Wary of China, India tries to charm its neighbours
INDIA’S foreign minister, S.M. Krishna, gushes about the close “civilisational, cultural” ties his country shares with Sri Lanka. He notes how India is the biggest trading partner and source of tourists for the island nation, plus one of the largest investors. It dishes out pots of aid, including roughly $300m for 50,000 Tamils, displaced in a brutal civil war that ended in 2009, to build houses near Kilinochchi and Jaffna in Sri Lanka’s north. And India is building a power station, and renovating railways and a port.
Memories in Sri Lanka of India’s troubled role in the long and bitter civil war appear to be fading. Meanwhile, India, officially, does not worry about signs of its neighbour’s dalliance with China. That is despite the news last month that Chinese investors took 85% control of the project extending Colombo’s main commercial port, which handles goods traded almost entirely with India. “Sri Lanka is sensitive to the security concerns of India,” says the foreign minister, reassured.
But regardless, Mr Krishna says, India does not (any longer) meddle in the affairs of its neighbours. “We will not destabilise or divide a nation”, he says firmly. The desire to ward off any resentment at India throwing its weight about the region is a fairly recent phenomenon. It may explain India’s inaction last week in the Maldives, when an elected ally, President Mohamed Nasheed, was toppled in what looks very much like a coup.
Hawkish Indians, such as Brahma Chellaney, a foreign-affairs type in Delhi, lament that as a result India’s “clout is eroded, and its ability to shape events is waning.” For Mr Chellaney, the Maldives is the latest example. Yet the cautious approach, combined with growing largesse, may win allies in the long term.
Already, Sri Lankans are sounding warmer towards India. Basil Rajapaksa, Sri Lanka’s economy minister, talks up intimate ties. Sri Lanka’s economy, growing by some 7%, gets about half of all Indian investment in South Asia, and Indian banks, hotels and fund managers have been crowding south. India is helping set up industrial zones, small-business parks and factories in Tamil areas. Gotabaya Rajapaksa, the defence secretary and the economy minister’s brother (a third brother is the president), is just back from a pilgrimage to Buddhist sites in India. He purrs about “very good and very ancient” links—though he then talks glowingly of China’s generosity and economic might.
India is quietly vying for greater influence across South Asia. One way to do that is economic. It has offered Sri Lanka a free-trade deal in services (a deal exists already for goods). Dushni Weerakoon of the Institute of Policy Studies in Colombo says that the concessions are so generous that political pressure for a deal must have trumped economic concerns. Stitching up closer trade relations elsewhere—for example letting Bangladesh’s booming garment industry export 10m pieces duty-free to India, or bidding for a big Indian investment to extract iron ore in Afghanistan—also looks designed to win friends.
A similar strategy is even at play with Pakistan, India’s arch-antagonist. This week India’s trade minister led a delegation of businessmen to Lahore. Late last year Pakistan formally said it would reciprocate a longstanding Indian offer of most-favoured-nation trading status. Though civilian rulers in Islamabad, the Pakistani capital, have since been too weak to implement any tariff cuts, the intention is clearly to give businesses in both countries a stake in promoting good relations.
The potential returns are big. India’s exports to Pakistan are surging, by over 30% a year, but from a minuscule base (garlic crosses the border in the picture, below). The Confederation of Indian Industries in Delhi says that if basic tariffs are cut, bilateral trade, now just $2.7 billion a year, could easily reach $10 billion by 2015. If all barriers were removed, trade in cars, chemicals, cotton and other goods could be worth $25 billion a year.
To lessen resentment in the region, India is getting more active as an aid donor. A decade ago that largely meant paying for Bhutan to build big hydropower plants that exported energy back to India. Today it means big, soft loans, China-style, so neighbours can buy capital goods. Bangladesh, where the Awami League government has close relations with India, recently got a cheap $1 billion loan for river dredgers and railway stock from India.
India also scatters small grants among villages in Nepal, to cut poverty and generate goodwill. It is one of the five biggest donors to Afghanistan, where it is training police officers. And it spends $100m a year teaching some 5,500 foreign civil servants, many from the region, in its academies. Such schemes could be fruitful if individuals go home thinking nice thoughts about their giant neighbour.
India is building up its neighbourhood diplomatic presence too. Since 2000 it has opened four new consulates in Afghanistan, two more in Sri Lanka and an extra one in each of Bhutan, Nepal and (to come) Pakistan. The offices may only become truly useful, however, once India gets more diplomats to staff them: its entire foreign corps of 600 is on a par with New Zealand or Singapore. A high official predicts a “slow, tortuous process” in raising the numbers by much.
What lies behind this broad Indian push is not hard to divine. Talk to Indian diplomats abroad and its most senior officials in Delhi, and a theme emerges. “India’s priority is democracy and stability,” says an Indian high commissioner in a nearby country. Most security types in Delhi have no time for the “string of pearls” theory—the idea that China is seeking to encircle India in its alliances with Pakistan and other neighbours. Yet they agree that India made mistakes in the past, failing to foster warm ties nearby and so leaving gaps into which Chinese investors, donors and diplomats have stepped.
Others spell out concerns more explicitly. At a seminar about the Indian Ocean held in Chennai late last year, participants noted that China has a legitimate interest in keeping its maritime trade routes open and secure. But that is bound to mean that China has a growing interest in India’s near-abroad. India, one participant said, had to prepare for “some kind of adversarial relationship” with China. “We are not Chinaphobic” said an ex-submariner, “but it is right to pay attention to China.” India had better make more friends now, in other words, before it is too late.
- The Economist