The gradual advance of china towards attaining its goals at the world stage following the remarkable economic achievements it recorded towards the end of the 1990s did not remain unnoticed by analysts and observers, and the future designs of china at the regional and international levels came under increased scrutiny. One of the most controversial and referred-to designs attributed to China is the doctrine of “String of Pearls” first introduced in 2005 by the Booz Allen Defense Consultancy in the report entitled “ Energy futures in Asia” provided to the then US Secretary of Defense Donald Rumsfeld. The report indicated that China would try to expand its naval presence in the Indian Ocean Region by building civilian infrastructures in friendly countries throughout littoral South Asia, in accordance with a strategy named “The String of Pearls”. Since then there has been much speculation and argument regarding the validity, and potential intentions associated with the theory.
China has vigorously pursued the policy of forging friendly ties with many Indian Ocean countries and has offered much-needed aid, as well as trade and defence deals and has proposed to finance building seaports in Myanmar, Bangladesh, Sri Lanka, Maldives and Pakistan. Some quarters, especially in India, the United States, and Japan have openly expressed concern over the possible hidden agenda of Beijing and the alleged long-term design of imposition of Chinese domination in the Indian Ocean region. They fear that these commercial ports may one day be upgraded into permanent naval bases catering for the ever-expanding size and might of the People’s Liberation Army (PLA) navy paving the way for Chinese supremacy in the Indian Ocean. To mitigate strategic concerns, China reiterates that the seaports are conventional shipping facilities designed to connect China’s landlocked western and south-western provinces to maritime trade routes in the Indian Ocean. At present almost 80 per cent of China’s oil imports pass through the Indian Ocean and Beijing insists that the ports in question and their overland conduits to China will permit some China-bound tankers to offload their oil without having to sail all the long way to East Asian waters, and avoid “chokepoint” of the strait of Malacca in case of a showdown with any potential adversary.
The concept of “One Belt, One Road” (OBOR) which was later renamed to “Belt and Road Initiative” (BRI) first introduced in 2013 by the Chinese President Xi Jinping also came to the aid of justification of seaport building agenda of Beijing although the construction of most ports had commenced much earlier than the official announcement of OBOR. The BRI is part of China’s long-term goals to develop the connectivity of countries on the Silk Road Economic Belt and 21st-Century Maritime Road. Around four billion people are included in the scope of BRI, starting in South East Asia and crossing China, Central Asia, the Middle East and Eastern Africa and finally reaching Western Europe.
China has made significant inroads into Myanmar and is the single largest source of Foreign Development Investment (FDI) for the country. Since 2010 the Kyoukpyu locality in the Rakhine state of Myanmar has been the focal point of Chinese endeavour to connect itself to the Indian Ocean at the Bay of Bengal and to convert this small fishing village into a major maritime hub of the BRI. The crude oil port and the 771 km long oil and natural gas pipeline to Yunnan province of china came into operation in 2015 and 2018 respectively. The port and the oil pipeline with the capacity of transiting 440,000 barrels of crude imports per day from the Middle East and Africa along with the gas pipeline from the Myanmar natural gas reserves may cater for almost 6% of china’s annual energy needs and allows partial diversification of energy supply away from the “choke-point” strait of Malacca. These two projects with the price tag of US$2.45 billion were financed jointly by china and Myanmar on a 70-30 per cent share basis. Further expansion of the facilities to construct a deep-sea port and a free trade zone at the same area was finally made possible in November 2018 with the conclusion of the deal after the Myanmar government out of the fear of a debt crisis scaled back the initial agreement with China and limited the value of the venture to $1.3 billion with the same 70-30 percent share formula. So far there has been no solid report on possible military-related activities by China at the Kyoukpyu port facility and its surrounding areas.
The defeat of the Tamil separatist movement in 2009 and the urgent need of the civil war-ravaged Sri Lanka to revive its shattered economy offered valuable opportunity for China to use its already strong and timely presence, and provision of much needed loans and DFI’s in major development projects for further consolidation of its influence in the island nation. To this effect, China enjoyed the blessing of the then Sri Lankan President Mahinda Rajapaksa as he maintained a lukewarm relation with India during the last years of the civil war and had every reason to snub New Delhi by laying down a red carpet for more Chinese investment in the country. Among the beneficiaries of Chinese loans and investments was the underdeveloped district and city of Hambantota, (the hometown and the electoral constituency of President Rajapaksa) which is strategically located at the southern tip of the Island overlooking the busy international shipping lanes at the Indian Ocean. Construction of the first phase of Hambantota port costing US$ 420 million mainly financed by EXIM bank of China commenced in January 2008 and the port was officially inaugurated on November 2010 at the peak of popularity of President Rajapaksa. Chinese officials have branded Hambantota port as a successful BRI project despite the fact that the port came into operation prior to the launching of OBOR or its successor, the BRI. However, there is still a debate over the commercial viability of the Chinese built Hambantota port and the adjacent international airport as it appears that political considerations, rather than economic justifications have been involved in the approval of the project by the Sri Lankan Government at the first place. As a result, the new port, not very far from the main deep-sea port at Colombo operates at minimum capacity and incurs considerable operational losses annually. Revenue generating Measures such as diverting car carriers bound for Colombo port to unload at Hambantota and transportation of the vehicles overland to the capital city has not helped much to alleviate the revenue crisis of the port.
With Rajapaksa voted out of office in 2015 and in a bid to avoid default on repayment of one billion dollar loan secured earlier from china, the new government of Sri Lanka after lengthy negotiations in 2017 agreed to the 99-year lease of the Hambantota Port and the 15000 acres of prime land around it to a Chinese state-owned enterprise. The deal has sparked heated arguments on the true nature of Chinese development offers and some analysts called the agreement the “debt- for – equity swap”.
To ward-off concerns on possible ill-designs of china, the Sri Lankan government has reiterated that the final agreement bars foreign countries from using the Hambantota port for military purposes unless granted permission by the government, and that, only the operation of port is handed over to china and the security remains firmly in the hands of the Sri Lankan authorities.
Being a next-door neighbour of India, or the so-called “big brother” of all South Asian countries places Bangladesh in a difficult situation of maintaining balanced bilateral ties both with India and China. Bangladesh is taking extra care not to further irritate New Delhi while benefiting fully from a lavish investment of China in its much-needed infrastructure upgrade. Dhaka joined BRI in 2016 and the BRI branded projects in Bangladesh are said to be valued at US$10 billion consisting of roads, bridges, industrial parks and seaports. The rapid growth of Bangladesh in recent years and its export-oriented economic policy, as well as transhipment of cargo destined for India, Nepal and Bhutan, calls for modernization of the existing port infrastructures and developments of new deep-water port facilities. To this effect, China offered to modernize the Chittagong port and also to build Bangladesh’s first deep-water port and a power plant complex at Sonadia district south of Chittagong at the cost of US$ 8 billion to be financed by Chinese soft loans. In February 2016 Bangladesh called off the Chinese port project at Sonadia and instead cleared the proposal of Japan International Cooperation Agency (JICA) to finance the construction of a deepwater port, an LNG terminal and a power plant complex at Matarbari district some 25 km away from the site of the Chinese proposed seaport. JICA’S 80 per cent financing of the total value of US$4.6 billion projects in comparison to the Chinese offer was more attractive with a minimal interest rate and longer repayment and grace periods. It now appears that aside from geopolitics and also the concerns expressed by the United States, India on China’s growing influence, the fear of “debt trap” notion has prompted Bangladesh to maintain a safe distance from Chinese offers. A Major setback for China’s BRI came ahead of the April 2019 BRI forum in Beijing with the Minister of state for foreign affairs of Bangladesh quoted as saying that “Bangladesh never will ask China for more loans as it looks for other ways to finance its future development”.
The unique location of Maldives at the central Indian Ocean and its relatively close proximity to the strategic US base of Diego Garcia may offer a prime opportunity for any potential naval power to pose a direct challenge at the presently dominant powers in the region. This island nation of 400.000 people relies mainly on tourism income and its territory stretches over almost 1200 small island of which only 200 are inhabited. China with whatever the motives, has actively been engaged in providing investment and loans to the Maldives especially during the tenure of former president Abdulla Yameen, who had overseen a huge surge in Chinese-funded projects during his five-year term of office. The BRI related projects in the Maldives accounts for 75 per cent of the total US$ 1.4 billion loans provided by Beijing to finance airport runway upgrade, construction of a bridge connecting the capital city Male’ to the nearby Island, building a hospital and a high-rise residential complex. No port development project has so far been on the agenda and an uninhabited Island leased to a Chinese company for tourism purposes does not seem to be at use for a different purpose. While Beijing had promoted the investments in the Maldives as a success story in its Belt and Road Initiative, the newly elected Government of Maldives furiously is in the process of establishing its full exposure to Chinese debt which according to the Chinese Ambassador to the Maldives touches the figure of US$3.2 billion, more than double the US$1.3 billion worth of Chinese loans on official books.
The dissolution of the soviet union and subsequent independence of the landlocked Central Asian republics prompted Pakistan to seize the moment and to project itself as the most convenient import-export gateway to central Asia that could offer shortest trade route to the open seas for all Central Asian nations. Considerable oil and gas reserves in Turkmenistan and Kazakhstan and lack of proper pipelines and seaport facilities for export encouraged Pakistan to market the primitive Gwadar port at the Gulf of Oman as the ideal location for development of a deep-sea port and construction of roads connecting it to the Afghan-Turkmen border through the Baluchistan province and the war-torn Afghanistan. Islamabad helped the creation of Taliban movement primarily to pacify Afghanistan and to shore-up concerns of potential investors on the critical security issue that compromised the feasibility of the whole project.
In March 2002 agreement with a Chinese state Company to built Phase one of the Port of Gwadar at the cost of US$248 million was signed. This phase of the project was completed in June 2006 and the government of President Musharraf mindful of the growing concerns over the increasing presence and influence of China in the area decided to award the operation and further development of the Gwadar port to the port of Singapore Authority (PSA) based on a 40 year lease agreement. The issues of economic viability and lack of modern port facilities soon exposed itself as the port had to rely on trans-shipment cargo by major shipping lines which in turns required comparative cost advantage. The Singaporean operator apparently failed to deliver this advantage and the port remained a semi-active and underused facility with little prospect of serving inland destinations. Also, the stay order issued by the Supreme Court of Pakistan against the allotment of previously agreed land to PSA for development of a free trade zone sealed the fate of the deal and in May 2013 Gwadar Port operations were handed over to the China Overseas Ports Holdings Limited. In 2015 it was announced that the second phase of the Gwadar port, the access roads and an International airport as the vital parts of the China-Pakistan Economic Corridor (CPEC) would be financed and built by China at the cost of US$ 1.2 billion. Later that year the port operation and 2282 acres of land to set up a free trade zone were officially leased to China for the duration of 43 years. So far and despite china’s resolve to turn the tide at the Gawadar area, the port has failed to attract significant cargo traffic and is expected to remain unprofitable pending resolution of Afghan crisis and real progress in the road, rail and pipeline project plans of Pakistan in the years ahead.
In the background of Islamabad’s strategic relations with Beijing, it would be very much expected that the China-Pakistan Economic Corridor (CPEC), the showcased project of China’s highly publicized BRI and the active presence and involvement of China in development of the Gwadar port to be viewed with skepticism in quarters suspicious of China’s greater strategic ambitions. At the same time, grievances of unfair and over-valued deals in favour of China is heard, not only at the popular level but also in official quarters in Pakistan and right after Imran Khan’s cabinet was formed in August 2018, officials expressed concern about the former government’s deals with China. While those complaints were walked back as Pakistan faced a possible balance-of-payments crisis just months later, Pakistan’s new government is actively engaged in reviewing BRI contracts that are referred to as “badly negotiated, too expensive or overly favoured China”.
So far, the overall examination of claims and counterclaims regarding the string of pearls notion and also the details of Chinese presence and involvement in sea-port facilities attributed to the theory (excluding Chinese presence in Djibouti) do not indicate serious military-oriented agenda on the part of China, at least for the near future. However, given the rising tide of China’s military might and its assertive behaviour in south china sea coupled with Beijing’s use of soft power to secure a foothold in sensitive locations of the Indian ocean did raise the alarm for big players. China’s success in securing its first overseas naval support base at the Chinese-built and Chinese-operated Port of Doraleh in Djibouti in 2017 has added fuel to the ever-growing concern on real motives behind Beijing’s seaport building endeavour. Djibouti’s economy relies largely on Chinese credit and the IMF recently estimated that Djibouti’s public and publicly guaranteed debt has climbed to 104 per cent of its GDP – and almost 80 per cent of this external debt is owed to Beijing. These developments have led to speculation that the Quadrilateral Security Dialogue (also called the Quad comprised of India, Japan, Australia, and the United States ), the diplomatic and military arrangement widely viewed as a response to increased Chinese economic and military power, is being revived after a dormancy of 10 years. The Quad’s future discussions for cooperative security are likely to be undertaken in coordination with other indo-pacific partners like Singapore and South Korea.
From the economic point of view, unlike other sources of international development funds that enforce strict criteria and guidelines for approval and financing of projects, China is very forthcoming with the needed resources at its disposal and is flexible enough to bypass most environmental and feasibility related concerns, or governance and accountability commitments. The darker side of Chinese financing is high-interest rates associated with the loans and the accumulation of debts that could push the recipient countries to the brink of default on loan repayment, and seeking bailout from the World Bank and the IMF, or to submit to controversial deals labelled as “debt- for –equity swap”. After an unprecedented run of funding large-scale investments in low-yielding projects from seaports to railways and highways in some poorer countries across Asia, governments are now adopting a far more cautious approach to China’s grand plans for what it may regard as its backyard.