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Why OBOR of China is not at all a good idea for India?

Paper No. 6119                                  Dated 25-May-2016

Guest Column by Commodore RS Vasan IN (Retd)

From the time the OBOR was conceptualized towards end of 2013, there have been plenty of discussions on the usefulness of this project to Asia, Africa and beyond.  It is also being made out that it will bring about greater connectivity, prosperity and regional economic integration.  Many countries across continents have joined the initiative.  India the regional power in Indian Ocean and an emerging economy has rightly chosen to defer the decision to join the Maritime Silk Route initiative.

In various discussions on the OBOR, what comes out clearly that it is China that will derive maximum benefits from the initiative while there are no doubts that the smaller economies will also gain marginally by flow of funds in to their economies and addition of infrastructure in the port and marine infrastructure. It is also not the case that there is no regional connectivity already with the existing ports and infrastructure.

Growth and modernization are ongoing processes and from that point of view, the MSR initiative will add value to the destination countries in adding to their potential to handle larger volumes of (Chinese?) traffic. China is leaving no stone unturned to convince the global audience that it is a benign scheme that has been conceived to benefit all the nations in the MSR or the land segment of the OBOR. The most recent example is from Hong Kong which sponsored a Belt and Road summit[i]. According to the top Chinese legislator who spoke at the summit, the silk route (and also the spice route which was not mentioned) has existed for over 2000 years enabling trade, cultural and political exchanges. It may be noted that the Chinese official did not mention India even once. While on the face of it the OBOR looks an economic initiative, India has to be watchful of the full import of this initiative from China with a middle kingdom syndrome.

As brought out by the Chinese Foreign Minister in Saudi Arabia in an interview to Al Jazeera[ii], a lot of emphasis is being placed on OBOR even in West Asia. Put simply, nations in the past looked for markets far and wide (for silk, spice and gems) and simultaneously evaluated as to what could be brought back from these destinations (horses, gold, technology etc.). It may be noted that not once was India mentioned in the entire interview though Indian Ocean was mentioned many times.  

In a globally integrated economy, market structures have evolved serving the economic growth of countries. China has become the manufacturing hub of the world and has captured markets across continents.  China therefore has to scale up in terms of its reach, connectivity and production to sustain its GDP growth.  So the OBOR is essentially a ploy to use its surplus stagnating reserves of about 3.2 trillion US Dollars and also utilize the excess capacity that it has built over the last few decades to achieve the number one position in manufacturing and meeting the needs of the global markets.  So as is being made out by China in all forums, OBOR is not a charity initiative and that factor needs to be borne in mind while evaluating this initiative. 

From the Indian view point, it is not just the economic leverages that China will obtain by huge investments in India’s neighbourhood but also the strategic dividend for future requirements as China aspires to be a global power. The access to the ports and facilities particularly in the maritime countries in Asia and Africa would be crucial for China’s Indian Ocean ambitions as it seeks to protect its maritime trade and security interests.  The assumption that India would be a loser if it does not get onboard the MSR initiative is flawed  in any which way for many reasons underlined below:-

  1. India is a huge growing market and already has a huge trade deficit with China. By facilitating the process of creating more captive ports or other infrastructure with Chinese help, it will provide greater access to emerging markets and only increase the trade deficit beyond unmanageable proportions.
  2. By heavy investments in the neighbourhood, China would eat in to the market share of India and there is no need press the self-destruct mode as for as India is concerned by getting on board a dubious project that does not benefit India in any manner.  
  3. India with its size, population and form of governance has many other alternatives for moving its own trade and transacting with other economies of the world by working on other sea and land routes and by using the advantage of its location in the Indian Ocean.
  4. The most recent case of the MoU signed for developing Chabahar in Iran provides wonderful alternatives to the cleverly camouflaged Chinese MSR.  It is doubtlessly a game changer provided India knows how to play the game correctly in the coming years and does not lose steam as it did in the past.
  5. The fear that   India would lose out on the inflow from China in terms of FDI in the maritime sector is unfounded as India has many other economies in East Asia and South East Asia including Japan, Vietnam, Indonesia, Malaysia and other developing and developed economies willing to invest in India in mutually beneficial initiatives.
  6. India which is trying to carve out an independent course cannot be seen as riding piggyback on a Chinese initiative particularly as China has been inimical to all the initiatives of India in the comity of nations.
  7. The recent example of snubbing India on its entry in to the NSG unless it signs the NPT, Refusal to allow India in to the UNSC, the bailing out of Pakistan on the issue of blocking JeM by misuse of its veto power, the border incursions, presence of nuclear submarines in the Indian Ocean, objecting to India’s off shore explorations with Vietnam in so called disputed EEZ while having no qualms in planning the China Pakistan Economic Corridor through the disputed territory of Pak Occupied Kashmir are all indicative of the mindset of China.
  8. By all its actions, China has demonstrated that it is not India’s friend and any engagement with China on its terms is fraught with danger for the future.
  9. India is a large enough economy albeit with its own worries of development with plenty of corrections to be applied. Its own economic growth trajectory has shown good trends that need to be sustained by proactive initiatives and joining MSR is definitely not one of them.  
  10. The engagement with China for most nations in the world has not been a positive one and these nations are looking at opportunities to diversify their investments and move out of China for various reasons.
  11. Within the South China Sea, the smaller neighbours are very angry with the aggressive behaviour of China. While most of them continue to do business with China, would keep working on alternative engagements with India, Japan, Korea, USA and other European economies. India needs to work with other economies to identify the alternatives for the smaller nations.  Surely the nations doing business with China do not want all the eggs in one basket.
  12. The North South Transport Corridor which uses the ship, rail and road route to connect Asia, Europe, Russia, Iran and Central Asia is again a wonderful counter to the OBOR. Dry runs have already been carried out on this corridor in 2014 and it has been established that there is a saving of about 2500 US Dollars for each 15 tons.  By the Chabahar initiative, India has lot more to gain than by the OBOR. Even when there ports built using the funds from China, India will not be denied the use of those ports for any commercial operation as they would be on commercial terms as applicable for international charters.

From all that has been said above it is clear that it is unwise for India to join either the land segment or the MSR which only benefits China with very marginal benefits to India   even if it joins the initiative at a later date.

The official stand of India that it would like to deal with specific proposals by China and not with the unilateral initiative makes eminent sense. There is no need to even officially state that India is against the MSR but it can remain ambivalent in its stand to keep China guessing. After all we are looking at   a project that will run for more than three decades and India  has plenty of time in which to shape its own counters to serve its long term national interests. 

The Government under Modi has covered considerable ground in foreign relations and has established a very favourable climate for investments and also for reaching out in all directions.

India also did think of the spice route and the Mausam which has its origins in the ancient trade practices between India, West Asia, Middle East and Europe. However, it has not taken off in the manner expected and has remained a slow starter.  This has received a new fillip with the connectivity being established through Chabahar.

Last but the most important issue is about the new plans on the anvil as outlined in the Maritime India Summit that concluded in Mumbai on 16th April 2016[iii]. The ambitious plan to optimize on the potential of the oceans envisages an investment of one lakh crore in the port sector with a target of 3000 million tonnes in the next fifteen years. In the last two years itself, some 56 new projects with an investment of more than 250 billion rupees have been awarded[iv]. The plan caters for addition of five new ports and also fourfold increase of coastal traffic in the corresponding period.

So there are grand plans afoot to realize the full potential of Maritime India without looking at or linking with China’s plans. Seen in the context of the regional integration through Chabahar, the Trilateral transport and transit  corridor (TTTC)[v] of peace and prosperity in the words of Modi passing through Iran, Afghanistan and the Central Asian Republic along with the North South corridor India has the potential to work on its own steam while reaching out to the new markets and  countries . India has a lot more geographical advantage in terms of its reach and access in comparison with China .It hardly needs the crutches in the form of MSR assistance from China that comes with many strings attached.

In conclusion, it is in the best interests of India not to go overboard on the Chinese initiative of Maritime Silk Route which only benefits China in the long run in economic and strategic terms. China has neither been a friend nor has it been an advocate for a prosperous India that is seeking its own place in the high seat of United Nations. It also continues to support Pakistan to the hilt and has no inhibitions in making things very difficult for India in dealing with matters of security and economy. It continues to nurture its ambitions of being a super power and Indian Ocean is an area of core interest though not so specifically stated.

India has enough options available particularly with a proactive government which can actualize its potential. While the recent agreement with Iran for development is a game changer, India has to ensure that there is no time and cost overrun and also builds a port along with the connectivity of the highest standards that will be the talk of the world.  India has to learn from its past mistakes  and has to ensure that it does not repeat them  in any new initiatives whether it is the Maritime India Summit that is grandiose on scale and conceptualization or the new initiative in the region that has the potential to catapult India in to the big league.

I would like to round off with the quotes of Sri BS Raghavan, Patron of Chennai Centre of China Studies who in an internal debate on OBOR had this to say. “Even taking OBOR at face value, an inchoate admixture of so many countries, economies, political systems and cultures seems to me to be foredoomed to running aground. By joining it, India is likely to find itself in a bewildering medley of unequal and incompatible partners, distracting it from single-minded attention to its own country-specific development goals. Both Arthashastra and Panchatantra warn against joining alliances which are being sponsored by those whose motives and agenda are not clear and members of which are apt to pull in different directions.”

(The author who is presently the Director of Chennai Centre of China Studies and Head of Strategy and Security Studies at the Center for Asia Studies)



[i] http://news.xinhuanet.com/english/china/2016-05/18/c_135368795.htm    India was not even mentioned even once in the entire speech indicating how unimportant India is in China’s calculus (accessed on 23rd May 2016)

[ii] http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1364778.shtml  no mention of India was made in the entire interview though there were plenty of references to the One Belt One Road. ( accessed on 23rd May 2016)

[iii] http://www.maritimeinvest.in/ the home page on the MIS gives all the data about the initiatives. Needs to be read along with  the reported quoted below

 

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