Is India still a diadem of South Asia? Chinese Perspective

06 Sep 2012

If I was to draw out a comparative analytical chart as to efficiency of investment regimes in South Asia, I would not hesitate or blink to put India at the bottom of the chart. Its economic as well as foreign policy have consistently been misplaced and to some extent confused. It has always believed in wait and watch policy rather than `doer’ or `go-getter’ approach. For instance, on one hand it permitted foreign investment by liberalizing the foreign exchange regulations and on the other hand it continued with its age old frosty visa restrictions, tax barricades and backward looking `sarkari babus’. For last two decades, it has been debating on how to identify and remove bottlenecks in the FDI domain. Many a times it had to eat its own words by pursuing roll back policy on account of pressures from political groups. Fortune favors the brave is a phrase, which has not been part of any dictionary owned by official Indian economists; perhaps they suffer from after-thought syndrome.  Chinese investment into India is one such example, which I want to write about. It’s a typical case of misjudgment of a situation by the Indian policy makers. When Chinese companies started to queue up for investments in India, they encountered various challenges and hurdles reportedly masqueraded by the Indian authorities including a big visa controversy coupled with intelligence issues and possible security breaches. Chinese investment wasn’t treated at par with other investments for obvious reasons triggered by the foreign policy dictates. However, in the last four years the said `not so friendly’ nation has become quite affable for India. The bottom line is `money talks and pauper walks’. India is welcoming Chinese investments with open arms like other South Asian nations; in the first place, India didn’t have any alternative as Chinese companies had already setup substantial business interests in Pakistan, Bangladesh, Sri Lanka, Nepal and Afghanistan. Indian couldn’t have permitted itself to an isolated spot.

South Asian political beliefs may exclude China from the club of 8 SAARC nations but its entry into the South Asian region cannot be prevented economically. The message is loud and clear from China and that is `stop looking at me only as an investee nation’. China has today assumed the new role of an `investor’. South Asian economy is moving towards a new dimension with an aggressive entry of large Chinese corporations. A decade or two ago, the foreign policy of India or for that matter many of the other South Asian countries used to dictate their respective economic policies but today it’s the other way round. Our economic interest governs our foreign policy and beliefs.

Chinese companies like Huawei, ZTE, China Mobile, Lenovo and Haier have remedied the reputational and qualitative taboo associated with the Chinese goods. These brands have become virtually household names. It may sound astonishing but is still true that China Mobile corporation has approximately 13 million subscribers in Pakistan, where it operates under the outfit of China Mobile Pakistan (CMP). Pakistan like India is also one the fastest growing mobile phone markets in the world. CMP is engaged in making huge investments in the telecom communications - infrastructure in Pakistan. As per reported sources, CMP has a plan for investing over US$ 1 billion in Pakistan. Fascinatingly, another large Chinese corporation named China Three Gorges Project is going ahead with a mammoth 10000 mega watt power project in Pakistan with an investment of over US$ 14 billion. Likewise, the same corporation is also making sizeable investments in a couple of hydro projects in Nepal.

Huawei’s India base is supposedly its biggest outfit outside China with a workforce of more than 5000 people. This world renowned telecom solution provider company has established a unique one of its kinds R&D centre in Bangalore. It’s partnering with almost all the telecom companies in India. Huawei has also made inroads in Sri Lanka, Bangladesh and Afghanistan. Lenovo also has a formal presence in India in the form of its subsidiary Lenovo India. No very many people in India who own Lenovo products know that it is a Chinese brand. Further Chinese civic infrastructure companies are also aware that India is in need of nearly US$ 1 trillion to immediately take care of its civic infrastructure needs; and Chinese companies are eying these opportunities.

Despite numerous teething issues, Chinese companies in their new outfit of `investors’ are becoming more and more visible in South Asia and are competing with large MNCs from US, Europe, South Korea and Japan. Another reason for their visibility is their `soft power’ approach in South Asia. China has accelerated its aid like investments in South Asia by building six friendship bridges in Bangladesh, helping Sri Lanka with investments in their Hambantota port (I was in Colombo last fortnight and saw a modern multi-utility/soccer stadium bestowed by Chinese to Sri Lankans) and investing in hospitals, technical institutes, roads and highways in Nepal. China is exploiting to their advantage the dire strait of the South Asian infrastructure by offering soft aid and effective involvement.

India ought to introspect and realize that sometimes finding the middle ground is the best policy, which in diplomacy can be flagged as `reconciliation’.