.19,000 crore for Smart City in Gujarat,” May 17, 2015, www.
dnaindia.com/money/report-china-to-invest-rs-19000-crore-for-smat-city-
in-gujarat-2086536, accessed on February 3, 2016; “Gujarat, an Investment
Hotspot for China, Japan,” www.rediff.com/business/report/gujarat-an-
investment-hotspot-for-china-japan/20141113.htm, accessed on February
3, 2016.
3. Some studies on road connectivity and development in the context of India
also show that the two are not always related. For example, Raghav’s study
on road transport connectivity in Rajasthan shows that in 11 out of
26 districts, there was no correlation between connectivity and develop-
ment. Similarly, N. Ram Singh’s study on rural road connectivity in NEI
shows that, although road connectivity in the Northeast is well below the
national average, the growth rates both in India and the Northeast was
8 per cent in 2001–02. Despite the subsequent road connectivity in the
Northeast, growth rates could not be maintained beyond 2005–06.
See, Raghav, “Road Transport Connectivity Patterns and Economic
Development in Rajasthan,” http://www.geographynotes.com/articles/
road-transport-connectivity-pattern-and-economic-development-in-rajas
than/229, accessed on January 26, 2016; N. Ram Singh, “Impact of Road
Development on the Rural Economy of NE India,” http://epao.net/
epPageExtractor.asp?src¼features.Impact_of_road_development_on_rural_
economy_of_NE_India.html, accessed on January 26, 2016.
4. Central government budget outlay for the year 2015–16 for the (NHAI)
National Highways Authority of India, which takes up the construction
and maintenance of highways, is Rs.22,920 crore. The Special Accelerated
Road Development Programme, which includes the KMTTP, was given
Rs.4000 crore. In contrast the total outlay for rural roads (roads and
bridges) stood at Rs.14,291 crore, out of which Rs.1155 crore have been
earmarked for NER and Sikkim.
5. See also, “Burma Insurgency,” http://www.globalsecurity.org/military/
world/war/burma.htm; “List of insurgent groups in Myanmar”, Smith
(1999) and Than (2013).
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Eastern Hill University, Shillong.
10
Look (Act) East Policy: With or Through
the Northeast
Walter Fernandes
10.1 Introduction
Where does the Look East Policy (LEP) stand in Northeast India (NEI)?
Some analysts feel that it has failed in NEI. If it is true that it has failed one
has to understand its reasons as well as the remedial measures. This
chapter is an effort to find an answer to this problem. After studying the
causes I will suggest a few possible alternative formulations of LEP, based
on a study of communities separated by the Indo-Myanmar border and its
implications for them. To understand the issue, one has to begin by
asking not whether the LEP has succeeded or failed in NEI but whether
it ever belonged to the region.
Dr. Walter Fernandes, formerly Director of Research and Executive Director, Indian Social
Institute, New Delhi and Editor of Social Action (1977–1999) and later Founder-Director of North
Eastern Social Research Centre, Guwahati (NESRC) (2000–2012) and Director of Research at
Animation and Research Centre, Yangon, Myanmar (2013–2015) is at present Senior Fellow at
NESRC. He has done extensive research on tribal, land, and gender issues and has many
publications on these issues to his credit.
W. Fernandes (*)
North Eastern Social Research Centre, Guwahati, India

234 W. Fernandes
10.2 Ignoring the East

One opinion on the issue of links with the countries of South East Asia is
that relations with Myanmar should have been through the Northeast
from the time of independence. That would have put NEI at the centre of
India’s links with ASEAN. Since this never happened the infrastructure
and political climate required for it was not developed even after the
formulation of LEP in the 1990s. In fact, the first effort to integrate LEP
with NEI was made only in 2007 when the then foreign minister Pranab
Mukerjee visited Shillong to discuss, with civil society groups and others,
the role of NEI in LEP (Ghoshal 2014: 25). Many of the more than
100 civil society representatives present at the dialogue felt that LEP was
New Delhi-centred and suggested that it be shifted to the Northeast
(Fernandes 2007). If it is true that LEP has failed in the region, that
analysis probably gives some indications of its reasons. A Delhi-centred
LEP involves treating the region as a corridor from Delhi to ASEAN with
limited commitment from NEI. For the region to become the centre,
much more attention has to be paid than in the past to its links with
ASEAN, beginning with Myanmar. A good infrastructure would be one
of its components.
Some analysts feel that even today the conditions required for a healthy
link between NEI and ASEAN are missing. A few others are of the view
that, instead of improving the infrastructure and communications
between the Northeast and ASEAN, India has gone back on some
initiatives (Bhatia 2014). For example, the bi-weekly Air India Gaya–
Kolkata–Yangon flight and the weekly Delhi–Gaya–Yangon flight are the
only Indian links with Myanmar; further, the flight from Guwahati to
Bangkok has been discontinued instead of extending it to Yangon. One
hears of the need to increase trade with ASEAN beginning with Myanmar.
In reality the trade through Moreh, the main land route, has declined
substantially during the last decade, and that from the rest of India has not
improved much (Ghoshal 2014). The customs office at Moreh is in a
bad shape. However, India is building the Asian Highway I from Moreh
to the Thai border and the Kaladan river port as a link with Mizoram and
the rest of the Northeast. Both the projects that can provide a road link are
behind schedule. India also has some other schemes, such as the one in
information technology, the Rice Bio-Park in Yezin the upgrading of the
Yangon children’s hospital and Sittwe general hospital, two industrial
training institutes, three power transmission lines and a telecom project
(Kuppuswamy 2014). However, one does not know whether these are
linked to LEP or whether LEP has much to do with NEI.
10.3 LEP and the Pattern of Development

It is also possible that both in Delhi and in NEI there is lack of clarity on
the nature of LEP. Despite or perhaps because of such uncertainty, the
discussion has continued in different forms; for example at a meeting of
ASEAN and Indian ambassadors to the ASEAN countries at Guwahati, or
a meeting of officials and civil society groups at Shillong in 2008. These
meetings left one with the impression that there was very little thinking on
the role of NEI and that LEP was centred on New Delhi. There was,
however, some thinking on the issue in the background paper of a
consultation on NEI organized by the National Advisory Council
(NAC) in New Delhi in October 2012. This focused on roads, high
quality medical and technical colleges in the cities and on the infrastruc-
ture of railways, industries and commercial hubs. It linked such develop-
ment to LEP and stated that the infrastructure thus created could result in
the development of the region and turn it into a link with the ASEAN
countries. Thus it assigned a role to NEI.
There was, however, difference of opinion on the nature of such
support. Many of the 20 persons from NEI invited for the consultation
agreed that much investment should be made in industries, roads and
related infrastructure at the macro-level, but felt that it was inadequate for
the region to develop, let alone own LEP.1 While recognizing the impor-
tance of such high level institutions and infrastructure they also saw the
danger of their benefits reaching only the elite, particularly in major cities,
and of excluding villages and small towns. In fact they could even end up
being in the region without belonging to the region, that is not available to
236 W. Fernandes
its people. For example, when questioned at a meeting in Guwahati in

December 2012, the Director of IIM, Shillong said that because of its
all-India character and its method of recruitment, during that academic
year the institution had only two students from NEI, both of them from
Assam. The main contention of the participants of the NAC consultation
was not that city-based prestigious institutions are not required but that
they cannot be taken in isolation. They wanted greater focus on field level
facilities and on making existing ones accessible to the villages and small
towns. The overall development plan of the region should begin with the
people in the rural areas. The prestigious institutions have to be its acme.
If their benefits do not reach the remote villages, they can turn the region
into a corporate sector controlled corridor linking Delhi with ASEAN
without the people being involved in the exchange (Fernandes 2013).
An example of this possible result is the link between the absence of a
rural infrastructure and land alienation. Studies show that much land
alienation in the region today is within the tribe. In the absence of good
university colleges in their neighbourhood parents have no choice but to
send their wards to colleges in Guwahati and Shillong or outside the
region. They pay for their children’s higher education by selling some of
their land to richer members of their tribe. The situation is worse in the
case of medical emergencies. People have no choice but to sell their best
land at a throwaway price in order to rush to the city where good facilities
are located (Kekhrieseno 2009: 207–209). The participants felt that
inclusive development alone can ensure that its benefits reach the rural
population. Some of them said that the basis of development in the region
should be Article 21 of the Constitution on the right to life which the
Supreme Court has interpreted as every citizen’s right to a life with
dignity (Vaswani 1992: 158). They wanted the decision-makers to accord
equal importance to this right and to the infrastructure at the macro-level.
In other words, development has to protect people’s right to a life with
dignity, for example by creating alternatives to land alienation. The
background paper of NAC spoke of public–private partnership (PPP) in
industries and high status educational and medical institutions. The
participants felt that PPP should become a reality in the villages and
small towns and that the services could be delivered through partnership
between the state and civil society groups who run village level schools,
medical and other facilities, often through self-help groups (SHG)

(Fernandes 2013).
10.4 Implications for LEP

Such an approach could be crucial both for the development of NEI and
for the link of its people with ASEAN, particularly Myanmar. A recent
study by the present author and his colleagues (Fernandes et al. 2015)
showed that the situation of educational and medical institutions in Chin
State, bordering Mizoram and the Sagaing Region of Myanmar and
Manipur, Nagaland and Arunachal Pradesh, is not different from that
in the rural areas of NEI. Many institutions in these administrative units
of Myanmar exist on paper but do not function properly. Access to those
that function is difficult because of the hilly terrain and lack of transport
between villages. Because of poor communication links between their
regions and the rest of Myanmar, the Konyak, Thangkhul and
Thangshang of the Naga Autonomous Area of Sagaing Region depend
on the Indian side for trade, education and health care. Some families
from the Thadou–Kuki tribes pursue these needs through legally recog-
nized channels. Their children have a hostel at Tamu on the Myanmar
side and go every day to a school in Moreh in Manipur. The immigration
rules allow them to enter India every day and return to Tamu the same
evening. But most Nagas studying in Arunachal Pradesh, Nagaland and
Manipur are not legally registered. The rules governing the entry permit
allow them to enter India on a few days in a month for trade, purchases
and to visit relatives, and to live in the country for three days. Since this is
inadequate for students, most of them enter and live in India “illegally.”
The families do not consider it illegal because they think of their tribe as
one, so they do not pay much attention to the international boundary that
divides them. Even if they were to pay attention to legalities, they would
not be able to live by the rules when they come to the Indian side of the
border for health emergencies. They cannot wait till the day set aside for
entry permits so they have no choice but to travel through “illegal” routes.
Moreover, exactly as families in NEI do, their counterparts in the Sagaing
238 W. Fernandes
region also sell some of their land in order to invest in the future of their
children or for medical emergencies.
Even that possibility is almost non-existent in Chin State. Its land is
infertile with very few springs. During the last decade even that land has
lost its fertility further because of deforestation and environmental degra-
dation. Families that can afford it send their children illegally to schools in
India. Some others are involved in trade with Mizoram and the local
Mizos allege that they have taken control of trade in their part of the state.
Even that possibility is available only to a few of them. The solution for
most Chins is migration to India and South East Asia. Mizoram has an
estimated 100,000 Chin migrants doing the lowest paid unskilled work in
exploitive conditions; Delhi has around 10,000 of them (Xavier and
Moraes 2013: 2). They continue to migrate because of lack of income
and other opportunities in their state. This causes much tension between
them and the local people.
Official circles that question the legality of these actions ignore the fact
of ongoing people-to-people contacts; but they can be considered another
type of LEP. Policy-makers do not recognize this situation because they
limit themselves to a corporate sector oriented infrastructure which could
turn NEI into a corridor to reach ASEAN but which may not involve the
people. It does not create the conditions required for a majority of the
population of NEI to own LEP. While speaking about non-recognition of
the people-to-people LEP one does not deny the need for such an
infrastructure. In fact one goes beyond it to state that more components
such as air and road connectivity between NEI and ASEAN, particularly
with Myanmar, should be added to the infrastructure. But the people of
NEI will not own LEP if it is limited to the macro-level. The role of
people, particularly the rural population, has to be recognized at the policy
level. Its first step is for the infrastructure as well as trade to reach rural
areas. Mutual dependence particularly in trade is strong between the tribes
separated by the Indo-Myanmar border. But official decisions are based
only on the needs of formal trade. For example the 22 items recognized for
exchange at the border by the 1997 Indo-Myanmar trade agreement do
not include the needs in which these tribes trade on a daily basis. The rules
governing entry permits do not recognize the dependence of Myanmar
counterparts on India for education and medical care especially in
emergencies (Fernandes 2014a: 15–16). Formal trade through this region

cannot grow much because,
in contrast with the rich base provided by Myanmar’s rapidly developing

Chinese neighbouring province of Yunnan, the States on both sides of the
Myanmar–India border are among the poorest in each country. So
Myanmar–India border trade cannot be expected to be a foundation for
large growth in bilateral trade and investment. Moreover, the trade routes to
the more dynamic domestic markets in both countries are longer and much
less developed along the India–Myanmar border, making other markets
more attractive. (Ghoshal 2014: 24)
Its result is that in 2011–12 border trade was only USD13 million which
was a little over 1 per cent of the Indo-Myanmar trade of 1.28 billion most
of it in favour of Myanmar. (ibid.: 23)
10.5 LEP with an NEI Orientation

This situation is bound to continue as long as one limits trade and other
relations with ASEAN to the formal sector and ignores the people-to-
people LEP.
10.5.1 Infrastructure and People
India cannot improve its trade through NEI because the major problem
lies with the poverty of the border areas where not many goods are
produced for formal exchange. Moreover, India’s bureaucratic approach
gives China an edge over itself. For example, “India lost to China an initial
order of substantial Nano cars of the Tata group because of lengthy
‘bureaucratic’ process. China was able to supply their Cherry cars without
delay in official processes and now these cars run all over Yangon as taxis
and privately owned vehicles” (ibid.).
For LEP to get an NEI orientation one has to deal with these issues and
turn links with ASEAN, particularly Myanmar, into an integrated system
in which the trade and development of NEI and of western Myanmar go
240 W. Fernandes
hand in hand. In other words, LEP has to be situated within the overall
relations between India and ASEAN. It involves questioning some of the
existing policies. For example, India’s relations with Myanmar are based
on three considerations. The first is the geographical reality that it is the
only country with a land link with NEI, and as such is the gateway to the
remaining ASEAN countries (ibid.: 20). The second is national security.
Some militant organizations of NEI led by the National Socialist Council
of Nagaland (Khaplang Group) (NSCN-K) have their base in the Naga
autonomous area of the Sagaing Region of Myanmar, referred to by the
militants as Eastern Nagaland. India would like to dislodge them from
their base but cannot do it without assistance from the Government of
Myanmar (Bhattacharyya 2014: 286–287).
The third is the presence of China in Myanmar. Myanmar can boast of
every possible mineral, from gold, jade and coal to petroleum and gas.
Because of it some call it the last frontier; and every country in the world,
particularly of the West, would like to get a share of its resources. However,
China dominates its economy. Myanmar wants some diversification in its
political and economic relations in order to ensure that it does not become
a colony of China. India would like to get a share of the mineral resources
to meet its energy needs but its priority seems to be countering China and
building a land link through NEI (Ghoshal 2014: 21), the need for which
can be attended to through the Kaladan scheme and AHI. However, the
priority accorded to countering China may alienate Myanmar where many
people feel that their country is being turned into a battlefield between
India and China. They would rather have India turn their country into a
meeting point with China (Thant 2012).
10.5.2 Changing the Approach
This approach has to change if India wants to create a level playing field in
its relations with Myanmar and, by implication, with the rest of ASEAN.
This change becomes equally important if it wants NEI to own LEP. To
begin with,
India need not imitate or compete with the Chinese for influence, but
should independently work its own strategies that will serve New Delhi’s
political, economic, energy and strategic interests in Myanmar. India can
learn from China’s success particularly in development and energy interests,
but also must avoid the mistakes committed by the Chinese in antagonizing
the local interests in its blatant pursuits of economic gains. New Delhi must
take note of the concerns expressed by the local people on the Kaladan
multi-modal project. (Ghoshal 2014: 22)
People around the Kaladan project have raised issues such as possible
environmental degradation and lack of transparency in dealing with their
communities on land acquisition and other areas (Marm Oo 2013). What
is said of Kaladan is equally true of other schemes.
10.5.3 Subsistence Agriculture
The soil in the Naga areas is fertile and their land has many springs.
Because of this combination, a section of the Tangkhul in Myanmar and
most of their counterparts in Manipur as well as the Angami and some
other tribes of Nagaland practise terrace cultivation or combine it with
jhum (the slash and burn method of cultivation) and even some wet rice
cultivation. This means that they have both individual and common land
(Shimray 2009). But most of the Konyak and all the Chin villages depend
on jhum. Land in this case is managed as a common property resource of
the clan over which the individual family has usufruct rights. The Tangsa
of Arunachal as well their Myanmar counterparts the Thangshang have a
compromise system in which the community recognizes individually
owned land because they combine wet cultivation with jhum. The
Konyak have modified their system in order to combine community
with individually owned land (Nongkynrih 2009). But land in Chin
State is infertile and poorly irrigated. Their holdings are small. Of the
158 Chin families interviewed 18 (11.39 per cent) are landless, 22 (18.93
per cent) cultivate less than an acre each and 104 (65.82 per cent) have
one to three acres. Deforestation and infertile soil add to the problem.
Thus over 90 per cent of them are unable to live on the produce of their
land or grow a second crop because of lack of irrigation. Only around
242 W. Fernandes
10 per cent of them grow potatoes, ground nuts and vegetables as a second
crop (Goan and Lin 2014: 12–13).
Thus, small plots, infertile land, lack of irrigation facilities and poor
transport infrastructure between villages force the Chins to search for
alternatives, migration in search of unskilled work being the main one for
most of them. A third of the 158 families interviewed have some members
supplementing their income through daily wage work in the village or its
neighbourhood, and 20 per cent have someone working “far away” mostly
in Mizoram. Land in Mizoram too is infertile with very few springs. But
education helps many of them to get salaried jobs within NEI or outside
it. In fact, 22 of the 100 families studied in Mizoram and Manipur have
their main income from something other than agriculture. They are from
the border areas with fewer facilities than in the capital, but education has
helped them to go beyond subsistence agriculture. The Chins go in search
of unskilled jobs in Mizoram, Malaysia and elsewhere since they do not
have the possibility of the type of education required for a salaried job as
an alternative (Fernandes et al. 2015: 48–49).
Another solution of a big number of Chin families is to cut trees for sale
as firewood or timber. Around 40 of them (25.32 per cent) have the forest
as their main source of income but a much bigger number of the
158 Chin families interviewed cut trees in the lean season as a secondary
source of income. However, relatively few Nagas in the villages studied do
it for an income, though the Sagaing and Thanithayi regions and Kachin
State are the main areas of timber smuggling in Myanmar (Fernandes
2014b: 17). This means that the sale of timber is not uncommon in much
of the Sagaing Region, though this is not the case in the study areas
because the Nagas have possibilities of income other than from cultivation
and forests. The Chin respondents cut trees mostly as workers under
timber smugglers. The result is deforestation, which as studies show
causes shortages and starts the vicious circle of the tribal people changing-
their tradition of sustainable resource management and beginning to
destroy forests and other natural resources for sheer survival. This
depletesresources further, poverty grows and competition begins for
what is left of the resource. Environmental degradation and lower land
fertility follow from this. Greater poverty and more destructive depen-
dence on resources are the consequences (Roy 2005: 10–11). One sees
this happening in the Chin Hills, and it will become a reality among the
Nagas too as resources are depleted.
10.5.4 Education and Health
Health and education are also casualties of a poor transport infrastructure

and of low investment in the social sector. Official data show that in
Myanmar as a whole only 10 per cent of the children who enter primary
school reach class 10. In the rural areas the problem begins at the primary
level. Most villages have a primary school. Smaller villages have a primary
school for two or three of them and a middle school for four or five. Poor
transport makes it difficult for children to attend the middle school
particularly during the monsoons, so the dropout rate rises. Moreover,
because of low salaries teachers supplement their income by insisting on
their pupils taking tuition. Poor children cannot afford its cost and more
of them drop out (http://en.wikipedia.org/wiki/Burma, accessed on
October 5, 2013). Most Chin and Naga villages have primary schools
but given their distance very few children, particularly girls, can afford to
go to the middle or secondary school. As stated above, families that can
afford to do so send their children to schools in India by getting them to
cross the border illegally. During fieldwork in late March 2014 the
researchers met some children who had come home from India for
holidays. A fairly large number of Nagas study in colleges in Manipur.
One was told that GOI is aware of their illegal stay but does not oppose it
openly.
Health care is also affected by poor transport and environmental
degradation. Traditionally forests provided the herbal medicines they
required. Around two-thirds of the respondents continue to depend on
them. With deforestation many herbs have disappeared but allopathic
care is not accessible to them because of the distance of the health centres
from the village, poor transport and their high cost. Most villagers have to
walk for four hours even to reach a first aid centre. But for exceptions,
centres with specialized care are two or three days away on foot or are
limited by poor transport. The result is poor health care. A few families
244 W. Fernandes
complained of new diseases but many more spoke of a higher incidence of

malaria caused by environmental degradation and dysentery that is water-
borne. Health facilities continue to be poor (Fernandes et al. 2015:
72–73).
10.6 Possible Follow-Up

What has been said above shows that a people-to-people LEP exists but
that it is not recognized by policy-makers. As a result, alternatives accept-
able to people separated by the border have not been worked out. An
attempt is made in the present section to give some suggestions based on
people’s aspirations. The mostly Naga respondents of Sagaing had very
few suggestions while the Chin villagers had many, mainly in the form of
alternatives to unemployment that forces them to migrate to Mizoram
and South East Asia, particularly since it causes tension and conflicts.
10.6.1 Suggestions for Alternatives
Common to all the respondents is the suggestion of better educational

facilities. However, the Naga and the Chin differed in the nature of the
suggestion. Many Naga respondents want better schools in their own
townships but others want access to schools in India, particularly in
Nagaland. Most Kuki and Thadou respondents wanted more hostels at
or near Tamu where their children can stay and attend a school at Moreh
or some other place in Manipur. The loudest voices were heard in the
Chin villages. Not a few village leaders said that English medium educa-
tion is the only way of changing the status of their children. The difference
with the Naga–Kuki–Thadou is that the Chin leaders want English
medium schools in their villages. They have seen how a few children
who study in India have developed themselves and would like all their
children to reach that stage.
The second request common to most respondents is around the
transport infrastructure, though its nature too differs. A few urban
middle-class leaders particularly in Tamu want India to build a North–
South road connecting the Sittwe–Mizoram road with villages in Chin

and Kachin States through the Sagaing Region. However, most villagers
in the Naga autonomous area want rural roads to be improved for better
communication with India while Chin villagers want new ones built since
no road exists connecting their villages. Leaders of the Tedim and Falam
tribes in particular repeated that they need to connect villages in order to
improve access to schools and health centres, and to take their produce to
market. They linked this suggestion to electricity, irrigation and health
facilities. Basic to these suggestions is employment generation to reduce
migration and the subsequent tension that was mentioned both by the
Mizos during the NEI part of the study and by the Chins during the
Myanmar study (Fernandes et al. 2015: 111–113). The Chin leaders kept
repeating that they have no choice but to migrate to Mizoram or to other
countries because of low income and high unemployment caused by the
low productivity of their land and the lack of other sources of income.
That has to be dealt with.
The Kuki–Thadou respondents too spoke of some tension, though this
was ethnic, linked to trade at the Moreh border, not to the division of the
tribe between Sagaing and Manipur. They go in and out of Manipur
regularly and depend on the Indian side for many of their supplies. Also
the Tangkhul, Konyak and Thangshang Naga depend on India for selling
their produce. They felt that relations with their counterparts in India
were good. The only problem they faced was occasional harassment and
bribe-taking by the security forces guarding the border.
10.6.2 How Can India Respond?
These suggestions on transport, education, health care, irrigation and

electricity could be the basis of an Indian response. Its first step may
have to be official recognition of existing people-to-people relations. Ways
can then be found of integrating them in official policies as intrinsic to
relations with Myanmar and the rest of ASEAN. Thirdly, no suggestion
can be taken in isolation. The link with Myanmar has to be part of a
development strategy that includes Chin State, the Sagaing Region as well
as NEI, that is of an overall development strategy of NEI and of the
246 W. Fernandes
neighbouring areas of Myanmar. This could result in peace, reducing

tension and building friendship.
To come to the suggestions. The one on a North–South road linking
the Sittwe–Mizoram road to the Thangshang area may not be viable
economically and the Myanmar Government may not favour it. More
realistic is the suggestion on roads linking villages, a need that most Chin
villagers felt. Similarly the Myanmar Government may not favour the
suggestion on Indian supported English medium schools in the state.
GOI has already committed USD25 million over five years for improving
schools in Chin State and Sagaing Region. That scheme is being
implemented, but the addition of English medium education is not
feasible. More feasible is the suggestion about having hostels on the border
for their children to stay and go across to schools on the Indian side. This
initiative should probably be left to religious or civil society groups. The
combination of better transport between villages and better schools could
perhaps be extended also to Chin State.
10.6.3 Limiting the Field
Though the need is great both in Chin State and the Sagaing Region, it is
probably more feasible to focus on the former where the need is greater
than in the latter. The Chins with very few resources other than infertile
land need better employment and income generation opportunities.
Despite small holdings, infertile soil and scarce water, a solution could
be found by improving their agriculture and commercializing its produce
without intermediaries. Viable alternatives have to be found to jhum by
which they cannot sustain themselves anymore. Ways have to be found of
preserving water for irrigation. At present the Chins depend on shifting
cultivation that is not viable because their land has lost its fertility.
Alternatives have to be found to it, but the terrace cultivation practised
by some Naga tribes depends on springs that are scarce in Chin State.
Rain water harvesting can be an alternative but their houses are built on
stilts and new technology would have to be developed for that terrain.
These technical solutions are important but they cannot by themselves
solve the problem. To be viable they have to be combined with
community-based human resource development. To begin with the sale

of their produce, at present most crops that can be sold are produced on a
small scale by individual families. In the absence of a central market and
because of poor transport the producers depend on some merchants from
their locality or outside it who buy their produce at a very low price.
Individuals cannot deal with the marketing issue. The producers will have
to be formed into cooperatives, and they could learn much from the
Mendipathar Multipurpose Cooperative Society (MPMCS) on the
Assam–Meghalaya (Garo Hills) border. This began as a cooperative but
after two decades of existence its experience shows that if they begin as a
cooperative, its members look at only its economic benefits. Instead of
growing as a community or working in cooperation they tend to compete
with each other for its economic benefits as individuals. That is why after
more than a decade of existence and success as a cooperative, MPMCS
took its members through the experience of self-help groups (SHGs).
This could probably also be a beginning for Chin State. For better
income the people need to come together as a community and move
towards cooperatives. The first step has to be their coming together into
SHGs. That is where cooperation with NEI can be useful. The southern
states of Andhra Pradesh, Tamil Nadu and Karnataka have a large number
of SHGs. There are more of them in Maharashtra and elsewhere. But all
or most of them respond to a caste context while the communities of
Myanmar, particularly of the ethnic minorities, are casteless. One may,
therefore, need to go back to NEI that has hundreds of SHGs of casteless
tribal societies, which could be used for training. The best base for such
training is Mizoram because the Chin and the Mizo belong to the same
family. But their languages are different and very few Chins understand
Mizo or even each other’s language. However, there would be some Mizo
speaking Chins who could be sent for training to Mizoram.
Their religion could strengthen the link. Around 90 per cent of the
Mizo and Chin are Christians belonging to different denominations. In
Mizoram the most important church is the Presbyterian, but it also has a
Catholic and a Baptist minority. A majority of the Chins are Baptists and
there is a fairly strong Catholic Church among them. All the denomina-
tions have their development wings and it is possible for them to work
together for a common cause. There are also some civil society groups
248 W. Fernandes
both in Mizoram and Chin State. They maintain their autonomy and are
not an integral part of any denomination, though many work closely with
one or other church. It is possible to involve them too. All the denomi-
nations and civil society groups have some persons capable of taking
initiatives for the development of their people. A dialogue is required
with all of them to plan the future.
The technical inputs have to be situated in the context of community
building. Individual families cannot market the produce of their small
kitchen gardens, or of some pigs or poultry birds. It has to be a cooperative
effort. Though their communities are breaking up they do have some
community ethos. Cooperatives could be built on this. All the denomi-
nations together could choose a few leaders to visit Mizoram and some
other areas of NEI like Mendipathar to understand them and negotiate a
training programme. After this some of those persons could be sent to
NEI for training in SHGs and cooperative formation. Some could even be
sent to the Angami area of Nagaland to study terrace cultivation and some
Angami farmers could be brought to Chin State to train the farmers.
Terrace cultivation has to be adapted to the terrain of Chin State, which
would require persons with technical knowledge. Such people could also
work on a rain water harvesting system meant for Chin terrain and houses.
Transport between villages would then form part of the cooperative
formation and employment generation process. Agricultural revival
requires environmental regeneration. Tree plantation, perhaps fruit trees
and herbal medicines, and soil regeneration would have to be an integral
part of agricultural revival and rain water harvesting. Solar lighting could
be encouraged and community health worker training be done through
SHGs. The people will also need training in numeracy in order to deal
with merchants. Experience in other places shows that marketing and
measures and weights are the biggest sources of exploitation in marketing.
For example, the farmers of the Ayeyarwady delta know pyi2 while the
merchants measure their paddy in pounds. The people do not understand
this exchange and the rate of interest (Htet and Pau 2015: 101–102).
That requires training in counting, weighing and measuring.
All of this requires cooperation between civil society groups and the
Governments of India and Myanmar. Viable alternatives have to be
developed to its transport, agricultural, health, educational, irrigation,
energy and trade needs and the facilities have to reach rural areas. As stated
above, because of the distance between villages and their hilly terrain,
people are unable to have a common market for trading. Because of the
lack of springs they are unable to go beyond the first crop. As a possible
solution, improvement of these facilities in the rural areas of NEI and of
western Myanmar, particularly Chin State, can be done as an integrated
whole. Civil society groups in NEI that have formed SHGs and cooper-
atives could be involved in training the people of Chin State in these
processes and thus provide a cooperative base to the work. The Govern-
ments of India and of Myanmar, civil society groups and the churches in
these Christian majority areas need to work in cooperation, in order to
develop new technologies for rain water harvesting, environmental regen-
eration, locally rooted health care and a village based transport and
cooperative system. This effort would give a new orientation to LEP
and lead to its success in NEI.
The churches and civil society organizations of Chin State took the first
step towards such a dialogue when their representatives met at Kalay on
April 22, 2015. They followed this up with discussion among themselves
over six months, before holding a second meeting on December 3–4,
2015 at which 61 civil society organizations of the state were present.
They have worked out a six-month programme for getting to know each
other, developing skills for community building and have prepared a
calendar for future planning. They will then work out the different
types of projects for the implementation of funding and technical coop-
eration. GOI could support these processes and turn them into an integral
part of a people-based LEP.
10.7 Conclusion
This chapter has examined whether NEI owns LEP. The overall consen-
sus is that LEP as practised today does not belong to the region. Even the
limited effort made in the region to implement it belongs more to the
corporate sector than to the people. Viable relations cannot be established
between the people of NEI and of western Myanmar as long as this
approach continues. One has to deal with these handicaps, and it is
250 W. Fernandes
possible to do so because good people-to-people trade and cultural and

social relations exist between the communities separated by the Indo-
Myanmar border. However, the two governments treat these relations as
illegal or at the least illegitimate. That obstacle has to be overcome and the
relations turned into a people’s version of LEP on which official relations
can be built. That could make it possible for NEI to own LEP.
Notes
1. The region cannot develop if concentration is exclusively or primarily on
infrastructure development in the major urban areas or on four-lane
highways leading to the ASEAN countries. People cannot own such an
LEP because they are forced to pay its price through land alienation and
other losses without getting any of its benefits.
2. Pyi is a measure of volume in a Burmese unit which is equal to 2.557181
litres or 2.70214 quintals.
References
Bhatia, R. (2014, August 4). Keynote address. Report of the conference on the Look
East policy: India and Myanmar pitching for greater connectivity (pp. 5–6). New
Delhi: Burma Centre Delhi and Institute for Social Sciences.
Bhattacharyya, R. (2014). Rendezvous with rebels: Journey to meet India’s most
wanted men. New Delhi: Harper Collins Publishers India.
Fernandes, W. (2007, July 6). The Look East policy. The Assam Tribune.
Fernandes, W. (2013, February 6). Election and NE development. Seven Sisters’ Post.
Fernandes, W. (2014a). Relations between divided tribes: NE India and Western
Myanmar. Report of the conference on the Look East policy: India and Myanmar
pitching for greater connectivity (pp. 10–19). New Delhi: Burma Centre Delhi
and Institute for Social Sciences.
Fernandes, W. (2014b). Relations between divided tribes: NE India and Western
pitching for greater connectivity (p.17). New Delhi: Burma Centre Delhi and
Institute for Social Sciences.
Fernandes, W., Das, T., Goan, Z., Lin, T. N., & Kashyap, F. (2015).
Relations across borders: Communities separated by the Indo-Myanmar border.
Guwahati: North Eastern Social Research Centre and Yangon: Animation and
Research Centre-Myanmar.
Ghoshal, B. (2014, August 4). A critical evaluation of India’s engagement with
pitching for greater connectivity (pp. 20–27). New Delhi: Burma Centre Delhi
and Institute for Social Sciences.
Goan, Z., & Lin, T. (2014). Links across borders: Tribes and communities divided
between Northeast India and Western Myanmar. Yangon: Animation and
Research Centre, Myanmar. (Mimeo).
Htet, N. M., & Pau, K. K. (2015). From disaster to development: Myanmar
rehabilitation initiative in Post-Nargis Laputta. Yangon: Animation and
Research Centre, Myanmar.
Kekhrieseno, C. (2009). Changing land relations and Angami society. In
K. Kikhi, A. D’Souza, & V. Hibo (Eds.), Angami society at the beginning of
the 21st century (pp. 191–217). New Delhi: Akhansha Publishing House.
Kuppuswamy, C. S. (2014, August 4). India’s development cooperation projects
in Myanmar. Report of the conference on the Look East policy: India and
Myanmar pitching for greater connectivity (pp. 28–37). New Delhi: Burma
Centre Delhi and Institute for Social Sciences.
Marm Oo, A. (2013, January 24). Indian Look East policy and the Kaladan
project of Western Myanmar. Mizzima News.
Nongkynrih, A. K. (2009). Privatization of communal land of the tribes of North
East India: A sociological viewpoint. In W. Fernandes & S. Barbora (Eds.),
Land, people and politics: Contest over tribal land in Northeast India
(pp. 16–37). North Eastern Social Research Centre and IWGIA: Guwahati.
Roy, R. D. (2005). Traditional customary laws and indigenous peoples in Asia.
London: Minority Rights Group International.
Shimray, U. A. (2009). Land use system in Manipur Hills: A case study of the
Tangkhul Naga. In W. Fernandes & S. Barbora (Eds.), op cit, pp. 88–112.
Thant, M.-U. (2012). Where China meets India: Burma and the New Crossroads of
Asia. London and Singapore: Macmillan.
Vaswani, K. (1992). Rehabilitation laws and policies: A critical look. In E. G.
Thukral (Ed.), Big dams, displaced people: Rivers of sorrow, rivers of change
(pp. 155–169). New Delhi: Sage.
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New Delhi: Jesuit Refugee Service.
Dr. Walter Fernandes is the founder Director of North Eastern Social Research
Centre, Guwahati and is currently a senior fellow at the Centre.
11
Rebel Camps in Myanmar: Will They
Hamper the Act East Policy?
Rajeev Bhattacharyya
11.1 Introduction
Ties between India and Myanmar have shifted a great deal during the past
six decades. The active cooperation during the Nehruvian era gave way to a
brief interlude of frosty relations after New Delhi supported the
pro-democracy movement in Myanmar in the late 1980s. Although both
neighbours have moved considerably closer in the past few years, there are
issues that have sometimes raised concerns between the twin neighbours.
New Delhi has firmed up ambitious policies involving Myanmar, such as
the Act East Policy (AEP), that envisage gaining access to the fast growing
economies of South East Asia. A slew of infrastructure projects are being
implemented by the Indian Government in Myanmar and efforts are also
being made to boost border trade. However, separatist insurgent groups
continue to operate out of camps in the neighbouring country and which
are active along the porous border. On June 4, 2015, rebels launched a
R. Bhattacharyya (*)
Guwahati, India

254 R. Bhattacharyya
joint operation and killed as many 18 soldiers of the Indian army near the
border in Manipur. New Delhi’s repeated pleas for eliminating their bases
have failed to elicit a positive response from Naypyidaw. This chapter
assesses whether these rebel bases would act as a barrier to AEP, so
assiduously pursued by the Indian Government.
11.2 The Camps

The association of rebels from India’s Northeast with those from Myan-
mar began from a very early period in the early 1950s when the Naga
National Council (NNC) began to work towards enlisting the support of
the Nagas in Myanmar (Nibedon 1983). Later their assistance continued
when the NNC sent batches of their cadres for training to China. As many
as six groups were trained by experts in the Chinese army and there were
also plans to set up a permanent base in Myanmar which would be out of
reach of the Indian security forces (Lintner 2012). But the hastily con-
cluded Shillong Accord between a section of the NNC and the govern-
ment in 1975 created a rift in the NNC and plans in Myanmar were put
on the backburner. A group of hardliners were opposed to the agreement
and they soon formed the National Socialist Council of Nagaland
(NSCN) five years later in Myanmar’s Sagaing Division. The emergence
of the new group also meant the emergence of camps in the neighbouring
country where cadres from both sides of the border were trained to fight
for the Naga inhabited territories in India and Myanmar.
By the mid-1980s, rebel groups from Assam and Manipur were also
allowed by the Nagas to set up camps in these regions. There was a reason
behind this policy: more groups meant more cadres to fight the
Myanmarese army that would regularly conduct raids and bombings on
the camps and villages. Later, the Nagas also benefitted by the weapons
that were brought by the People’s Liberation Army (PLA) and the United
Liberation Front of Asom (ULFA) from Kachin in the late 1980s (Inter-
view with Khaplang 2011). The friendship that was established between
these outfits has since remained and was not affected by the split in the
11 Rebel Camps in Myanmar: Will They Hamper the Act East Policy? 255
NSCN into the Khaplang and Isak–Muivah factions in 1988. Of course

the other groups preferred to stay with Khaplang since the base in
Myanmar was crucial for sustaining the campaign for the independence
of the Northeast.
The situation improved after 2001 when an “informal understanding”
was arrived at between Myanmar’s Junta and the NSCN-K not to attack
each other (Khaplang 2011). The ambience of peace encouraged more
rebel groups from Manipur to set up camps, training facilities and station
more cadres in the region under the control of NSCN-K in Myanmar
which is adjacent to the eastern districts of Arunachal Pradesh and
Nagaland. In 2011, there were as many as seven groups from Manipur
and two from Assam in the region with their headquarters at Taga in
Huwkwang Valley (Bhattacharyya 2014). This apart, the Manipuri
groups were also able to arrive at an understanding with local officers of
Tatmadaw for setting up camps in southern Sagaing Division which are
however beyond the control of the Naga rebel group (Bhattacharyya
2007).
It is estimated that there are around 60 large and small camps belonging
to the separatist outfits in Myanmar. Indian diplomats have raised con-
cerns at regular intervals but Naypyidaw has disregarded the pleas and has
never acknowledged the presence of Indian rebels in its territory. There
are four locations in northern Sagaing Division where these camps are
located on a similar pattern. The camp of NSCN(K) is located at the
centre with the other groups having their establishments within a radius of
approximately 10 km. The rationale behind this arrangement is to assem-
ble as many cadres as possible for defence in the event of an offensive by
any adversary, either the Indian or Myanmar army or rival militant groups
like the National Socialist Council of Nagalim (NSCN-IM). Taga has the
biggest concentration of camps which are often frequented by the top
functionaries of the groups. Next in size is the Second Battalion which is
around 20 km from the Indo-Myanmar border in Nagaland’s Mon,
followed by the settlements known as the Council and First Battalion
opposite to Changlang in Arunachal Pradesh. The general headquarters of
NSCN-K, situated across the border in Mon, also has a large number of
cadres from different groups but they are located at one place and not
scattered in different camps unlike the other outfits.1
In southern Sagaing Division which is contiguous to Manipur, most of

the camps belong to the separatist outfits from the Imphal Valley. The
camps are scattered and adjacent to Chandel and Churachandpur dis-
tricts. There are also reports that a few groups from the valley have
established their presence in some areas in Chin State which is contiguous
to Mizoram. A camp of the United National Liberation Front (UNLF),
which happens to be the biggest underground outfit in the Northeast
currently, is located about 30 km from the border in Chandel where an
ambush on the Indian army was carried out on June 4, 2015.2 According
to a section of government officials, groups like the Kuki National Army
(KNA) and the Zomi Revolutionary Army (ZRA) that have signed
ceasefire agreements with the Indian government have also managed to
establish hideouts in Myanmar in villages inhabited by communities with
whom they share cultural similarities.
These camps and training facilities exist as a result of the “understand-
ing” between the separatist groups and Myanmarese army. All the orga-
nizations pay stipulated sums of money to the army commanders on a
yearly basis for maintaining the camps and cadres. However, rebel cadres
have claimed that “extra payments” have to be made and donations given
sometimes to the police and district administration officials as well.3
These clandestine agreements came to light in 2001 when UNLF chair-
man Rajkumar Meghen (aka Sana Yaima) was supposedly apprehended
with weapons near Tamu by Myanmarese army but was soon released
after the rebels paid a hefty sum of money (Haksar 2009). Like the
northern zone, most of these settlements are situated deep in the jungles,
although cadres in small numbers are also stationed at centres like Tamu
and Mandalay.
11.3 AEP and Myanmar

LEP which was implemented from the early 1990s, aimed at strengthen-
ing ties with the fast growing economies of ASEAN countries. Myanmar
occupies a pivotal place in the policy since it is India’s link to South East
Asia. Apart from its strategic and economic importance, Myanmar is also
important to India because it is a member of the Bay of Bengal Initiative
for Multi-Sectoral Technical and Economic Cooperative (BIMSTEC),

along with Bangladesh, Bhutan, Sri Lanka, Thailand and Nepal. The two
neighbours Myanmar and Bangladesh are also part of the
Bangladesh–China–India–Myanmar Forum for Regional Cooperation
(BCIM). Economic and diplomatic relations between India and Myan-
mar have scaled new heights since 1994 when a trade agreement was
signed between the two countries. In the last five years, as many as
12 MoUs have been signed that provided for a credit of USD 500 million
and various other schemes aimed at closer ties and better connectivity
between the two neighbours. During the visit of Indian Prime Minister
Narendra Modi to Myanmar, both sides have agreed to fight terror
together and enhance intelligence sharing on the border with
Bangladesh, northeastern states and China where insurgents are active.
The Stillwell Road that links Assam to the south-western province of
Yunnan in China through northern Myanmar has been projected as one
of the available road links that could be restored between India and
Myanmar. However, New Delhi has not evinced interest so far to develop
the historic route (Assam Tribune 2011). The argument that reopening
the route would give a boost to trade has not found acceptance in New
Delhi because it passes through some conflict zones like Kachin and the
northern Sagaing Division which is under the control of the NSCN
(K) where separatist rebel groups from the Northeast also have a presence.
A section of government officials are of the opinion that reopening the
route could be “damaging” since it would facilitate the influx of more
cheap Chinese goods as well as narcotics and weapons.
Naypyidaw is quite willing to join hands with India on AEP but has
desisted from initiating action against the rebel bases in Sagaing Division.
Befriending the Nagas and allowing their allies from the Northeast to
establish their camps on Myanmarese soil does not seem to have harmed
either Naypyidaw’s or Tatmadaw’s interests. The Myanmarese Govern-
ment does not exercise control over these areas which explains why its
army decided to discontinue the campaign against the Nagas and con-
cluded a ceasefire agreement with them in 2012 (Bhattacharyya 2014).
Myanmar’s support of AEP is driven by many factors including its desire
not to be over-dependent on China. Beginning from the late 1980s,
China emerged as the closest ally of Myanmar. Naypyidaw seems to be
concerned over China’s grip over its economy and its policy of covertly
supporting insurgent outfits like the United Wa State Army (UWSA).
Incidentally, the Wa autonomous region in Shan State is beyond the
control of Naypyidaw as is the Naga inhabited areas in northern Sagaing
Division. The UWSA has been supplied with sophisticated weapons like
armed personnel vehicles and anti-aircraft guns by China. Perhaps,
Beijing’s objective is to deliver a stern message to Naypyidaw not to
jeopardize its commercial and strategic interests in the country (Davis
2012).
Of the 15 on-going projects in Myanmar that have an Indian engage-
ment either in terms of investment or in assistance, nine are in areas that
have a presence of rebels belonging to local outfits or from India’s
landlocked Northeast (RIS 2014). New Delhi has offered Rs.150 crores
over a period of five years for the Border Areas Development Project to be
executed in Sagaing Division and Chin State. Naga rebel chief S. S.
Khaplang had said that he would not oppose investment by the Indian
government as long as it was devoid of “political goals”; but it remains to
be seen if the funds would also be spent in the areas controlled by the
NSCN-K.4 The India–Myanmar Friendship Road that runs from the
border at Moreh–Tamu to Kalemyo and Kalewa passes through pockets
that have a presence of militant cadres from Manipur. A small part of the
road also overlaps with the Trilateral Highway Project. Tamu and Man-
dalay are often frequented by functionaries belonging to the UNLF, the
PLA and the two factions of the People’s Republican Party of Kangleipak
(PREPAK). Some of these groups have also invested in business in this
region for ensuring regular sources of income5 and it is quite unlikely that
these outfits would engage in activities that could be a cause of embar-
rassment for Myanmar’s government. Their base in Myanmar is abso-
lutely necessary for the sustenance of the campaign of independence.
The 80 km Rih–Tiddim Road Project being implemented in
Myanmar’s Chin State is adjacent to Mizoram and Manipur. There are
also plans to connect this road to Mandalay and the Trilateral Highway
Project. According to reports, rebels from Manipur have been active at
certain locations in Chin State. Investment in business is not a feasible
proposition in Chin State since it is among the most impoverished regions
in Myanmar. There are places that have been earmarked by the militant
outfits in this region as a fallback option in case the camps in Sagaing
Division are shut down. Apart from the rebel outfits from Manipur, the
Chin National Front (CNF) has also been active in the region where the
road is being constructed.6 However, CNF’s movement has lost its vigour
and is now defunct; a breakaway faction of the organization has signed a
ceasefire with Myanmar’s government recently.
There are three projects in Rakhine State: reconstruction and reconcil-
iation assistance, the upgrading of Sittwe General Hospital and the
Kaladan Multimodal Transit Transport Project (KMTTP). Among the
three, the Kaladan project is considered the most vital as it will allow for
goods to be transported from the eastern Indian ports to Sittwe in
Myanmar and then to be carried to Mizoram and the other states of the
Northeast. The project is running behind schedule but government
officials are optimistic that the project would be completed and inaugu-
rated by the end of 2017. This multi-crore project has various compo-
nents that pass through some areas in Rakhine State where the Arakan
Army exercises influence.7 The Arakan Army was founded in 2009 and is
campaigning for self-determination like many other insurgent outfits in
Myanmar. Fighting with government troops had escalated from the end of
2015 with casualties on both the sides. Rakhine State has also witnessed a
series of communal riots between Buddhists and Muslim Rohingyas with
the result that thousands belonging to the latter community were rendered
homeless and forced to leave the country for fear of being killed. It is
difficult to make an assessment of the future course of events in this
politically volatile region. Violence resurfaced in the region again and
thousands of refugees crossed over the border to Bangladesh after militants
owing allegiance to the Arakan Rohingya Salvation Army (ARSA) launced
an offensive on 25 August 2017 against security forces and civilians.
11.4 Promotion of Border Trade

Besides the above-mentioned projects, efforts are also being made to boost
border trade between the two neighbours. Initially border trade was
agreed to be conducted on 22 items which was raised to 40 in 2008
and subsequently to 62 in 2012. Both countries have also agreed to set up
border haats (market place) for trade in local products and eight locations
have been identified. So far only one haat has been opened at Pangsau Pass
(Nampong) in the Chaglang District of Arunachal Pradesh as a pilot

project. Under the present system, local Myanmarese traders are allowed
to sell their products in Nampong once a week and the Indian traders are
permitted to visit Pangsu town in Myanmar twice a month where fairs or
markets are organized under the supervision of the district administration
and the paramilitary forces.
The volume of border trade along the India–Myanmar border at
Moreh showed tremendous growth in the initial years. The total trade
volume increased from Rs.15 crore in 1995–96 to Rs.46.49 crore in
1996–97 and Rs.62.39 crore in 1997–98. However, a sharp drop was
witnessed in 1998–99 and, since then, total trade has shown a declining
trend (Das 2014). The presence of militants is conspicuous in the region
around Moreh–Tamu, Pangsau Pass and some other places that have been
identified for border haats.8 However, the downward trend in trade
cannot be attributed to the presence of militants for two reasons. First, a
boost in border trade could also mean an income for the rebel groups from
taxes. The possibility that they themselves might engage in trade also
cannot be ruled out. Second, local support is crucial for the survival and
maintenance of the camps. So the rebels are unlikely to indulge in any
activity such as hindering cross-border trade that would antagonize the
local populace. More than the militants, factors such as Myanmar’s
demand that imports into the country should precede exports from
India, the limited choice of commodities for traders, the ban imposed
on the export and import of certain commodities by both governments,
the frequent bandhs9 and the blockades called for by various groups in
Manipur are the barriers to the expansion of trade. It must also be borne
in mind that the border region in both the countries is thinly populated
and underdeveloped where the demand for different items is low. There
are still many areas in Myanmar where the traits associated with modern
civilization like school, hospital, road, etc are yet to be found.
11.5 Conclusion
Aung San Suu Kyi’s party, the National League for Democracy (NLD),
won a landslide victory in the general elections held on November 8, 2015
in Myanmar. The chairperson has stated that the new administration will
make the peace process with insurgent outfits its top priority. Not
surprisingly, speculation is rife that the rebel camps and training facilities
of the rebel groups in Sagaing Division would soon draw to a close.
However, it is not Naypyidaw but the army that will have a dominant
say in shaping the policy towards Sagaing Division and its rebel camps. In
all likelihood, the camps will continue to exist for the time being since
Myanmar’s government does not have an effective presence in the region
under the control of the NSCN-K. Myanmarese army is engaged in
conflict with other insurgent outfits in Kachin, Shan State and Rakhine
State and it would not prefer to open another hostile front in a region that
lacks infrastructure like roads. The rebel groups, on their part, have
already formed an alliance called the United National Liberation Front
of Western South East Asia (UNLFWSEA) and efforts are being made to
bring more groups into the coalition and to form a government-in-exile.
The NSCN-K has not signed the ceasefire with Myanmar’s Government
but its relationship with the army continues to remain cordial. The
understanding that was worked out five years ago between the two sides
has not suffered any glitches so far. Therefore it is quite unlikely that the
rebel outfits would indulge in any activity in Myanmar that would throw a
spanner in the implementation of AEP) since Naypyidaw has offered
support to the initiative.
Notes
1. The author visited a few of these camps in Myanmar between 2008
and 2012.
2. Interview with surrendered militants of insurgent outfits in Manipur,
Imphal, 2010–12.
3. Interview with surrendered militants of insurgent outfits in Manipur,
Imphal, 2010–12.
4. Interview with NSCN(K) chairman S. S. Khaplang, Sagaing Division,
Myanmar, December 23–24, 2011.
5. Interview with surrendered militants of insurgent outfits in Manipur, held
at Imphal in 2010–12.
6. Interview with a retired additional secretary of the Research & Analysis

Wing, Guwahati, December 15, 2010.
7. Interview with a retired director general of police of Mizoram, July
20, 2012, New Delhi.
8. Interview with a commander of the PLA, Imphal, Manipur, September
24, 2007.
9. Bandhs refers to a kind of shut down notice for business and other
establishments, including by any group of people protesting against any
decision or policy of the government. It is a kind of forced no-work
demonstration observed by establishments in response to its call by a
group of people opposing a government decision, action and so on.
References
Ambassador V. S. (2014). Seshadri, transforming connectivity corridors between
India and Myanmar into development corridors, RIS Research and Information
System for developing countries, New Delhi.
Bhattacharyya, R. (2007, September 24). Why the claim that the Indian Army killed
83 militants during its operation in Myanmar doesn’t stand up to scrutiny, http://
www.caravanmagazine.in/vantage/why-claim-indian-army-killed-83-militants-dur
ing-its-operation-myanmar-inaccurate#sthash.SsEWajn8.dpuf. And interview
with a commander of People’s Liberation Army, Imphal.
Bhattacharyya, R. (2014). Rendezvous with Rebels: Journey to Meet India’s Most
Wanted Men. New Delhi: Harper Collins Publishers India.
Centre Decides Against Reopening Stillwell Road. (2011, March 23). The Assam
Tribune.
Das, P. (2014). Status of India’s border trade: Strategic and economic significance.
New Delhi: Institute for Defence Studies and Analysis.
Davis, A. (2012, December 20). State of Wa, Jane’s intelligence review.
Haksar, N. (2009). Rogue Agent (p. 201). New Delhi: Penguin.
Khaplang, S.S. (2011) Interview with Rajeev Bhattachayya at Sagaing Division,
Myanmar on December 23–24.
Lintner, B. (2012). Great game east: India, China and the struggle for Asia’s most
volatile frontier (pp. 336–339). New Delhi: HarperCollins Publishers.
Nibedon, N. (1983). Nagaland: The night of the guerrillas (p. 48). New Delhi:
Lancers Publishers.
Rajeev Bhattacharyya is a Chevening Fellow and senior journalist in Guwahati.

Previously he had been with The Times of India, Times Now, The Telegraph and
The Indian Express and was the founding executive editor of Seven Sisters Post.
Part IV
Opportunities and Ways Forward in
Building Strategic Partnerships
Unlocking the trade and business potential for Northeast region remains a
daunting task. With greater connectivity it is expected that there would be
higher flows of goods, traffic and people across borders. At the same time
opening up the region for commercial linkages with South East and South
Asia will also throw up challenges within the region to cope with the
international market. The onus lies within the states of the region to find
their niche areas so as to realize the potential gains from larger frameworks
of regional integration. An integrated market in the Northeast Region will
enable the states to develop their economies according to their compara-
tive advantage and thus enjoy the gains from scale economies and
specialization.
12
A Unified Northeast Economy:
The Road to Gainful Economic Integration
with South East Asia
Atul Sarma
12.1 Introduction
One does not have to labour hard to show why the Northeast Region
(NER) as a unified economy is the most appropriate approach for the
development of this area. The Northeast states are perceived as a region
because it is landlocked and surrounded on all sides by foreign countries
and connected with the mainland of India through a narrow neck of
29 km; it is hilly and remotely located from the rest of the country; and all
but one of its constituent units are small but richly endowed. Yet NER
suffers from persistent under-development.
However, the states within the region are very dissimilar in several
ways. Broadly speaking, the Northeast states are of two distinct categories:
the entirely hilly states of Arunachal Pradesh, Meghalaya, Mizoram and
Nagaland, and the partially hilly states of Assam, Tripura and Manipur
This is a revised version of the J. B. Ganguli Memorial Lecture delivered at Tripura Central
University on April 11, 2011.
A. Sarma (*)

268 A. Sarma
that have overwhelmingly larger chunks of their population living in the

valley/plain districts. Significantly, however, the latter three states account
for 48.70 per cent of the scheduled tribal population of the region.
They are also dissimilar in terms of population size, varying from 1.1
million in Mizoram to 31.2 million in Assam in 2011. Population density
ranges from 17 per sq. km (Arunachal Pradesh) to 397 per sq. km
(Assam), which is higher than the all-India average of 382. They are
also dissimilar in terms of the urbanization rate, literacy rate and other
demographic characteristics, physical features, stages of economic devel-
opment and so on, leaving aside the ethnic composition. Yet the North-
east states are an interdependent economic system, both for historical and
geo-political reasons.
12.2 The Region’s Strengths

The region has several strengths that should have spurred fast economic
development. Some of these are:
• The region as a whole has a fairly large market with more than 45.5
million people. Only ten Indian states have a population larger
than that.
• It has diverse resource endowments: water, forest, oil and gas, coal and
several other mineral products.
• The region is one of the major hotspots of bio-diversity in the world.
• The literacy rate is high in the region and higher than the all-India
average in all states of the region. The number of the English speaking
population, particularly among the youth, is high in the region. That
has given an edge to Northeast youths in some service sector jobs in the
national job market.
• The region has large potential for tourism development.
• The region is characterized by high quality traditional skills as reflected
in its handloom and handicraft products.
• Long-established traditions of community-based economic and social
organization have facilitated a smooth transition to the contemporary
12 A Unified Northeast Economy: The Road to Gainful Economic. . . 269
institutions of the Panchayati Raj in all of Sikkim and Arunachal

Pradesh, and most of Assam and Tripura and the valley areas of
Manipur. Meghalaya and Mizoram and certain parts of Assam and
Tripura fall under the Sixth Schedule of the Constitution with Auton-
omous District Councils. The hill areas of Manipur have local bodies
under state legislation. Nagaland has well-established institutions of
village councils and village development boards, which are also man-
dated by state legislation for village level administration and develop-
ment. Such decentralized institutions should pave the way for inclusive
governance.
• The strength of the region lies in the progressive social attitude of its
population.
12.3 Paradox of Widening Income Gap Despite

Special Dispensation
Despite all the strengths of the region, it has lagged behind the rest of the
country and there has been deceleration in the growth of the economies. In
1999–2000, only Mizoram among the Northeast states had a real per capita
income (at 1999–2000 prices) marginally higher by 1.3 percent from the
all-India average. In 2007–08, states other than Sikkim recorded a gap in
per capita income compared to the national average in the range of 12.6
per cent for Tripura to 37.6 per cent for Assam. Only Sikkim witnessed a
slightly higher (0.8 per cent) growth rate than the national average.
What is surprising is that, ever since 1996, NER has received special
economic packages.1 In October 1996, H. D. Deve Gowda, the then
Prime Minister, announced an economic package of Rs.6100 crore for
specific projects in Northeast states. He also introduced Northeast
sub-plans in all Central Ministries for which 10 per cent of their budgets
would be earmarked. I. K. Gujaral, who followed him as Prime Minister,
assured the implementation of the package. In January 2000, Atal Behari
Bajpai, the next Prime Minister, further announced a package of Rs.10,
271.66 crore for the region. Such special dispensation for the develop-
ment of the Northeast continued thereafter. In fact, the Government of
270 A. Sarma
India (GOI) created in September 2001 a dedicated ministry called the

Ministry of Development of the North Eastern Region (DoNER) to serve
as a nodal ministry of the central government to deal with matters
pertaining to the socio-economic development of the region and which
also reportedly spent as much as Rs.80,500 crore on development during
the Tenth plan (2002–06) period.
But the question that intrigues is: Why this paradox? In other words,
why do the Northeast states continue to decelerate even while several
special economic packages were put in operation? I will address this issue
as well as provide an analytical framework to view the problems of the
persistent under-development of Northeast India (NEI). I will then
discuss the new development paradigm that is emerging following the
articulation of the Look East Policy (LEP) in the early 1990s. In that
context I will argue for unifying the NER economy as a precondition to
making the best of the new paradigm of economic development for the
Northeast, which is integrating the NER economy with East and South
East Asia.
I have argued elsewhere2 for five widely known “Is”:
1. Initial conditions such as (i) disruption of traditional trade and transport

links following partition, (ii) population influx, (iii) colonial pattern of
harnessing its natural resources leading to an enclave economy, and
(iv) monopolistic operation of deeply entrenched trading interests;
2. Infrastructure;
3. Insurgency;
4. Imperfection/distortion in factors and product markets;
5. Indifferent governance, which is still the case even after more than six
decades of planning as binding constraints on the economic develop-
ment of the region.
Moreover, the infrastructure, such as the railways developed in the

colonial period, which links the areas associated with tea, oil, coal and
plywood, does not do so for any of the traditional urban centres of the
region. Similarly, the Stillwell Road that links NEI with Myanmar, which
was constructed during the Second World War period to serve as a
defence supply line, does not provide any market linkage. These con-
straints have vitiated the growth process of NER by way of generating
outflows much larger than inflows in the commodity market, money
market as well as labour market. Larger outflows in the commodity
market arise due to a huge dependence on the rest of the country for
the region’s requirements. Outflows in the money market result from the
savings of the region being invested elsewhere for lack of investment
demand in the region, as reflected in its very low credit–deposit ratio
and outflows in the labour market that take place through outward
remittances made by the enormous number of migrant workers. When
the outflows are far in excess of the inflows in all the three markets, the
economy records slow growth. This has happened in the Northeast
economy.
12.4 Explanatory Hypotheses for Persistent

Under-Development
Keeping this analytical framework in view, I would now like to discuss the
explanatory hypotheses about the persistent under-development of the
region. The Northeast, which shares only 0.5 per cent of its territorial
boundary with the rest of the country, was loosely fitted into the macro-
development perspective of the national economy. This was because the
development initiatives for NER were largely anchored on two perspec-
tives. One was a security perspective rather than a well-articulated devel-
opment perspective, and the other was a perspective based on least
interference in traditional institutions and practices.3
A few examples will highlight the thrust on security considerations even
in the post-independence period. Way back in the mid-1950s with the
finding of large deposits of crude oil, GOI considered setting up an oil
refinery. The Expert Committee constituted for selection of the site did
not find the Northeast suitable for strategic reasons. In response to the
prolonged two years long agitation by the people of Assam, the first public
sector oil refinery was set up in Guwahati in 1962 but two years later
272 A. Sarma
another refinery at Barauni with a capacity 1.3 times that of Guwahati was
set up to process low sulphur crude oil (sweet crude) of Assam. Again, the
Armed Forces Special Powers Act (Assam and Manipur) was enacted in
1958 when, apart from Naga hostilities, there was no other insurgency
that warranted such a drastic measure.
Another important initiative that GOI took gives an insight into its
strategic obsession. In view of the interdependence of the economies of the
seven states of the Northeast, the establishment of the North East Council
(NEC) was a significant institutional innovation. But even this was designed
to cater more to security concerns than to promote the integrated develop-
ment of the region. This is clear from the fact that the NEC was placed for
long under the administrative control of the Ministry of Home, GOI, and
under the chairmanship of one of the governors of the Northeast states but
not under any development ministries or the Planning Commission. Only
recently has the NEC been reorganized as a regional planning body, though
its functioning has continued to be like a rudderless body so far.
Further, major development projects adopted in the region were more in
response to public agitation. There are numerous examples to show that
many critical projects such as the first bridge over the Brahmaputra, the
conversion of the railways to broad gauge, the setting up of the first and the
second oil refineries and that of the Indian Institute of Technology were
the products of ad hoc responses to public concerns. The point to note is that
for far too long, GOI’s development initiatives were more an outcome of
strategic/security considerations and ad hoc responses to the public demand
than anything following from a well-articulated development perspective.
The other perspective on which the development initiatives were
anchored especially in the hill states/regions was that of least intervention
in the traditional system and institutions. The requirement of an inner
line permit for entry into most parts of the hill regions and the ban on
land ownership by non-tribals in the hill states are evidence of the attempt
to preserve the traditional system and institutions. What perceptions and
forces shaped this perspective or whether there exists any justification is
outside the scope of this chapter. But the point to note is that these
institutions and systems are not compatible in a market driven economy.
12.5 New Paradigm of Development

Perspective
I propose two paradigms here. One relates to the over-emphasis on
security/strategic considerations than on a development perspective. The
other relates to the minimum intervention in the traditional systems and
institutions of the hill economy, which is what has led to their
non-compatibility with the growing penetration of market forces in the
process of economic development efforts.
These paradigms continued to sway the thinking and actions of GOI.
Since the mid-1990s, the economic development of the Northeast began
to find a place in the mainstream collective psyche as reflected in the
growing national level debate, deliberations and discourse as well as the
announcement of special economic packages for Northeast economic
development. With the articulation of LEP in the early 1990s, a new
development perspective in terms of NER as a gateway to the dynamic
East and South East Asian economies had been given wide publicity. The
basic motivation behind this new vision was “to break the fetters of geo-
political isolation,” as NER Vision 2020 puts it. To this end, “new
inputs” in foreign, defence and international trade policy are called for.
For putting this development perspective into operation, the “immediate
priority is to build the required infrastructure right up to the border area,
establishing connectivity and communication links to the cross-border
points through which trade and economic exchanges with the countries
neighbouring the North-East Region are proposed to be promoted under
the ‘Look East Policy’.” The NER Vision Document 2020 emphasized that
this priority is to be accorded by all Central agencies and State Governments

because while the “Look East Policy” has yielded few returns to the Region
thus far, it is in North-East India that South-East Asia begins and as such, it
is for the North-East to play the arrow-head role in the further evolution of
this policy. This requires a redefining of the “Look East Policy” to resolve
outstanding issues of trade, transit and investment with countries
neighbouring the region. It also involves promoting Indian investment
infrastructure in partner countries, especially Myanmar, particularly in
respect of ports such as Sittwe and international highways to connect the
North-East Region to ASEAN.4
274 A. Sarma
The economic rationale that lies behind this new vision is that the
landlocked Northeast in the aftermath of partition will have wider access
to markets, and that too with some of the fastest growing East and South
East Asian economies. This market integration would boost trade with
those countries with the Northeast serving as the gateway. Trade would
thus serve as a driver of rapid economic development of the region. What
followed was an attempt to revamp the NEC, recognizing explicitly the
economic interdependence of the constituents of the Northeast. In
February 2005, the NEC was restructured more as a regional planning
mechanism than an administrative one with the overtone of strategic
consideration.
With the emergence of an economic perspective, a shift in policy thrust
on the part of GOI became visible. Attention has been directed towards
road connectivity between the Northeast states,5 connectivity and com-
munication between the region and the rest of the country, development
of other infrastructure support, harnessing the resources of the region,
development of potential areas such as tourism, and paving the way for
large trade with the East and South East Asian countries and a flow of
funds with specified objectives—all of which indicates initiatives within a
development perspective. Development activism of the civil society has
also been playing an important role.
Notwithstanding these positive developments, the region is far from
emerging as a major trade partner to South East Asia even though there
has been a significant rise in India’s trade with these countries. The fact is
that the issues of trade, transit and investment with the countries
neighbouring the region are yet to be fully addressed and the required
infrastructure to be operationalized in the region.
12.6 Rationale for Unifying the Northeast

Economy
Even if all the factors required for the economic integration of NER with
South East Asia were put in place, could the Northeast realize potential
gains from it? In this context I argue that NER would be better placed to
gain from its economic integration with South East Asia only if its
economy is unified from within. This is because:
• The Northeast as a region is landlocked and within it, for geo-political

and historical reasons, the states are economically interdependent. Yet
the economy of the region is fragmented by several barriers.
• An Inner Line Permit (ILP) required for entry into most hill states
hinders free movement and thus economic integration.
• The high cost of the movement of people and materials due to poor
transport and communications networks results in a fragmented
market.
• Assam is critically located in the NER and through it each of the states
in the region could be accessed.
The Northeast states other than Assam are individually small and thus
have a small market each. As mentioned earlier, the Northeast together
constitutes a reasonably large market of about 45 million people. An
integrated market of the region would provide the benefit of a larger
market, which in turn would enable the states to develop their economies
according to their comparative advantage and thus enjoy the gains from
scale economies and specialization.
The internal economic integration of NER would serve as the enabling
condition for augmenting the gains from trade and economic exchanges
with neighbouring countries that are proposed to be promoted under
LEP. This is because a unified market provides large market access and
thus facilitates the gains of scale economies. That in turn would enable
each of the states to specialize in economic activities according to their
respective comparative advantage. For example, agriculture in the region
is suitable for specialization in complementary products. The valley areas
could specialize in modern technology based crop production, while the
agro-climatic conditions of the hill areas would serve investment in
horticulture, floriculture, forestry and conservation, bio-diversity and
genetic wealth and wild life. Surplus food grain production in the river
plains could be available for sale in the hills, while the marketable surplus
of horticulture, floriculture, medicinal and aromatic plants and herbs
including organic farm products could get a market outlet in the plains
276 A. Sarma
and even outside the region. Such market integration would make it
possible for farmers to abandon the current subsistence-oriented cropping
pattern through shifting cultivation. This would yield higher income to
the farmers while arresting the adverse impact on forest conservation and
the environment.
A similar pattern of geographical specialization could emerge in areas
such as plantations of tea, bamboo, rubber and spices. The important
point to emphasize is that if different parts of the region specialize in
complementary activities according to their comparative advantage, the
output level would expand, leading to higher overall growth in income
and employment.
12.7 How Does Market Integration Work?

Market integration leads to both trade creation (i.e. the emergence of new
trade and industry) and trade destruction (i.e. the exit of inefficient ones
due to competition from more efficient competitors in the integrating
countries). This process stimulates specialization depending on the respec-
tive region’s comparative advantage and eventually higher growth and
welfare through scale economies resulting from a larger market linkage.
This is the theoretical reasoning that has spurred regional integration in
different parts of the world. Notable examples are the European Union
(EU) and the Association of East Asian Nations (ASEAN).
The inspired advocacy for the integration of NER with the dynamic
South East Asian countries could be anchored on this theoretical postu-
lation. It is empirically true that “opening up to international trade has
helped many countries grow far more quickly than they would otherwise
have done. International trade helps economic development when a
country’s exports drive its economic growth. Export led growth was the
centrepiece of the industrial policy that enriched much of Asia and left
millions of people there far better off.”6
It is within this perspective that the NER with foreign countries on its
bordering region7 could expect robust trade ties with these neighbours.
However, this depends on political relations and policy environment. The
erstwhile East Pakistan and now Bangladesh are crucially important for
the Northeast’s inland and surface transport links. But the country’s
political relation fluctuates from one of overt or covert hostility to a
friendly one, depending on the political regime in the country. More
important, Bangladesh poses a demographic threat to the region even if it
is not a security threat to India. Nevertheless, during the current regime in
Bangladesh there have been positive developments that would facilitate
larger trade and investment between the two countries.
12.8 What Facilitates a Unified Market?

A unified market for the region would require:
• Free movement of goods, labour and capital by removing all impedi-

ments, physical or policy;
• Efficient physical connectivity between and within the constituent
units that would reduce the costs of the movement of people and
materials;
• Policy harmonization (e.g. tax, transport, trade, investment);
• Removal of irritants such as boundary disputes and the prevailing cloud
of suspicion among the sister states;
• Promoting joint action on matters with positive or negative
externalities;
• A more imaginative and proactive role of the reconstituted NEC
focusing on internal integration of the region.
12.9 What Should Be the Agenda?

In order to have a unified market, the task at hand would be to focus on:
• Resolution of state boundary disputes;

• Management of water resources and the environment for the collective
good;
• Promotion of R&D on problems unique to the region; Marketing
collectively packages suiting various types of tourists’ preferences;
278 A. Sarma
• Strengthening transport and communications and other related infra-

structure between the states of the region;
• Sharing development experiences utilizing IT and IT-enabled services;
• Promoting activities that are complementary in nature;
• Developing activities with comparative advantages thus promoting
specialization and competitive edge.
12.10 Conclusion
In conclusion, I would like to submit that it is important to work out the
details of all various steps that would pave the way for creating a unified
market in the region. The proposals that I have suggested above are only
indicative. Detailed exercises are essential because market integration involves
gains for some and losses for other units in the process of specialization in the
short run. Unless all the units acquire some gains from market integration,
there would not be much enthusiasm on the part of all stakeholders. In this
context, I may cite the example of the EU, which was envisioned in the
Treaty of Rome in 1950 but made little progress until the 1990s. It took off
only after a major study8 showed the gains and losses to each unit in concrete
terms and the overall gain to all. Equally important is to have a vision shared
by the states of the region. The document, “NER Vision 2020,” which has
been brought out in the emerging development perspective, perhaps reflects
the shared dream of the Northeast states. Concrete steps for internal market
integration of the region as a follow-up would be a step forward towards
integrating the northeast economies with the East and South East Asian
countries and thus towards a resurgent northeast India.
Notes
1. A high level Commission entitled “Transforming the North East” was
constituted under the Chairmanship of Shri S. P. Shukla following the
Prime Minister’s announcement of “New Initiatives for the North Eastern
Region” on October 27, 1996. The report was submitted in March 1997.
Prior to that, the Planning Commission constituted a Working Group on
the Development of the North Eastern Region during the Seventh Five
Year Plan, 1985–90 under the Chairmanship of P. H. Trivedi, Secretary,

NEC. Also, the Planning Commission at the instance of the Union Home
Ministry constituted a Committee under the Chairmanship of L. C. Jain,
then Member, Planning Commission, to look into the question of the
economic development of Assam under Clause Seven of the Assam Accord.
The report was submitted in April 1990.
2. “Why the Northeastern States Continue to Decelerate(2005),” Man and
Society: A Journal of North East States, Volume 1, Number 1, Spring.
3. For similar observations in another context, see Amar Yumnam, “Regional
Cooperation and Development: Strategy for Development in a Conflict
Zone,” presented at the conference on “Towards A New Asia Transna-
tionalism & Northeast India,” organized by the CENISEAS Forum, OKD
Institute of Social Change and Development, Guwahati on September
10 and 11, 2004, p. 3.
4. NER Vision 2020, May 13, 2008.
5. GOI has recently sanctioned: a multilane Northeast Express Highway
linking all the capitals of the Northeast states (spanning 6907 km to
provide connectivity within and between different units of the region)
and infrastructure development (4464 km of national highways, 2050 km
of newly declared highways and 393 km of NEC roads).
6. Joseph Stiglitz (2002), Globalization and its Discontents, Allen Lane, p. 4.
7. Assam, Tripura and Meghalaya share borders with Bangladesh, while
Mizoram, Manipur and Nagaland share them with Myanmar. Assam has
a border with Bhutan, too. The Tibet region of China and Myanmar
border Arunachal Pradesh.
8. Paolo Cecchini (1988), European Challenge 1992; Gower, London.
Prof. Atul Sarma is Chairman of the Omeo Kumar Das Institute of Social
Change and Development, Guwahati, and also Visiting Professor at the Institute
for Human Development, New Delhi. He was Head and Professor of Economics
at the Indian Statistical Institute, New Delhi, and also Vice Chancellor of Rajiv
Gandhi University. In addition, he was ICSSR National Fellow. Professor Sarma
was Member of the Thirteenth Finance Commission (2007–2009).
13
Look (Act) East Policy and Northeast India:
Challenges and Opportunities in Building
Strategic Partnerships—The Way Forward
Sudhir Devare
13.1 Introduction
Over the past few years there has been intense debate as to whether the
Northeast Region (NER) of India which borders Myanmar in South East
Asia has been fully integrated within India’s Look (Act) policy initiated
since the mid-1990s. For India, the East starts where the Northeast of
India ends. The Northeast which has often been described as a “bridge-
head” or “gateway” to South East Asia shares commonalities in ethnic,
socio-cultural or historical aspects with its eastern neighbours and there-
fore locating it comprehensively within India’s Look (Act) East policy
should constitute a basic foreign policy approach. At the same time there
are many challenges which need to be addressed in the domestic context,
namely economic growth and greater employment opportunities for the
people of the Northeast; better connectivity and accessibility to and
within the Northeast and improvement of infrastructural, educational or
S. Devare (*)
Symbiosis School of International Studies, Pune, India

282 S. Devare
medical facilities, which besides benefiting the local people, would also
help in promoting people-to-people exchanges with neighbouring
countries.
It also needs to be understood that the Look (Act) East policy actually
starts in South Asia itself and does not bypass South Asia. Accordingly,
India’s closer and deeper relationship with its South Asian neighbours
such as Nepal, Bhutan and Bangladesh also assumes importance within
the ambit of its Look (Act) East Policy. Significantly, NER adjoins these
states as well and therefore the nature of contacts between these countries
and the region also acquires relevance. China remains a major factor,
directly or indirectly, given its proximity to NER and other South East
Asian countries. This Chinese proximity cannot be ignored in India’s
Look (Act) East policy.
13.2 Evolution of the Look East Policy

This policy which was enunciated in the early 1990s was India’s response
to the changing geostrategic situation in the Asia–Pacific following the
end of the Cold War and the onset of globalization. It was an innovative
foreign policy approach which was action oriented. The Indian Govern-
ment realized that the South Asian countries had been besieged with
disagreement that did not permit any meaningful cooperation within
them. On the other hand, an outreach to the countries of the Asia–Pacific,
which were seen to be rapidly advancing economically, offered a promise
which was considered worth exploring. India was also keen to revive its
traditional links with South East and East Asia. It may be recalled that
soon after its independence India had taken the lead in strongly
supporting the freedom struggles of several Asian countries. The 1947
Asian Relations Conference convened by India marked the first major
effort towards building unity and solidarity among the countries of Asia.
The response of ASEAN to India’s Look East approach was positive
and supportive. This helped in India joining the ASEAN-led institutional
framework of multilateral engagement for peace, security and economic
cooperation. India’s Dialogue Partnership and Summit Partnership with
13 Look (Act) East Policy and Northeast India: Challenges and. . . 283
ASEAN, its membership of the ASEAN Regional Forum (ARF), the

ASEAN Defence Ministers’ Meeting (ADMMþ) and the East Asia
Summit (EAS) testify to this. India’s engagement with the East is now
in the third phase. Starting with ASEAN, this engagement was expanded
to include Northeast Asian giants like Japan, China and Korea. Moving
beyond the economic dimension it has also entered the strategic sphere. In
the past two years Prime Minister Modi’s visits to the ASEAN capitals
and to China, Japan and Korea have helped to create strategic partnerships
with the countries of the region. India’s capabilities in the military field,
especially in naval power, have been growing steadily, which has enabled
the country to contribute in an increasing measure to the maritime
security of the wider Indo-Pacific space. Its security doctrine considers
the entire area from the Gulf of Aden to the Malacca Straits and beyond
into the South China Sea as a zone of direct security interest and therefore
the policy formulation has to take into account this basic aspect. On the
contentious issue of the claims and counter-claims between China on the
one hand and five other states on the islands in South China Sea on the
other hand, India has taken (and expressed publicly) the position that the
issue needs to be handled under the aegis of international law, namely the
United Nations Convention on the Law of the Seas (UNCLOS), and that
freedom of navigation through international waters and the airspace above
should be respected by all concerned.
13.3 US and Chinese Plans in the Indo-Pacific

India’s strategic engagement is no doubt influenced by the geopolitics in
the region; however, the policy of intensified interaction with the coun-
tries of the East is not purely reactive. This is India’s own way of
projecting its security and economic interests in this vital space. Against
the backdrop of the US proposal of “Pivot to Asia” and the Chinese
project of “One Belt One Road” (OBOR), in which the two major powers
in the region aim at strengthening their respective influence, India’s Look
(Act) East Policy, which is now over two decades old, seeks to establish
284 S. Devare
cooperative security, both strategic as well as socio-economic in its imme-

diate and extended neighbourhood. India does not support any military
alliances or groupings. With China, India believes that there is enough
space for both countries with regard to projecting their sphere of interest
and thus there is no cause for confrontation. There is a discernible security
convergence between India and Japan and member states of ASEAN.
Japan, under Prime Minister Abe, has been showing clear signs of taking
on a more active role of security provider to the states of South East Asia
and even beyond in the Indian Ocean. In this quest it sees India as a useful
partner and is seeking ways to cooperate more actively with it, especially in
the maritime field and also economically.
The strategic challenge that India faces today is that US power and
interest is gradually declining in the Asia–Pacific, the announcements of
“Pivot to Asia” notwithstanding. US military presence has not increased
nor have US investments in the region kept pace with expectations. The
Trans-Pacific Partnership initiative of the USA is seen as creating division
amongst ASEAN states. The US President Trump has now called off
TTP. On the other hand, the Chinese project of OBOR and the maritime
silk route is looked upon as a well prepared policy to expand Chinese
influence in a major way in South East Asia and the Indian Ocean region.
For India this presents a challenge, as Chinese presence close to its shores
could create an imbalance in security terms. India will therefore need to
prepare militarily, diplomatically and economically. While strengthening
its own defence preparedness, India would be well served to develop a
close understanding with the countries of South East and Northeast Asia.
It should be noted that they also have major security concerns as is evident
in their strong differences or even clashes with China on the question of
rights in the South China Sea or East Sea. In the Indian Ocean region, the
island states are wary of the danger of rivalry between the USA and China.
All these states are therefore engaged in building their defence capabilities,
both in equipment as well as skills. It is in this area that India has excellent
opportunities to assist and strengthen their efforts. The maritime field
offers especially promising scope. This would include shipbuilding, train-
ing, and port and related infrastructure construction.
13 Look (Act) East Policy and Northeast India: Challenges and. . . 285
13.4 The Northeast and Neighbouring

Countries: The Way Forward
The strategic picture in the Asia–Pacific can directly or indirectly impact
on the security situation in India’s Northeast as it shares borders with a
number of foreign countries. It is in this context that improved relations
between India and Bangladesh, Myanmar or China would augur well for
the peace and economic development of NEI. Recent positive steps
between India and Bangladesh such as the Land Boundary Agreement
or India’s support for the newly established democratic government in
Myanmar can create a better atmosphere for ongoing projects of connec-
tivity between India, Myanmar and Thailand or for investments from
Japan, Korea and South East Asia into the Northeast or people-to-people
exchanges across the borders with Bangladesh, Myanmar, Nepal or China.
The success of such initiatives as BIMSTEC, MGC or BCIM, which are
primarily aimed at providing benefits to Northeast India, will no doubt
depend upon how AEP is steered through in the coming months and
years.
India’s vision of ASEAN which has in 2015 become the ASEAN
Economic Community (AEC) can itself provide a valuable opportunity
as ASEAN is poised to emerge as a dynamic marketplace of more than
650 million people for trade, investment and technology exchanges. For
India to be competitive in this market it will be necessary that Indian
companies are increasingly part of the global value chains which a large
number of Northeast and South East Asian countries’ companies already
are. The transaction costs of Indian business operations are still far too
high compared to those in the Asian economies. We now have the
ASEAN–India Comprehensive Economic Agreement (AICEA) both in
goods and services. There are also bilateral comprehensive agreements
with Singapore, Malaysia, Japan and South Korea. Currently, India, along
with other member states of EAS), is negotiating the Regional Compre-
hensive Economic Partnership (RCEP). Despite the progress made India
still has a long way to go before being economically integrated with these
economies. The US sponsored Trans-Pacific Partnership (TPP) agree-
ment in which a number of countries of South East and Northeast Asia
286 S. Devare
are associated presents another major challenge. There are however a few
promising sectors in which NEI can have a competitive edge with the
neighbouring countries of South East Asia. These may include petro-
chemicals, pharmaceuticals, agro-processed items, tea, horticulture, as
well as services such as tourism, education, healthcare and IT. As connec-
tivity between NEI and South East Asia improves in road, civil aviation
and cyber networks, the prospects of closer economic integration with this
region will get better. States in NEI no doubt enjoy with South East and
East Asia cultural and ethnic similarities, but this affinity will gain salience
only when there is connectivity and economic complementarity and
possible integration. In the meantime it will be important to engage states
of NEI in India’s bilateral discussions relating to border problems, issues
of immigration, economic cooperation and so on with neighbouring states
like Bangladesh, Nepal, Bhutan or Myanmar. The practice, though
initiated, needs sustainability and continuation.
NEI had always been considered an important part of LEP. It may be
recalled that soon after India’s dialogue with ASEAN was announced
another initiative in the form of BISTEC (soon to be followed by
BIMSTEC, indicating the involvement of Myanmar in this sub-regional
cooperation) was taken up. The project of a road linking Moreh (on the
Manipur border with Myanmar) to Kalewa in the Sagaing Division of
Myanmar was also stated around that time. The Look (Act) East policy is
one of the anchors of India’s foreign policy. Inevitably there will be several
challenges which would need to be addressed and overcome. There will be
at the same time opportunities which would have to be seized. At present
the roadblocks appear to be related more with respect to implementation
than political will. Closer coordination between government, academia
and the corporate world could serve well in addressing the issues.
Sudhir Devare is former Ambassador to South Korea, Indonesia and Ukraine

and former Secretary Ministry of External Affairs, Government of India. He is
also Former Director General, Indian Council of World Affairs, New Delhi. He
was the Ram Sathe Chair Professor in International Studies at the Symbiosis
International University, Pune. He is currently Chairman, Research Advisory
Council of Research and Information System (RIS) of Developing countries,
New Delhi.
14
India’s Act East Policy Begins in Myanmar
Munmun Majumdar
14.1 Introduction
India’s policy of looking east1 is not new. The Asia–Pacific region has
always drawn the attention of India’s foreign policy-makers. However, the
contexts and thrusts of India’s approach to the region have changed.
Earlier in the pre-1991 period, the focus was mostly on bilateral relations
between India and the countries of the region as part of New Delhi’s
engagement with its South East Asian neighbours. Post-1991, together
with bilateral relations, multilateral interactions have also assumed critical
salience in India’s engagement with the region (Ghoshal 2013). Given
India’s economic reforms from the early 1990s and the attendant effort
to integrate with the regional and global economy, India’s Look East
Policy (LEP) had undoubtedly assumed a greater economic dimension,
M. Majumdar (*)
Department of Political Science, North-Eastern Hill University, Shillong,
India

288 M. Majumdar
particularly in its relations with the ASEAN2 countries. The policy was
also linked with India’s domestic considerations as it was a ground-
breaking attempt to link the landlocked states in the Northeast with the
economies of the ASEAN region. Over the years India’s LEP has acquired
substantive economic as well as strategic weight (Ghoshal 2000). The
separate but interlinked India–ASEAN Ministerial Meeting, the ASEAN
Regional Forum (ARF) Foreign Ministers’ Meeting and the East Asia
Summit Ministerial Meeting are pointers to the various components of
LEP. The government in 2015 upgraded LEP to the Act East Policy
(AEP)3 which continues to be driven by economic and security interests
and is extended beyond South East Asia, underlining the importance of
the geopolitics of the region. At the East Asia Summit on November
13, 2014 Prime Minister Narendra Modi stated: “Since entering office six
months ago my government has moved with a great sense of priority and
speed to turn our Look East policy into the Act East Policy.”4 This is
therefore not merely a change in nomenclature; instead it suggests India’s
desire to enhance LEP to AEP is a commitment to take part in the
evolving Asian security order underscoring the centrality of ASEAN.
In this the role of Myanmar is crucial5 because India cannot afford to
ignore the geopolitical reality of the former as the only land bridge to
South East Asia and beyond and its strategic importance for India’s
security, particularly in the context of the Northeast. Befriending Myan-
mar also enables India to reap the benefits of the consequential transfor-
mation of the landlocked Northeast to a land-linked one. Prime Minister
Modi also spelled out that Myanmar is an important component in
India’s AEP when he visited Myanmar.6 Engaging Myanmar therefore
is of great consequence since it is an uninterrupted adjoining space to the
ASEAN countries with which India has established engagement models.
The significance of Northeast India (NEI) has grown over the years
because of its land linkages with Myanmar. There have been migrations of
people from different parts of South East Asia to Assam and the adjoining
areas.7 India’s states of Arunachal Pradesh, Nagaland, Manipur and
Mizoram in the Northeast share a long land border with Myanmar’s
states of Kachin, Sagaing and Chin. There exist strong ethnic, kinship and
cultural ties between the people living on both sides of the border. That is
why in augmenting AEP NEI emerges, by the criterion of geography, as
the region which will act as the strategic catalyst or game changer in
accomplishing the vision that the policy aspires to embolden (Goswami
2015a). For that reason it is imperative for India’s ASEAN journey to
begin in Myanmar.
14.2 Myanmar Is Crucial for India’s AEP

“As in the past, so in the future, the people of India will stand shoulder to
shoulder with the people of Burma, and whether we have to share good
fortune or ill fortune, we shall share it together.” These were Indian Prime
Minister Jawaharlal Nehru’s words in 1948, on the day of Burma’s
independence from Britain. Since then relations between the two coun-
tries have been following a nonlinear course that has been shaped by a
complex interplay of domestic issues, regional factors as well as the
dynamics of the global order. Myanmar is India’s immediate neighbour
and its geographic location as a node between South and South East Asia,
together with its proximity to India and China, endows it with great
strategic significance for New Delhi. India and Myanmar also share the
strategic ocean space of the Bay of Bengal. As early as 1944 Sardar K. M.
Panikkar drew attention to the strategic significance of Myanmar to India
when he said “the defence of Burma in fact is the defence of India and it is
India’s primary concern no less than Burma’s to see that its borders
remain inviolate. In fact, no responsibility is considered too heavy for
India when it comes to the question of defending Burma.” This prophetic
statement holds good today.
A realistic assessment and understanding of the geopolitical and eco-
nomic context had prompted India, after years of opposition to
Myanmar’s Junta,8 to engage its eastern neighbour in a constructive
policy. And despite its support of the democracy movement led by
Aung San Suu Kyi, India constructed a policy to engage Myanmar for
more than just strategic reasons. From India’s perspective a resource rich
Myanmar is of vital importance for defence and security, and for the
development of NEI together with the expansion of India’s influence in
the Bay of Bengal area and South East Asia. The importance of Myanmar
as an economic gateway became even more enduring when it became a
290 M. Majumdar
member of ASEAN. Additionally seeking to balance China’s economic

and security interests in Myanmar were also a crucial aspect of LEP. As a
result Myanmar became important as the required impetus to realize
India’s new regional geopolitical vision that was defined in LEP.
According to Mani Shankar Aiyar, “in many ways, I would suggest
Burma matters much more than Pakistan; whereas the west part of India
can live with suspended economic activity with Pakistan, northeast India
can never break off from its trap of backwardness without active cooper-
ation of Burma or Myanmar.”. NEI was given a focal reference in India’s
foreign policy with the hope that opening commercial linkages with
ASEAN countries could resolve years of infrastructural neglect of the
Northeast that fuelled discontent. And that geography would be used as
an opportunity to translate into long-standing trade relations across both
land borders and the sea route in order to assist NEI to come out from its
state of remoteness, under-development and instability. The raison d’être
of engaging and opening the land frontier to Myanmar is that India’s
security-centric approach was to be replaced by a smart border principle.
However, a smart border is not an ideal concept as long as the region
remains unstable and basic political dilemmas are not resolved.
Notwithstanding the fact that security dilemmas on both sides of the
border constitute major concern, the success of the Look (Act) East Policy
projects requires a strong and vibrant relationship with Myanmar. For
long, much of the India–Myanmar border region has been a witness to
negative activities such as insurgency, smuggling, illegal trade in narcotics,
currency and arms. To counter these detrimental activities the two
governments have set up dialogue mechanisms, signed instruments and
made arrangements for intelligence exchange and security cooperation.
Accordingly, a series of regular high level visits, provision of training
facilities, joint military actions and so on have taken place, given the
fact that, in addition to the geo-strategic reasons why Myanmar offers to
combat insurgency in the Northeast, it was natural that defence cooper-
ation formed an important component of India’s engagement with
Myanmar.
NEI is cut off from the rest of India by Bangladesh to the west and by
Myanmar to the east. The 22 km Siliguri neck controls access to the seven
sisters of the Northeast and represents as much a developmental hurdle as
a psychological barrier to the integration of the region with the rest of

India. But Myanmar’s political opening together with physical connec-
tivity amends this geopolitical fact (Majumdar 2013). India understands
that, in order to have a continental thrust, Myanmar’s strategic location
has an important bearing since its efforts to expand its outreach to the
ASEAN region embedded in the construction of the Trans-Asian High-
way and the Trans-Asian Rail Network will remain unfulfilled without
taking Myanmar into the loop.
While it is recognized that meaningful cooperation with Myanmar is
possible only when India establishes connectivity between its states in
NEI and Myanmar, India’s highest decision-makers have already made
limited attempts to speed up and improve infrastructure projects that
when completed will benefit NEI and open it up towards the ASEAN
region and beyond. Presently there are no rail links and the only road
linking the two is insecure and poorly maintained. There are no direct
flights to any city in Myanmar from NEI, although a number of projects
have commenced to improve physical connectivity. Infrastructure bottle-
necks remain in the entire India-initiated rail, road, power and energy
related projects. The infrastructure at border posts like Moreh–Tamu are
in need of repair, and the bus service between Imphal and Mandalay,
which was supposed to have begun, is still on the drawing board. There-
fore, despite the shared vision for forging a close connection, there is a
yawning gap between words and deeds. And New Delhi’s tall talk on
promoting connectivity, trade and investment links with Myanmar does
not match its performance on the ground.
Over the past two decades successive governments have made persistent
efforts to reach out to Myanmar, focusing on five areas of its capacity
building: developmental areas, mutual trade, improving communication
infrastructure for land and sea links with India’s landlocked regions,
defence cooperation and coordination, and regional cooperation. Prime
Minister Modi’s immediate predecessor, Manmohan Singh, visited
Myanmar in 2012 (which was the first visit in 25 years since Rajiv
Gandhi’s visit in 1987). While providing an opportunity to review the
progress in implementation of decisions taken during President Thien
Sein’s visit to India in October 2011, the visit was also an occasion when
new initiatives and a definite road map were devised for further
292 M. Majumdar
cooperation. The two countries signed 12 MoUs, including a USD500

million line of credit, a development deal to establish the Indo-Myanmar
border haats, an increase in bilateral airline services, and assistance for
setting up centres for research, including in information technology and
agriculture. These measures were taken because the pattern of India’s
relations with Myanmar has a direct bearing on security and the develop-
ment of NEI; and yet India has failed to capitalize on these relations,
whether economic or strategic or in ensuring energy security. Unable to
execute major projects on time, India has lost much ground in Myanmar
despite the freedom it has had to deepen commercial ties during these
years.
While it is true that India has to act swiftly to implement and leverage
fully the existing framework and ensure that it delivers, what has also to be
taken heed of is that the mere construction of roads will not help connect
the two countries unless the issue of security is addressed. More impor-
tantly, connectivity is not merely about creating physical infrastructure; it
is also about connecting people by reviving shared links. In order to
facilitate easy movement of people and allow greater people-to-people
contact between the two countries at the level of students, scholars and
academic exchanges, the Inner Line Permit (ILP) enacted under the Inner
Line Regulation of 1873 and the Restricted Area Permit (RAP) required
for foreigners to gain entry to states such as Arunachal Pradesh must be
revoked. Such regulations go against the vision of opening up NEI
through AEP.
Again challenges that take the form of non-traditional security con-
cerns, namely the inflow of people from Myanmar who come to the state
of Mizoram as refugees and migrants on the one hand and the inflow of
narcotics and the spread of HIV/AIDS on the other, must be simulta-
neously addressed so that greater linkages with Myanmar appear as an
opportunity and not as an additional source of trouble. The border
between India and Myanmar is porous where the unchecked movement
of goods, people, trade and the large-scale movement of arms and drugs,
in both directions, take place. Strict patrolling is almost impossible owing
to the rough hostile terrain. India being located between the Golden
Crescent in the west and the Golden Triangle in the east faces the
challenge of an arms–drugs nexus. It is therefore equally important to
address the issue of the smuggling of drugs, goods and arms if India seeks
to open NEI to ASEAN countries. Failing which, India will not be able to
use its eastern frontiers to benefit from the opening up with Myanmar
(Majumdar 2013).
What is more India needs to cooperate with Myanmar to ensure the
security of the Bay of Bengal and work out mature plans of development,
especially regarding stalled projects, and harness the potential for strategic
military cooperation that will secure India’s Northeast Region (NER).
Unless these domestic drivers remain untapped it is likely that the policy
will continue to have only limited relevance. At the same time it needs to
be ensured that the pattern of investment and development will provide
appropriate representation to all sections of the people of the Northeast
(Majumdar 2013). Greater participation of local people in production
and distribution activities should be assured. Last but not least, it must be
shown that the states in NEI have adequate representation and are taken
into confidence or given room to participate in the implementation of the
policy.9
The transnational aspects highlight the impact of borders and their
meaning and appraise the consequence of such an engagement for the
landlocked NEI. Since the two border communities are bound by reli-
gious, cultural and ethnic ties which go back two millennia, a better
appreciation of the border areas and the people is critical to the under-
standing of the process of social and cultural change taking place with
connectivity, trade, security and so on. It is increasingly being recognized
that cross-border linkages are far more central to historical change than
previously acknowledged, and opening up of NEI to Myanmar would
indeed have considerable impact on livelihoods and on diverse ethnic,
religious and occupational communities. It is for these reasons that it is
important to understand how these communities will respond to different
transformations. The shared ties of the border communities along the
India–Myanmar border can be used as a link to South East Asia given the
fact that the ethnic bonds are the oldest connection between the two
countries. These communities want greater interaction with Myanmar so
that NEI can become an integral part of the development along the space
connecting the two (Seshadri 2014). Hence, India should begin to take
steps to draw advantage from the desire for such engagements.
294 M. Majumdar
If India is serious about having a successful AEP then the role played by
border communities will have to be taken into account. Likewise the
transnational movement of goods, capital, labour and cross-border
exchanges through informal means will need to be studied seriously.
This is particularly so when many ordinary citizens (rather than gangsters
alone) take advantage of the grey areas in unregulated transactions. The
process of this shadow economy, which is a characteristic feature of border
economies, will have to be evidenced. Similarly, cross-border transit
infrastructure deficits, which are a major drag on India–Myanmar trade,
will have to be addressed. In the recent past the two countries have been
engaged in contestation over border fencing, the fixing and repairs of
border pillars, and other aspects of border management. Consequently
border management remains a critical challenge for the future.
It is equally important to bear in mind that Myanmar can attain some
form of stability only when it is able to address successfully the ethnic
question (Steinberg 2011). This fundamental question needs to be
addressed not just for Myanmar to make diversity its strength rather
than its weakness, but is as important especially in the context of
India’s Northeast which houses more than 200 ethnically, linguistically
and culturally distinct groups. The region has been battling insurgency
movements with demands including independence, autonomy and tribal
rights (Datta 2001). These movements have had ethnic ties and tribal
linkages between their people on either side of the border which have
facilitated their movements and extended assistance for those seeking
refuge (Raman 2007). Myanmar faces similar problems of ethnic conflict,
with a consequence that requires India to be attentive so that it is able to
assess the end result of opening up NEI to Myanmar. Given that both
Myanmar and India are faced with the problem of ethnic insurgency it is
pertinent to develop a better appreciation of the complex internal dynam-
ics that it generates and the role of democracy in managing them. In a
way, therefore, Myanmar also holds the key to the ongoing insurgency
in NEI.
Even though there are hurdles, there is ample scope to convert India’s
Northeast history and culture into a soft power resource. A good begin-
ning would be to persuade the new government in Myanmar to allow
greater people-to-people contact between the two countries. There is a
sizable number of people of Indian origin in Myanmar. The potential role

that the Indian diaspora can play is yet to be explored. Simultaneously,
educational institutes of higher learning located in NEI must include
courses on South East Asia and its languages and engage specialists in
South East Asian Studies to disseminate knowledge about the region.
Prime Minister Narendra Modi’s announcement10 to the ASEAN Centre
in Shillong might be a meaningful step in this direction. Additionally
India would do well to focus on its assistance for monuments that reflect
the shared history of both countries. The development of a Buddhist
circuit extending from NEI to Myanmar could be useful in harnessing an
enduring relationship at the same time as enhancing tourism that in turn
could provide lucrative career options and promote a web of economic
and cultural interdependency. Tracing the important Buddhist sites
beginning with NEI right up to Myanmar holds immense potential to
draw visitors from not just Myanmar but also from the entire ASEAN
region. This in turn will encourage greater interaction, leading to an
increase in trade, commerce and tourism11 in the entire region. However,
it needs to be emphasized that expanding links with South East Asia can
be facilitated only when GOI ensures that adequate infrastructure is in
place. The optimistic picture depicted by AEP will only see the light of the
day when the bottlenecks in infrastructure, bureaucracy, insurgency,
connectivity, markets, security, financial transfer systems and trade outlets
are cleared and a visible road map for investment plans and so on are in
place. Until then there is good reason to be cautiously optimistic.
Since the political reform in Myanmar, India is seeking to infuse greater
enthusiasm in its engagement with Suvarnabhumi12 and land connectiv-
ity, economic exchanges and tourism with NEI are once again being
emphasized. Prime Minister Narendra Modi coined the term “Natural
Economic Zone” and called for NER to be developed through economic
corridors to South East Asia (Goswami 2015b) and also emphasized the
significance of regional connectivity for economic prosperity during the
12th ASEAN–India Summit. While this may be a promising offer at
the same time, it is crucial to undertake an in-depth examination on
whether India’s conceptualization of AEP has any room for the unique
local ways of doing trade (RBI 2000). Whether they are equipped to
296 M. Majumdar
handle trade in the context of LEP/AEP that was essentially crafted within
the framework of neo-liberalism? In the tribal societies kinship ties are
very strong. Are such ties inimical to the idea of liberating individual
entrepreneurial freedoms and skills? Are they then equipped to operate
within such parameters? Furthermore, if augmenting the development of
NEI was a key factor of LEP, have the productive capacities of the region
been sufficiently developed to provide a level playing ground in market
relations?
While India has been helping Myanmar to build institutional capacity
and develop areas such as information technology, assistance from other
countries—especially China—often overshadows this. There has been a
decline in the flow of Chinese money into Myanmar as per the data from
China’s Ministry of Commerce,13 which has opened the way for other
actors such as Japan and South Korea to speed up investments (Xiaoyang
2014). China’s investment projects have also come under strong criticism
ever since a civilian government took over in Myanmar in 2011.14 Public
opinion in Myanmar objected to the construction of the Myitsone dam
and the project was suspended by the government along with other
projects such as the Letpadaung Copper Mine in Sagaing Division15
that signalled a major departure from the past, reflecting the growing
anti-Chinese sentiment in the country. Again, the clashes in Kokang
along the China–Myanmar border have intensified the belief among a
large section in Myanmar that China seeks to exploit its natural resources.
All of these developments have not evoked a response from Myanmar that
indicates that it will be less reliant on China. In any case India’s current
commitments in Myanmar seem to have been replaced by China’s
economic prowess.
However, India has a major advantage in the context of strong institu-
tions. The success of Myanmar’s transition is essential for India’s security.
As a country with a large ethnic distribution, Myanmar has a great role to
play in demonstrating the virtues of tolerance and mutual respect in a
diverse multi-ethnic polity. If democracy fails in Myanmar it will lead to
the revival of authoritarian rule that will have a bearing for ASEAN as well
as India. India, therefore, has a great stake in the success of Myanmar’s
democratic efforts and can make up the diplomatic ground it has lost to
China, if it can help Myanmar in its democratization efforts through
training in capacity and institution building, keeping in view India’s long

experience in these areas. At the same time India needs to understand
Myanmar’s dual inclination to be friendly to neighbours and to assert its
independence (Bhatia 2015).
Myanmar for its part has not been over-enthusiastic about wholly
embracing India’s eastward expansion, and has done so only to the extent
that it suited its immediate interests and when it adequately counterbal-
ances pressure from China. From Naypyidaw’s perspective, deeper ties
with India could alleviate some of its own concerns about destabilizing
developments on its side of the border, while also demonstrating that the
country can balance its partnership with China along with other regional
actors (Egreteau and Jagan 2013). For Naypyidaw this amounts to having
greater leverage against Beijing by emphasizing that Myanmar has other
options. Clearly India’s national interest is best served when there is a
strong stable government in Myanmar. A democratic Myanmar will draw
India deeper into Asia, and India will be better placed to devise a concrete
policy towards Myanmar so that it can manage its AEP effectively.
14.3 Conclusion
It is obvious that engaging Myanmar within the context of the Look (Act)
East policy was based on certain calculations of geo-strategic and eco-
nomic interests which are concurrently conceived also as an extended
security trajectory to project India’s legitimate power and resist growing
Chinese domination in Myanmar. In this India needs to recognize the fact
that Myanmar shares a long border with China with which it has a long
historical association. It would not be a good judgement for the wise
elephant to attempt to replace or compete with the mythical dragon.
Instead it should explore and work on the areas where it enjoys a distinct
edge in Myanmar. However, without a cooperative Myanmar it would be
difficult to translate its LEP to AEP in the context of opening continental
connections through several points along the 1643 km16 international
border with Myanmar. There is no doubt that Myanmar is an important
factor if AEP is to live up to its potential of becoming the Northeast’s road
to peace and prosperity. The critical test for the success of India’s policy to
298 M. Majumdar
establish linkages between NEI and South East Asia lies to a great extent
on New Delhi’s ability to strengthen its ties with Myanmar. It would
therefore be in India’s interest to address and overcome the present
challenges and bring about a tangible outcome in boosting its ties with
ASEAN that begins with Myanmar. Only then can it truly act east.
Notes
1. On India’s relations with South East Asia and its Look East Policy, see
Sudhir Devare, India & Southeast Asia: Towards Security Convergence,
Institute of Southeast Asian Studies, Singapore, 2006; Prakash Nanda,
Rediscovering Asia: Evolution of India’s Look East Policy, Lancer Publisher,
New Delhi, 2003; Isabelle Saint-Mezard, Eastward Bound: India’s New
Positioning in Asia, Manohar-CHS, New Delhi, 2006; P.V. Narasimha
Rao, India and the Asia Pacific: Forging a New Relationship, Institute of
Southeast Asian Studies, Singapore, 1994.
2. ASEAN was established in Bangkok in August 1967. The original mem-
bers were Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Brunei joined in 1984, Vietnam in 1995, Laos and Myanmar in 1997
and Cambodia in 1999.
3. Prashanth Parameswaran, “Modi Unveils India’s ‘Act East Policy’ to
ASEAN in Myanmar,” The Diplomat, November 17, 2014.
4. http://www.mea.gov.in/SpeechesStatements.htm?dtl/24238/Prime_Minis
ters_remarks_at_the_9th_East_asia_Summit_Nay_Pyi_Taw_Myanmar
(accessed on November 16, 2014).
5. See Graham Lees, “Burma is the Key to India’s ‘Look East’ Economic
Strategy,” July 19, 2007, available at http://www.worldpoliticsreview.
com/article.aspx?id¼941
6. See Prime Minister Narendra Modi’s opening statement at the 12th
ASEAN Summit, Myanmar.
7. For more on cross-border history, see Thant Myint-U, Burma and the
New Crossroads of Asia Where China Meets India, Faber and Faber,
London, 2011, pp. 225–247.
8. Democratic rule came to an end in 1962 when General Ne Win led a
military coup d’etat. He subsequently ruled for 26 years. After the 1988
pro-democracy uprising, a younger generation of Burmese generals staged
another coup, declared martial law and formed the State Law and Order
Restoration Council (SLORC) to govern Burma. SLORC was renamed

the State Peace and Development Council (SPDC) in 1997 led by
General Than Shwe. In 1989 the name of the country was changed
from Burma to Myanmar. The period from 1988 to 2011 was marked
by centralized military rule by decree. Since 2011 a series of democratic
reforms have been undertaken.
9. Speech by the President of India Pranab Mukherjee to the Members of
Arunachal Pradesh Legislative Assembly on November 29, 2013, http://
presidentofindia.gov.in/sp291113-1.html (accessed on December
1, 2013).
10. It has been announced that North Eastern Hill University located in
Shillong will have an ASEAN Centre; see The Telegraph, www.
telegraphindia.com/1151122/jsp/northeast/story_54403.jsp
11. Jarnail Singh, Secretary of the Ministry of Development of NER, in his
speech to the three-day conference organized by the Ministry and Indian
Chamber of Commerce, Hanoi, February 12, 2009. www.saigon-gdaily.
com.vn/Business/2009/2/68535/
12. Suvarnabhumi (“Land of Gold”), is commonly thought to refer to the
Southeast Asian Peninsula, including lower Burma and the Malay
Peninsula.
13. “Status Quo Revisited: The Evolving Ties Between China and Myan-
mar,” Wharton, University of Pennsylvania, December 20, 2013 at
http://knowledge.wharton.upenn.edu/article/status-quo-revisitedevolving-
ties-china-myanmar/ (accessed on February 19, 2014).
14. Sophie Song, “China Says West Can’t Afford to Help Myanmar, But
Which Rival Should it Fear?” International Business Times, December
18, 2013 at http://www.ibtimes.com/china-says-west-cant-affordhelp-
myanmar-which-rival-should-it-fear-1512578 (accessed on February
21, 2014).
15. “Status Quo Revisited: The Evolving Ties Between China and Myan-
mar,” Wharton, University of Pennsylvania, December 20, 2013 at
http://knowledge.wharton.upenn.edu/article/status-quo-revisitedevolving-
ties-china-myanmar/ (accessed on February 19, 2014).
16. India shares a 1643 km long border with Myanmar. Arunachal Pradesh,
Nagaland, Manipur and Mizoram are the States, which share the border
with Myanmar. The State-wise length of the borders is as Arunachal
Pradesh 520km, Nagaland 215km, Manipur 398km and Mizoram
510km. Available at http://mha.nic.in/hindi/sites/upload_files/
mhahindi/files/pdf/BM_MAN-IN-MYAN(E).pdf.
300 M. Majumdar
References
Barter Trade with Myanmar under the Indo-Myanmar Border Trade Agreement,
Reserve Bank of India, October 16, 2000. Available at http://rbidocs.rbi.org.
in/rdocs/notification/PDFs/16423.pdf
Bhatia, R. (2015). India Myanmar relations: Changing contours. New Delhi:
Routledge.
Datta, S. (2001). What ails the Northeast: An enquiry into the economic factors.
Strategic Analysis, XXV(1), 73–87. Security of India’s Northeast: External
linkages. Strategic Analysis, XXIV(8), 1495–1516, 2000.
Egreteau, R., & Jagan, L. (2013). Soldiers and diplomacy in Burma: Understanding
the foreign relations of the Burmese praetorian state (p. 338). Singapore: NUS Press.
Ghoshal, B. (2000). India and ASEAN: Political partnership into the 21st century.
In K. S. Nathan (Ed.), India and ASEAN: The growing partnership for the 21st
century. Kuala Lumpur: Institute of Diplomacy and Foreign Relations.
Ghoshal, B. (2013, October). China’s perception of India’s Look East policy and its
implications. IDSA monograph series no. 26, p. 20.
Goswami, N. (2015a). Act East policy: Northeast India as a strategic catalyst.
CLAWS Journal, summer, 71.
Goswami, N. (2015b). Act East policy: Northeast India as a strategic catalyst.
CLAWS Journal, Summer, 72.
Majumdar, M. (2013). Engaging Myanmar: Using the North-East India as a
crucible. International Journal of South Asian Studies, 6(1), 118–128.
Raman, B. The Kao Boys of R&AW. New Delhi, Lancer 2007. Renaud
Egreteau, Instability at the gate: India’s troubled Northeast and its external
connections, CSH occasional paper 16. pp. 120–134.
Seshadri, V. S. (2014). Transforming connectivity corridors between India and
Myanmar into development corridors. Research and information system for
developing countries-RIS, New Delhi: RIS.
Steinberg, D. I. (2011, April). Myanmar’s perpetual dilemma: Ethnicity in a
“Discipline-flourishing democracy”, politics, governance and security series,
no. 22, East West Centre Working Paper.
Xiaoyang, T. (2014, January 25). Chinese investment is key to Myanmar’s
reforms, Carnegie Tsinghua Centre for Global Policy. http://carnegietsinghua.
org/publications/?fa¼54299&reloadFlag¼1. Accessed 26 Feb 2014.
Munmun Majumdar is an associate professor at the Department of Political

Science in North Eastern Hill University, Shillong.
15
Locating Northeast India in the Look (Act)
East Policy of India
Saswati Choudhury
15.1 Introduction: India’s Asian Incarnation

India’s engagement within Asia since the nineties was driven by the twin
shocks it suffered from the collapse of the USSR and the near financial
default in the early 1990s. India’s first attempt to be “in Asia” began in
1947 with the hosting of the Asian Relations Conference at New Delhi.
India’s Asianized role continued until the 1962 Sino-Indian war; since
then its presence in Asia has remained somewhat obscure. The preoccu-
pations with Pakistan including the wars in 1965 and 1971 diverted much
of India’s attention away from consolidating its position in the region.
India’s growing proximity with Moscow and its lukewarm relationship
with the USA alienated it from many Asian nations which were closer
towards the USA. The post-1970 oil shocks brought India closer to the
Middle East for energy, business and remittances. The uncomfortable
relation with most of the South Asian countries and inward looking
S. Choudhury (*)
OKD Institute of Social Change and Development, Guwahati, India

302 S. Choudhury
economic structure and protectionist policies generated little interest

about India in South East Asia. After the end of the Cold War, India’s
role in the Non-Aligned Movement (NAM) lost much of its importance
in international politics. Likewise, the near financial crisis of the early
1990s made it amply clear for India that its foreign policy needed a
fresh look.
The China factor (membership in the United Nation’s Security Coun-
cil and deference accorded by the major states of the world like the USA)
made it essential for India to look within Asia to gain its own ground as an
Asian power. This move was inevitable for India to avoid over-
dependence on any one power, to reset its house from the loss of political,
military and economic support from the erstwhile USSR and East Euro-
pean countries, and to avoid marginalization in international politics. For
the South East Asian countries, relations with India meant hedging:
improving relation with India provided the much needed support to
withstand the USA, which emphasized on upholding human rights and
democracy on the social clauses and trade negotiations under the World
Trade Organization (WTO) (Choudhury 2006). The emerging relation-
ship between India and South East Asian nations has been further induced
by the mutual concerns about growing Chinese power in Asia. The
economic liberalization in India finally opened the gateways for bilateral
economic relations between India and SE Asian countries.
Since the late 1980s, at the behest of the then Prime Minister, Rajiv
Gandhi, India began reviving its relations with South East and East Asia.
There were hardly any high level contacts between India and ASEAN
prior to 1985, a definite trend emerged since 1985 indicating that
ASEAN was interested in recuperating old relations with the restoration
of political dialogue (MEA 1995–96). During the next five years, the
Indian Prime Minister visited Indonesia, Thailand, Myanmar (then
known as Burma), Vietnam and China. India also hosted leaders from
South East Asian countries like Suharto of Indonesia, Lee Kuan Yew of
Singapore, Mahathir Mohammad of Malaysia, Van Linh of Vietnam and
Hun Sen of Kampuchea, as well as other ministers. The political
exchanges between India and South East Asian countries during Rajiv
Gandhi’s period also focused on issues of trade and commerce, search for
15 Locating Northeast India in the Look (Act) East Policy of India 303
energy, and cooperation in the field of science and technology. The global
political development at the end of the Cold War following the disman-
tling of the USSR required a pragmatic assessment and approach in
India’s foreign policy. The economic exigency following the balance of
payment (BOP) crisis also forced India to shelve its protective economic
policies and liberalize and her eastern neighbours offered promises for
bilateral/multilateral engagement. ASEAN, together with Japan, Korea
and China, was economically the fastest growing region not only in Asia
but globally as well. Singapore became the focal point in India’s overseas
investment promotion tours undertaken by the Indian Finance Minister
and Minister of State for Commerce in 1991. Singapore reciprocated and
actively supported India’s efforts to join ASEAN as a dialogue partner.
India became a Sectoral Dialogue Partner of ASEAN in 1992, a full
ASEAN Dialogue Partner in 1995 and a member of the ASEAN Regional
Forum (ARF) in 1996.
India’s engagement with East and South East Asian countries since the
1980s has largely been phrased as “Look East Policy.” During his
September 1994 visit to Singapore, the Indian Prime Minister Narasimha
Rao delivered a lecture entitled “India and the Asia–Pacific: Forging a
New Relationship at ISEAS” in which he emphasized India’s eagerness to
join the future development path in the Asia–Pacific region in the post-
Cold War period. The catch phrase “Look East Policy” appeared in
official records of India for the first time in the Annual Report of MEA
in 1995–96 (MEA 1995–96). India continued its engagement in the
ASEAN region with emphasis on economic and institutional relations.
In his lecture at the Institute of Defense Studies and Strategic Analysis in
August 2003, the Defence Minister Yashwant Sinha said that, with the
holding of the first India–ASEAN Summit in Phnom Penh in November
2002, India had effectively entered Phase II of its “Look East” policy.
Subsequently in his lecture at Harvard University the same year, he
reiterated that the first phase of India’s Look East Policy (LEP) had
focused on trade and investment with ASEAN but the new phase incor-
porated a wider definition of “East” which extended from Australia to East
Asia with ASEAN as its pivot. In December 2005 in his keynote address at
the Special Leader’s Dialogue of the ASEAN Business Advisory Council
304 S. Choudhury
in Kuala Lumpur, India’s Prime Minister Manmohan Singh stated that,

since 1992, the Government of India (GOI) had launched LEP as an
external economic policy. This marked a strategic shift in India’s
envisioned role in the changing global economic scenario and an attempt
to reach out to India’s civilizational neighbours in South East and East
Asia. He reiterated that India’s partnership with ASEAN was a key feature
of its foreign policy and the foundation of LEP.
India’s engagement with her eastern neighbours has also been acknowl-
edged by ASEAN. In the Fourth India–ASEAN Summit held at Kuala
Lumpur in December 2005, India’s support to the CLMV countries
(Cambodia, Laos, Myanmar, Vietnam) in areas of the service sector—
English language training, satellite based networking and telemedicine
services, as well as super speciality health care facilities—has been appreci-
ated. LEP moved beyond economic cooperation and included defence and
strategic partnership and also regional cooperation for human resource
development. Although Indian leaders at different forums had spoken of
LEP, there is but no written document which lays down the principles or
the directives of the policy. Rather, the catch phrase “Look East Policy”
broadly refers to India’s strategic (political, defence and economic) engage-
ment with ASEAN and Far East nations like Japan, Australia and Korea.
15.2 Sub-Regional Cooperation: India

and South East Asia
It is pertinent to note here that Indo-ASEAN dialogue had paved the way
for multilateral relations like the Bangladesh–India–Myanmar–Sri
Lanka–Thailand Economic Cooperation under BIMSTEC and Mekong–
Ganga Cooperation (MGC) (in which India and five other ASEAN
countries, i.e. Cambodia, Laos, Myanmar, Vietnam and Thailand, are
associated). BIMSTEC was initially BISTEC and launched in June 1997
with Bangladesh, India, Sri Lanka and Thailand. As only Bangladesh and
India shared common borders among the four members, the idea of
inviting Myanmar (as it had common boundaries with all the three
countries except Sri Lanka) to the forum was approved in December 1997
(six months after Myanmar joined ASEAN) and BISTEC was renamed
BIMSTEC. The main objective of the forum is to link the Indian
subcontinent and China. The forum has initiated steps for infrastructure
development particularly the Trans-Asia Highway that seeks to link
Northeast India (NEI) to Bangkok via Mandalay. A second regional
forum, the MGC, was launched in July 2000 by India, (the riparian
country of the Ganges) and five other ASEAN countries, that is Cambo-
dia, Laos, Myanmar, Vietnam and Thailand (the riparian states of the
Mekong River). The main plank of the multilateral cooperation of MGC
is cultural and social commonalities between the two river valley civiliza-
tions of Asia.
The Indian initiative in South East Asia also brought China to
the forefront of forming regional forums. Yunnan, the south-west
Province of China, with support from Beijing, launched the
Bangladesh–China–India–Myanmar (BCIM) Forum, the first conference
of which was held in Kunming in August 1999. The Kunming Initiative
or BCIM helps China to gain exigency through Myanmar to South Asia
(India and Bangladesh) and the Indian Ocean. The BCIM region is one of
the richest in the world in terms of natural, mineral and other resources.
The region covers 9 per cent of the world’s total area, 7.3 per cent of the
global gross domestic product and involves 440 million people. The
successive BCIM forums created awareness about the potential benefits
of sub-regional cooperation. The BCIM economic corridor will connect
Kunming in China’s Yunnan province and pass through Yangon and
Mandalay in Myanmar, Chittagong–Dhaka–Sylhet in Bangladesh before
entering the Northeastern states, Bihar, Bengal and ending in Kolkata.
The corridor allows and offers opportunities for the four participating
countries to exploit the existing complementarities in trade both in sectors
and in products. While Myanmar is a primary goods exporter and has
abundant cheap labour, India leads in service export and China is the
largest manufacturing exporter in the world; Bangladesh enjoys advan-
tages in both services exports and low-end manufactured goods. The
potential areas of engagement under BCIM includes conventional and
renewable energy resources in the region, hydrocarbons in Bangladesh,
hydro-electric and mineral resources in NEI, natural gas reserves in
306 S. Choudhury
Myanmar, and coal reserves in East Indian states like Odisha, Chhattis-
garh and Jharkhand and China’s Yunnan province.
Besides building on the Indo-ASEAN relation through various forums,
the “Eastward ho!” of India appears to be working at two levels for its
future ties with South East Asia. First, it has been trying to break into the
East Asia Club through eventual membership in the Asia–Pacific Eco-
nomic Cooperation (APEC). This is essential for India from an economic
point of view for a number of reasons. The 21-member APEC, established
in 1989, is an organization which is consensus based and has nearly half of
the world trade among its members. India has been lobbying for mem-
bership for the last two decades. It has been an observer since 2011 and
membership would have been in tune with the Modi Government’s AEP.
Second, China, as a Pacific Rim country, has been in APEC for more than
two decades and its fast growing economy with its fairly easy investment
climate will further attract FDI. India has to compete with China on equal
terms in expanding trade within Asia and the rest of the world. There is an
urgent need on the part of India to get a strong foothold in regional
cooperation with East and South East Asia.
It is important to note that since pre-colonial days India has had
continental trade with Burma and also South East Asia (Bhattacharjee
1980). In the post-independence period the Indo-Burma relationship
continued to be cordial thanks largely to the personal relations between
late Jawaharlal Nehru and his Burmese counterpart U Nu. However, after
the military coup in March 1962 led by General Ne Win, relations began
to decline. The Sino-Burmese border agreement and the treaty of friend-
ship signed in January 1960 had further repercussions on the Indo-Burma
relationship. The nationalization measure of the early part of 1964 by the
military regime led to loss of property for Indian businessmen and traders
in Burma; no compensation was paid to them. Many Indians who wanted
to leave Burma had neither the money for passage, nor did the Myanmar
Government pay for it. Those who managed to leave were debarred from
taking anything with them. These events and developments brought the
Indo-Burma relationship to near breaking point (though efforts were
made through various trade agreements but without much success).
However, towards late 1964, the strained Sino-Burma relationship, fol-
lowing Chinese support to Burmese militants, drew Burma closer to
India. The economic cooperation between the two countries did not
progress much despite the signing of an agreement in December 1962
to promote trade between them. Rather, China replaced India as the
biggest importer of Burmese rice (for details see Aung and Myint 2001).
A new payment agreement between India and Burma in 1974 enabled
the trading of goods like cotton textiles, pharmaceuticals, electrical hard-
ware imports by Burma and urea and mineral ores by India. There was a
lull in relations during the period 1977–88 while at the same time
Myanmar nurtured its relations with China. The Indo-Myanmar rela-
tionship reached its lowest point after India’s open support for the pro-
democracy upsurge in 1988. India’s support to the pro-democracy move-
ment followed by joining the international fraternity led by the USA in
isolating the Burmese military regime culminated in an all-time low in the
relationship. In fact, India’s support for the pro-democracy movement is
viewed by many experts on international relations as the biggest bungle by
India in its Burma policy. On the other hand China’s open support for
the military junta forged a closer Sino-Burmese relationship in political
and economic domains.
Therefore, after 1991–92, foreign policy experts in India started
rethinking the country’s stand towards the military junta in Myanmar.
There were possibly three reasons for this: (i) NEI had by then become
insurgency prone and the Indian Government needed the Myanmar
Government’s support to flush out the militants along its border; (ii) India
wanted to neutralize the growing Chinese influence in Myanmar, which is
situated along its eastern sector, since the Sino-Pakistan relationship along
its western border has been a major source of discomfort and irritation;
(iii) India’s bid to be “Asianized” emerged from the economic necessity of
gaining a foothold in the new world order after the fall of the USSR and
East Europe and the fast changing trade and investment climate due to the
impact of globalization. Strategically a nuclear China’s engagements with
Myanmar left India uncomfortable, and redefining the new policy
towards Myanmar was to diffuse this concealed fear. For the military
junta in Myanmar, it was essential to maintain a friendly relationship with
India to enhance its own political image, both within and outside the
country and to decry the US led campaign against its military rule and
human rights violations. Also the sanctions by the USA and the EU have
308 S. Choudhury
restricted the flow of investment and aid to Myanmar. China is at present

the major investor with large investments in infrastructure and military
aid. However, Myanmar’s requirements are far more orientated towards
investment in telecommunication and information technology where
India is perceived to be the best supplier. Therefore it was in the mutual
interest of both Myanmar and India that bilateral relations were pro-
moted.1 In its pursuit to get a foothold in Asia, the Indian Government
began its continental relationship with South East Asia by signing the
border trade agreement with Myanmar in 1994 that became operational
in 1995. The border trade started between India and Myanmar through
Moreh, a small town in the state of Manipur in India to Tamu in
Myanmar’s Sagaing Division. It is pertinent to mention here that there
has been growing interest within ASEAN to connect with South Asia as
there is high possibility of establishing production networks. India,
through its AEP and its status as a full dialogue partner of ASEAN, has
sought to engage with the region through various channels and
mechanisms.
The most distinctive feature of international trade in recent years is the
rise of multistage global production networks in which multinational
firms fragment manufacturing production across borders by locating
individual production stages in the countries where they can be performed
at least cost (Jones 2000; Helpman 2011). India too has joined the global
production network (GPN), and parts and components are becoming
increasingly important in Indian GPN trade, though network products
still remain relatively unimportant in terms of total manufacturing exports
(Sen 2014). However, their share is increasing over time. The most
important GPN commodity in the export basket of India is road vehicles,
followed by other transport equipment, followed by electrical machinery.
Athukorala (2013) notes that road vehicles and other transport equipment
accounted for 28 per cent of total Indian network exports in 2010–11,
and the total volume of transport equipment exports is fast approaching
that of exports from Thailand, which is the most successful second-tier
automotive exporting country (after Japan and the Republic of Korea) in
Asia. India has become a favourite investment site for a large number of
leading automobile industries and many auto part suppliers have
established assembly plants in India and some have begun to use the
country as an export platform within their GPN (Humphrey 2003;

Srivastava 2011). Transport equipment which is transported by road,
rail or sea can play a significant role in promoting economic corridors
and organizing clusters of production centres in areas with low labour and
other input costs and linking the production hubs with the exit points,
either by road or rail or sea. The economic corridors can play a significant
role in facilitating trade between India and East and South East Asia
because the location of the auto ancillary parts along the corridor in India
will reduce the transaction costs from these units to the final assembly
units for the production of cars that are located in East and South
East Asia.
15.3 NEI and the Look (Act) East Policy

NEI’s truncated connectivity following the partition in 1947 has been a
major concern for development experts in the region. The economies of
this entire region suffer from the disadvantages of poor infrastructure and
connectivity. The under-developed infrastructure and unfavourable insti-
tutional and business environment within the region have seriously lim-
ited the growth of regional networks.2 Security/strategic considerations
rather than a development perspective has been the major thrust of GOI’s
approach towards NEI.3 At the same time, minimum intervention in the
traditional systems and institutions of the hill economy has led to their
non-compatibility with the growing penetration of market forces in the
process of economic development efforts. The growing unrest in the
region, a fall out of lack of employment opportunities due to slow pace
of economic development, catapulted as a major social problem and state
response to the same was initiation of a plethora of development packages
in the 1990s (Sarma 2011).
Distinct from the cultural-anthropological paradigm of the 1950s, the
security paradigm of the 1960s and the political paradigm of the 1970s
and 1980s, LEP, beginning in the 1990s, was considered to be a devel-
opment paradigm for the region. The integration of the regional with the
international market was seen as the best possible way to break the
economic jinx. The primary focus of the Policy for NEI centres around
310 S. Choudhury
the economic and social aspects. LEP was made an integral part of Vision
2020, a roadmap for the development of NER. Historical records testify
to the fact that the region had close social and economic relations with
different regions of South and South East Asia. Besides the Patkai route
through which Sukapha4 and his men and materials entered Assam, there
were several other routes to China via Burma, Bhutan and Tibet through
which the ancient Assam had trade access. There were also many other
passes through which the northern mountains of Assam led to China,
Afghanistan and the West through Bhutan and Tibet (Ray 2005). NEI as
a geographical space was first described by the Colonial Administration. It
was Sir Alexander Mackenzie5 whose report Memorandum on the North-
East Frontier of Bengal (1869) used “Northeast” to refer to the lands lying
Northeast of Bengal Province which included Assam and the adjoining
hill areas (Mackenzie 1995). It was a buffer region between the eastern
frontier of Bengal under British Rule and the neighbouring Burmese
territory. In the post-independence period it has been commonly used
to describe all the constituent states in the region, which is disparate with
diverse physiographies, demographic and ethnographic features. The
states of NEI may be treated as a political unit for administrative conve-
nience by GOI, but historically at no point of time it was one unit either,
culturally, economically or even politically (Sharma 1991). Much of the
debate on the relevance of LEP, as far as NEI is concerned, centres around
opening continental connection through access points along the 1643 km
international border with Myanmar, which covers the four states of
Mizoram, Manipur, Nagaland and Arunachal Pradesh.
The region today has as many as 426 notified land customs stations
(LCSs) of which only 26 are functional, though the infrastructure and
facilities available at these LCSs are abysmally low. In fact, most of the
LCSs suffer from inadequate infrastructure and other facilities which
prevent the conducting of high volumes of trade (RIS 2011). Bare
minimum border trade has continued to be NEI’s only engagement
with Myanmar in South East Asia and Bangladesh in South Asia. The
low trade volume of NEI through these border points and the low
functional status of the LCSs are not difficult to understand when one
delves into the current economic scenario in the region. Over the last
three decades, the region’s contribution to the national income has been
falling. From 4.2 per cent in 1980, the share has come down to 2.8 per
cent. The primary sector today contributes 22 per cent of the region’s
income; however, more than 61 per cent of the rural and 12 per cent of
the urban workforce continues to be engaged in this sector. The secondary
sector, dominated by construction and manufacturing, contributes
another 20 per cent while the tertiary sector comprising trade and services
has a share of 56 per cent. Workforce engagement on the other hand is
higher in the primary sector.
In the first decade of the twenty-first century the northeast region’s
industrial sector had shown vibrancy with growth in capital invested,
workers and net value added (NVA), but the average wage received by
the workers in the region in the organized industrial sector was much
lower than the country average (Das 2012). In fact inadequate remuner-
ation or wages has been one of the primary reasons cited by the Employ-
ment Report (2015–16) for the high unemployment rate in NER. One of
the reasons for the low wage rate is explained by the fact that products of
the industries in the organized sector comprising food and beverages,
wood products, textiles and manufacturing mostly fulfil the demands
generated locally. There is no production for export beyond the local
market. Though transport and capital subsidy has been provided by the
state since 1971 for industrial promotion in hilly terrains and backward
areas of the region, a careful reading of the data reveals that much of the
transport subsidy in the hilly states has been claimed by small units like
bakeries, fabricators and tailors catering to local demand. The capital
subsidy claimed has been very meagre as products manufactured in the
region have not been able to create a market beyond (Das 2012).
The synergy between the rural and urban economy in the region, with
back-end linkages, is another critical gap. This can be understood from
the spatiality of the region. There are 248 towns with an area that spreads
over a little more than a quarter of a million square kilometres. The
region’s share in the country’s total geographical area is about 8 per
cent, in towns 5 per cent and in the urban population approximately
3 per cent. The mean distance between towns in NEI works out to
49.23 km as compared to 33.51 km in the whole of India. Further, a
town in NEI on an average serves an area of nearly 2000 sq. km as
compared to 1000 sq. km in the country. This in a way indicates that
312 S. Choudhury
urban services are far more distantly located for the vast majority of the
rural population in the region than in the country. The youth unemploy-
ment rate among the educated continues to be higher (15 per cent) in the
region than the national average and lack of employment opportunities is
thus a major constraint (NCAER 2012). There is also a stark rural–urban
divide in the rates of employment in the states of NEI; the urban areas
have significantly lower rates of employment compared to rural areas. To
illustrate, Assam has 26 per cent unemployment in urban areas as against
12 per cent in rural areas. In Maharashtra, the urban unemployment is
below 5 per cent and in Bihar it is 12 per cent.
Besides the basic infrastructure, another shortfall is the availability of
financial services in NER, provided by the nationalized banks. Banks are
constrained by the high incidence of rural non-performing assets (NPAs)
due to targeted lending to unviable projects. Credit flow to the region has
been very low and has further dwindled after the financial sector reforms.
The region has no active capital market and easy exchange clearing system
except at Guwahati. The region’s strength in horticulture production,
plantation economy, handloom and handicrafts, mineral resources, as well
as potential in tourism, health care and educational services have failed in
the development of a value chain production which can create production
networks among the states of the region to tap the emerging market in
ASEAN.
Against this backdrop, LEP seemed to provide a development frame-
work for NEI where four aspects were clearly delineated in the document
of MDONER (LEP 2011). These include:
1. Connectivity and physical infrastructure to facilitate trade;

2. Trade and investment protocols;
3. Shortfalls in operationalization of existing assets and facilities;
4. Soft aspects of bilateral/multilateral relationships such as in tourism
and enhanced people-to-people interaction through sports, culture,
academia and medical research.
The historical evidence clearly reveals that Burmese rice, teak and cigars
were in high demand in pre-independent India and later in the post-
independence period up until the early 1960s. In fact rice composed more
than 80 per cent of India’s imports from Burma during the 1930s to
1950s. The current Indo-Myanmar trade has a balance in favour of
Myanmar, with India as the major export market.
After the opening of the border trade point at Moreh, some 22 items were
listed of which only 12 were actually traded. The agreement specified the
designated customs posts through which trade had to be conducted; these
were (1) Moreh (State of Manipur in India) and Tamu (Sagaing Region in
Myanmar); (2) Champhai (State of Mizoram in India) and Rhi (Chin State
in Myanmar). The Moreh–Tamu points paved the way for the opening of
four more points—Pangsau Pass, Paletwa, Lungwa-Yanyong and
Pangnyo—between the two countries in 1995, and with the construction/
upgrading of the Rhi–Tidim and Rhi–Falam road sections in Myanmar, the
Zowkhathar–Rhi border points were operationalized in 2004. The border
trade agreements led to a spurt in formal trade across borders during the
period 1995–98, but in May 1997 Reserve Bank of India (RBI) guidelines
for the border trade between Myanmar and India mandated that the barter
trade should be restricted to land routes as per the Border Trade Agreement
between the two countries and that such transactions should take place only
by way of head load or non-motorized transport. It was further required that
imports from Myanmar to India should precede exports from India to
Myanmar and that there will be no monetary transaction under the barter
trade arrangement. A report of the Directorate of Commerce and Industry of
the Government of Manipur (2006) stated that trade through the barter/
exchange mechanism is restricted to 22 items only and that there was a
shortage of commodities that could be exchanged or bartered. Moreh
accounts for about USD3.6 million of India–Myanmar merchandise trade,
of which exports contribute 41 per cent and imports 59 per cent (De 2011).
During the period 1996–2005, average annual exports from NEI were
about USD 2.4 million and its average annual imports from Myanmar
were USD1.9 million, a marginal 2.1 and 0.5 per cent of India’s total
exports to and imports from Myanmar, respectively. All third-country goods
and non-specified barter trade items entered in unspecified quantities
through Gate No. 24 without levying any duty, which indicated flaws
in the border trade arrangement (Mero 2005). The report of Joint
Indo-Myanmar Task Force (CII 2006) showed that trade along the Indo-
Myanmar border remained relatively low in comparison with the Sino-
314 S. Choudhury
Myanmar and Thai-Myanmar borders. Tamu in Namphalong market

(adjoining the area of India at Moreh) had third-country goods such as
electronic goods from China, plastic products from Korea, hardware and
instruments from Japan, and textiles and consumer products from Thailand.
Indo-Myanmar border trade through Moreh was noticeably more restricted
by over-regulation, taking trade only as an exchange of commodities instead
of seeing it as a means for the flow of ideas and opportunities for raising per
capita income as well (Yumnam 2005). The level of NEI–Myanmar trade
has stagnated over the last decade. Therefore, border trade potential between
India and Myanmar is yet to be realized.
Bilateral ties between India and Myanmar grew much faster in terms of
its trade and service exchanges over the last decade. The growing
geo-political concerns between the two countries have largely shaped
this relation. On the one hand Myanmar prefers to improve its ties with
New Delhi so as to push forward its policy of regional engagement and
minimize its dependence on China and counter the sanctions from the
West, especially the USA, while India on the other hand wants a peaceful
Myanmar to improve its continental engagement with South East Asia.
The total volume of trade for NEI has grown from Rs.1628 crore in
2009–10 to Rs.2615 crore in 2013–14 at a CAGR of 13 per cent, with
exports from the region constituting a significant 89 per cent. But the
share of the region in trade between India and its eastern neighbours is
only 1 per cent (ICC, https://www.indianchamber.org/border-trade)
which shows that the trade potential between the states of NER and
neighbouring countries remains largely untapped.
15.4 NEI and the Look (Act) East Policy:

Complementarities in Partnership Building
Taking note of the existing nature of trade through the border points and
its volume, two important developments have taken place recently: one is
a shift from barter to normal trade and the second is a shift from border
trade to normal trade that can take place through land border customs
stations.7 Abolition of barter trade by the RBI and a shift to normal trade
and border trade to normal trade implies that trade transactions at the
border through LCSs take place in permitted currencies in addition to

taking recourse to the Asian Clearing Union (ACU).8 However, due to
lack of clarity on the implications of these two aspects at the field level, the
DGFT annulled all the previous documents related to India–Myanmar
border trade, including the India–Myanmar Border Trade Agreement.
The trade through Moreh is currently guided by the RBI recent circulars,
though informal channels of trade continue to thrive.
It is important to remember that geographical and social contours play
an important role in shaping the economic structure of an area. To assume
that industrialization and trade are the only possible ways of economic
engagement is perhaps a little far stretched for the states of NEI. There is a
need to look for complementarities of the region with the South East
Asian countries. The geographical contiguity of NER with South East
Asia and its historical and cultural affinity with the countries in the region
can be taken as the soft power engagement to promote tourism, cultural
exchange programmes and also commercial exchanges. India is a member
of several sub-regional groupings like BIMSTEC, BCIM and the MGC.
Thailand’s Look West Policy initiated in 1996 became a strong stimulant
for BIMSTEC in areas of cooperation including trade and investment,
technology, transport and communications, energy, tourism and fisheries.
MGC focuses on tourism and culture, and infrastructure and information
technology. These sub-regional initiatives offer scope for the states of NEI
to partake in the development opportunities in ASEAN. In the ASEAN
framework of cooperation, physical connectivity, institutional connectiv-
ity and people-to-people connectivity have been the three critical nodes
for regional cooperation. Significantly this complements the similar thrust
propounded in the GOI document on LEP and NEI.9
The resource endowment in the border states of Kachin, Sagaing and
Chin in Myanmar (agro resources like vegetables and fruits, bamboo and
medicinal plants, and minerals) are just the same as the states of NEI. It is
often argued that resource base and production compositions in the two
regions are more competitive than complementary, which limits the scope
for trade between them. There is a missing link between border trade and
production structure (both agriculture and industry) for NEI; the larger
gains from trade seem to accrue to traders operating beyond NER.
Therefore, border trade at Moreh–Tamu takes the form of transit trade
316 S. Choudhury
mostly. A closer scrutiny also shows that such proximity and shared
features offer scope for integrated development of the sub-region. The
possibilities, however, rest on identification of the niche areas in the
region for trade with the countries in South and South East Asia. To
cite an example, though agriculture engages almost 70 per cent of the
workforce in NER, the region is deficient in the production of major
cereals like rice and also pulses and depends on imports from North West
India which have high transport costs. At the same time Myanmar is
traditionally an exporter of pulses and rice and it would be more cost
effective to import these basic items from Myanmar to the region. Besides,
NEI can import at a much cheaper rate other essential vegetables like
onions and potatoes from Myanmar rather than procuring the same from
elsewhere in North West India. Coal, tea, limestone and other minerals
form the key export based commodities from the region. Most of the
exports (with tea as an exception) are to countries such as Bangladesh,
Myanmar, Bhutan and Nepal. A recent study by FICCI on the Gateway
to the ASEAN India’s North East Frontier in November 2014 identified
that there are strong prospects for developing the export potential of the
region in edible fruits and nuts, apparels, beverages, lime and cement, fish
and aquatic products, salt and stone. There is high potential as the
primary demand for such products exists in neighbouring countries
which at present are met by other states from India. The industries for
these items if located in the region also would have a high logistic cost
advantage vis-a-vis other regions. Besides, it is important that value chain
networks within the region can be developed by exporting semi-finished
and finished products rather than exporting raw materials. The Moreh–
Tamu Road (opened in 1996) and the 144 km Kalay–Kalaywa–Kyiong–
Tamu road in the Sagaing Division (opened in February 2001) provides
connectivity up to central Myanmar. The recently announced plans of
awarding road projects of Rs.1 lakh crore in NER over the next five years
and the declaration of 18 national waterways are some of the recent
developments which shift the focus on developing the connectivity of
the region. The Kolkata–Ho Chi Minh City corridor is 4430 km long and
passes through NEI. The road corridor development will require a total
investment of USD3 billion to provide adequate road connectivity
between South Asia and South East Asia. Of the USD3 billion,
USD1.9 billion has been borne by GOI for the road programme that is
being implemented for the Northeast states. This route also connects NEI
to the GMS countries. Within the GMS, the Kolkata–Ho Chi Minh City
corridor follows through Tamu at the Indian border and enters the
frontiers of South East Asia. It has been estimated that infrastructure
development along with industrial capacity development would bring a
cumulative investment of Rs.42,500 crores to the region and create new
employment opportunities both in rural and urban areas. Also eliminating
border crossing obstacles and providing good road infrastructure would
cause regional engagements to increase tremendously.
While merchandise has always been a major component in any trade,
two potential niche areas in the region for trade with South East Asia are
energy and services. Given the fast emerging energy market in South East
Asia, NEI, with its vast hydro-power potential, could emerge as a crucial
partner in energy trade. In the case of services, NEI could be a significant
partner in services related to education, health and tourism. The devel-
opment potential in terms of resource endowments are based on the
supply side of a market. To unleash this development process there is
need for creating enabling conditions both for the demand and supply
sides to interact efficiently. While on one hand, market rigidities are
required to be eased out, on the other there is need to protect the ethnic
identities of indigenous peoples and their economic wellbeing without
hindering market integration. The time is now opportune to push
through the connectivity improvements and institutional reforms for
the easier transit of people and merchandise. Though the region is not a
homogeneous unit, it does offer large untapped potential in cross-border
cooperation in cultural and economic spheres. It therefore requires devel-
oping a growth synergy that embodies within it the traditional economic
life and the market system such that complementarities between the
traditional and market economy induce the dynamism of growth which
can break through the economic logjam in the region.
318 S. Choudhury
15.5 Conclusion
To forge common regional and sub-regional understanding and cooper-
ation both within and beyond the borders of NEI, there is an impending
need for a clear understanding on the various critical issues which would
provide a road map for a shared regional development. Notwithstanding
the institutional diversities which are hallmark of the region, these diver-
sities have a bearing on the transaction costs and influence the investment
flow to the region. There is an urgent need to understand the various
institutional arrangements in the region. Success at transforming resources
into sustainable and inclusive development outcomes is therefore condi-
tional upon the extent to which initiatives taken in a country are
implemented domestically and the ability to coordinate efforts among
the wide range of stakeholders, notably at the regional level (Ramdoo
2014). It would be in the fitness of time that India breaks out of her
security syndrome approach towards NEI and moves into more pragmatic
ways of fostering economic and socio-cultural cooperation in its AEP. For
NEI, the immediate necessity is to develop its transport connectivity
within the region, the urban centres and basic amenities and services.
Unless the minimum critical requirements are present, economic growth
with generation of effective employment opportunities will remain theo-
retical propositions without any tangible real gains for the region
(Choudhury 2006).
Notes
1. It is worth mentioning here that Jawaharlal Nehru, the first Prime Minister
of India, emphasized that economic factors are more important for India in
evolving its foreign policy. He stated that, until the economic policies of
India are well framed, foreign policies would remain vague and direction-
less. After the collapse of the USSR and the financial crisis of the early
1990s, economic factors became prominent in writing India’s foreign
policy.
2. The border states of Sagaing, Kachin and Chin regions in Myanmar, which
are mountainous and endowed with rivers and creeks, have diverse
resources, for example water, forest, oil and gas, coal and several other
mineral products with similar infrastructure bottlenecks, which have

restricted the expansion of cross-border regional networks.
3. The very fact that the North Eastern Council set up in 1971 under an Act
of Parliament was an advisory body in the matter of economic develop-
ment—under the Ministry of Home Affairs until its amendment in 2002
when it was made into a regional planning body and placed under the
Department of Development of the North East Region (DONER)—
reflects the prolonged obsession with security concerns by the Central
Government regarding the region.
4. The records of the Ahom Buranjis note that Sukapha was a prince by birth
and that his country of origin was Maulung in upper Burma. He was the
leader of the body of Shans who laid the foundation of the Ahom Kingdom
in Assam. Historically, these people are known for their valley-dwelling
and wet-rice-growing character. The particular branch to which the Ahoms
belong is known as the Tai-mao, or the Mao section of the Tai, but widely
known by the Burmans as the Shan. The Ahom Chronicles, or Buranjis
make specific mention that the Ahoms were led by Prince (Chao-lung)
Sukapha who left Mong Mao-lung in AD 1215. Sukapha’s followers
included several nobles (thao-mong), a number of officers of various
ranks, and 9000 men, women and children. After a westward march for
13 years and staying at several places for periods ranging from one to three
years, they arrived at Patkai in AD 1228. Posting a governor at the
Khamjang Valley, their first territorial unit, situated on the shore of the
Nongjang Lake, Sukapha and the rest of his party at first followed the
Namrup, then the Buri Dihing (Nam-jin), thereafter the Brahmaputra and
the Dikhow before finally arriving at Charaideo, which became his per-
manent capital.
5. Alexander Mackenzie (1842–1902) joined the Indian Civil Service in
1862. His career began in Bengal, first as an assistant magistrate and
then as a secretary to the local government.
6. Of these 42 land custom stations (LCSs), 33 are with Bangladesh, five are
with Myanmar, three are with Bhutan and one with China. Of the
26 functional LCSs, 21 are with Bangladesh, two each with Myanmar
and Bhutan, and one with China.
7. RBI/2015–16/230, dated November 5, 2015. RBI Circular No. 26, A.
P. (DIR Series) on Switching from Barter Trade to Normal Trade at the
Indo-Myanmar Border, issued on November, 2005.
320 S. Choudhury
8. Barter trade was initially permitted to facilitate the exchange of locally

produced commodities along the Indo-Myanmar border. As such, these
transactions were not captured in the banking system or reflected in the
trade statistics. ‘However, over a period of time the trade basket has
diversified and an adequate banking presence is in place to support normal
trade with Myanmar’ (RBI, A. P. DIR Series; Circular No. 26, dated
November 05, 2015).
9. Look East Policy and the North Eastern States, Government of India,
Ministry of Development of North Eastern Region, February 15, 2011;
this document by the NEC gives a brief outline of how NEI can be posited
within the LEP framework.
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Index
A Angami, 241
Accumulation, 64 Annihilation, 64
Act East Policy (AEP), 3, 45, 69, 132, Annual Report of MEA, 303
261 Annual trade fairs, 6
Agrarian, 6 Anthropological construct, 86
Agreements Anxiety, 162
bilateral, 32 Arakan Army, 259
multilateral, 32 Armed Forces Special Power Act
Agricultural produce (AFSPA), 54
floriculture, 39 Arm-drugs nexus, 292
fruits, 39 Aromatic plants, 275
vegetables and spices, 39 Article 21 of Indian Constitution, 236
Agro-processing, 165 Artificial stimulation, 224
Air transport, 109, 140 Arunachal Pradesh, 237
Aiyar, Mani Shankar, 290 Association of South East Asian
Alienate, 301 Nations (ASEAN), 1, 103, 173,
Aligned, 13 213, 276, 284, 288, 303
Alternative way, 161 car rally, 5
Note: Page numbers followed by “n” refer to notes.

and Act East Policy, DOI 10.1007/978-981-10-5320-7
324 Index
Association of South East Asian Assam

Nations (ASEAN) (cont.) Ahom, 28
Centre in Shillong, 295 ancient, 27
Comprehensive Agreement on colonial period, 28
Investment (ACIA), 135 post independence period, 28
Economic Community (AEC), Asset specificity, 167
133, 134, 136–138 Aung San Suu Kyi, 260, 289
highway, 140 Autonomous councils, 215
India Comprehensive Economic Autonomous District Councils
Agreement (AICEA), 285 (ADC), 170, 269
India Summit, 295 Autonomy, 294
+3, 161 Average wage, 311
Power Grid (APG), 116 Awami League, 57
Regional Forum, 50 Ayeyarwady delta, 248
17th Summit, 107
studies centre, 58
ASEAN Comprehensive Agreement B
on Investment (ACIA), 135 Bajpai, Atal Behari, 269
ASEAN Defence Ministers’ Meeting Balance of payment (BOP), 2, 303
(ADMM), 283 Balance of trade, 72
ASEAN Defence Ministers’ Meeting Bamboo and wood products, 165
Plus (ADDM+), 131 Bandhs, 50, 171, 260
ASEAN Free Trade Area (AFTA), 106 Bangladesh, 8, 30
ASEAN Highway Network (AHN), Bangladesh–China–India–Myanmar
115 Forum for Regional
ASEAN Regional Forum (ARF), 2, Cooperation (BCIM), 9, 32,
283, 303 173, 214, 257, 285, 305
ASEAN Single Window (ASW), 118 Banking and insurance, 166
Asian Clearing Union (ACU), 315 Banking services, 189
Asian Economic Community, 32, Barak Valley, 51
160 Barter trade, 314
Asian Highway, 35, 291 Basic heavy industries, 31
Asian Infrastructure Investment Bank, BBIN (Bangladesh, Bhutan, India,
127 Nepal) Initiative, 13, 69
Asian Relations Conference, 282, 301 Bengal Initiative for Multi-Sectoral
Asia–Pacific Economic Cooperation Technical and Economic
(APEC), 306 Cooperation (BIMSTEC), 32,
Asia–Pacific region, 2, 142, 282 173, 214, 257, 285, 305
Index 325
Bilateral relations, 7, 287, 308 Cargo, 69

Binding constraints, 41 Cartographic domain, 87
Biodiversity, 39, 149, 268, 275 Ceasefire, 259
Blueprint, 113 Central funds, 79
Boost, 26 Centrally Sponsored Schemes (CSS),
Border, 258 80
trade, 52 Centrality, 11
Areas Development Project, 258 Cha-am Hua Hin Declaration, 134
management, 294 Chaglang, 260
Border Trade Agreement, 32 Champai, 76, 85
Borderland people, 85 Chandel, 256
Bottlenecks, 295 Charter of 1833, 28
Boundary disputes, 277 Chatterjee, S., 67
Bounded space, 59 Cheap labour, 85
Bribery, 171 Chin, 237, 288
BRICS Development Bank, 127 Hills, 243
Bridge, 26 migrants, 238
British colonialization in 1826, 28 Chin National Front (CNF), 259
Buddhist circuit, 295 China, 49, 240, 303
Bureaucracy, 295 Chinese Aggression, 160
Bureaucratic approach, 239 Chinese proximity, 282
Burma, 28 Chittagong, 13, 305
Bus service, 13 Chittagong port, 34
Business Advisory Council, 3 Churachandpur, 256
Business organizations, 150 Church
Baptist, 247
Catholic, 247
C Presbyterian, 247
Cambodia, 7 Civil society, 235, 248
Cambodia Laos Myanmar Vietnam Civil Society Organizations (CSO),
(CLMV), 3, 118, 122 249
Capacity building, 291 Coal, 189
Capital, 82 Coase, R., 167
accumulation, 82 Cold war, 160, 282, 303
formation, 189 Commodity market, 271
market, 135, 312 Common market, 133
Capitalism, 216 Common property resource (CPR),
Capitalist mode, 81 241
326 Index
Communication, 66 similarities, 219, 256

Communitarian, 86 and societal values, 173
ethos, 86
reading, 68
Community-based economic D
organization, 268 Deceleration, 269
Community of Connectivity, 107 Decentralized institutions, 269
Community of People, 107, 111 Dedicated Freight Corridor (DFC),
See also Community of 132
Connectivity Defence, 289
Comparative advantage, 27, 278 Deforestation, 238
Competitive, 315 Democratic government, 47
Competitive edge, 278 Demographic, 30, 160, 268
Competitiveness, 107 Department of Economic Affairs
Complementarities, 315 (DEA), 4
Compression, 64 De-territorialisation, 64
Connectivity, 6 Deve Gowda, H. D., 269
ICT, 33 Developing countries, 168
physical, 34 Development, 68
Construction and manufacturing, 311 corridors, 128
Continental trade, 85 deficit, 78
Convergence, 84, 174 gap, 13
Corporate sector, 236 opportunities, 68
Corruption, 225 participatory, 68
Costs people and institutions, 68
bargaining, 167 status, 108
enforcement, 167 tourism, 268
information, 167 Dhaka, 305
Credit-deposit ratio, 189 Dialectic, 64
Cross border, 8, 52 Digital divide, 111
facilitation, 123 Director General of Foreign Trade
linkages, 293 (DGFT), 315
rules and regulations, 122 Disguised unemployment, 70
trade, 260 Diverse endowments, 268
Cultivation and forests, 242 Diversification, 240
Cultural, 12, 288, 293 Diversified trade, 73
capital, 160 Domestic connectivity, 148
exchange, 162 Domestic output, 107
Index 327
Dominant paradigms, 35 size, 133

Drop out, 243 and social spheres, 4
Dual exchange rate, 170 uncertainty, 59
Dynamism, 13 zone, 295
Economies of scale, 66
Economies of specialization, 275
E Education, 12, 165
East Asia Summit (EAS), 131, 285 Educational services, 312
Eastern seaboard, 142 Efficiency status, 168
Eastern sector, 307 Efficient physical connectivity, 277
East Europe, 302 Eight recommendations, 67
East–West Economic Corridor Employment, 312
(EWEC), 116 Employment growth, 162
Economic, 27 Enabling conditions, 39, 317
activities, 186 Energy, 6, 12, 302
agents, 172 Energy infrastructure, 110
competitiveness, 163 Engine of growth, 165
complementarities, 6 English speaking, 10
cooperation, 68 Enthusiasm, 162
corridors, 123 Entrapped, 64
development, 27 Entrepot, 37, 39
diplomacy, 46 Environment, 162, 277
efficiency, 168 Environmental
empowerment, 113 challenge, 59
exchange, 6 concerns, 110
gains, 4, 27, 85 degradation, 238, 243
globalization, 46 Equity investor, 161
growth, 27 Ethnic, 215, 288
imprisonment, 64, 87 bonds, 293
indicators, 186 conflicts, 225
integration, 201 ties, 294
interests, 297 Ethnicized space, 59
logjam, 317 European Union (EU), 276
packages, 40 Exchange rate, 170
perspective, 148, 274 Explanatory hypotheses, 271
progress, 52 Export basket, 204
resurgence, 26, 46 Export growth, 103
scenario, 3 Export led growth, 276
328 Index
Export profile of the LCS, 75 Gas use, 110

Exporter, 305 See also Gas supply
largest manufacturing, 305 Gateway, 41, 68, 179, 273
primary goods, 305 Geographical specialization, 276
External frontier, 30 Geographically disadvantageous, 149
Externalities Geo-political isolation, 273
negative, 277 Geo-political rigidities, 26
positive, 277 Geopolitics, 3
Extortions, 171 Geo-strategy, 68, 297
Extra payments, 256 Giddens, Anthony, 36
Global, 67
convergence, 67
F exports, 103
Far East, 304 networks, 65
Fetters, 273 value chain, 177
Finance Commission, 79 Global production network (GPN),
Financial crisis, 108 308
Financial services, 135, 136 Golden Crescent, 292
Financial transfer system, 295 Goods and merchandise, 9
Five widely known Is, 270 Government patronage, 29
Focal points, 3 Greater Mekong Sub-region (GMS),
Foreign direct investment (FDI), 48, 9, 10, 102, 119, 317
67, 146 Growth and development, 186
Foreign exchange, 48 Growth rate, 72
Foreign policy, 281, 290 Growth triangles, 108
Forest products, 28 Gujaral, I. K., 269
Fragmented market, 275
Fragmented production centres, 166
Framework, 8 H
Frameworks of cooperation, 126 Haat, 259
Free trade agreement (FTA), 32, 132, Handicrafts, 28
133, 138 Handloom and handicraft, 39, 165,
Friendship Bridge, 120 268
Friendship road, 4 Hardware connectivity, 113
Full Dialogue Partner, 303 Harmonization, 12, 41
Harvey, D., 64
Health, 12, 165
G care, 312
Gandhi, Rajiv, 302 centres, 243
Gas supply, 110 Herbal medicines, 243
Index 329
High end services, 166 Indian Ocean, 305

High Level Commission to the Prime Indigenous, 29, 215
Minister, 40 Indigenous people, 29
High literacy rate, 189, 268 Indo-Bangla Joint Commission, 33
the Hill economy, 25 Indo-Burma relationship, 306
Higher education, 236 Indo-Myanmar Border Trade
Higher growth, 41 Agreement, 73
Hinterland, 37 Indo-Pak War, 160
HIV/AIDS, 36, 292 Induce growth and development, 6
Horticulture, 6, 165, 275 Induced, 29
Hostility, 30 Industrial corridors, 221
Human capital, 205 Industrial development, 103
Human Development Index (HDI), Industrial sector, 189
40, 145 Inefficiency, 41
Hun Sen, 2 Inflows, 271
Huwkwang, 255 Informal exports, 76
Hydro-electric power, 40 Informal trade, 8
Hydro-power, 39 Infrastructural services, 206
Infrastructure
bottlenecks, 291
I Infrastructure connectivity, 108
ICT Master Plan, 110 Infrastructure development, 122
Illegal border trade, 31 Initial Implementation of the Cross-
Illegal fees, 171 Border Transport Agreement
Immigrants, 54 (IICBTA), 127
Impediments, 41 Inner Line Permit (ILP), 50, 275, 292
Inadequate infrastructure, 310 Inner Line Regulation, 50
Incidence of malaria, 244 Inputs, 29
Inclusive growth, 68 Insecurity, 4
Indebtedness, 83 Institute of South East Asian Studies
India (ISEAS), 2
exports, 161 Institutional capacity, 296
imports, 161 Institutional cooperation, 3
India-Myanmar Friendship Road, Institutional diversities, 318
258 Institutional network, 220
India–Myanmar–Thailand (IMT), 69 Institutional structure, 167
India–Myanmar–Thailand TH Insurgency, 290, 295, 307
(IMTTH), 143 Integrated economic entity, 172
330 Index
Integration, 11 Karen National Union (KNU), 222

Interdependence, 272, 275 Karenni National Progressive Party
Interest groups, 12 (KNPP), 222
Interface, 66 Khanna, S., 37
Internal integration, 277 Khaplang, S.S., 255
Internal market integration, 278 Kinship, 288, 296
International border, 87, 163, 179 Kokang, 296
International Production Network Kolkata–Ho Chi Minh City corridor,
(IPN), 103 316
International trade, 276, 308 Konyak, 237, 241
Internet and telecommunication Korea, 303
services, 165 Kuki, 222
Intervention, 25 Kuki National Army (KNA), 256
Intra-industry production network, Kunming, 144
189 Kunming Singapore Rail Links
Intra-regional disparities, 54 (KSRL), 115
Investment, 4, 40
linkages, 119
promotion, 2 L
protocols, 6, 312 Labour
Inward looking policy, 31 force, 186
Isak-Muivah, 255 shortage, 29
Isolation, 30 Lack of investment, 271
Isolationist, 28, 38 Land, 236
IT enabled services, 278 based network, 153
border, 288
bridge, 288
J linked projects, 120
Japan, 303 locked, 9, 120, 215
Jhum, 241 route, 234
Jungles, 256 Land custom station (LCS), 73, 163,
310
Landlocked regions, 26
K Lao PDR, 7
Kachin, 222, 288 Large market, 6, 268
Kaladan Multimodal Transit Lasha, 28
Transport Project (KMTTP), 7, Leasing of land, 83
106, 259 Least interference, 271
Index 331
Ledo, 144 Marx, K., 63

Lee Kuan Yew, 2 Master Plan on ASEAN Connectivity
Legal frameworks, 118 (MPAC), 10, 125, 139
Legislative safeguards, 59 McMahon line, 30
Letpadaung Copper Mine, 296 Mean distance, 311
Limestone, 6, 189 Medieval, 28
Linguistic group, 294 Meitei, 51, 222
Linh, Van, 2 Mekong Ganga, 7
Livelihood, 162 Mekong–Ganga Corporation
and employment, 166 (MGC), 214, 285, 305
Local production, 39 Mekong–India Economic Corridor
Local voices, 52 (MIEC), 7, 11, 116, 126, 132
Logistic cost, 7 Memorandum of Understanding
Logistics, 168 (MoU), 13, 40, 257, 292
Look East Policy (LEP), 3, 4, 10, 45, Mendipathar Multipurpose
270 Cooperative Society (MPMCS),
Low productivity, 206 247
Merchandise trade, 313
Micro-governance structure, 170
M Middle school, 243
Mackenzie, Alexander, 310 Migration, 162, 288
Macroeconomic fundamentals, 69 Military deployments, 148
Mae Sot, 35 Ministry of Commerce, 53
Main income, 242 Ministry of DONER, 5
Mainland India, 105 Ministry of External Affairs (MEA), 1
Mainstream(ing), 13, 26, 52, 273 Missing links, 234
Mandalay, 305 Modern technology, 275
Manipur, 237 Modes of production, 82
Manpower resources, 9 Modi, Narendra, 288
Manufactued products, 190 Mohammad, Mahathir, 2
Manufacturing, 70 Mongla, 13
Maritime transport, 139 Monopoly, 28
Market, 3, 274, 317 Moreh, 35, 76
access, 274 Motor Vehicle Agreement (MVA), 13
driven, 32 Mukerjee, Pranab, 234
integration, 26, 278 Multilateral, 287
linkage, 276 Multimodal port, 7, 116
332 Index
Multimodal transport systems, 219 Nation states, 66

Multipliers, 29 Natural endowments, 39
Multi-pronged, 12 Natural gas and coal, 6
Multi-track, 121 Natural products, 28
Murphy, K., 172 Natural resources, 189, 204
Myanmar, 288, 304, 308 Naypyidaw, 254, 255
Junta, 289 Nehru, Jawaharlal, 289
Myitsone, 296 Nehruvian, 253
Neo-classical, 167
Neo-liberalism, 296
N Neoliberal market, 48
Naga, 222, 237 Neoliberal policy, 48
Naga Autonomous Area of Sagaing Net value added (NVA), 311
Region, 237 Network
Nagaland, 237 highways, 36
Naga National Council (NNC), 254 pipeline, 36
Nampong, 260 railways, 36, 109
Narcotic drugs Networked production centres, 168
hashish, 31 Networking, 3, 12
heroin, 31 New international boundaries, 88
National Advisory Council (NAC), New middle class, 54
235 New opportunities, 116
National Council of Applied New vision, 6, 26
Economic Research (NCAER), Nodal argument, 46
77 Non-Aligned Movement (NAM),
National Democratic Alliance 302
(NDA), 69 Non-performing assets (NPAs), 312
National Democratic Alliance (NDA) Non-tariff barriers (NTBs), 135
II, 45 Non-tariff measures (NTMs), 118
National Democratic Front of Non-traditional security, 292
Bodoland (NDFB), 35 Normal trade, 314
Nationalization, 306 North-East Frontier of Bengal, 310
National League for Democracy North Eastern Council (NEC), 5,
(NLD), 260 272
National Socialist Council of North-Eastern Frontier Tracts, 30
Nagaland (NSCN), 35, 51, 254 Northeast India, 46
National security, 240 Northeast Region (NER), 105
Nation state framework, 224 exports, 163
Index 333
five Is, 270 People-to-people connectivity, 113,

imports, 164 118, 125
land customs stations, 163 Per capita income, 39, 269
Vision 2020, 68, 150, 273 Peripheralization, 68
Nostalgic fiction, 65 Peripheral region, 26, 69
Permeable, 65
Petroleum products, 165
O Physical connectivity, 139
Offshoring, 103 Physical contiguity, 3
Ohmae, K., 65, 66, 82 Pivot to Asia, 283
Oil and Natural Gas Corporation Pivotal role, 8
(ONGC), 8 Planning Commission, 72, 272
One Belt One Road (OBOR), 217, Plantation, 6
283 Policy, 3
Open sky policy, 109 agenda, 108
Organized economic sector, 29 harmonization, 14, 277
Oriental, 159 Political, 1
Outflows, 271 development, 2
Outsourcing, 103 dialogue, 1, 302
Outward looking policy, 36 dynamics, 55
economy, 9, 10, 48
exchanges, 2
P geo, 11
Pacific Rim Country, 306 image, 307
Pakistan, 301 interventions, 215
Panikkar, K.M., 289 isolation, geo political, 5
Paradigm, 309 relations, 30
Paradox, 270 securities, 11, 15
Partnership for Quality Infrastructure, Politico-administrative boundaries,
47 88
Pathway, 87 Poor health care, 243
Patkai, 28, 310 Poor market accessibility, 206
Patron-client, 172 Population density, 268
Peasants, 221 Post independence, 38
People’s Liberation Army (PLA), 35, Post-colonial, 214
254, 258 Potential economic benefits, 173
People’s Republican Party of Poverty, 84, 146
Kangleipak (PREPAK), 258 incidence, 119
334 Index
Poverty (cont.) Rao, Narasimha, 2, 67, 303

line, 55 Rationalisation, 12
reduction, 120 Regional Comprehensive Economic
ratios, 54 Partnership (RCEP), 137, 138,
Power supply, 165 154n13, 285
Pre-colonial period, 49 Regional
Preconditions, 151 economies, 41
Pre-liberalization, 65 peace, 120
Prescribed path, 65 production network, 201
Primary products, 72, 195 sub-regional cooperation, 9
Primary school, 243 trade blocks, 177
Primary sector, 311 Regional Comprehensive Economic
Private investment, 189 Partnership (RCEP), 132
Private sector led growth, 67 Regional trade agreements (RTA),
Pro-democracy, 307 201
Product diversification, 195 Regionalism, 9
Production, 206 Regulatory framework, 134
networks, 108, 109, 122, 206 Regulatory issues, 118
possibility frontier, 3 Research and Information System
relation, 6 (RIS), 77
Progressive social attitude, 269 Reserve Bank of India (RBI)
Property rights framework, 167 guidelines, 313
Prospective economic region, 65 Resource endowment, 315
Public Administration, 70 Resources and product base, 165
Public–private partnerships (PPP), Restricted Area Permit (RAP), 292
151, 236 Resurgence, 4
Pyi, 248 Re-territorialization, 88
Rights of the indigenous people, 162
Rih-Tiddim, 258
R Road density, 109
Racial distinctions, 67 Rohingya, 222, 259
Railway density, 109 Rural population, 238
Railway lines, 147 Rural workforce, 311
Rain water harvesting, 246
Raison d’etre, 290
Rakhine, 222 S
Ramesh, Jairam, 32, 35 SAARC/SAPTA, 37
R&D, 186, 277 Sagaing, 254, 288
Index 335
Saw Tun, 33 Small entrepreneurs, 221

Scheduled tribe population, 268 Small market, 275
Secessionist forces, 215 Small powers, 223
Secondary school, 243 Smart border, 290
Secondary sector, 70, 311 SMEs, 142
Sectoral Dialogue Partner, 2, 303 Smuggling, 171
Sectoral partner, 131 Social change, 293
Security, 128 Social space, 86
considerations, 272 Societal governance, 170
interest, 283 Societal values, 173
issues, 4 Socio-cultural relations, 126
perspective, 271 Soft infrastructure, 123
treaties, 223 Soft policies, 112
Sein, Thien, 291 See also People-to-people
Self-help groups (SHGs), 247 connectivity
Semi-skilled labourers, 221 South Asia Free Trade Agreement
Service sector, 205 (SAFTA), 34
Shan, 222 South China Sea, 284
Shared links, 292 South Asian Association for Regional
Shifting cultivation, 276 Co-operation (SAARC), 34,
Shleifer, A., 172 213, 223
Shukla Commission, 30, 39 Southeast Asia, 293
Sikri, Rajiv, 36 Space, 64
Siliguri corridor, 30 Spatial fixes, 64
Singapore, 303 Special Accelerated Road
Singapore Lecture, 67 Development Programme in
Single-Window Inspection (SWI), North East (SARDP-NE), 55
127 Special Category States, 79
Singh, Manmohan, 3, 32, 291 Special economic packages, 270
Sinha, Yashwant, 303 Special economic zones (SEZ), 204
Sino Special Leader’s Dialogue, 3
Burma, 306 Special Purpose Vehicle (SPV), 143
Indian, 301 Stakeholders, 278
phobia, 223 State boundary disputes, 277
Sittwe, 144 State Law and Order Restoration
Sixth Schedule of the Constitution, Council (SLORC), 30
82, 269 Statist theory, 48
Skilled labour, 136 Stilwell Road, 34, 257, 270
336 Index
Stilwell Road (cont.) Terrace cultivation, 241, 246

Bhamo, 34 Tertiary sector, 70, 311
Kunming, 34 Thadou-Kuki, 237
Lashio, 34 Thailand, 7
Ledo, 34 Look West Policy, 315
Lekhapani, 34 Thangkhul, 237
Myitkyina, 34 Thangshang, 237, 241
Pangshu Pass, 34 Third country goods, 313
Yunnan, 34 Throwaway price, 236
Strategic consideration, 35 Tibet, 28
Strategic location, 178 Tourism, 6, 205, 312
Strategic partnerships, 3, 12 Track II, 9
Strategic relationship, 178 Trade
Structural adjustment, 48 access, 28
Sub-regional connectivity, 217 Bangladesh, 31
Sub-regional cooperation, 32 and commerce, 302
Suharto, 2 creation, 27
Sukapha, 28, 310 cross border, 32
Summit-level partner, 131 deficit, 164
Supply chain network, 139 destruction, 27
Supply chains, 119, 122 facilitation, 116, 135, 168
Supply side, 39 flows, 119
Supporting conditions, 152 formal, 31
Supportive development, 107 informal, 31, 76, 171
Surface transport links, 277 outlets, 295
Suvarnabhumi, 295 potential, 195
Sylhet, 305 volume, 103, 260
Traditional institutions, 170, 272
Traditional systems, 25
T Transaction cost economics (TCE),
Taga, 255 167
Tai Shan, 28 Transaction costs, 41, 166, 285
Tamu-Kalewa-Kalemyo, 33 Trans-ASEAN Gas Pipeline (TGAP),
Tangkhul, 241 116
Tatmadaw, 255 Trans-Asian Rail Network, 291
Tea, 29 Transnational, 293
Technocratic analysis, 65 Transnational connectivity projects,
Telecommunication services, 165 225
Index 337
Trans-Pacific Partnership (TPP), 284, Unskilled work, 242

285 Untraded interdependencies, 66
Transportation cost, 172 Urban services, 311
Transport connectivity, 318 Urban workforce, 70, 311
Transport subsidy, 311 Urbanization rate, 268
Tribal rights, 294 USA, 301
Trickle down, 179 USSR, 301
Trilateral Highway, 7, 57, 217
Tripura, 8
Tumultuous period, 50 V
Vajpayee, A.B., 2
Valley districts, 268
U Value addition manufacturing
U Nu, 306 industries, 186
UNCTAD, 201 Value chain network, 202
Under-developed region, 154 Value chain production, 312
Underdevelopment, 168, 215 Vietnam, 7
Unemployment, 186 Villages, 236
UN Economic and Social Vishny, R., 172
Commission for Asia and the Vision NER: (2020), 5
Pacific (UNESCAP), 214 Vision Statement, 126
Unexplored domains, 10 Volume of trade, 195
Unification of markets, 84
Unified economy, 267
Unified market, 10, 275 W
Union Government, 46 Wa, 258
United Liberation Front of Assam Wage employment, 29
(ULFA), 35, 222, 254 Water resources, 277
United National Liberation Front White paper, 67
(UNLF), 256, 258 Williamson, 167
United National Liberation Front of World Bank, 67
Western South East Asia World Trade Organization (WTO),
(UNLFWSEA), 261 302
United Nations Convention on the
Law of the Seas (UNCLOS), 283
United Wa State Army (UWSA), 258 X
Unregulated transactions, 294 Xenophobic, 215
338 Index
Y Z
Yangon, 305 Zokhawthar LCS, 73, 144
Youth unemployment, 312 Zokhawthar-Rhi route, 33
Yunnan, 9, 257, 305 Zomi Revolutionary Army (ZRA), 256

Atul Sarma, Saswati Choudhury (Eds.) - Mainstreaming The Northeast in India's Look and Act East Policy-Palgrave Macmillan (2018)

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Mainstreaming

ISBN 978-981-10-5319-1 ISBN 978-981-10-5320-7 (eBook)

Library of Congress Control Number: 2017950813

© The Editor(s) (if applicable) and The Author(s) 2018

Cover illustration: imageBROKER / Alamy Stock Photo

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

to the Institute to organize a conference as part of its Silver Jubilee

My esteemed friend, M. P. Bezbaruah, Former Member of the North

1 Towards a Perspective on the Look (Act) East Policy and

2 Integrating Northeast with South East Asia: Great

2.3 Lessons from the Past Internationalization

3 Insider or an Outsider: Where Is the Northeast in India’s

4 Look East Policy and Northeast India: Is It a

4.4.5 Central Assistance to NEI 78

Part II Linking South East Asia Through Northeast India:

5 Unlocking the Northeast Region of India: An ASEAN

6 India’s Connectivity with ASEAN: What Role for Northeast

7 Act East Policy and Northeast India: The Role of

8 Integration with Regional Blocks Through Intra-industry

8.3 Northeast India and Bordering Nations: Trade

Part III Look (Act) East Policy and India’s Multilateral

9 Look East Policy, Sub-regional Connectivity Projects and

10 Look (Act) East Policy: With or Through the Northeast 233

10.5.2 Changing the Approach 240

11 Rebel Camps in Myanmar: Will They Hamper

Part IV Opportunities and Ways Forward in Building

12 A Uniﬁed Northeast Economy: The Road to Gainful

12.7 How Does Market Integration Work? 276

13 Look (Act) East Policy and Northeast India: Challenges

14 India’s Act East Policy Begins in Myanmar 287

15 Locating Northeast India in the Look (Act) East Policy

ACIA ASEAN Comprehensive Agreement on Investment

APG ASEAN Power Grid

GMS Greater Mekong Sub-region

MRAs Mutual Recognition Arrangements

SAPTA South Asian Preferential Trade Agreement

Fig. 4.1 NEI’s contribution to national income 72

Table 2.1 Indo-Myanmar border trade (through Moreh Route)

Table 5.1 ASEAN–India trade indicators 104

© The Author(s) 2018 1

Prime Minister visited Indonesia, Thailand, Myanmar (then known as

“I speak today on ASEAN and the Asia–Paciﬁc . . . This region is one of

cultural and spiritual connectivity with Asia is as important as physical

1.2 Northeast India and India’s Look East

• Connectivity and physical infrastructure to facilitate trade;

specializing in particular craft or trade are encouraged to improve the

transfer to Mandalay from different towns are estimated to be $59.80

1.3 Mainstreaming Northeast India

countries of the Mekong sub-region where there is demand for English

and diplomacy. The establishment of regional norms for strategic coop-

1.4 The Way Forward

a holistic approach taking both external and domestic dimensions into

1.5 Chapter Scheme

physical infrastructure and low performing economic institutions like the

network and, by extension, economic development in this part of India.

and political handicaps. In Northeast India conﬂicting economic interests,

Part 4, “Opportunities and Ways Forward in Building Strategic Part-

Leonard, M. (2015). Geo-economics: Seven challenges to globalisation. World Eco-

Saswati Choudhury is an Associate Professor at Omeo Kumar Das Institute of

© The Author(s) 2018 25

2.2 How Does Market Integration Work?

2.3 Lessons from the Past Internationalization