India’s withdrawal from the recent Chinese One Belt One Road summit has been a major diplomatic fallout that India is now trying to make up by a grand Modi-Xi summit at Astana, which is part of the Shanghai Cooperation Organisation.
The summit promised Chinese funding and cash flow to infrastructure projects that are part of the SCO. India’s Act East policy, then, gets a new lease of life with it becoming a full member of the SCO, and thereby a recipient of Chinese investment.
Further, later this year, India’s participation in the Brazil-Russia-IndiaChina-South Africa summit will advance a closer cooperation between India and China on mutually-agreed bilateral and multi-lateral projects.
These developments are significant not only from China’s already ensconced project of “Belt and Road’ initiative offering $200 billion, but this brand new involvement of India, as a full member in the SCO, will create all the enabling conditions for Chinese investment in projects of mutual interest in vast Central-North Asian region.
The region, comprising Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan, needless to say, facilitates a great partnership between China and India in strategic and sensitive areas of oil and mineral exploration by giving the latter a boost in import and export of crude oil and strategic minerals like uranium, plutonium along with access to a string of sea ports like Chah Bahar port in Iran and then commercial places like Akshbad (Turkmenistan), Almaty (Kazakhstan), Dushanbe ( Tajikistan), Tashkent (Uzbekistan) and the like. India’s investments in Iran’s Chah Bahar port for its upgradation will come handy once China joins hands with India in the region.
What is significant from the point of view of Northeast India is Chinese readiness to accommodate Indian interest through the SCO.
This entails Indian road projects, which are supposed to be completed in developing India-Myanmar-Thailand Trilateral highway, will not face Chinese roadblock and India will be able to complete the stretch between KalewaYagyi-Chaungma-Monywa to link up the border town of Moreh to Mae Sot via Bagan in Mynamar. Apart from this, the stiff Chinese competition that India faces in Myanmar in building up any project, especially in developing sea ports and roads, needs to be mellowed down by way of China-India cooperation in forums like SCO and BRICS.
So the larger issue is that the landlocked North-east needs opening up to the entire South-east Asian region through this kind of China-India cooperation.
There are many grey areas too. The call for boycott of Chinese products as an offensiv e against flooding of Indian markets by Chinese goods have been mapped onto developing India’s own sea routes through the Bay of Bengal and Indian Ocean.
Further, Indian insurgents receiving tacit Chinese support is no less a security concern that affects India’s Act East policy. The critical China-Myanmar factor comes a cropper here.
Myanmar’s dependence on China for its economic and strategic strength comes as a major challenge for India’s North-east to enjoy the goodies of the Act East policy. Instead the capital goes elsewhere in India bypassing the Northeast. For example, the $8.66-billion India-Thailand trade mostly originates and ends in South and West India and Japan’s scanty involvement in road building projects within the North-east does not create a multiplier effect as trade with South-east Asia would have created. Indeed the contrast is so glaring that Japan is spending some Rs 22,000 crore for road building in the Northeast.
This comes as loan, which the Northeast states will have to repay. Chinese investments in Gujarat and South India come as a boon without much financial liability. The overwhelming security concerns of internal insurgency and military rivalry with China creates a condition of bad weather for foreign investment.
More importantly, structural issues like low capital formation, low credit-deposit ratio and low marginal rate of technical substitution, along with increasing transaction costs in both factor and output markets have created a slow economic growth cycle in the region.
To reverse this, a heavy dose of public investment has to create a sustainable financial and productive eco-system, which is still a far cry. The Act East policy can provide a stimulus to foreign direct and institutional investment by way of establishing greater Sino-Indian synergy, for which the Centre needs to work out a careful plan.
The damming of the Brahmaputra at Zangmu in South-west Tibet by China constrains the hydrological cycle in a major way. The gradual recession in rainfall in the downstream Brahmaputra and adjoining North Bangladesh indicates a possible sharp decline in preparation of agricultural soil and reduced aquatic life cycles, which is a major ecological shift in the downstream Brahmaputra and delta regions of the Bay of Bengal.
The Act East policy has to make up these losses of sorts by restoring it, independent of possible cooperation from neighbours. What is more critical is the direct link between a depleting ecology and an investment-strapped regional economy of the Northeast that does not promise an immediate recovery. Leaving too many unresolved issues, re-building the Stilwell road connecting Ledo to Kunming via Myitkyina and Kachin to reach up to South-west China, has been there on the cards for the last two decades.
As a large part of the road, almost 900 km, falls in China once again, so the China factor plays a major role in regulating India’s access to Myanmar and Chinese markets through this road. The question is, do these factors combine in reproducing a rivalry structure between India and China?
Indian exports to Myanmar and the volume of trade being restricted to an average US $100-150 million every year does not promise much improvement, while India importing pulses worth Rs.200 crore is a need-based import without a favourable balance of trade.
Indian companies find it difficult to enter Myanmar markets, but prefer to develop oil and mineral exploitation projects with huge investments or sell standard pharmaceutical products through its Singapore and Hong Kong-based companies.
Given these kinds of prevailing hurdles for India, the geopolitical space for India diplomacy is stuck into resolving hard issues of territorial security and economic competition that does not find an easy fulcrum through existing forums like the BRICS, SCO and the Association for South-East Asian Nations.
Bilateral forums are never so successful in a contested and already skewed terrain of inter-country relationship. In such a situation, India is virtually diverting itself from the Northeast to the Asia-Africa growth corridor without much emphasis on Southeast Asia.
Whatever India is able to do in South Asia through the South Asian Association for Regional Cooperation forum and other bilateral connections with its neighbours is also fraught with a trust deficit. Indo-Bhutan, IndoNepal and Indo-Bangladesh relationships are often overshadowed by Chinese manoeuvrings. Wherever India gets a leeway, say in Sri Lanka, it takes the former some distance only to be checkmated by the constrained geopolitical situation in territories across South Asia.
Given this, India’s North-east is still waiting to break the jigsaw puzzle by self-propelled growth engines, which are far from being built around its internal resources.
What is also projected is the possibility of the Northeast developing export potential in organic products; it does not get maximum financial support from investors. Resource pools of the North-east only acquire the most unenviable status of a raw material market that often proves more depreciating than anything to gain. The recent shrinkage in employment in the factor market as well in product market across the Northeast has only negatively opened up its economy to resource exploitation. The government policy of oil extraction from various basin and foothills lacks consensus and hence exists only as an inducement for some private party investment that does not boost statelevel economic revenues.
The crucial linkage between the economies of scale and output markets do not get any impetus from selective and dwindling levels of public investment, as the very nature of private investments is such that it follows the boons from public investment.
Given these internal shortcomings of economy, prospects of geopolitical gains by handling China a little more diligently would have opened up the landlocked economy of the Northeast to newer exploration into South and Southeast Asian markets. Possibility of India’s permanent membership in SCO and its efforts to connect with central Asia can creative a conducive environment for Chinese investment in the Northeast, which could create newer opportunities. Seemingly, the Centre is sceptical of any progress of China in the Northeast, come what may.
This only gives rise to the territorially difficult imagination of Japanese investment in the region but this is geopolitically the most difficult investment choice, as Japan too faces stiff rivalry from China.
Northeast India’s way out could be building close ties with Myanmar, but that again is fraught with uncertainties. It takes one back to square one, from where the Look East Policy started.
The writer is an associate professor at the department of philosophy, North eastern Hill University, Shillong.