South Asia Strategy Monitor No. 5

BEIJING, DELHI JOCKEY FOR POSITION IN BANGLADESH
Regional rivals China and India have both chosen to invest in the development of Mongla, Bangladesh's second largest port, in what could soon emerge as a flashpoint in their increasingly tense relationship. In 2015, India signed a deal with Bangladesh to upgrade Mongla under a line of credit worth roughly $600 million. The following year, China signed a deal with Bangladesh to fund 27 development projects in the country, one of them being the "expansion and modernization of Mongla's facilities." Unfortunately, neither China nor India began the project promptly, and it languished until India assigned an engineering firm to serve as the contractors for the project this past December. Soon after news of the development broke, Beijing confirmed to Dhaka that it had the money to fund the project. While Bangladesh denies the Sino-Indian rivalry is the cause of the investments in Mongla, and stresses that the Chinese and Indian funding will go toward different projects within the port, the developments set the stage for an intensification of the Sino-Indian rivalry. (Nikkei, January 24, 2023)

KHAN'S PTI MAKES A POWER PLAY
In mid-January, leaders of Pakistan's main opposition party in the provinces of Khyber Pakhtunkhwa and Punjab dissolved the respective provincial government assemblies in an effort to force the country to move up the its national election. The Pakistan Tehreek-e-Insaf (PTI) is led by former Prime Minister Imran Khan, who was ousted following a no-confidence vote in April 2022. The development puts the country on the horns of a serious dilemma. On the one hand, given the current, fragile state of the economy and national politics in the wake of humanitarian crises, Pakistan is poorly positioned to hold not one but two separate elections. On the other, existing law requires that elections take place 90 days after the dissolution of an assembly. In such a way, the PTI is hoping to force the hand of the current ruling party and capitalize on its weakening domestic position, given widespread dissatisfaction over its recent performance. (Al-Jazeera, January 26, 2023; Dawn, February 10, 2023)

TO PROTECT AGAINST CHINA, INDIA GREENLIGHTS DOMESTIC ARMS...
India is forging ahead with its efforts to bolster its defense capabilities against China. In mid-January, the country's Defense Ministry authorized the purchase of short-range, portable air defense missiles developed by the Defense Research and Development Organization of India. These missiles are used against low altitude, close--range aerial threats, similar to U.S. surface-to-surface FIM-92 Stinger missiles. The purchase has a clear purpose and message. After recent clashes between Indian and Chinese troops at the Northeast Indian border of Arunachal Pradesh, and a lack of progress to resolve the situation at the negotiating table, tensions between Beijing and New Delhi are continuing to mount. (Bloomberg, January 3, 2023)

...AND DEEPENS PARTNERSHIP WITH THE UNITED STATES
Another way India is building up its defense and technology arsenal is by partnering with the U.S. on the "U.S.-India Initiative on Critical and Emerging Technologies." The purpose of the initiative, which was announced on January 31st by the White House, is to bolster technology sharing between India and the U.S., such as boosting Western phone networks in South Asia to counter China's Huawei technologies, encouraging more Indian microchip specialists to travel to the U.S., and expanding collaboration on artillery systems. Taiwan is the number one semiconductor manufacturer in the world and Chinese telecom companies have some of the highest reach and connectivity throughout Asia. Fears that China could invade Taiwan within the next decade are growing, and the effects of such an invasion would have a drastic effect on the global economy. By collaborating on building some of these vital technologies, India and the U.S. hope to reduce global dependence on China, as well as on Taiwan. (Reuters, January 31, 2023)

THE TALIBAN'S NEW GROOVE
In what represents its first major international economic agreement since returning to power in Kabul in August of 2021, Afghanistan's ruling Taliban movement signed a 25-year oil extraction deal with a Chinese company last month. Under the contract, Xinjiang Central Asia Petroleum and Gas (CAPEIC) plans to invest $540 million into Afghanistan over the span of three years, building Afghanistan's first crude oil refinery and exploring five gas blocks in the country's north. It is believed that Afghanistan sits "atop $1 trillion worth of natural resources, such as oil, gold and lithium," and investment by the Chinese could create 3,000 new Afghan jobs, marking a massive boost to the country's beleaguered economy.

However, China has security concerns about its investment, especially in light of the December 2022 Islamic State attack in Kabul that killed five Chinese citizens. But the rewards outweigh the risks; Chinese investment in Afghanistan provides Beijing with an opportunity to shape the economy of a nation that has the potential to play a key role in its unfolding Belt and Road Initiative. (Bloomberg, January 5, 2023; Nikkei, January 19, 2023)