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Mains Roundup 2017

What is China’s One Belt One Road (OBOR) Initiative? Should India join it?

India will not be able to stop China in carrying on this initiative nor can it stop its neighbours from joining this initiative. So, whether India joins this initiative or not, the project will take place and not join may harm India’s interests.
By IT's Mains Roundup Team
May 19, 2017

Contents

  • Why in news?
  • What is OBOR?
  • Objectives of OBOR initiative
  • Why is BRI important for China?
  • Who are interested and who are not?
  • Is it all about economy and trade? Or Any hidden agenda?
  • Who will benefit more: China or the host countries?
  • Scepticism over OBOR
  • Nepal in, India absent: What does this mean for India?
  • Why is India opposed to OBOR?
  • Advantages of joining OBOR
  • Disadvantages of joining OBOR
  • What should India do to counter One Belt One Road?
  • Way ahead for India

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Why in news?

  • Recently, China has organized the two-day Belt and Road Initiative (BRI), also known as OBOR (One Belt, One Road) project, summit in Beijing.
  • Though leaders from over 100 countries participated in the first OBOR summit India refused to participate in the summit.

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What is OBOR?

  • In the ancient days, China, and much of East Asia, was connected to the rest of the world through a route that got its name from China’s biggest export – silk.
  • Today, the country is looking to rebuild a route that will connect Asia, Africa and Europe – a new Silk Road.
  • The OBOR initiative was raised by Chinese President Xi Jinping in 2013.
  • The One Belt One Road (OBOR) initiative is not one project but six major routes which will include several railways line, roads, ports and other infrastructure. It seems like a natural step for the world’s biggest trading country.
  • It will impact 4.4 billion people. China is said to be spending $1 trillion on it.
  • China claims these economic corridors will not only build infrastructure in countries that cannot afford to do it themselves but also boost global trade.

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Objectives of OBOR initiative:

Among Chinese objectives of the OBOR initiative are –

  • Finding outlets for excess capacity of its manufacturing and construction industries;
  • Increasing economic activity in its relatively underdeveloped western region; and
  • Creating alternative energy supply routes to the choke points of the Straits of Hormuz and Malacca, through which almost all of China’s maritime oil imports pass
  • Through BRI, China can strengthen its influence over swathes of Asia and Africa, buttressing its ambitions to be a maritime power, and developing financing structures parallel to (and eventually competing with) the Bretton Woods system.
  • It is a rich mix of economic, developmental, strategic and geopolitical motives. It is also the most ambitious global infrastructure project ever envisaged by one country.

Why is BRI important for China?

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  • The slowdown in the Chinese economy and excess production of steel, cement and machinery that it cannot consumed has forced the Chinese government to search for new markets for its products.
  • Critics said that Beijing is going for a bigger role as a global superpower. With this in mind, having a direct link to major countries may not only boost its economic power, but also its political clout in both the Western and Eastern hemisphere.
  • Also, many of China’s production sectors have been facing overcapacity since 2006. The Chinese leadership hopes to solve the problem of overproduction by exploring new markets in neighbouring countries through OBOR. The OBOR initiative will provide more opportunities for the development of China’s less developed border regions.
  • China also intends to explore new investment options that preserve and increase the value of the capital accumulated in the last few decades. OBOR has the potential to grow into a model for an alternative rule-maker of international politics and could serve as a vehicle for creating a new global economic and political order.
  • China has cash and deposits in Renminbi equivalent to USD 21 trillion, or two times its GDP, and expects that the massive overseas investment in the BRI will speed-up the internationalization of the Renminbi.
  • BRI is also seen as a strategic response to the military ‘re-balancing’ of the United States to Asia.
  • China can also benefit from the New Silk Road project through other means like the easing up of growth of state-owned enterprises as well as an increase in the Chinese people’s income.

Who are interested and who are not?

  • Most of the countries in Asia and all of India’s neighbours, except Bhutan (Bhutan has no diplomatic relations with China), are willing to take part in the project.
  • While some countries like Pakistan and Afghanistan are keen on OBOR, countries like India and Indonesia are wary because of the shift in status quo that this project could cause in sensitive areas like Kashmir and the South China Sea.

Is it all about economy and trade? Or Any hidden agenda?

China always hides its military plans in its economic projects.

  • Experts have noted that OBOR is also a part of China’s strategy for economic diplomacy.
  • Considering China’s exclusion from G7, OBOR policy might just provide China an opportunity to continue its economic development.
  • A vast infrastructural footprint in dozens of countries in Asia and Africa will eventually mean a strong Chinese military presence across OBOR.
  • A small country that hosts infrastructure created by China and unable to repay the loan will be vulnerable to China’s diplomatic and military moves.

Who will benefit more: China or the host countries?

Benefits to host countries, but with conditions:

  • The participating countries will benefit in terms of infrastructure and trade.
  • OBOR can be an easy and fast way for many small countries to acquire important infrastructure projects which they cannot afford otherwise.
  • But all this will come at a huge hidden cost. China will lend money for OBOR projects to host countries at high rates of interest which the countries may not be able to repay.
  • This can lead to China acquiring equity and then controlling stakes in these projects, getting a permanent footprint in several small countries which is nearly impossible for it to achieve otherwise.

Benefits to China:

  • OBOR can provide big long-term benefits to the Chinese economy. OBOR can give it opportunities to use its overcapacity in steel and minerals.
  • The trade routes will give it access to new markets. Permanent Chinese presence in dozens of countries will give China an edge over its rivals in trading with these small countries.
  • China can even spread its manufacturing across countries as manufacturing costs such as power and wages in China are going up.
  • If OBOR becomes a reality, it can help China create a vast economic empire in Asia and Africa.

Scepticism over OBOR:

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Contracts and jobs

  • Experts has doubted serious concerns as major part of the contracts and jobs will be given to Chinese firm and people. There has been serious reservation and protest by people in different countries over the implementation of OBOR.

Debt trap:

  • Analysts have pointed how China is pushing countries in its debt trap by giving loans to countries for unviable projects and increasing Beijing’s leverage.
  • Pakistan is already fallen victim of the Chinese debt trap as it has taken USD 50 billion dollar at the market which is going to balloon to USD 90 billion over a 30 year period.
  • Similarly, countries like Sri Lanka and Cambodia has fallen in the Chinese debt trap.

Nepal in, India absent: What does this mean for India?

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  • Nepal and India have sustained good bilateral ties. However, with China entering the equation, India might just have a hard time in keeping its status intact.
  • Chinese foreign policy experts have noted that Nepal’s inclusion in OBOR may force India to join the initiative or face exclusion. This is not constructive for India and will reduce its appeal in the region. The neighbours may ask questions like why is India not involved?”

Why is India opposed to OBOR?

India has stayed away from the Belt and Road Initiative (BRI) summit, citing sovereignty, procedural and leadership issues.

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CPEC:

  • A key part of OBOR is China-Pakistan Economic Corridor (CPEC), a 3,000 km project connecting Pakistan’s deep-water port Gwadar and China’s Xinjiang. It passes through Gilgit-Baltistan region which lies in Pakistan-Occupied Kashmir.
  • The Chinese presence in a disputed region which India claims as part of its own territory raises sovereignty concerns for India.
  • The establishment of a project with China in the disputed territory gives Pakistan’s occupation of the area a degree of legitimacy. And India’s clear stand on the issue is that Pakistan is illegally occupying Indian territory.
  • Getting on board OBOR or talking to China and Pakistan about CPEC would be problematic for India as it could be seen as conceding ground to Pakistan. It would also involve a third country which goes against India’s stand that this is a bilateral issue which needs to be worked out between the two neighbours.

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‘String of pearls’ policy:

  • India is said to have officially flagged this as its only reason for not taking part in the OBOR summit. However, a major security concern is CPEC giving China control of Pakistan’s Gwadar port.
  • Add to that OBOR boosting the Chinese presence in the Indian Ocean. OBOR will turn China’s old ‘string of pearls’ policy to encircle India into a reality.

Military deployment:

  • The fact that the Chinese have begun to deploy 30,000 “security personnel” to protect the projects along the CPEC route makes it an active player in the politics of the Indian sub-continent. Clearly, this is a case of double standards.

Advantages of joining OBOR:

  • India will not be able to stop China in carrying on this initiative nor can it stop its neighbours from joining this initiative. So whether India joins this initiative or not, the project will take place and not join may harm India’s interests.
  • India may become isolated in this region since all of its neighbours (except Bhutan) have joined One Belt One Road. Leaving any regional platform may hamper India’s credentials and may hasten the end of its regional hegemony.
  • Some analysts say that this initiative will be a win-win situation for India since it will increase the connectivity of the region. There may emerge mutually beneficial swap where India protecting Chinese interests in the Indian Ocean and China securing India’s essential undertakings in their part of the waters.
  • Regional transport, energy security, and blue economy are key to OBOR initiative which will be helpful for India.
  • China has the financial capital, technology to accelerate the development of other countries and India also need resources and funds for its own development.
  • The OBOR project will open more links of trade between India and other countries. Further, India does not enjoy much leverage to guide ocean trade markets despite having proximity to the sea and a strong navy. Through OBOR project India will get access to more business in an environment which promote friendly reforms.
  • Some analysts feel that countries like Russia and others in SCO would want Indian participation in OBOR as a counterweight to Chinese influence.
  • Regardless of economic interests, India cannot ignore the symbolic significance as it was along the Silk Route that Indian trade and philosophy (Buddhism) travelled to the rest of Asia. Thus, China may gain cultural hegemony in the region which may prove counter-productive to India.

Disadvantages of joining OBOR

  • OBOR is a unilateral ideational of China and there is a lack of transparency in its working. The process is not participatory and collaborative in nature.
  • Under Maritime Silk Route (MSR) China is developing ports in Bangladesh, Sri Lanka, and Pakistan and is trying to enlarge its influence using its economic might in the Bay of Bengal and the Arabian Sea. Thus, MSR is nothing but an economic disguise to the “Strings of Pearls” Theory. China is investing a huge amount of money in India’s immediate neighbourhood and these countries tend to use the China card against India.
  • OBOR seems to be primarily driven by broad geostrategic and geopolitical aim. For Example, China-Pakistan Economic Corridor gives de facto legitimization to Pakistan’s rights in Pakistan Occupied Kashmir which is against India’s interests. Since this port is closer to the Persian Gulf, it could be used as a transhipment point for China’s energy supplies obviating the needs to go through the Strait of Malacca in South East Asia. Apart from serving as a commercial port, Gwadar is also deep enough to accommodate submarines and aircraft carriers. Thus, it may be used as a military port by People Liberation Army Navy in future.
  • Through OBOR, China is countering the strategies of India in North East region and is promoting its greater presence in North East India, part of which China claims as its own territory. This may have a security impact on India.

What should India do to counter One Belt One Road?

India has already refused to join this initiative due to geostrategic and geopolitical angle attached to this project. Instead, India has started initiatives for connectivity on its own.

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Following are some of the steps taken by India.

Project Mausam:

  • It is soft power diplomacy by India. The project is under Ministry of Culture and its purpose is to reconnect and re-establish communication links between countries of Indian Ocean and enhancing their cultural values.

SagarMala:

  • It is a port led direct and indirect development with a focus on infrastructure and connectivity.
  • The project is to enhance the capacity of major and non-major ports and also to start their modernization process.

Chabahar Port:

  • Chabahar’s location give India access, besides Iran, to Afghanistan, central Asia, and Europe, bypassing Pakistan altogether and cutting down significantly current travel distances and time.
  • International North South Transport Corridor initiated by India, Russia, and Iran is another connectivity solution for India in Central Asia.

Naval Ports:

  • India is developing naval ports in Indian Ocean regions like at Madagascar, Seychelles, and Mauritius.

IORARC:

  • India is involved in the Indian Ocean Rim Association grouping whose first summit took place in Jakarta in 2017.

Alliances:

  • Alliance of India with like-minded countries like Japan.
  • Japan has agreed to promote India’s “Act East” policy by developing and strengthening reliable, sustainable and resilient infra that augments connectivity within India and between India and other countries in the region aimed at advancing Asian industrial networks and regional value chains with open, fair and transparent business environment in the region.
  • Japan and India can build rail and road connectivity across the Eurasian landmass running parallel to OBOR.

Way ahead for India:

  • India now needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region.
  • This will require the government to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; BRI can assist in the latter.
  • Chinese railways, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian double-digit growth.
  • Simultaneously, India can focus on developing last-mile connectivity in its own backyard linking to the BRI — the slip roads to the highways, the sidetracks to the Iron Silk Roads.
  • Currently, India has neither the resources nor the political and economic weight to put in place competitive and alternative connectivity networks on a global scale.
  • Therefore, for the time being, it may be worthwhile to carefully evaluate those components of the BRI which may, in fact, improve India’s own connectivity to major markets and resource supplies and become participants in them just as we have chosen to do with the AIIB and the NDB.

 

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  • Priyanka

    very comprehensive. covering every possible aspects. hatts off IASToppers team..thank you very much sir……

  • Priyanka

    very comprehensive. covering every possible aspects. hatts off IASToppers team..thank you very much sir……

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