C3S Article no: 0040/2017
This article may be read in conjunction with an earlier article by the author- ‘Why is OBOR Not at All a Good Idea for India?’ (vide https://www.c3sindia.org/economyandtrade/5620)
The countdown for the jamboree on the Belt and Road Initiative (BRI), formerly known as the One Belt One Road (OBOR) has begun. With less than ten days for this mega event, billions of US dollars have been earmarked and being spent by the Chinese Government to showcase this project as something that is good for the world and will aid the developing countries across continents to promote regional integration and development. The importance being given to this event and the money being spent is not surprising at all considering that it has been the pet project of Xi Jinping from the time he announced and launched this mega initiative some three and half years ago.
The prominent leaders from the list of attendees from around the world for this event (in Beijing on May 14) are conspicuous by their absence. It is evident that majority of the world leaders have opted to give it the go by or have low level participation. In the context of such lack of support for this support by major global economies including India (which has very different reasons for opposing the BRI) it would be necessary to analyse the reasons for the lack of enthusiasm from leaders around the world on BRI.
The ambitious vision for the BRI, spans from Asia to Africa to Europe on a proposed platform of connectivity, investment and development. While the land segment known as the Silk Road Economic Belt (SREB) connects China through the Central Asian Republic, the oceanic segment called the Maritime Silk Road (MSR) connects the ports in Asia, Africa and Europe which will be developed by huge investments funneled through the Asia Infrastructure Investment Bank (AIIB) and other instruments for a whopping 50 billion USD for the project. While it is being showcased as something that would benefit the destination countries along the MSR, there are no doubts that the major beneficiary is China which is finding ways to channelize its surplus funds and capacity to serve both its economic and strategic interests well in to the next century. The countries which have joined the initiative by and large are low to middle level economies that have shown interest in the investments which would aid their infrastructure development and modernization. However, there is increased realization amongst these countries that the threat of debt trap looms large as witnessed in the case of Sri Lanka where China has invested heavily in Hambantota deep sea water port, Mattala airport and Colombo Port City (CPC) project. While there were expectations that the Government of Maithripala Sirisena would scrap the CPC project, the financial terms were such that this would never be feasible with the weak state of economy and the clauses for cancellation which were cost prohibitive. Also, contrary to expectations, most of these projects hardly contribute to job generation as the Chinese bring their own labour force and experts to execute the projects. Surprisingly, they even set up their own colonies in which the law of the host country is not applicable. While it is known that Hambantota is not a profit-making port and has many operational issues, China would not mind it as it has provided it a foot hold in the Indian Ocean and would be free to serve its strategic interests in the Indian Ocean. The airport Mattala and the port of Hambantota serve the purposes of strategic airlift if required and a turn round operational port for the PLA Navy.
As for as India is concerned, there are serious reservations about the entire project and the China Pakistan Economic Corridor(CPEC). The CPEC alignment passes through Pakistan Occupied areas of Gilgit-Baltistan and India has made its reservations known to the Chinese Government. It is interesting to note that China which is so sensitive to any activity in so called disputed areas such as Tibet, Arunachal Pradesh, overlapping Exclusive Economic Zone (EEZs) in respect of its maritime neighbours hardly cares for similar concerns in its projects. China on its part would like to legitimize the CPEC as an economic initiative and is making all efforts to get India onboard. CPEC also provides the gateway to China to the Arabian Sea through Gwadar Port which it is managing. It is notable that Pakistan is committed to providing special security to the Chinese workers on the project. Pakistan just like Sri Lanka would also be at the mercy of China’s funds and would also fall in to a debt trap.
China never bothered to consult India when it was drawing up the contours of the One Belt One Road and the MSR or the CPEC. Whatever benefits there are would accrue only to the Chinese establishment and aid its long-term objectives of expansion and wielding influence around the world. There are no reasons what so ever for India to support any component of this project that has no advantage either in the short term or long term. China has also hardened its stand in the recent months on issues such as the Nuclear Suppliers Group (NSG) admission for India, the admission to United Nations Security Council (UNSC), and the issue of JeM leader Azhar Masood being proscribed. On all the three issues,that India has been supported by the member nations and the members of the UNSC has made no difference to China’s stand on these issues.
It is quite clear that China would be unhappy with the lack of response for the 14th May event in Beijing. To a certain extent, this would also bring down the esteem of Xi Jinping who has been recognized and anointed as the Core leader. China is working overtime to see if they can garner some support notably from India on the issue. India has no reasons to yield any ground to China on this unilateral initiative that also has touched a raw nerve by its efforts to legitimize the illegal occupation of Gilgit-Baltistan in Pak Occupied Kashmir by trying to term the CPEC as a purely economic initiative.
There is another important dimension of the MSR that has escaped the attention of observers. Over all, the existing network of ports and infrastructure has connected the economies of the world and as long as the tariffs and port handling charges are paid, any nation can use the facilities for trade and commerce. Another important aspect is about the present state of global shipping that has stagnated; it would be a long time before global shipping volumes improves. Many ships are idling due to lack of volumes to transport and are being auctioned or broken up.
All the global trade is in favour of China and even China has its own issues with the slump in global shipping. It appears that China would develop ports and maritime infrastructure in this relatively idle period for shipping and wait for things to improve. As per the shipping industry estimates, the situation would change somewhere around 2030 but again in favour of China. China’s shipping fleet would be put to good use for exporting Chinese goods to new markets which have been modernized to handle higher volumes in the ports across the world. The smaller nations which have used Chinese money will increasingly find it difficult to repay the money. China would be very happy to convert the outstanding loans in to equities that would give it the lion’s share to manage the port and obtain leverages through the economic routes. The example of Sri Lanka which has fallen in the debt trap should serve as a warning to other nations who are readying to fall in to tight embrace of the dragon.
Despite the brave face put up by the Chinese leadership, without the support and participation from the leading nations of the world (Only Italy is attending amongst the G8 nations) the 14th May event will be a damp squib. Knowing China, it would put up a grand show with plenty of theatrics and rhetoric without substance.
From the point of India, there should be no reasons whatsoever to even review its decision about participation. While BRI has no tangible benefits for India, the non-participation would send a clear signal to China that it cannot have the cake and eat it too.
India hardly has any need to depend on China as the global climate is conducive for diversifying its interests and investments. China which has seen the GDP growth of India overtaking that of China would be aware of the potential of an Asian economy that can hardly be ignored by the rest of the world. There are other large economies both on the east and the west who also would like to move away from China and this works to India’s advantage. At times, India has been seen as a nation that is not proactive. Some of the actions have been interpreted as reacting to the initiatives of its adversaries. India which even weathered the international sanctions post the Pokhran blast in 1998 has the wherewithal to shape its responses by ensuring that it does not fall in to the Chinese trap. While there is no need to immediately consider radical bilateral measures, it is time for India to shape its own course without undue dependence on China’s action or lack of it.
[Commodore R. S. Vasan IN (Retd) is the Regional Director NMF at Chennai and the Director, C3S. The views expressed here are his own and do not reflect the official policy or position of the NMF, C3S, the Indian Navy or the Government of India. He can be reached at firstname.lastname@example.org.]