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ABSTRACT
Regional strategic dynamics in South Asia is in a state of flux since the announcement of China’s Belt and Road Initiative (BRI). China emphasises on the economic aspect of investment in infrastructures and energy projects, but strategic underpinning are very much apparent. China loan has created indebtedness in these countries and has helped Beijing to gain strategic foothold in the region which India considers as core to its security. India’s aid programme though focuses on the neighbourhood, it remains small compared to China and suffers from delivery deficit. This article examines India’s policy response to China’s presence in the region.
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Notes
1 Agreement on Trade and Intercourse with Tibet Region, April 29, 1954
2 Rezaul Karim and Shakhawat Liton, STRATEGIC PARTNERS, October 15, 2016, The Daily Star, http://www.thedailystar.net/frontpage/strategic-partners-1298923.
3 Address by Prime Minister at the Tsinghua University Beijing, May 15, 2015, https://mea.gov.in/outoging-visit-detail.htm?25242/Address+by+Prime+Minister+at+the+Tsinghua+University+Beijing+May+15+2015.
4 “Sri Lanka accepts a US$1 billion, eight-year loan from China Development Bank”, south china Morning post, 26 May 2018, https://www.scmp.com/news/china/money-wealth/article/2147903/sri-lanka-accepts-us1-billion-eight-year-loan-china, also see Shahbaz Rana, “China Agrees to give $2 billion loan to Pakistan”, Express Tribune, July 28, 2018, https://tribune.com.pk/story/1767965/1-china-agrees-give-2b-loan-pakistan/.
5 The regime of Mahinda Rajapakse was facing international pressure to investigate into charges or war crime by the UNHRC. India was also pressuring Rajapakse to attend to the Tamil political grievances post war. China’s support became important to veto any resolution against the regime and balance India. Similarly, in Maldives, the regime was facing international pressure as it arrested opposition and undermined democracy. China was seen as strategic balancer.
6 Marcel Mauss, The Gift London, Routledge, 2002 (first edition 1954).
7 Ministry of External Affairs, ITEC Programme, https://www.itecgoi.in/index.php.
8 Some studies on Indian Aid are: Andrea Fuchs and K.C. Vadlamannati, “The Needy Donor: An Empirical Analysis of India’s Aid Motives”, Discussion Paper Series 532, University of Heidelberg, 2012, D. Chanana “India as an Emerging Donnor” Economic and Political Weekly, 46 (12), 2009, Rani Mullen, “India’s Development assistance: Will it Change the Global Development Paradigm?” Paper presented in a workshop on Innovation in Governance of development finance: Causes, Consequences and the role of Law, April 8-9, 2013, Saurabh Kumar and Aparna Sharma, “India’s Neighbourhood Aid Policy Opportunities and Challenges”, CUTs International, September 2015, p. 5, http://www.cuts-citee.org/pdf/Indias_Neighbourhood_Aid_Policy-Opportunities_and_Challenges.pdf, (Accessed on April 25, 2019).
9 Ministry of Commerce, PRC, 1990, p. 63 as cited in Axel Dreher and Andreas Fuchs Rogue Aid? The Determinants of China’s Aid Allocation”, October 2011, p. 11, https://www.princeton.edu/politics/about/file-repository/public/Rogue-Aid-China-Aid-Allocation.pdf.
10 Ai Jun, “India over-sensitive on China’s engagement in South Asia”, Global Times, March 21, 2017, http://www.globaltimes.cn/content/1038736.shtml, (Accessed on May 1, 2019).
11 Axel Dreher Andreas and Fuchs Rogue Aid? The Determinants of China’s Aid Allocation”, October 2011, p. 18, https://www.princeton.edu/politics/about/file-repository/public/Rogue-Aid-China-Aid-Allocation.pdf.
12 Naim Moises, “Rouge Aid”, Foreign Policy, No. 159, March/April 2007.
13 https://www.cgdev.org/sites/default/files/examining-debt-implications-belt-and-road-initiative-policy-perspective.pdf. In the China Africa summit, President Xi Xinping said, “for those of Africa’s least developed countries, heavily indebted and poor countries, landlocked developing countries and small island developing countries that have diplomatic relations with China, the debt they have incurred in the form of interest-free Chinese government loans due to mature by the end of 2018 will be exempted. See “Full text of Chinese President Xi Jinping’s speech at opening ceremony of 2018 FOCAC Beijing Summit (2)”, Xinhua, September 3, 2018, http://www.xinhuanet.com/english/2018-09/03/c_137441990.htm.
14 PRC, China’s Foreign Aid Information Office of the State Council The People’s Republic of China, April 2011, Beijing,http://english.gov.cn/archive/white_paper/2014/09/09/content_281474986284620.htm.
15 Maldives is categorised as high risk in the debt distress category of the World Bank and Nepal is low rish. https://www.imf.org/external/Pubs/ft/dsa/DSAlist.pdf.
16 Sri Lanka in 2018, debt repayment amounts to Rs. 1970 billion. From April 1, it placed a Special Levy for Debt Repayment charge at the rate of 20 cents per Rs. 1,000 on the total transaction made through banks.Seehttps://www.colombotelegraph.com/wpcontent/uploads/2017/11/budgetspeech.2018.English.pdf. The outstanding central government debt fell to 77.6 per cent of GDP as at end 2017, compared to 78.8 per cent of GDP at end 2016, Foreign debt as percentage of GDP stands at 35.5% and domestic debt is 42.1. Ministry of Finance, Government of Sri Lanka, Annual Report 2017, p.1&5 %.http://www.treasury.gov.lk/documents/10181/12870/2017.pdf/2bce4f3d-ebde-4409-b2b5-c8a0801b3edc.
17 PRC, China’s Foreign Aid Information Office of the State Council, The People’s Republic of China, April 2011, Beijing,http://english.gov.cn/archive/white_paper/2014/09/09/content_281474986284620.htm.
18 Ibid.
19 Ruben Gonzalez-Vicente, The limits to China’s non-interference foreign policy: pro-state interventionism and the rescaling of economic governance, Australian Journal of International Affairs, 69 (2), 2015, p. 210. Also see Emma Mawdsley, “The Changing geographies of foreign aid and development cooperation: Contributions from Gift theory”, Transaction, 37 (2), 2012, pp. 256-272.
20 Ruben Gonzalez-Vicente, The limits to China’s non-interference foreign policy: pro-state interventionism and the rescaling of economic governance, Australian Journal of International Affairs, 69 (2), 2015, p. 215.
21 Rani Mullen, “India’s Development assistance: Will it change the global development paradigm”, April 2013, http://www.iilj.org/wp-content/uploads/2017/02/Mullen-Indias-development-assistance-2003.pdf.
22 Government of India, Department of Income Tax, Budget speech 2003-2004, https://www.incometaxindia.gov.in/Budgets%20and%20Bills/2003/107010000000330493.htm.
23 Saurabh Kumar and Aparna Sharma, “India’s Neighbourhood Aid Policy Opportunities and Challenges”, CUTS International, September 2015, p. 5, http://www.cuts-citee.org/pdf/Indias_Neighbourhood_Aid_Policy-Opportunities_and_Challenges.pdf, (Accessed on April 25, 2019).
24 Ministry of Finance, Department of Economic Affairs, Bilateral Cooperation Division, “Guidelines on Line of credit extended by Government of India to various Countries under Indian Development and economic assistance”, March 21, 2015, https://www.dea.gov.in/sites/default/files/Exim_LoC.pdf.
25 Currently, DPA I deals with project appraisal and lines of credit; DPA II deals with capacity building schemes, disaster relief, Indian Technical and Economic Cooperation Programme and DPA III deals with project implementation.https://www.mea.gov.in/development-partnership-administration.htm.
26 Ministry of External Affairs, Annual Report 2004-2005, p. 133, http://www.mea.gov.in/Uploads/PublicationDocs/166_Annual-Report-2004-2005.pdf.
27 Press Information Bureau, Government of India, Cabinet Committee on Economic Affairs (CCEA), “Extension of the Indian Development and Economic Assistance Scheme,” November 18, 2015, http://pib.nic.in/newsite/PrintRelease.aspx?relid=131605.
28 1 crore = 10 million Rupees. At the current exchange rate of 1US$ = 72,8 INR, 14 393 crores amount to nearly two billion US$.
29 Ministry of External Affairs, “Lok Sabha Question No.3496 Project in Neighbouring Countries,” 8 August 2018, https://www.mea.gov.in/lok-sabha.htm?dtl/30256/QUESTION_NO3496_PROJECT_IN_NEIGHBOURING_COUNTRIES.
30 Ministry of External Affairs, Annual Report 2017-2018, p. 278.
31 Ministry of External Affairs, “Lok Sabha Question…,” no. 29
33 Government of India-Line of Credit Statistics https://www.eximbankindia.in/lines-of-credit.
34 Devirupa Mitra, “India’s Aid Diplomacy is Worth $24 Billion. But How Well is the Money Being Spent?”, The Wire, June 16, 2017, https://thewire.in/diplomacy/india-lines-of-credit-aid-diplomacy.
35 Diego Hernandez, Are New Donors Challenging World Bank Conditionalities?, World Development, 96 (C), p. 529.
36 PTI, “Nepal should not become ‘boxing arena’ for India, China: Wang Yi”, Indian Express, December 25, 2015, http://indianexpress.com/article/world/world-news/nepal-should-not-become-boxing-arena-for-india-china-wang-yi/.
37 Yubraj Ghimire, China Tells Nepal What to Do, Indian Express, October 27, 2014, https://indianexpress.com/article/opinion/columns/china-tells-nepal-what-to-do/.
38 Nepal Rashtra Bank, “A Survey Report of foreign Direct Investment in Nepal”, Research department, June 2018, p. 25.
39 Ibid.
40 MEA, ‘India-Nepal Relations’, http://mea.gov.in/Portal/ForeignRelation/India_Nepal_Relations_11_04_2017.pdf.
41 Ministry of Foreign Affairs of Peoples Republic of China, “Wang Yi Talks about the Trilateral Relations Among China, Nepal and India: Build a Three-Dimensional Connectivity Network Across the Himalayas”, April 18, 2018, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1552708.shtml. Also see Prime Minister Prachanda’s proposal on trilateral at the BRIC-BIMSTEC Summit in Goa, Anil Giri, Nepal PM proposes trilateral partnership with China and India”, Hindustan Times, October 16, 2016, https://www.hindustantimes.com/india-news/nepal-pm-proposes-trilateral-partnership-with-china-and-india/story-7pYSqDDzH7RpR1BopyQBqN.html.
42 MEA, Press statement on the situation in Maldives, February 13, 2013, https://www.mea.gov.in/press-releases.htm?dtl/21169/Press_statement_on_the_situation_in_Maldives.
43 Ashwini Phadnis and K. Giriprakash, “Why GMR had to bail out of Maldives”, The Hindu Business Line, December 30, 2012, https://www.thehindubusinessline.com/companies/why-gmr-had-to-bail-out-of-maldives/article23097540.ece.
44 For an elaborated exposition surrounding the controversy see, Scott Morrison, “A Contractual dispute in the Maldives: Some Facets of a Country in a multi-faceted Crisis”, Journal of South Asian Studies, ESci journals, 2 (03), 2014, pp. 185-202.
45 The Dhaiehi Quamee Party (DQP) circulated a 24-page paper titled, “Handing the Airport to GMR: The Beginning of slavery”, against GMR and India, see E Johnstone, “GMR could Colonise Economy, DQP, Minivan News, https://minivannewsarchive.com/politics/gmr-could-colonise-economy-dqp-29593.
46 Nasheed said, “We would like the Indian government to send an envoy, backed by its military, to free the judges and the political detainees, including former President Maumoon Abdul Gayoom, from their detention and to bring them to their homes. We are asking for a physical presence,” See, Meera Srininvasan, “Nasheed Seeks Indian Military intervention in Maldives”, The Hindu, February 7, 2018, https://www.thehindu.com/todays-paper/tp-international/nasheed-seeks-indian-military-intervention-in-maldives/article22672634.ece.
47 Wang Yi, China’s Foreign Minister in a meeting with Maldives Special Envoy dispatched by Yameen after the crisis ensued said, “Maldivian government and people have the wisdom and capability to properly handle the current problem and resume the normal national order in accordance with the law. China will not interfere in the internal affairs of the Maldives, and this is also a basic norm governing the international relations enshrined in the UN Charter. We support the Maldivian government in resolving differences with relevant parties in the Maldives through dialogue and negotiation and upholding the independence, sovereignty and legitimate rights and interests of the nation. The international community should play a constructive role in promoting stability and development of that country on the basis of respecting its will.” See the statement of 09 February 2018, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1533682.shtml While answering to a question that India has placed its Army in a high alert, the Chinese Foreign Ministry spokesperson said, “what happens now in the Maldives falls within that country’s internal affairs and should be properly resolved by various parties in the Maldives through dialogue and negotiation. The international community should play a constructive role on the basis of respecting the Maldives’ sovereignty and will rather than take actions that may complicate the situation.”
48 Engen Tham, Ben Blanchard, Wang Jing and Shihar Aneez “Chinese warships enter East Indian Ocean amid Maldives constitutional crisis”, The Independent, February 20, 2018,https://www.independent.co.uk/news/world/asia/china-warships-maldives-crisis-indian-ocean-abdulla-yameen-india-a8219531.html.
49 See MEA statements: On February 2, “We have seen last night’s order of the Supreme Court of Maldives releasing all political prisoners. In the spirit of democracy and rule of law, it is imperative for all organs of the Government of Maldives to respect and abide by the order of the apex court…As a close and friendly neighbour, India wishes to see a stable, peaceful and prosperous Maldives.”, February 2, 2018, https://www.mea.gov.in/press-releases.htm?dtl/29409/Press_Release_on_Indias__over_evolving_situation_in_Maldives_after_order_of_the_Supreme_Court_of_Maldives. Statement of February 20, 2018 which reads, “The order issued by the Supreme Court of Maldives on February 1, 2018 should be implemented in letter and spirit.”,https://www.mea.gov.in/press-releases.htm?dtl/29501/Press_Release_on_situation_in_Maldives; Statement of February 21 after the extension of emergency through a controversial Majlis meeting, “We are deeply dismayed that the Government of Maldives has extended the State of Emergency for a further 30 days. The manner in which the extension of the State of Emergency was approved by the Majlis in contravention of the Constitution of Maldives is also a matter of concern.” February 21, 2018, https://www.mea.gov.in/press-releases.htm?dtl/29505/Press_Release_on_the_situation_in_Maldives.
50 Graft watchdog advises against awarding ‘mega projects’ without bidding, Maldives Independent, June 26, 2016, https://maldivesindependent.com/politics/graft-watchdog-advises-against-awarding-mega-projects-without-bidding-124981, (Accessed on April 18, 2019).
51 Majlis approves foreign freeholds in second amendment to constitution”, Maldives Independent, July 22, 2015, https://maldivesindependent.com/politics/majlis-authorizes-foreign-ownership-of-land-in-second-constitutional-amendment-101193, (Accessed on April 18, 2019).
53 Maldives independent, Daily Round up from the Campaign trial, https://maldivesindependent.com/politics/campaign-trail-i-excluded-nasheed-i-excluded-gasim-140916.
54 Xinhua, “China Sri Lanka Upgrade their Relationship”, May 28, 2013 http://china.org.cn/world/sri_lankan_president/2013-05/28/content_28976568.htm.
55 Smruti S. Pattanaik, “Controversy over Chinese investment in Sri Lanka”, East Asia Forum, June 5, 2015, http://www.eastasiaforum.org/2015/06/05/controversy-over-chinese-investment-in-sri-lanka/, “New Hambantota Port Deal: China Consolidates its Stakes in Sri Lanka”, https://idsa.in/idsacomments/new-hambantota-port-deal-china-consolidates-its-stakes-in-sri-lanka_sspattanaik_140817.
56 Maria Abi Habib, How China Got Sri Lanka to Cough Up a Port, New York Times, June 25, 2018, https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html.
57 Ministry of Foreign Affairs Press Briefing, July 18, 2018, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1573668.shtml.
59 Despite IMF warning on Colombo’s huge debts, “China lends $1 bn to Sri Lanka”, Business Standard, August 3, 2018, https://www.business-standard.com/article/international/despite-imf-warning-on-colombo-s-huge-debts-china-lends-1-bn-to-sri-lanka-118080301197_1.html.
60 According to the Annual Report of the central bank of Sri Lanka, “the outstanding balance of central government debt decreased by 1.2 percentage points of GDP to 77.6 per cent at end 2017, compared to 78.8 per cent recorded at end 2016. Outstanding domestic debt, which stood at 44.9 per cent of GDP by the end 2016, further fell to 42.1 per cent of GDP at end 2017, while the outstanding foreign debt rose to 35.5 per cent of GDP at end 2017 from 34.0 per cent of GDP at end 2016. In 2017, government debt service payments accounted for 87.5 per cent of government revenue. Larger debt service payments in 2017 reflect both in interest payments which grew by 20.4 per cent year-on-year, and debt repayments which recorded an increase of 17.0 per cent in 2017 over 2016. Government debt service payments amounted to 12.1 per cent of GDP in 2017, inched up from 11.4 per cent in 2016. Of total debt service payments, debt repayments accounted for 6.5 per cent of GDP in 2017, while interest payments accounted for 5.5 per cent of GDP. Government of Sri Lanka, Ministry of Finance, Annual Report 2017, p. 7, http://www.treasury.gov.lk/documents/10181/12870/2017.pdf/2bce4f3d-ebde-4409-b2b5-c8a0801b3edc.
61 Ibid, p. 108.
63 Lok Sabha, Parliament Standing Committee Report, pp. 63-64.
64 Ibid, p. 66.
65 Axel Dreher Andreas and Fuchs Rogue Aid? The Determinants of China’s Aid Allocation”, October 2011, p. 18, https://www.princeton.edu/politics/about/file-repository/public/Rogue-Aid-China-Aid-Allocation.pdf, Jane Perlez and Yufan Huang, “Behind China’s $1 Trillion Plan to Shake Up the Economic Order”, New York Times, May 13, 2017, https://www.nytimes.com/2017/05/13/business/china-railway-one-belt-one-road-1-trillion-plan.html.
66 Lok Sabha Unstarred Question No. 142, November 16, 2016, https://www.mea.gov.in/Images/attach/lu142.pdf.
67 Around $3.7 million was distributed in checks: $678,000 to print campaign T-shirts and other promotional material and $297,000 to buy supporters gifts, including women’s saris. Another $38,000 was paid to a popular Buddhist monk who was supporting Mr. Rajapaksa’s electoral bid, while two checks totalling $1.7 million were delivered by volunteers to Temple Trees, his official residence. Most of the payments were from a subaccount controlled by China Harbour, named “HPDP Phase 2,” shorthand for Hambantota Port Development Project. See “Maria Abi Habib, How China Got Sri Lanka to Cough Up a Port, New York Times,” June 25, 2018, https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html, Also see Maria Abi Habib, “Sri Lankan Lawmakers Target Reporters in Times Investigation”, New York Times, July 3, 2018, https://www.nytimes.com/2018/07/03/world/asia/sri-lanka-port-new-york-times.html.
68 P. Vaidyanathan Iyer, “Exim Bank’s red flag: Why most Africa deals go to so few firms?”, Indian Express, October 20, 2015. https://indianexpress.com/article/india/india-news-india/exim-banks-red-flag-why-most-africa-deals-go-to-so-few-firms/.
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Smruti S. Pattanaik
Dr Smruti S. Pattanaik is Research Fellow at IDSA, New Delhi. Views expressed are personal.