Connecting Asia March 1-3 Files

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2016

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Connecting Asia

Contents

Note from the Convenor 3

1. India and the Ideas of Asia 6

2. Balance in a Tilted, Technicolour World 12

3. Asian Connectivity and its Geoeconomic Imperatives 18

4. A New Pathway: Is Sub-Regional BBIN a Role Model for Asian Connectivity? 26

5. India and Maritime-Asia: Seeking Economic Convergence Amidst Strategic Discord 34

6. Sustaining Development: Cleaning Up Asia’s Environmental Act 42

7. Future of Energy: Regional Energy Cooperation in South Asia 52

8. Navigating Namami Gange: India’s Flagship River Project 60

9. Choosing Between Freedom and Firewalls 68

10. Buddhism and Asia’s Connectivity 72

11. Economic Diplomacy Between Asia and Africa: Platform for Bandung 2.0? 80

Observer Research Foundation n Raisina Files 2016 1 ORF’s Flagship Publication for the

DIALOGUE

March 1-3, 2016

New Delhi

20 Rouse Avenue, New Delhi-110002 Ph: +91-11-43520020. Fax: +91-11-43520021 www.orfonline.org [email protected] Files

“A conversation and Introduct i an exploration of ideas, thoughts and opinions” on

n its essence, a dialogue is a conversation and an exploration of ideas, thoughts and opinions. Great societies represent a continual dialogue—ever in conversation with themselves. At its root, the Raisina Dialogue, the inaugural edition of which takes place this year, sees itself as a legatee of that great Indian, Asia and human tradition of Iconversation and of an exposition of thought. The Raisina Dialogue 2016 focuses on Asian connectivity—an expression that can be inter- preted in diverse ways. The imperative for an Asian connectivity is physical and digital, economic and strategic. The integration of Asia within itself as well as the integration of Asia with the rest of the world is the abiding geoeconomic, geopolitical and geostrategic quest of our age. As such, the theme of the Raisina Dialogue is not just apposite, it is emblematic of the major continental and global challenges of the coming decades, if not of all of the remaining 21st century. Few countries and societies have as much at stake in this endeavour as India. Asia is a vast continent that stretches from the gates of Europe and the heartland of Eurasia to the shores of the Indo-Pacific. These flanks, to India’s west and east, constitute India’s economic hinterland and its strategic geography. Yet, it is not just India that is implicated. Packed into that fascinating and incredibly diverse geography are the deepest questions of our time. They include, though are not limited to, finding common pathways that take this continent and its stakeholders towards that aspiration of connectivity and integration. Inevitably, there is a search here for an Asian identity—not in some philosophical, artifi- cial manner, for how could one find one idiom and rubric to describe a native of Baku and a resident of Bali, or Kirkuk and Kalimpong for that matter? That search for a togetherness needs sinews such as economic prosperity, social development; it needs to lay the building blocks of a shared destiny. In turn, this is the inspiration behind Raisina Files and the collection of essays it features. Of course, this theme will also inform the coming Dialogue, of which this volume is in a sense a trailer. The essays cover a gamut of subjects from energy cooperation to river-basin development, from

Observer Research Foundation n Raisina Files 2016 3 Files

realising the potentialities of the internet and the digital ecosystem to crafting an architecture to secure maritime-Asia and the seas and oceans that are the lifeline of this continent.

on The essays are written by leading Indian analysts, the selection being carefully curated by the Raisina Dialogue team at the Observer Research Foundation. Having said that, the views and assessments that feature in these essays do not purport to represent the long view from India, or from Raisina Hill, the elevation in New Delhi on which India’s presidential palace— the Rashtrapati Bhawan—and the seat of the Union government lie. Rather, they represent i Introduct the individual minds of their authors, but also seek to encapsulate and conflate a larger continental discourse on the most salient and trenchant challenges before Asia and its peoples. The appeal of It is crucial to contextualise those challenges. At one level, they are challenges for the entire planet—for Asia’s vulnerabilities and op- connectivity is one portunities are increasingly vulnerabilities and opportunities for the mechanism; there could broader world order and human community, given the economic en- be complementary gines that power the continent as well as the conventional, non-sta- themes. In the coming tus quoist and increasingly asymmetrical threats that rumble within. In another calculus, the Raisina Files essays allude to the range years, successor of imperatives driving Indian foreign policy: securing the country’s editions of the Raisina frontiers and its people, wherever they may be, from war, terrorism, Dialogue and the disaster and other physical harm; laying the foundations of a middle-income, middle-class economy by filling the energy gap; cre- Raisina Files will strive ating new and sustainable urban spaces; opening up avenues for to take these themes— growth and jobs; providing uninterrupted and disintermediated ac- and this legacy— cess to information, education and public services by using digital forward. platforms; and being sensitive to the environment. Each of these is a domestic conundrum. Each of these is also a clear foreign policy goal, the realisation of which will not only enhance India’s connectedness to the region, continent and world beyond, but will also lead to the generation of still greater diplomatic leverage and surplus. As India attained independence on 15 August 1947, Jawaharlal Nehru, the new nation’s first prime minister, gave a remarkable address that spoke for the moment and anticipated the tasks ahead. “Peace,” he explained, “has been said to be indivisible; so is freedom, so is prosperity now, and so also is disaster in this one world that can no longer be split into isolated fragments.” While he did not quite use those words, Nehru was linking domestic prosperity to foreign policy, physical connectivity and a more intangible sense of connectedness. The Raisina Dialogue 2016 seeks to reimagine this mission in a new century, with very different capacities and technologies as well as very different defining questions. The appeal of connectivity is one mechanism; there could be complementary themes. In the coming years, successor editions of the Raisina Dialogue and the Raisina Files will strive to take these themes—and this legacy—forward. —Ashok Malik, Convenor, Raisina Dialogue 2016

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2016 Files India and the Ideas of Asia C. Raja Mohan s i a a i a & A Ind

s one of the an aspiration on the international stage. world’s oldest Yet, the fact is that the scale, scope and intensity of continuing civili- its connectivity with Asia varied over the millennia. There sations, India has always been enriched by its interaction have been periods of expansive engagement with its with other cultures and civilisations around it. As India’s neighbouring regions, interspersed by centuries of iso- firstA prime minister Jawaharlal Nehru told the delegates lationism. Nehru’s own stewardship of independent India to the 1947 Asian Relations Conference in Delhi, India saw Delhi intensely embrace Asia only to turn its back on is “so situated to be the meeting point of western and it soon after. Today, integrating with Asia has once again northern and eastern and southeast Asia. Streams of cul- become a major theme of India’s economic and foreign ture have come to India from the west and the east and policies. This essay reviews the changing ideas of Asia, been absorbed in India, producing the rich and variegat- the tension between forces of unity and division within ed culture which is India today.” “At the same time,” Neh- the great continent, and India’s imperatives in connecting ru added, “streams of culture have flowed from India to Asia and promoting peace and prosperity in the region. distant parts of Asia… If you would know India you have to go to Afghanistan and Western Asia, to Central Asia, United and Divided to China and Japan and to the countries of Southeast The idea of Asia’s unique identity endures and takes Asia. There you will find magnificent evidence of the vital- many forms. There is the notion of a ‘cultural Asia’ that ity of India’s culture which spread out and influenced vast has been propounded by the Japanese art historian numbers of people.” If the idea of a culturally intercon- Okakura Kakuzo way back at the turn of the 20th centu- nected Asia animated the Indian national movement, the ry, as the region began to discover shared civilisational hopes of constructing an “Asian Federation” emerged as roots. “Asia is one,” was the simple but profound first

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Observer Research Foundation n Raisina Files 2016 7 Files sentence of Kakuzo’s highly influential work, The ide- and laid the foundation for the great reverse in the balance als of the East, published in 1903. As they gained na- of power between the East and the West. tional consciousness, became more aware of the world Complementing the rise of an ‘economic Asia’ was around them and intensified the effort to free themselves the new ‘institutional Asia.’ If Asian regionalism and in- s i a from colonial yoke, many in the region defined Asia as ternationalism in Asia rapidly dissipated in the 1950s, the ‘spiritual other’ in the East to the ‘materialistic West.’ the end of the Cold war saw the dramatic expansion a i a & A Some in Asia were deeply wary of the idea of an Asia of trans-regional institution building in Asia under the that defines itself in anti-Western terms. Instead, they leadership of the Association of South East Asian Na- Ind sought to imagine the Asian tions (ASEAN). What seemed identity in more universal terms. an impossible dream in the mid- Contemporary Asia’s first dle of the 20th century turned great power, Japan, instrumen- Contemporary Asia’s into a reality by the beginning talised the idea of pan-Asianism first great power, Japan, of the 21st century amidst the to promote its own imperial in- instrumentalised the proliferation of regional institu- terests in the first half of the 20th tions, including those focusing century. As it occupied vast idea of pan-Asianism on political cooperation such swathes of Asia, Japan talked of to promote its own as the ASEAN Regional Forum, an ‘Asia for the Asians’ and pre- imperial interests in the East Asia Summit and the sented its own conquest of the the first half of the 20th Conference on Interaction and region as a ‘liberation’ from Eu- Confidence-Building in Asia. ropean colonialism. In contrast century. As it occupied Asian nations are now more to the notions of Asia’s imperial vast swathes of Asia, economically connected than unity, the anti-colonial struggles Japan talked of an ever before. They are striving generated a very different ver- to deepen regional integra- sion of Asian unity. This sense ‘Asia for the Asians’ tion through trade liberalisation of solidarity expressed itself at and presented its own agreements at the sub-regional, Asian Relations Conference in conquest of the region trans-regional and international Delhi and the The Afro-Asian as a ‘liberation’ from levels. In the middle of the 20th Conference at Bandung (1955). century, regionalism ran into op- It eventually morphed into the European colonialism. position in Asia from those em- Non-Aligned Movement. phasising ‘economic sovereign- Asia’s sense of unity, however, ty.’ Today Asian nations have the was shattered quickly as inter-state and intra-state con- luxury of dealing with competing trade pacts. As it seeks flicts, exacerbated by narrow nationalism and Cold War to build an economic community among its ten members, geopolitics, enveloped the region. As the West prepared the ASEAN is also promoting the Regional Comprehen- for a triage of the new nations, the so-called ‘Asian Tigers’ sive Economic Partnership with six other partners— Chi- surprised the world by demonstrating the prospects for na, Japan, Korea, India, Australia and New Zealand. The rapid economic growth through globalisation in the 1960s. United States has led the effort to draft a more ambitious Their example was emulated by others, including China trade pact among 12 nations, including some members and India, in the subsequent decades. Their separate ef- of the ASEAN, called the Trans-Pacific Partnership. Chi- forts turned Asia into the world’s economic powerhouse na has proposed a much wider arrangement called the

8 Observer Research Foundation n Raisina Files 2016 Files Free Trade Area of the Asia Pacific. Meanwhile, market has agency in shaping the world’s financial and political forces are pushing different parts of Asia and its immedi- order. If the reviled Vasco da Gama moment has ended ate neighbourhood together. The rise of China and India in Asia, the region is also facing sharp internal divisions. Ind has made them the largest and preferred customers for While the focus of the last two decades has been on the the oil resources of the Gulf and mineral resources of Af- shifting balance between Asia and the West in favour of i a& A rica. Trade, investment and aid volumes from China and the former, the region is now coming to terms with struc-

India with the Middle East and Africa have surged. tural changes in the evolution of Asia’s ‘internal’ balance s i a Beijing has also led the creation of new Asian and in- of power. The rapid rise of China relative to the other ternational financial institutions, powers in Asia has raised big such as the Asian Infrastructure questions about the future stra- Investment Bank and the New tegic order in Asia. China has Development Bank, the latter Beijing has also led overtaken Japan to become the under the non-geographic fo- the creation of new second largest economy in the rum BRICS involving Brazil, Asian and international world and is poised to surpass Russia, India, China and South the US in the near future. The Africa. Its ambitious Belt and financial institutions: widespread hopes for Beijing’s Road initiative to build physi- the Asian Infrastructure peaceful rise have evaporated cal connectivity across borders Investment Bank; the amidst the sharpening maritime promises to recast Asia’s eco- New Development territorial conflicts between Chi- nomic geography. Its project for na and its neighbours. overland industrial belts extend Bank under the non- To make matters worse, the all across Eurasia. Beijing’s geographic forum great power harmony in Asia that Maritime Silk Road project con- BRICS. Its Belt and has existed since the normalisa- nects the Indian and Pacific tion of Sino-American relations Oceans, long viewed as sepa- Road initiative to build in the 1970s and the collapse rate maritime domains. Japan, physical connectivity of the Soviet Union in 1991 has which had led the efforts in the across borders promises been replaced by mounting ten- second half of the 20th century to recast Asia’s economic sion between China and Japan to build Asian infrastructure, is on the one hand, and between now taking fresh initiatives. As geography. Beijing and Washington on the a result of these initiatives, Asia other. There is renewed empha- is going to be more intricately sis on alliances, defence part- tied to itself through new roads, high-speed railway sys- nerships and military modernisation across the continent. tems, energy pipelines and optical fibre networks. At the same time, the project to build a comprehensive The moment to celebrate the extraordinary triumph of cooperative security architecture for the region is in disar- the idea of Asian unity, however, seems to be marred by ray. There are deep disagreements on the nature, scope the re-emergence of conflict and power rivalry in the re- and terms of any such arrangement, some of which have gion. Regaining control of national destinies was one of turned the idea of Asia into a contested one. One view, the main objectives of the post-colonial states in Asia. articulated with great vigour in Beijing, reaffirms the slogan The region today is no longer a mere theatre for Europe- of ‘Asia for Asians’ and demands that outside powers quit an colonial powers. It is the motor of global growth and the region. Others wary of Chinese power eagerly seek

Observer Research Foundation n Raisina Files 2016 9 Files American military presence in the region. As they develop pact of Muslim rulers from Arabia, Turkey and Central Asia strategic partnerships with America, they also strengthen saw the enrichment of Indian society. But it was the rise of military cooperation among themselves as an insurance capitalism in Europe and the colonial era that dramatically against a potential US-China duopoly in the region. A reconnected India to the world. s i a century after the ideas of unity and shared identity gained While it subjected India to alien rule, colonial rule be- regional traction, Asia enjoys levels of integration and co- gan the process of globalising the Indian economy. The a i a & A operation that few could have imagined. Yet, the political region was no longer producing for itself and trading with fault lines in the region have never been so deep. the limited agrarian surpluses. The new era saw local pro- Ind duction for global markets and Engagement and the emergence of India itself as a Isolation market for goods produced else- As Asia enters a period of great The question of where in the world. The colonial churning, the question of India’s India’s role in the era also saw the movement of role in the region has become an region has become Indian capital and labour across important one. The great poten- the world and formed the foun- tial and persistent challenges to an important one. The dation for India’s global footprint India’s role in Asia can be seen in great potential and and human connectivity. Through terms of a paradox: Through the persistent challenges the colonial era, India became ages, India was both a self-con- the economic connector of dif- tained (sub)continent in itself as to India’s role in Asia ferent regions in Asia and in the well as the geographic pivot be- can be seen in terms of Indian Ocean littoral. The colonial tween different parts of Asia. In- a paradox: Through the era saw the construction of three dia’s history has seen periods of ages, India was both major ports—Bombay, Madras expansive engagement with the and Calcutta—that became crit- neighboring regions interrupted a self-contained (sub) ical nodes in the new global mar- by extended periods of self-im- continent in itself as itime trading network. The British posed isolation. This pattern has well as the geographic Raj continuously opened new repeatedly played out over the markets and new trading routes centuries. pivot between different between India and its abutting The dynamic interaction with parts of Asia. regions in inner Asia, from Xinji- the Aryans from inner Asia, its ang to Yunnan. It built road and maritime linkages with Greece rail networks, much in the manner and Rome, the spread of Buddhism from India by land and that China is doing with its Silk Road initiative today. sea and its links to the Silk Road all marked a significant in- At the political level, the colonial Raj saw the ter- teraction with the world in the pre-Christian and immediate ritorial consolidation of India. Although the Raj never post-Christian era. This engagement took place despite fully approximated to the coherence of modern Euro- the physical barriers—the seas to the south, the deserts pean states, it did become the largest empire that the to the west and the great Himalayas to the north and east. subcontinent had ever seen. The need to concentrate When the Indian society turned inward around the 10th the means of violence under colonial rule saw the cre- century, its engagement with the world was confined to ation of a massive armed force, that built on the many the margins of the subcontinent. In this era too, the im- indigenous formations before. This force inevitably

10 Observer Research Foundation n Raisina Files 2016 Files emerged as the centre of British imperial defence sys- nomic reforms initiated at the turn of the 1990s was not tem. India’s armed forces became the main security surprising. Reconnecting to Asia, Delhi recognised, was provider in the Indian Ocean and its abutting regions— critical for the modernisation of the Indian economy that Ind from the South China Sea to the Mediterranean and had fallen behind the rest of the region and to rejuvenate from Southern Africa to Siam. its foreign policy in the new era. Since then, India has i a& A Independent India, wittingly or unwittingly, abandoned made considerable advances in connecting with Asia. It

this legacy of a massive external economic and military is now part of the major regional institutions, has growing s i a engagement with Asia and the Indian Ocean. By making economic and trade links and has stepped up its security a conscious choice in favour of cooperation with most Asian na- economic self-reliance and im- tions. Yet, there is a widespread port substitution, India discon- sense of disappointment in Asia nected itself from the regional Independent India, with India’s recent record in the markets. The great Partition of wittingly or unwittingly, East. Asia’s regional dynamic— made matters worse by break- abandoned the legacy in economic, political and strate- ing up the political and econom- gic domains—has moved much ic unity of the subcontinent. The of a massive external faster than Delhi’s readiness to creation of new borders and the economic and military adapt. Asia today hopes that the tensions between India and Pa- engagement with Asia ‘Act East’ policy unveiled by the kistan meant that the region’s and the Indian Ocean. government of Narendra Modi military energies, directed out- will bridge the gap between In- ward during the Raj, were now By making a conscious dia’s promise and performance. turned inwards. The unification choice in favour of To meet the regional expecta- of China, its control of Tibet, and economic self-reliance tions for leadership, India will the boundary dispute between need to accelerate its internal Delhi and Beijing resulted in and import substitution, it economic reforms, deepen its shutting down the long frontier disconnected itself from integration with its South Asian between India and China. If an the regional markets. neighbours, seize the opportu- insular approach to develop- nities for strengthening physical ment diminished India’s relative connectivity with different parts economic weight in Asia and the Indian Ocean, Delhi’s of Asia, play a more active role in the regional institutions foreign policy rooted in non-alignment reduced India’s and intensify its defence diplomacy. Delhi cannot afford weight in the security politics of Asia. That India became to miss the unprecedented opportunity to accelerate increasingly isolated in a region that was its natural space Asia’s march towards prosperity or disavow the historic for leadership underlined the tragic paradox of India’s for- responsibility to shape its future political order. eign policy in the early decades after independence. It took the end of the Cold War and an internal economic C. Raja Mohan is Director, Carnegie reorientation to put Asia back at the Centre of India’s for- India. He is the foreign affairs columnist for eign and economic policies. The Indian Express and visiting research professor, Institute of South Asian Studies, Reconnecting India Singapore. His most recent book is Modi’s That India’s Look East policy came in the wake of its eco- World: Expanding India’s Sphere of Influence (2015).

Observer Research Foundation n Raisina Files 2016 11 Files Balance in a Tilted, Technicolour World Samir Saran & Abhijnan Rej T rends

uturists often hedge their prognoses with Yogi Berra’s dictum that pre- diction is difficult, especially when it The centrifugal forces comes to the future. And yet, when it comes to drawing correspond to five meta- the broad contours of how the future would look like in trends—the consolidation the medium run, all one needs to do is revisit yesterday’s F of geopolitical news. The past year saw five meta-narratives emerge around ‘asymmetries’ between means and abilities, ‘mul- asymmetries; the rise of tiplicities’ of malign and benign norms, and glaring ‘con- big economies; competing tradictions’ between aspirations and capabilities. This is models of globalisation; true—in equal measures—both at home and abroad. If predicting the future is a difficult exercise, doing so the continued tug of for Asia is doubly so. Looking at the continent, one sees war between the pre- certain centrifugal forces dominate the centripetal forc- modern and post-modern; es that would promote status quo ante when it comes to continuity of norms and practices. These forces cor- and economic growth respond to five meta-trends—the consolidation of geo- trajectories in which the political asymmetries; the rise of big economies that are fruits of innovation do poor in per capita terms and weak states with demo- not translate into rise in graphics which are double-edged swords; competing models of globalisation; the continued tug of war be- purchasing power. tween the pre-modern and post-modern; and economic

12 Observer Research Foundation n Raisina Files 2016 Files trends

Observer Research Foundation n Raisina Files 2016 13 Files growth trajectories in which the fruits of innovation do etary Fund.3 Pakistan’s nuclear arsenal can be put to not translate into rise in purchasing power. apocalyptic use, and yet it remains a non-starter as a responsible player in global governance. Then there The Era of Dangerous Asymmetries is North Korea, a nuclear power with absolutely zero Asia is home to states that have significant military capa- stakes in global governance. bilities, but very limited stakes in the liberal international This asymmetry—between military capability and order. Such states cultivate hard military power—and limited global governance stakes—becomes more pro- T rends the consequent ability to upend the geostrategic status nounced as one traverses Asia from the North to the quo—but have very little ability South and from the West to the (and desire) to shape the col- East. To integrate these states lective economic order. From into an open world order, it be- the global governance per- Asia is home to states comes an imperative to further spective, the challenge, there- that have significant empower the few initiatives fore, is to discover means by military capabilities, but in which these states have a which these ‘military-maximalist’ stake. For example, Russia has states can be integrated further very limited stakes in been enthusiastic about BRICS into international processes. the liberal international (acronym for association of Bra- Consider this. On one hand, order. Such states zil, Russia, India, China, South out of the nine nuclear powers cultivate hard military Africa) since it perceives the in the world, six are Asian, in- grouping as a balancing coali- cluding Russia. On the other power—and the tion. Irrespective of its percep- hand, Asia’s share of global consequent ability to tions, however, empowering gross domestic product (GDP, upend the geostrategic BRICS does increase Russia’s computed at purchasing pow- involvement in the global gover- er parity levels) is only 35.6 status quo—but have nance architecture. percent, Russia included.1 The very little ability (and Russian atomic arsenal is ac- desire) to shape the Big, Poor, Young and tually bigger than that of the collective economic (In)capable. United States (US, at 7,500 The Rise of weapons against 7,200)2 but order. Testosterone Politics its GDP is a small fraction com- Two of the largest Asian econ- pared to the US GDP. omies, China and India, are China has the world’s largest military but it has only poor in per capita terms, the middle-income tag not- 3.8 percent of voting shares at the International Mon- withstanding. This tyranny of arithmetic is compound- ed by the fact that such big economies with relatively poor populations are also growing at the fastest rates. 1 Computed by summing the 2014 GDP share of individual Asian G20 countries in global GDP. “GDP as a Share Such states also face significant demographic chal- of World GDP at PPP by Country,” Quandl, accessed lenges in terms of growing old and young populations February 1, 2016, https://www.quandl.com/collections/ economics/gdp-as-share-of-world-gdp-at-ppp-by-country. 3 “IMF Members’ Quotas and Voting Power, and IMF Board 2 “World Nuclear Weapons Stockpile,” Ploughshares Fund, of Governors,” International Monetary Fund, last updated accessed February 1, 2016, http://www.ploughshares. February 1, 2016, accessed February 1, 2016, https:// org/world-nuclear-stockpile-report. www.imf.org/external/np/sec/memdir/members.aspx#C.

14 Observer Research Foundation n Raisina Files 2016 Files and gender imbalance. corded history—93 girls to every 100 boys.6 This imbal- Traditionally, big economies that were also rich in ance points to the rise of testosterone politics, where the per capita terms assumed significant responsibilities in voices and imperatives of men will crowd out those of managing global crises. Today’s ‘big and poor’ Asian women. They also point to the possibility of deep struc- T rends countries are unable to respond similarly due to their tural changes in the very fabric of Asian societies. understandable ‘domestic development-first’ agendas. Demographics would continue to limit the commit- The Multiverse of Globalisation ments that these ‘big and poor’ states can make to their Between the fall of the Berlin Wall in 1989 and the de- own populations as well. The struction of the New York World United Nations estimates that by Trade Centre in 2001, there 2050, India will have 300 million was broad consensus that elderly, more than the current If the rise of the young Fukuyama’s Last Man having population of the US, while its and the old is one arrived and overseen the end of median age will be 37.4 This challenge, gender Hegelian history, Globalisation means that the Indian state will (with an uppercase ‘g’) was the have to provide for substantial imbalance is the other. magic bullet that would lift bil- young and old populations by China’s preference for lions out of poverty and be the then. How we design our institu- male children has led vanguard of liberal internation- tional mechanisms today—from to 118 boys for every alism. Things have not turned pensions to skilling, from social out to be as simple: What Asia sector redesign to incentivising 100 girls, while India’s is seeing now are multiple glo- market forces to play a greater gender imbalance stands balisations, characterised by role in what has been the prov- at 93 girls to every 100 exclusion of the Other. ince of the state—will determine At the same time, the world and foil the crowding-out of the boys. This points to the is witnessing the rise of a Mid- old by the young in the future. rise of testosterone dle-Kingdom version of global- If the rise of the young and politics, where the voices isation, promoted by China. In the old is one challenge, gender of men will crowd out this version, China’s ‘opening imbalance is the other. China’s outwards’ will create a physical preference for male children—a those of women. web of land and sea routes link- deep-seated Asian prejudice— ing inner China to Europe, cut- has led to 118 boys for every ting through the Asian heartland 100 girls (against the global average of 103 to 107).5 and the seas. Through its One Belt, One Road (OBOR) India’s gender imbalance now stands as the worst in re- initiative, China seeks to export a model of authoritarianism at home and part of global value chains. The US-led 4 Prachi Priya and Anuj Agarwal, “India’s two-speed Trans-Pacific Partnership (TPP), signed in 2015, is a re- demography,” The Financial Express, January 16, 2015, accessed February 1, 2016, http://www.financialexpress. active geoeconomic rebalance to OBOR, which seeks com/article/fe-columnist/indias-two-speed- to homogenise trade and remake economic activity in the demography/30570/. 5 Sui-Lee Wee, “China says its gender imbalance ‘most 6 “India’s gender imbalance ‘worst in recorded history’,” serious’ in the world,” Reuters, January 21, 2015, LifestyleNews, April 15, 2011, accessed February 5, accessed February 5, 2016, http://uk.reuters.com/article/ 2016, https://www.lifesitenews.com/news/indias-gender- uk-china-onechild-idUKKBN0KU0V720150121. imbalance-worst-in-recorded-history.

Observer Research Foundation n Raisina Files 2016 15 Files member-states in its own image. Both OBOR—and the experience; the Communist Party of China exists, be- partial policy connectivity support, the Regional Compre- cause of its total control over it. hensive Economic Partnership (RCEP) will provide it— These bring up an important point. Karl Popper fa- and the TPP are similar in their exclusionary nature: The mously identified ideologies such as Marxism as ene- US is absent in RCEP, China in the TPP. mies of open societies; could the cult of the Digital—in Which universe would India choose to inhabit? the sense of being a pawn of constricting mindsets—be Would it actively participate in the US-led one, as a another one? T rends “Western power”7? Would it be co-opted into China’s vision? Or would it—through the dent of soft power and Fissuring of the Link Between influence—create its own? The forthcoming years will Innovation and Consumption see answers emerging. That innovation is key to economic growth is now recognised. The Digital Engagements, That innovation is key to role of technology innovation in Feudal Mindsets economic growth is now increasing individual purchasing The state is back. The patriot is power and consumption, howev- back. The misogynist is back. recognised. The role of er, is becoming weaker than ever, One of the paradoxical features technology innovation thanks to the ever-important role of the social media explosion is in increasing individual of global value chains. Simply that it consolidates the obnox- put, the fruits of innovation, orig- ious and the obsolete instead purchasing power and inating in advanced economies, of transplanting us into a virtual consumption, however, are not contributing to the uplift- classless international utopia as is becoming weaker ment of consumers of high-end it was billed. than ever. Simply put, technology, mostly in poor coun- One of the reasons behind tries in the global South. this is premature de-industri- the fruits of innovation, The Fordist model of indus- alisation that promoted a leap- originating in advanced trial organisation was such that frogging from the pre-modern economies, are not the fruits of innovation—the to the post-modern. Whether it assembly line, to begin with— is the use of matrimonial sites contributing to the translated to higher incomes in India to arrange marriages upliftment of consumers for workers, which in turn according to class and caste of high-end technology. made them consumers of the lines, or the remarkable efficacy very products they were man- of Twitter as free advertising for ufacturing. This virtuous cycle the Islamic State (IS), social media has consolidated promoted higher standards of living and incentivised old prejudices instead of upending them. continuous innovation. The breakdown of this cycle ne- Authoritarian states have learned—àpres China—that cessitates course-correction for the current technology the best way to contain the challenges of social media and intellectual property rights regimes.8 is by selective and tailored access. The Chinese are happy with Weibo because it offers the surrogacy of 8 Samir Saran, “The Tyranny of Technology: Time to Change Old Systems to Align With New Realities,” The Lowy Interpreter, December 4, 2015, accessed February 1, 7 C. Raja Mohan, “India and the Balance of Power,” Foreign 2016, http://www.lowyinterpreter.org/post/2015/12/04/ Affairs, July/August 2006, 18. Tyranny-of-technology-Aligning-the-old-with-the-real.aspx.

16 Observer Research Foundation n Raisina Files 2016 Files Conclusion extremism à la IS. The crisis of sovereignty is reflected The five meta-trends identified here can be situated by the unenviable choices members of mega-free trade within five crises of global governance the world faces agreements such as the TPP face. Finally, the crisis of today.9 These crises are of legitimacy—of internation- legitimacy points to nations that have great power to T rends al institutions and even national governments failing to harm the international order without fulfilling their basic deliver lifeline support to their populations; of sover- domestic obligations. eignty—the ongoing clash between the state and the One needs to watch how these crises are resolved in world; of the collective—the push-and-pull of aggrega- the coming years—if at all—to determine Asia’s, and the tion and devolution; of identity—where globalisation, in- world’s, trajectory. stead of dissolving identities, consolidates it; and finally, of representation—where the global South finds itself Samir Saran is a Senior Fellow and Vice with a disproportionately small voice in the global gov- President at ORF. He is a frequent ernance architecture. The crises of legitimacy and the commentator on global governance issues collective have led to multiplicities of globalisation. The and India’s foreign policy crises of identity have led to the hijacking of information and communication technology to promote global Abhijnan Rej is a a Fellow at ORF. He works on geoeconomics, Indian foreign 9 Samir Saran, “The Global Crisis of Governance: India’s Options in a Polycentric World” (Lecture at the Nehru policy and applied game theory. Memorial Library, October 7, 2015).

Observer Research Foundation n Raisina Files 2016 17 Files Asian Connectivity and its cs Geoeconomic Imperatives Abhijnan Rej

“The history of mankind is the instant between two i Geoeconom strides taken by a traveller.”

– Franz Kafka, The Blue Octavo Notebooks

s the geopolitical centre of gravi- ty shifts back to Former United States the Eurasian landmass—after the brief interlude between 1989 and 2001, of the unipolar moment—the question national security thatA emerges for strategists is how to maximise nation- advisor Zbigniew al power under the precondition of geopolitical stability Brzezinski defined in inner Asia and its rims. Former United States national geostrategy as the security advisor Zbigniew Brzezinski defined geostrategy as the strategic management of geopolitical interests.1 strategic management This essay defines geoeconomics as the economic man- of geopolitical interests. agement of such interests—where the notion of ‘balance This essay defines of power’ is broadened by ‘balance of influence.’ It argues that an Asian Century is one where Asia emerges as a geoeconomics as the connected entity which will, in turn, ensure geopolitical economic management stability at the inter- or intra-continental levels. of such interests—where But if connectivity—understood in all its manifesta- the notion of ‘balance of tions: physical, policy, digital or human—is a geoeco- power’ is broadened by

1 Zbigniew Brzezinski, The Grand Chessboard: American ‘balance of influence.’ Primacy and Its Geostrategic Imperatives (New York: Basic Books, 1997), xiv.

18 Observer Research Foundation n Raisina Files 2016 Files Geoeconom i cs

Observer Research Foundation n Raisina Files 2016 19 Files nomic imperative, it is also a key determinant of national nise the flow of labour, capital and goods. Indeed, it is power which fuels socio-economic growth at home. As argued in this essay that there ought to be a feedback India seeks to grow with a stated reliance on interna- and feed-forward loop between the “software” of policy cs tional trade, connecting itself to the world becomes a and the “hardware” of infrastructure, to rephrase David key way in which its main domestic goals of rapid pov- Dollar.2 The recent geoeconomic component of the US erty alleviation and ex ante provision of opportunities are Asia-Pacific rebalance, the Trans-Pacific Partnership served. The question of regional connectivity can thus (TPP), seeks to provide the software; the hardware of be framed in terms of bridging domestic goals and geo- physical links is being, almost exclusively, being promot- i Geoeconom political ambitions. ed by the Chinese. One expects The discourse around Asian that as OBOR progresses, Chi- connectivity so far has been pri- na will also introduce a set of marily focused on the Chinese The discourse around norms, albeit informally, on top ‘One Belt, One Road’ (OBOR) Asian connectivity has of the existing mega-free trade initiative that proposes to link been primarily focused agreements (FTAs) in Eurasia. the two flanks of the Eurasian Thus, the real geoeconom- landmass both through land on the Chinese ‘One ic competition that will define (the Belt) and sea (the Road). Belt, One Road’ (OBOR) Asia in the 21st century will be China watchers over the past initiative that proposes between the two drivers of con- year can attest to the finan- to link the two flanks of nectivity in the region: the actors cial and political will China’s who shape norms and the ones leadership has shown towards the Eurasian landmass who provide the infrastructure. pushing OBOR. As India as- both through land (the serts itself as a confident power Belt) and sea (the Road). Connectivity conscious of its geographical Constellations in the centrality in South Asia, it too China watchers can Geoeconomic Order has sought to transform the attest to the financial Both physical and policy con- region into a loose economic and political will China’s nectivity initiatives have to be confederation, beginning with leadership has shown situated in the contemporary its leadership in the South geoeconomic architecture. This Asian Association for Regional towards pushing OBOR. is characterised by the two driv- Cooperation (SAARC), created ers of the ‘new normal’: a China in 1985; its interest in creating that is in retreat in terms of its a Bay of Bengal economic forum—the Bay of Bengal domestic growth and yet on an ascent when it comes Initiative for Multi-Sectoral Technical and Economic Co- to playing a greater—and more muscular—role in es- operation (BIMSTEC) initiative is an example; and its tablishing new international institutions and initiatives; outreach to the Association of Southeast Asian Nations. and a US that has finally put the global financial crisis The physical—pipelines, highways and sea routes—is of 2007-2009 behind it and has sought to aggressively only one aspect of connectivity. If physical connectivity reshape the Asian trade agenda as a strategic policy to is made to work to the advantage of all parties, it should rebalance the Asia Pacific. be predicated by policy connectivity—a set of institutions and formal and informal norms that facilitate and harmo- 2 David Dollar, “China’s Rise as a Regional and Global Power,” Horizons, Summer 2015, 164.

20 Observer Research Foundation n Raisina Files 2016 Files China’s “opening outwards,” as it calls the OBOR ent in the American calculation is the diminishing role of initiative, is driven by three domestic problems that it the World Trade Organization (WTO) as the final arbiter

seeks to redress. One, China’s economy is experienc- of international trade. With the Doha Development Agen- Geoeconom i ing a significant slowdown after a couple of decades da finally buried in the December 2015 WTO Ministerial of very high growth rates. As it moves from exporting Meeting in Nairobi, the US will seek other ways to shape manufactured goods to a path of economic growth global trade regimes. The TPP—with its intrusive and ex- driven by domestic consumption, China will most defi- tensive ‘behind-the-border’ measures that run the gamut nitely experience problems associated with industrial from labour to environmental standards—along with the cs overcapacity. The OBOR ini- under-discussion Transatlantic tiative seeks to absorb some of Trade and Investment Partner- this.3 Two, as William Overholt ship (TTIP), seeks to reengineer wrote last year, Beijing’s mas- The shape of the the global trade architecture as sive accumulation of foreign geoeconomic order economic containment of China. reserves was a major strategic that is emerging is The shape of the geoeco- error, and OBOR will act as re- nomic order that is emerging dressal.4 Three, China seeks to clear. China seeks is clear. China seeks to push correct its persistent problems to push physical physical connectivity before with total factor productivity by connectivity before policy connectivity. The US, hav- an increased focus on innova- policy connectivity. ing failed at promoting its own tion in high-end manufacturing. version of the Silk Route under OBOR states will act as natu- The US, having failed then Secretary of State Hillary ral markets for Chinese innova- at promoting its own Clinton, is now left to push pol- tion, as well as provide cheap version of the Silk Route icy connectivity along the lines labour that will feed the lower of TPP and TTIP alone. If con- ends of China-designed global under then Secretary of nectivity is indeed destiny, in the value chains. State Hillary Clinton, is words of geostrategist Parag The TPP, signed last year by now left to push policy Khanna, it will be shaped by the 12 countries, represents a more connectivity along the push and pull between its hard- balanced American rebalance ware and software. in the Asia Pacific. The US Piv- lines of TPP and TTIP. Beyond any security chal- ot to Asia had, for far too long, lenges OBOR poses for In- focussed exclusively on military dia, as a physical economic capacity; with the TPP, it seeks to dramatically expand connectivity project it is unprecedented. It seeks to its economic presence in the region as well. US Defence link, by land and sea, the western flank of Eurasia to Secretary Ashton Carter famously noted last year that the the eastern, connecting more than 60 countries at TPP “was worth an aircraft carrier”—the strategic compo- the last count. Indeed, if Indonesia is where OBOR nent is thus far from being understated. But equally pres- was co-announced by Chinese President Xi Jinping in 2013, “Europe [too] wants in,” in the words of François 3 “China’s One Belt, One Road: The Land Strategies, Part 5 2 of 2,” BNP Paribas, July 8, 2015. Godement. China has put aside $40 billion for the 4 William H. Overholt, “Posture Problems Undermining One Belt, One Road and the US Pivot,” Global Asia, Fall 2015, 5 François Godement, “Europe Stands to Benefit from China’s 16. 21st Century Silk Road,” Global Asia, Fall 2015, 35.

Observer Research Foundation n Raisina Files 2016 21 Files Silk Road Fund, and seeks an equal amount from the India in the Connectivity new Asian Infrastructure Investment Bank towards ‘New Normal’ OBOR. The maritime component of the initiative, the Where does India fit in these emerging connectivity con- cs Maritime Silk Route, will stretch beyond the Eurasian stellations? The answer can be broken down to the why landmass and seek to connect with Africa. OBOR can and the how. The ‘why’ is, in many ways, the simpler as- also be viewed as a culmination of a variety of Chi- pect to answer. na-led initiatives, such as the China-Pakistan Econom- One, as India’s economy seeks greater integration ic Corridor, various arrangements under the Shanghai into the world—more than 40 percent of India’s GDP i Geoeconom Cooperation Organisation, the is through international trade— proposed Bangladesh-Chi- it becomes paramount that it is na-India-Myanmar connectivity networked, both physically and project, and the China-Mongo- One of the goals of in terms of shaping the norms lia-Russia corridor.6 One Belt, One Road and practices of global trade. One of the goals of OBOR, (OBOR) initiative is This will inevitably call for shed- as stated above, is physical ding some prejudices when it connectivity that seeks to cre- physical connectivity comes to security concerns, ate alternative global value that seeks to create real and imagined, something chains where China becomes alternative global this essay turns to later. the locus of innovation. But Two, as is known from litera- at the same time, it passes value chains where ture on international bargaining, through some of the most po- China becomes the a state either becomes an ‘agen- litically unstable regions of the locus of innovation. da-maker’ as a first mover, or world, in South, Central and But at the same time, it ends up being an ‘agenda-taker.’ West Asia. The world has, Not participating in the Chinese speaking candidly, bought passes through some and/or American initiatives at China’s ‘peaceful rise’ narrative of the most politically their formative stages risks India mainly because of remarkable unstable regions of the being left out much in the same self-restraint exercised by Chi- way it was in the second wave of na in terms of non-interference world, in South, Central globalisation of the 1980s. as it sought to expand its eco- and West Asia. Three, the failure of the nomic interests. As China con- ‘single undertaking’ Doha De- tinues to push OBOR, this will velopment Agenda and the be severely tested, and will become the arbiter of the ascent of mega-FTAs point to a diminishing role of project’s success in the long run. Ultimately, the lack of the WTO and simultaneous increasingly larger role explicit policy connectivity underlying OBOR will mean of arrangements such as the draft US Trade in Ser- that any Chinese hard intervention to secure the Belt vices Agreement, along with TPP and TTIP, that are and Road will be unilateral and contrary to the image shaped by plurilateral consensus.7 It becomes imper- China has promoted for itself. 7 Chakravarthi Raghavan, “How the US is Using Secret Agreements on Services to Wriggle Out of Its WTO 6 Alain Guidetti, “Confront or Accommodate? The Maritime Obligations,” The Wire, July 17, 2015, http://thewire. Silk Road Will Test US-China Rivalries,” Global Asia, Fall in/2015/07/17/how-the-us-is-using-a-secret-agreement- 2015, 43. on-services-to-wriggle-out-of-its-wto-obligations-6459/.

22 Observer Research Foundation n Raisina Files 2016 Files ative that India engage with these arrangements. For The Bangladesh-Bhutan-India-Nepal (BBIN) initiative those who imagine the still-to-be-finalised Regional is a signature example of a physical connectivity initia-

Comprehensive Economic Partnership as a ‘counter- tive built on top of policy convergence. The BBIN initia- Geoeconom i weight’ to TPP, the low ambi- tive is broad-based, contained tion levels of the former could in scope and consultative in very well render it ineffective design. (A separate essay in as such. Plurilateral policy The Bangladesh- this volume focuses exclusive- connectivity—as a pathway Bhutan-India-Nepal ly on it.) An exclusively policy cs to larger multilateralism—that (BBIN) initiative is a connectivity initiative, albeit at integrates India’s economy a low-ambition level, is BIMS- selectively then becomes the signature example of a TEC. Often viewed as “SAARC only way forward in this ‘new physical connectivity sans Pakistan,” it could serve as normal.’ initiative built on top a natural entity to facilitate fur- Four, both Beijing and New of policy convergence. ther trade in the Bay of Bengal Delhi share the Hormuz Dilem- region. Setting environmental ma. From the energy securi- The BBIN initiative concerns aside, the Andaman ty point of view, it becomes is broad-based, and Nicobar Islands could important that India routes contained in scope and emerge as a regional shipping some of its energy needs hub for BIMSTEC in the future. through land pipelines. The consultative in design. But these initiatives are, wel- recent progress on the Turk- An exclusively policy come as they may be, too small menistan-Afghanistan-Paki- connectivity initiative, in scale to fully serve India’s stan-India (TAPI) pipeline is a albeit at a low-ambition connectivity interests. This is welcome development, with an where co-opting OBOR be- added bonus: By integrating level, is BIMSTEC. Often comes a very important part of Pakistan and Afghanistan into viewed as “SAARC sans India’s geoeconomic strategy. a single initiative with India, Pakistan,” it could serve The Indian argument against TAPI can become the harbin- OBOR is clear, and is largely ger of better ties between India as a natural entity to driven by two concerns. One, and its immediate neighbours. facilitate further trade the China-Pakistan Economic Coming to the ‘how,’ it goes in the Bay of Bengal Corridor complicates India’s without saying that the fiscal region. strategic environment serious- capacities of Beijing and New ly—not to mention that it legiti- Delhi are vastly different at mises Pakistan’s occupation of present, so an Indian version Kashmir. Two, for China’s Mari- of OBOR is little more than a pipe dream. India’s op- time Silk Route to fructify, India would have to allow for tions essentially boil down to promoting plurilateral greater Chinese naval presence in the Indian Ocean physical connectivity in the Indian Subcontinent, but- which would, in turn, nullify the strategic advantage In- tressed by co-opting regional components of OBOR dia has there. India can, however, creatively reimagine but in a way that does not compromise its core na- OBOR, and sell it to China as such, in a way that either tional security interests. or both concerns are mitigated even as the two coun-

Observer Research Foundation n Raisina Files 2016 23 Files tries’ connectivity objectives remain intact. en its rather limited fiscal ability? One potential strategy to address the first concern The answer lies in revisiting David Dollar’s metaphor would be the following.8 India should mitigate Beijing’s of physical infrastructure as the “hardware” of connec- cs Malacca Dilemma by offering to co-develop an Indian tivity and policy connectivity initiatives such as free/ port in the Arabian Sea through the Sagarmala initia- preferential trade agreements as the “software.” In a tive, connect this port through a land-based economic computer, the hardware and software interface at the corridor centred around a highway that links the west ‘middleware,’ which connects the operating system that of India to Kolkata, and finally greenlight through all drives the hardware to more complex software appli- i Geoeconom rungs of the Indian bureaucra- cations. India ought to be that cy the Bangladesh-China-In- ‘middleware’ in the new geo- dia-Myanmar component of economic architecture. OBOR that will link Kolkata to India should mitigate To explain this point fur- Kunming. This way, CPEC’s Beijing’s Malacca ther: India’s foreign policy, attractiveness is reduced with- Dilemma by offering to (strangely) free from any do- out compromising the Chinese co-develop an Indian mestic impetus, was activ- objectives that had taken them ist-internationalist for most of to Gwadar in the first place. By port in the Arabian the post-independence era. building a land highway running Sea, connect this port Whatever be the costs of this parallel to the Tropic of Cancer through a land-based posture—and there were in- through the heart of India, this deed many—it did win India corridor can be controlled by economic corridor that a certain goodwill throughout New Delhi at will, thus vastly links the west of India the erstwhile Third World. By diminishing any strategic use to Kolkata, and finally pragmatically engaging both of the same by Beijing—unlike greenlight through Beijing, the supplier of the a land corridor through India’s “hardware” of connectivity, and Northeast, for example. Indian bureaucracy the Washington, the maker of the Bangladesh-China-India- “software” of new norms, and Conclusion Myanmar component cashing in on its goodwill from This essay has laid down the the non-alignment era, India geoeconomic imperatives for of OBOR that will link can emerge as an honest bro- Asian connectivity from an In- Kolkata to Kunming. ker between the two powers dian perspective. As has been and shape competing visions argued, India ought to engage at the same time. If connectivi- plurilaterally when it comes to ty is what would make Asia an both physical and policy connectivity initiatives, with- entity in its fullest sense, New Delhi must realise that out forsaking the benefits that come from leveraging its real strength lies in this role. Chinese and American initiatives as well as without compromising core security interests. This might Abhijnan Rej is a Fellow at ORF. sound like a tall order. How might India do all this, giv- He works on geoeconomics, Indian foreign policy and applied game theory. 8 Samir Saran and Abhijnan Rej, “Engage the Dragon on Balochistan,” The Times of India, February 4, 2016.

24 Observer Research Foundation n Raisina Files 2016 Files

Observer Research Foundation n Raisina Files 2016 25 Files The New Pathway: Is Sub-Regional BBIN a Role Model for Asian Connectivity? Nilanjan Ghosh Infrastructure

ver since Bangladesh, Bhutan, India and Ne- The MVA is expected pal (BBIN) signed the to pave the way for landmark multilateral Motor Vehicles Agreement (MVA) on 15 June 2015 for the regulation of passenger, per- seamless movement Esonnel and cargo vehicular traffic, much is being dis- of people and goods cussed in the context of sub-regional connectivity in across their borders, South Asia. The MVA is expected to pave the way for seamless movement of people and goods across their leading to regional borders, leading to regional integration and development. integration and However, even before there is realisation of benefits of development. However, connectivity, BBIN is being projected as a role model for even before there is broader Asian connectivity. But, is it really so? To answer this question, one needs to understand the broader con- realisation of benefits text of connectivity, a concept that is being increasingly of connectivity, BBIN is discussed today with respect to South and East Asia. being projected as a A prime driver of BBIN are the economic interests of China and India, two emerging Asian economies. China role model for broader is contemplating actualising the design of its new mar- Asian connectivity. But, itime Silk Route, creating new trade avenues through is it really so? the Bangladesh, China, India and Myanmar Forum for

26 Observer Research Foundation n Raisina Files 2016 Files Infrastructure

Observer Research Foundation n Raisina Files 2016 27 Files Regional Cooperation (BCIM) The proposed corridor, cover- and development of its rela- t is hoped that the ing 1.65 million square kilome- tively underdeveloped Yunnan I tres, entails connecting China’s province. India’s ‘Act East’ poli- BCIM economic Yunnan province, Bangladesh, cy reckons that opening trading corridor will accrue Myanmar and Bihar in northern corridors with its eastern and significant gains India through the combination of southeastern neighbours will road, rail, water and air linkages usher in an era of development through sub-regional in the region.

Infrastructure for its northeastern states. Fur- economic cooperation While this interconnected- ther, connectivity is also meant within the region. The ness is envisaged to facilitate to unlock India’s tremendous multimodal corridor, if cross-border flow of people untapped trading potential and goods, minimise overland with its immediate South Asian realised, will be the first trade obstacles, ensure great- neighbouring economies. Peo- expressway between er market access and increase ple-to-people connect and cul- India and China and multilateral trade, China has tural ties are, of course, import- a special interest in the BCIM ant objectives of such initiatives pass through Myanmar economic corridor. It wants to and have deep geopolitical im- and Bangladesh.The connect its relatively less de- plications for promoting region- proposed corridor, veloped Yunnan province with al peace and harmony. But, the covering 1.65 million other parts of South Asia and underlying driver is definitely develop it as a major economic economics.1 square kilometres, hub. China’s interest in BCIM entails connecting further emerges from the per- India’s Dilemma: China’s Yunnan spective of labour costs. China BCIM or BBIN? envisages a future with rising India is faced with the choice of province, Bangladesh, labour cost, which might nega- being part of two regional blocs: Myanmar and Bihar in tively affect its labour-intensive BBIN or BCIM. In both blocs, northern India through industries such as textile and Bangladesh is a common part- the combination of road, agro-processing. As a ratio- ner. Apart from economics, an- nal economic agent, China will other prime motive for becom- rail, water and air. want to transfer these industries ing a member of these regional to newer hubs with lower labour blocs is strategic/political mo- costs. Quite logically then, Chi- tives. Some even say there are cultural aspects as well. nese industry will accord priority to this trade corridor, It is hoped that the BCIM economic corridor will ac- given the ease of access and a ready market. This is crue significant gains through sub-regional economic evident from the Chinese interest evinced in funding cooperation within the region. The multimodal corridor, infrastructure projects in certain parts of the corridor. if realised, will be the first expressway between India On the other hand, after India signed the BBIN and China and pass through Myanmar and Bangladesh. MVA, there has been renewed interest among policy circles and academics to discuss the potential of 1 N. Ghosh and M. Bhonsale, “Act East for Better BBIN as the new emerging economic order of South Connectivity,” Hindu Business Line, June 25, 2015.

28 Observer Research Foundation n Raisina Files 2016 Files Asia. A study by the Asian Development Bank pro- gion. If capital movement restrictions are removed over posed 10 regional road networks as South Asian time, one may even think of developing a regional stock

Corridors, of which seven have been identified in exchange, a regional agricultural spot exchange and the Infrastructure the BBIN region. The land-locked trading centres of like. This is because there seems to be a higher possi- Nepal and Bhutan can get access to ports in India bility of achieving fiscal and monetary convergence in and Bangladesh. Tripura in Northeast India can get BBIN than BCIM. Once that is achieved, BBIN could access to Bangladesh’s Ashugunj port, and Chit- be dreaming of a common currency in the near future. tagong and Mongla ports can be accessed to move However, China wants BCIM to flourish more for foodgrains from Kolkata to the its own market development. Northeast. There are apprehensions that The opening of the Bangab- China wants BCIM China will define oceans off andhu bridge over the Jamuna its shores as territory to be river and the development of to flourish more owned and controlled. Beijing the Padma bridge, the Dha- for its own market is poised to assume a more ka-Chittagong transport corri- development. There prominent presence in both dor and other strategic trans- are apprehensions the Indian Ocean and the port corridors can facilitate South China Sea.3 While this trade between Bangladesh that China will define in itself may not indicate an in- and India’s Northeast and oceans off its shores as timidating prospect, the situa- West Bengal. India is the larg- territory to be owned tion may go either way. China, est trader in the BBIN sub-re- on its part, dismissed India’s gional bloc. India’s trade ties and controlled. Beijing apprehensions regarding its with Nepal and Bhutan com- is poised to assume ambitious multi-billion dollar prise a significant share of the a more prominent Silk Road projects, stretch- total international trade con- presence in both the ing across continents to build ducted by the latter two coun- infrastructure and improve tries. For instance, Bhutan’s Indian Ocean and the connectivity with the avowed exports to India account for South China Sea. aim of expanding trade and about 90 percent of its total development. It also sought exports.2 to assure India that there are If analysed properly, the ad- benefits for countries joining vantages accrued by BCIM, however, seem to peter the projects envisaged under the One Belt, One out significantly, when compared with BBIN. While Road initiative, unveiled by President Xi Jinping two trade may flourish in BBIN through removal of tariff and years ago.4 non-tariff barriers, thereby helping the creation of a free- Whatever be the unfolding of the geopolitical reality, trade zone, there remain possibilities of having smooth- er international mobility of capital and labour in the re- 3 N. Ghosh and P. Basu, “Trimming the Dragon’s Sails,” Hindu Business Line, March 14, 2015. 2 N. Ghosh, “India must watch Chinese plans when opting 4 PTI, “China dismisses India’s apprehensions on Silk between BBIN & BCIM blocs,” ABP, December 11, 2015, Road projects,” The Indian Express, September 2015, http://www.abplive.in/blog/india-must-watch-chinese- http://indianexpress.com/article/india/india-others/ plans-when-opting-between-bbin-bcim-blocs. china-dismisses-indias-apprehensions-on-silk-road- projects/#sthash.stPIpxO1.dpuf.

Observer Research Foundation n Raisina Files 2016 29 Files the real connectivity challenge lies with economic and alised. Yet, there is no denying that signing the MVA trade links. Regional economic integration with China as clearly signals the willingness of countries in the region a partner is a distant dream for India as well as South to promote connectivity and ignore broader obstacles Asia. The macro structure of the capital market, currency created by political forces. In fact, there have been ear- regulations, fiscal management parameters, etc. in China lierattempts to create a strong sub-region within South is completely different from that in the economies of In- Asia. For example, in 1994, the eastern states intend- dia and Bangladesh. At the same time, China is also in ed to form the South Asia Growth Quadrangle but the a completely different develop- initiative could not take off for

Infrastructure mental trajectory, as compared various reasons.6 to South Asian nations.5 It might be a bit too early to Bangladeshi and Nepali It might be a bit too infer the fate of BBIN. Oppor- policy scholars feel that Chi- early to infer the fate tunities are immense, as noted na views them as economic of BBIN. Opportunities above. But the challenges are ‘opportunities.’ While China no less. First of all, one needs definitely sees Bangladesh are immense. But the to understand that the defi- as an opportunity because of challenges are no nition of ‘connectivity’ cannot cheap labour and a growing less. First of all, one be confined to mere road con- upper-middle class population needs to understand structions, aviation and maritime (as a market opportunity), it is pathways. The bigger concern a myth that Nepal merits the that the definition of is development of the region: To same attention from China. In- ‘connectivity’ cannot be reiterate, economics is the prime dia needs to wait and watch confined to mere road driver of connectivity. The chal- the Chinese designs, maintain lenge for BBIN lies in the various good relations with them and constructions, aviation developmental parameters and engage them in a manner that and maritime pathways. use of resources. offsets any adversity. Given un- The bigger concern The most interesting dis- certainty about China’s plans, it is development of the course here is that BBIN is one of is better for India to move slow- the very few regions of the world ly on BCIM, while fully exploring region: To reiterate, that presents the critical paradox the BBIN initiative. economics is the prime of development theory: “ample driver of connectivity. water, ample poverty.”7 In 2011, Challenges Facing Ghosh and Khan inferred that BBIN the major problem with resource While the BBIN MVA is defi- sharing in BBIN wouldcreate a nitely a departure from the virtual stagnationof initiatives for South Asian integration, this move is merely a small 6 A. Basu Ray Chaudhury, P. Basu and M. Bhonsale, beginning. The success of this move is yet to be re- “Driving Across the South Asian Borders: The Motor Vehicle Agreement between Bhutan, Bangladesh, India 5 N. Ghosh, “Challenges to Environmental Security in and Nepal,” ORF Occasional Paper No. 69, 2015. the Context of India-Bangladesh Trans-boundary Water 7 J. Bandyopadhyay and N. Ghosh, “Holistic Engineering Relations,” Decision (Springer) 42, no. 2 (2015): 211-28. and Hydro-diplomacy in the Ganges-Brahmaputra- Special Issue on Managing Critical Resources: Food, Meghna Basin,” Economic and Political Weekly 44 (45): Energy and Water. 50-60; Ghosh and Basu, “Trimming the Dragon’s Sails.”

30 Observer Research Foundation n Raisina Files 2016 Files threat for the general environmental security in the region.8 Bhutan, Nepal and Northeast India is poor; even parts Bandyopadhyay has long been talking of the problems of connecting highways in this region are in bad shape, created by the reductionist engineering framework that which augment the time and cost of transportation.11 Infrastructure has been responsible for various water-related problems Further, though the joint statement adequately ac- in South Asia.9 Ghosh blames “arithmetic hydrology” be- knowledges the benefits from trade, the costs of the hind non-cooperation of the transboundary waters as also BBIN initiative are not yet known. There is no clarity the looming concern of poverty and development.10 on the sunk costs of construction of roadways and the The other concern is trade within the region. BBIN recurring externality cost, once some of the proposed trade relations are significant roadways come up. These ex- considering, for instance, that ternality costs are social and Bangladesh’s exports to In- environmental. Certain costs dia comprise 2.09 percent of The most interesting are to be borne by the com- its total exports. Bangladesh’s discourse here is that munities in the context of their exports today stand at $27 bil- BBIN is one of the very relocation, as well as ecolog- lion. Similarly, 1.79 percent of ical costs. One such example India’s exports are bound for few regions of the world is the road within Terai Arc Bangladesh. India’s trade ties that presents the critical Landscape, expected to inhibit with Nepal and Bhutan com- paradox of development trans-boundary wildlife move- prise a significant share of the theory: “ample water, ment and affect the livelihood of total international trade of the the poor. The concern is wheth- latter two countries. A joint ample poverty.” In 2011, er these socio-environmental statement by the four trans- Ghosh and Khan inferred costs are going to exceed the port ministers of BBIN during that the major problem expected benefits of trading.12 the MVA meeting stated that Hence, the fundamental “transforming transport corri- with resource sharing hypothesis with which BBIN dors into economic corridors in BBIN would create a connectivity is sought is en- could potentially increase in- threat for the general hancement of trade. More im- tra-regional trade within South environmental security in portantly, the trade multiplier Asia by almost 60 percent and within the region is supposed with the rest of the world by the region. to generate growth and devel- over 30 percent.” But this is opment. Mere infrastructure not an easy task. Poor physical connectivity, however, is not infrastructure in the sub-region is one of the most se- sufficient to promote trade, unless the non-tariff barriers rious causes of concern. Road density in Bangladesh, are removed. While it is a fact that tariff barriers within the nations concerned in South Asia have been sub- 8 N. Ghosh and S.E. Khan, Situation Analysis on stantially lowered, domestic interests still often prevail Environmental Security, Ecosystems for Life: A over regional connectivity issues and non-tariff barriers Bangladesh-India Initiative (New Delhi and Bangkok: IUCN, 2012). 9 J. Bandyopadhyay, “Water Science in India: Hydrological 11 A. Kumar, “BBIN MVA: Embracing Sub-regionalism in Obscurantism,” Economic and Political Weekly 47, no. 16 South Asia,” Indian Council of World Affairs Policy Brief, (2012): 45-47. 2015. 10 See note 5. 12 See note 1.

Observer Research Foundation n Raisina Files 2016 31 Files have traditionally been used for the BBIN region. This is the movements of goods and ser- dream dreamt by an erstwhile vices. Yet, one cannot deny the A bigger challenge fragmented Europe that led to fact that trade has increased lies with movement the formation of the cohesive substantially between nations of capital. None of the European Community. in South Asia in the recent past. BBIN nations have opted India has been the prime A bigger challenge lies with mover of the BBIN initiative movement of capital. None of for full capital account thus far. Being the largest and

Infrastructure the BBIN nations have opted convertibility. Therefore, the most powerful nation (both for full capital account con- until now, free politically and economically), vertibility. Therefore, until now, India’s role will be the most free movement of capital has movement of capital important one. The BBIN initia- been restricted. There is an has been restricted. tive is a reflection of the clinical immense opportunity to open There is an immense shift of the trajectory of India’s up BBIN economies for capital opportunity to open neighbourhood policy, with movement, which will diminish economics and trade being the the transaction costs of trade up BBIN economies key driver. Therefore, the suc- manifold. The extent of the re- for capital movement, cess of the BBIN initiative will duction needs to be estimated which will diminish help India alter its perception through a separate study. as a hegemonic power.14 As the transaction costs rightly pointed out by Kumar, From Economics to of trade manifold. The “Economic cooperation and Politics extent of the reduction good relations are reciprocal As stated earlier, the MVA needs to be estimated to each other. The BBIN MVA marks the beginning of a much could not have been possible if broader objective of sub-re- through a separate India-Bangladesh relationship gional cooperation. The route study. had not improved in recent chosen towards achieving this years.”15 goal is inherently economics, Whether BBIN will emerge through trade cooperation. Over time, therefore, if as a replicable model for bigger Asian integration is dif- the BBIN connectivity initiative moves in its desired ficult to state for various reasons. Firstly, it is too early direction, sociocultural cohesion and economic inter- to comment given that the MVA only marks the tip of dependency among BBIN member countries can only the iceberg. Secondly, Asian integration remains a dis- increase. Seamless connectivity is directly linked with tant dream given the various political and governance regional economic prosperity and people-to-people structures in various Asian nations, which all have dif- contacts.13 It is a fact that while the benefits can only ferent political goals. Political will might not be present, be monetised through trade and economic variables, as some nations might be more interested in exploiting the cultural connectedness and resulting political co- their own resources for their own wellbeing. Thirdly, the hesiveness might be the net non-monetised benefit, different nations are on different economic growth tra- thereby ushering in an era of peaceful geopolitics in 14 Ibid. 13 See note 11. 15 Ibid.

32 Observer Research Foundation n Raisina Files 2016 Files jectories; ‘management models’ of said trajectories and will of the BBIN nations to implement what has been further ambitions also differ. In that sense, they might dreamt of. not find it too remunerative to move into a multilateral Infrastructure structure with other Asian partners vis-à-vis partners Nilanjan Ghosh is Senior Fellow and from other continents. heads the Economy and Development The opportunities for BBIN are huge—so are its Programme at ORF Kolkata. He is also challenges. The challenges rather present themselves Senior Economic Advisor at the World as opportunities. It now solely depends on the political Wide Fund for Nature, New Delhi.

Observer Research Foundation n Raisina Files 2016 33 Files India and Maritime-Asia: Seeking Economic Convergence Amidst Strategic Discord ar i t me

M Abhijit Singh

For long, the waters around Asia have been regarded as a aritime-Asia presents combination of two both challe dissimilar strategic nges and opportunities. This vital space is set to play a sub-systems—the crucial role in the political and economic future of the Indian Ocean as a MAsia-Pacific region. Its security challenges are grave and cannot be overlooked. But its economic opportuni- theatre of irregular ties must be seized to India’s advantage. In the coming threats amenable to years, littoral-Asia will be a key determinant of prosper- a collective form of ity in the Indo-Pacific region. For long, maritime experts have regarded the waters around Asia as a combina- maritime security, while tion of two dissimilar strategic sub-systems. The Indian the Western Pacific as Ocean was thought of as a theatre of irregular threats a domain of intractable amenable to a collective form of maritime security. The geopolitical conflict Western Pacific, on the other hand, was perceived to be a domain of intractable geopolitical conflict and warring and warring maritime maritime agencies. Many believed the two sub-regions agencies. had so little in common that applying similar solutions to

34 Observer Research Foundation n Raisina Files 2016 Files M ar i t me

Observer Research Foundation n Raisina Files 2016 35 Files their problems was akin to prescribing the same medi- drug-running, arms trafficking, illegal fishing and climate cation for different physical ailments. Yet, a subtle shift change continue to test the effectiveness of maritime is now underway and a gradual equalisation of chal- forces on either side of the Strait of Malacca. lenges is beginning to occur across this vast strategic system. Evidence suggests that the strategic differen- The Security Conundrum tial between the two sub-theatres comprising maritime From New Delhi’s perspective, what is vital is the con-

ar i t me Asia is narrowing, with the Indi- tradiction between the two main

M an Ocean littorals beginning to factors that mediate the mari- resemble the troubled waters of time environment in South Asia. the Western Pacific. Indian experts are While increasing deployment of The rebalancing of security concerned by the modern naval forces near critical threats, among other things, choke points in the Indian Ocean can be put down to the prev- modernisation of region (IOR) has led regional na- alence of three factors. First, Pakistan’s navy, the vies to assume robust postures, there is a growing maritime mil- growing deployments new dangers are being posed itarisation occurring across the of the PLA Navy in by non-traditional security Asian littorals characterised by threats, which require a collec- a gradual build-up of naval forc- the Indian Ocean and tive response. Indian experts are es. The modernisation of the China’s reclamation of concerned by the modernisation People’s Liberation Army Navy maritime features in of Pakistan’s navy, the growing (PLA Navy) and other navies in deployments of the PLA Navy in Southeast Asia is matched by a South China Sea. They the Indian Ocean and China’s maritime military build-up in In- also recognise the reclamation of maritime fea- dia, Pakistan, Iran, Saudi Arabia challenge posed by non- tures in South China Sea. These and other Indian Ocean states. traditional adversaries, threats require robust deterrent Second, huge investments action by the Indian Navy. But are being made in maritime tackling which needs Indian analysts also recognise infrastructure in both sub-the- joint and sustained effort. the challenge posed by non-tra- atres. China has been leading ditional adversaries, tackling in the race for infrastructure which needs joint and sustained creation thus far, but others are not far behind. Japan, effort. An instructive example is the grave danger posed Indonesia and Thailand have undertaken construction by ‘hybrid’ forces (non-state actors launching attacks on of huge maritime projects, even as India, Sri Lanka, Mal- regular forces). Al Qaida’s audacious attack on a Paki- dives, Mauritius and Seychelles have expanded their stani frigate docked at Karachi port in October 2014 led investments in coastal development and the blue ocean Indian naval planners to strengthen the coastal security economy. This has led to the presence of extra-regional architecture, and enhanced consensus in favour of joint maritime forces, triggering anxiety over the increased surveillance.1 The militants’ plan to hijack the ship and militarisation of the littoral spaces. Third, there has been a gradual expansion of non-tra- 1 “Indian Navy to approach Pakistani ships with caution after al-Qaeda hijacking attempt,” Mail Online Today, ditional threats in both sub-regions. Even though piracy December 4, 2014, http://www.dailymail.co.uk/indiahome/ off the coast of Somalia has been successfully tackled, indianews/article-2859847/Indian-Navy-approach- Pakistani-ships-caution-al-Qaeda-hijacking-attempt.html.

36 Observer Research Foundation n Raisina Files 2016 Files use it to mount attacks against United States’ and Indian sufferance.”4 naval forces in the Indian Ocean was foiled in the nick The economic scenario in maritime Asia, however, of time. No one, however, is willing to bet on the same though stands apart from the security picture. Notwith-

result every time. standing the strategic impulse that divides the Indo-Pa- M Despite clearly converging security interests, qual- cific, there is a strong economic rationale that binds the ar i t me ity cooperation among regional maritime forces has region. The discourse in India routinely overlooks the fact been hard to engender. This is principally on account that the synergy of maritime initiatives in littoral-Asia is of the distrust that exists among premised on the leveraging of powerful nations with strong strengths and common region- geopolitical interests in mari- espite numerous al interests. Not only is there a time Asia. India and China have D strong economic dividend to be been suspicious of each oth- attempts by China realised by working in operational er’s intentions in their primary to elicit a positive sync, pursuing joint projects can theatres of maritime operations. response from India, also produce substantial dip- Indian analysts regard China’s lomatic and cultural gains. Yet, growing IOR deployments and New Delhi has remained economic opportunities are not its announcement of a Maritime non-committal about being currently taken seriously Silk Route project as elaborate the MSR project. The because nations fear these could covers for its military ambitions real concern has been compromise national interest and in the IOR. Some even consid- strategic influence in the wider er the latter as a strategic ploy the China-Pakistan maritime space. for naval access to ports in Economic Corridor, a the South Asian littoral zones, critical component of China’s Maritime Silk metaphorically described as Road the ‘string of pearls’.2 But Bei- the OBOR that will make One such developmental pro- jing has not been welcoming Pakistan a critical node posal that is yet to pass the lit- of India’s maritime presence in along both land and sea mus test of political consensus 3 the South China Sea either. routes. is China’s 21st Century Maritime Indian naval ships entering the Silk Road (MSR). A key compo- South China Sea have had to nent of the larger Chinese ‘One contend with an assertive PLA Navy, intent on under- Belt, One Road’ (OBOR) project meant to promote trade, lining its primacy in what it considers to be its regional investment, services and infrastructure construction in waters. While outwardly indifferent to Indian presence, Asia and Europe, the MSR aims at an economic, diplo- the message to Indian naval ships has been clear: “You matic and cultural integration of littoral Asia. To achieve have entered Chinese waters. You operate here at our the project’s stated ends, Beijing has created specific instruments, such as the Asian Infrastructure Investment 2 Brahma Chellaney, “Countering China’s ‘string of 5 pearls,” Washington Times, May 6, 2013, http://www. Bank and a $40 billion Silk Road Fund. These have been washingtontimes.com/news/2013/may/6/countering- chinas-string-of-pearls/. 4 Ibid. 3 C. Raja Mohan, “Indian Navy in South China Sea: 5 “China to establish $40 billion Silk Road Beijing’s unwelcome escort,” Indian Express, June 12, infrastructure fund,” Reuters, November 8, 2014, 2012, http://archive.indianexpress.com/news/indian-navy- http://www.reuters.com/article/us-china-diplomacy- in-south-china-sea-beijing-s-unwelcome-escort/962011/. idUSKBN0IS0BQ20141108.

Observer Research Foundation n Raisina Files 2016 37 Files received positively by some governments in Asia, but many military base in Djibouti has further fuelled Indian fears, remain wary of its strategic implications. convincing many Indian experts that China is stealthily To convince potential partners, Beijing has com- moving to counter Indian influence in the IOR. bined the drive to create infrastructure with an effort For its part, China insists that its investments in IOR to increase trade volumes. Last year, China signed maritime infrastructure are motivated by pure econom- an agreement to upgrade its free trade area with the ics and that the benefits will accrue equally for all par- 6 ar i t me Association of Southeast Asian Nations (ASEAN). ticipating states. Chinese academics and experts un-

M By dovetailing the MSR with derscore the MSR’s utility in a master plan for an integrat- integrating existing initiatives, ed ASEAN community, Beijing including regional efforts, to has sought to provide greater China, it is claimed, improve physical connectivity urgency to its proposal. Among has only two purposes and development opportunities. the states that it has most ac- in the Indian Ocean: Consequently, Chinese schol- tively courted, India has been ars contest the ‘string of pearls’ the most significant. economic gains and the theory. A prominent Chinese Unfortunately, despite numer- security of sea lines of daily last year noted that Indi- ous attempts to elicit a positive communication. Thus, an fears of PLA military bases response from India, New Del- throughout Indian Ocean were hi has remained non-committal access, rather than bases, without factual basis. China, it about the project. Indian policy- is what drives Chinese claimed, has only two purpos- makers usually point to the lack naval deployments in es in the Indian Ocean: eco- of specifics on critical projects the IOR—‘access’ that nomic gains and the security in the Indian Ocean, but the of sea lines of communication.8 real concern has been the Chi- will drive the creation In other words, access, rath- na-Pakistan Economic Corri- of economic ‘mega- er than bases, is what drives dor, a critical component of the projects’ in the Indian Chinese naval deployments OBOR that will make Pakistan a in the IOR—‘access’ that will critical node along both land and Ocean and South drive the creation of economic sea routes.7 The Indian Navy is China Sea. ‘mega-projects’ in the Indian also wary about the PLA Navy’s Ocean and South China Sea, growing ship and submarine de- and ultimately assist Asian gov- ployments in the Indian Ocean, which many Indian ana- ernments in fulfilling their developmental mandate. lysts believe is meant to establish China’s de-facto dominance in India’s strategic backyard. The new Chinese Indian Initiatives in the Asia Pacific Beijing’s win-win propositions in maritime Asia are 6 “China, ASEAN seals deal to upgrade bilateral FTA,” November 23, 2015, http://news.xinhuanet.com/ 8 A commentary in People’s Daily quoted Fu Xiaoqiang english/2015-11/23/c_134842731.htm. of the China Institutes of Contemporary International 7 Alvin Cheng-Hin Lim, “Iron Brothers: Sino-Pakistani Relations saying that “India’s fears of military base in Relations and the China-Pakistan Economic Corridor,” Maldives were unfounded,” The Hindu, July 26, 2015, Eurasia Review, May 7, 2015, http://www.eurasiareview. http://www.thehindu.com/news/international/south-asia/ com/07052015-iron-brothers-sino-pakistani-relations- china-says-indias-fears-of-military-base-in-maldives- and-the-china-pakistan-economic-corridor-analysis/. unfounded/article7465222.ece.

38 Observer Research Foundation n Raisina Files 2016 Files worthy of empathetic consideration because they by lack of connectivity within and beyond the sub- are led by the same economic rationale that drives continent. Geographical constraints, for instance, New Delhi’s own outreach in the Asia-Pacific region. impede India’s land-based foreign trade with Chi-

India’s trade with ASEAN and East Asia has grown na and Myanmar, two of its immediate neighbours. M rapidly. A rising proportion of Indian oil and contain- As a result, most of India’s merchandise trade with ar i t me er shipments now traverses the Straits of Malacca. these countries is thorough the sea. A greater desire New Delhi has energy interests off the Vietnam coast for economic synergy is one reason New Delhi has and seeks to increase investments in the oil and gas been willing to endorse the Bangladesh-China-In- sectors in Southeast Asia. dia-Myanmar Trade Corridor Moreover, India’s Look East (BCIM) proposed by Beijing. Policy, the main policy frame- While BCIM might be bene- work of India’s engagement While BCIM might be ficial for India, it may yet be in- with Southeast Asia, has a beneficial for India, it sufficient in overcoming New clear economic focus.9 New may yet be insufficient Delhi’s connectivity problems, Delhi’s regional endeavours unless supplemented by larger include the India-ASEAN Free in overcoming New joint projects in the common Trade Area, Mekong Ganga Delhi’s connectivity seas. The Modi government Cooperation and the Bay of problems, unless is looking to revive former In- Bengal Initiative for Multi-Sec- supplemented by dian Prime Minister Atal Bi- toral Technical and Economic hari Vajpayee’s ‘Sagar Mala’ Cooperation.10 Today, despite larger joint projects in Project.11 The project aims to a newly invigorated approach the common seas. The enhance overseas trade con- christened; ‘Act East,’ India’s Modi government is nectivity by developing new approach essentially remains seaports along peninsular In- tilted in favour of economic looking to revive the dia, and envisions ‘port-led and cultural reintegration with ‘Sagar Mala’ Project development’ of the hinterland Southeast Asia. to enhance overseas as well as special economic While New Delhi’s devel- trade connectivity zones (SEZs). Indian ana- opmental and socio-political lysts and policymakers must agenda is clear, it faces major by developing new now consider the potential of geographical and infrastruc- seaports along MSR to supplement existing ture-related constraints. Many peninsular India. arrangements in a manner that of its initiatives are hindered can better facilitate seaport and SEZ development. More 9 For a broader discussion on India’s Look East Policy, see: importantly, there is a need to synergise blue econ- A.N. Ram ed., Two Decades of India’s Look East Policy: omy initiatives for sustainable development of the lit- Partnership for Peace, Progress and Prosperity (New Delhi: Indian Council of World Affairs, 2012). toral zones. 10 “India’s Look East Policy: Implications for Thailand and South East Asia,” Address by India’s Foreign Minister, 11 “Sagarmala: Concept and implementation towards Blue Press Information Bureau, Government of India, Revolution,” Press Information Bureau, Government September 14, 2007, http://www.pib.nic.in/newsite/ of India, March 25, 2015, http://pib.nic.in/newsite/ erelease.aspx?relid=31253. PrintRelease.aspx?relid=117691.

Observer Research Foundation n Raisina Files 2016 39 Files A Cultural Convergence instrument to boost regional growth.13 There might also be a cultural convergence between Partnering with Beijing on the MSR could have the MSR and Indian maritime initiatives in the Indian clear benefits for New Delhi. With Chinese authorities Ocean. According to Chinese keen to outsource manufac- analysts, Bejing considers the turing to their MSR partners, MSR to be a cultural project. India’s advantages in terms ar i t me In this, it resembles India’s hile integrating of low labour costs and raw

M W ‘Mausam’ and ‘Spice Route’ maritime Asia has its materials place it in a good projects.12 The former is an position to strengthen its man- academic enquiry into cultural own risks, especially ufacturing base, propagate its linkages in the Indian Ocean; the possibility of ‘Make in India’ campaign, and the latter, a plan to retrace a increased competition generate employment oppor- historical route along Coro- tunities.14 If India decides to mandel Coast of southern In- among regional stay out of the MSR, howev- dia where ancient traders plied maritime forces, India er, it runs the risk of losing the their wares. Taken together, the must capitalise on the momentum for development. Indian and Chinese proposals opportunity for vast China’s neighbours and MSR symbolise Asia’s historic mar- partners would be more than itime heritage, traditions and economic gains. It must willing to make up for India’s practices, lending credence do so by committing absence, thereby negating to idea of a resurgent Asia. In resources and actions, New Delhi’s advantages. particular, the MSR appears While integrating maritime well-positioned to integrate pursuing free trade and Asia has its own risks, especially Asia economically, creating other open economic the possibility of increased com- mutual dependence and great- arrangements, and petition among regional maritime er regional order and stability. shaping norms and forces, India must capitalise on the opportunity for vast econom- Towards an setting priorities for ic gains. It must do so by com- Integrated Maritime regional development. mitting resources and actions, Asia pursuing free trade and other Asia’s economic growth in the open economic arrangements, past few decades has indeed and shaping norms and setting been impressive. Yet, amidst a global slowdown today, priorities for regional development. It must do all of these, the developmental agenda appears under threat. With even while deterring adversaries, taking measures to pre- exports falling and export costs growing, Asian states are looking for new ways to maintain growth rates. 13 Mingjiang Li, China’s “One Belt One Road” Initiative: The Convergence of Strategic Interests and Domestic Since China is willing to create industrial capacity in its Imperatives,” in China’s Maritime Silk Route and Asia, neighbouring states, the MSR appears to be a useful eds. Vijay Sahuja and Jane Chan (New Delhi: Vij Books 2016), 14. 12 “Modi’s Mausam to co-opt Spice Route”, The Times 14 Gurpreet Khurana, “Why is India So Coy about China’s of India, June 4, 2015, http://timesofindia.indiatimes. Maritime Silk Road?,” The Wire, June 9, 2015, http:// com/city/kochi/Modis-Mausam-to-co-opt-Silk-Route/ thewire.in/2015/06/09/why-is-india-so-coy-about-chinas- articleshow/47534113.cms maritime-silk-road-3522/.

40 Observer Research Foundation n Raisina Files 2016 Files serve the regional balance of power, and fighting trans- the Indian Ocean, and regional development through national threats like piracy and terrorism. New Delhi must economic integration of the maritime-Asia. demonstrate that it is willing to seize opportunities and

act, not merely in pursuit of narrowly-construed national Abhijit Singh is a Senior Fellow at ORF M interests, but also for the greater regional good. and heads the Maritime Security Initiative. ar i t me In effect, India must balance ‘benefit and risk’ to find a A former naval officer, he is a keen middle path, a compromise that allows it to pursue two commentator on maritime security affairs seemingly conflicting goals: ensure strategic primacy in in the Asia-Pacific region.

Observer Research Foundation n Raisina Files 2016 41 Files Sustaining Development: Cleaning Up Asia’s Environmental Act Vikrom Mathur and Tanoubi Ngangom i l tyi nab S usta

The Asian Boom Despite the consistent Growth, Poverty, Environment performance for at least The rise of Asia is a central theme in global economic discourses today. Through economic globalisation, the past two decades the countries of the region currently enjoy high to moderate region continues to be growth rates. Presuming that they sustain this growth plagued by basic issues momentum, Asia’s GDP will grow by $157 trillion in just of hunger and poverty: 40 years, and will constitute 50 percent of the global GDP by 2050.1 Seven countries—China, India, Indo- Two-thirds of the world’s nesia, Japan, Republic of Korea, Thailand and Malaysia, ‘hungry population’ will drive this process and will be responsible for about resides in the Asia- 91 percent of Asia’s total projected growth.2 However, despite the consistent performance for at Pacific region. In terms least the past two decades, and the associated opti- of overall poverty, more mistic forecasts, the region continues to be plagued by than 700 million Asians basic issues of hunger and poverty: Two-thirds of the still live below the world’s ‘hungry population’ resides in the Asia-Pacific region.3 In terms of overall poverty, more than 700 mil- international benchmark lion Asians still live below the international benchmark of $1.25 per day. of $1.25 per day.4

42 Observer Research Foundation n Raisina Files 2016 Files S usta i nab i l ty

Observer Research Foundation n Raisina Files 2016 43 Files The explosive growth has also left an environmen- ronmental challenge. In urban areas of Asia the poor tal crisis in its wake. 700 million individuals have to live in slums on marginal lands without proper access be pulled out of poverty but the environmental car- to social services and the natural resource-dependent rying capacity of our cities, rivers and landscapes is livelihoods of farmers are under maximum stress. Se- bursting at its seams. Rapid urbanisation along with curing the Asian century rests on how effectively the corresponding processes of industrialisation has led region can sustain growth while protecting the environ- to severe deterioration in air quality. A staggering 24 ment and ensuring that benefits of growth accrue to all, percent of the total burden of disease in Asia Pacific especially those who still lack basic standards of living. i l tyi nab S usta is attributable to environmental Sustainable development is risk factors.5 These risks are now part of the economic and most acute in China and India. political discourse worldwide. A red alert was issued in Bei- A staggering 24 The definition of the Brundtland jing in December and schools percent of the total Commission—‘development shut down, as pollution lev- burden of disease in Asia that meets the needs of the cur- els were 10 times higher than rent generations without com- those recommended by the Pacific is attributable promising the ability of future WHO.6 In India, the situation to environmental risk generations to meet their own is no better, with 13 of the top factors. These risks are needs”—is generally accepted. 20 most polluted cities in the most acute in China It suggests an equal consider- world located in the country.7 ation of economic, social and A host of other environ- and India. A red alert environmental goals. The grand mental challenges are con- was issued in Beijing narrative of sustainability needs straining development in Asia. in December and to brought down to earth; it is a Deforestation, soil erosion, complex multidimensional con- desertification and land deg- schools shut down, as cept which provides the nor- radation are disproportionately pollution levels were 10 mative orientation for societal impacting on the poor. Water times higher than those action but the rhetoric needs to is a growing concern in South recommended by the be replaced by strategies, poli- Asia: Poor domestic manage- cies and practical ways of find- ment of water resources, along WHO. ing that elusive balance. Social, with pressures from population economic and environmental growth and industrialisation, systems are complex and inter- have led to daily water shortages along with increased linked. It’s difficult to predict how they will interact and vulnerability to floods and droughts.8 Global warming change. Sharing the benefits of growth and cleaning up is expected to further exacerbate the development our environmental act will be central to sustaining de- challenge of the region. Given the vast population, velopment to avoid collapse and surprise. rapid rate of urbanisation, and the existence of vulnerable ecosystems such as small island countries, major Cleaning up the Environment river systems and long coastal lines, Asia is expected Environmental degradation continues to scar Asia’s to bear a disproportionate cost of climate change. economic miracle. Civil society groups and publics in The poor are most adversely affected by the envi- Asian countries are demanding better environmental

44 Observer Research Foundation n Raisina Files 2016 Files standards from their governments. Economic growth Fuel quality standards have to improve in tandem to is driven by private businesses and three broad sets the technology being used in vehicles. Recent efforts of strategies have emerged to ensure that growth is to control pollution in Delhi have also led to a slew of S usta i nab i l ty aligned with environmental objectives: regulations, measures demanding use of Compressed Natural Gas laws and standards; economic policies and market (CNG) vehicles in all taxis as well as restrictions on the incentives to support environment-friendly business purchase of certain sport utility vehicles.10 This follows practices; and voluntary private sector initiatives to im- a Supreme Court directive of 1998, which called for prove environmental performance in response to pub- the introduction of CNG as fuel for all public transport lic and investor pressure. in India. India has also introduced a Regulations, Standards tax on coal, which serves to cre- and Laws Three broad sets ate a fund towards investment Most Asian countries now of strategies have in clean energy technologies.11 have fairly evolved environ- emerged to ensure Moves to increase regulatory mental laws and standards frameworks and improve com- but compliance is the main that growth is aligned pliance with environmental law concern, due to a lack of in- with environmental in Asia will in the end require stitutional capacity to enforce objectives: regulations, more effective mainstreaming them. Capacity varies across laws and standards; of environmental consideration the administrative levels—ca- in sector policies related to land pacity at municipal and local economic policies and use, water and sanitation, urban authorities is often the lowest, market incentives to development and transport. which is where the most action support eco-friendly is needed. Decentralisation of Economic Policies and environmental management practices; and voluntary Incentives is an increasing trend across private sector initiatives Economic policies and incen- Asia but raises issues of local to improve performance tives that push for efficiency, capacities and conflict across in response to public and cleaner fuel and energy choices provincial jurisdictions. In India, and less polluting technologies for example, disputes across investor pressure. hold the key to sustainable and provincial borders and river effective environmental action. basins have already been wit- In India fossil fuel subsidies are nessed, which complicates top-down efforts towards being phased out in favour of taxes on coal through ini- environmental management and the success of laws tiatives such as the Coal Cess. Market-based instru- and regulatory efforts. ments incentivise consumers, particularly in industry, Regulation is however critical to drive environmental to reduce consumption, improve energy efficiency and modernisation. Regulatory standards drive innovation generate savings. For example, the Indian Bureau of and compel industry to invest in research and devel- Energy Efficiency launched the Perform, Achieve and opment and improve vehicle technologies. This has Trade (PAT) Scheme in 2012. PAT is a market-based been proven in the United States’ White House direc- mechanism designed to support improvements in en- tives on Corporate Average Fuel Economy standards.9 ergy efficiency in large industries and facilities through

Observer Research Foundation n Raisina Files 2016 45 Files the certification of energy savings, which can be trad- occasionally forced to source products from the deed. The scheme resulted in about $5 billion saved in oil veloping world that meet certain minimum conditions imports, based on average Brent crude prices over the with regards to environmental and labour practices. three-year implementation period (2012-15), and elec- Encouraging eco-labelling to cater to environmen- tricity savings equivalent to the output of five coal-fired tally conscious consumers can at times work better power plants.12 Incentives and market mechanisms are as a strategy than regulation. Voluntary disclosure therefore key policy instruments for engaging industry in programmes are also increasingly popular through pursuing environment-friendly business decisions. initiatives such as the Carbon Disclosure Project, an i l tyi nab S usta organisation that encourages ‘Voluntary’ Actions companies and cities to dis- As Asian companies grow they close their environmental im- will need to comply with envi- In India a law passed pacts to generate data that can ronment laws and standards in 2014 requires change business practices.14 but they can also be more companies to spend two Environmental performance proactive and become part- is becoming an increasingly ners in the sustainable devel- percent of their net profit important criteria to consumers opment agenda. Stronger en- on social development. and stakeholders. Improving gagement with private sector While the legislation is a standards makes increasing through mandating corporate welcome step, it remains sense, from a business point social responsibility, disclosure of view, for private sector ac- programmes, green procure- to be seen whether the tors who are afraid to lose mar- ment strategies, eco-labelling ruling will simply lead to ket share or see a lowering in of products and encouraging forced philanthropy with stock price. reports on corporate environmental performance can help solely symbolic and ‘tick Regional Cooperation engage private sector actors in box’ efforts or, worse, Shared efforts at environmental environmental action. fudging of data in order protection are key given that In India, for instance, a law to avoid compliance. rivers, forests and mountains passed in 2014 requires com- do not confine themselves to panies to spend two percent of national boundaries. Asian their net profit on social devel- countries are already working opment.13 While the legislation together to: share rivers, for ex- is a welcome step towards drawing in a wider range ample cooperation in the Ganga and Mekong basins; of actors in social development efforts, it remains to manage contiguous forest areas, such as expanding In- be seen whether the ruling will simply lead to forced dian and Bangladeshi cooperation on the Sunderbans; philanthropy with solely symbolic and ‘tick box’ efforts and manage shared oceans, for example through the or, worse, fudging of data in order to avoid compliance. Indian Ocean Rim Association. There is also notice- In developed countries the private sector is in- able evidence of ‘regional-think’ about global problems creasingly under pressure to develop environmentally like climate change, such as through the Association friendly products and services as a result of growing of Southeast Asian Nations (ASEAN) and South Asia public preference for the same. Companies are also Co-operative Environment Program climate initiatives.

46 Observer Research Foundation n Raisina Files 2016 Files Regional responses are not only needed where nat- countries, including Vietnam, Thailand, Indonesia and ural resources are shared but are also useful to share Bangladesh, also depend heavily on the supply of knowledge and best practice on localised but common low-wage labour. S usta i nab i l ty issues. There are several successful examples of re- The very factors responsible for the unprecedent- gional/sub-regional projects, such as the programme ed growth in Asia are also feeding rising inequality on Asian Brown Cloud run in the region. The focus on by the UN Environment Pro- cost-competitive manufac- gram to study seasonal haze turing means that human in Southeast Asia; ASEAN’s The very factors resource investment would Agreement on Transboundary responsible for the prove counterproductive by Haze Pollution and Framework pushing up labour costs. for Environmentally Sustain- unprecedented growth However, the age structure of able Cities; Acid Deposition in Asia are also feeding the Asian population will shift Monitoring Network in East rising inequality in dramatically over the next 40 Asia; South Asia’s Malé Dec- years, highlighting how unsus- laration on Control and Pre- the region. The focus tainable the current models vention of Air Pollution and its on cost-competitive are.18 This is something that likely Transboundary Effects15; manufacturing means India, too, will have to con- regional cooperation to con- that human resource tend with. The Indian model, trol dust storms in Northeast though, must address an ad- Asia.16 The Indus Treaty on wa- investment would prove ditional challenge. Despite ter sharing between India and counterproductive it already experiencing the Pakistan also stands alone as a by pushing up labour working-population explosion, success story in an otherwise India has been unable to gen- tense relationship between the costs. However, the erate proportionate employ- South Asian neighbours. age structure of the ment. The country’s growth Asian population will has been largely due to a Sharing Growth shift dramatically over small, highly-skilled portion The Asian growth story is of the labour force engaged based on leveraging surplus the next 40 years, in the services sector, which labour for low-cost manufac- highlighting how contributed 72.4 percent to turing: In fact, this phenome- unsustainable the current the GDP in 2014-15.19 India’s non has earned the continent economy then suffers from the the moniker ‘Factory Asia’ in models are. same challenge—under-in- the global market. The East vestment in the major portion Asian tigers relied on such an of its working population. economic model. The spectacular economic growth Sustaining economic growth in the future will depend of China is rooted in a similar model—the share of more on output per worker than the actual number of labour income in total national income has declined workers, which calls for alternative economic models drastically in under a decade (from 60 percent in that are not beholden to labour surplus. While mar- 2000 to 43 percent in 2009).17 Various other Asian ket-oriented reforms have created an economic boom,

Observer Research Foundation n Raisina Files 2016 47 Files these market forces themselves are not sufficient. Ad- the region is also witnessing widespread disparity in dressing the development challenges of Asia requires a access to health and education facilities, which further three-pronged strategy: redistributing income; investing widens the income gap. For instance, the probability in social sectors; and strengthening social protection. of poor children (lowest income quintile households) staying out of primary/secondary schools is five times Redistributing Income higher than their richer counterparts (highest income The current framework has resulted in high income-in- quintile households). In terms of health, infant mortal- equality across the region. Because low-cost manu- ity statistics for poorer households are ten-fold that i l tyi nab S usta facturing is based on extremely of wealthier ones.22 This is be- cheap labour, workers earn pal- cause countries in Asia gener- try remunerations, while factory ally have parallel health/educa- owners and managers are able Because low-cost tion systems—a high-quality, to reap much higher profits. In manufacturing is based well-regulated one much like the case of India, highly-skilled on extremely cheap those in western economies workers employed in the pro- catering to the wealthy, and a ductive services sector earn labour, workers earn much more basic one for poor- relatively higher incomes in paltry remunerations, er households. There is a need comparison to the rest of the while factory owners and to build a bridge between these labour force. A recent report managers reap much two realities, and this calls for by the Peking University shows active state intervention to cre- that the top one percent of Chi- higher profits. In the case ate more comprehensive sys- nese households owns one- of India, highly-skilled tems that are able to provide third of the country’s wealth workers employed in certain minimum quality stan- while the bottom 25 percent dards. This will not only bring owns just a single percent of the productive services about better quality of life, but the total wealth.20 The situation sector earn relatively will also dramatically increase in India is worse—the richest higher incomes in the likelihood of obtaining pro- one percent of the population comparison to the rest of ductive employment. owns 53 percent of the total economic pie.21 the labour force. Strengthening Social Inclusive development will Protection require the creation of an effi- The third strategy relates to the cient taxation system that is able to capture the entire provision of social safety nets. Existing social security spectrum of the population and leads to more balanced infrastructure in Asia is generally weak, with high out- wealth distribution. Apart from satisfying the realloca- of-pocket health expenditure being the norm. Out-of- tion objective, higher taxes also mean larger revenue for pocket expenditure as a share of total private healthcare increased expenditure on social sectors like health and costs in India stood at 85.9 percent in 2003; the corre- education. sponding figure for China was 76.7 percent.23 Designing suitable social protection frameworks for Investing in Social Sectors the Asian region requires a better understanding of lo- Rising inequality in Asia is not only limited to income; cal realities. Much like the case of health and educa-

48 Observer Research Foundation n Raisina Files 2016 Files tion, the region’s protection systems are also plagued requires extensive financial inclusion efforts that link by a dualistic structure. While those employed in large each household to the formal financial net. This will public and private enterprises are often covered by var- not only allow transfers to bypass multiple bureaucrat- S usta i nab i l ty ious social security schemes, the majority of the popu- ic ‘check-posts,’ but will also facilitate expansion of the lation who is self-employed and/or works in the infor- insurance system. mal sector is primarily excluded from such insurance In striving for shared development, attention must programmes. For instance, public sector employees in also be paid to the widening of pre-existing social di- India enjoy a range of services—subsidised housing, vides caused by economic reforms. Already vulnerable health insurance, pensions and groups such as women or rural lifelong pensions for surviving residents are now exposed to spouses, and maternity and higher competition, and further sick leave.24 In striving for shared marginalised. Targeted policies Casting a wider net demands development, attention must be created to ensure that an exploration of ways to ef- must be paid to the Asian countries move towards fectively capture the informal better social cohesion. sector workers. Governments widening of pre-existing in the region recognise this social divides caused Another Style of Life challenge—social protection by reforms. Vulnerable Political rhetoric that juxta- schemes are oriented towards a groups such as women poses poverty eradication and different set, which focuses on growth is misplaced: ‘Develop social assistance. Unlike social or rural residents are first and then deal with pollu- security schemes, which tend now exposed to higher tion later’ argument should be to disproportionately benefit the competition, and further cast aside. There is no clear wealthier sections, social assis- blueprint where we can es- tance programmes are specifi- marginalised. Targeted tablish targets and navigate cally targeted towards the poor. policies must be created and ‘arrive at’ sustainable de- Different countries have adopt- so that Asia moves velopment because the social, ed different types of social as- towards better social economic and environmental sistance: the Philippines mod- system is complex; uncertainty el, Pantawid Pamilya, is based cohesion. and surprise is likely to chal- on conditional cash transfer to lenge how institutions think. lower-income households. Ne- We need to design institutions pal has a similar cash transfer model.25 On the other with new mindsets – ones that can manage the com- hand, India’s largest social protection programme, the plex dynamics. Technology has been hailed as the Mahatma Gandhi National Rural Employment Guaran- panacea to problems of sustainable development and tee Act, provides a guaranteed term of employment to climate change. However, social changes are equally every rural household. critical. The Delhi odd–even scheme which restricted Despite the existence of such targeted pro-poor vehicular use is an important step in that it opens the initiatives, actual outcomes remain sub-optimal in policy space for more ambitious regulation in the fu- the face of large leakages and the inability to effec- ture. Also, it forced citizens to give up certain privi- tively target poor households. Tackling this challenge leges they take for granted, thereby opening space to

Observer Research Foundation n Raisina Files 2016 49 Files further question consumption patterns and potentially environmentally conscious behaviour is vital. A change change behaviour. in mores and values to accompany the potential policy The current modes of production and consumption instruments described above will both supplement and need to be re-examined and the needs of the weakest broaden the effort to mainstream environmental action in Asia should be at the centre of economic policies. with developmental agendas. Another style of life that incorporates more socially and

Endnotes

i l tyi nab S usta 1 Asian Development Bank, “Executive Summary,” Asia 2050: Realizing the Asian Century (New Delhi: Sage India, 2011), 5, http://adb.org/sites/default/files/asia2050-executive-summary.pdf.

2 Ibid.

3 Jose Graziano da Silva, “Towards a hunger-free Asia and Pacific,” FAO, March 14, 2014, 8, http://www.fao.org/ fileadmin/user_upload/FAODG/docs/Jose-Graziano-da-Silva-Hunger-Free-Asia-Pacific.pdf.

4 “Redefining Poverty in Asia and the Pacific: ADB’s Take,” Asian Development Bank, September 17, 2014, http:// www.adb.org/features/redefining-poverty-asia-and-pacific-adbs-take.

5 UNEP, “Environment and Health Linkages in Asia Pacific” (Discussion Document for Session 4, First Forum of Ministers and Environment Authorities of Asia Pacific, Bangkok, April 22, 2015), http://www.unep.org/roap/ Portals/96/Ministerial%20Forum%20Agenda/Environment%20and%20Health%20Linkages%20in%20Asia%20 Pacific_FINAL.pdf.

6 Katie Hunt, and Shen Lu, “Smog in China closes schools and construction sites, cuts traffic in Beijing,” CNN, December 8, 2015, http://edition.cnn.com/2015/12/07/asia/china-beijing-pollution-red-alert/.

7 Chetan Chauhan, “13 out of world’s top 20 polluted cities in India, only three in China,” The Hindustan Times, June 5, 2015, http://www.hindustantimes.com/india/13-out-of-world-s-top-20-polluted-cities-in-india-only-three- in-china/story-myTrPZM8DHmQOhxB9cc5hI.html.

8 Mandakini Devasher Surie, “South Asia’s Water Crisis: A Problem of Scarcity Amid Abundance,” The Asia Foundation, March 25, 2015, http://asiafoundation.org/in-asia/2015/03/25/south-asias-water-crisis-a-problem- of-scarcity-amid-abundance/.

9 “Remarks by the President on fuel efficiency standards of medium and heavy-duty vehicles,” White House Press Release, February 18, 2014, https://www.whitehouse.gov/the-press-office/2014/02/18/remarks-president-fuel- efficiency-standards-medium-and-heavy-duty-vehicl.

10 Utkarsh Anand, “Ban on big diesel cars stays, Supreme Court says get us data on polluting fuel,” The Indian Express, January 6, 2015, http://indianexpress.com/article/cities/delhi/supreme-court-upholds-ban-on-sale-of- large-diesel-cars-in-delhi/.

11 Anand Upadhyay, “India Doubles Coal Tax, Yet Again,” Clean Technica, March 3, 2015, http://cleantechnica. com/2015/03/03/india-doubles-coal-tax-yet/.

12 Natalie O. Pearson and Alex Nussbaum, “India’s Modi Aims for Energy Efficiency, Not Obama CO2 Cuts,” Bloomberg, January 22, 2015, http://www.bloomberg.com/news/articles/ 2015-01-21/india-s-modi-aims-for- energy-efficiency-notobama-emission-cuts.

13 Mansukhlal Hiralal & Company, “India: Corporate Social Responsibility - Indian Companies Act 2013,” Mondaq, January 14, 2015, http://www.mondaq.com/india/x/366528/Corporate+Governance/.

14 Carbon Disclosure Project, https://www.cdp.net/en-US/Respond/Pages/companies.aspx. 15 “Male Declaration on Control and Prevention of Air Pollution and its Likely Transboundary Effects for South Asia,”

50 Observer Research Foundation n Raisina Files 2016 Files South Asia Cooperative Environment Programme Press Release, June 5, 1998, http://www.sacep.org/pdf/Press- Release-Archieves/1998-Press-Releases/1998.06.05-Male-Declaration-Press-Release.pdf.

16 “Prevention and control of dust and sandstorms in north-east Asia,” Eighth special session of the Governing S usta i nab i l ty Council/ Global Ministerial Environment Forum, UNEP, March 2004, www.unep.org/GC/GCSS-VIII/ K0470437%20INF3.doc.

17 Xu, Miaojie, and Yao Yang, “Labor, demography, and the export-oriented growth model in China,” Journal of Comparative Economic Studies 5 (2009): 72, http://www.ces.kier.kyoto-u.ac.jp/jces/05_jces_2009/07_Yao_ Yu.pdf.

18 Andrew Mason, and Sang Hyop Lee, “Population Ageing And Economic Progress In Asia: A Bumpy Road Ahead?,” The East West Centre, February 2011, http://www.eastwestcenter.org/system/tdf/private/api099. pdf?file=1&type=node&id=32478.

19 “Chapter 1: The State of the Economy,” Economic Survey 2014-15, Government of India, http://www. indiabudget.nic.in/es2014-15/echapvol2-01.pdf.

20 Gabriel Wildau, and Tom Mitchell, “China income inequality among world’s worst,” Financial Times, January 14, 2016, http://www.ft.com/intl/cms/s/0/3c521faa-baa6-11e5-a7cc-280dfe875e28.html#axzz40G6RRuSV.

21 Anil Padmanabhan, “India’s next big challenge: inequality,” Livemint, October 19, 2015, http://www.livemint.com/ Opinion/lJIQmqwIltTJSqruSaVsAO/Indias-next-big-challenge-inequality.html.

22 “Asia’s Challenges,” OECD Yearbook 2013, http://www.oecd.org/development/asia-challenges.htm.

23 “Health expenditure ratios, all countries, selected years Estimates by country,” Global Health Observatory data repository, World Health Organization, http://apps.who.int/gho/data/node.main.75.

24 S. Guhan, “Social security in India: looking one step ahead,” in Poverty in India. Research and Policy, ed. B. Harriss, S. Guhan and R.H. Cassen (New Dehli: Oxford University Press, 1992).

25 “The Social Protection Index. Assessing Results for Asia and the Pacific,” Asian Development Bank, 2013, http:// www.adb.org/sites/default/files/publication/30293/social-protection-index.pdf.

Vikrom Mathur is a Senior Fellow and Head, Climate Change and Growth Initiative, ORF. He focuses on science and public policy; technological change; governance of trans-boundary natural resources and Cultural Theory.

Tanoubi Ngangom is a Junior Fellow wih ORF’s Economy and Development Programme. She focuses on India’s international and domestic development policies, and is also a part of DataLabs@ORF.

Observer Research Foundation n Raisina Files 2016 51 Files Future of Energy: Regional Energy Cooperation in South Asia g y Ashish Gupta & Akhilesh Sati E ner

he creation of a new ‘archi- European Union offers hope. European nations fought tecture’ for regional cooper- many wars and yet they took the first step of creating a ation in general and energy coal and steel network which proved to be instrumental in particular will be a critical step in the process of Asia’s in bringing the nations together. development. This will require support of the concerned Tgovernments and various other players, including in- Energy Profiles of South Asian dustries, institutions, regulatory bodies and consumers. Economies South Asia is one of the most dynamic regions in the South Asian economies are quite different from each world, but it is also one of the least economically inte- other but have some commonalities as well. They have grated. Seven of the eight South Asian countries face high degrees of dependency on energy imports, partic- a persistent energy shortage and power outages that ularly of oil. All economies have highly regulated domes- account for the loss of at least two percent of the Gross tic energy markets and have limited ability to significant- Domestic Product (GDP).1 ly alter their energy consumption patterns. As the price With shared histories and cultures, the South Asian of energy does not often reflect the ‘value’ of energy, region has a huge potential for economic integration. South Asian economies are not among the most effi- The low trust environment between India and Pakistan, cient energy users. the largest nations in South Asia, is one of the biggest Millions of South Asian energy consumers are ener- barriers to regional cooperation, but the story of the gy poor, as they do not have access to modern energy services even to meet basic needs such as lighting and 1 Presentation on Establishing Cross Border Electricity cooking. Energy transportation and distribution infra- Interconnections: Approach, Achievements and Next structure is inadequate within each country and existing Steps by S. Padmanaban, SARI/Energy

52 Observer Research Foundation n Raisina Files 2016 Files E ner g y

Figure 1: Fuel Shares in South Asia

100%

50% N P S I M B B 0% A nd i a f epa l r hu t ang l a gan i i k

l Lan k d a i s i an

v t

ade s s an e t s a an

Oil Gas Coal Nuclear Hydro Renewables

Source: USAID: Energy Security Quarterly Observer Research Foundation n Raisina Files 2016 53 Files infrastructure is often poorly maintained. oil needs.4 Bangladesh imports over 95 percent; the India’s overwhelming size dominates the South Asian remaining South Asian economies are completely de- region with 75 percent of the population, 64 percent of pendent on imported oil.5 the land mass and 82 percent of the combined GDP of $4.96 trillion in terms of purchasing power parity.2 Energy Intensity g y India, along with Pakistan (9%) and Bangladesh (6%), The energy intensity, the amount of energy the economy accounts for over 95 percent of the region’s GDP with consumes to produce one unit of GDP, is quite low in E ner corresponding energy consumption.3 The commercial South Asia overall, except for in India, Pakistan, Nepal energy mixes of South Asian and Bhutan. Lower energy in- economies differ widely. tensities are a sign of efficient India is primarily a coal- energy use as well as greater based economy while the two he South Asian region industrialisation. The high ener- island states of Maldives and T gy intensity levels in these four Sri Lanka, as well as Afghani- has countries which South Asian nations indicates stan, are oil-based. Bhutan is are amongst the top low levels of industrialisation the ‘greenest’ among South ten nations population- and rampant energy poverty. Asian economies, as most of its commercial energy is de- wise, but also some of Potential for Regional rived from hydropower. Bangla- the smallest on earth. Cooperation desh’s energy basket is domi- GDP per capita among The South Asian region has nated by natural gas while that the nations is among the countries which are amongst the of Pakistan is dominated by oil top ten nations population-wise, and gas. Overall, all are fossil lowest in the world with but also some of the smallest on fuel-based economies barring none of the countries earth. GDP per capita among Bhutan (see Figure 1). coming out among the the nations is among the lowest in the world with none of the Commercial Energy top 100 in world as far countries coming out among the Imports as GDP per capita is top 100 in world as far as GDP Since South Asian economies concerned. per capita is concerned. are highly dependent on im- India’s overall exports to its ports of oil, they are vulnerable neighbouring countries are less to volatility in global crude oil than five percent of its total trade prices. India, the largest South Asian economy, imports and India’s imports from the region are less than one per- 80 percent of its crude oil needs while Pakistan, the cent. The energy sector cannot be divorced from this over- second largest, imports over 84 percent of its crude all trade environment. The South Asian region produces one million barrels a day (mbpd) of oil, it consumes four mbpd and imports three mbpd. The net deficit situation is 2 Population and Landmass from ESMAP, Potential & unlikely to change because most of South Asia is yet to Prospects for Regional Energy Trade in the South Asian Region, World Bank, 2008; Minaz Merchant, “South Asian Compact,” The Times of India, April 10, 2012. 4 Energy Information Administration, www.eia.org, Country 3 Ding and Iyabo Masha, “India’s Growth Spillovers to Profiles, 2012. South Asia,” IMF Working Paper WP/12/56, 2012. 5 Ibid.

54 Observer Research Foundation n Raisina Files 2016 Files

Table 1: South Asia—Energy Trade Prospects Importing Countries

Afghanistan Bangladesh Bhutan India Maldives Myanmar Nepal Pakistan Sri Lanka E ner

Afghanistan Transit for Transit for g y Energy trade Energy trade ✗ ✗ ✗ ✗ ✗ ✗ ✗ with East Asia with East Asia Bangladesh Marginal Significant Marginal hydropower & hydropower & hydro ✗ ✗ gas export via gas export ✗ ✗ power & ✗ ✗ India gas export via India Bhutan Marginal Significant Unlikely; hydropower hydropower Similarity of ✗ ✗ ✗ ✗ ✗ ✗ export via export resources India India Supply Supply Supply Supply Supply Supply Supply Supply Refined Refined Refined Refined Refined Refined Refined Refined ✗ products via products products products products products products products Pakistan Maldives

✗ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✗ E xporting C ountries

Myanmar Marginal Significant hydropower hydropower & ✗ ✗ ✗ ✗ ✗ ✗ ✗ export via gas export India Nepal Marginal Marginal peak peak hydropower ✗ ✗ ✗ ✗ ✗ ✗ ✗ hydropower support support Pakistan Supply of Supply of gas electricity ✗ ✗ ✗ ✗ ✗ ✗ ✗ and gas Sri Lanka Marginal peak ✗ ✗ ✗ hydropower ✗ ✗ ✗ ✗ ✗ support

Source: ORF Petro India report on “Regional Energy Cooperation,” 2012.

Observer Research Foundation n Raisina Files 2016 55 Files gain access to motorised personal transportation. Growth Electricity in demand for liquid petroleum fuels will be driven by trans- The most obvious gains in regional integration are in the portation in the absence of sustainable alternatives. The power sector, with connectivity enhancing system reliabili- demand from this region is likely to be in the range of 550 ty, lowering costs and carbon emissions, and relieving de- million tons of oil equivalent (mtoe) which is likely to grow bilitating shortages in all countries by enabling the sustain- g y to about 700 mtoe by 2020. South Asia produces 4.2 bil- able development of the enormous hydro and gas-based lion cubic feet (bcf) of gas but consumes more gas than power generation potential of the Himalayas—the “water E ner it produces. The region also consumes more coal than it tower” of Asia—and of Central Asia. Electricity trade will in- produces despite the fact it has crease sector revenues and also proven reserves of 125 billion avoid or defer national generation tonnes. Overall energy demand investment costs. For example, of the South Asian region out- All countries in Bhutan’s power export contrib- strips supply by a huge margin. the region import utes 25 percent of its GDP and The gap between supply and petroleum products 60 percent of state revenues. demand notwithstanding—and Similarly, Nepal can also benefit keeping in mind opportunity to except India. The from export of power. create supply—significant poten- total consumption of tial exists for regional cooperation petroleum products in India-Nepal among South Asian nations, par- the region is about 3.9 Cooperation between India ticularly in the fields of petroleum and Nepal in the power sector and electricity generation. mbpd and the refining dates back to the 1960s when capacity is about 4.4 India assisting in the develop- Petroleum mbpd. This gives a net ment of a one megawatt (MW) Inter-regional trade is possible hydropower plant in Pokhra, with refined petroleum products. surplus of 0.4 mbpd. which was commissioned in All countries in the region im- The combined import 1968. The Power Exchange port petroleum products except of refined products from Committee was constituted in India. The total consumption of countries other than 1992 to oversee the exchange petroleum products in the re- (and other matters). Both gion is about 3.9 mbpd and the India is only 0.4 mbpd. countries share a long border, refining capacity is about 4.4 which has 22 radial links at mbpd. This gives a net surplus 132/33/11 kilo Volt (kV) from of 0.4 mbpd. The combined import of refined products one system to the other. The first high-capacity 400 kV from countries other than India is only 0.4 mbpd. The op- Double Circuit TL from Dhalkebar (Nepal) to Mujaffar- timal trade flow of petroleum products given by any logis- pur (India) includes the strengthening of the sub-na- tics optimisation software tool would be from refineries tional transmission network in Nepal and the devel- in the Indian coast to Pakistan, as it would offer the best opment of cross-border interconnection. The second cost and infrastructure optimisation options.6 high-capacity cross-border link has been identified as Moolpani-Naubise-Hetauda-Ballia 400 kV link project, for which preparation has started. Several other 6 Details based on presentation made by Ashok Dhar, Petro India Conference on Regional Cooperation, interconnections at 400 kV have been proposed, for December 11, 2012, New Delhi.

56 Observer Research Foundation n Raisina Files 2016 Files Table 2: Cross-Border Power Trade Potential Exporting Countries India Bhutan Nepal Bangladesh India Significant quantities of hydro- Significant hydropower export Significant amounts of gas or power ✗

power being exported possible possible. Some resource uncertainty E ner Bhutan Dry season support Unlikely: similarity of resources Small amounts of thermal power and ✗

and seasonal shortages gas; connection via India g y Nepal Thermal power support, Unlikely: similarity of resources Small amounts of thermal power and ✗ dry season support and seasonal shortages gas; connection via India Bangladesh Sharing reserves; Some hydropower; connection Some hydropower connection

I mporting C ountries ✗ electricity swaps via India via India Source: Report on “Prospects for Regional Cooperation on Cross-Border Electricity Trade in South Asia” USAID, SARI/ EI & IRADe instance Duhabi-Purnea, Butwal-Anada Nagar, Anar- from Bheramara (Bangladesh) to Baharampur (India). mani-Silguri.7 This led to the establishment of a 500 MW 400/230 KV back-to-back HVDC substation at Bheramara.9 The India-Bhutan link was successfully completed in September 2013. Both the countries began to cooperate in the electricity sector in 1974 with an agreement to develop the 336 India-Sri Lanka MW Chukha hydroelectric power project. The project In December 2006, Cabinet of Ministers decided in was commissioned in 1988-89, followed with the devel- principle to study the feasibility of power interconnec- opment of Kurichu (60 MW) and Tala (1,020 MW) hydro- tion between India and Sri Lanka and appoint a Steer- electric power projects.8 Bhutan and India entered into ing Committee to look over technical, commercial, regu- an umbrella agreement in 2006 to develop hydropower latory and legal aspects. Subsequently, a 400 kV HVDC projects and associated transmission systems as well grid interconnection was proposed, which involves the as trade in electricity through public and private sector construction of a HVDC connection between Madurai participation. Under the agreement, India has agreed to in South India and Anuradhapura in central Sri Lanka import at least 5,000 MW power from Bhutan by 2020. through the Palk Strait.10 The link may initially transfer up to 500 MW of power and may eventually be able to India-Bangladesh transfer up to 1,000 MW. Both the countries signed a memorandum of understanding in January 2010 to exchange electricity India-Pakistan through cross-border grid connectivity and to jointly The proposal to develop cross-border power linkages invest in power generation in Bangladesh. After sever- between India and Pakistan has been on the table for al visits and a study by a joint technical committee, it quite some time. The project is expected to support was proposed to establish 400 kV, 30 kilometre dou- the import of 500 MW electricity from India to Pakistan ble-circuit High Voltage Direct Current (HDVC) line via the Amritsar-Lahore interconnection. However, no constructive results have been achieved due to strained 7 Presentation, “Status of cross border trade and energy political relations between the two nations. market–Nepal-India Exchange,” R.C. Pandey, Nepal All South Asian nations are facing a severe power Electricity Authority. 8 Report on “Prospects for Regional Cooperation on Cross-Border Electricity Trade in South Asia,” USAID, 9 Ibid. SARI/ EI & IRADe. 10 Ibid.

Observer Research Foundation n Raisina Files 2016 57 Files crisis. Apart from bilateral trade in power such as that Eurozone came into effect. Along with political will and between India and Bhutan and India and Nepal, there resolve, the need to share and cooperate in developing is also the possibility of a model of inter-regional pow- resources like coal and steel contributed to promoting er trade that includes China. If the trade route between European economic cooperation and integration. Sikkim and the Tibet Autonomous Region of China is Towards the cherished vision of regional integration in g y reopened, the southwestern part of China that faces a the energy sector, energy ministers of the South Asian power shortage can be supplied by the northeastern part Association for Regional Cooperation agreed in 2005 to E ner of India, which potentially has huge hydropower genera- cooperate in harnessing all forms of energy in order to tion capability. achieve the objective of creating Cross-border transmission an ‘Energy Ring’ in South Asia. lines between India and Ban- A special purpose vehicle called gladesh and India and Pakistan Cross-border SAARC Energy Centre was es- stretch merely 30 to 40 kilome- transmission lines tablished in 2006 at Islamabad tres, which can be erected in a between India and to initiate, promote and facilitate few months. This seemingly in- cooperation in the energy sec- significant piece of infrastructure Bangladesh and India tors of SAARC member states could be among the most signif- and Pakistan stretch for the benefit of all. It is funded icant confidence building mea- merely 30 to 40 by all SAARC member states sures (CBMs) in the region.11 and supervised by a governing kilometres, which can board comprising representa- Regional Energy be erected in a few tion from all member states. Initiatives in South months. This seemingly India also proposed prepar- Asia insignificant piece of ing a roadmap for a SAARC The driving vision in most South market for electricity (SAME). Asian forums is to integrate the infrastructure could The proposal’s main emphasis region through trade and infra- be among the most was on coupling the indepen- structure so as to sow the seeds significant confidence dent electricity grids of different for deeper South Asian integra- countries through HVDC links. tion. The motivation is from the building measures More recent rounds of SAARC European Union, which began (CBMs) in the region. discussed modalities of the with the integration of its infra- earlier initiatives. Under the structure. The Schuman Plan, theme ‘Building Bridges,’ the as it came to be known, sought to connect energy and 17th SAARC summit in 2011 called for implementing industry infrastructure in Europe, which eventually be- energy initiatives that are already in the pipeline, such came the basis for European integration. The European as the ‘Energy Ring’ concept.12 Coal and Steel Community evolved into the European Said single electricity market for the SAARC region Economic Community, and in 1993, the organisation could be developed on the pattern of NORDPOOL (4 was renamed the European Union. In January 2002 the countries), SAPP (9 countries) and/or Central West Eu-

11 Details based on presentation made by Mahendra P. 12 Declaration of the 17th SAARC summit, April 2012, Lama, Petro India Conference on Regional Cooperation, http://www.saarc-sec.org/2012/02/15/news/Declaration- December 11, 2012, New Delhi. of-the-Seventeenth-SAARC-Summit/87/.

58 Observer Research Foundation n Raisina Files 2016 Files rope (CWE) single market.13 The mechanism needs to thing to share with its neighbour.14 be deployed for Single Day-Ahead Market for SAARC Energy security in South Asia could be seen from members and Ministries of External Affairs, Commerce the sustainable development perspective and the en- and Energy should be made aware of such a possibility. ergy security perspective. The critical question is the E ner Political will needs to be aligned for mutual benefits. centrality of India, its size and its exclusive geographical location that shares common borders with all. India’s g y Regional Approach to Energy borders have so far been looked at purely from a per- Security: The Way Forward spective of threats; from the energy security perspec- The narrative on energy security within each country tive, they must be looked at as opportunities.15 17 out is the independent pursuit of self-sufficiency. This has of the 28 states in the country share borders with other to change with what we may call ‘friendship pipelines,’ countries and they have 94 districts in the border re- ‘friendship ferries’ and ‘friendship freight corridors.’ gions. Cooperation across borders means sharing con- These will convert the region into a seamless common trol over resources, physical and social infrastructure. market and an economic union on the lines of the Euro- This is the biggest challenge for both small and large pean Union. These energy flows can be facilitated by a countries in the region. ‘friendship petroleum product pipeline’ between Jaland- What is very critical in the entire context is to build con- har and Lahore, which may eventually go up to Kabul; fidence. In the past, positive stakeholders were created between Haldia and Dhaka. South Asia could also have through military CBMs, such as ceasefire agreements; product ferries from Jamnagar to Karachi. these must now be extended to economic CBMs and so- Like the barges of Europe, the region could have cial CBMs. Joint power projects could go a long way in barges plying between Vizag, Paradip, Haldia and building confidence at the economic and social levels. Chittagong or Myanmar. The SAARC region has plans Regional energy integration is not merely to fuel for transnational corridors: Lahore-Delhi, Kolkata-Dha- economies but to save them. Given the right vision and ka-Agartala, Thimphu-Haldia and Thimphu-Chit- the capacity to learn from each other’s experiences and tagong. This quantum leap in connectivity will create a mistakes, the coming years could see very different re- Schumann plan-like transformational impact. It is now gional alignments as priorities are redefined and Asian hard to think of Germany and France going to war. With neighbours increasingly deal and transact with each transformational energy infrastructure linking nations no other. All would benefit from reliability support, reserve one can think of war between India and Pakistan in 20 sharing, cleaner fuels, better investment opportunities or 30 years. A united South Asia can harness tradable and reduced risks for investors, and the associated energy resources of Iran, Turkmenistan, Tajikistan, Kyr- sharing of knowledges and experiences. gyzstan, Uzbekistan and Kazakhstan. Afghanistan could be seen as a transit linkage. Pakistan could explore for Ashish Gupta is an Associate Fellow more gas and could be the transit for Iranian or Turk- with ORF’s Energy Initiative. menistan and other sources of gas. Nepal and Bhutan can export hydropower and gas from Myanmar. If we envision a grid of importing countries versus exporting Akhilesh Sati is Programme Manager for countries, we will observe that every country has some- the ORF Energy Initiative.

13 Details based on presentation made by Rajesh K Mediratta, Petro India Conference on Regional 14 See note 7. Cooperation, December 11, 2012, New Delhi. 15 See note 11.

Observer Research Foundation n Raisina Files 2016 59 Files Navigating Namami Gange: India’s Flagship River Project Ashok Malik Water

s the Ganga a revered river because it is economically important, or is it economically important because it is revered? The basin covers This is a crucial question, wrapped in philosophy and 860,000 square enveloped in the mists of time, and yet one that has a kilometres (twice the size Icontemporary resonance. The Ganga’s economic and social impact on India, and indeed the Indian subcon- of Germany), present in tinent, warrants its cleaning, renewal and optimal utili- 11 of India’s 29 states. 40 sation as a river, a water resource, a waterway, natural percent of the country’s capital as it were, for the 500 million Indians—one in three citizens—who live in the Ganga basin. gross domestic product The basin covers 860,000 square kilometres (twice the is generated here. The size of Germany), present in 11 of India’s 29 states. 40 states of Uttar Pradesh, percent of the country’s gross domestic product is gen- Bihar and West Bengal erated here. The states of Uttar Pradesh, Bihar and West Bengal are not just part of the Ganga basin, but locations are not just part of of India’s deepest developmental challenges. Some 200 the Ganga basin, but million Indians in the Ganga basin live in poverty. Add Ban- locations of India’s 1 gladesh and Nepal, and the numbers worsen. deepest developmental 1 “Ganges Focus Area Strategy: 2013-2017,” South Asia challenges. Water Initiative, https://www.southasiawaterinitiative.org/ ganges.

60 Observer Research Foundation n Raisina Files 2016 Files w ater

Observer Research Foundation n Raisina Files 2016 61 Files When one speaks of the Ganga’s rejuvenation—as one can literally see down to the riverbed. anticipated by the Narendra Modi government’s Nama- Do we measure a clean Ganga, then, not in terms of mi Gange initiative, which in turn widens the scope of visual appeal but impact of its water quality and what the predecessor Manmohan Singh government’s Na- removing pollution means for the present marine life? tional Mission for Clean Ganga—one is not discussing How does one tabulate the estimated half-a-million merely a superficial cleansing or pandering to religiosity. deaths each year due to water-borne diseases relat-

Water The Ganga is a crosscutting phenomenon. It has con- ed to the Ganga? Surely an improvement in the basic sequences for fields as far apart as urbanisation, public quality of life of both humans and river organisms alone health and job creation. would make expense to clean For instance, Namami the river worth it. Gange envisages the rede- velopment of 118 towns and Over half the water Compelling cities that have over the cen- used in India is from Prospects to Revive turies emerged by the banks the Ganga basin, and the Ganga of the Ganga. Intelligently Over half the water used in India done, this could be conflated 90 percent of it is for is from the Ganga basin, and 90 with the Indian government’s irrigated agriculture. percent of it is for irrigated agri- ‘Smart Cities’ programme, Yet, efficiency of use culture. Yet, efficiency of use is which aims to build or revit- is below 40 percent. below 40 percent. This means alise 100 urban clusters that much of the water taken for ir- make efficient use of energy, This means much of rigation purposes is wasted, water and waste-management the water taken for though it is possible that some technology. irrigation purposes of it is used for domestic pur- Separately, there is a proposes and some simply flows posal to make 1,649 gram pan- is wasted, though it is back. Just how much is unclear. chayats/villages in the basin possible that some of There is very little recorded open-defecation free. This is it is used for domestic data. A scientific study of this part of Swacch Bharat or the purposes and some alone can revolutionise water Clean India mission, the gov- use in northern India, make for ernment’s leading project for simply flows back. much more informed social and waste management and sanita- economic choices, contribute tion. When accomplished, this to modernising agriculture and will improve health and general living conditions as well restore the vitality of the river. as prevent human waste polluting the river. There is the compelling prospect of reviving the To consider the ‘cleaning’ of the Ganga as a narrow Ganga waterway, a freight corridor of ages past. The objective is self-defeating. In fact, there is need for clari- cleaning of the Rhine, which begins in the Swiss Alps ty on what is meant by a clean river. What are the bench- and flows through 1,200 km of Europe, was carried out marks we must set? The Ganga is a sediment-laden simultaneously with its development as an internation- river, flowing down from the Himalayas, a comparatively al waterway. This process took decades but left the young mountain range. Even when cleaned up it is un- Rhine community that much better off. Today waterways likely to ‘look’ as clean as, say, a European river where in Germany and the Netherlands carry 40 percent of

62 Observer Research Foundation n Raisina Files 2016 Files freight. In India, they carry 0.5 percent.2 hi-Kolkata train route. This is the geography of the pro- The National Waterways Bill, introduced in Parlia- posed Eastern Freight Corridor (EFC), extending from ment in 2015, envisages the creation of a network of vi- Ludhiana in Punjab to Dankuni on the outskirts of Kol- brant inland waterways and reimagining our great rivers kata. The plan is to connect the EFC and NH 2 to NW as what they once were, the original expressways and 1 and make road and rail infrastructure projects part of w ater freight corridors of history. It is a key element in India’s the Ganga story, with cargo moving from river to land emerging connectivity strategy. to rail track in a seamless, interruption-free continuum. For the Indian government, the thrust on inland wa- Yet, this is not all. terways is particularly essential NW 2 (the Brahmaputra to realising the potential of the river) can be linked to NW 1 Ganga as economic capital, through Bangladesh. It carries especially in the context of pas- The 1,630 km stretch the hope of addressing access senger and freight movement of the Ganga from issues in the landlocked, rela- down the Ganga. It is also a test Haldia in West Bengal tively isolated states of India’s case for a multiyear, multi-wa- Northeast and reducing their terway rejuvenation of other to Allahabad in Uttar distance from northern India. river basins across the country. Pradesh is called Assam and the other states The 1,630 km stretch of the National Waterway of the Northeast also lay great Ganga from Haldia in West (NW1). It travels through store on NW 6 (the Barak). It Bengal to Allahabad in Ut- can flow into NW 1, and cre- tar Pradesh is called National West Bengal, Bihar ate a Barak-Ganga waterway, Waterway (NW 1). It travels and eastern UP, among through the Sunderbans and through West Bengal, Bihar the poorest and most the Bay of Bengal. and eastern Uttar Pradesh, Equally audacious is the de- among the poorest and most infrastructure-scarce signing of a link between NW 5 infrastructure-scarce regions regions of India. NW1 (the Brahmani) and NW 1 using of the country. NW 1 has the has the capacity to bring the East Coast Canal in Odis- capacity to bring goods and goods and people from ha. The British built the canal people from the deep east to in the 19th century but it has the heart of northern India. Riv- the deep east to the been damaged by decades of erside land has been acquired heart of northern India. neglect. It is now close to be- in Varanasi in Uttar Pradesh to ing completely silted. Even so, build a terminal. Strategical- it can be redeemed. If it is made ly located at a distance of 700 metres from National functional again, coal, iron ore and steel from Odisha Highway 2 (NH 2, part of the old Grand Trunk Road can travel to far-off markets not by trucks or trains but and one of India’s busiest road connections), the ter- on the river. minal can marry a key waterway and highway. How will this help or be more efficient? River ves- About five km away is a small station that is on the sels of reasonable size can carry 1,500-1,800 tonnes same line as the Mughalsarai station, part of the Del- of freight and replace a third of goods-plying trains. To be able to do so, on the Ganga at least, water depth 2 India – Brief: Ports, World Bank, http://www.worldbank. of three metres in the navigation channel is required. org/en/country/india/brief/ports.

Observer Research Foundation n Raisina Files 2016 63 Files The Ganga, abused by industry and individuals over the Furthermore, India has limited knowledge of state-of- years, suffers on this count. In the stretch from Patna in the-art dredging equipment. There is also the question Bihar to Allahabad, for example, the navigation channel of what to do with the dredged material. This sandy is only about two metres deep. This can be addressed waste, when dried, can be used for building work. One by dredging and, technical reports suggest, building school of thought is considering giving it for free to vil- two to four barrages. lages by the riverside, as an incentive and a gift from

Water the munificent river—and to create a constituency for Opportunities and Challenges Namami Gange. Here, one arrives at both op- Environmentalists worry portunities and challenges about river traffic for two ma- that are far more complex than jor reasons: fuel emissions and commonly understood. If the If the dredging possible spillage, and the im- dredging exercise is conduct- exercise is conducted pact of propeller sound on the ed and the barrages are built, and the barrages are movement and breeding pat- economic activity by and down terns of river dolphins. On NW the Ganga will be accelerated. built, economic activity 1, the Ganga nurtures dolphins This will create jobs. Barges by and down the Ganga in Vikramshila (Bhagalpur, of 1,500 tonnes can be made will be accelerated, Bihar) and Varanasi. Nama- from the debris of ship-break- creating jobs. Barges mi Gange will need to deploy ing, an industry India specialis- technology in the form of noise es in. Using such re-rolled steel of 1,500 tonnes can be attenuators and upgrade ma- could give a boost to ‘Make in made from the debris rine pollution regulations. Chi- India,’ the manufacturing mis- of ship-breaking, na’s tragic experience with the sion of the Indian government. dolphins of the Yangtze serves The barges and freight ves- an industry India as a warning. sels themselves could carry specialises in. Using From 1 January 2015 the foodgrain, cement, edible oil such re-rolled steel International Maritime Organ- and chemicals up and down the could give a boost to isation has mandated the use river, saving costs for a host of of higher-quality, less-polluting industrial units—from oil mills to ‘Make in India.’ fuel for international waters. sugarcane processers to power The minimum sulphur content plants—that populate the Gan- has been cut by 90 percent. ga’s banks. This has been the experience in Europe and These strict provisions will need to be introduced and the United States. monitored in domestic waters. Nevertheless, the project is not without its challenges. Barrages impede natural water flow for short Managing Hydopower Potential stretches of the river. This raises the water level in parts through Run-of-the-River Projects and could inundate the char land that currently gets Whenever discussion on pollution in the Ganga takes created in the summer months and is used for some place, as it does so often in the context of the Namami agriculture. The pay-off for the users of this char land Gange project, the issue of upstream construction on will need to be explained and politically negotiated. the river obstructing the natural flow of waters comes

64 Observer Research Foundation n Raisina Files 2016 Files up. Quite correctly, it is pointed out that this hindering of structs it; submergence can be minimal. the river’s course contributes to the muck in the plains Take the case of the government-owned Vishnugadh and the fact that fresh-flowing water does not replenish Pipalkoti Hydroelectric Project on the Alakananda river, the river, as has happened for centuries. a tributary of the Ganga, in Uttarakhand. Meticulously Periodically, there are demands to deny permission designed, this project, construction for which began w ater to new hydroelectric projects on the Ganga and its trib- in 2014, sees submergence at a point where the river utaries. This is part of a larger appeal to ban all con- goes into a deep, narrow gorge. As a result, there is zero structions on the river. It could go a long way in nurtur- displacement of population and no houses or fields are ing and repairing the Ganga, it submerged. Not only has this is argued. project found financial support While the intentions of those from the World Bank, otherwise behind such thinking are laud- Any water body, wary of big dam projects, it has able, it is important that the whether the Ganga or also won validation from India’s messaging around this deci- another river, is a force National Green Tribunal. sion is nuanced, careful and It is important to differentiate thoughtfully explained. It would of nature. Harnessing between storage dam projects be a pity if it were to become its multiple energies and run-of-the-river projects. an excuse for an all-out attack will inevitably lead to Both do not merit equal treat- on hydropower in general. In- human intervention ment, especially as hydropower deed, even in the context of emerges as vital for India’s en- dams and hydropower projects with the natural ergy mix, economy and secu- on the Ganga, it is necessary order. Sensitive and rity, and not just in the Ganga to distinguish between what is sustainable cooperation basin. Hydropower is crucial absolutely not needed and what because it is the one source of could be lived with. with the ecology of energy that can instantaneously Any water body, whether and around a river respond to fluctuations in de- the Ganga or another river, is a system is non- mand. It is an insurance policy force of nature. Harnessing its negotiable, but also against an accident or sudden multiple energies will inevitably surge. In some countries, hy- lead to human intervention with unavoidable. dropower potential is so high the natural order. Sensitive and that it has become a major sustainable cooperation with source of energy. Brazil and the ecology of and around a river system is non-nego- Norway fulfil about 80 percent of their energy needs tiable, but also unavoidable. using water. In the past few decades, hydropower projects have In India, where use of coal and thermal power is dis- become controversial. Much of the argument is about proportionately high, the quest for renewables is criti- large reservoir or storage dam projects. Such projects cal to the emissions challenge. While solar energy and are justifiably derided for their substantial social and en- even nuclear energy will doubtless play a role, it would vironmental costs. On the other hand, run-of-the-river be imprudent to ignore hydropower. Blanket bans in projects can be relatively more agreeable with nature. one part of the country, especially if they are not thought A run-of-the-river project diverts water more than ob- through or contextualised, could become self-defeating

Observer Research Foundation n Raisina Files 2016 65 Files precedents for other regions. dependence on the Indian market will give New Del- A culture of protest and policy paralysis has anyway hi greater leverage in Kathmandu at a time when Chi- delayed realising the hydropower potential of Arunachal nese influence in South Asia is growing and needs to Pradesh, estimated at 50,000-60,000 MW. In the be neutralised using economic tools. Hydropower de- Northeast, particularly in the Brahmaputra basin, inabil- velopment in India and South Asia has multiple conse- ity to find the right ecological, social and economic bal- quences. Any government—and the Indian system as it

Water ance has handed over the advantage to China, which were—has to be mindful of all of these. is going ahead with its upstream dam and hydropower The Ganga was around well before we arrived and plans. Eventually, these could will be nourishing our earth well turn out to be much more ex- after we are gone. As the famil- pensive for India. iar aphorism goes, we have not The Ganga was around inherited it from our parents as Reaching Out to well before we arrived much as borrowed it from our Neighbours and will be nourishing children. As such, any plans or No sensible hydropower pol- vision for the Ganga cannot be icy can be wholly domestic. our earth well after we frozen in time but must build One of the motivations of the are gone. As the familiar into it dynamic tools that adapt Bangladesh-Bhutan-Nepal-In- aphorism goes, we have to future needs. Eventually a dia framework of cooperation, not inherited it from truly global-class river-basin or- among the Modi government’s ganisation will be called for to best-known foreign policy ini- our parents as much as not just look at the quality of the tiatives, is engagement on such borrowed it from our Ganga waters but also address issues with riparian neighbours. children. As such, any issues of quantity: How much Two trajectories can be cited water is there? To whom and here: Bangladesh-Bhutan-India plans or vision for the to which sectors should it be and Nepal-Bangladesh-India, Ganga cannot be frozen allocated and on what basis? both of which are part of the in time but must build What is the impact of flooding Ganga basin. into it dynamic tools that and how can it be mitigated? India is such a big market for How much water is needed Bhutanese hydropower that it in adapt to future needs. for agriculture and how much effect sustains its neighbour’s will be for navigation? What is economy. It is a win-win in the—that blockbuster term— that Bhutan contributes to India’s energy security. The the value of the water? How will the water allocation 3,000 circuit km transmission system from Tala, Bhutan, and distribution pattern change in 20 years, as labour to Delhi uses Bhutanese hydropower to light up homes moves from farms to factories and from agriculture to and businesses in north India. A similar arrangement manufacturing? with Nepal is essential, which, like in the case of Bhutan, Can we foretell the answers? Is it all a zero-sum will raise prosperity levels in Nepal and simultaneously game and is an ‘arms race’ for water pre-destined, or have positive implications for India’s national security. is supply augmentation feasible? From financial alloca- The hydropower transmission corridors from Nepal tion, the paradigm has to move to water allocation, and cannot but run into India and seek customers here. This then from allocating a quantum of water to allocating a

66 Observer Research Foundation n Raisina Files 2016 Files quantum of benefits. of such entitlements, sector by sector, in river command In a sense, a microcosm for such an institution exists areas. In time, the Ganga will be required to shift in the in Maharashtra, which has a State Water Resources direction of such an institutional architecture and con- Regulatory Authority, supported by the World Bank and ceptualisation of river basin management. India’s once which oversees bulk entitlements as well as the pricing and forever river, and her people, deserve just so. w ater

This piece is a compilation and expansion of two previously published blog pieces: “Ganga as national highway: Namami Gange is not just a religio-cultural obsession, it builds India’s infrastructure,” The Times of India Blog, May 30, 2015, http://blogs.timesofindia.indiatimes.com/toi-edit-page/ganga-as-national-highway-namami-gange-is-not-just-a-religio-cultural-obsession-it-builds-indias-infrastructure/ and “Ganga has many faces: India needs to repair its rivers while retaining hydropower as a vital part of its energy mix,” The Times of India Blog, December 14, 2015, http://blogs.timesofindia.indiatimes.com/ toi-edit-page/ganga-has-many-faces-india-needs-to-repair-its-rivers-while-retaining-hydropower-as-a- vital-part-of-its-energy-mix/.

Ashok Malik is a Senior Fellow at ORF and heads the Neighbourhood Regional Studies Initiative. He is a regular commentator on Indian domestic politics and foreign and trade policy.

Observer Research Foundation n Raisina Files 2016 67 Files Choosing Between Freedom & Firewalls Arun Mohan Sukumar C yber

ny country that susceptible to mass surveillance. On this count, aspires to be the leaks broke a cozy compact between govern- a cyber power ments and the private sector everywhere, changing must concern itself with two questions: First, does it se- the rules of the digital economy irreversibly. cure the data of its systems, networks and users, and 2. The realisation that technology can contribute to second,A whether law enforcement agencies can effec- “security by design,” thereby making all physical de- tively retrieve such data for legitimate purposes. The first vices agnostic to intrusion requests, whether from a concern is a property of the country’s approach to data cyber criminal, hacker or law enforcement authority. protection, and the second, its proclivity to intercept data. 3. The lack of common legal standards for data pro- Where the private sector plays a crucial role in the digital tection and lawful interception across jurisdictions. economy, it is incumbent on businesses to protect the Rather than looking to comply with varying national data of their users and consumers. Where governments laws, the private sector is evolving its own set of use digital networks to provide e-governance services, norms, led by a select few global companies. its mandate is also to protect the integrity of sensitive The bundling of law enforcement agencies into a user data from any outside intrusion. On the other hand, motley mix of actors—criminals, hackers, cyber militias the license to intercept data is purely a prerogative of and business competitors—poses an unusual problem. governments, conferred by appropriate legislation. This How will cops solve cases where electronic evidence is is a neat theoretical demarcation, but increasingly, private encrypted and inaccessible to all but the user? Just as sector players are using data protection technologies to the private sector invests heavily in new technologies to secure data from all players, including law enforcement enhance security, governments would channel their re- agencies. Three factors have contributed to this situation: sources to buying exploits and developing countermea- 1. The Snowden revelations, which suggested that sures to encryption—in sum, rendering cyberspace as governments where the rule of law is strong too are a whole unstable. This problem is particularly relevant

68 Observer Research Foundation n Raisina Files 2016 Files C yber

Observer Research Foundation n Raisina Files 2016 69 Files to the Asia Pacific, which hosts be guilty of murder. But were the the biggest concentration of in- shooting unplanned and truly a ternet users in the world. How- Technologies that “crime of passion,” as the tab- ever, most data from the region allow the FBI to force its loids referred to it, Mr. Nanavati is stored in the West. Faced way into the shooter’s would be punished for the less- with a lack of agency (given the iPhone will compromise er offence of culpable homicide. C yber net outflow of data) and the lack The Supreme Court found him of technologies (in comparison the operating systems guilty of murder, but not after a to Western countries), Asian of all iPhones, Apple’s protracted drama that involved a nation-states are faced with an CEO Tim Cook argued jury exonerating him. existential question: Do we opt Let us tailor the Nanavati for freedoms or firewalls? in a letter to consumers. case to a modern setting. In the The struggle between Apple The legal precedent 2016 adaptation of the crime, and the US Federal Bureau of set by this case will be the police retrieve Mr. Ahuja’s Investigation (FBI) over access closely studied. iPhone, which purportedly con- to the San Bernardino shooter’s tains a draft tweet suggesting he iPhone highlights the varying pri- feared for his life. The tweet was orities of the private sector vis- never published, and Mumbai à-vis the government. The FBI sought access via a court cops need it to prove Mr. Nanavati had threatened him warrant to the locked iPhone of Syed Rizwan Farook—a previously. The Information Technology Act (specifically, citizen of the United States who in December 2015 killed Section 69) confers sweeping powers on the Maharash- 14 and injured scores in a mass shooting in California— tra government to retrieve such information but Twitter which Apple has refused to provide. Technologies that claims it cannot extract unpublished tweets. The cops allow the FBI to force its way into the shooter’s iPhone turn to Apple with a request to unlock Mr. Ahuja’s phone, will compromise the operating systems of all iPhones, but Apple refuses, suggesting that building a backdoor Apple’s CEO Tim Cook argued in a letter to consum- for one iPhone will compromise the security of all. ers. The legal precedent set by this case will be closely What options do the Mumbai police have? Apple is studied, but what lessons does the San Bernardino case not an Indian company and can refuse to comply with hold for Asia, and particularly India, where Apple’s market Section 69 of the IT Act, claiming the provision violates share is less than one percent? California law (where Apple Inc. is based). Apple In- To illustrate how the confrontation between Apple and dia Private Ltd, its Indian subsidiary, is registered under FBI would play out in India, consider an example. Law the Companies Act but mostly performs administrative schools across India illustrate the difference between and financial functions. Apple does not provide internet “culpable homicide” and “murder” through the famous services, and has no software licensing agreement with K.M. Nanavati case of 1961. Mr. Nanavati, a commander Indian telecom operators. What is more, Indian devel- with the Indian Navy, was informed by his wife of her affair opers whose content is featured in the App Store sign with Prem Ahuja and her desire to leave the marriage. An agreements directly with Apple Inc., the parent compa- enraged Mr. Nanavati barged into Mr. Ahuja’s home, and ny. Short of proceeding legally against an Apple India after an angry exchange of words, shot and killed him. In Director or revoking its import license—neither of which the trial that followed, Mr. Nanavati’s punishment swung would be sound measures—the Government of India on whether his act was pre-meditated. If it was, he would has limited options to secure its compliance.

70 Observer Research Foundation n Raisina Files 2016 Files For these reasons, the Indian debate over encryption ment agencies can solve crimes based on information is very different from the discussion that Apple’s ongo- available with data giants, their compliance with governing tussle with the FBI has generated. Nevertheless, the ment requests has been abysmal. Research by Rebec- episode offers two broad lessons. ca MacKinnon and Elonnai Hickok suggests the Indian

The first lesson is for Indian regulators: Find the right government in 2013 placed 3,598 requests for user data C yber mix between protecting user data, while allowing law en- from Facebook with a 53% compliance rate, while the US forcement agencies to retrieve it for investigation. The US government made nearly 12,600 requests with a compli- does not have high data protection standards, but law ance rate of 81%. There is simply no basis or justification enforcement agencies have met with increasingly steep for the differential treatment of compliance requests but judicial barriers—thanks to the Snowden revelations—to for the fact that Facebook is a US-based company. Giv- extract electronic data. As a result, companies like Apple en desperate times, the Indian government took desper- have been encouraged to invest in strong encryption, as ate measures: In its draft encryption policy released (and the evolution of its operating system iOS shows. withdrawn subsequently) last year, it sought backdoors India, on the other hand, has low data protection stan- into all internet applications based abroad. dards as well as low legal thresholds for intercepting in- The ‘Apple v. FBI’ debate in the US has generated formation. Measures necessary to intercept information much controversy because nearly half of America’s mo- have had the unintended consequence of stalling the bile users today own an iPhone. Encryption is common- development of indigenous high-security devices like the place, while courts, law enforcement agencies and tech iPhone. For instance, the Department of Telecommuni- companies—all based in the US—debate the optimal mix cations continues to prescribe low encryption standards of interception and data protection. The Indian context is for Internet Service Providers, while subjecting them to far from comparable. Most Indians, especially first gener- liability for attacks on the network. ISPs are faced with ation internet users, own unencrypted devices. The com- a Catch-22 situation, with little room to strengthen their peting pressures of the market have only contributed to security. The dangerous mix of low data protection stan- the overall insecurity of India’s internet infrastructure. The dards and legal barriers against monitoring puts India in rush towards cheap smartphones like Freedom 251— the bottom quadrant of Table 1, alongside China. whose vendors could not even offer a secure website to Table-1 Legal Barriers to Data Extraction process phone bookings—have seriously compromised High Low the integrity of user data. What is more, to secure their High Data Protection European Union Russia Standards data and to retrieve it for investigation, Indian authorities Low Data Protection United States China, India need the assistance of foreign internet companies. There Standards is no side to choose in this fight, since India needs its The second lesson is for internet companies based own variants of Apple and the FBI: high-security devices abroad: co-operate with law enforcement agencies on that protect data, and a law enforcement agency that can legitimate requests for user data. Popular internet ap- effectively retrieve electronic information. plications and social media platforms in India today are This is an expanded version of the author’s article all based in the US or Europe, and host data in serv- “What Apple versus FBI means for India,” The Hindu, ers abroad. To unlock Mr. Ahuja’s iPhone for the Mum- February 25, 2016. bai police, Apple would need to create a sophisticated “backdoor” to break its encryption protocols. This is an Arun Mohan Sukumar heads the Cyber extraordinary instance, involving a drastic solution. But Security and Internet Governance even in the majority of cases where Indian law enforce- Initiative at ORF.

Observer Research Foundation n Raisina Files 2016 71 Files Buddhism and Asia’s Connectivity P. Stobdan i sm B uddh

uddhism is one of the Spread of Buddhism most intriguing philo- Buddhism travelled from India to myriad directions along sophical products that the web of trans-Asian overland and maritime trade net- originated in India some 2,600 years ago. The profound works. The fabled Silk Route across Central Asia became wisdom of Lord Buddha has never been viewed as a the primary corridor along which Buddhist philosophical Breligion in a theistic sense or in the context of being a ideas, including medicine, astronomy, mathematics, art faith. It has remained a powerful integrated philosophi- and architectural styles, and diplomacy and statecraft, cal whole, encompassing all facets of both spiritual and were transmitted to China and beyond, while connect- material culture that have guided humanity for centuries. ing various Asian regions cutting across races, regions, According to Sir Edwin Arnold’s book The Light of ethnicities, languages, genders and cultures. This led to Asia (1879), Buddhism influenced millions for over 26 Buddhism becoming synonymous with trade. centuries and the spatial dimension of its dominions ex- Merchants, traders and artisans actively financed tended “from Nepal and Ceylon over the whole Eastern monastic institutions. They assisted monks and pil- Peninsula to China, Japan, Tibet, Central Asia, Siberia, grims, who played a vital role, by spreading Buddhism, and even Swedish Lapland.” in connecting to distant Asian regions. Thousands of Buddhism provided the solid foundation for a soci- monasteries dotting the Eurasian continent ensured etal and cultural transformation in Asia. It continues to peace and prosperity. be a key anchor for Asian identity and a phenomenon Scholars from across Asia came to study in re- of an unprecedented Pan-Asian importance, especially nowned Indian universities, such the Nalanda and Tak- in terms of another layer of connectivity among nations, shashila, and took home with them Buddhist teachings, with enduring impact. texts and relics. Interestingly, kings and monarchs, too,

72 Observer Research Foundation n Raisina Files 2016 Files B uddh i sm

Observer Research Foundation n Raisina Files 2016 73 Files reached out to each other through Buddhist channels Buddhism and Asian Values and used missionaries, translated texts and relics as Undoubtedly, Buddhism provided the foundation for peo- valuable diplomatic tools. There were even instances of ple, whether residing in India, China, Japan, Korea or in kings going to war over said relics. other parts of Asia, to adopt common culture, thoughts, Buddhism reached its zenith in China in the ninth idioms and spiritual beliefs and practices. In fact, it be- century. It continued to thrive due to a continuous two- came the single-most important factor for infusing the way exchange of trade and commerce with India un- hitherto ill-defined ‘Asia’ with a cultural coherence, pro- i sm B uddh til the Arab conquests of Bactria (the land that today viding a channel for the flow of ideas and interactive re- straddles Afghanistan and Ta- lationships. Through the move- jikistan). The subsequent de- ment of ideas, commodities and struction of monasteries during peoples, Buddhism integrated the 12 and 13th centuries It is important to note myriad societies and regions, ef- resulted in a decline in trade, that Buddhism spread far fectively interweaving them into and consequently a complete and wide without use of a common culture of ethical val- disruption in India-China ties. ues, especially among the social Fortunately, pathways to the force or coercive action; and political elites in Asia. rest of Asia, including Korea with the passage of The ideals of Buddhism con- and Japan, from either China or time, Buddhism became tinue to intersect with the polit- India through maritime routes, indigenous to the regions ical and economic contexts of remained open, and thus the many Asian nations, together spread of Buddhism continued it had spread to, and with a current combined pop- unabated. gradually became less ulation of 1.6 billion, or 22 per- It is important to note that dependent on India. cent of the world’s population, Buddhism spread far and wide according to latest estimates1. without use of force or coercive Several research findings It is indeed the root from which action. The monks and mission- are emerging on how a several Asian nations draw their aries were peaceful in their ap- process of localisation of national identities and political proach and style, and made sure Buddhist tenets has led to and social heritages. In many to take into account local condi- countries, Buddhism is imbed- tions, although without compro- ‘Buddhist globalisation.’ ded into their ‘nationalistic’ think- mising on essential teachings ing and actions, such as in Sri and points of wisdom. A study Lanka. It acts as a strong unifying by the Centre on Public Diplomacy titled “Buddhist Di- force in Myanmar, Laos, Thailand and Cambodia. Certain- plomacy: History and Status Quo” examines how monks ly, Buddhism is an intensifying factor for Asian emotional and disciples used public diplomacy methods to spread bonding and connectivity. Indeed, Buddhism has also Buddhism across Asia. generated spiritual awakening elsewhere in the world and With the passage of time, Buddhism became indigenous to the regions it had spread to, and gradu- 1 “Buddhism Could Now Be the 2nd Largest Spiritual Path with 1.6 Billion or 22% of the World’s Population ally became less dependent on India. Several research According to Some Recent Studies,” Buddha Weekly, findings are emerging on how a process of localisation February 12, 2016, http://buddhaweekly.com/buddhism- of Buddhist tenets has led to ‘Buddhist globalisation.’ now-2nd-largest-spiritual-path-1-6-billion-22-worlds- population-according-recent-studies/.

74 Observer Research Foundation n Raisina Files 2016 Files influenced philosophical traditions the world over. to respond positively to modernity and change. In the The history of Asian narratives explains how, at one process of becoming modern, a majority of Asian societ- level, Buddhism fulfilled people’s quest for religious ies and nations, including Japan, India and China, did not beliefs, and at another, allowed people to connect to entirely emulate Western value systems. They accept- B uddh i sm higher values of spiritualism without requiring them to ed necessary modern shifts, for instance those related abandon their faith or religion. to economic and technological skills, but adopted them At the core of Buddhism lies the idea of exploring the within the realm of their traditional culture and values. potential of oneself to attain enlightenment. This philo- One of the most profound impacts of Buddhism in sophical virtue contributed to the Asia has been the infusion of foundation of democratic culture non-conflicting philosophic train many Asian societies. The ditions. Buddhist principles have core ethics of Buddhism that One of the most allowed societies and nations stress on the nature of interde- profound impacts of to seek transformation without pendence and interconnection Buddhism in Asia has being in conflict. In fact, this tra- allowed every society to absorb dition is at the root of emergent changes and reforms, including been the infusion of non- democracy in Asia. The recent political transitions—all accept- conflicting philosophic political transition in Myanmar ed as interdependent phenom- traditions. Buddhist has demonstrated how Bud- ena mutually inclusive in nature. principles have allowed dhist values impact political pro- The values drew Asian societies cesses among people in Asia. towards adaptation and co- societies and nations The long experience lived operation, and these still drive to seek transformation through the practice of Bud- them towards a cooperative without being in conflict. dhist traditions has led to an culture. Buddhism was found to atmosphere of peace in Asia. be compatible with democracy In fact, this tradition is Since it is not a religion in a and it allowed people to live in at the root of emergent dogmatic sense, it has creat- an atmosphere of harmony and democracy in Asia, for ed space for flexibility beyond equality. The emphasis on the instance, recently in fixed ideas. It has also provided need for consensus practiced a template for people to realise in the monastic order of Sang- Myanmar. the need for transforming self ha, where decisions are taken and societies irrespective of through collective discourse, race, nationality or gender. impacted on Asian societies. Similarly, the Vinaya rules The benign nature of Buddhism has even influenced for monastic community infused a culture of democratic Islamic tradition in Asia. Despite prejudices, Asian his- traditions. Above all, Buddhist virtues provided individ- tory is full of friendly interactions and cooperation be- uals an opportunity to realise one’s potential as well as tween Buddhists and Muslims, which was an advantage cultivate a sense of universal responsibility. The diversity for Asian connectivity. Many Asian societies have inter- of Asian value systems today reflects how the culture of nalised Buddhist principles without having to adopt a inclusiveness and tolerance has protected Asian cohe- Buddhist identity. Sufism, for example, is a product of sion at various turns of history. long-drawn intensive interface between Buddhism and Furthermore, Buddhist teachings also allowed people Islam, with tremendous capacity to positively influence

Observer Research Foundation n Raisina Files 2016 75 Files large sections of humanity, more so now when Islam is admission, China Daily commented: passing through a critical phase. “Such a tribute to the relationship between the two Today, innumerable traits of Buddhist connectivity, in countries is so rare in this world. It speaks volumes of the all their intensity and complexity, continue to manifest in long, long duration of the kinds of links, the regard and the popular realm of Asian cultural, spiritual, social and respect the two peoples have for each other, much lon- economic lives. Clearly, there is a great deal to learn from ger than a human life span or two. It speaks of neighbor- Asian experiences of a tolerant culture and make it more liness, the conquests of hearts and minds by inspiration, i sm B uddh relevant to our lives in the future. These experiences are example and a way of life. It speaks of the esteem the even more relevant now against people hold each other in and the backdrop of emerging dis- their maintaining it beyond the putes and conflicts being man- day-to-day events, over thou- ifested through terrorism and For India, Buddhism sands of years.”3 sectarian violence. In an era of a lies at the core of its Buddhism declined in India globalised and free-market econ- identity as a cradle after the fifth and sixth centu- omy it is imperative for the world ries, but its principles form the to adopt a flexible and dynamic of wisdom that has core values of Indian foreign system, which is in practice in given the country policy. The intrinsic nature of Asia in several places. It is the a unique image. As Buddhist principles provides Asian experience, the spirit of Chinese Ambassador India a global persona of be- freedom, equality, cooperation nign international influence. and prosperity of all nations that Hu Shih commented, The essence of Buddhist in- can form a new alternative model “India conquered fluence lies in co-optive pow- for a 21st century world order. and dominated China er, allowing nations to pursue interests without being explic- India’s Buddhist culturally for 20 itly political. India’s domestic Connectivity centuries without ever performance (democracy and For India, Buddhism lies at the having to send a single pluralism) and external pursuits core of its identity as a cradle soldier across her (independent and non-aligned of wisdom that has given the foreign policy) have their un- country a unique image of being border.” derpinnings in Buddhist doc- an embracer and enlightener trine of Madhyamika. rather than a conqueror. A high These principles have in- profile Chinese Ambassador, Hu Shih, has commented, creased India’s global credibility as a non-threatening “India conquered and dominated China culturally for 20 power. The recent strategic embrace of India by major centuries without ever having to send a single soldier world powers, including in the globally contested field of across her border.”2 In a way Hu Shih’s words reflect nuclear cooperation, is driven not merely by the contin- the soul-binding links between the two nations. In a rare gency of interstate relations, but more because of India’s irrefutable historical personality and unique appeal. 2 Desh Kapoor, “Hinduism in China: Influence that goes back many millennia,” Drishtikone (blog), August 5, 2013, http://www.patheos.com/blogs/drishtikone/2013/08/ 3 “A warm Indian welcome to a neighbor,” China Daily, hinduism-in-china-influence-that-goes-back-many- October 19, 2014, http://www.chinadaily.com.cn/ millennia/. opinion/2014-09/16/content_18608745.htm.

76 Observer Research Foundation n Raisina Files 2016 Files Buddhism is once again making a rapid comeback Nalanda: A New Hope and its growing popularity is accorded to its peaceful Much of Buddhist diplomacy today involves loaning of rel- nature, philosophy and geographic spread. Over 98 ics, gifting of statues and hosting conferences for monks. percent of the world’s Buddhist population lives in the The only forward-looking initiative is a collaborative project B uddh i sm Asia-Pacific region. The number is growing: Over 14 for reviving the past glory of the Nalanda University from countries in Asia have more than 50 percent Buddhist where all major Asian Buddhist schools trace their lineag- population, and seven of these countries have over 90 es. This Pan-Asia Nalanda project is meant to be the cen- percent people practicing Buddhism.4 It has become trepiece of Asian civilisation. It is meant to focus on the a catalyst not just for meeting process of Asian renaissance, spiritual quests, but also prov- to reconnect Asian people and ing a currency of wellbeing and societies, and to reconstruct prosperity for millions in Japan, Buddhism has already Asian values and ethos to deliver Korea, Taiwan, Southeast Asian gained prominence long-term benefits for Asia, and countries and China. in India’s diplomacy indeed, the world. India has an This pattern of intra-Asian opportunity once again to play a connections has profound im- for fostering deeper key role. For instance, the re-con- plications for Asian renaissance engagement with the ceptualisation of Nalanda seems in the 21st century, something Association of Southeast to have run into roadblocks and India seems to have taken note Asian Nations as part of the university is unable to lay a of with great interest. sound footing despite several Buddhism has already its ‘Look East,’ now ‘Act countries supporting the initia- gained prominence in India’s East,’ policy. It will not tive: India needs to provide the diplomacy for fostering deeper be an exaggeration to much-needed push to shape the engagement with the Associa- institution in its nascent phase. tion of Southeast Asian Nations say that Buddhism is fast as part of its ‘Look East,’ now becoming a symbol of Struggle for Asian ‘Act East,’ policy. It will not rising India. The country Buddhist Leadership be an exaggeration to say that is sitting atop millennia- The Nalanda project could open Buddhism is fast becoming a up prospects of Asian conver- symbol of rising India. The coun- old tourist mines. gence, but there have been try is sitting atop millennia-old signs of late that indicate that tourist mines. Numerous Bud- Buddhism is becoming a seri- dhist sites in India directly linked to spiritual destinies of ous source of competition rather than an area of con- millions in Asia could form a part of a ‘Buddha-Industry,’ vergence between China and India. This is primarily be- which in turn could transform lives of millions, providing cause of political leverages associated with Buddhism, lucrative career options for the country’s youth. which allow major powers to enlarge their scope of communication and build emotional connect with countries 4 “Buddhism Could Now Be the 2nd Largest Spiritual across the Asian continent that share the same heritage. Path with 1.6 Billion or 22% of the World’s Population For example, China has lately been projecting it- According to Some Recent Studies”, Buddha Weekly, February 12, 2016, http://buddhaweekly.com/buddhism- self as the main patron and sponsor for the Buddhist now-2nd-largest-spiritual-path-1-6-billion-22-worlds- world. Beijing is drawing on its vast cultural resources population-according-recent-studies/.

Observer Research Foundation n Raisina Files 2016 77 Files for establishing cultural links with Buddhist institutions idea. He has shown much greater propensity to use Bud- throughout Asia. In fact, since 2009, China has been dhism to strike directly at the spiritual linkage with China. forcefully evoking Buddhism as a means to underpin its Both Prime Minister Narendra Modi and Chinese ‘peaceful rise’ and using it as soft power advocacy to President Xi Jinping seem to have acknowledged that boost its global and regional influence. the shared spiritual heritage could potentially bring back There are fears that China will wield its Buddhist influ- the traditional depth of India-China relations in the 21st ence alongside its hard power to impact on other nations’ century. For the two nations needlessly locked in a ter- i sm B uddh political and economic security. For example, there have ritorial dispute, working on Buddhist connectivity may been recent cases where China prove to be a game changer has attempted to build psycho- and could change the future In- logical connections to win the dia-China narrative. Clearly, this hearts and minds of people in There are fears that challenging initiative has been Myanmar, Sri Lanka and oth- China will wield its undertaken with a high degree er Southeast Asian countries Buddhist influence of sincerity and trust by the two through Buddhism. This is being alongside its hard leaders, but the risk lies in this viewed as an attempt to edge in gentle philosophy becoming a on India’s traditional sphere of power to impact on pawn of India-China rivalry. The influence. Many suspect that the other nations’ political Indian establishment working on underlying objective behind Chi- and economic security. such a conceptual play seems na’s gigantic infrastructure proj- confronted with a strange di- ect, the ‘One Belt–One Road’ This is being viewed lemma of whether to employ initiative has underpinnings of as an attempt to edge Buddhism to re-establish India’s fostering its cultural connectivity in on India’s traditional Asian connectivity or use it as a with Asia. sphere of influence. means to contain China. India sees China deriving Any struggle for leadership geopolitical benefits from its China’s gigantic One over Buddhism also means a Buddhist links, and as a result Belt, One Road intiative struggle for leadership over New Delhi, too, has begun to ri- includes a layer of peace, which in itself is not a bad val China by undertaking several thing. In reality, while there may countermeasures—for example, cultural connectivity. not be any strategic rivalry over sponsoring Buddhist confer- Buddhism, there may be ulte- ences, playing the Tibetan card and checkmating Chinese rior political motives behind steering such a rivalry, such Buddhist influence in India’s neighbourhood. China and as simply wanting to thwart any move made towards In- India approaching Buddhism from this narrow prism of po- dia-China Buddhist congruity. litical utility is not a good idea and goes against the very India does not need to compete with China over Bud- essence of Buddhist thought. It is unlikely to be helpful for dhism. Most Asian countries will continue to look towards either country or, above all, for building an Asian Century. India as their spiritual home and rely on India’s guidance in times of difficulty. The answer lies not in seeking rivalry Modi, Buddhism and China with China, but in building India’s own Buddhist profile and Placing Buddhism at the centre of India’s diplomatic capability, which translates into embracing the Buddhist initiatives by Prime Minister Narendra Modi is a creative world and finding creative ways to win over the hearts and

78 Observer Research Foundation n Raisina Files 2016 Files minds of a growing Chinese-Buddhist population estimat- structure to tap into the potential of millions of Asian ed to be one billion or 80 percent of the country’s popula- pilgrims. Above all, India needs to raise its capability to tion.5 (This figure may be exaggerated.) It seems China’s comprehend, as well as own up to, its responsibility to sudden re-embrace of Buddhism has led to the creation/ deepen linkages with Asian populations. B uddh i sm revival of over 28,000 monasteries and 16,000 temples as Modi has understood the challenges of building Bud- well as 240,000 monks and nuns. dhist connectivity that binds India with rest of Asia. As India needs to start thinking about seeking a greater Modi grapples with the challenges of diplomacy, he transformation in China from authoritarianism to embrac- seems to have realised that Buddhism can bring ben- ing the culture of Buddhism. The efits to India. As he said while impact of such a change may leading the Buddha Purnima establish enduring relations be- prayers last year, “The 21st tween India and China. Modi has understood century will be Asia’s century It appears that Modi, thus the challenges of and without Buddha, this can- far, is walking on Harsha’s road building Buddhist not be Asia’s century.” map of appropriating Buddha The present government’s to reach out to the new genera- connectivity that binds policy has shown subtlety, indi- tion of Chinese people. On the India with rest of Asia. cating a more potent and tangi- occasion of Buddha Purnima in He seems to have ble component in pursuing this 2015, Modi joined the Chinese realised that Buddhism goal. There is a definite shift in microblogging site, Weibo, to India’s East Asia policy. Steps connect with Chinese youth. can bring benefits to have been taken to restore In- India. While leading dia’s Buddhist legacies and links Conclusion the Buddha Purnima with other Buddhist nations. Buddhism could become a cat- Moreover, India is a participant alyst for building greater inter- prayers last year he in China-led New Development action among the Asian com- said, “The 21st century Bank and the Asian Infrastruc- munity. India, on its end, does will be Asia’s century. ture Bank, both meant to expand not need to prove anything or And without Buddha, Asian infrastructure links. compete for leadership, since Clearly, Modi is steering the Buddha himself remains a this cannot be.” Buddhism rather passionately, powerful Indian brand. It only but his efforts run the risk of needs to end its long apathy failure if they remains confined towards Buddhist heritage sites, which are lying unat- to achieving limited goals of organising events, holding tended in the country. It also has to simplify Buddhist conferences and seminars for academics and monks. heritage circuits and improve connectivity and infra- Employing Buddhist diplomacy should include more than lip service and posturing.

5 “Buddhism Could Now Be the 2nd Largest Spiritual Path with 1.6 Billion or 22% of the World’s Population P. Stobdan is a former Ambassador, an According to Some Recent Studies”, Buddha Weekly, expert on Asian affairs and currently a February 12, 2016, http://buddhaweekly.com/buddhism- now-2nd-largest-spiritual-path-1-6-billion-22-worlds- Senior Fellow at the Institute for Defence population-according-recent-studies/. Studies & Analyses, New Delhi.

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ca Asia and Africa: Platform for Bandung 2.0?

a s i a & A fr Malancha Chakrabarty A

ukarno’s speech in the Band- ung Conference was titled ne of the core ‘Let a New Asia and Africa be O born.’ The Bandung conference was an effort to strength- values of the Bandung en collaboration between Asian and African countries and Conference was Sto reduce their reliance on Europe and North America. self-determination. One of the core values of the Bandung Conference was self-determination. However, what followed in the coming However, what followed decades was strong political clientelism and economic in the coming decades dependence in the South. Afro-Asian solidarity largely was strong political remained a slogan because economic relations between clientelism and Asia and Africa were very limited. The ‘New Asia and Africa’ that Sukarno spoke about economic dependence was actually born in the early 2000s. The economic and in the South. The ‘New political realities in Asia and Africa underwent tremen- Asia and Africa’ that dous change during this period. Many African economies witnessed a turnaround in the 2000s. Africa is no Sukarno spoke about longer the ‘hopeless continent’ it once was. Secondly, was actually born in the Asia, led by India and China, became a major contrib- early 2000s. utor to global growth. However, the defining feature of this period was an intensification of Asia-Africa eco-

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Observer Research Foundation n Raisina Files 2016 81 Files nomic relations and a decline in the relative importance to a huge demand for resources, such as oil and min- of Africa’s traditional partners, namely the United States erals as well as agricultural commodities, from Africa. and Europe. There was also a major reform in India and Asian demand has had a huge quantitative impact on China’s approach towards Africa in this period. The African economies and led to an unparalleled growth ca foreign policy focus shifted from the ideological realm in exports from Africa to Asia. Sub-Saharan Africa’s ex- to economic diplomacy. Trade, investment and official ports to China grew remarkably from 2000 onwards, at financial flows from China and India to Africa grew dra- a compound annual growth rate of 22 percent and by

a s i a & A fr matically in this period. 2013, they exceeded sub-Saharan Africa’s exports to A The rising economic im- the US.1 Similarly, there was a portance of Asia in Africa has twelve-fold increase in sub-Sa- caught the attention of re- haran Africa’s exports to India searchers, journalists and pol- Asian demand has from $2,876.2 million in 2004 icymakers. Some scholars ex- had a huge quantitative to $35,288.7 million in 2014.2 press scepticism about Asia’s impact on African Asian demand has become growing economic footprint in even more important for Africa Africa and describe it as “new economies and led since the global financial crisis colonialism.” Some even re- to an unparalleled that led to a decline in demand fer to Asian interests in Africa growth in exports from from the West. Moreover, as the “the new scramble for Africa to Asia. Asian Asian demand has also been African resources.” However, a major contributor to the rise such claims are deeply flawed demand has also been in the world commodity prices because the rise of Asia offers a major contributor to in the last decade, leading to new economic opportunities the rise in the world an improvement in the terms for Africa. India and China have of trade in many African econ- emerged as important sources commodity prices in the omies. India and Africa have of trade, investment and finan- last decade, leading to also extended duty free access cial flows. Moreover, Indian and an improvement in the to their markets. Implementa- Chinese economic engage- terms of trade in many tion of China’s Duty Free Tariff ment is significantly different Preference (DFTP) scheme led from Western engagement in African economies. to a rapid growth of sesame the African continent. India and seeds from Ethiopia to China China are contributing towards and the launch India’s own economic diversification in African countries and help- DFTP scheme in 2008 led to an increase in African ing them alter their position in the international division exports to India, particularly from Tanzania. Therefore, of labour. the rise of Asia has played an important role in reviving African economies. Asia is Emerging as Africa’s Principal Asian countries, particularly China, have also become Economic Partner important sources of manufactured goods for most Af- Demand for African exports is the most direct channel rican countries. For instance, China currently accounts through which Asian countries are affecting African for over half of the imports of consumer goods, such economies. High growth in India and China has led as textiles and apparel, footwear, hand bags and travel

82 Observer Research Foundation n Raisina Files 2016 Files goods, in African countries that include Angola, Ethio- communications, energy and automobiles has grown pia and the Democratic Republic of Congo (DRC).3 The rapidly. rapid growth of Asian exports has displaced manufac- The global financial crisis severely impacted the A tured exports from developed countries (Germany, Italy, flow of funds from the West to Africa. But an enor- s i a& A fr France) in these countries.4 Imports of manufactured mous increase in official financial flows from Asia to goods from Asian countries have significant welfare en- Africa has been visible in recent years. China commit- hancing effects for the poor people because they are ted about $75 billion to Africa from 2000-11 period, ca more affordable than imports from developed countries. which was about a fifth of the total flows ($404 billion) In addition to manufactured coming from Organisation for goods, there has also been Economic Co-operation and monumental growth in exports Development’s Development of machinery and transport The global financial Assistance Committee and equipment from India and Chi- crisis severely comparable to those from the na. Machinery imports from impacted the flow US ($90 billion).7 There has China and India, as opposed been a concurrent growth of to developed countries, pres- of funds from the India’s development assistance ent some advantages for Afri- West to Africa. But an to Africa as well. The Export can economies. Firstly, capital enormous increase in and Import Bank of India has imports will lead to produc- official financial flows extended 144 lines of cred- tivity gains in African coun- it worth $7 billion to African tries. Secondly, machinery from Asia to Africa has countries since the launch of and transport equipment from been visible in recent the Indian Development and India and China are relatively years. Asian titans Economic Assistance Scheme. cheaper as compared to im- India has also committed an ad- ports from Europe and United have exerted a huge ditional credit line of $10 billion States, which in turn has led to quantitative impact and a grant assistance of $600 a decline in investment costs in on African economies million in the recently conclud- these countries. from the trade, aid and ed India-Africa Forum Summit China and India have also in New Delhi. emerged as important sourc- investment side. es of foreign direct investment Asia is Helping Alter (FDI) in African countries. Chi- the Position of African na was the fourth and the second largest source of FDI Countries in the World for Angola and DRC respectively in 2012. Chinese FDI Not only have the Asian titans exerted a huge quantita- flows to Ethiopia have outstripped FDI flows from de- tive impact on African economies from the trade, aid and veloped countries, such as Germany and Italy.5 Indian investment side, Asian economic engagement in Africa investment in Africa has also grown in recent years. is also qualitatively different from Africa’s traditional Indian investment flow in Africa was about $50 billion partners. Asia-Africa trade is undoubtedly concentrated in 2014.6 Although much of the Indian investment is di- in a few mineral commodities, but a more disaggregated rected to the tax haven, Mauritius, the presence of Indi- analysis reveals that some African countries are slow- an companies in sectors such as pharmaceuticals, tele- ly diversifying and moving up the value chain. For in-

Observer Research Foundation n Raisina Files 2016 83 Files stance, China’s policy of zero tariff entry for agricultural Chinese firms. goods helped Ethiopia become a major exporter of ses- Chinese and Indian development assistance is also ame seeds and reduced its dependence on coffee, its significantly different from western development assis- traditional export commodity. DRC’s exports of refined tance. The most striking feature of Indian and Chinese ca copper have increased from 2007 onwards, gradually development assistance is that it is ‘demand driven,’ i.e., overtaking raw copper exports to China.8 Similarly, the based on the request of the recipient country. China dramatic growth of crude oil exports from Africa to India emphasises on ‘win-win cooperation’ rather than tra-

a s i a & A fr masks the positive growth in other export categories. ditional donor-recipient relationships. Similarly, Indi- A India has emerged as the sec- an development assistance is ond largest market for inorganic also based on requests from chemicals from Africa behind individual African countries. An the European Union, and medi- Chinese and Indian African nation typically makes a um technology exports form the development assistance request to the Indian embassy largest category of technology is also significantly which then forwards the re- exports to India.9 quest to the Indian Ministry of Growth of Asian investment different from western External Affairs.12 Therefore, it is also paving the way for Afri- development assistance. is easier for African countries to ca’s industrialisation. Although The most striking align their national development large infrastructure-for-re- feature of Indian and priorities with Indian and Chi- source deals have attracted nese development assistance much of the scholarly attention, Chinese development as compared to traditional aid. there has been a steady growth assistance is that it is Moreover, Chinese and Indi- of private Chinese investment ‘demand driven,’ i.e., an aid is also characterised by in the manufacturing sector in faster and less bureaucratic aid many African countries. Many based on the request of disbursement regime.13 In the Chinese companies are in- the recipient country. words of a senior United Na- creasingly trying to use Africa Development assistance tions expert, “If you want con- as a platform for manufacturing is mainly directed to the crete things you go to China. If and export to the developed you want to engage in endless country markets. According to infrastructure sector. discussion and discourse you some scholars, such as Deb- go to the traditional donors.”14 orah Brautigam, expansion of Chinese and Indian develop- Asian business networks in Africa will contribute to- ment assistance is mainly directed to the infrastructure wards Africa’s industrialisation.10 Some recent studies sector, a sector which has traditionally been ignored also indicate that Chinese businesses have created by the Western donors.15 China has emerged as the jobs in African countries, such as Ethiopia, Liberia and foremost infrastructure builder in Africa and the bulk of Rwanda.11 Although Indian investment in Africa is still its official financial flows to Africa are directed towards at a nascent stage, there have been some big-ticket development of transport and energy infrastructure.16 investments by Bharti Airtel, Tata Chemicals and Wi- Indian credit lines to Africa are also typically directed to pro Technologies. The record of Indian firms in terms of infrastructure-related projects—energy and water sup- employment generation is also much better than that of ply, power transmission, roads, etc. Given that most Af-

84 Observer Research Foundation n Raisina Files 2016 Files rican countries, particularly post-conflict ones such as really value their sovereignty and are very keen to diver- Angola and DRC, suffer from an acute shortage of in- sify their economic partners. Lucy Corkin argues that frastructure, this is a welcome development. Moreover, the role of African agency should not be underestimat- A better infrastructure will also promote regional econom- ed. Some African countries, particularly Angola, have s i a& A fr ic integration in Africa. India also launched the Pan-Af- been able to use China’s involvement to expand their rica e-Network in 2009 with the aim of narrowing the economies and generate new interest from other coun- digital divide in Africa and harnessing socio-economic tries. With the economic rise of Asia, African nations ca benefits of information and communication technolo- now have choices which were previously not available gies. Under this project, India to them. The growth of trade has set up a fibre-optic network linkages with Asia also made to provide satellite connectivity, these countries less dependent tele-medicine and tele-educa- The role of African on foreign aid. The share of net tion to African countries. agency should not be official development assistance Asia has emerged as an at- underestimated. Some in gross national income has tractive alternative to the West declined in most African coun- and official financial flows from African countries, tries. This has also contributed Asia have been able to alter particularly Angola, have to the growth of African agency Africa’s aid landscape. Huge been able to use China’s and made African governments official financial flows from Asia involvement to expand more accountable to their own to African countries have led to people. competition between donors their economies and Many African leaders also and have enabled African coun- generate new interest perceive engagement with tries to access more resources from other countries. China and India to be less from international institutions as threatening than engagement well. Taking a cue from China, With the economic rise with Europe or the US. As dis- other donors have also started of Asia, African nations cussed above, Chinese and lending for infrastructure. This now have choices which Indian engagement with Africa was particularly true in Angola, were previously not is characterised by respect for where Chinese official financial sovereignty. India also enjoys flows led to a change in the di- available to them. substantial goodwill in the con- rection of traditional develop- tinent due to its long history of ment assistance. Official finan- technical assistance since the cial flows from China have also contributed to African evolution of the ITEC programme and its support for agency by increasing the bargaining power of African anti-colonial movements. African leaders also welcome countries and enabled many African countries to ‘trian- China’s policy of political non-interference and ‘win-win gulate’ between donors.17 cooperation.’ Many African leaders are genuinely inspired by Asia’s The Rise of African Agency economic success and aspire to learn from India and Most of the African countries were mismanaged for China’s development experiences. For instance, African decades by imperial powers which exploited the con- countries are particularly impressed by India’s green tinent’s resource wealth. As a result, African countries revolution and are trying to learn from India’s expe-

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rience. Some African leaders are also inspired by the avoid new dependencies by maintaining a safe distance state-led growth model in China. As a result, individual from emerging powers, particularly China. Here also, African countries are pressing to move beyond trade Angola provides a good example. Despite the huge flow ca and investment in minerals into value-added industrial of funds from China to the Angolan oil sector, it has not production, agricultural development and scientific co- become a client state and has been able to manage its operation. oil sector independently.

a s i a & A fr There are some fears over potential competition be- In a nutshell, the rise of Asia has fuelled growth in A tween China and India in Africa. But such concerns Africa, reduced the dominance of western powers may be overstated at the moment because Chinese and contributed to African agency. In other words, the trade, investment and official flows are much larger than ‘Bandung Spirit’ is being realised through greater eco- India’s. Moreover, African countries are also trying to nomic cooperation between Asia and Africa.

Endnotes 1 Author’s estimates.

2 Malancha Chakrabarty, “India-Africa Trade Relations: Trends and Prospects,” in Common Futures: India and Africa in Partnership 2015, ed. Abhijnan Rej and Tanoubi Ngangom (New Delhi: Observer Research Foundation, 2015).

3 Author’s estimates.

4 Ibid.

5 Ibid.

6 Daouda Cissé, “China and India in Africa,” The Diplomat, November 13, 2015, http://thediplomat.com/2015/11/ china-and-india-in-africa/.

7 Austin Strange et al, “China’s Development Finance to Africa: A Media-Based Approach to Data Collection,” Centre for Global Development Working Paper, 2013.

8 Malancha Chakrabarty, “Growth of Chinese trade and investment flows in DR Congo – blessing or curse?,” Review of African Political Economy (2015).

9 “India-Africa: South-South Trade and Investment for Development,” Confederation of Indian Industry and World Trade Organization, 2013, https://www.wto.org/english/tratop_e/devel_e/a4t_e/global_review13prog_e/india_ africa_report.pdf.

10 Deborah Brautigam, “Close Encounters: Chinese Business Networks as Industrial Catalysts in Sub-Saharan Africa,” African Affairs 102 (2003): 447–67.

11 Xiaofang Shen, “Private Chinese Investment in Africa: Myths and Realities,” World Bank Policy Research Working Paper, 2013.

12 Rani D. Mullen, “Lines of Credit,” Centre for Policy Research, 2013, http://idcr.cprindia.org/blog/lines-credit.

13 Gedion G. Jalata, “Development Assistance from the South: Comparative Analysis of Chinese and Indian to Ethiopia,” Chinese Studies 3, no. 1 (2014): 24-39.

14 Kojo Busia, “New Partners Emerging,” quoted in Jalata, “Development Assistance from the South.”

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15 Jean Claude Berthelemy, “China’s Engagement and Aid Effectiveness in Africa,” African Development Bank Working Paper, 2011. A

16 Vivien Foster et al, “Building Bridges China’s Growing Role as Infrastructure Financier for s i a& A fr Sub-Saharan Africa,” World Bank, 2009, https://openknowledge.worldbank.org/bitstream/ handle/10986/2614/480910PUB0Buil101OFFICIAL0USE0ONLY1.pdf?sequence=1.

17 May Tan-Mullins, Giles Mohan, and Marcus Power, “Redefining ‘aid’ in the China–Africa Context,” Development

and Change 41, no. 5 (2010): 857–81. ca

Malancha Chakrabarty is an Associate Fellow at ORF. She researches the impact of emerging countries, such as India and China, on Africa’s development process

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88 Observer Research Foundation n Raisina Files 2016 Mandate ORF seeks to lead and aid policy thinking towards building a strong and prosperous India in a fair and equitable world. It sees India as a country poised to play a leading role in the knowledge age – a role in which it shall be increasingly called upon to proactively ideate in order to shape global conversations, even as it sets course along its own trajectory of long-term sustainable growth. ORF helps discover and inform India’s choices. It carries Indian voices and ideas to forums shaping global debates. It provides non-partisan, independent, well-researched analyses and inputs to diverse decision- makers in governments, business communities, and academia and to civil society around the world. Our mandate is to conduct in-depth research, provide inclusive platforms and invest in tomorrow’s thought leaders today. Files 2016

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