‘India’s Strategy for Economic Integration with CLMV’, a Report brought out by the Ministry of Commerce and Industry, Government of India, provides a rationale for establishing commercial and economic linkages between India and the Cambodia, Laos, Myanmar and Vietnam (CLMV) region. Prime factors that make economic cooperation between India and CLMV plausible include geographical proximity, economic dynamism, and cheap labour cost in CLMV, among others.

The Commerce Secretary Ms. Rita Teaotia, launched a Report of the Ministry at an event organized by the Research and Information System for Developing Countries (RIS) here in New Delhi on Friday, unveiling a strategy of India towards the CLMV region. The session was chaired by Ambassador Shyam Saran, Chairman, RIS and former Foreign Secretary to Government of India.

The ASEAN region is characterized by the presence of strong production networks and Regional Value Chains (RVCs). While India’s participation in regional value chains (RVCs) has remained low, RVCs are also not well developed in CLMV too, as compared to the rest of ASEAN. Considering that RVCs have emerged as important vehicles for regional economic integration, they need to be facilitated with adequate and integrated policy responses. This is important for achieving developmental objectives such as employment generation, poverty alleviation and improvement in quality of life.

It is in this context that the Ministry’s Report, prepared by Ram Upendra Das, an economist and professor at RIS, presents an analytical and empirical basis for India’s economic integration with the CLMV. It argues for adopting an integrated approach towards trade in goods, services, investment and skills while identifying sectors with untapped potential complementarities.

The current level of economic linkages between India and CLMV, both in trade and FDI, are weak. Some major challenges confronting India-CLMV economic relations include information gap, communication gap, skill unavailability, banking constraints and integrating SMEs in RVCs.

  There are several sectors in CLMV that the report has identified as focus sectors from the view-point of taking advantages of synergies across, manufacturing, trade and investment. These include agro-processing, oil and gas, pharmaceuticals, wood and timber, light engineering, garments, automobiles, education, IT, SMEs, tourism and skill development. The Report finds that one of the important ways of utilising the CLMV’s economic space is by setting up manufacturing units in the region. This will help in accessing the Chinese markets through exports originating from CLMV under the China-AEAN FTA. Additional export expansion to the tune of US$ 100 billion is feasible, which in turn can address the trade deficit of India with China, as estimated in the Report.

One of the major thrusts in the Report includes creating an India-CLMV convergence in the regional trade negotiations and alignment of India’s commercial interests with CLMV’s policy focus. The Report observes that one of the most important ingredients of setting up business is skill availability and there exists considerable skill complementarities between India and CLMV in terms of skill availability in India matched with unavailability in CLMV. It is also desirable to integrate the employment-intensive SMEs with regional value chains through India-CLMV integration and to facilitate this process there is a need to increase the presence of Indian banks there.

The Indian government has sought to promote investments by India Inc. in CLMV as recommended in the Report. In the Union Budget for 2015-16, Finance Minister Arun Jaitley stated that “the ‘Act East’ policy of the Government of India endeavours to cultivate extensive economic and strategic relations in Southeast Asia.” Work is in process for implementing the announcement. This is an important pointer towards effective operationalisation of India’s ‘Act East Policy’, as emphasized by Prime Minister Narendra Modi.

Economic integration with CLMV to promote regional value chain participation and coordinated trade investment skills policy, facilitating Indian investment. The Report advocates an integrated approach across trade, services, investment and skills to strengthen India CLMV economic linkages, develop Regional Value Chains, and advance employment and poverty reduction objectives. It identifies information, communication, skill, banking and SME integration gaps; prioritises sectors including agro processing, pharmaceuticals, light engineering, garments, automobiles, education, IT, tourism and skill development; and recommends promoting Indian manufacturing and investment in CLMV, increasing Indian bank presence, and aligning India's commercial interests with CLMV policy focus to operationalise Act East objectives.