Connectivity Issues in India’s Neighbourhood © Asian Institute of Transport Development, New Delhi. First published 2008 All rights reserved The views expressed in the publication are those of the authors and do not necessarily reflect the views of the organizations to which they belong or that of the Board of Governors of the Institute or its member countries. Published by Asian Institute of Transport Development 13, Palam Marg, Vasant Vihar, New Delhi-110 057 INDIA Phone: +91-11-26155309 Telefax: +91-11-26156294 Email: [email protected], [email protected] Website: www.aitd.net Contents Foreword i Connectivity: An Overview iii Perspectives on Northeast Connectivity 1 Mani Shankar Aiyar Imperatives of Connectivity 10 B. G. Verghese Connectivity and History: A Short Note 20 TCA Srinivasa-Raghavan India-China Connectivity: Strategic Implications 26 Gen. V. P. Malik Maritime Connectivity: Economic and Strategic Implications 36 Vijay Sakhuja Infrastructure, Northeast and Its Neighbours: Economic and Security Issues 66 Manoj Pant India-China Border Trade Connectivity: Economic and Strategic Implications and India’s Response 93 Mahendra P. Lama Connectivity with Central Asia – Economic and Strategic Aspects 126 Rajiv Sikri China’s Thrust at Connectivity in India’s Neighbourhood 146 TCA Rangachari Foreword The land and maritime connectivity have played a crucial role in political and economic evolution of the nation states. With a view to exploring the developments in this area in India’s neighbourhood, the Asian Institute of Transport Development held a one-day seminar on May 24, 2008 at India International Centre, New Delhi. The seminar was inaugurated by Hon'ble Mr. Mani Shankar Aiyar, Union Minister for the Development of North-Eastern Region (DONER) & Panchayati Raj and chaired by Mr. B. G. Verghese, a noted guide and commentator of our times. Mr. TCA Rangachari, former Indian Ambassador to France, eminently coordinated this colloquium. The speakers at the seminar included distinguished academicians, thinkers and policymakers: Gen. V.P. Malik, Mr. Rajiv Sikri, Mr. Vijay Sakhuja, Prof. Manoj Pant, Mr. TCA Srinivasa-Raghavan, Prof. Mahendra P. Lama, Mr. Falguni Rajkumar, and Mr. R. Dayal. The background papers and presentations addressed the main theme from different perspectives. The discussions were stimulating, informative and well- focussed. A snapshot of the key issues and guideposts for action is presented in the ‘Overview’ included in this publication. The rich material provides a fertile ground for further research. Asia is now building transport networks to rival any in the world. This is happening not only at the national level but also at the regional level. As a result, the old divisions are giving way to much-needed integration in the region and we are witnessing the emergence of regional transport networks that are bringing countries and peoples closer together through greater promotion of trade and tourism. It gives me great pleasure in bringing to the readers this highly useful volume. It brings home the central role of connectivity as a network of goodwill and influence rather than merely as something along which people travel. I hope our policies will be adjusted accordingly to meet the challenges of our times. K. L. Thapar Chairman Connectivity: An Overview The last quarter of the 20th century saw the re-emergence, after a gap of about 50 years, of an old phenomenon – greater global integration, first through trade and then through finance. It was the former that led to the latter. There were many reasons why global trade increased but at the root of it lay an age-old reason: better connectivity between regions and countries. The obverse of this, of course, was that countries and regions that did not improve their connectivity were left out of the global trading boom. There are many reasons why countries trade with each other. Unilateral trade liberalisation, participation in the multilateral trading system, decline in transport and communication costs, all have a role to play. Satellite delivery of services has completely neutralised the distance factor. The decline in transport costs in the 20th century has resulted in monumental changes in the patterns of trade and investment. The most striking example of this is Europe. East Asia is the latest case in point. Some researchers have found that, over time, the proportion of trade over shorter distances increases in relation to trade over longer distances. One of the most important consequences of this boom in trade has been gradual (but by now very perceptible) shift in economic power from the West to the East. Two centuries ago, before the industrial revolution, India and China accounted for more than half of the world’s output of goods and services. By 1950, this share came down to less than 10 per cent. But in the last two decades, it has begun to climb back and Asia can be expected to produce 50 per cent of the world's GDP by 2030. The key factor in this regard has been better connectivity of different sorts – physical, financial, electronic and intellectual. To deliberate on the various facets of this issue, the Asian Institute of Transport Development organized in New Delhi a seminar on Connectivity Issues in India’s Neighbourhood: Economic and Strategic Implications on 24th May 2008. Inaugurating the seminar, Shri Mani Shankar Aiyar, Minister for the Development of Northeastern Region and Panchayati Raj observed that connectivity between the rest of India and the North East was disrupted by the Connectivity: An Overview iv Partition of India and the creation of East Pakistan and the 1965 war and subsequently, the emergence of Bangladesh really wrecked that. What had been, throughout history, internal trade was transformed into international trade subject to all its vagaries. The Chhatak Cement Factory in Northern Bangladesh, set up in 1937 by a British-Indian firm which had tapped the limestone available in Cherrapunjee (Sohra) and brought it by an aerial ropeway to Chhatak, is a good example. It is staggering that our diplomacy with respect to a country in whose liberation we were deeply involved has been of such a high order that we have not succeeded in reestablishing that connectivity which was taken as normal and natural through the worst period of the India-Pakistan relationship! As a result, the Northeast continues to be on an economic trajectory well below that of the rest of India; also the 'Look East Policy' cannot be operationalized without the participation of the Northeast, for Northeast India is where South-East Asia begins. If there is a Look East Policy, then, it cannot be looking East only from Chennai and Bangalore, who have been the biggest beneficiaries of this policy thus far, but will have to include the Northeast. Connectivity to, and through, the Northeast is the most important element of connectivity between India and its neighbourhood in regard to the economic and strategic implications. The pipeline from Akyab (Sittwe) in Myanmar through Bangladesh into India might have helped Bangladesh in improving their balance of payments and perhaps even bring it to equilibrium by squeezing us for transit fees on gas that will go through the pipeline. We might even have put in a little clause that either party, Bangladesh or India, could feed their respective gas into the same pipeline that would take gas from Myanmar into India. At Brahmanbari, which is the place where they have most of their gas, there is no petrochemical or chemical industry and the bulk of these industries are located around Jessore, a place which is at diagonally opposite end of Bangladesh, much closer to Kolkata than it is even to Dhaka. This could have been a way of effectively using available gas from Tripura which is also capped for lack of, what the oil sector technically calls, evacuation. The evacuation of gas is a big problem from Tripura. So, it is all capped there. Here was the opportunity to bring it to the rest of India using exactly the same pipeline that would come in from Myanmar (where we are part owners of the gas fields A1 and A3). But that draft agreement was not allowed to v Connectivity: An Overview move forward. And Myanmar, in total despair, committed the entire gas to China. In thirty-seven years after helping this country to liberate, we have not been able to restore that level of connectivity between the rest of India and the Northeast. There is a railway line connecting all of the Northeast and Kolkata that went through East Pakistan at the worst time in relations between India and Pakistan, but there is, today, no direct service. And the same applies to road traffic though a bus service between Kolkata and Dhaka, and, subsequently, between Agartala and Dhaka is operating. As for waterways – cheapest form of transport we can still go from Haldia all the way up to Dhubri – except that the Bangladeshis don't really need that waterway, and, therefore, they are neglecting its upkeep, and, in a delta area like Bangladesh, if you do not resort to frequent upkeep, you cannot really use it. If the Brits could go up and down by waterway, it is extraordinary that two centuries later, we cannot go upstream and downstream by waterway! We have had a difficult relationship with Bangladesh but Thailand has an excellent relationship with them. There is a Thai company specialized in the upkeep of waterways. If we were to tie up with them, and if the Thai company were to offer to look after the upkeep of the Padma in Bangladesh, that would solve the problem and we would have plenty of connectivity to the Northeast region through the Brahmaputra. We need to get on with the job of this connectivity.