It's official: China is India's
security threat By Indrajit
Basu
KOLKATA - The Indian government is
drafting a new foreign direct investment (FDI)
policy that will, for the first time, include
China on a list of countries not limited to
Pakistan and Bangladesh that are considered a
sensitive for India's national security.
New Delhi has long been wary of allowing
Chinese to invest in sensitive sectors, such as
ports and telecommunications, but the new edict
will extend security reviews to all sectors,
including such innocuous sectors as household
appliances. For the first
time
China will be officially labeled a "security
risk".
Once the new FDI norms come into
effect, it would mean an end to all automatic
clearances for Chinese investments under India's
supposedly liberalized FDI laws as each an every
investment coming from China will have to undergo
scrutiny by the Indian security agencies.
Until now, India was selective about
imposing restrictions. For instance, only
investments in sectors like ports, aviation and
telecom and Internet services were selectively
screened. But the new framework has reportedly
increased the security filter to cover a
cross-section of important sectors, such as drugs
and pharmaceuticals, data processing, metallurgy,
IT hardware, data processing, hydrocarbon
exploration, pipelines and refineries and consumer
goods.
The new framework may still be
under formulation, but Chinese companies have
already started facing serious discrimination in
India compared with investors from other
countries. Take the recent disqualification of two
telecom companies, one Chinese and the other
US-based, from the world's largest Global System
for Mobile communication (GSM) network tender
floated by India's largest government-controlled
telecom company, Bharat Sanchar Nigam Ltd (BSNL).
Worth about $4 billion, this tender for
about 60 million new GSM lines was tendered last
week and was supposed to be open to all global
telecom companies. But when announcing the opening
of the tender, BSNL said that Chinese major ZTE
and Motorola were disqualified since these two
companies "failed to meet the stringent technical
criteria stipulated by the tender".
BSNL
did not specify what it meant by "stringent
technical" norms, but it is easy to guess what
these are. According to sources, both companies
were eliminated on security grounds. ZTE is a
Chinese company; Motorola declared in its tender
offer earlier that it was sourcing a significant
part of its equipment from Huawei, another Chinese
vendor. According to India's intelligence
agencies, like the Research and Analysis Wing
(RAW) and the Intelligence Bureau, Huawei has been
"responsible for sweeping operations in the
country". Consequently, the final bids have now
narrowed down to just three European vendors,
Ericsson, Nokia and Siemens.
Indeed, the
two countries have never been comfortable with
each other, and that has been going on for
decades. Ever since the eruption of border
skirmishes between India and China in 1962 that
gradually developed into an emotional posturing
called "The Chinese Aggression", Indians and
Chinese have viewed each other with mutual
suspicion.
Although the two countries have
settled many of their differences in the ensuing
four decades, the paranoia about China as a
security threat seems to be increasing daily in
India. For instance, India now feels, said one
recent report, that investments from not only
China but those from Hong Kong and Macau should
also be screened. Besides, investments from North
Korea, Taiwan and Afghanistan, too, are being
included in the sensitive list. The current FDI
norms just categorize Bangladesh and Pakistan as
"security risk" countries.
According to
the National Security Council, foreign investments
from these countries should not only be subjected
to special security screening at the time of
approval but also during the entire period of
operation. The NSC also wants to be kept in the
loop for all investment approvals. It has
suggested that before each approval, India's
businesses should seek its opinion, even if such
investments involved an Indian partner.
Clearly, these moves, which a local
newspaper editorial terms "anti-Chinese", have
started bothering the Chinese authorities. In
fact, at an India-centric event organized in
Beijing last month by an influential Indian
industry chamber, Wang Jinzhen, the secretary
general of the China Council for Promotion of
International Trade reportedly expressed his
concern about India's attitude toward Chinese
investments.
He said that several Chinese
companies were eager to invest in India in a wide
range of industries, but were getting stymied and
discouraged by the "over-cautious attitude toward
Chinese investment and a stream of anti-dumping
cases filed in India against Chinese companies".
Criticism about the present government's
security stance are emerging from within India as
well. The business sector, eager for Chinese
investment and technological cooperation, is
worried about the rising anti-China tide. It took
pressure from the country's largest business,
Reliance Industries Inc, to get the government to
loosen up on visas for Chinese technicians needed
for its projects. On the political left, the
Communist Party of India-Marxist (CPI-M), that
lends crucial support to the current Congress
Party-led government, wants the government to
explain why it considered Chinese investment in
infrastructure projects posed a threat to India's
security. In August, India refused approval of a
port terminal contract to a consortium consisting
of Chinese companies - Kaidi Electric Power
Company and China Harbor Engineering Company. The
CPI-M feels such refusals go against India's
foreign policy of seeking closer ties with China.
Yet NSC sources say that India is just
following the footsteps of other countries such as
the US and Britain. For instance, in justifying
the NSC's moves, India's security advisor M K
Narayanan cited in a recent TV interview that even
the US had security checks on foreign investments
that authorized the president of the US to block
or suspend mergers, acquisitions or takeovers by
foreigners on grounds that they may threaten its
national security.
The NSC also says that
British norms mandate that all foreign telecom
equipment should be certified by the government
before its is mass produced and distributed in
that country.
Meanwhile, the Indian
government may look down on the Chinese with
suspicion, but it seems that most Indians feel
positively about their next-door neighbor.
According to a recent public opinion survey on
Americans and Asians by the Chicago Council on
Global Affairs, about 56% of Indians and 46%
Chinese felt they were partners rather than
rivals, even as 66% of Americans saw the two Asian
biggies as rivals. The survey added that 72%
Indians viewed China's economic growth positively,
and interestingly, both South Koreans and the
Chinese viewed that India practiced fair trade.
Indrajit Basu is a Kolkata-based
journalist.
(Copyright 2006 Asia Times
Online Ltd. All rights reserved. Please contact us
about sales, syndication and republishing
.)
