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12 March, 2013

Neighbourhood challenges

BRP Bhaskar
Gulf Today

China-watchers are speculating on the implications of Beijing’s involvement in infrastructure projects in Sri Lanka and the Maldives, two small countries where India has vital strategic interests. Foreign media accounts speak of a “string of pearls” from Pakistan to Myanmar, comprising Chinese-funded port development projects.

The largest of these is the Hambantota port in southern Sri Lanka, the first stage of which, built at a cost of $360 million, was opened to ships in 2010. When its second stage, for which China has provided $810 million, is completed, it will become the largest port in the region.

Conceived as a refuelling and service point for cargo vessels, Hambantota is expected to handle about 45,000 metric tonnes (MT) of ship fuel this year. In the next two years its handling capacity will go up to 125,000MT. China has also offered $500 million for the expansion of the Colombo port.

Since 2007 China has committed $6.4 billion for various projects in Sri Lanka. Out of this $3.6 billion has been disbursed. An international airport for which China lent $209 million is due to open next week. Chinese companies have secured at least 14 major infrastructure projects in the island without going through the tender process.

Already Sri Lanka’s biggest partner in trade and development, China is all set to assume an even bigger role in its economy. The country expects China to provide more than half of an estimated $21 billion needed for various projects in the next three years.

In the last decade China’s trade with the Maldives has grown from $3 million to $60 million. When the country terminated its airport agreement with the Indian company GMR there were insinuations that it was acting at China’s behest. Later, Maldivian Defence Minister Mohammed Nazim visited China, leading to speculation that President Mohammed Waheed, who seized power ousting elected president Mohamed Nasheed, plans to take relations with China beyond diplomatic and economic levels.

When the Maldives sought a soft loan from China for information technology and communications projects, India was concerned it may have implications for its own security.

The US Congressional Research Office, in a report two years ago, had said China was “building or wanting to build” naval bases along the sea lane linking it with Gulf oil sources. China, it added, was following a “places, not bases” strategy: it was building commercial ports, not military bases.

Around the same time the International Institute for Strategic Studies, London, quoted a retired Chinese naval officer as saying China might set up its first overseas base somewhere in the Middle East. However, the Defence Ministry denied any overseas base was planned.

The emergence of divergent voices from China may be indicative of differences of opinion within its powerful political establishment. Contrary to the conventional view of foreign experts, different views are known to be in contention within it.

Justifying China’s increased presence in the Indian Ocean, Sri Lankan Defence Secretary Gotabaya Rajapaksa, who is a brother of President Mahinda Rajapaksa, points out that it has a vital interest in the region as it imports 200MT of oil a year to sustain its industry-intensive economy. The Chinese-aided projects in the island are purely commercial, he says.

Sri Lanka receives investments from India, the US and Japan also but they cannot match cash-rich China’s soft loan terms. China provides assistance in the form of cash grants, interest-free loans and long-term concessionary loans on which the interest rate may be as low as two or three per cent.

Some domestic analysts disapprove of Sri Lanka’s excessive dependence on China. A former diplomat, Dayan Jayatilleka, reminds the administration that, unlike Pakistan, Sri Lanka has no land link with China, and it is highly improbable that China will bruise its relations with India over anything other than its own core interests. 

While the interests of India and China do not always coincide the two are sensitive to each other’s vital concerns. Attempts by China to understand India’s position in Afghanistan, which is at variance with that of its long-time ally Pakistan, is a case in point.

The most worrisome aspect of India’s relations with its small neighbours is not China’s growing economic links with them but its own diplomatic and political failures. It has not been able to persuade Sri Lanka to give its Tamil minority a fair deal or the Maldives to respect the rules of democracy. -- Gulf Today, Sharjah, March 12, 2013.

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