String of Pearls: China’s Encirclement of India

How India is countering China's String of Pearls?

N. Sathiya Moorthy     17 November 2020

News reports have quoted the Chinese Embassy in Colombo about Sri Lanka participating in a China-hosted five-Nation multilateral virtual meet on COVID-19 management and post COVID-19   economic revival. It was the second such consultation among the ‘partners’ in as many months, with Afghanistan, Pakistan, Bangladesh and Nepal having participated in the earlier round.

One noticeable feature is that all these Nations are not only located in South Asia but also have a tentative, if not tense relation, with India, the largest of South Asian Nations with which China has an antagonistic relationship. The adverse relations date back to the early sixties and has only worsened in recent times due to Chinese border incursions, despite two positive, informal summits between President Xi Jinping and Prime Minister Narendra Modi.

The term employed by China to describe its out-reach with other Nations these past years is BRI, a short term for ‘Belt and Road Initiative’. Before China formalised the form and content of the BRI structure and roped in Third World Nations in Asia and Africa, and also in the European First World, one American author saw the earlier initiatives of the kind, especially in South Asia and the extended Indian Ocean Region (IOR) in Africa as the ‘encirclement of India’.

The name given at the time was ‘String of Pearls’. Though China at the time was talking only about development funding, setting up of industrial units in the host-nations and the like, wherever Beijing has put in its money, it’s seen only as a debt-trap, even by a section of the host-nation’s polity and economic community. There has been lil’ or no direct benefit for the people in the host nations, in terms of jobs and incomes (the latter, with or without new and more jobs).

What they have got instead is the Hambantota kind of investments, or what could be termed usury behaviour. In political terms, China has never linked investments or debt-traps to conditionalities, whether economic or otherwise. Developing Nations have had such problems with the IMF and World Bank. The two Bretton Woods institutions, and also a host of others, like prudent commercial lenders, have for decades now, began evaluating the repayment capacity of Nations before lending.

In such circumstances, they have also been laying down what is being commonly termed as ‘conditionalities’, which are unpopular with local polity and people at large. These relate to levying more tax on the local population, cutting down on welfare spending – and, more importantly liberalising trade and investments, especially for the foreign trader and investor.

There is a second economic element, which is as much if not more important than possibly even the first. It is all about the availability of funds with the investor-nation, on development-funding, as different from their private sector, whose intention is to make money for their share-holders. China has the funds, but then, its so-called developmental funding agencies, call themselves only as commercial entities. Their investments are also commercial propositions, with nothing by way of developmental ease for the debtor-nation.

Twine shall not meet

Yet, there is the larger element of international politics and diplomacy, where China scores. Beijing does not link its investments, say, to the host Nation’s human rights records and such other matters. It is anybody’s guess if China would put its best diplomatic foot forward, say, for Sri Lanka on the war-crimes probe at the UNHRC without the Nation being a ‘development partner’, as it is now, but it has succeeded in convincing the other that it is not so.

This contrasts with the behaviour of the US-led West, where they use human rights as their current yardstick for offering trade concessions and international politico-diplomatic support on issues. This covers even their approach to development funding. This behaviour of the West has permeated into the conduct of the West-created IMF, World Bank and the like. This is also where China has scored.

Lately, the US wanting to fund development projects in the country through the Millennium Challenge Corporation (MCC), for instance, has no seeming human rights tag attaching to it. That does not mean that the US has given up on its original UNHRC demands on war crimes probe, etc, etc. They seem to have concluded that the two, namely, developmental funding and human rights concerns can travel along two parallel tracks, and the twine never would have to meet.

But that is not how the host Nations, especially those like Sri Lanka, that are caught in a cleft-stick of the western making, look at it. For a change, they seemed to be telling the West that ‘Either you are with me, or against me’, and with great conviction.

In geo-strategic terms, the US, especially under former President George Bush, more so the latter, used to tell prospective allies that they had to be either with the US, or would be deemed to have been against the US. No half-way mark, no balanced position and posturing on foreign policy, which sovereign nations could chalk out, based on their own perspectives and priorities.

Changing perspective

This is where the perception about ‘String of Pearls’ being only an earlier ‘avatar’ of BRI needs to be looked at. Today, no one talks about BRI in the same tone and tenor as they used to point it out to the ‘String of Pearls’, when originally coined. Critics do not see the need to refer to the old, original nomenclature. To them, it is the old wine in a new bottle, and that’s it.

But whom they call the ‘client States’ of China have a problem accepting it as such. To the West, especially, BRI is only an expanded version of the String, which they had explained, targeted (only) Beijing’s Indian adversary. But BRI partners are not confined to least developed Nations and the like. Going beyond Iran and Iraq, Singapore and Saudi Arabia, Indonesia and the UAE are/were signatories. So is/was South Korea, which is both a friend and ally of the US.

But then, China seems to be using the BRI platform only to fund and finance, aid and assist only Third World nations. Their partnership with First World partners seems to remain mostly on paper. The whole world is impacted by COVID-19, and so is the global economy. But China’s munificence on the COVID-19/ post- COVID-19 fund seems restricted to the Third World, especially in India’s neighbourhood.

Making a difference

It is here Indian aid stands out vis-a-vis China funding, especially in terms of transparency and affordability in terms of interest and repayment – two crucial factors from a debtor-nation’s perspective. Compared to China, India’s assistance packages may not be massive and tantalising, but they are focussed assistance, aimed at community-specific projects, including larger investments – where employment-creation for locals is at the top of the agenda.

It is in this context, Indian High Commission’s recent statement in Colombo, underlining how under New Delhi’s High Impact Community Development Projects (HICDP), a total of 64 schemes, worth SLR. 20 billion have been implemented in the country. Likewise, the two Governments have signed, in the presence of Prime Minister Mahinda Rajapaksa, MoUs for third-phase HICDP projects of SLR 300 m each in sectors such as agriculture, health and education, sanitation and water supply. Together, the third-phase projects under the MoU, signed by High Commissioner Gopal Baglay for India and Treasury Secretary S. R. Attygalle for Sri Lanka, will cost SLR 5 billion.

“It had been also agreed during the Virtual Bilateral Summit to deepen and broad-base the HICDP projects currently undertaken in each of Sri Lanka’s 25 districts,” the Indian High Commission said in a statement, referring to the virtual summit between Prime Ministers Rajapaksa and Narendra Modi, on 29 September.

These projects shall relate chiefly to socio-economic development, livelihood support, conservation of environmental and cultural heritage, empowerment of women, child welfare and facilitation of community life, particularly through the creation of infrastructure in the education, health, agriculture or community development sectors. The Ministry of Finance is the nodal Ministry for implementing the HICDP scheme on the Sri Lankan side.

“Presently, 21 projects covering all provinces viz., Northern, North-Central, North-Western, Western, Southern, Central, Uva, Sabaragamuwa and Eastern Provinces of Sri Lanka are being undertaken under the MOU. They include construction of primary schools and colleges, vocational training institutes, Universities, hospitals, rural sanitation, cultural heritage, rain water harvesting, social housing for poor, agricultural warehousing, tourism and civil aviation infrastructure support.

“The HICDP scheme has been designed to contribute to the developmental aspirations and needs of Sri Lanka. The projects undertaken are always demand-driven and entirely based on the requirements of the Government and the people of Sri Lanka,” the statement said. Significantly, the statement also added how “all overheads and administrative costs for implementing these projects, as indeed any other projects under Government of India grant, are absorbed separately by Government of India and are not included in the project outlay”.

In particular, the High Commission pointed out, of course, without drawing parallels, how the “scheme is entirely on-budget and implemented through various line Ministries of Sri Lanka” – and not by any Indian agency. Translated, it implies that the Sri Lankan Government, for all practical purposes would be using the services of local entrepreneurs and labour – with the result, the Indian investments, as also all the benefits derived from the same, stays within Sri Lanka and also reaches the local population, in every which way.

Burdening the future

It is here, Sri Lanka and Sri Lankans need to look at foreign funding, whether it is from China, India, or the US, or any other. – Whether it is BRI or Indo-Pacific or any other form of aid. How much of burden and/or benefits is the present generation going to leave behind for the yet-to-be born generations. The latter may not have any clue about how the roads and bridges looked like before China began funding, or how healthcare (including the India-funded ambulance service across the nation) and education improved, likewise – but they would all at the same be alive to the debt-burden that is left on their shoulders even before they were born.

The alternative, not to hurt the future generation, seems to be in the Hambantota kind of debt-equity swap deal. Is this what the present generation wants to leave behind as its legacy for the future?

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