Although China is making alarming inroads in India’s neighbourhood, it must be admitted that India’s relations with its neighbours were fractious long before this intervention. It began with Pakistan’s outright hostility, rooted in the complexes that led to Partition. Behind Pakistan was the United States which saw in the Islamic republic a means first of countering Soviet influence in the region and then of promoting ties with China. Any damage India suffered in the process was of no consequence to US diplomacy.
As China woos and wins most of the countries of South Asia including a distant archipelago like the Maldives, India’s diplomatic failure in the neighbourhood holds the threat of serious security implications. The landlocked Himalayan kingdom of Bhutan alone remains a staunch friend. Now, preparing for the 25th round of border talks with China, the Bhutanese refuse to sign a border treaty or exchange ambassadors. Bhutan has suffered military intimidation as over the Doklam standoff, and resisted economic blandishments like the recent Chinese offer of $10 billion in economic assistance.
A former Bhutanese foreign minister, the late Dawa Tsering, once the world’s longest-serving foreign minister, told me that many South Asian leaders had welcomed Pakistan’s explosion of a Chinese-assisted nuclear bomb. They were not necessarily pro-Pakistani or anti-Indian, he said, but felt there should be some check on India’s authority. As Sri Lanka’s former president, J R Jayewardene, summed it up when the South Asian Association for Regional Cooperation was formed in Dhaka, India is bigger than all the other seven SAARC members put together. No two of them even touch each other but most have borders with India. Now, with Pakistan weakened by internal squabbles and China looming much larger over the rest of South Asia, two recent developments seem specially designed to reduce Indian influence in the region.
First, China and the Maldives entered into a Free Trade Agreement on December 8, 2017 when the Maldivian President, Abdulla Yameen, was on a four-day visit to Beijing, a first for the Maldives which also became the second South Asian country after Pakistan to sign an FTA with China. In addition, the Maldives signed a Memorandum of Understanding that brings it into the Maritime Silk Road, a component of China’s ambitious Belt and Road Initiative to which India objects vigorously because the China-Pakistan Economic Corridor, a flagship venture of the BRI, runs through a part of the Indian state of Jammu and Kashmir which Pakistan invaded and occupied. Other pacts signed during Mr Yameen’s trip will deepen bilateral cooperation in a range of fields, including health, tourism, technology, and climate change. But for the confidence derived from this association, Mr Yameen may not have disregarded India’s views during the recent political crisis in his country. Indian fears had already been aroused in 2015 when the Maldivian parliament enacted a law allowing foreigners to own land providing they invested over $1 billion in a project whose site had to be mainly (70 per cent) reclaimed land. Although the law is applicable to all foreigners, the Chinese are expected to be the main beneficiaries. The fear is they will buy land to set up a base or listening post on a Maldivian island. Male’s permission in August 2017 for three Chinese warships to dock in the port was seen as a straw in the wind.
Second, the February 19, 2018 decision of the governing board of Dhaka’s Stock Exchange to sell 25 per cent of its equity to a consortium of China’s Shanghai and Shenzhen Stock Exchanges was a slap in the face for India. This would have been a setback (and a consequent gain for China) even if the only other bidder had not been a rival group, including India’s National Stock Exchange and the US Nasdaq. Investment in the Dhaka Stock Exchange is seen as an astute strategic move that might eventually allow the Chinese to acquire greater access to – and possibly eventual control over – Bangladesh’s financial infrastructure. The winning bid was $119 million in cash – 56 per cent more than the Indo-American bidder was prepared to offer. China is believed to have invested $3 billion in Bangladeshi projects between 2007 and 2017. When President Xi Jinping visited Dhaka in October 2016 he promised infrastructure worth more than $20 billion. Observers already predict the total Chinese investment could increase tenfold to $31 billion.
Critics of the Sino-Maldivian FTA fear the smaller partner might run into a Chinese debt trap. More than 70 per cent of the country’s foreign debt is to China. The loan interest alone is more than 20 per cent of the Maldives budget. Opposition leaders fear the FTA might draw the Maldives deeper into China’s debt, undermining the country’s sovereignty by giving Beijing a huge leverage. This has already been happening to Sri Lanka and Pakistan. China lent Sri Lanka billions of dollars for infrastructure projects that have not all been commercially rewarding. Some like the strategically located Hambantota port and its nearby airport have not attracted enough business for Colombo to repay the approximately $8 billion it owed Beijing, thus forcing the Sri Lankan government to agree to lease Hambantota to the Chinese for 99 years. As for Pakistan, China’s $62 billion investment in the China-Pakistan Economic Corridor may saddle the Pakistanis with a $90 billion debt that will have to be repaid over the next 30 years. Pakistan has already handed over the operation of Gwadar port in Baluchistan to China for 40 years. Under this agreement, 91 per cent of the revenue from terminal and marine operations and 85 per cent of gross earnings from the Gwadar free zone will go to the state-run China Overseas Port Holding Company. In short, Pakistan has lost control of a major strategic port on the Arabian Sea for the next four decades.
Nepal is another Indian neighbour China is wooing with aid and investment, especially since the September 2015 blockade of the Nepal-India border that was blamed on India, although the culprits were Nepal’s own Madhesi community which felt discriminated against by Kathmandu. The Communist Party of Nepal (Unified Marxist Leninist) leader, Khadga Prasad Sharma Oli, who then emerged as a vocal critic of New Delhi, has since taken his country closer to China. Beijing has pledged $8.3 billion for roads and hydropower plants while Indian commitments remain around $317 million. Beijing hopes to connect Kathmandu to Lhasa by rail as part of the BRI at an estimated cost of $8 billion.
The effect of all this is that India must now contend with China not only along 2,400 km of the Himalayan border but also in Nepal, Bangladesh, Myanmar, Sri Lanka, the Maldives and, of course, Pakistan which is virtually an outpost of China. No wonder India went to Bhutan’s rescue at Doklam so promptly. Alone in South Asia, the Druk kingdom resists being drawn into a Chinese strategic perimeter.
The writer is the author of several books and a regular media columnist.
