Today's Editorial

07 April 2017

Alone by the wayside



Source: By Krishnan Srinivasan: The Telegraph



The Silk Road, so named by the German geographer, Ferdinand von Richthofen, in the 19th century, was never a single road but a network of trade routes within and across Asia to Europe that developed in fits and starts over the past 2,000 years. Many products apart from silk travelled on this route and were traded, including art objects, manuscripts and ideas, religious and scientific, the most celebrated and long- lasting being the Buddhist faith that originated in India. At one end of this ' road' was China; at the other end were India, Persia, Arabia and Europe, unified in an early manifestation of globalization by the Mongols in the 13th century. The Silk Road enduringly excites the imagination and possesses a unique brand identity.


On separate occasions in 2013, China's president, Xi Jinping, announced a new ' Silk Road Economic Belt' and a 'Maritime Silk Road', which together have become known as 'One Belt, One Road'. China invited other countries to be partners in this venture, which would be mainly financed from its considerable resources, amounting to four trillion dollars. The newly- formed China led Asian Infrastructure Investment Bank and the New Development Bank would support the project. Four years later, Xi declared China to be a champion of free trade and globalization; OBOR would represent free- flowing goods and services and exchanges of people and ideas in a spirit of cooperation.


China's economy is moving from one based on investment to one resting on internal consumption, resulting in huge overcapacity in infrastructure, machinery, steel, cement, workers and engineers, along with zero or negative return on investments domestically. Its poorer peripheral landlocked provinces, such as Tibet, Yunnan and Xinjiang, would benefit from inclusion in a wider trading network.


Every finance minister is looking for easy money to relieve budget constraints. Although not previously consulted, over 50 countries have already endorsed the OBOR, accepting the Chinese assurance that "we are not imperialists and we do not want to colonize the world". But India has not joined that number, though the OBOR's connectivity and integration could be the stimuli needed to improving our manufacturing and competitiveness. India could also take advantage of China's consumer market and easier access to Iran, Afghanistan and Central Asia.


The OBOR project was not designed as an anti- India measure or as a way to exclude India, but India's acceptance would necessitate looking at China with an open mind, overriding the paranoia in certain circles, including in the government and armed forces, and shifting the emphasis from confrontation to cooperation. Participating in the OBOR could also help smoothen India- Pakistan relations.


Bangladesh, Cambodia, Myanmar, the Philippines, Vietnam and many other countries are vying for Chinese investment, and capital from China would accelerate Indian infrastructure projects. The OBOR project, once linked with Indian information technology, could incentivize the provision of higher education in India for foreign students.


Whether or not India joins the project, the OBOR will, in any case, make headway. A train from China to Spain and back has already completed the 16,200 miles round trip. A summit of interested countries is to be held in May in China, and it is to be seen whether India proposes to attend. Where the OBOR transits disputed territory, one of India's leading diplomatic analysts has pointed out that joint development of such areas — on the lines of Russia and Japan in the Kuril Islands — can override the questions of sovereignty, with benefit to both parties concerned.


Chinese firms have invested in lease facilities in a variety of ports in relatively small coastal nations from Darwin in Australia to Zeebrugge in Belgium, with the likes of Kuantan, Colombo, Male, Djibouti, Haifa, Ashdod, Port Said, and Piraeus in between. Many of these places have poor infrastructure, weak construction companies and fiscal problems, and welcome China's involvement irrespective of security considerations. India's opposition to the OBOR was first articulated in 2016 and reiterated by Narendra Modi this year.


Noting the "compelling logic of regional connectivity for peace, progress and prosperity", he added that connectivity could not "override or undermine the sovereignty of other nations". Seeking "openminded consultation", India has described the OBOR as a unilateral Chinese initiative, with a limited role for participating countries, and has, most importantly, objected to the route of the $ 50- billion China- Pakistan corridor that passes through Gilgit/ Baltistan in Pakistan- occupied Kashmir en route to Gwadar in Balochistan. Modi warned against "rising ambition and festering rivalries", saying that the need was "to guard against any inclination that promotes exclusion". In reality, China is not likely to make any tall demands violating sovereignty, but India apprehends that the OBOR could be a part of China's plan to encircle India and build up the economies of neighbouring countries which will augment their strategic autonomy.


However, New Delhi fully understands that no rising power will refrain from seeking geostrategic opportunities. China is rising and there is an air of inevitability about a future Sino- centric Asia. Apart from the argument about disputed territory — since 1960, China has professed that it does not have a border with India in Kashmir — the economic analysis of the OBOR is significant, and presents a negative picture. China's resources enable it to invest in low profit, high risk projects abroad that could meet its need for energy, raw materials and markets for manufactures.


Since most of the foreign investment will be done with Chinese labour and material, foreign exchange from China will be a small component of the costs of investment.


The countries through which the OBOR — in the form of rail, road, pipelines and cables — will pass will provide the land and incur debt to pay the costs of the projects. It is still uncertain if the benefits will exceed the costs incurred. Permanently transferring real estate to the Chinese and incurring the debt could prove onerous to host countries before long, and favours provided by Beijing may one day be called in. According to Chinese analysts themselves, 80 per cent of the loans to Pakistan might not be repaid, and 30 per cent to 50 per cent of the loans for the OBOR in other host countries. The conclusion has to be that the benefits to China would, therefore, be non- economic, namely diplomatic, strategic, political and intellectual.


Furthermore, if the infrastructure is purely economic and not strategic, it should be open to all countries to utilize it, which, in turn, would enhance its viability. If this is the case, third countries like India will have nothing to gain by joining the OBOR participants' club as such. Strategically, through the OBOR, China will strengthen its political bonding and international presence, develop land routes to the Indian Ocean, secure the benefit of oil and gas pipelines, counter American influence, and prevent Central Asia and Pakistan from becoming a base for Islamic extremism. The Maritime Silk Road would develop into logistic bases, the most desirable locations being at the intersections of the land and maritime corridors.


A relatively minor OBOR offshoot, the Bangladesh- China- India- Myanmar connectivity project, though mentioned in many Sino- Indian joint statements at the highest level, also incurs Indian suspicions since it would allow China access to and through the sensitive Northeast. Along with security considerations, India fears that cheaper Chinese manufactures and consumer goods will flood the Indian market, adding to the $ 60 billion deficit in balance of trade

Enhancing the Indian disquiet are signs that the early strains between the Trump White House and Beijing may be dissipating, with the potential of the United States of America and China working together to contain North Korean weapons of mass destruction and reviving the four- nation US- Pakistan- China- Afghanistan group to mediate between Kabul and the Taliban. The latter could lead to a renewal of US interest in Pakistan as a central factor and a rapprochement between Islamabad and Kabul, thereby diminishing India's role in the region and its preferential status with Washington — which may have been wishful thinking in New Delhi all along. The Indian case on the China- Pakistan economic corridor may rest on solid grounds, but it is never comfortable in any situation to stand alone as the sole dissenter.