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Three years, no takers for India’s $1-billion credit line for ASEAN digital links

Government sources said that the pilot projects “had been planned to ensure better takeoff of credit line projects and to reduce the dependence of the ASEAN countries solely on China. These, we hope, will be like trailers of the movies, yet to be released.

Nearly 40 months after Prime Minister Narendra Modi offered a $1-billion credit line for digital connectivity for 10 ASEAN countries from India, there are few takers.

The credit line was announced at the India-ASEAN Summit in Kuala Lumpur in November 2015, as part of India’s “Act East” policy.

Surprised by this lack of interest from ASEAN countries, in January, Delhi decided to give a grant of $40 million for pilot projects in Cambodia, Laos, Myanmar and Vietnam (CLMV) countries to help “kick-start” the credit line.

Government sources said that the pilot projects “had been planned to ensure better takeoff of credit line projects and to reduce the dependence of the ASEAN countries solely on China. These, we hope, will be like trailers of the movies, yet to be released.”

The overall responsibility for the $1-billion credit line, which includes both physical and digital connectivity in ASEAN countries, is with the Ministry of External Affairs, with funds released by the Export-Import Bank of India (EXIM Bank). The Department of Telecom (DoT) and Telecom Equipment and Services Export Promotion Council (TEPC) are the lead agencies from the Indian side for connectivity projects.

Of the 10 ASEAN countries, only Laos has so far sent formal requests for digital connectivity projects under the credit line. But, this request for three projects, made through diplomatic channels last May, has not progressed as EXIM Bank has no “Telecom Consultant” on its panel. (An empanelled Telecom Consultant is required to prepare a detailed project report for the projects requested by a foreign nation, as per procedure.)

EXIM Bank sources said that they only have infrastructure consultants on the panel because India has extended credit lines for infrastructure projects so far and this is the first time a digital connectivity project is being considered. It is, therefore, working with DoT, sources said, to finalise the telecom consultant.

Terming the past two years “a learning process”, former telecom secretary and Chairman of TEPC, Shyamal Ghosh told The Indian Express that “the credit line and pilot projects will enable Indian companies to establish footprints in the East, which would effectively actualize our Look-East policy besides providing an impetus to our indigenous manufacturing.”

Ghosh said that the proposal to offer $40 million for grant-in-aid pilot projects to CLMV countries “would facilitate taking up projects in the Line of Credit”.

Sources said a major impediment in any progress on availing the credit line is the issue of sovereign guarantee which is to be provided by the foreign government. As the telecom sector in ASEAN countries is in the private sector, no government is keen to provide a sovereign guarantee for a loan given by India to a private firm.

Even Laos, which has been the most forthcoming, proposed that it could, at best, issue a “letter of comfort.” The proposal from Laos is still under consideration by Delhi.

Other countries, sources said, have also “raised questions about the terms offered for the credit line and the technology being transferred”. In discussions in Myanmar last December, Myanmarese officials told their Indian counterparts that China was offering them a credit line at better terms than India, with a guarantee of modern technology transfer. As per TEPC officials, modern technology can only be transferred if the government is willing to let private Indian telecom companies execute the projects, and not restrict them to public sector firms.

DoT officials said the procedure at EXIM Bank is “very cumbersome and bureaucratic” which makes the credit line “unattractive” for ASEAN countries. Most of these countries, they said, also have a lengthy process for initiating projects at their end. For example, in Myanmar, inter-ministerial, parliamentary and Presidential clearances for such a project will take two years.

Sources said they are keen to show progress as Modi will address the ASEAN-India Summit in Vietnam on November 18.