Enhancing Connectivity for Promoting ASEAN-India Economic

IntegrationSuthiphand ChirathivatChula Global Network

Chulalongkorn UniversityBangkok

Introduction

• The world has changed, Asia is fast becoming economically dominant

• How to act in the new environment if we are going to advance our role and influence in international affairs

• Despite uncertainly in Europe and slow growth around the world, ASEAN, China and India are projected to grow faster than the others

• How to manage ASEAN-India economic integration?

Introduction

• How to fit in ASEAN-India connectivity?• Issues like India’s links to ASEAN production

networks?• Can connectivity help?• Need to substantiate connectivity with policy

regulations and participation of private sector (De (2010))

Estimated 2010 Data

Population(million)

GDP Size (billion US$, 2009 prices)

GDP per capita (US$, 2009 prices)

ASEAN 588.4 1,611.5 2,738.6China 1,354.1 5,497.8 4,060.0India 1,214.5 1,393.2 1,147.1

Source: Estimated from UN, World Bank and ADB data.

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Estimated ASEAN 2010 DataPopulation

(million)GDP Size (billion

US$, 2009 prices)GDP per capita

(US$, 2009 prices)

Brunei Darussalam 0.41 10.65 26,171

Cambodia 15.05 11.02 732

Indonesia 232.52 573.24 2,465

Lao PDR 6.44 6.05 941

Malaysia 27.91 206.73 7,406

Myanmar 50.50 34.01 673

Philippines 93.62 172.81 1,846

Singapore 4.84 208.66 43,137

Thailand 68.14 284.57 4,176

Viet Nam 89.03 103.79 1,166

Source: Estimated from UN, World Bank and ADB data.5

Implied Growth Rates From Aspirations

Average Annual Growth2.5 times 4.7 %3 times 5.6 %3.5 times 6.5 %4 times 7.2 %

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ASEAN Aspirations (Country Studies)2010 GDP per capita

(US$, 2010 prices)Aspiration Target

(times)2030 GDP per capita

(US$, 2010 prices)

Brunei Darussalam 30,391 2.5 75,978

Cambodia 729 4.0 2,917

Indonesia 3,039 3.5 10,636

Lao PDR 1,021 3.5 3,574

Malaysia 8,519 3.0 25,557

Myanmar 756 4.0 3,026

Philippines 2,132 2.5 5,330

Singapore 46,041 1.6 73,665

Thailand 4,679 3.0 14,038

Viet Nam 1,195 3.4 4,063

ASEAN 3,161 2.98 9,406

Coefficient of Variation 1.582 1.3157

ASEAN-India Trade and Investment Flows

• Significant trade increase from US 7.1 billion in 2000 to US 41.3 billion in 2009

• Trade share of ASEAN with India has increased from 1.28% in 2000 to 2.83% to 2010 and that of India with ASEAN increased from 7.67% to 9.19%

• ASEAN has facilitated production network by increasingly involving in international supply chain and developing associated activities like foreign outsourcing and offshoring

ASEAN-India Trade and Investment Links

• Emergence of international product fragmentation has been identified as an important characteristic of recent development of trade and investment in ASEAN

• Using such a framework, India would probably be characterized as having entered the first phase of integrating into IPNs (Rahul Sen and SadhanaSrivastava (2010))

• Compared to major ASEAN economies, India’s contribution to exports of global parts and components is found to be small

ASEAN-India Trade and Investment Links

• Growth of export share of intermediate inputs from ASEAN to India has been positive, with Indonesia, Malaysia, Singapore and Thailand being major exporters of such products

• In case of India also a positive but very gradual growth is observed

• Export share of intermediate goods from ASEAN to India and vice-versa is very low compared to that of China

• Indication of China to have evolved as a major export destination of intermediate goods for ASEAN countries and also India

ASEAN-India Connectivity in the Context of AEC

• 10 member countries• A combined population of over 600 million• A nominal GDP exceeding US 1.8 trillion• Growth rate expected to exceed 5% in 2012• Target to from a single market and

production base by 2015

ASEAN-India Connectivity in Relation to MPAC

• By adopting MPAC, special emphasis on the role of connectivity (17th ASEAN Summit)

• Three dimensions –physical, institutional and people-to-people, a holistic approach to support the building of ASEAN Community

• MPAC envisioned intra-regionally well-connected ASEAN, connectivity with the economies beyond the Region is also as much critical to the success of ASEAN as a Community

• Sixth EAS declared “inclusive ASEAN Connectivity as a key priority area of cooperation in the EAS, together with other agreed priority areas of cooperation”

US President Barack Obama (8th R) participates in the East Asia Summit family photo, part of the Association of Southeast Asian Nations (ASEAN) summit in Nusa Dua on Indonesia's resort island of Bali on November 19, 2011. Standing in the first row (L to R) are Russian Foreign Minister Sergey Lavrov, Japanese Prime Minister Yoshihiko Noda, Indian Prime Minister Manmohan Singh, South Korean President Lee Myung-Bak, Indonesian President Susilo Bambang Yudhoyono, Obama, Chinese Premier Wen Jiabao, Australian Prime Minister JuliaGillard and New Zealand Foreign Minister Murray McCully and (back row-L to R) Thai Prime Minister Yingluck Shinawatra, Singaporean President Lee Hsien Loong, Cambodian Prime Minister Hun Sen, Philippines President Benigno Aquino, Brunei Sultan Hassanal Bolkiah, Myanmar President Thein Sein, Vietnamese Prime Minister Nguyen Tan Dung, Malaysian Prime Minister Najib Razak and Laos PresidentChoummaly Saignason.

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ASEAN-India Connectivity and ASEAN Roadmap to 2015

• Managing increasing disparities among countries and sub-regions

• Regional integration as the link to individual Asian countries and the world

• Rethinking the regional integration model in the wake of the Euro zone crisis

• Building capacity for greater institutional connectivity

4-1. A regional framework

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ASEAN-India Connectivity and New Challenges in Asia

• Challenges of rising wages in Asia• China’s impact on shifting manufacturing hubs• Infrastructure challenges of manufacturing in

emerging economies• Lessons learned from the effects of Thailand’s

flood on supply chains

Enhancing ASEAN-India Connectivity:Mekong-India Economic Corridor

• CADP promoted MIEC, with connectivity between Ho Chi Minh City, Phnom Penh, Bangkok and Dawei by road, and further to Chennai in India by sea route.

• ASEAN leaders adopted the promotion of MIEC as one of the key actions in the MPAC in October 2010

• Dawei, a potential deep sea port and economic zone will provide opportunities for firms operating in Bangkok area and region along MIEC by opening up a new shipping route to India, the Middle East and Europe.

The second Thai-Lao Friendship Bridge over the Makong River connects Mukdahan province with Savannakhet in Laos.

Bangkok Post, Mid-year Economic Review, 2012, Page 26.

READY TO SELL: Thais cross the border to sell goods in Myanmar.Bangkok Post, Sunday, July 15, 2012, Page 13.

HIGHWAY HEADQUARTERS: an office for the road construction project.Bangkok Post, Sunday, July 15, 2012, Page 13.

Enhancing ASEAN-India Connectivity:Dawei Development Project

• More recently, an MoU was signed between MPA and ITD to develop Dawei deep sea port and integrated development plan

• ITD granted right from the government to develop the project covering an area of 250 km2 over 75 years project period, for the development of a deep sea port, industrial estate, and trans-border corridor link

• Total project cost estimates of US 80 billion

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BRING IN THE BULLDOZERS: Rights, a concrete marker bearing the initials ITD for Italian-Thai Development sits on a hilltop overlooking the sea at the site of a planned deep-sea port near Dawei.

UP THE CREEK: Far right, a farmer holds what he says is lead dust he pulled from a creek in the countryside near Dawei.

NO HURRY: Below left, a boy walks down a dirt road in a village near Dawei on the Andaman Sea.

CHANGE IS COMING: Two teenagers cruise past a sign indicating the economic zone near Dawei.

Source: Bangkok Post, Sunday, December25, 2011 p.1123

4-2-2. Dawei development project (2)

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4-2-2-(2). Dawei industrial estate: Layout plan

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Enhancing ASEAN-India Connectivity:Role of Myanmar and Northeast India

• Still weak physical connectivity between Myanmar and Northeast India

• Moreh land customs stations (LCS) has been the busiest, handling almost 99% of the regions trade with Myanmar

• Northeast India’s trade with Myanmar has always remained less than a percent of India’s total trade with Myanmar since the opening of Moreh LCS in 1995 (De (2011))

Enhancing ASEAN-India Connectivity:Route Development Possibilities

• Moreh/Tamu route• Zolkawtar/Rhee route• Nampon/Pangsu route: Stilwell road• Kaladan Multimodal Transit Transport project• Bangladesh transit route• Kyaukphyu project

Prime Minister Yingluck Shinawatra talks to Myanmar President Thien Sein on the way to his welcoming ceremony at Government House

Bangkok Post, July 24, 2012, Page 16A.

That the recent visits to Thailand by Myanmar democracy icon Aung San Suu Kyi, left, and President Thein Sein, right, were such big news item here shows a changing mentality among Thai people towards welcoming a former enemy now seen as a resource-rich potential business partner.

Bangkok Post, Tuesday, July 31, 2012, Page 11.

Enhancing ASEAN-India Connectivity: A Regional Framework

• Multi-modal approach; maritime, inland waterways, land, air, and other different modes of transportation

• Multi-functional approach; physical, institutional and people-to-people

• Multi-tier approach; tier 1(Bangkok, Chennai, Delhi, etc), tier 2 (existing)(Kolkata, Dhaka, Kunming, etc), tier 2 (emerging) (Yangon, Mandalay, Dawei, Kyaukphyu, etc, tier 3, others

5-2. Key infrastructure projects (1)

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6-1. Economic impacts of MIEC

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Simulation Scenarios Infrastructure Development of the Bridge

at Neak Loueng, new highway between Kanchanaburi and Dawei, and Dawei Port in 2015, leading to the speed-up to 60km/h along the road.

Customs facilitation, meaning that time and costs at the 3 border points at Kanchanaburi-Dawei, Poipet-Sisophonand Bavet-Moc Bai are halved.

Special customs facilitation that products of Thailand, Laos, Cambodia and other countries to be exported to India or EU can go through Kanchanaburi to Daweivery smoothly, at 15 minutes and free-of-charge, and vice versa.

Connecting Dawei and Chennai, and Dawei and Rotterdam by international equivalent sea routes.

Reducing PCBs 2% per year in Vietnam, Cambodia, Thailand, Myanmar and India.

Economic impacts will be wide-spread, with significant gains in CMV and Thailand.

6-2. Economic impacts of Trilateral Highway

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Simulation Scenarios Development of New highway

running Silchar-Moreh/Tamu-Pale-Bagan-Theinzayat-Mawlamyine-Kawkareik-Myawaddy/Mae Sot.

Customs facilitation at the Moreh/Tamu and Myawaddy/Mae Sot borders.

Allowing the transit transport in Myanmar only when firms use the road.

Fixed PCBs.

Larger impacts are expected in Manipur, Nagaland, and Mizoram.

6-3. Economic impacts of KMMTT project

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Simulation Scenarios Connecting Kolkata port to Sittwe

port. Develop new Inland waterway

between Sittwe and Paletwa. Develop new road between

Paletwa and Saiha, India. Allowing the transit transport in

Myanmar only when firms use the way between Sittwe and Indian border via Paletwa.

Fixed PCBs.

Myanmar will enjoy most of the gains from the project, though Mizoram will gain very slightly.