Business Today

India's Chabahar vs China's Gwadar: New Delhi plays tic-tac-toe with Beijing

India has been making a concerted effort to spread its influence across Asia, both to its east and west, countering China at every step.
Anilesh S. Mahajan   New Delhi     Print Edition: December 3, 2017
India's Chabahar vs China's Gwadar: New Delhi plays tic-tac-toe with Beijing

There was jubilation all around at Deendayal Port Trust - the former Kandla port - on October 29, as the first of six shipments of wheat bound for Afghanistan left Indian shores. What was so special about the shipment? It was the first time any large consignment from India was travelling to landlocked Afghanistan bypassing Pakistan. Over the next few days, the wheat was shipped 650 nautical miles (1,200 km) to Chabahar port in Iran, and thence another 635 km by road to Zahedan on Afghanistan's western border. Until India began building two berths at Chabahar port - which have been leased to it by Iran for 10 years - surface transport from India to Afghanistan was impossible without passing through Pakistani territory. The new route is so crucial to both India and Afghanistan that both External Affairs Ministers, Sushma Swaraj and Salahuddin Rabbani, respectively, monitored the consignment's departure via video conferencing.

The Chabahar berths not only provide India a route to Afghanistan but also to Central Asian markets, without having to join the Chinese-promoted 'One Belt, One Road' (OBOR) initiative. Though some have criticised India for staying away from OBOR - in which a host of Asian and European nations are involved - External Affairs Ministry say that whatever objectives India could have achieved by joining OBOR can be fulfilled by other means as well. In any case, a vital component of OBOR is the China Pakistan Economic Corridor (CPEC), as Chinese Premier Xi Jinping himself acknowledged at the OBOR conference in May this year. Given that the CPEC passes through Pakistan-occupied Gilgit and Baltistan, there was no way India could have endorsed OBOR. "OBOR or no OBOR, India must chart it own path," says T. C. A. Rangachari, former diplomat. "We need to find ways to repair our economy and locate our own markets and reach them."

Indeed, the India-China competition for regional clout has now found a new arena. If India intends to use Chabahar, China has nearby Gwadar port, which it has leased from Pakistan for 40 years and which, through the CPEC will connect to Kashgar on its western border. Fortunately for India, the CPEC project has been delayed due to opposition from various sections in Pakistan which claim the terms are biased in China's favour. India has used the opportunity to accelerate the completion of its Chabahar berths, which were expected to be fully operational by December 2018 but may now be ready months earlier. "Work is proceeding on a war footing," says a Ministry of Shipping official. The berths are being built by India Ports Global Pvt Ltd, a joint venture of Jawaharlal Nehru Port Trust and Deendayal Port Trust. Indian business has every reason to hope that once Chabahar gets going, apart from foodgrain, trade in heavy engineering goods, pharmaceuticals, chemicals, agricultural produce, automobiles and more with Afghanistan, Iran and the Central Asian republics will see a major fillip.

Alongside, India, Iran and Afghanistan have signed an agreement to set up a Transit and Transport Corridor, which could well rival CPEC. As part of the deal, IRCON International, the wholly owned subsidiary of Indian Railways, is constructing a railway line from Chabahar to Zahedan, which will be linked to Iran's domestic rail network. Iran has already completed the road from Chabahar to Zahedan, which in turn will connect with the road from Zaranj to Delaram, two important urban centres in Afghanistan, which India built in 2009.

So far this year India's trade with the five key Central Asian countries - Kazakhstan, Turkmenistan, Tajikistan, Uzbekistan and Kyrgyzstan - has been a mere S1.6 billion. These markets are dominated by Chinese, Russian and European products, but India believes its trade can increase manifold if it can build convenient trade routes. Accordingly, apart from Chabahar, India is also seeking to use the Iranian port of Bandar Abbas, further west of Chabahar. In September 2014, India held a trial run of an empty container tagged with a GPS device, from Mumbai by sea to Bandar Abbas and thence by road to Astrakhan in southern Russia, passing through Azerbaijan and found this route substantially reduced transport costs to the region.

No doubt bottlenecks remain, both within the country and beyond, but India is trying hard to overcome them with dedicated freight corridors, industrial corridors and the series of ports it is building under the Bharat Mala project. As part of the agreement to develop Chabahar port, Iran is to get a $150 million loan from India, but has yet to complete the formalities which will enable EXIM Bank to disburse the first tranche. (India's control of the two berths will become operational as soon as the loan is disbursed.) Shipping ministry officials, however, assured that many matters had been streamlined between the two countries and the disbursal was likely to happen soon. Again, tariffs along the trade routes and other logistical details of trade have yet to be finalised with both Iran and Afghanistan. Even so, a beginning has certainly been made.

Eastern Initiatives

India is already part of various groupings for greater integration with its eastern neighbours. There is the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement, signed in 2015 to enable movement of trucks and buses throughout the four countries. (This, however, has hit a snag with Bhutan's Parliament unwilling to ratify it.) There is the Bangladesh-China-India-Myanmar (BCIM) Forum for Regional Cooperation, launched in 2013, to build a trade corridor through the four countries with industrial zones along the way.

There is the Regional Comprehensive Economic Partnership (RCEP), expected to be finalised in the near future - a single, free trade agreement between the 10 ASEAN nations and the six with which ASEAN already has such agreements - Australia, China, India, South Korea, Japan and New Zealand. The RCEP was even seen by analysts as a rival to the Trans Pacific Partnership (TPP) - which includes many of the Southeast Asian countries and the US, but excludes India and China - but is now being viewed as a substitute, given the US's reluctance to pursue the TPP ever since Donald Trump became President. Yet the rivalry between India and China, and especially their deteriorating relations after the Doklam standoff in mid-2017 has had its impact on these agreements as well.

For one, India is trying to edge China out of the BCIM corridor and replace it with Bhutan. For another, India, while willing to remove certain trade barriers for its ASEAN partners, is unwilling to do so for China, which in turn is delaying the RCEP from being finalised. India knows that if unfettered trade and travel can be brought about on its eastern side in three main areas - India-Myanmar-Thailand, India-Bhutan-Bangladesh and India-Bangladesh - it does not really need to include China.

As is well known, the Indian mainland and its north eastern states are linked only through the narrow chicken neck at Jalpaiguri, with Bangladesh wedged between them. Thus when courier firm DHL Global sent a trial consignment from Kolkata to Agartala in November 2015 through Dhaka in Bangladesh instead of via the chicken neck, it was able to cut road travel from 1,550 km to 640 km. Huge savings in logistics are possible if India can connect with its own north eastern states through Bangladesh. Requisite agreements can give the northeast - and Tripura in particular, being the closest - access to Bangladesh's ports such as Ashugunj, Mongla and Chittagong, instead of only relying on Kolkata. India is working towards lowering of tariff and non-tariff barriers with Bangladesh and Myanmar.

Other Efforts

India is also working closely with the US, Australia and Japan to form a "quadrilateral" which will try to increase trade and counter China's influence across numerous countries in Asia and Africa. The four countries together are trying to provide the others with an alternative source of cheap capital than that which China has been pumping in, along with building infrastructure for them and assisting their economic development. They are feeding into fears in the recipient countries that China engages in predatory financing and could force them into unsustainable debt.

In some countries, this has already happened. Two major Chinese backed projects in Myanmar, for example - the Kyaukphyu Special Economic Zone and the Myitsone Hydel Project - are already finding it hard to meet their debts, as is Sri Lanka with its Hambantota port, which China financed and where it had to yield 70 per cent equity to Chinese companies, being unable to repay the debt. These Chinese investments were made at the fag-end of military rule in Myanmar and of civil strife in Sri Lanka, when the leaders needed them badly and did not examine the fine print too closely.

Officials involved in the talks revealed that during Prime Minister Narendra Modi's last trip to the US in June this year, he discussed OBOR with President Donald Trump and set forth India's reasons for staying clear of it. The 'quadrilateral' idea was also born out of these discussions.

"India might not have pockets as deep as China, but countries have realised that dealing with India is simpler," says a former diplomat.



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