OBOR challenge

GS2 – Important International institutions, agencies and fora, their structure, mandate

GS2 – Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

GS2 – Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora

Context

• China is organising ‘Belt and Road Forum for International Cooperation’ which will be held in Beijing on May 14 and 15.
• It will mark the formal launch of China’s ambitious and potentially game-changing initiative to build a network of transport and economic corridors across Asia and Europe with China as the nodal point.
• At last count, some 28 heads of state and government had confirmed attendance while another 50 countries will send official representatives.
• India is unlikely to participate, except at a functional level, as it has objected to one major component of the One Belt One Road (OBOR) — the China-Pakistan Economic Corridor (CPEC) — as it runs through Pakistan-occupied Kashmir (PoK).
• After all, China routinely blocks any international funding of projects in Arunachal Pradesh on the ground that it is disputed territory. Of late, it has even raised objections to the central government undertaking projects in that state.
• China has suggested starting negotiations on a ‘China India Treaty of Good Neighbours and Friendly Cooperation’, restarting negotiations on the China-India Free Trade Agreement, striving for an early harvest on the border issue and actively exploring the feasibility of aligning China’s ‘One Belt One Road Initiative’ (OBOR) and India’s ‘Act East Policy’.
• To repeat Nehru’s outright rejection in 1960 of Zhou Enlai’s proposal to settle the border dispute would be a historic mistake.

 What are long term benefits from China’s OBOR?

• India’s response should be based on its long-term interest and not short-term concerns.

1. (I) Treat the Belt and Road Initiative (BRI) — which already has contracts of over $1 trillion covering over 60 countries — as enlarging areas of cooperation

(II) Push for India as the southern node and a ‘Digital Asia’.

(III) India cannot be a $10 trillion economy by 2032 without integrating itself with the growing Asian market and its supply, manufacturing and market networks.

2. Complementary to China’s Initiative, develop common standards with the fastest growing economies in Asia that are on the periphery of the B&R Initiative, such as Bangladesh, Vietnam and Indonesia, to facilitate trade, investment and business engagement.
3. (I) Offer a new cooperation framework in South Asia around global challenges.

(II) For example, sharing meteorological reports, region specific climate research and the ‘Aadhaar’ digital experience, despite on-going security concerns.

4. (I) Thought leadership provides an avenue to increasing global influence.

(II) Hinduism and Buddhism spread to East and South-East Asia with commerce and an urbanising Asia and world, and needs a new organising principle around shared prosperity — principles that dominated India till 1800 making it the world’s richest country for over two millennia.

What are objections of India?

• Notwithstanding Chinese activities in PoK, India saw merit in joining the Asia Infrastructure Investment Bank (AIIB), the BRICS Development Bank and the Shanghai Cooperation Organisation (SCO), all initiatives led by China.
• The difference is that India was actively involved in shaping the architecture of the AIIB and the Development Bank, their lending policies, and is represented at senior levels in these institutions.
• The SCO, too, is a multilateral institution and members have an important say in its policies.
• But the OBOR does not fit into this pattern. India had conveyed to China that a similar consultative process was even more important for such an ambitious undertaking.
• The Chinese apparently want India to first sign on to the initiative before getting into the specifics of India’s role, the choice of projects and financing. If this, indeed, is the case, then India’s caution is well founded.
• The OBOR appears to be more a series of bilateral projects among China and various partner countries rather than a truly multilateral cooperative venture.
• If there are specific projects, such as port development or railway projects, that China is willing to offer for India-China cooperation, let these be posed so that they may be properly evaluated.
• Projects under the OBOR, even in closely allied countries like Pakistan, are financed through loans that have to be paid back. The economic viability of projects has to be a prime consideration.
• The experience of Hambantota Port in Sri Lanka, which is included in the OBOR, is not encouraging. The revenue from the port, financed by Chinese credit, is not even able to meet the interest costs and, being in hock, the Sri Lankan government is willing to convert the outstanding loan into equity to be held by a Chinese company.
• But in return, China wants a 90-year lease on a vast acreage around the port to develop an industrial zone. There are other examples of such debt traps created by Chinese-funded projects, including the CPEC.
• Cooperating with China where there are convergent interests and confronting it when India’s interests are threatened has been an effective time-tested policy. The same principle should be applied in evaluating the OBOR.

What are other issues?

• China is making strong efforts to persuade India to join its ‘One Belt, One Road (OBOR) initiative. India has, however, not yet openly agreed to be a part of the project which aims to connect the Eurasian landmass and Indo-Pacific maritime routes through an overland ‘belt’ and a ‘maritime’ silk road.
• The project envisages the construction of a maze of road, rail and port projects through a number of countries to connect mainland China to markets in Asia and Europe.
• The OBOR initiative includes a number of projects including the “flagship” China-Pakistan Economic Corridor (CPEC), Bangladesh-China-India-Myanmar (BCIM), New Eurasian Land Bridge, China-Mongolia-Russia Economic Corridor, China-Indochina Peninsula Economic Corridor and 21st Century Maritime Silk Road.
• Most of India’s neighbours, including Nepal and Bangladesh, have already agreed to participate in the project.
• It has been widely projected that India’s reluctance to join OBOR is mainly because of the CPEC, which violates India’s sovereignty as the project covers the Pakistan-occupied Kashmir (PoK) region.
• It has been suggested that India may shed its reluctance to join OBOR if CPEC is renamed, or China declares CPEC is not the part of Belt and Road initiative.
• OBOR would massively strengthen China’s economic, political and security influence in India’s neighbourhood.
• OBOR would involve the export of Chinese capital, labour, technology, industrial standards, commercial benchmarks, use of the Yuan, development of new ports, industrial hubs, special economic zones and military facilities, under Beijing’s auspices.
• The scope of OBOR is bigger than the one undertaken by the British Empire in the 19th Century.
• Not just India, even Japan has refused to join the project and started its own Belt and Road initiative named as “Partnership for Quality Infrastructure” which would cover Indo-Pacific and Eurasian regions. Japan has also invested around $150 billion for this project.
• New Delhi aspires for a friendly neighbourhood but considering the constant security threat, it faces from Pakistan and often from China even now, India cannot afford to play second fiddle to Beijing. And even if it decides to join OBOR, it cannot afford to be a junior partner

Criticism of India’s policy towards OBOR

• Countries are now gaining influence more through the strength of their economy than the might of the military. However, analysts in India have yet to recognise these global trends and continue to see the re-emergence of China through a security prism.
• Calls for new alliances with Iran, Iraq, and Afghanistan “to create a two-front dilemma for our western neighbours, but also encirclement of our northern neighbour from the west” ignore the strategic impact of the BRI which all countries in Asia, except Japan, embrace and require new approaches to secure our own re-emergence.
• As a continental power, China is knitting together the Asian market not only with roads, rail, ports and fibre optics but also through currency exchange, standards, shifting of industry and common approaches to intellectual property rights.
• As the world economy is expected to triple by 2050, Asia will again have half of global wealth. China is seeking to fill the vacuum following the U.S.’s withdrawal from the Trans-Pacific Partnership, and India should add elements to it that serve its national interest as part of its vision of the ‘Asian Century’.
• Change also raises the question whether existing approaches, institutions and rules are the best way of organising international relations.
• Coordination between the major powers is emerging as the best way of global governance in a multi-polar world.
• Despite their territorial dispute, strategic differences and military deployment in the South China Sea, China and Japan have just agreed to strengthen financial cooperation, and the Forum could provide an impetus to settling the border dispute between India and China.
• BRI seeks “complementarities between a countries’ own development strategy and that of others”, though its goals have yet to be formalised, and India would lend a powerful voice to a strategy and structure that ensures common goals will not be neglected.

 Way forward

• India needs to speed up its own infrastructure projects and find ways to strengthen its sphere of influence.
• India should ramp internal connectivity. As China didn’t start OBOR as an external initiative but it was “built upon the top of the internal “Go West” strategy that focused, over the last two decades, on unifying China’s domestic market and connecting its developed east coast with the interior provinces.”
• India should modernise connectivity across its land and maritime frontiers with neighbouring countries. China is certainly not responsible for India neglecting its inherited trans-border connectivities since Independence; nor has Beijing stopped India from building road and rail links to its borders.
• India should work with countries like Japan and multilateral institutions to develop regional connectivity in the Indian Subcontinent and beyond.