Reviving SAARC to deal with China
Context:
- Over the past decade, hegemonic China has strengthened its economic and military ties with India’s neighbours in South Asia as part of its global expansionism, which could pose a challenge for India
How does China exert its influence in India’s neighbourhood?
1. Trade
- Over the past decade, China has replaced India as the major trading partner of several South Asian countries.
- For instance, the share of India’s trade with Maldives was 3.4 times that of China’s in 2008. But by 2018, China’s total trade with Maldives slightly exceeded that of India.
- China’s trade with Bangladesh is now about twice that of India.
- China’s trade with Nepal and Sri Lanka still lags India’s trade with those countries but the gap has shrunk.
2. Investments, loans and grants
Hard infrastructure
- According to the American Enterprise Institute’s China Global Investment Tracker, China has committed around $100 billion in the economies of Afghanistan, Bangladesh, the Maldives,Pakistan, Nepal and Sri Lanka.
- China is now the largest overseas investor in the Maldives, Pakistan, and Sri Lanka.
- Their database shows that Chinese investment is concentrated in hard infrastructure – power, roads, railways, bridges, ports and airports.
- Nearly 80 percent of Chinese investments in South Asia have been in the energy and transport sectors, according to the tracker.
Financial systems
- Beyond hard infrastructure, China has also invested in the financial systems of these countries.
- For instance, Beijing has taken stakes in the Dhaka and Karachi stock exchanges and cultivated trade in yuan between China and Pakistan.
Go beyond economics- loans
- China is accused of extending excessive credit with the intention of extracting economic or political concessions when countries cannot honour their debts.
- This raises fears that China’s credit to its South Asian partners, particularly through the Belt and Road Initiative (BRI), could be a strategic disadvantage for India.
- Such fears were amplified after Sri Lanka had to lease out its Hambantota Port to China for 99 years, after being unable to service its debt.
3. Arms sales
- Chinese arms sales across South and Southeast Asia grew from $386 million in 2008 to $1.3 billion in 2016 before falling to $759 million in 2018.
- China is the biggest arms supplier to Pakistan and Bangladesh today.
4. Strengthening navies
- Beijing is helping strengthen the navies of Pakistan, Bangladesh, and Sri Lanka to enhance its footprint in the Bay of Bengal and the Indian Ocean.
- This is seen as part of an encirclement or ‘string of pearls’ strategy to contain India by building a network of military and commercial facilities in India’s neighbourhood.
Hegemonic China
- According to a Brookings India study, most South Asian nations are now largely dependent on China for imports despite geographical proximity to India.
China- Pakistan
- Pakistan, an Islamic republic, has emerged as Communist China’s closest ally and the two countries in recent years firmed up their all-weather alliance with USD 60 billion China-Pakistan Economic Corridor, the biggest overseas investment by Beijing.
China- Nepal
- Nepal is moving closer to China for ideational and material reasons.
- China has been making an effort to gain entry into SAARC, and Nepal has continuously backed and supported the proposal to include China as a member in the regional grouping.
- Since 1975, Sino-Nepalese relations have been close and grown significantly, with China being the largest source of FDI, while India still remains one of the major sources of remittance to Nepal.
China- Bangladesh
- China is supporting Bangladesh by offering tariff exemption to 97% of Bangladeshi products
China- Srilanka
- It has intensified its ties with Sri Lanka through massive investments.
Reinvigorating SAARC
- Several foreign policy experts argue that India’s strategic dealing with China has to begin with South Asia. In this regard, it is important to reinvigorate SAARC, which has been in the doldrums since 2014.
About SAARC
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Deviating from SAARC
- In the last few years, due to increasing animosity with Pakistan, India’s political interest in SAARC dipped significantly.(India has been trying hard to isolate Pakistan internationally for its role in promoting terrorism in India)
- India started investing in other regional instruments, such as BIMSTEC, as an alternative to SAARC.
Issues
Least integrated region
- According to the World Bank, trade in South Asia stands at $23 billion of an estimated value of $67 billion.
- South Asia is one of the least integrated regions in the world with intra-regional trade barely 5% of total South Asian trade, compared to 25% of intra-regional trade in the ASEAN region.
- While South Asian countries have signed trade treaties, the lack of political will and trust deficit has prevented any meaningful movement.
Way forward
Revive South Asian economic integration
- India should take the lead and work with its neighbours to slash the tariff and non-tariff barriers.
- There’s a need to resuscitate the negotiations on a SAARC investment treaty, pending since 2007.
- According to the UN Conference on Trade and Development, intra-ASEAN investments constitute around 19% of the total investments in the region.
- The SAARC region can likewise benefit from higher intra-SAARC investment flows.
- Deeper regional economic integration will create greater interdependence with India acquiring the central role, which, in turn, would serve India’s strategic interests too.
Domestic challenges for India
There are two major domestic challenges that India faces in revitalising SAARC.
Divisive domestic politics
- Majoritarian politics influences foreign policy in undesirable ways.
- It dents India’s soft power of being a liberal and secular democracy, which gives moral legitimacy to India’s leadership in the region.
- This divisive domestic politics fuels an anti-India sentiment in India’s neighbourhood.
Self reliance and protectionism
- It has been said that India needs to cut down its dependence on imports, thus signalling a return to the obsolete economic philosophy of import substitution.
- If this marks sliding back to protectionism, it is unsure if India will be interested in deepening South Asian economic integration.
https://www.thehindu.com/opinion/op-ed/reviving-saarc-to-deal-with-china/article31956334.ece
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