Vivien Massot The BRI seen from India Antagonisms and ambiguities

The Bottom Line.

In this insight, Vivien Massot explores the Belt and Road Initiative (BRI) from the perspective of India. He explains that for a variety of strategic, political, infrastructural and transparency reasons, the initiative faces a certain reluctance from India. Now more than ever, Massot Concludes, India is still seeking to preserve its natural sphere of influence (South Asia, Indian Ocean) but does not have sufficient financial resources to be able to counter Chinese trade integration projects.

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The BRI seen from India: Antagonisms and ambiguities in the face of the Chinese presence

[By Vivien Massot]

The emergence of China over the past decades has transformed global economic and strategic relations, particularly in Asia. Undeniably, recent Chinese political and financial undertakings such as the Belt and Road Initiative (BRI) aim at fostering China’s trade integration. Yet, they can be perceived by China’s main partners as a rather negative ambition to expand China’s interests in a hegemonic way.

China’s economic development has been based on huge investments in infrastructure, including transport (roads, railways, airports, etc.) across the country, mostly aimed at connecting the interior and western regions with the more industrialized eastern regions. This expertise has naturally extended beyond borders, however, and in many situations, China’s capacity-building forces have also helped to solve the infrastructure needs of neighboring Asian and Central European countries.

Still, one question deserves some attention: where does India stand with this?

China’s geostrategic development and India’s position.

While BRI discussions often highlight the economic benefits brought to happy hosts and partner countries, India has consistently expressed dissatisfaction with China-supported infrastructure projects in South Asia.

Power, presence, influence.

In essence, the region is of geostrategic influence for India.

China has financed the development of numerous ports (Bangladesh, Burma, Sri Lanka, Pakistan) and rail networks (Nepal) in India’s neighboring countries. But in building a network of port facilities (commercial and military) as part of the “pearl necklace” strategy in the Indian Ocean since the mid-2000s, China has also effectively integrated Indian interests into the BRI “maritime route”.

Said differently, China is somewhat stepping on Indian feet, and anxiety levels are rising sharply.

For starters, the Indian military and civilian authorities have always seen negatively the increased Chinese presence in the Indian Ocean.

Furthermore, China’s ability to adapt its infrastructure to exercise more active security and military control has an impact in terms of international trade and energy presence.

Overall, the BRI initiative incarnates the growing struggle for influence between India and China on the Asian sub-continent and the Indian Ocean.

Intercontinental and sub-continental projects (around India).

So, what exactly is happening around India? Officially launched in 2013, the BRI is a major support for the promotion of trade relations and infrastructure financing which includes several key projects in South Asia.

The Bangladesh-China-India-Myanmar (BCIM) Economic Corridor.

The Bangladesh-China-India-Myanmar (BCIM) Economic Corridor was launched in the late 1990s, but it has not received regular diplomatic support and faces complex geographical and geological constraints.

The 2800 km road project is almost complete, but two 200 km sections (Silchar-Imphal in India and Kalewa-Monywa in Myanmar) are still under construction. In fact, China recently suggested that the economic corridor might also be fully equipped with a high-speed train line to reduce transport time and promote trade.

The China-Myanmar Economic Corridor (CMEC).

In parallel, the China-Myanmar Economic Corridor (CMEC) is a multimodal network with a total length of 1700 km (roads, oil and gas pipelines, deepwater port, etc.) which aims to connect the Chinese province of Yunnan directly to the Indian Ocean (Kyaukpyu port) and Yangon (Burma’s economic capital).

The commissioning of the gas pipeline (in 2013) and the oil pipeline (in 2015), for a total cost of USD 7.5 billion, has definitively established a Chinese strategic footprint in Myanmar.

The Twenty-First Century Maritime Silk Road (MSR).

The Twenty-First Century Maritime Silk Road (MSR) is a combination of bilateral infrastructure projects, which is now presented as a multilateral initiative.

This maritime and coastal component of the BRI focuses on China’s strategic areas of interest, i.e. the Indian Ocean and the South China Sea. MSR projects can take several forms: construction, extension, management of a port concession financed and/or carried out by Chinese companies or with a significant Chinese presence; but also infrastructure generally linked to a port (shipyard, warehouses), industrial zones in special economic zones.

Three major port and economic activity projects can also be found in nearby countries surround India: Hambantota in Sri Lanka, Kyaukpyu in Burma and Gwadar in Pakistan. The latter project is an integral part of the China-Pakistan Economic Corridor (see below), while the second is also included in BCIM (previous point).

The port of Hambantota in Sri Lanka was commissioned in 2010 and extended in 2014 with a container terminal. Given the importance of the port of Colombo (and its planned expansion), operations proved to be loss-making, causing difficulties for the operator to repay its debt to its Chinese creditor; control of the port then went under Chinese flag with a 99-year concession contract.

The Trans-Himalayan Economic Corridor (THEC).

The Trans-Himalayan Economic Corridor (THEC) is an economic corridor expected to contribute substantially to the development of infrastructure (through and through) and to the opening up of Nepal. In addition, it should lead to reducing the region’s trade dependence on India.

All in all, although the idea of a tripartite agreement dates was discussed in 2010, only Nepal and China have already reached a consensus to strengthen their economic cooperation in the areas of rail, road, aviation, electricity and telecommunications. India has not offered a formal commitment to THEC and prefers to maintain its relations with Nepal in a bilateral format.

The China-Pakistan Economic Corridor (CPEC).

Last but not least, the China-Pakistan Economic Corridor (CPEC) is a set of infrastructure projects (highways, railways, power generation) worth about USD 60 billion.

India’s response to BRI projects (CPEC, Sri Lanka, etc.)

So, what is India’s response to the BRI developments? Overall, the two countries relationship seems to be characterized by conflicting perceptions and robust oppositions.

Conflicting perceptions.

India perceives the BRI as a unilateral Chinese policy aimed at establishing strategic and economic domination over all partner countries. India is also concerned about the transparency and modalities of the initiative. Hence, although it is not opposed to infrastructure development in Asia (and South Asia in particular) India is concerned about the implications of BRI projects.

The expansion of Chinese economic interests in South Asia has a direct impact on India’s strategic interests: BRI infrastructure projects near India’s land and maritime borders affect India’s security and strategic environment. While these projects thwart efforts to strengthen bilateral relations between India and its South Asian neighbors, India is nowadays in a weaker geo-strategic position than China.

China vs India: some robust oppositions.

India also considers the BRI to be an infringement of its territorial sovereignty. The dispute is linked to the CPEC which crosses the Gilgit-Baltistan region, a territory claimed by the Indian government since 1947. And India does not accept this de facto recognition by China of the region as an integral part of Pakistan.

To express its dissatisfaction with the CPEC, India was the only major economy not to have participated in the BRI International Forum in Beijing in May 2017, where 29 heads of state or government and delegations from nearly 130 countries were present. No Indian government officials or representatives of the Indian Embassy in China were present at the Summit, thus distancing themselves from the overall BRI project.

With regard to the port of Hambantota in Sri Lanka, the Indian government criticized the takeover of control and management by Chinese state-owned companies. It highlighted the excessive financial imposed on the country and the unsustainable external financing situation imposed by China and multilateral institutions.

The increasing use of the port of Hambantota for military purposes (parking and supply of ships and submarines), mainly by China, is also a source of concern to the Indian authorities, even though the Sri Lankan Navy has announced its intention to establish its southern command center there. Hence, the use of this port for military purposes would no longer be possible.

On the Chinese side, however…

India is a much lesser challenge for China, as the BCIM Economic Corridor (initially founded well before the BRI) has as its main objective cooperation and trade facilitation.

To the Chinese, in fact, India could even rely on BRI infrastructure to develop new economic corridors: a multimodal transport system along the Kaladan River, the international border between India and Burma; and trilateral rail link projects between India, Burma, and Thailand. The convergence of economic corridors in Burma would furthermore allow for a successful sharing of India’s and China’s commitment to regional trade and income development.

India’s approach to regional development: China’s vision, projects, and responses.

Since its independence, India has had a history of strong diplomatic and socio-cultural relations with neighboring South Asian countries, with the notable exception of Pakistan. India has significantly less financial power than China to develop infrastructure outside its borders, however, and it has generally been slow to identify, initiate and implement a coherent approach to better connectivity in South Asia.

Indian contributions.

This is not to say that the country does not contribute to regional development, nonetheless. India’s partners in the region have benefited from infrastructure supported by India, occasionally associated with other international donors, such as Japan or the Asian Development Bank. In addition, India has initiated a vision for subregional economic integration (Bangladesh-Bhutan-India-Nepal, BBIN), with a first agreement on the free movement of vehicles signed in June 2015.

For example, the multimodal transport system on the Indo-Burmese border aims to provide better maritime access, via the port of Sittwe in Burma, to the landlocked territories of north-eastern India through beneficial cooperation mechanisms.

Another significant example is the good diplomatic relationship between India and Iran, which has led to the redevelopment of the Shah Bahar port in Iran (2 berths for an investment of USD 85m inaugurated in December 2017). This port allows India to both strengthen its multimodal regional connectivity infrastructure, particularly with Afghanistan, and reduce the strategic influence of the port of Gwadar in Pakistan (located only 72km away).

India is also considering several port investment proposals in Sri Lanka (redevelopment of the port of Trincomalee, renovations of the ports of Palaly and Kanakaesanthurai), while construction of a first deepwater port in India (Kerala, southern state) has begun; this should potentially reduce the commercial and strategic value of the port of Hambantota, built, owned and operated by China.

China – India: The bottom line.

To conclude, the BRI is facing a certain reluctance from India due to the lack of Chinese transparency in infrastructure projects (project financing and over-indebtedness of partner countries, underlying geostrategic ambitions), and strong opposition to the CPEC due to the issue of sovereignty in Kashmir.

In any case, India is still seeking to preserve its natural sphere of influence (South Asia, Indian Ocean) but does not have sufficient financial resources to be able to counter Chinese trade integration projects.

References:

Darshana M. Baruah, India’s Answer to the Belt and Road: A Road Map for South Asia, Carnegie India, Working Paper, Octobre 2018
Ajay Chhibber, China’s belt and road initiative and India’s options: Competitive cooperation, Journal of Infrastructure, Policy and Development, Vol. 1 Issue 2, Août 2017
Rangan Datta, North East and the China-Myanmar Economic Corridor (CMEC), Institute for Strategic, Political, Security and Economic Consultancy (ISPSW), ISPSW Strategy Series No. 529, Janvier 2018
Mohd Aminul Karim et Faria Islam, Bangladesh–China–India–Myanmar (BCIM) Economic Corridor: Challenges and Prospects, The Korean Journal of Defense Analysis, Vol. 30, No. 2, Juin 2018
Nicholas Szechenyi (éditeur), China’s Maritime Silk Road, Strategic and Economic Implications for the Indo-Pacific Region, Center for Strategic and International Studies, Mars 2018

This insight was originally published in French in « La Lettre de la Chine Hors Les Murs » n 26, 21/11/2018 by the French External Trade Advisors (Comite National des Conseillers du Commerce Exterieur). Photo by Aashish R Gautam on Unsplash

Vivien Massot | Economist, Managing Director India at TAC ECONOMICS.

Vivien Massot is the Managing Director India at TAC ECONOMICS & a French Foreign Trade Advisor (Conseiller du Commerce Extérieur de la France – CCEF).

Vivien originally joined TAC ECONOMICS in France in 2009 as an economist to work on country risk analyses as well as on specific country studies; he is also in charge of the overall knowledge management. Since 2010, he has returned to India to manage our subsidiary with a local team of three analysts/economists.

Disclaimer: The views expressed are those of their author(s) only and do not reflect those of The Asia-Pacific Circle or of its editors unless otherwise stated.

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