P.K.BALACHANDRAN | 12 DECEMBER, 2017
China woos India’s neighbours with high finance and few conditions
COLOMBO: Even a casual observer of the South Asian scene will notice that resurgent China has become a major player in South Asian economics and politics, seriously threatening India’s traditional status as the regional hegemon.
This is generally and simplistically attributed to China’s ability and willingness to finance schemes of interest to the countries of the region while its rivals, India included, are reluctant to loosen their purse strings either because they do not have the money or because they look at projects from the point of view of viability in economic terms, in contrast to China which looks at economic projects from a political and geo-strategic point of view.
But the factor which actually determines the attitude of South Asian countries is not China’s financial ability or its financial daring, but its avowed policy of not interfering in the internal affairs of these countries.
This is the reason why the Chinese dragon is seen as being benign, and India as being a juggernaut out to crush the small countries in its neighborhood.
Realizing that this attribute is critical for its success in the region, China went out of the way to state it in the Joint Sino-Maldivian Communique issued on December 7 during the visit of the Maldivian President Abdulla Yameen to China.
The communiqué said that China “adheres to the principle of non-interference in internal affairs and supports Maldives’ independent choice of a development path which suits its domestic features.” Through this statement, China has sought to reach out to all countries in the South Asian region.
China’s statement was manna from heaven for the Yameen regime which is under pressure from the West to deliver on human and political rights, apparently as part of a campaign to bring about a regime change with the help of the opposition Maldivian Democratic Party (MDP).
As of now, countries of the South Asian region see China as a “benign benefactor” while India is not seen as such. These countries automatically assume that Indian aid has strings attached and that is part of a scheme to shape domestic politics to suit its exclusive interest which, according to them, is perpetual dominance over the region.
Even the best Indian schemes get rejected or remain unimplemented because of the lurking suspicion about India’s political intentions.
Recipients of Indian aid deliberately brush under the carpet the fact that, in contrast with Chinese aid, it is at least 30% in grant form while Chinese aid is almost completely in loan form given at a high rate of interest (4 to 6% in some cases in Sri Lanka).
In Sri Lanka, former President Mahinda Rajapaksa saw India as being the key partner in a West-led coalition to throw him out of office for following an independent (in this case a pro-China) policy. The present regime led by President Maithripala Sirisena began by welcoming India and the West sidelining China, but within two years reversed the policy. It has been keeping Indian projects on the shelf while forging ahead with the implementation of Chinese projects.
The Sri Lankan government is forging ahead with the implementation of the controversial Hambantota port project on terms more favorable to China than what was agreed upon when the “pro-Chinese” Rajapaksa was in power. Furthermore, Prime Minister Ranil Wickremesinghe, thought to be the most pro-West and pro-India Sri Lankan leader, declared publicly that Sri Lanka is now part of China’s OBOR and the 21st.Century Maritime Silk Route projects, schemes India has been warning Sri Lanka and other countries against.
India’s plea that the financial terms of the OBOR schemes will land the host countries in a debt trap has fallen on deaf ears. These countries want funds and that too fast, which only China can and does provide. And in their view, the OBOR is not only a good source of funding but is also free of political strings.
The Sheikh Hasina regime in Bangladesh, generally thought to be pro-India, has made up with China. It is not only welcoming Chinese economic and military aid but has also made Bangladesh a part of OBOR.
India failed to help Bangladesh’s pro-Indian regime at its hour of need when more than 600,000 Rohingya refugees had poured in from troubled Myanmar. Indian Prime Minister Modi dealt a body blow to Bangladesh when he fully backed the Myanmar government’s military campaign against the hapless Rohingya of Rakhine State blaming ‘Islamic terrorists” among them for their plight. Reducing the Rohingya exodus to a covert plan of Islamic terrorists to infiltrate into India was considered unfair and contemptible.
China also sided with Myanmar government and angered Bangladesh in the process, but it quickly made up by getting the two sides to the talks table which resulted in an agreement on repatriating the refugees. China’s intervention resulted in the suspension of the brutal ethnic cleansing operations in Rakhine State.
India, which has equal economic and strategic stakes in mineral-rich Myanmar, did precious little to alleviate the situation. Politically, it lost an opportunity to promote its ambition to be the “net security provider” in the South Asian region. The role will soon be grabbed by China.
In Nepal, the Nepali Congress-Maoist coalition government, thought to be pro-Indian, eventually made up with China and signed up with OBOR. With the Communist coalition set to emerge victorious in the on-going parliamentary elections, China’s footprint in the Himalayan country is expected to get larger than India’s from 2018 onwards.
In the Maldives, India is seen as being partisan, siding with the opposition Maldivian Democratic Party (MDP). When the MDP leader and former President Mohamed Nasheed was in power he had given the prestigious Male airport modernization project to the Indian company GMR in 2010. But the contract was cancelled after Naseed’s ouster by Mohmmed Waheed and given to China by the incumbent President Abdulla Yameen in 2016.
India has been retaliating for this by tacitly supporting the Western powers’ bid to dethrone Yameen, using his allegedly poor human rights record and Islamic radicalization which is allegedly taking place under his watch.
Indian Prime Minister Narendra Modi has entertained Yameen in New Delhi but he is still to visit the Maldives, though he has visited all the other South Asian countries including arch enemy Pakistan.
On its part, the Maldives has been viewing India’s economic aid proposals with suspicion though the public stance is that its doors are open to Indian investments and aid. It has also said that as far as security goes “Maldives will work with India and Sri Lanka, and no one else”.
Meanwhile, the Maldives’ ties with China are growing significantly with the signing of a Free Trade Agreement (FTA) on December 7 and its becoming part of the OBOR through a MoU.
The joint statement of December 7 said that the Maldivian side has agreed to facilitate investments by Chinese enterprises, while the Chinese side will encourage more competitive Chinese enterprises to invest in the Maldives and provide assistance to the Maldives’ social and economic development.
The signing of the FTA was a critical part of Yameen’s visit. It throws open the huge Chinese market to Maldivian fish and fish products which can now enter at zero percent duty. About 400 Maldivian products other than fish are also expected to benefit.
This is a boon for the Maldives because after the withdrawal of GSP Plus concessions, Maldivian exporters have had to cough up 25% duty for entry into the EU market, the country’s main overseas market.
The FTA helps China export its industrial goods to the Maldives at concessional duty. This has led to criticism that the Maldives will be flooded with Chinese goods and the trade gap which is huge will further widen. China exported US$ 320 million worth of goods to Maldives in 2016 but the total exports of the Maldives was only US$ 137 million. But China has pumped in millions in FDI to make up for the trade imbalance.
Maldivian government says that it needs more Chinese goods to sustain its ambitious infrastructure and economic diversification projects, and the FTA facilitates easy entry. Yameen, who is going to face elections in September 2018, needs to show development to counter the opposition’s propaganda on human rights issues.
The downside of the Joint Statement of December 7 is that the Maldivian government has agreed to cooperation at all levels of government and across departments. This is expected to spread and entrench China’s influence on the Maldivian government.For better communication and cooperation, China will be setting up schools to train Maldivians in the Chinese language.
Interestingly, Maldives has granted to China’s request to enable it to forge closer interactions with SAARC countries. Therefore in addition to Pakistan, China too will be a problem for India in SAARC.
Unless the West and India come up with a matching strategy based on a realistic understanding of the mindset, concerns of South Asian countries, these nations cannot be prevented from moving into China’s orbit.