*** South Asia: A Bump in the Belt and Road

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Editor's Note:

This is the second installment in a four-part series exploring the underlying motivations behind China's ambitious Belt and Road Initiative and the challenges that it will face.

As part of its ambitious Belt and Road Initiative, China is looking to build new inroads into South Asia. The region is rife with opportunity for Beijing. By establishing new security and economic connections with neighboring South Asian countries, China hopes to quell unrest in remote Xinjiang province. South Asia also offers an easy outlet for China's manufactured goods as the country weathers an economic slowdown. In the long term, moreover, the region would afford Beijing access to new trade routes outside the Malacca Strait and the contentious South China Sea. But of all the projects China has undertaken through its Belt and Road Initiative, its ventures in South Asia are the riskiest. The region's deep geopolitical divisions and security challenges could derail Beijing's plans there. And so long as India opposes China's activities in its traditional sphere of influence, the Belt and Road Initiative in South Asia will amount to little more than a bundle of bilateral deals.

Iron Brothers

China's vision for South Asia includes plans to link up the region through ports in Sri Lanka, a potential railway from Nepal’s capital Kathmandu to Lhasa in Tibet and the nascent Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC). So far, though, it has made significant headway only on the China-Pakistan Economic Corridor (CPEC). CPEC proposes to connect the Chinese city of Kashgar with the deep-water port of Gwadar on the Arabian Sea through a network of roads and railways. The plan also includes numerous energy projects and free trade zones. Since Chinese President Xi Jinping clinched the deal with Islamabad in April 2015, the CPEC has moved quickly into the implementation phase, and its first projects will reach completion this year or the next.

The CPEC's rapid progress is hardly surprising. China often refers to Pakistan as its "iron brother," an affinity that traces back to the Cold War, when the two countries worked to balance against India and helped each other's nuclear development in the 1970s and 1980s. The relationship is not free of tension, of course. Nevertheless, Pakistan's isolation in South Asia has made China an indispensible partner over the years. And CPEC is an unequivocal boon for Islamabad. The Pakistani government hopes the initiative, which will focus on building energy and transportation infrastructure along with free trade zones, will remove the barriers to growth and development that have held Pakistan back for decades.

At its signing, the deal was originally projected to entail around $46 billion in spending. Most of that amount — which has since climbed to $51.5 billion — has been earmarked for energy infrastructure, including a $2.5 billion natural gas pipeline to Iran. Pakistan faces an annual energy deficit of around 4,000 megawatts; demand for energy in the country, meanwhile, is growing at a rate of 10 percent per year. Energy shortages cost Pakistan an estimated 2 to 2.5 percent of gross domestic product growth in 2015. Through CPEC, China hopes to remedy this shortfall by adding an estimated 7,000 megawatts by 2018, building eventually to 16,000 megawatts.

In addition, several road construction and rehabilitation projects — also set to wrap up by 2018 — would enhance connectivity in Pakistan's geographic core and parts of its outlying regions. The corridor makes the most of the country's geography, with many of its projects following the Indus River southwest to the coast on the Arabian Sea, where an initiative to expand and connect the Gwadar port will reduce the strain on other maritime hubs in the country. It could also help Pakistan address some of its most enduring challenges. By connecting the ethnically distinct and impoverished provinces of Balochistan, Khyber-Pakhtunkhwa and the Federally Administered Tribal Areas to the country's Punjab heartland, the Pakistani government aims to increase economic opportunity and at the same time quiet unrest.

But Pakistan's geographic and ethnic tensions have already caused problems for the CPEC. Separatist militants in Balochistan have found the plan's infrastructure projects a convenient target to express their grievances. The opposition Pakistan People's Party, similarly, has accused the government of devoting more resources to CPEC initiatives in the country's predominantly Punjab regions. In response to the mounting regional strife, local governments have expanded policing along the corridor, while the Pakistani military has established a special task force and security division to patrol the Gwadar port and a nationwide special security division dedicated to protecting CPEC projects. Still, the militant and political dynamics will become only more complex as the project progresses, and more questions over the project's economic viability will arise.

Overcoming the Partition

Elsewhere in South Asia, Belt and Road will face equally daunting problems, including Afghanistan's continued disarray. The far greater challenge, however, will be securing India's cooperation on the matter. As much as the country wants to project power over its namesake subcontinent and establish strong, secure ties across its borders, it has struggled to do so in its modern history. India's partition in 1947 created lasting rifts with Pakistan and Bangladesh (then known as East Pakistan), which left its orbit after gaining independence. Nepal and Sri Lanka, on the other hand, have each sought support elsewhere to limit New Delhi's influence over their affairs. Despite its rapid growth and position at South Asia's geopolitical core, India has neither the economic clout nor the internal political coherence to overcome its domestic divisions, much less to become a powerful regional hegemon. And China's sway in its periphery threatens New Delhi's prospects for realizing that goal.

China's manufacturing prowess has already made it an important economic power in the Indian subcontinent. Today, the country is the top source of imports for Pakistan, Sri Lanka and Bangladesh, as well as India; between 2010 and 2015, China's exports to Pakistan doubled. By contrast, Bangladesh is the only South Asian country among India's top 10 export destinations, ranking ninth. India simply can't compete with China when it comes to regional trade. Nepal presents a good case study. After delaying for months to consult India, Nepal decided to sign on to the initiative ahead of the May 14-15 Belt and Road Forum. Ultimately, Katmandu said it could not pass up such a massive economic opportunity. Nor has it had much success with development projects in nearby countries. India's Chabahar port venture in Iran, for instance, has foundered while similar Chinese projects in Pakistan and in Sri Lanka have proceeded apace.

As China builds inroads through the region as a result of the Belt and Road Initiative, India must decide whether to throw its weight behind the campaign. Beijing would like New Delhi to participate in Belt and Road; in fact, the success of the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) partly depends on India's involvement. The plan, originally proposed in 1999 — long before Belt and Road — would connect Kolkata with China's Yunnan province, giving India the access it so desires to lucrative markets in Southeast Asia. By adding India to Belt and Road, China hopes to dovetail with the Act East Policy initiated in 1991, something the country's ruling Bharatiya Janata Party (BJP) has emphasized since it came into power.

A Tough Sell

The possible benefits notwithstanding, though, the Belt and Road Initiative also presents major risks for India. With even fewer barriers to trade in the region, Chinese goods could crowd out India's struggling manufacturing sector altogether. For that reason, New Delhi will be careful to keep Chinese imports from overwhelming its consumer market if it decides to join in on the Belt and Road Initiative. India's Cabinet has already passed a proposal mandating the use of domestic steel in state infrastructure projects.

Pakistan's prominent role in the initiative is the another deterrent for India. The rivalry between the two nuclear-equipped nations has become a defining feature of South Asian geopolitics, and it finds enduring expression in the dispute over Kashmir. India claims control of the region in its entirety, though Pakistan and China each administer portions of the territory. And it fears that the CPEC, which runs through Pakistan-controlled Kashmir as well as the Aksai Chin area under Chinese jurisdiction, will change the status quo in the contested region. As it is, the portion of Kashmir that India administers is home to a restive population and an active separatist movement; New Delhi worries that the CPEC will further undermine its authority there.

Chinese media outlets have suggested that Beijing could act as a mediator over the dispute between India and Pakistan in Kashmir — an idea that India balked at and Beijing quickly disavowed. Regardless, since it has no recourse to stop the CPEC's construction in Kashmir, India will have to face China's growing involvement in the contested area. To that end, the ruling Bharatiya Janata Party has long called for an end to Kashmir's special status under the constitution. 

In the long-term, India's greatest concern about the Belt and Road Initiative is that China will effectively encircle it by forging deep economic and security ties with the surrounding countries. New Delhi is also leery of China establishing a permanent presence at a string ports along the Indian Ocean, from Gwadar to Colombo, Hambantota and Chittagong. Given China's limited naval capacity — and its focus on maritime disputes in the South China Sea — doing so will probably be a lengthy undertaking. And as the protests (likely orchestrated with India's help) over China's port projects in Sri Lanka demonstrate, Beijing will face blowback in this endeavor.

The Belt and Road Initiative puts New Delhi in a difficult position. India will face risks whether it joins in the endeavor or continues to oppose it. New Delhi's decision not to send any representatives to the landmark May 14-15 Belt and Road Forum is a sign that it will continue to bide its time, though, waiting to see how these projects evolve and perhaps choosing to step up its efforts to limit the extent of China's creeping influence in the meantime. Even if it can't stop the Belt and Road, India can at least work to complicate the projects in South Asia by stoking unrest in Sri Lanka and tensions in Pakistan's peripheral regions, for example. New Delhi can then use this leverage to try to sculpt Belt and Road to align more closely with India's interests. For China, these efforts will complicate its vision for the region.