India’s Exim Bank Sees Potential in Burma

By Kyaw Hsu Mon 12 September 2013

RANGOON – The Export-Import Bank of India opened an office in Rangoon on Monday, becoming the first bank owned by the Indian government to set up headquarters in Burma.

The Exim Bank aims to promote India-Burma trade, and it has already extended credit totaling US$247 million to projects in Burma, in sectors including transportation, telecommunications, electricity and vehicle manufacturing. The Irrawaddy caught up with Jasmeet Singh Narula, the Burma representative of India’s Exim Bank, in Rangoon this week to discuss the bank’s move to the Golden Land and what it hopes to achieve here.

QuestionHow does India’s Exim Bank work here? I mean, how do you promote your bank to traders, both Burmese and Indian?

Answer: Exim Bank has been providing alternative financing solutions to the Indian industry, especially the exporting fraternity, supporting them in their efforts to be internationally competitive. Over the past three decades, a greater measure of internationalization of Indian business has been occurring, through Indian corporates establishing joint ventures and wholly owned subsidiaries, as well as acquiring companies abroad. Exim Bank was the first financial institution approved by the Reserve Bank of India, India’s central bank, to provide overseas acquisition finance.

Through its wide range of financing, advisory and capacity building activities, Exim Bank also endeavours to significantly supplement the efforts of the host country government in achieving its development objectives. Exim Bank, with the support of government of India, has extended seven lines of credit (LOCs), valued at US$247 million, to Myanmar [Burma] for various developmental projects, including upgrading and setting up of railway projects, a petrochemical complex, OFC links, refinery projects, automobile assembly and manufacturing plants, and transmission lines projects. Exim Bank is the only financial institution in India today through which all LOCs extended by the government of India are implemented. Exim Bank’s LOCs afford a risk-free, non-recourse export financing option to Indian exporters. The bank also offers medium- and long-term buyer’s credit for project exports to Myanmar, enabling Indian project exporters to secure business while avoiding risk.

Q: Why did Exim Bank decide to open here? How will Myanmar benefit?

A: The inauguration of Exim Bank’s representative office in Yangon [Rangoon] marks the opening of its eighth office overseas, besides its 10 domestic representative offices in India. Since its inception, Exim Bank, through its wide network of offices located in Washington DC, Dubai, Singapore, Addis Ababa, Dakar and Johannesburg, besides its branch in London, has strived to play a catalytic role, as a key player in promoting India’s international trade and investment relations with partner countries, while contributing to the internationalization endeavors of Indian business. With its presence in Yangon, Exim Bank will now focus on further enhancing India’s bilateral trade and investment links with Myanmar, with which India shares rich historic, cultural, social and economic ties.

Q: Do you think Myanmar’s banking system is sufficiently connected to international banks?

A: Growth in the economy and a pickup in consumer demand are expected to fuel growth in Myanmar’s financial sector, which presents opportunities for collaboration. With increased demand for technology and expertise from the banking sector required for global integration, opportunities emerge in technology upgrades and automation of the financial sector. Indian financial institutions could collaborate with local banks as they seek to offer more services. Foreign banks may eventually look to secure branch licenses, which could fuel domestic growth through providing commercial and project financing services. With India’s proven expertise in banking and financial sector-related software and automation processes, India could contribute to capacity building and training for the personnel of regulatory agencies and financial institutions. With the need for greater global financial integration to enable cross-border payment and transaction, there is expected to be an increasing demand for technology for integrated electronic payment systems, ATM networks and banking security, among others.

Q: What are the challenges of entering Myanmar’s banking sector?

A: Myanmar’s recent reforms open up a wide range of economic opportunities, including foreign investment in key sectors, mainly on account of its strategic geographic location and abundance of natural resources.  With a view to attracting greater foreign investments into the country, the adoption of the new Foreign Investment Law by the government of Myanmar is a welcome development which would encourage creation of a favorable investment climate and increased investment flows.

Q: Do you have some figures about recent Myanmar-India trade?

A: Trade relations between India and Myanmar have witnessed a robust trend in recent years, with India’s total trade—exports plus imports—with Myanmar having risen from US$408 million in 2001 to almost US$2 billion in 2012, witnessing a more than fourfold rise. This buoyant trend has been underlined by both a rise in India’s exports to and imports from Myanmar. Bilateral trade relations between India and Myanmar have witnessed a significant rise in recent years, with India accounting for 15 percent of Myanmar’s global exports in 2012, and ranking as its second-largest export market. As a partner country for Myanmar’s imports, India accounted for a share of 3 percent of Myanmar’s global imports while ranking as the seventh-largest import source Myanmar generally maintains a trade surplus with India, which has increased from US$293 million in 2001 to almost US$1 billion in 2009, and stood at US$819 million in 2012, reflecting the large volume of India’s imports from Myanmar, vis-à-vis India’s exports to Myanmar.

During the period 2001 to 2012, India’s exports to Myanmar have risen more than ninefold, from US$58 million in 2001 to US$527 million in 2012. India’s exports basket to Myanmar primarily comprises pharmaceutical products, articles of iron or steel, machinery and boilers, electrical and electronic equipment, residues and animal fodder, and iron and steel, which together account for as much as 73 percent share in India’s total exports to Myanmar in 2012.

As regards India’s imports from Myanmar, wood articles, charcoal and edible vegetables dominate the import basket, accounting for as much as 95 percent of India’s total imports from Myanmar.  For both these items, Myanmar is India’s largest import source, accounting for a share of 26 percent each in India’s global imports of wood and wood articles and edible vegetables, roots and tubers.  India’s imports from Myanmar witnessed a sharp increase from US$ 350 million in 2001 to US$ 1346 million in 2012.

Analysis of trends in Myanmar’s imports of major items and India’s share would reveal that India has achieved a respectable share in only few products out of the major import categories of Myanmar, namely pharmaceutical products, perfumes and cosmetics, rubber and articles, iron and steel and articles, and cotton. India’s share in the other major import items of Myanmar continues to remain marginal.

With a view to, thus, further enhancing bilateral trade relations, there is need to identify potential items of India’s exports to Myanmar, in line with India’s global export capability as also demand existing in Myanmar exhibited by the rising trend in major import items of Myanmar. This win-win situation, in turn, would also serve to enhance India’s ranking as Myanmar’s import partner.

One may also note that in spite of India’s geographical proximity to Myanmar and export capability in most leading import items of Myanmar, India’s share in Myanmar’s imports is relatively low, as compared to other partner countries in Asia including China, Thailand, Singapore, Korea, Japan and Malaysia. There is a need for a stronger bilateral cooperation between India and Myanmar in order to harness the true potential that exists for increasing bilateral trade and investment. In this regard, it was envisaged by both countries during the India-Myanmar Joint Trade Committee meeting held in New Delhi in September 2011 to double bilateral trade to US$ 3 billion by 2015.