Category: India

How Nepal Turned to China to Fill its COVID-19 Vaccine Shortfall

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Shreha Gupta, Research Intern ICS

Image: Vaccine diplomacy and Nepal
Source: Griffith Asia Institute

Nepal’s vaccination drive against COVID-19 began on 27January, 2021 with the Oxford-AstraZeneca vaccine manufactured by the Serum Institute of India (SII) under the brand name Covishield. The campaign was launched with the one million doses of Covishield that India had provided under grant assistance in sync with its ‘Neighbourhood First’ Policy and ‘Vaccine Maitri’ Initiative.

On 17 February, 2021, Nepal signed a contract with SII and made the advance payment to procure two million doses of Covishield, out of which only a million doses were delivered.  According to a report by Reuters, India had put a temporary hold on all major exports of the AstraZeneca Coronavirus shot made by SII to meet rising demands at home amid the raging second wave of Coronavirus. The second phase of the vaccination drive that began on 7March, 2021 was left in limbo, despite the country becoming one of the first in the world to launch the campaign.

However, India denies that restrictions were imposed on vaccine exports and maintained that it was trying to prioritise the demand at home. “India has not enforced any restrictions on exports of Covid-19 vaccines,” said Arindam Bagchi, spokesperson for the Ministry of External Affairs of India during the weekly press briefing on 2April, 2021. “We will export vaccines taking into account the domestic demand”, he added.

Following the inability expressed by SII to provide vaccine until the end of this year, the COVAX facility which is a vaccine pillar of the Access to Covid-19 Tools (ACT) Accelerator in partnership between Coalition for Epidemic Preparedness Innovations (CEPI), the Global Alliance for Vaccines and Immunization (GAVI), UNICEF and WHO, suggested that Nepal should explore appropriate alternatives apart from the Covishield vaccine.

Nepal began looking towards China to fill its vaccine shortfalls amid uncertainty over COVID-19 vaccine supplies from India. China had donated 1.8 million Covid vaccines developed by Sinopharm in two different grants of 800,000 doses and 1 million doses. On 29March 2021, Nepal received China-gifted 800,000 doses of vaccine as per the commitment of providing 500,000 doses made on 5February 2021 during a telephonic conversation between the foreign ministers of China and Nepal. Later, China decided to provide an additional 300,000 doses which increased the grant assistance of the COVID-19 vaccine for Nepal to 800,000 doses.

On 1June 2021, Nepal received another consignment of 800,000 doses of Vero Cell vaccine developed by the Chinese state-affiliated pharmaceutical giant Sinopharm, out of the 1 million doses of vaccine which were earlier announced to be provided on a grant basis as per the commitment made during a telephonic conversation between presidents of the two nations on 26May, 2021. The remaining 200,000 doses of the Vero Cell vaccine has been provided to Nepal by the Government of the Tibet Autonomous Region of China, Nepal’s Ministry of Foreign Affairs stated in a release.

Nepal has also bought four million doses of the Vero Cell vaccine from China under an agreement with a non-disclosure clause, of which 800,000 doses have been received on 9 July 2021. On 16July, Hou Yanqi, Chinese Ambassador to Nepal informed the newly-appointed Nepalese Prime Minister Sher Bahadur Deuba that China will provide additional 1.6 million doses of the COVID-19 vaccine to Nepal in grant assistance. With this announcement, China has become by far the largest vaccine donating and exporting country to Nepal.

Ashok Pandey, Associate Research Fellow in Policy Research Institute mentioned in his Research Report that vaccine donations made by India helped to strengthened Nepal-India relations but the delay in the procurement thereafter and news of corruption in vaccine procurement began to reverse the gains. He also mentioned that the gesture of one million vaccine donations from China was widely appreciated in Nepal at a time when the country was in dire need of the vaccine.

Beijing’s vaccine diplomacy will benefit its competition for influence in South Asia where India has traditionally been the dominant power. According to an article published in Voice of America (VOA), analysts have pointed out, “China moves in to fill the gap left by India, Beijing’s “vaccine diplomacy” could give it leverage in the strategic Indian Ocean region, where it has been pushing its Belt and Road initiative that aims at building infrastructure projects across many countries”.  

Michael Kugelman, the Deputy Director of the Asia Program and Senior Associate for South Asia at the Wilson Center pointed out that China views its vaccine diplomacy as an image-building tactic and India’s suspension of vaccine exports is a strategic opportunity for China.

In his article published in The Himalayan Times, retired Nepali Army lieutenant colonel Ashok Kumar Khand mentioned that the economic giants like India, China and the United States are “trying to regain a foothold in the countries of their interest or influence in the name of humanity through vaccine donations”. According to him, “the vaccine donation gives China a key to deter India’s monopolistic political influence over Nepal, counter the Indo-Pacific Strategy of the United States and the QUAD policy, and push the ambitious BRI project forward”. He added, “Winning the Nepali sentiment for India, aligning the Nepali view with that of India against China’s expanding influence in South Asia, including the Belt and Road Initiative (BRI), and control of Nepali politics from behind the curtain could be the hidden agenda behind India’s vaccine diplomacy”.

Prime Minister Narendra Modi held a telephonic conversation with Prime Minister Deuba on 19 July 2021 and assured early supply of covid vaccine to Nepal but India’s image as a vaccine-giving nation and its soft power gains has been dented and could be further damaged if there is a long delay in exporting vaccines. As the world’s largest producer of vaccines, India is expected to ramp up enough capacity to resume vaccine deliveries to other countries in addition to meeting the requirements at home. Michael Kugelman pointed out that New Delhi has the opportunity to reassert itself further down the road and India has an inherent comparative advantage over China because it is the world’s top manufacturer of vaccines. Another advantage India’s locally produced vaccine has over Chinese vaccines is its affordability. Although the price of the Chinese vaccine has not been disclosed owing to the non-disclosure clause, it is said to be around $10 per dose whereas, Nepal bought the jabs from the SII at $4 per dose.

India had an early movers advantage because it moved in with the commitment of initial large supplies but it lost ground due to the inability to provide vaccines either on a grant basis or fulfil commercial commitments made by SII. Nepal gave priority to vaccines produced in India because of reasons like, logistics, pricing, existing storage and transportation facilities in Nepal and India’s assurance to facilitate procurement but India’s inability to provide vaccines have created a vacuum that was filled in by China. According to Harsh Pant, Director Studies and Head Strategic Studies program at the Observer Research Foundation in New Delhi, “Given that this crisis will be with us for the foreseeable future, certainly there is going to be a sense of China becoming a very important player for many of these countries if India is not able to pick up some slack after a few months once things stabilize”.

Nepal is still far from achieving the required inoculation for its population. According to the latest data (14th September 2021) of the Ministry of Health, 5243236 people or 17.4% of Nepal’s 30 million population have been fully vaccinated. The lost ground could still be retrieved if India can ramp up its vaccine producing capacities and resumes providing vaccines to Nepal. It will be in India’s interest to prioritize inoculating the Nepali population because the two countries share an open border and uninoculated people crossing the India-Nepal border on a daily basis could surge the coronavirus cases in both countries. In addition, India should also take lessons from the 2015 border blockade which pushed Nepal into China’s lap and be cautious about China’s attempt to fill the gap in vaccine shortage.

************************************************************************The author is thankful to her mentor, Ambassador Ashok K. Kantha, Director, Institute of Chinese Studies and former Ambassador of India to China, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.

How Nepal’s Immediate Neighbour Takes Opposite Approaches to its Political Crisis

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Shreha Gupta, Research Intern ICS

Source: Myrepublica

On 20 May 2021, the Supreme Court of Nepal intervened and overturned the decision of dissolving the Parliament in another landmark verdict. The verdict ordered the appointment of Sher Bahadur Deuba, Nepali Congress President, as Prime Minister.  Deuba was sworn in as Prime Minister on 13 July, 2021. Earlier, on 21 May, President Bidya Devi Bhandari, on the recommendation of the then Prime Minister K.P. Sharma Oli had dissolved the Parliament and announced mid-term polls on 12 and 19 November, 2021.

Nepal had plunged into political turmoil twice after Oli’s contentious recommendation to dissolve the Parliament on 20 December, 2020 and again on 21 May, 2021. In February, Nepal’s Supreme Court intervened and ordered the reinstatement of the Parliament that was dissolved on 20 December, 2020. This came as a setback to Oli who was already preparing for snap polls. Nepal’s highest court reinstated the Parliament for a second time in just five months.

The political crisis in Nepal has created a measure of uncertainty in the Indian and Chinese policies towards Nepal. The two countries have followed different trajectories in their response to Nepal’s domestic developments in the recent past. China, despite their claim of non-interference in domestic affairs have shown a keen interest in Nepal’s political crisis, whereas India, despite having been accused of interfering in Nepal’s internal matters in the past, has decided to step back and wait for the situation to unfold.

In December last year, Hou Yanqi, Chinese Ambassador to Nepal met with Nepalese President, party chair Pushpa Kamal Dahal and Standing Committee member, Barsha Man Pun after dissolution of the House of Representatives.  Earlier in May and July, she had held a series of meetings with top party leaders including Oli and Dahal in a failed attempt to reunite the Nepal Communist Party (NCP).

On 27 December 2020, China had sent Guo Yezhou, a vice-minister of the International Department of the Chinese Communist Party to Kathmandu to take stock of the political situation. The visit came at a time when China was concerned over the political stability in Nepal and the unity of the NCP. China was also concerned that the political crisis in Nepal could threaten to reverse the gains made after President Xi Jinping’s visit in October 2019 as it was instrumental in taking China-Nepal bilateral relations to a new height.

The Guo-led delegation had met with President Bhandari, Prime Minister Oli, Nepali Congress President Deuba and chair of the other faction of the NCP, Pushpa Kamal Dahal. The Chinese delegation reportedly wanted to explore the possibility of a reunion between the two warring factions of the NCP, the reasons behind its spilt, its impact on Nepal-China relations and the possible road ahead for the future political course in Nepal. The Chinese team had to return empty-handed after the NCP factions failed to bury the hatchet.

While China sent a high-level delegation to Nepal to persuade the rival factions of the NCP to stay together, India stated that Nepal’s political developments are its internal matter and it is for the country to deal with them under its domestic framework and democratic processes.

On 6 February 2021, the Chinese Foreign Ministry issued a press statement in the context of a telephonic conversation between Nepalese Foreign Minister, Pradeep Gyawali and Chinese Foreign Minister, Wang Yi. According to the statement, Wang Yi said that China adheres to the principle of non-interference in the internal affairs of other countries and respects the path towards development chosen by the people of Nepal.  “As a friendly neighbour, China hopes that all parties and factions in Nepal will bear in mind the fundamental and long-term interests of the country and its people, seek common ground while shelving differences, and maintain unity and stability, so as to create favourable conditions and environment for its own development and prosperity,” the statement added.

Although Wang Yi claims China’s adherence to the principle of non-interference in the internal matters of other countries, observers in Nepal don’t agree with it. Political analyst Uddhab Pyakurel criticised China for meddling in Nepal’s internal matter. “No matter what the Chinese side say to justify their visit to Nepal, we all know that they are trying to interfere in Nepal’s internal affairs. For this, NCP leaders and Nepali media, which helped build the narrative that Chinese leaders had played a role in unifying the erstwhile CPN-UML and CPN-Maoist Centre, are responsible,” he said. He was concerned that Chinese activities would turn Nepal into a strategic playground in its tiff with India and other western powers including the United States of America.

Analysing China’s recent actions, Political scientist, Dev Raj Dahal stated that China is using its soft power by sending CPC leaders to influence Nepal. He added that China was alarmed about the security and stability in Nepal as Nepal shares its border with the Tibetan Autonomous region, ‘the geopolitical loophole of China’. He said that China is concerned about stability in Nepal also because it is interested in doing business with India’s vast market through Nepal. This would be possible only if Nepal remains politically stable.

China’s meddling in Nepal’s domestic politics has drawn international attention. Some foreign diplomats in Kathmandu viewed China’s brazen interference as a demonstration of its growing influence in Nepal’s internal matters while India’s decision to steer clear has been appreciated by former diplomats. “India, which is usually the whipping boy of their politics is correctly staying out of the picture, while China attempts to involve itself in their politics,” said Manjeev Singh Puri, former Indian Ambassador to Nepal.

There could be several reasons why India preferred to keep a low profile and refused to take sides in a political tug of war between different parties in Nepal. In the past, India has been seen as trying to meddle in Nepalese politics which hasn’t been received well by people in Nepal.

To reiterate, China had invested in buttressing the Oli government which has now been ousted. In the short term, recent developments in Nepal could result in a limited setback for the Chinese policy towards Nepal. However, these developments have not fundamentally undermined China’s position in Nepal. China’s ambitious Belt and Road Initiative (BRI) and its ongoing and proposed involvement in hard infrastructures, including highways, bridges, airports, hydroelectric projects have significantly helped China entrench its presence in Nepal. China has also built up its soft and sharp power in Nepal in recent years. The latest change in government is unlikely to have a major impact on China’s position in Nepal.

India’s present policy of non-interference with regard to Nepal’s political crisis is serving India well. The change in government will help India to some extent in developing its equities in Nepal as it has been given credit for not interfering in Nepal’s domestic affairs. Durable political stability in Nepal augurs well for India whereas, instability will only pave way for inimical external influences. India must encourage the strengthening of a people-driven polity, invest in reinforcing its considerable linkages and synergies in Nepal and work towards improving its image that has been hampered in recent years. It is important for India to avoid being perceived as partisan and adopt the strategy of detached pragmatism rather than proactive involvement.

Interview of Aparna Pande on her book ‘Making India Great: The Promise of a Reluctant Power’

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Yash Johri, Research Assistant, ICS

Q1. In your first chapter you illustrate an incompatibility between the prevailing nationalism and India’s ability to effectively engage with the world community? Can you please explain this further; particularly given that nationalism in India has been electorally validated as well as the fact that it has been on the rise across the world.

I accept both presumptions, nationalism, populism and protectionism are in ascendance across the world, including in the United States where I currently reside. India isn’t unique, however, there are differences, the United States has strong institutions, the American media, judiciary as well as the political parties provide an adequate balance of power to the executive. In the Indian scenario, these institutions aren’t commensurately strong. While our founders put us on the path of a constitutional democracy in practice, we are far from achieving the same. Conversely, there has always been an alternative idea of India which we see has gained electoral validation from the late 1980s onward.

The reason I say it matters today is because we are no longer in the post-cold war era, we live in a world where anything happening around the world is on social media within a very short span of time. At a time when the world is looking at India as a counter to China, as a democratic model for the rest of the world, ally and partner with the United States or other South East Asian countries as well as to be a model developmental state within our own neighborhood, we cannot say that what is happening within cannot impact what’s happening without. Domestic politics impacts foreign policy.

If India wants to be seen as a regional power and wants acceptance from its South Asian neighbors (Bangladesh, Nepal, Sri Lanka, Maldives, Afghanistan, Pakistan, Bhutan) as well as from countries of Central Asia and Middle-East and seeks to project its power in the Indian Ocean Region and beyond then the vision of India portrayed to the outside world, has to be one that our neighborhood, extended neighborhood and the world is comfortable with. We may not like this and may say that our electorate has chosen us and others don’t have a right to criticize, but the world in the past has looked at India as a democratic, plural, multi-religious and multi-ethnic nation which despite numerous fissiparous tendencies managed to sustain high rates of growth.

Q2. Numerous analyses of India often compare it to the development story of China and how it lags behind on numerous measures, the book uses a number of these measures in the second chapter on human capital. However, India is an electoral democracy and it is true that a number of the government’s initiatives will work towards serving the platform which has elected it to power – yet at the same time the Indian people do trust the Prime Minister to deliver reform and a better standard of living. For all the criticism, the incumbent government is working on numerous initiatives such as Aayushman Bharat, National Digital Health Mission, Swachh Bharat Mission, a new National Education Policy, repeal of the Essential Commodities Act, on the digital front there’s been unparalleled global investment in the country even if its been to one corporation. Therefore, even though one can rightly question his politics, it has delivered to the country political stability. Further there is criticism on execution, that the entire government’s work can’t be remote controlled by one office and that enough ministers and domain experts are not empowered enough, is this hindering the process?

I’ll take the second part of your question first, if you are referring to the recent exits of Economists then yes, it is something which institutions like the World Bank and International Monetary Fund closely monitor. Rating agencies like Moodys and Standard & Poor also observe and ascertain who is really making decisions about the economy, they keep a close tab on the management and health of the country’s economic institutions such as the RBI and Finance Ministry.

As to the first point, I don’t understand how these new initiatives counter the arguments that I have made in my book. Forget about China, over the last few decades Bangladesh has done a better job in literacy than India has done, why is that? The question isn’t about who you are being compared to, the comparison with China is important because they are who we always benchmark ourselves against. Let’s take one step back, which of these areas have we done a good job in the past. There’s a lot that’s been started now that could have been started 6 years ago, the reason I say this is that Covid has brought to light the many glaring deficiencies in both education and healthcare. The more literate a society the better it responds to crises and listens to experts, my argument primarily is at the core one has to rebuild institutions, we have to invest in people at the primary and secondary level. We need to build the skill capacity, and this has a long gestation period. The question is why is it that even when we start and talk about reforms, we rarely bring them to fruition?

Let us give an example there are numerous policies from the UPA years, such as MNREGA. At the end of the day if an industrialised country is supposed to have 60% skilling of the workforce and India has just 7% there is a real problem which has national security implications. If you fix the primary and secondary school systems along with skills and basic healthcare there’s a lot that will take care of itself. One will not have to worry about finding a job if he/she has skills. Our challenge is that we need vocational training to provide a productive outlet for the 1.3 Billion persons of our country.

Q3. You state that there is a mismatch in strategic planning, between the civilian and military arms of the government. However, what do you think about the latest reform that’s been brought of a negative import list in the realm of defence? Do you feel that this is a result of policy being created by the newly formed office of the Chief of Defence Staff (CDS) that wishes to address this very problem by bringing civilian and military personnel under one roof or is it just further encroachment on the independent institution of the army by the political leadership?

We will have to wait a few years to see how India’s CDS and the new Department of Military Affairs (DMA) actually works. Given the strong British legacy that continues to persist in our armed forces we haven’t ever had such an office that brings civil and military actors under one roof to jointly pursue strategic goals. There have however been integrated headquarters and there has been some coordination. So, it will take a few years to find out really how effective the CDS will be? We have to bear in mind the fact that most of the new capital acquisitions will not be under CDS and DMA therefore the jury is still out. There is a likelihood that the CDS can actually bring about the coordination that India needs and there’s a chance that it doesn’t really work. We have to wait a few years to see that.

What I would say is three things. First, at the end of the day what matters is how much money we allocate to the military. If we are spending only 1.5-1.7% of our, as of now, shrinking GDP the majority of which goes in salaries and pensions, we are going to have almost nothing to modernise and purchase new equipment. Almost 65%-68% of military equipment is outdated. The People’s Liberation Army (PLA- China) which is sitting on our border and has taken our territory has allocated large funds and has rapidly modernised. If we don’t increase our budget allocations the CDS will not have the money and resources to do what he needs to do. Second, in addition to the office of the CDS what we also need is to build a systematic method of working whereby the country can plan not just a few months ahead but 10-20 years ahead for each of the services. Third, is going to be the question of what purpose is achieved by adding a layer of bureaucracy to perform powers and functions that are already being performed by the incumbent Chiefs of the Army, Navy and Air Force on the military side and the defence officials in the Raksha Mantralaya on the civil side.

Budget allocations at the end of the day are indeed a deeply political exercise. However, there is an important need to ingrain a strategic culture that becomes a mainstay in defence allocations and isn’t affected by the whims and fancies of politics. Forget external events, to deal effectively with our internal insurgencies of Naxalites, North-East, Kashmir the fight begins in the correct allocation of resources. Secondly, for us to be able to continue to fortify the foundation of our national security, it is essential that we meet the challenges of developing our economy further

At end of the it is our country. It’s like, it’s your house. The house may have certain problems and you may need to you know, rebuild the floor and you may need to breakdown a wall and build a new one, but it’s your house at the end of the day. So, you care about it, you invest in it, and you want it to last, there’s a pride in it. At the end of I’ve written this book because, I really do believe India can become great, but like most Indians my concern is that to do that we are lagging and need to accomplish things, so this is a wake-up call. My duty is to ask the questions to provoke people to start thinking about the same.

Q4. To what extent do you believe that the recent events in Ladakh between the Indian and Chinese armies have hastened India’s western embrace? Do you agree with people like Gideon Rachman, who’s recent op-ed in the Financial Times states that India has picked a side in the new cold war, because Foreign Minister Jaishankar in a recent interview on the 20th of July has stated that non-alignment was a term of a particular era and geopolitical landscape but that India will never be a part of an Alliance? While there may not be a de jure alliance, but on the ground what strategic formation do you see taking place?

I would come more on the Jaishankar side of this debate. I don’t think that we have picked a side. We have had a close relationship with the West for decades, from the 1990s our relations with not just the United States but with the United Kingdom, France, Germany as well as American allies to our East. So, I would say, its not a question of India making a Western embrace, what I would say actually is that if China thought it could teach India a lesson and India for its growing proximity to the Western liberal order then I think it has miscalculated. We are not going to stop catering to our national interest which we have been pursuing in the past, which is building closer relationships with countries with whom it sees strategic, economic and cultural ties benefitting itself. However, that won’t stop India from having a relationship with the Russians or with Iran even though these countries face western sanctions. I also believe a further deterioration of relations with China is only detrimental to our national interest. But I don’t believe it is a western embrace. I believe we are already quite close to the US and many of the western countries.

Due to connectivity and inter-dependence the question of picking a side today compared to the Cold War era is very complex and challenging one. During the Cold War there were no global supply chains, the NATO and Warsaw Pact spheres provided economic aid to help development in their respective countries. It was basically the Soviets giving us aid or helping us set up factories. Today except for in the defence industry where we are dependent on the supply parts, we don’t have a supply chain Relationship with Russia. The difference is that China has since the early 90s built a strong trading relationship with most countries, further with its new initiatives of Belt and Road it is building a strong foreign investment relationship as well. Therefore, in practice, it is very difficult to decouple.

Experience of Chinese Technologies and Products for the Industries of Eastern India

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Amitava Banik, Research Intern, ICS

Source: Indian Industry Plus

China’s progress in manufacturing

China is considered as the world’s manufacturing powerhouse. China had been successful in building infrastructure supporting world corporations to make their products in the country. Over time, the world’s leading companies have shifted their manufacturing assembly lines to China. Also, the home-grown manufacturing industry in China is itself quite big. China is successful in manufacturing and exporting a whole range of products from simple electronics to complex machineries.

According to Yue and Evenett (2010), China attracted huge FDIs between 1979 to 2007 of which 70 per cent went to the manufacturing industry. The concentration and development of the global value chains of all industries, including the high-tech industry, on the eastern coast of China have boosted the country’s exports, resulting in the “Made in China” phenomenon.

Multinational corporations such as Siemens have set up facilities for assembly and manufacturing of many of its products including high-end medical equipments such as CT Scanners for their South Asian market in China, taking advantage of low manpower cost and good connectivity networks. A world-renowned instrumentation company such as Yokogawa of Japan, manufactures and exports their meters and oscilloscopes from China. The Chinese are considered to be good with reverse engineering capabilities, which have helped grow a lot of domestic manufacturers across industrial sectors.

China’s market for capital goods and spares in Eastern India

The Chinese machineries and capital items occupy the top of India’s list of imports from China valued at US$ 19,103(2019-20). Unlike China, the global multinationals are more focused on making India a marketing hub for catering to the huge domestic market of India and South Asia rather than India being a global manufacturing destination. Thus, India’s manufacturing capacity for capital goods like other high technology products is low.

In Eastern India, where there is dearth of both capital and new industries, China has successfully filled the vacuum to some extent with its cheaper and competitive products and industrial solutions. According to a survey conducted by the author, traders and businessmen are of the view that there could be further enhancement of Chinese market in this part of the country if the Chinese companies could set up manufacturing and assembly lines for their products – both capital goods and spares in Eastern India. China has made considerable inroads into the industrial market in Eastern India both for high value capital goods as well as low value tools and spares. However, there is dearth of specific data on import of capital goods and spares parts from China by the industries of Eastern India, so this assumption is based on practical experience and field survey as illustrated in Table 1. According to some of the users interviewed from these industries, the satisfaction level of the industrial customers and the value for money proposition is good for Chinese products and their installations. The traders interviewed are of the opinion that easy loan and financial credit facilities are available for buying Chinese machineries. Companies such as Donfang Electric Corporation doing power projects have also set up offices in Kolkata to oversee their projects, marketing, and customer services, etc. The traders are vocal about dealing with China’s ease of doing business. According to them, it is easy to get dealership of Chinese companies and start doing business with them, and Chinese manufacturers are also prompt in responding to trade or dealership enquiries.

Eastern India is primarily a mineral rich belt of India producing steel, ferroalloys, power, etc. Earlier, most of the installations in old plants had been of Russian, US or German technology, but now most of the plants, particularly those built on private investments are using Chinese technologies (Refer Table 1). Even in many of the tenders called by the central and state PSUs*, Chinese companies are the lowest bidders and many of them are ordering Chinese products.


Just like industrial installations of capital goods in Eastern India, Chinese manufacturers have made considerable penetration into the market for low-end manufactured products, tools and spares. The trading communities in Kolkata and other places import Chinese products at lower price and sell them in the market at a premium and make considerable fortune. The result of the survey of a leading bearing trader in Kolkata is put up in Table 2.

Present Situation

The military standoff situation like the recent Galwan Valley clashes and its aftermath creates anxiety among the trading and industrial community, which affect business sentiments. As the Chinese influence is currently highly embedded in Indian economy, trade and commerce, complete decoupling may be expensive for India especially in the present Covid-19 pandemic scenario. However, though decoupling is tough, at the same time it is not possible to entirely ignore border and security issues in the face of economic or business considerations. Thus, India needs to look at economic growth with leverage on China.

Conclusion

Chinese economy (about US$ 14 trillion) is much bigger than that of India (about US$ 3 trillion). India is home to 1.3 billion people (17 per cent of world population) but has only 3-4 per cent of the world GDP. Although the two countries try to co-operate on several international forums such as WTO, BRICS, G20 etc., strategic rivalry is visible. This shows that while there is an understanding on many common matters of concern, the two economic giants sharing a common boundary and geopolitical and historical landscape are often at loggerheads on issues of diverging interests, geopolitical and economic ambitions.

In view of the evolving world order during the pandemic, several multinational companies are looking to relocate their manufacturing facilities out of China. It may be an opportunity for India to pitch in and fill the void by offering incentives to these corporations as well as to Indian corporates for setting up more manufacturing facilities in east and northeastern parts of India, and other untapped industrial belts. This may also help in developing these deprived regions as new industrial pockets. If this happens, it would lead to overall growth and development of these regions and augment the value chains for the industries.

Abe’s imprint on India-Japan relations: Speculating the future of bilateral relationship post Abe

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Shamshad A. Khan, Visiting Associate Fellow, ICS, New Delhi and
Assistant Professor, Department of Humanities and Social Sciences, BITS Pilani Dubai Campus.

Weeks before a scheduled virtual India-Japan summit meeting, Japanese Prime Minister Shinzo Abe’s announcement to step down from the office citing his deteriorating health, have been received as a surprise and shock in India. As the ruling Liberal Democratic Party is engaged in electing Abe’s successor, it is unlikely that the meeting will be held on scheduled time. Ministry of External Affairs is also non-committal about the scheduled meeting. Irrespective of the cancellation of virtual summit meeting, Abe’s absence will be felt in India and especially the Indian strategic circles for a long time to come even though his departure is unlikely to derail the bilateral engagement process.

When it comes to India-Japan relations, Abe is regarded very high among the Indian strategic circles and media for strengthening the bilateral relationship. Undoubtedly, Abe has played a leading role in strengthening India-Japan relations during his previous short stint which ended in 2007 and during the present term which started in December 2012. He attached special importance to India-Japan relations much before he assumed the top post. While he was still serving as a Japanese Cabinet Secretary during Junichiro Koizumi’s regime, he envisioned in his most talked about book “Towards a Beautiful Japan” that in the coming decades India-Japan relationship will “overtake” Japan-US and Japan-China relations. He had developed deep emotional connect with India as we witnessed that New Delhi figured prominently in almost all his key policy strategies starting from confluence of the two Seas, (now evolved as Indo-Pacific) Asia’s Democratic Security Diamond and the Quadrilateral Initiatives envisioned in 2007 and revived in 2013. Why India was so special to Abe? Tomohiko Taniguchi an advisor to the prime minister and an speech writer for Abe once told this author that Abe spent his childhood with his maternal grandfather Kishi Nobusuke who held India in high esteem shared his memories of his India’s visit to Abe especially how India treated him when he visited India on his first overseas visit in 1957.

Indian Prime Minister Nehru offered Kishi Nobusuke a big platform to address a large gathering of Indian audience from the rampart of the historic Red Fort from where only the Indian Prime Ministers address to the nation on every Independence Day. At that time, the memory of Imperial Japan was afresh among the Asian countries and no Asian country was keen to give such a platform to a Japanese leader and Kishi Nobusuke was moved by this gesture offered by the Indian leadership. In a speech delivered at New Delhi based Indian Council of World Affairs in 2011, Abe noted that his grandfather’s visit to New Delhi before embarking on a US trip provided him much needed “political capital” to bargain with America with whom Kishi was going to renegotiate the revision of US Japan security treaty. While the Cold War politics dampened the chances of fostering a closer cooperation between India and Japan, Abe driven by the emotional connect and compelled by the strategic needs saw India as an inalienable partner in Japan’s National Security Strategies and Defense planning. Japan’s first National Security Strategy unveiled during Abe’s second term in September 2013 noted India’s ascendance and considered it as an important player to strengthen its relations “in a broad range of fields, including maritime security, through joint training and exercises as well as joint implementation of international peace cooperation activities.” Considering the fact that from Kishi to Koizumi, America was considered ‘first, second and third’ important country for Japan, the special importance Japan acceded to India during Abe’s period was considered as Japan’s acceptance of India as an important partner.

Abe, indeed, invested his energy to strengthen India-Japan relations when he assumed office after Koizumi left the scene soon after signing the bilateral Strategic Partnership in 2006 which gave much needed institutional backing to Japan’s relationship with the south Asian country. But he could not leave a mark on the bilateral relationship during his first stint as Abe held only one summit level interaction with the then Indian Prime Minister Manmohan Singh. In his second term in office, India-Japan relations progressed in a faster pace as Abe held seven summit level interactions with his Indian counterparts- two with Manmohan Singh and five with Narendra Modi. At the bilateral level, signing of the long pending India-Japan civil nuclear cooperation agreement, upgrading the ‘two plus two’ strategic dialogue to ministerial level, an annual Maritime Affairs Dialogue, an in principle agreement on Acquisition of Cross Services Agreement which will give a fillip to bilateral defense cooperation, signing the contract to lay first Shinkansen project between Mumbai and Ahmedabad and upgrading the currency swap agreement to 75 billion US dollar are a few agreement during his last tenure which will be remembered as Abe’s legacy on India-Japan relations. At the multilateral level he pushed for a greater cooperation with India by identifying New Delhi as an important partner including in Asia Africa Growth Corridor, Indo-Pacific, UN Security Council reform

Since Abe has left a deep imprint on India-Japan relations, it is quite natural that Indian media and New Delhi is missing his presence and is speculating the fate of India-Japan relationship post Abe. In the past, similar concerns also came to the fore in 2009 from the Indian strategic circles, when Japan was undergoing a regime change and in Japan in 2014 when change of government was certain in India. Since the Liberal Democratic Party which has forged the strategic partnership with India in 2006 lost power to the Democratic Party of Japan (DPJ)-a party which sought to forge an equidistant security relationship between the US and China, it was believed that India-Japan relationship will be derailed. For those who believed that India-Japan relationship is a byproduct of a burgeoning US-India relations post Indo-US nuclear deal, it was quite natural to believe so. But belying those speculations, the DPJ showed keen interest in taking the bilateral relationship forward. In fact, the negotiation on the civil nuclear cooperation agreement started during the DPJ regime and a landmark Comprehensive Economic Partnership Agreement to uplift abysmal bilateral trade volume was signed. Similarly, when Manmohan Singh who is considered as an architect of modern India-Japan relations had various official meetings with Japanese government in the capacity of Finance Minister and Prime Minister of India, questions were raised about the fate of India-Japan relationship post Manmohan Singh. But the ruling Bhartiya Janata party continued the momentum in the bilateral ties and deepened it further. This is enough to suggest that India-Japan relationship enjoys a bi-partisan support both in India and Japan and will remain immune to the political changes at the domestic levels. Moreover, India-Japan relationship is no more personality driven as was the case during the Cold War period.

The bilateral relationship is much more “institutionalised” as both the countries have made a commitment in 2006 strategic partnership to hold a prime ministerial level meeting annually and it is evident that the change of government has not had any negative impact on the bilateral relationship. In addition to this, India-Japan relationship, thanks to the strategic partnership, is much more diverse. Apart from the bilateral level dialogues, they are engaged in various multi-lateral dialogues including on UN Security reforms, a quadrilateral dialogue involving US and Australia and two prominent trilaterals- JIA consisting of Japan, India and Australia and JAI-consisting of Japan, America and India. These bilaterals and multilaterals will continue to bind Japan and India together.

Moreover, most of the probable successors of Abe including Fumio Kishida, Shigeru Ishiba, Taro Kono, Toshimitsu Motegi and the top contender Yoshihide Suga have dealt with India in different ministerial capacities and India is no stranger to them. Even though Abe’s absence may be felt in India, Japan’s economic and strategic interest in India and the need to strengthen strategic partnership amid assertive China will not let the bilateral relationship go off the track.

India-Taiwan Trade Relations in COVID-19 Era: Opportunities and Challenges

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Kannan R Nair, Research Intern, ICS

Image Source: Reuters

Recent skirmishes between China and India at Galwan Valley ignited debates in policy circles across New Delhi about growing importance of Taiwan in positioning India’s stance towards Beijing. Currently, Taiwan is India’s 35th largest trading partner, and for Taiwan, India is 17th largest trading partner. In 2019-20, trade accounted for US$ 5.7 billion, which is a decline of 17.54% as compared to the previous year. However, in the current strategic context, India’s appointment of seasoned diplomat Gauranglal Das as an envoy to Taiwan and virtual participation of two parliamentarians in Taiwan president Tsai Ing-Wen’s swearing-in ceremony indicates a shift in policy towards China.

Since the 1990s, there have been efforts to diversify Taiwan’s trade beyond mainland China. In 1994, Taiwan president Lee Teng-hui officially announced the ‘Go South Policy’ aimed to improve its trade and investment relations with ASEAN countries. India was also included in the policies owing to its growing economic importance after the DPP (Democratic Progressive Party) won the presidential election for the first time under the leadership of Chen Shui-Bian in 2000. The DPP government signed a Bilateral Investment Agreement (BIA) with India in 2002, which came into force in 2005. The agreement stressed on the need for protection and promotion of investments.

In 2011, China Steel Corporation (CSC), the largest integrated steel maker in Taiwan invested $178 million in Bharuch district of Gujarat. A rapport existed between the Indian state of Gujarat and its then Chief Minister Narendra Modi with Taiwanese firms. Informal deliberations for a FTA (Free Trade Agreement) between Taiwan and India were held when he later became Prime Minister of India in 2014,  the discussions for which are ongoing and not finalized and. India also signed a Double Taxation Avoidance Agreement (DTAA) and a Customs Cooperation Agreement with Taiwan in 2011. The BIA was updated by both of the countries in 2018 to ensure that Taiwanese businessmen’s investments are treated in synchrony with international standards. The COVID-19 spread raises generous challenges and opportunities to furthering India-Taiwan relations together.

Opportunities

China is Taiwan’s largest trading partner accounting for 30% of total trade. Tsai Ing-wen’s reelection exhibits the changing perception in Taiwanese people against Mainland China. According to a survey conducted by the Pew Research Center in 2019 among Taiwanese youth shows that about 85% of the participants supported close economic relations with the United States, at the same time, support for Beijing was limited to 52%. The New Southbound Policy (NSP) initiated in 2016, reoriented the prime focus of Taiwanese firms from China. Apart from NSP, there are several reasons substantiating the migration of firms from Mainland China. First, increasing intense competition from Mainland companies in the manufacturing sector. This adduced as the primary reason for the firms shifting their business to huge markets with similar traits. Second, rising labour costs and lastly the instability in markets caused by the US-China trade war.

According to Sana Hashmi, a Taiwan Fellow at the Institute of International Relations, National Chengchi University in Taipei, there was a dip in the trade figure last year. More than trade, Taiwanese companies see India as a vast market for investment. Foxconn is already investing US$ 1 billion in the Apple plant at Chennai. Therefore, the focus should be on attracting investment in the post COVID-19 period.

Keeping the market potential aside, the cheap labour cost in India, as compared to PRC, invited more attention. Soon after Foxconn’s announcement regarding their $1 billion investment to set up a factory in India, Pegatron, the second-largest assembler of Apple iPhones based in Taipei announced their interest to set up a plant in India. The availability of skilled labour, massive mobile user base and Indian government’s policy initiatives like Make in India and by latest ‘Atma Nirbhar Bharat’ has attracted foreign investments from Taiwan.

During the pandemic, China’s expansionism yielded more investments to India from Taiwan. Policymakers should endorse the role of Taiwan in addressing India’s technology deficits. Under the aegis of Make in India and Atma Nirbhar Bharat, India should work towards attracting more investment which will have an impact on the rising unemployment rates. As Taiwanese exports to India majorly concentrated on heavy machinery and engineering tools, India must make use of the current geopolitical/geoeconomic environment by inviting more firms.

Challenges

The first challenge is regarding the long-standing talks on FTA between India and Taiwan. To address this, both sides need to fast track talks and finalize an agreement by sidelining political difficulties. A two-year joint feasibility study was conducted by the Indian Council for Research on International Economic Relations and Chung Hua Institution for Economic Research in Taiwan during the 2011-13 period. The study suggested an Economic Cooperation Agreement (ECA) for promoting trade relations.  As stated by Taiwanese officials, India and Taiwan are also in the negotiations regarding allowing Special Economic Zones (SEZs) for Taiwanese firms. Currently, India has SEZs with Chinese and Japanese firms.

Source: Taiwan Ministry of Economic Affairs

The trade figures also affirm the fact that India is way back in terms of trade, as compared to other dominant countries. Here a contradiction in China’s actions is it’s exponential growth in trade with Taipei on one hand and restricting India to do the same on the other hand.

Source: Taiwan Ministry of Economic Affairs

The second challenge is regarding the unbalanced tax system. Recently Taiwan and Japan approached the World Trade Organisation (WTO) to set up dispute settlement panels against India owing to lopsided tariff structures on Information and Communication Technology (ICT) devices and mobile phones imported from them. Imbalance in this tariff structure restricts the prospective inflow of investments towards India.

Transparency in the legal system and effective utilization of decentralized governance can also trigger foreign direct investments. Open-ended support from local governments to a business-friendly environment can also help in this regard.

India and Taiwan share many commonalities such as belief in democratic values and similar economic potentials. In the current geopolitical scenario, India’s best option would be to enhance trade and people to people interactions with Taiwan. Both are gradually strengthening their bilateral ties. Tapping into Taiwan’s Taiwan’s expertise in healthcare, education and agriculture would help India in the future.

Geopolitics of Tibet’s Rivers for Lower Riparian India

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Yash Johri, Research Intern, ICS
Shivi Sanyam, Advocate and former Judicial clerk, Supreme Court

Source: AsiaNews

Grave hostilities in Ladakh along the line of actual control (LAC) between India and China and actions on the part of government and business have dominated public discourse. External developments apart from those relating to Pakistan are rarely an issue in the domestic narrative but brewing anti-China sentiment amongst several parts of the populace has positioned our eastern neighbor in the national consciousness. While all eyes are fixated on the game of brinkmanship being played out on the LAC, it is an opportune moment to highlight another important area of contention: China’s management of Tibet’s rivers and the plausible impact on lower – riparian countries like India, this matter has arisen in the past and will certainly arise prominently, in the future.

We need to be better informed about this issue, therefore, it’s important to aggregate the cross-section of experience that exists on the issue from varying fields of business, government, law, climate studies, agriculture and others via analyses and interactions. As a student of China and Sino-Indian ties, one feels there are is a lack of dedicated efforts in the country to understand and prepare for the numerous complexities of our relationship with our eastern neighbor, especially with regard to the issue of management of the waters of Tibet. There is an urgent need to generate greater domain knowledge on this matter.

China in the present situation to deflect from the economic devastation that Covid – 19 has been inflicted on its economy and to divert the anger of its people with genuine grievances from the failures of the CCP, has kindled many of its rivalries. At this critical time, the mandarins of the middle kingdom have thrown caution to the wind and are acting unilaterally, disregarding norms and agreements, both bilateral and multilateral to further their agenda. There is a laundry list of enmities, many of these disputes are territorial and stem from China’s desire to maximize its economic and cultural influence.

It is in this political environment that there is a serious need for India to arouse consciousness nationally and build support at multilateral levels to put checks on China’s uninhibited dam building, water diverting and mining projects along the course of the Brahmaputra River (in China known as Yalung Zangbo). While the Chinese share hydrological data for the Sutlej and Brahmaputra, enabling us to anticipate water levels to prepare in time for flooding, they charge us a fee for that. It is interesting to note that, India does not charge its downstream neighbors- Pakistan and Bangladesh. Further, even though there have been numerous MOUs on sharing hydrological data, the latest being in 2018, they stop sharing data as and when they please, as was seen around the time of the Doklam crisis. There is little cooperation in addition to sharing hydrological data, while India has robust water sharing treaties with Pakistan and Bangladesh. It is estimated by Brahma Chellaney in his book, ‘Water: Asia’s New Battleground’ that until China has achieved its national objectives of power generation and river water diversion to its parched northern lands, it is unlikely to acquiesce to any agreement. India has on numerous occasions suffered from floods due to bursting of dams, polluted waters flowing into Arunachal due to upstream mining and construction activity and various other actions where the doctrine of ‘‘sic utere tuo ut alienum non laedas’’ (To use and exploit one’s sovereign property in such a manner so as to not harm the neighbor’s rights and interests) has not been followed.

China has a dual design on reigning in the Brahmaputra river with the future objective of not only generating power for the relatively underdeveloped region but also to divert waters of the Brahmaputra to their northern parts as the third phase of the South North Water Diversion Project (南水贝雕工程总体规划). The dam site they’ve chosen has been detailed by Chellaney in his book at Metog County, Nyingchi Prefecture, where they aspire to build a 38 GW(Gigawatts) generating facility (a capacity larger than the Three Gorges Dam), in comparison the Bhakra Nangal Dam generates a meagre 1.3 GW. Supporting infrastructure in the form of roads and railroads has already or are in the process of being constructed. This location near the Namche Barwa gorge is ideal for power generation given the steep natural fall that water takes before they enter India. Additionally, the point for the water diversion project is further upstream. This entire region is in the proximate area of Pemako, a region considered very sacred by Tibetan Buddhists – where there is vast virgin forests and varied flora and fauna. Further this region in particular is close to where the Indian and Eurasian plates converge thereby being prone to seismic risks.

It is now settled that China is the upper riparian power and reigns sovereign in these areas, following the NDA Government’s 2003 recognition of the Tibet Autonomous Region as a formal part of China. However, its exploitation of Tibet’s blue gold in the aforementioned megaproject and by way of numerous other projects such as the Zangmu dam (completed in 2014 with installed capacity of 500 MW), certainly affects the interests of lower riparian countries such as India and Bangladesh adversely. The NDA government’s action of course is only a cherry on top of the cake that was India’s concessionary foreign policy in the years post-independence. Other rivers such as the Irrawady, Mekong and Salween that also originate in Tibet have been heavily dammed leading to concerns in the countries of South-East Asia into which they drain. Given that many of China’s neighboring states have high dependency ratios (Food & Agriculture Organization data) relative to China for their water supply, with India (33.4%), Bangladesh (91.3% Including Ganga which originates in India), Laos (42.9%), Thailand (47.1%), Cambodia (74.7%) and Vietnam (58.9%), there is certainly a need for a mechanism to ensure a sustainable integrated river basin management. However, the Chinese style is to only deal bilaterally, if at all, as they have stayed away from any such multilateral arrangements, the Mekong River Commission being one of them. Further, China was one of three countries along with upper riparian Turkey that opposed the UN Convention on Non-Navigational use of International Watercourses in 1997, the resolution carried 103-3 with 27 abstentions.

Any questions pertaining to integrated basin management with China will in turn throw up our policy on Tibet, while as a rule – following country we must abide by past treaties and commitments but should certainly not leave any leverage we may have with regard to the land of the Dalai Lama of the table. The entire world is re-evaluating and taking a hard-look at their respective approaches to China, in the aftermath of the events in the Galwan valley, we must do the same.

The North-East of our country being a riverine civilization will feel the major brunt of China’s unilateral action in Tibet, which it refers to as its water tower. While the seven sisters are undoubtedly far away from New Delhi, and given our food surplus at the moment water security may seem like a distant concern. However if we are to act east, we must ensure our water security, not only for the purposes of agriculture, fisheries and the dependent communities but also to generate our own power.

Originally Published as The Great Sino-Indian Water Conundrum in The Guardian,15 July 2020.