China enlarges its footprint in South Asia

China enlarges its footprint in South Asia

China is increasing its footprint throughout South Asia, with global power United States under Donald Trump becoming inward looking, and regional power India being hamstrung by financial constraints and bilateral political issues bedeviling  relations with its South Asian neighbors, writes P.k.Balachandran in Daily Mirror.

Technically, the Sino-Lankan Concessional Agreement of July 29 over the funding and management of the US$1.4 billion Hambantota port could be changed after the parliamentary debate on it on Tuesday. But no substantive change is envisaged, given the fact that two agreements on the port have been signed already.

As per the latest “Concessional Agreement” the Chinese company, China Merchant Port Holdings Company (CMPort), will have 70% stake and the Sri Lanka Ports Authority (SLPA) 30% in the port. CMPort will be taking the port on a 99 year lease, though there are provisions for SLPA to take a majority share in later years, if it can afford it.

However, the reality is weighted in favor of CMPort. The share holding structure is such that the Chinese company will, in actual fact, have a majority stake in both the special vehicle companies set up for the management of the port and not just in one, as claimed by the government.

Nominally, the SLPA has more shares in the Hambantota Port Service Company (HIPS) which handles operations and security. But if one takes into account the fact that 8.7% of SLPA’s shares in it come from the Hambantota International Port Group Company (HIPG) in which CMPort has 85% of the shares, the SLPA’s hold is less than CMPort’s. Further, the business side of the port is to be handled by HIPG and there, 85% of the shares are with CMPort.

All this has been done to get a mere US$ 1.12 billion, which the Sri Lankan government says is necessary to pay back existing debts. But many do not think it is a valid argument for “selling family silver” or bartering away a national strategic asset.

The earlier “Framework Agreement” signed in December 2016, gave CMPort 80% stake. It also had the right to use the port for any purpose, including military use  – a right denied in the July 29 Concessional Agreement. But the present deal is still very good for China. No wonder, the Executive Vice President of China Merchant Group had no hesitation is declaring that the Hambantota port will be part of Beijing’s grand  One Belt One Road (OBOR) global communication project.

China, which has already built and is running the Colombo International Container Terminal profitably in collaboration with the SLPA, now has two ports in Sri Lanka as part of the OBOR. And it is now looking to have an industrial zone adjoining the Hambantota port.

Though this zone will be nominally open to investors from anywhere in the world, it is likely to be a Chinese zone, essentially. The Chinese Ambassador in Sri Lanka, Yi Xianliang, is fixated on getting Chinese investors and in view of their coming in large numbers, he has proposed the setting up of a Sino-Sri Lankan University to train professionals. He is aiming to provide 50,000 jobs to trained Sri Lankans.

China has already built roads, a coal fired power plant  and seven star hotels and is sending students and MPs to China for educational tours to get them to take a favorable view of China.

China has an advantage over its regional rival, India, in so far as, it does not have any bilateral issues arising from geographical proximity, such as the Tamil problem or the fishing issue. This predisposes Sri Lankans to view China more favorably and with less apprehension than they view India. Therefore, it is likely that the Sri Lankan  parliament and the population at large will give the green signal to the agreement on Hambantota port despite its obvious disadvantages from the broader and long term perspective.

Pakistan          

In Pakistan, China has already overtaken the US to be the top most investor. As per the latest figures, China is going to spend US$ 62 billion on the multi-dimensional China Pakistan Economic Corridor (CPEC) which includes the already constructed deep water port at Gwadar.

The US$ 500 million US investment in Pakistan between 2013 and 2017, pales in comparison with Chinese investment of US$ 1.83 billion. Seventy seven Chinese firms are already in Pakistan and many more are to come as part of CPEC.       

Bangladesh

Sino-Bangladesh bilateral trade amounts to US$ 6.8 billion, but it is heavily weighted in favor of China, with Bangladesh exporting only US$ 401 million. However what Bangladesh wants and is getting from China, is investment, especially in textiles, energy and power, pharmaceuticals, communications and infrastructure development.  And China has been quick to seize the opportunity.

In March, China granted Bangladesh US$ 23.8 million for vital projects.  Additionally, US$ 133 million has been provided as a soft loan for the setting up of a project aimed at bringing all government offices across the country under one network. In May, China expressed its interest in investing in Bangladesh’s beleaguered apparel industry.

In June, Dhaka accepted a Chinese proposal for the construction of a transnational highway, connecting the Indian state of West Bengal and the southwestern Chinese city of Kunming, via Myanmar and Bangladesh.

The six Bangladesh-China Friendship Bridges built with Chinese assistance, the multipurpose Padma rail-road bridge, the Bangabandhu International Conference Centre in Dhaka, the Barakpuria coal mine and coal-based electricity generation, the Shah Jalal fertilizer factory, and upgrading of mobile networks for the introduction of 3G technology, exploration rights at the Barakpuria coalmines   are other Sino-Bangladeshi projects worth mentioning.

Bangladesh has also given Chinese naval vessels access to Chittagong port, which worries India. Bangladesh has formally joined Beijing’s mega project OBOR.

Nepal

In Nepal, 108 projects have been started with a Chinese investment of around Rs 29.80 billion (US$ 284 million). The energy sector, with three projects, has got the highest Chinese investment. And like Bangladesh, Nepal has joined China’s OBOR.

India

Locked up in a border conflict and also over Tibet since the 1950s, India- China economic relations have never been optimal. Chinese investment in India is low but Chinese goods  have come to dominate the Indian market, which is reflected in the yawning trade deficit.

In a way, China’s footprint on India is large despite the conflict. Calls for boycott of Chinese goods in the wake of the on-going border conflict at Doklam, have not affected the inflow of Chinese goods including consumer goods.

In 2016, India-China bilateral trade was US$ 71 billion But India’s  trade deficit with China was US $ 46.56 billion and India’s exports have continued to decline. On the other hand, China’s exports to India totaled to $58.33 billion in 2016, registering an increase of 0.2% over the figure in 2015.

(The featured image at the top shows Chinese built port at Gwadar in Pakistan.Photo. News International) 

 

 

 

 

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