By Jeff M. Smith

My previous article for The Diplomat examined Filipino President Rodrigo Duterte’s trip to Beijing and the security and economic implications of the deals he sealed with China to construct ports and artificial islands in the Philippines.

In Foreign Affairs this May, I wrote about the implications of China’s investments in the Sri Lankan ports of Colombo and Hambantota, which had not only plunged Sri Lanka into debt, but raised questions about the security and defense consequences of Beijing’s use of economic statecraft, including in rekindling Sino-Indian rivalry.

The emergence of new details about China’s endeavors in Sri Lanka merit revisiting what is quickly becoming a case study for China’s emerging One Belt One Road (OBOR) initiative.

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Rajapaksa Opens The Door

The Sino-Sri Lankan relationship was fundamentally transformed by the 2005 election of President Mahinda Rajapaksa. Unlike many South Asian capitals India had shielded from Chinese influence, Colombo established cordial, if limited, diplomatic ties with Beijing by the late 20th century, even importing arms from China in the 1990s.

Rajapaksa entered office two decades into a brutal conflict with the Liberation Tigers of Tamil Elam (LTTE), a hyper-violent separatist movement claiming to defend the interests of Sri Lanka’s Tamil minority. Colombo and the LTTE reached a ceasefire in 2002 but the violence continued and Sri Lanka’s foreign minister was assassinated shortly before Rajapaksa’s inauguration. Within weeks of taking office the president privately appealed to Delhi for military aid to underpin a major offensive he was planning to crush the LTTE.

In 2006 Delhi quietly gifted Rajapaksa five Mi-17 helicopters and aided efforts to target LTTE personnel, supplies, and floating arsenals at sea. However, with a politically influential Tamil minority of its own, Delhi balked at requests for more robust military support. Nor could Rajapaksa turn to the United States. Concerned about human rights violations in the LTTE conflict, Washington had “drastically reduced its foreign assistance package for Sri Lanka.”

China gladly filled the void in the defense realm. In 2007, Rajapaksa secured a $37 million deal for Chinese ammunition and ordinance. In 2008, China “gifted” Colombo six F7 jet fighters, and provided anti-aircraft guns and JY-11 radar. The ceasefire with the Tigers collapsed that year and in 2009 Rajapaksa launched a scorched-earth offensive that eliminated the LTTE, though not before claiming up to 20,000 civilians in the process.

At a parade celebrating Sri Lanka’s victory, “the majority of the hardware on display was Chinese-made.” And when Colombo faced international criticism over the civilian death toll during Rajapaksa’s offensive, China again proved its value by blocking the UN Security Council from addressing the issue. A senior Sri Lankan official later told U.S. officials on Capitol Hill, “We have the United States to thank for pushing us closer to China.”

Ports and Politics

What was China getting in return? Rajapaksa upgraded ties to a “strategic cooperative partnership,” opened Colombo’s doors to a wave of senior Chinese defense and political officials, pledged respect for China’s “core interests,” and enthusiastically supported China’s OBOR initiative. The real prize for China, however, were the ports of Sri Lanka, positioned as the island-nation is along the principal east-west sea lines of communication (SLOCs) connecting China to its energy suppliers in the Middle East and Africa.

A month before Rajapaksa signed the first arms agreement with China in 2007, he inked a separate deal to lease land to a Chinese consortium at Hambantota, where they planned to construct a $1 billion deep-water port. Poorly located in a desolate jungle, Hambantota was the president’s home district and the port his pet project. The $361 million first phase was completed in November 2010, funded by loans from China’s Ex-Im Bank. (India, the United States, and others were offered the Hambantota port contract and passed).

In 2010, Beijing lent Sri Lanka an additional $200 million to build a second international airport near Hambantota, and in 2012 offered $810 million for the second phase of the port project.

In November 2013, Chinese firms were contracted to build a $272 million railway in Sri Lanka, “the first new railway construction in Sri Lanka within a century.”

The same month, China offered to take a leading role in the development of a new mega project at Sri Lanka’s main port in Colombo. Various plans for a Colombo Port City Project (CPCP) had been percolating since 2004, but China had the capital and experience realize the vision. China Merchants Port Holdings had already constructed — and taken an 85 percent ownership stake — in the South Container Terminal at the Colombo port on a 35-year right of ownership agreement. A separate deal signed in 2009 had granted China an exclusive investment zone 34 miles from the Colombo port.

This was a more ambitious endeavor. The $1.4 billion CPCP was billed as the largest infrastructure project in the country’s history and would require reclaiming 233 hectares of land adjacent to the existing port. The new “mini-city,” to be built by China Harbor Engineering Company (CHEC), would include shopping malls, apartments, golf courses, hotels, and an F1 racing track.

Some in Sri Lanka and across the Palk Strait began voicing concerns about Colombo’s embrace of China and its growing indebtedness to Beijing. Since 2005, China had funded and/or constructed 70 percent of new infrastructure projects, overtaking Japan as Sri Lanka’s largest donor.

Chinese non-military aid soared from a few million dollars in 2005 to $1 billion in 2008. An additional $5 billion in aid and loans was distributed between 2009 to 2015. “Critics of the Rajapaksa regime fear that the Sri Lankan government will be unable to repay such large loans in time, giving the Chinese an opportunity to turn part of the loan into equity, making them part owners of vital projects and installations,” noted Indian defense analyst Nitin Gokhale.

That’s precisely what happened when Chinese President Xi Jinping visited Colombo in September 2014. At the time, the Chinese-funded Hambantota Port was hemorrhaging money. Only six vessels berthed at the port in 2011 and less than 100 in 2013. Meanwhile, Colombo was paying $30 million per year in interest payments alone. “The port that was touted as a competitor for Singapore has continued to bleed the government,” noted the South China Morning Post.

Xi agreed to “ease loan conditions” for the costly port. In return, Rajapaksa quietly signed an agreement granting Chinese companies operating rights to four of the seven container berths at Hambantota port on a 35-year lease. The deal was not publicly revealed until months later and the terms remain secretive.

Submarines and Subterfuge

That was not the only peculiar thing about Xi’s visit. A week before his arrival, Japanese Prime Minister Shinzo Abe was visiting Colombo when the Sri Lankan capital received an unexpected guest: a Chinese submarine and support ship docked at the Colombo port, the first appearance by a Chinese submarine at an Indian Ocean port in over a decade. Interestingly, “unlike other military ships which are mandated to dock at SLPA berths, the submarine had used the Chinese-run [South Container Terminal] in violation of protocol.”

Even before the port visit Delhi had grown uncomfortable with Rajapaksa’s embrace of China. In 2007, India’s national security adviser warned: “It is high time that Sri Lanka understood that India is the big power in the region and ought to refrain from going to Pakistan or China for weapons.”

The sudden appearance of Chinese submarines on its geopolitical doorstep proved a bridge too far for Delhi, given over 70 percent of the transshipment business at the Colombo port is India-related. Later that month, Indian Prime Minister Narendra Modi personally reminded Rajapaksa that Sri Lanka “was obliged to inform its neighbors about such port calls under a maritime pact.” Yet the same submarine resurfaced in Colombo in November, again without prior notice to Delhi.

Sri Lankan presidential elections were announced the same month, with Rajapaksa widely expected to win a third term. Yet he faced an unexpected challenge from a former ally, Maithripala Sirisena. On the campaign trail Sirisena criticized Rajapaksa’s embrace of Beijing and the billions in Chinese debt he accrued. “The land that the White Man took over by means of military strength is now being obtained by foreigners by paying ransom to a handful of persons,” his election manifesto explained. He insisted Sri Lanka “would not offer preferential economic or security access to any one country, but equally develop its strategic relations with all major Indian states.”

A New Sheriff in Town

In a surprise upset, Sirisena bested Rajapaksa 51 percent to 48 percent. Notably, the Sri Lankan station chief of India’s intelligence agency, RAW, was expelled shortly after the election. He was reportedly involved in organizing and uniting the political opposition, convincing Sirisena to defect and run, and persuading a former prime minister not to contest the election and diminish Sirisena’s chances. “The turning point in the relationship,” an Indian security official told Reuters, “was the submarines. There was real anger.”

In February 2015, Sirisena made India his first destination abroad as prime minister, reaching terms on Sri Lanka’s first-ever nuclear deal. One month later, Modi became the first Indian prime minister to visit Sri Lanka in 28 years. A week before his arrival Colombo suspended the CPCP on allegations of corruption during the bidding process and failure to obtain the necessary permits. Chinese firm CHEC was separately accused of illegally “funding the election campaign of former President Mahinda Rajapaksa” through 11 “suspicious” financial transactions totaling over $200 million.

Sirisena objected to several highly-questionable provisions in the “private and confidential” CPCP deal. Topping the list was a provision offering CHEC 20 hectares of land on a “freehold basis” (unrestricted ownership) beyond the 88 hectares it was granted on a 99-year lease.

Additionally, Sri Lanka’s Civil Aviation Authority warned that under the agreement, “the airspace over the Chinese-held area would be exclusively controlled by China,” while there was “no record of the mandatory environmental impact and feasibility studies needed for such a project, nor was there any document showing the government had cleared it.” “You cannot just jump into the Indian Ocean and start filling it up,” Sri Lanka’s finance minister explained.

Soon after, Sirisena’s foreign minister suggested Colombo would bar Chinese submarines from future port visits: “I really don’t know under which sort of circumstances that led to some submarines… to [visit] the port of Colombo on the very day the Japanese prime minister was visiting Sri Lanka. But we will ensure that such incidents, from whatever quarter, do not happen during our tenure.”

Not So Fast

Sirisena soon realized his room for maneuver was far more limited, and his country far more indebted to China, than he imagined. Of the $5 billion China issued between 2005-2012, only two percent took the form of outright grants; the rest were loans at or near “commercial interest rates as high as Libor plus six percent.” Meanwhile, the loans from China’s Ex-Im Bank were “mainly offered to buy Chinese products and services,” according to one Sri Lankan financial analyst, while the laborers and subcontractors are all Chinese and “all raw material is imported from China.”

Unsurprisingly, Sri Lanka’s foreign debt soared from 36 percent of GDP in 2010 94 percent in 2015. Today, more than a third of government revenue goes toward servicing Chinese loans, with total foreign debt-service reaching $8.2 billion annually. Meanwhile, Sri Lanka’s trade deficit with China has soared, with in imports ($3.8 billion) exceeding exports ($250 million) by a factor of 15. In 2016, Fitch downgraded the country’s credit rating and Colombo was forced to secure a $1.5 billion bailout from the IMF, its second since 2009.

In July 2015, Sirisena unexpectedly approved a feasibility study for the recently-disgraced CHEC to build an addition to the Hambantota port. Under the proposed terms, CHEC would control management and operations of the dockyard at Hambantota. “We have $1.5 billion sunk in the project and no revenue. We need to make use of it,” a Sri Lankan official told the South China Morning Post. The same month, China and Sri Lanka held their second-ever joint military exercise.

In October 2015 Sri Lanka’s finance minister appealed to Beijing to restructure Sri Lanka’s $8 billion in debt. Separately, Sirisena’s defense secretary told Reuters the country would give “due consideration” to requests for port visits by Chinese warships. Three months later, Colombo welcomed three warships from the People’s Liberation Army Navy (PLAN).

In December 2015, Sirisena completed the U-turn, reversing the suspension of the CPCP. CHEC and parent company CCCC were offered lucrative tax breaks to restructure the project and in turn agreed to drop a $143 million claim against Colombo for violating the initial contract. In April 2016, Prime Minister Ranil Wickremesinghe traveled to Beijing to seal the new deal, advance negotiations on a free trade agreement, and upgrade the relationship to an “all-weather partnership.”

The CPCP was re-labeled an “international financial outpost” with “its own economy, its own jurisdiction and… separate economic and commercial laws.” A joint venture “with Chinese majority holding” will oversee the land reclamation project that will house a new Colombo International Financial and Business District.

The CPCP was expanded from 243 to 269 hectares and the land granted to China on a 99-year lease was increased from 88 to 110 hectares. Colombo, however, stood firm in opposing the transfer of 20 hectares on a “freehold” basis, “as India has strongly protested against the move.” China also “will not be able to dock ships or planes without prior permission from [Colombo].”

Finally, Wickremesinghe requested an “equity swap” offering Beijing equity in Sri Lankan firms and infrastructure projects in return for debt relief. Sri Lanka’s international trade minister explained the goal was to “reduce the current debt that we have and open up the opportunity for us to take more funds from Chinese banks” (emphasis added). He also announced Colombo would issue up to $1 billion in bonds in China to “pay Chinese firms planning to build infrastructure projects.”

“It’s an opportunity for everyone to make money,” he later explained. “That’s what we do in Asia.”

Deja Vu at Hambantota

In October 2016, as Chinese dredgers returned to resume work on the CPCP, Colombo announced it was providing China Merchant Holdings an 80 percent equity stake in the struggling Chinese financed and constructed port at Hambantota. “The money from the deal,” Sri Lanka’s finance minister explained, “will be used to repay expensive foreign loans.”

A Chinese firm was also contracted to assume management of the $209 airport at Hambantota. Once envisioned as an international transport hub, on a trip there in 2016 Wade Shepard found a nearly-abandoned airport operating just one daily and one weekly flight with “10 to 20 passengers per day.” With elephants roaming the runways and unused terminals storing rice, Sri Lanka is still paying China $17 million per year for the airport.

Together with a 15,000 acre Chinese-led industrial zone nearby, Shepard says Hambantota “seems well on the way from being a Sri Lanka national project financed by China to a full-fledged Chinese enclave at a very strategic position on the Indian Ocean.”

Facing questions about the terms of China’s loans, this month China’s ambassador to Sri Lanka later blamed “outside forces” for stalling the Hambantota and CPCP projects. “The Sri Lankan people and the government,” he said, “should have a more thankful attitude towards China.”

“If you don’t like this [loan] why have you spoken to me about getting another one?”

Why, indeed.

By Sultan M Hali - Source Pakistan Today

An unfortunate display against our sole “all weather friend”  

Dr. Stephen P. Cohen — famous American political scientist, prominent expert on Pakistan, India, and South Asian security and a senior fellow in foreign policy studies at the Brookings Institution – was asked by a journalist during an interview if there is any example in the world (in his knowledge) where the cordial relations between the states are not entirely based on the mutual interests. Dr. Cohen replied that in his recollection, China-Pakistan relations can be described as the states’ relations which are above their personal interests.

Indeed, often described as “iron brothers”, China and Pakistan fit the bill of having ties which are beyond the realm of ethnocentrism or selfish, national interests. When China achieved its independence on October 1, 1949, it was battered and worn after a prolonged struggle to rid itself of foreign occupation and an internal struggle to defeat the “Kuomintang” (KMT). After suffering defeat at the hands of Chairman Mao Zedong’s Chinese Communist Party, the KMT retreated to Taiwan (formerly “Formosa”) in 1949, where it established an authoritarian one-party state under Chiang Kai-shek. Ironically, the West ignored the 583 million Chinese and genuine “People’s Republic of China” (PRC) and instead recognised Taiwan comprising 1.2 million KMT and some aborigines as “Republic of China” and even granted it a permanent seat at the UN Security Council – complete with veto power.

For 22 years, PRC was treated as a pariah state barred from any exposure to western technology, trade and commerce links. During this bleak period, Pakistan stood by China. For decades it was the only window for the recluse state, when Pakistan International Airlines (PIA) was the sole international air carrier operating to and from China to the outside world. Pakistan fought the case for PRC’s recognition at the United Nations and international forums and also facilitated the rapprochement between PRC and USA. Henry Kissinger’s clandestine visit to Beijing in 1971 was organised by Pakistan. This trip became the precursor of US President Richard Nixon’s historic visit to China, which finally thawed Sino-US relations.

China never forgot the gestures and, continuing to acknowledge Pakistan’s munificent support in those bleak years, has always stood by Pakistan in its every moment of trial and tribulation. Whether it was wars with India, natural calamities or manmade disasters, China has always been the first to reach its distressed brother Pakistan. During prolonged periods of sanctions imposed on Pakistan by the Occident, China continued to support Pakistan’s genuine defence requirements. Similarly, Pakistan has also endeavoured to provide all out support whenever PRC or its people faced any catastrophe.

On May 2, 2011, US Navy SEAL’s clandestinely stormed a residential compound in Abbottabad and eliminated the mastermind and creator of Al-Qaeda, Osama bin Laden. The whole world was chastising Pakistan, claiming that Pakistan had been harbouring the world’s most wanted terrorist for over a decade. The whole nation was morose and depressed owing to the serious allegations being hurled against Pakistan. It was only PRC that not only stood by Pakistan in its moment of agony but challenged the world to stop harassing Pakistan and instead acknowledge Pakistan’s sacrifices and efforts in combating terrorism. China’s unstinted support for Pakistan brought cheer to the people of Pakistan.

Whenever India has tried to have the United Nations or other international organisations declare Pakistan or any of its outfits blacklisted on the charge of terrorism, China has vetoed it. If this is not support and friendship beyond personal interests then what else is?

Over the years, astute planning and judicious use of its resources have propelled PRC to become the world’s second most powerful economy while on the other hand, Pakistan has sunk into a deep abyss of economic grief, compounded by acute power shortages and incessant terror attacks. Political wrangling and poor law and order situation have exacerbated the environment. International sports and trade teams have stopped visiting Pakistan, foreign investors have deserted the terror stricken country and to make matters worse and further isolate it, Pakistan is being accused of sponsoring terrorism by its arch rival India.

In this desolate milieu, China has chalked out development projects to enable Pakistan to climb out of the quagmire of economic dependency. President Xi Jinping has envisioned a mega project “One Belt, One Road” (OBOR), which is a revival of the ancient Silk Route and also has a maritime component. One of the constituents of the OBOR is the China Pakistan Economic Corridor (CPEC), which commences from the deep seaport of Gawadar (also constructed by China) and meandering through various parts of Pakistan, including the under developed provinces of Balochistan and Khyber Pakhtunkhwa, concludes at Kashgar in China. The OBOR fans out from Kashgar into Central Asia and reaches Europe. The OBOR and CPEC are not mere highways but comprise special economic zones envisaging industrial, commercial, trade, health, educational, energy, and information centers. Train, oil, gas, data, marine and air links complement the OBOR.

Cognizant of the outcome of the mega project in bringing prosperity to Pakistan, India is bent upon sabotaging the CPEC along with the deep sea port of Gawadar. Besides fomenting strife and insurgency in Pakistan’s province of Balochistan and wreaking havoc through terror attacks, India and some other countries backing it for their vested interests are bribing or influencing some Pakistani politicians to oppose CPEC and the ingress of Chinese investment in Pakistan.

Unwittingly, these politicians are biting the very hand that is trying to feed Pakistan and help it overcome the morass and building infrastructure. Chinese philosophy is: “give a poor man a fish, he will not starve for a day; teach him how to fish and he will not starve for life.” Operating on the same principle, China has established factories, power plants assembly lines in Pakistan with soft loans and also provided transfer of technology to enable us to stand on our own feet. The advent of the Asian Infrastructure Investment Bank (AIIB) was established by China to help finance emergent countries institute development projects by setting up the infrastructure themselves.

Besides finding imaginary faults with CPEC, criticising the priorities, these detractors are also creating despondency by comparing the advent of CPEC to the British East India Company, which had come to the Indian Subcontinent during the Seventeenth Century in the reign of the Moghul Emperor Jahangir and became the precursor of three centuries of British Rule in India. This was stated by none other than Senator Tahir Mashhadi, chairman of the Senate Standing Committee on Planning and Development.

It is highly derogatory to draw parallels with the East India Company and must have hurt the sentiments of Pakistan’s sole benefactor. There is no doubt that OBOR and CPEC will benefit China but it had other options too besides Pakistan, yet it chose us because of our special relationship. To find imaginary faults with it and presuppose the honourable intentions of Pakistan’s Iron Brother, all weather friend and strategic partner, is tantamount to making holes in the platter we eat in. If China were to discontinue CPEC (God Forbid), Pakistan would be left in a lurch, fending for itself against the very sharks that want to disintegrate us and devour us. Pragmatism demands that Pakistan’s interests must be safeguarded but the true Sino-Pak bonds must not be sacrificed at the altar of vested interests.

By Sultan M Hali - Source Pakistan Today

The US and China are already working together on the clean-energy project Sapphire Wind in Pakistan, where Beijing and Washington want Pakistan to grow its economy and undermine extremism. PHOTO: SAPPHIRE WIND

By MARC GROSSMAN

With Mr Donald Trump’s election, China and the United States could be on a collision course. The US President-elect promised during the campaign to label China a currency manipulator, instruct the US Trade Representative to bring cases against China in the World Trade Organisation and threaten 45 per cent tariffs if China does not renegotiate trade agreements with the US. Meanwhile, China pursues a military build-up in the South China Sea designed to diminish US influence in Asia.

As Mr Trump addresses trade and the other issues on the US-China agenda as president and not candidate, he may find it useful to look for areas where the two countries could work together.

One opportunity ready to be explored is the vision promoted by both Beijing and Washington of the need for more economic and infrastructure connections between East Asia, South and Central Asia, the Middle East and Europe.

Two concepts are in play: China’s One Belt, One Road, or Obor initiative, a multibillion-dollar programme to build ports, railways, roads, power plants in and around 60 countries and the more modest, but still important, American New Silk Road initiative, or NSR.

In July 2011, then-Secretary of State Hillary Clinton spoke in India about the benefits of linking Central Asian economies with those in South Asia, with Afghanistan and Pakistan in the centre. Increased regional economic connectivity, she argued, would promote sustainable economic growth, a crucial part of the effort to defeat extremism.

In September, the US convened a NSR ministerial meeting in New York and China expressed enthusiasm for the project.

Turkey hosted the Heart of Asia Conference in November 2011 and, supported by the US and China, the concept became a touchstone for regional cooperation.

Obstacles then emerged. The Chinese said the name New Silk Road “belonged to China” and “Historic Trade Routes” would be a better name for the US initiative.

In 2013, Chinese leaders responded with a Silk Road initiative of their own: One Belt, One Road consists of two main components — a land-based Silk Road Economic Belt and a sea-based Maritime Silk Road — which Chinese leaders believe will together change the geostrategic and geo-economic face of the region.

BENEFITS FOR AFGHANISTAN AND PAKISTAN

In August this year, Chinese President Xi Jinping announced that more than 100 countries and international organisations had committed to participate in Obor.

According to Chinese press reports, Obor is supported by US$40 billion (S$56.7 billion) from China’s Silk Road infrastructure fund, US$100 billion in Asian Infrastructure Investment Bank pledges, and an initial US$50 billion commitment from the New Development Bank of the Brics countries — Brazil, Russia, India, China and South Africa — with a promise to increase that to US$100 billion.

The US and Chinese projects are currently on separate trajectories. American officials maintain that they support Obor, though the US is rightly wary of projects that enhance China’s military capacity. And the US cannot match the dollars or yuan pledged or spent.

That said, there are several strategic, regional and commercial benefits to additional US-China cooperation around the Obor and NSR initiatives.

For example, the US-China Summit in Hangzhou in September highlighted Afghanistan as an “area of cooperation”.

The two countries share an interest in an Afghan state in which Al Qaeda and Islamic State find no havens, drug exports shrink and private sector–based economic activity increases.

A coordinated Obor-NSR effort to create what Afghan officials once called an “Asian Roundabout” to encourage a sustainable Afghan economy would promote these shared goals. The recent opening of a rail line from the eastern coast of China to the northern Afghan city of Hairatan, offers Afghan exporters an alternative route to Asia with dramatically reduced transit times.

Another area of potential cooperation is Pakistan, where China and the US want Pakistan to grow its economy and undermine extremism.

China’s US$51 billion commitment to the China-Pakistan Economic Corridor is designed to build highways, railways and energy generation in Pakistan, including a proposed rail link and highway between Pakistan’s port at Gwadar and China’s north-western region of Xinjiang, which would also connect the Obor to China’s Maritime Silk Road project.

Pakistanis hope the corridor will create 700,000 jobs by 2030 for some of Pakistan’s 190 million people, a majority of whom are under the age of 22.

Washington and Beijing are already working together in Pakistan on the clean-energy project Sapphire Wind.

The US Overseas Private Investment Corporation has provided US$128 million for this 50MW wind project, which uses General Electric turbines.

Under the umbrella of the US-Pakistan Clean Energy Partnership, the US will invest US$70 million on transmission lines to connect a 680MW wind project in Sindh to the national grid. China is also an investor.

Collaborative NSR-Obor efforts between the US and China can benefit US companies. The Wall Street Journal reported in October that General Electric, Honeywell and Caterpillar are already focused on the possibilities. According to the Journal, GE’s orders in Pakistan are more than US$1 billion today, compared with less than US$100 million five years ago.

Connecting US firms to Obor and keeping them aware of NSR opportunities require a concerted effort by the US government, including the Departments of State and Commerce, the US Overseas Private Investment Corporation and the Export Import Bank.

POTENTIAL CHALLENGES

Despite the obvious benefits, there are many challenges to creating an NSR-Obor nexus. China may be pursuing Obor to control rising wage rates at home by exporting employment and soaking up overproduction in industries like steel.

The Chinese might decide to go it alone, with the enormous resources they have promised against a small US investment in NSR. The number of American firms interested in Obor may be too small to reach critical mass and those that seek engagement may stand no real chance to work with Chinese companies, especially state-owned enterprises.

In September, representatives of 10 Chinese state-owned enterprises visited Washington and New York to promote US commercial interest in Obor opportunities, but more needs to be done by Beijing to welcome US private-sector participation and protect US commercial interests.

Another challenge is managing Indian anxieties about Obor. Many analysts in Delhi see Obor not as a development initiative, but as a strategic effort by Beijing to surround India with naval facilities in Gwadar in Pakistan, Colombo in Sri Lanka and Kyaukpyu in Myanmar.

The possibilities of joint efforts inspired by Obor and NSR present the incoming Trump administration with a strategic opportunity to improve US-China ties, advance common security interests and create economic opportunities for American business.

Success would bring tangible benefits to a region where further state failure would surely fuel extremism, a threat to both the US and China.

And, not least, there would be something positive on President-elect Trump’s already contentious agenda with China when he takes office in January.

Ambassador Marc Grossman is a Vice Chairman of The Cohen Group. A US Foreign Service Officer for 29 years, he was the US Special Representative for Afghanistan and Pakistan (2011-2012) and a Kissinger Senior Fellow at Yale in 2013. This article was first published in Yale Global Online.

The China sponsored ‘One Belt One Road’(OBOR) project has caught India by surprise, said Srikanth Kondappally, Professor of Chinese Studies, JNU.

Delivering the valedictory address at the conference on ‘India, China and the new Silk Road Initiatives’ organised by the Mahatma Gandhi University, Prof. Kondappally said while the proposed global scale of the projects connecting Europe, Asia and Africa could provide an opportunity for expanding trade and investments it also challenged the national security of the country as the projects are passing through the India-claimed Kashmir regions currently held by Pakistan.

OBOR projects, if pursued vigorously are expected to connect the ‘heartland’ with the ‘rim land through continental and maritime routes and thus at one stroke make the rising China indispensable in the calculations of any country in the region, he said.

For India, regional and global leadership issues are also a consideration in the OBOR initiative. On the other hand, India also has its own initiative of Project Mausam of reviving commercial and cultural linkages with the Indian Ocean region and beyond, he noted.

Kandaswami Subramanian from Chennai Centre for China Studies, said that the global economic crisis leading to the collapse of exports has fuelled the rebalancing in China.

The earlier economic model had created excess capacity in major sectors like steel, transport, cement, metals. These excess capacities coupled with the management capability of Chinese public and private firms beg for opportunities abroad. These arrangements also seek to challenge the U.S. hegemony and the threat posed through its ‘Pivot Asia’ and TPP negotiations to dislodge China.

Another dimension of the OBOR may be related to China’s ‘going out’ policy, i.e. outward investment, beginning with the turn of this century.

M.J. Vinod, Professor, University of Bangalore, cautioned that while the Maritime Silk Road (MSR) is exclusively economic in orientation, yet it could still have strategic implications for India.

Though India cannot ignore the new Asian order that is fast emerging, the onus also lies on China in assuaging India’s concerns pertaining to the MSR.

K.B. Usha of the Centre for Russian and Central Asian Studies, JNU, pointed out that Chinese logistical initiative has expanded after the Ukraine crisis sharing the vision of Russia’s Eurasian Economic Union (EAEU).

Russia-China strategic partnership is thus growing, she said. Raju A. Thadikkaran, former director, ICCS, chaired the valedictory session.

‘It will connect the ‘heartland’ with the ‘rim land through continental and maritime routes.’

Source : The Hindu