Geopolitical notes from India

M D Nalapat

Friday, May 14, 2010 – In every government, there are admirers of the North Korean model of governance, where every part of the system responds in a coordinated manner to a situation. The Beloved Leader speaks, and all that the rest needs to do is to applaud. However, democracies have a different dynamic, and in such places, differences of opinion are often expressed in public. Sadly, in India, powerful politicians are these days seeking to snuff out alternative points of view, and present a mock unity to the outside world, when in reality strong minds will often differ equally strongly. A week ago, it was the chiefs of the three services who were asked to refrain from participation in the public debate on major issues. Since that warning was administered to them, they have been silent, and as a result the people have lost, because an important point of view has been excluded from their sight.

Strangely for a democracy, successive governments in India have continued to keep secret even the records of meetings that took place in the 1930s. Among the later reports yet to be made public are those that examine the reasons behind the 1962 rout at the hands of the Chinese. Even when parties that were in the Opposition came to power, they colluded in keeping such records secret. The result is that the Indian public has remained ill-informed about many matters that affected them deeply, usually in order to protect the image of a leader. Although a Right to Information Act was passed many years ago, as yet the reasons behind several controversial decisions remain secret from the electorate. In many cases, the excuse given for such a suppression of truth is “national security”, two words that can be — and are — used to cover a multitude of sins. Sometimes, the card of “national security” gets played solely in order to promote the interests of an individual or a company. Severalbusiness persons angry at the effective ban placed by the Union Home Ministry on the import of telecommunications equipment from China claim that the reason for the ban is to favour a West European country that is prominent in the supply of telecom equipment, but which sells equipment at a cost more than 30% higher than that of a Chinese company, Huawei. Some external agencies have given substantial inputs on the activities of Huawei in Pakistan, and such reports have been used as a the reason to ban the purchase of Huawei equipment. Apart from Telecom, similar arguments are being put forward – again by the same external agency – warning against buying power generation equipment from China. Once again, the reason given is the close relationship between certain Chinese power companies and Pakistan.

Because India is one of the fastest-growing economies in the world, orders for Telecom and Power are expected to cross $15 billion in a couple of years time. This has made India an important market for companies in Europe, who are facing the prospect of closure because of the high cost of their equipment. Although initially Chinese companies turn out goods of lower quality, yet very soon they catch up. In the Telecom sector, for example, Huawei products match those of international giants such as France’s Alcatel-Lucent.

However, the argument that has been made against them is that the company — which is presumed to be close to the Chinese army, which itself is very close to the Pakistan army – may embed malicious software in its products, especially those located in sensitive regions. Of course, the reality is that such activity can get carried out by other foreign companies as well, some of whom may for reasons of profit play the game of a third country. However, once the “national security” card gets used, most people become silent, even when it is clear that the Chinese companies are the cheapest in the international market, and indeed have a significant market share even in countries that are the home base of the telecom majors vying for a slice of the Indian cake.

Those unhappy at being denied the better prices offered by Chinese telecom and power equipment manufacturers say that several countries have very close links with the Pakistan military, not just China, and that several countries have supplied deadly weaponry to them. Both the US and France have supplied several items of advanced weaponry to Pakistan, including missile and undersea capability. However, there is no doubt that in scale, the Chinese contribution is the largest, whether in the missile or the nuclear field. There are many in India who favour closer engagement with Pakistan, while shunning the military. This group clearly wants to signal to Beijing that it cannot have it both ways, give lavish assistance to Pakistan and then have India open up the multibillion market for technical equipment. Clearly, the Chinese telecom companies are being made an example of, to drive home the point that India will take action on those entities that are regarded as negative to its security. Looked at from a purely commercial angle, however, it makes little sense to prevent Indian buyers from taking advantage of the low prices offered by the Chinese. Should the PRC get shut out of the Indian market, the remaining (much higher-cost) suppliers are likely to shoot up prices. Already, for some reason, equipment and even petroleum products sold to India are priced much higher than similar items sold to countries in Europe. Why India is paying higher prices than Germany for some petro-products is a mystery to most observers. Enter Environment Minister Jairam Ramesh, one of the most highly-trained of the Manmohan Singh team. When in Beijing last week, Ramesh was emphatic that the various policies that restrict Chinese telecom companies from competing in India were based on “paranoia”. He was echoing the view of others, who say that a blanket ban is not the answer. What is needed is to hold the Chinese companies accountable for their activities, including those that have a direct bearing on India’s security. As India’s able Home Secretary G K Pillai pointed out, even US and Russian companies have been banned on security grounds, not just Chinese. Although, of course, the Chinese entities are far larger.

Prime Minister Singh is known to have regard for his Environment Minister, who stood with China at the Copenhagen Climate Summit, to the chagrin of the EU and the US, which sought to get India on their side. Hence he has made it clear that the minister will not lose his job in the coming Cabinet reshuffle, just because he sees the Home Ministry as going to extremes in its obsession with threats to national security. There is no doubt that India needs to give a message of determination to punish those working against its interests, but equally, this must not result in windfall profits for a few corporate, especially those from countries that place several non-tariff barriers to exports from India. The Home Ministry needs to be transparent about its apprehensions regarding Chinese companies.

The reality is that India and China are the two giants of Asia, and neither can afford to become the enemy of the other. Minister Ramesh has done a service in launching a debate on the way in which “national security” has often been used in ways that benefit a few companies and countries to the exclusion of others. An example is the way in which Russian and Gulf investment was blocked for a time on security grounds, when international financial capitals such as London and Geneva were openly welcoming both. In India as in Pakistan, the working of the intelligence agencies needs to be subject to public and parliamentary scrutiny, so that misuse gets avoided.

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