Indian Ocean’s ‘Great Game’

31 January 2011 FDI Team

Due to the confluence of common strategic interests shared by the world’s major powers, a new great game is emerging in the Indian Ocean region. Both China and India have fostered initiatives and forums to attract and project their power and influence.

For instance, China has two main multilateral forums, the Shanghai Cooperation Organization and Forum of China-Africa Cooperation. Similarly, India has three multilateral initiatives: the Indian Ocean Naval Symposium, India-Africa Forum and the Pan-African e-network.

The advent of this changing geopolitical dynamic has provided developing countries with greater flexibility to resist Western pressure by courting China and India. A case in point was recently encapsulated by the president of Senegal, Abdoulaye Wade, who wrote in the Financial Times, “The battle for influence in the world between the West and China is not Africa’s problem. Our continent is in a hurry to build infrastructure, ensure affordable energy and educate our people.

“With direct aid, credit lines and reasonable contracts, China has helped African nations build infrastructure projects in record time – bridges, roads, schools, hospitals, dams, legislative buildings, stadiums and airports.

“Today I find myself at the heart of an economic struggle with the EU. If Europe does not want to provide funding for African infrastructure … the Chinese are ready to take up the task, more rapidly and at less cost,” he added.

The hallmarks of power plays that continue between India and China are apparent in almost every country throughout the Indian Ocean region. China’s drive to open new routes and markets that bypass its strategic overdependence on the Malacca Strait has led to trade and economic development in underdeveloped regions of Central Asia, West Asia and South Asia.

For instance, in South Asia, China has invested billions in major infrastructure development projects such as the construction of new ports like Hambantota in Sri Lanka, Gwadar in Pakistan and Sittwe in Myanmar. China is also engaged in the construction of highways, railways and oil and gas pipelines that directly link Gwadar and Sittwe to China’s western and southern borders.

Similarly, India has sought to expand into new markets and is offering attractive aid and investment packages to countries in South Asia and throughout the Indian Ocean region.

There are numerous examples of China and India’s regional engagement. For instance, India recently approved a credit facility worth $640 million for the development of Ethiopia’s sugarcane and bio-fuel industry, while China provided a soft loan worth $700 million so the Ethiopian government can build an 80-kilometer, six-lane highway and a $1.5 billion loan to modernize telecommunications infrastructure.

Bilateral trade between India and Mozambique increased from $178 million in 2005-06 to $459 million in 2008-09. Similarly, India’s bilateral trade with Kenya has surpassed $1.5 billion in 2009-10, making India Kenya’s sixth-largest trading partner.

Bilateral trade between China and Mauritius has increased from $96 million in 2001 to an estimated $505 million in 2007. In 2008, China announced plans to invest $730 million to open a trade development zone for Chinese firms, which made the project the largest source of foreign direct investment in Mauritius. One year later, China agreed to lend $260 million to expand Mauritius’ only international airport.

For the time being, the emerging competition and shifting balance of power in the Indian Ocean region is proving beneficial for developing countries that are intent on rapid economic and infrastructure development. Indeed, while Western countries over the last few years have generally increased their foreign aid budgets and investment in the developing world, this alone has not necessarily secured Western influence as aid and investment is often attached with political and human rights caveats.

In contrast, China and India have no such compulsions and continue to focus foreign investment and aid to enhance their strategic influence throughout the Indian Ocean region.

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