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EFSAS Commentary

After a turbulent year South Asia will be hoping for a better 2023, but for that China’s predatory designs will have to cease


If the year 2021 in South Asia was in large part defined by the horrors that the COVID-19 pandemic, the iniquitous Chinese export to the rest of the world, wreaked upon it, the upcoming new year, quite unfortunately, threatens more of the same with the deeply flawed and impracticable Chinese zero-COVID policy having failed miserably and Beijing’s much flaunted Chinese vaccines having turned out to be patently ineffective. That has meant that as South Asia is closing out a year in which it would have been encouraged, at least on the public health and mortality front, by the petering out of the COVID-19 virus’ devastating effects, it is now yet again having to resort to much more stringent measures as the virus runs riot across China and a Chinese mutated version threatens to make its way and explode across the region.

Even if the COVID-19 threat had all but died down in 2022, South Asia had for long periods of the year been beset by serious problems such as the grave economic crises that engulfed Sri Lanka and Pakistan, the unending turmoil that seems to have become an endemic feature of Pakistan’s political landscape, as also that of Nepal’s, the devastating natural disasters, most notably the floods in Pakistan, the increasing repression in Afghanistan, a country the international community seems to have by and large forgotten, and China’s increasing propensity to seek recourse in violence in its pursuit of questionable expansionist designs along its borders with India. On the eastern periphery of South Asia, Myanmar continues to burn as ruthless military dictators, who have been spurned by the West but backed by China and its ilk, continue to hound and persecute large sections of the country’s population, especially those of a democratic bent. In fact, of the issues noted above, a Chinese angle appeared to loom large over well nigh all of the crises that the region faced in 2022, barring, perhaps, the floods in Pakistan.

Sri Lanka’s unprecedented economic meltdown had been in the making for quite some time. As Michael Kugelman, director of the South Asia Institute at the Wilson Center in Washington DC, pointed out in Foreign Policy, successive Sri Lankan governments had fallen into a debt trap and in late 2019, the then-newly elected President Gotabaya Rajapaksa enacted tax cuts, which deprived the government of much-needed revenue when the COVID-19 pandemic set in a few months later. Sri Lanka still spent heavily, leading to currency depreciation. Then, Rajapaksa banned chemical fertilizers in 2021, which drastically limited agricultural production and fueled rising food costs. As a result, Sri Lanka’s economy was especially vulnerable to the supply chain shocks and rising commodity costs triggered by the pandemic and Russia’s war in Ukraine. COVID-19 also decimated Sri Lanka’s tourism industry, which accounted for nearly 6 percent of its GDP in 2018 but less than 1 percent in 2020.

By early this year, Sri Lanka had plunged into one of the world’s worst economic crises. Food inflation at one point surged to 90 percent, gas stations ran out of fuel, and usable foreign reserves dwindled to a mere $25 million. Sri Lanka’s currency fell by 80 percent, and the economy practically ground to a halt. In May, Sri Lanka defaulted on its debts for the first time in its history. This crisis, coupled with mass protests, prompted Rajapaksa to resign in July. Kugelman underlined that “Commentators seized on Sri Lanka’s economic collapse as a cautionary tale: an illustration of the dangers of overdependence on Chinese loans, the disproportionate effects far-off conflicts can have on poor countries, and the costs of years of economic misgovernance”.

As the Sri Lankan government tried frantically to draw the attention of the international community to its plight, it found that first the impact of the COVID-19 pandemic and then the Russian invasion of Ukraine made support and assistance hard to come by. This was true as much for the Ukraine-consumed West as it was for partner countries like China, which over the last decade and a bit had benefitted substantially from lucrative projects in Sri Lanka that were as much strategic as they were economics oriented. As the economic disaster bred political unrest and protests that often degenerated into violence, a Sri Lankan government desperate to halt the seeming slide towards lawlessness and chaos found an invaluable ally in neighbouring India, which not only lived up to its role of being the regional power but did so while focusing on the best interests of the people of Sri Lanka. India’s assistance to help the people of Sri Lanka overcome their current difficulties has been worth well over $3.5 billion this year alone. It has also sent over 65,000 tonnes of fertilizers, 400,000 tonnes of fuel, and large quantities of urgently needed food and medical supplies to Colombo. Equally importantly, as Gotabaya Rajapaksa underscored in an interview with Bloomberg News earlier this year, the Indian government went out of its way to urge the International Monetary Fund (IMF) to expedite the processes that could help Sri Lanka mitigate the crisis.

China has, over the years, been the single largest beneficiary of the grandiose plans and the ill-considered profligacy of the Rajapaksas, and this was especially true of Gotabaya’s elder brother Mahinda’s terms as President between 2005 and 2015. As Darpan Singh noted in his article in India Today“During the rule of the Rajapaksas, Sri Lanka also moved closer to China. Sri Lanka was sinking deeper and deeper into China’s development partnership model. A hand that fed was also eating into Sri Lanka's already vulnerable economy. Here is how it was unfolding –  Sri Lanka borrowed heavily from China to plug years of budget shortfalls and import goods needed to keep the country running. But it wasted large amounts on building expensive and unviable aviation, shipping, highway, hospitality, and other such facilities that further squeezed public finances. And much of what was built remains abandoned after making huge losses and failing to service Chinese loans that kept growing in size. Only China, Sri Lanka's biggest bilateral lender, is the winner. Contracts went to Chinese companies and China gets the real estate in the form of equity”.

A report in the Hong Kong Post early this year had summarized that the end result of reckless borrowing from China to finance unprofitable infrastructure projects was what had contributed to putting Sri Lanka in the unenviable position it found itself in. The Hong Kong Post added that “China has shed some crocodile tears over the economy of Sri Lanka getting caught in a quagmire after hobnobbing with the BRI projects of China, record inflation, soaring food prices and the sufferings of the people. The key concern, however, is how such a negative situation would impact the attitude of Colombo towards borrowings from China, and what it would mean for the ultimate relations between China and Sri Lanka”. In March 2022, China refused to respond to Sri Lanka’s appeal to reschedule its huge debts, and its Ambassador to Sri Lanka saying on 21 March that his country was more keen on considering a further $1 billion loan and $1.5 billion credit line. Whether the Chinese strategy of offering more loans to the already heavily indebted Sri Lanka, in all probability under very stringent conditions as evidenced in recent years, was what Colombo needed was the key question.

China’s near-total absence from the stage at a time when Sri Lanka could do with its empathy and assistance the most has been as noteworthy as it is remarkable. Following the storming of the Presidential Palace in Colombo by the protestors, all that China’s Ministry of Foreign Affairs had to say was that it hoped Sri Lanka would “overcome the current difficulties and strive to restore stability, revitalise the economy and improve people’s livelihoods at an early date”. Praveen Swami, the National Security Editor of The Print, emphasized that the surreal disintegration of Sri Lanka’s economic and political system marks a disaster for Chinese President Xi Jinping’s Belt and Road Initiative (BRI) that was designed to grow China’s power across Asia and Africa. Swami felt that “Leaders across the region, who eagerly signed up for Xi’s BRI cash, will be wondering if it might lead them to the fate of Sri Lanka’s ruler… The ruins of Sri Lanka’s white elephants could mark a turning point in South Asia’s relationship with China”.

The political and economic crisis that engulfed Sri Lanka early this year has not faded away quite as dramatically as international concern, overtaken by other momentous events such as those in Ukraine and Taiwan, seems to have done. Sri Lankans continue to be burdened by the worst economic crisis they have ever witnessed, and many have been plunged into poverty. The IMF's stringent bailout conditions and China’s distinctly unsupportive approach mean that Sri Lanka’s road to economic and political recovery will probably be a long and arduous one.

Pakistan, which just like Sri Lanka has over the years become overwhelmingly dependant on Chinese loans, spent much of 2022 in a similar, or even worse, situation than it did in 2021. Beijing, in better times, lent Colombo and Islamabad billions of dollars in credit to allow Sri Lanka and Pakistan to build ports, power plants and other infrastructure, much of which experts have derided as being unnecessary and economically unviable. Now, with both recipient countries in the economic doldrums, and with the IMF stipulating non-negotiables with both nations in order to extend credit, Beijing has come across as highly reticent in extending a meaningful helping hand to either country. In the corresponding annual round-up of last year that was contained in the EFSAS commentary of 07-01-2022, it had been observed that Pakistan had spent most of 2021 on the brink of bankruptcy, and postulated that given its deep indebtedness to China and its gross inability to handle its finances in a responsible manner, it was likely to remain on similar edge throughout 2022. That has indeed turned out to be the case, with protests against Chinese projects and violent attacks specifically targeting Chinese nationals conveying the depth of public anger against Chinese exploitation and plunder of resources. As it got further buried under the weight of Chinese loans, Pakistan continued to cede more of its sovereignty to China. Meanwhile, Pakistan’s continuing support to terrorist groups remained a matter of international concern.

A historical event in Pakistan’s political trajectory was witnessed in the wee hours of 10 April, when after much dramatic fuss and needless political wrangling and feet dragging by the then Prime Minister Imran Khan, the no-trust vote against him was finally held and yielded a narrow opposition victory. Khan thereby became saddled in perpetuity with the ignominy of becoming the first Prime Minister in the country’s tumultuous political history to be booted out through the electoral expression of parliament’s loss of trust in him. However, as the euphoria of the victory faded, the enormity of the challenge that Khan had bequeathed to his successor Shehbaz Sharif began to hit home. The economy was literally in shambles and the situation only threatened to get worse as the debt obligations to China for projects under the China-Pakistan Economic Corridor (CPEC) loomed. An editorial in The Dawn daily was of the view that “Fixing the broken economy is probably the most formidable challenge facing Mr. Sharif’s cabinet”. Khan, with a particular single-mindedness, had also gone about wreaking havoc in most foreign relationships that successive Pakistani regimes had valued highly and held dear. These included relations with the United States (US) and Saudi Arabia, to name only a couple.

Meanwhile, fundamentalist groups were regularly browbeating the government into acceding to their extreme demands, and Pashtun and Baloch terrorist groups were targeting Pakistani and Chinese interests at will. In a sardonic twist of fate, Pakistan in February 2022 became the first country to formally accuse the terrorist Taliban regime that it had painstakingly nurtured and crowned of harbouring anti-Pakistan terrorist groups and allowing them the freedom to launch cross-border attacks against Pakistani forces and interests from within Afghan territory.

As the new dispensation struggled to deal with these momentous challenges, it was confronted with another major headache in the form of a 3 November attack on Imran Khan. The deposed Prime Minister was shot and injured in the leg during a protest rally in Punjab province in an incident that left one bystander dead and at least six others, including leaders of Khan’s party, wounded. The attack on Khan has propelled Pakistan into yet another stage of political instability, one fraught with the increased likelihood of further political violence. As the respected Pakistani daily Dawn summarized eloquently in a scathing 7 November editorial titled ‘Democrats, dictators & demagogues’, “The system is imploding, spectacularly — collapsing under the weight of the multiple distortions created by decades of political engineering, not to mention outright military takeovers”. It added ominously that “No one seems to know how it will all end”. The appointment of a new Army Chief late in the year has introduced another element of unpredictability.

Amidst all this gloom, the floods that devastated much of Pakistan this past summer are a grim foreteller of what lies in store for humanity unless urgent action to stall the rise in global temperatures is rushed through. The flooding submerged one-third of the country and affected 33 million people. Losses were estimated at $40 billion, and millions of crops were damaged or destroyed, heightening food insecurity. Extreme heat, raging fires, destructive flash floods, and severe drought have become regular phenomena across much of the world – from Australia to the Americas and from Africa to Asia. However, the tragedy for Pakistan, and also the rest of South Asia, is that along with most of the global South, it is being made to pay a very steep price for climate-change inducing excesses that it did not itself indulge in. Encouragingly, at this year’s annual United Nations (UN) climate change summit, countries reached an agreement on a new loss and damage fund that was welcomed across South Asia.

Despite the several problems that it itself faces, prominent among which is Chinese aggression along its northern borders, India emerged in many senses as a beacon of light in South Asia in 2022. Not only was it the fastest growing economy in the world, it also began to shoulder an increasing proportion of the responsibility of global leadership over this past year. This was acknowledged and much appreciated by global leaders. French President Emmanuel Macron in his address to the United Nations General Assembly (UNGA) in New York asserted that “Narendra Modi, the Prime Minister of India was right when he said the time is not for war. It is not for revenge against the West, or for opposing the West against the East. It is the collective time for our sovereign equal states to cope together with challenges we face”. United Kingdom (UK) Foreign Secretary James Cleverly underlined in an interview that “Prime Minister Modi has a powerful, influential voice on the world stage. We know the Russian leadership respects India's voice and position on the world stage. I think Prime Minister Modi's intervention is very, very welcome. And we really hope that Vladimir Putin listens to those voices who are calling for peace and for de-escalation. So we very much welcome Prime Minister Modi's intervention”.

Perhaps the most consistent and significant praise and support for India’s global role has come from the United States (US). Not only has the US-led West come to terms with India’s Russian oil purchases, the US is increasingly indicating that such oil purchases and India’s not joining several US-led initiatives against Russia notwithstanding, India remains the most important bilateral relationship for the US in the 21st century. India’s unifying role at the two-day G20 summit hosted on 15-16 November by the Indonesian presidency in Bali came in for special praise. India’s constructive, and consensus-building approach helped to somewhat bridge the gap between Russia and Western countries, and it was commended by multiple senior US officials. India’s stand that this is “not an era of war” found a prominent place in the joint communiqué, finalised amid deep divisions over Russia’s invasion of Ukraine, issued at the conclusion of the Bali G20 Summit. This augurs well for India as it assumed the G20 presidency for the coming year on 1 December.

Subsequently, at a gathering of Indian-Americans in Washington on 20 November, US Principal Deputy National Security Advisor Jon Finer publicly applauded Modi. He asserted that “Looking around the world when the United States and President Biden look for partners that can truly help carry the load, truly helped move forward a global agenda, India and Prime Minister Modi are very high on that list. We just saw this in real-time at the G-20 where the Prime Minister was instrumental in forging a consensus around a joint statement among a far-flung group of countries and in the comments and work that the Prime Minister has done and others in the Indian government have done to highlight the increasing risk related to nuclear issues”.

Responding to a question on India during his appearance at the Aspen Security Forum meeting in Washington DC on 8 December, Kurt Campbell, the White House Asia Coordinator, said that in his view India is the most important bilateral relationship for the US in the 21st century. Campbell stressed that “The fact is, I don’t know of any bilateral relationship that is being deepened and strengthened more rapidly than the United States and India over the last 20 years”. In a candid articulation of the US’ understanding of India’s worldview, Campbell pointed out that “India has a unique strategic character. It will not be an ally of the United States. It has the desire to be an independent, powerful State and it will be another great power. But I think there are reasons to believe that our strategic alignment is growing across the board in almost every arena”. Campbell also stressed that the India-US relationship was not simply built on anxiety around China, but on a “deeper understanding of the importance of the synergies between our societies”.

The US, in its 2022 National Security Strategy and National Defense Strategy, has identified China as its sole geopolitical competitor with the intent, will, and capabilities to reshape the world order. Even as the US sees India as a key country to “counter-balance” China, India has thus far been cautious and guarded in coming across as too open or keen to fulfill such a role and has even spoken of the ability of New Delhi and Beijing to handle their differences bilaterally. Despite this, that China continues its mindless belligerence in the Himalayas, as witnessed in its transgression across the Line of Actual Control (LAC) near Tawang in Arunachal Pradesh earlier this month in an attempt to again unilaterally alter the LAC to its advantage, will make it very difficult for India to remain mellow.

As 2023 approaches, South Asia can only hope for a more constructive Chinese engagement with it, one that will not push smaller and poorer countries further into debt and misery nor force reluctant nations to choose sides more definitively to guard against the unprovoked threats of a larger bullying, land snatching, neighbour.