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Maldives face-off: China’s Belt and Road expansion tests India’s resolve

bridge

The landmark $US200 million Male-Hulhumale bridge paid for by China as aid and and part-loan to the Maldives government, from Twitter feed of Maldives Housing Minister Dr Mohamed Muizzu.

 

The Maldives, an island nation better known as the playground for the rich and famous, is in crisis.

At the sharp end of an increasingly fierce strategic rivalry between India and China, it has become the proxy for a wider battle going on for regional influence as Beijing rolls out its trillion-dollar infrastructure plan, known formally as the Belt and Road Initiative.

Former President Mohamed Nasheed has accused current leader Abdulla Yameen of allowing China to engage in a “land grab.” Yameen, meanwhile, has been arresting opposition figures and, when challenged by the courts, declared a state of emergency earlier this month – now extended – in a bid to stay in control ahead of looming elections.

This leadership tussle goes well beyond domestic politics.

The Maldives, traditionally within India’s sphere of influence, has become much closer to China over the last three to five years under Yameen, with the two countries signing a free trade agreement and Beijing funding roads, airport upgrades and city developments. The flagship project is the Friendship Bridge linking the Maldives’ capital with the airport.

Nasheed, who claims he was forced at gunpoint to step down in 2012 and granted asylum by Britain two years ago, says Beijing has already taken over 16 islands. He is concerned the indebted government will not be able to pay back loans for other projects and they too will fall into Chinese ownership.

It’s a situation not without precedent. Last year, Sri Lanka handed over its southern port of Hambantota to China on a 99-year lease as part of a deal reached when Colombo struggled to meet its debt payments. A Chinese state-owned company also now controls Gwadar port in Pakistan, where China is investing billions of dollars in a new economic corridor.

All of these cases highlight the growing tension between China and India as Beijing increasingly looks to boost its presence in the Indian Ocean region. Relations deteriorated last year over a border dispute in the Himalayas and the presence of Chinese warships in the Indian Ocean this month at the same time as the political upheaval is taking place in the Maldives has unsettled the region.

The news agency Sina.com.cn reported a fleet of destroyers entered the Indian Ocean this month. The site did not link the deployment to the Maldives. It did however state: “If you look at warships and other equipment, the gap between the Indian and Chinese navy is not large.”

Meanwhile the prospect for more critical infrastructure projects in strategic locations falling into Chinese hands has world governments on edge about how to manage China’s more muscular foreign policy stance. There is a widespread view Beijing is using the Belt and Road to extend its reach far beyond its borders.

German Foreign Minister Sigmar Gabriel warned world leaders and defence officials at the Munich security conference last Saturday not to underestimate Beijing’s strategic objectives.

He said while it was understandable China was relentlessly pursuing “a real global strategic idea,” he castigated the West for not creating “a new balance in our world order”.

Concerns like these have prompted other calls for a plan to rival the Belt and Road.

Japan and India launched the Asia-Africa Growth Corridor last May and there is momentum building for the revived Quadrilateral Security Dialogue – which involves the US, Australia, Japan and India – to establish an infrastructure scheme.

“Japan and India have been working on boosting infrastructure investment in the region for some years and the Quad is seen as a good way of broadening that to include the US and Australia,” says David Brewster, a senior analyst with the National Security College at the Australian National University.

“It’s still at a very conceptual stage.”

The problem for any rival plan is that China has been massively investing in infrastructure at home for the past 40 years. Beijing, through its state-owned banks and construction companies, has the expertise and funding to get projects done and it also has the political will. While Japan has a large budget for infrastructure, it’s more rigorous government and planning procedures inevitably slow down the roll out.

Kalai Pillay, a senior director at Fitch Ratings, who worked on a lengthy Belt and Road report last year, says it’s difficult for other countries to compete with China in speed and scale when it comes to global infrastructure investment.

“In China the banks are owned or controlled by the same people who control the construction companies,” he says. “They can package and provide everything in one go. You can’t do that in the US, Japan and Australia.”

This strong backing from China’s government for the Belt and Road means uneconomic projects are able to attract interest and funding.

“The economics doesn’t stack up on a lot of these projects,” says Brewster. “Traditional international funding agencies are passing on them.”

Pillay agrees many of the projects China is investing in won’t be commercially viable.

“These countries do need the infrastructure but they are being sold stuff they cannot afford,” he says.

“For some countries this is a substantial part of their GDP. China provides low-cost funding but when they can’t pay it back what do they have to do? Hand over the asset. That’s what happened in Sri Lanka and it could also happen in Laos. Many of these projects are too large. They need it but they can’t afford it and that’s why it’s never been built.”

For China, the main goal is not investment returns.

The Belt and Road initiative was first flagged by President Xi Jinping in 2013 as a plan to create new trade routes via a “belt” linking China overland to Central Asia, Russia and Europe and a maritime “road” connecting it to Southeast Asia, India and Africa. It has since become the government’s signature foreign policy and last year it was even included in the Communist Party’s constitution, a sign of its importance to the leadership’s long-term planning.

It is not just about commerce. There are clear geo-strategic aims.

Take the China-Pakistan Economic Corridor, for example. A trade route through Pakistan offers China an alternative and shorter way to access the Indian Ocean, reducing its reliance on the Strait of Malacca. This maritime route to the Middle East, Africa and Europe is controlled by the US and Singapore as far as Beijing is concerned, leaving the country vulnerable to a blockade in times of conflict. Most of its energy imports come from the Middle East.

Nick Bisley, executive director of La Trobe Asia and professor of international relations, says there are a few layers to the Belt and Road. It is about improving the economic situation in underdeveloped parts of China and soaking up excess capacity but it is also a quasi-development program for the region.

“The idea being that places like Pakistan, Kazakhstan and Bangladesh are better equipped economically which means they are less likely to be unstable and their economic interests will be aligned with China,” he says noting “this is the same idea behind the World Bank”.

However, Bisley says “the most important thing China is trying to achieve is for a reduction in the vulnerability of its maritime approaches”.

“If there are multiple doorways into the China market it reduces that vulnerability and gives it a strategic depth it doesn’t already have,” he says. “That makes it harder for the US or other countries unsettled by China’s rise to pressure Beijing.”

China’s response to the Maldives crisis has been telling.

“It represents China being ambitious and operating outside of its traditional domain,” says Bisley.

“It shows the new-found confidence Xi Jinping is bringing to the table. If [former president] Hu Jintao was running the show, this would have been hosed down already.”

Brewster says while the US remains the biggest military power in the region, it is dealing with a much more complex environment and one of the biggest changes has been China’s move to build a military presence in the Indian Ocean. Last July, China opened its first foreign military base in the East African nation of Djibouti and it is expected Beijing will look to build others, which may include somewhere in the Maldives.

“There is certainly concern that China might want to bring its island-building ship and build an island that could be used for military purposes,” says Brewster. “If you look at the development of Chinese military facilities across the Indian Ocean region, they need a facility in the central and eastern Indian Ocean if they’re to cover the whole region and the question is where. Countries like Sri Lanka and the Maldives are the key candidates.”

However, Brewster says Beijing risks driving India to be more active in the revived Quadrilateral Security Dialogue, a grouping it opposes, which is being set up to manage China’s rise in the region.

“I think we’re increasingly going to see China testing India’s resolve in the Indian Ocean.”

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