India’s ambitions to establish a foothold in Myanmar and strengthen ties with Southeast Asia risk being jeopardised by the ongoing Kaladan project. This ambitious venture exposes India’s overseas infrastructure failings, and thus its inability to push rival China aside.
Long deterred by Myanmar’s status as a military dictatorship, India has only relatively recently built substantial strategic and economic ties with neighbour Myanmar. With China becoming increasingly assertive in that region, Myanmar now forms an important part of India’s ‘master plan’ for ASEAN connectivity. India’s government is ready to exploit the opportunities afforded by Myanmar’s more democratic, liberal regime. Nevertheless, the long-mooted Kaladan Multimodal Transit Transport Project, intended to integrate India’s traditionally underdeveloped northeast with Myanmar’s southwest, is yet to materialise.
Since the 1990s, Indian trade with ASEAN has grown steadily, and ASEAN is now India’s fourth-largest trading partner. India has progressively built up an economic, political and security alliance with that regional bloc. But China is vastly more experienced with its overseas infrastructure dealings, and for this reason many Southeast Asian leaders have placed their eggs in China’s basket. If India fails to deliver with Kaladan – and similar overseas projects – then this Sino-oriented status quo will remain untouched.
India’s concerns
India is naturally concerned about China’s Belt and Road Initiative (BRI). As previously argued, BRI is important for the enhanced political and economic clout that China is demonstrating across the Asia-Pacific. Malaysia and others are developing unsustainable debt with China, which translates into growing regional influence for the Asian behemoth.
According to The Diplomat, Chinese investment in Myanmar dwarfs India’s. During fiscal year 2015-16, China invested US$3.3bn, whereas India invested just US$224m. It is a similar story for the other Southeast Asian countries, for China’s GDP is almost 5 times that of India. Although doubtless that China’s intentions are not entirely altruistic, such gargantuan foreign investment reflects an offer that each ASEAN member cannot refuse.
India’s move closer to Myanmar reflects its ‘neighbourhood first’ policy, which prioritises building diplomatic ties with its geographical neighbours. Aside from providing a gateway to Southeast Asia, through Myanmar, western ally India seeks to become a more assertive regional player, countering China’s influence.
For Myanmar, as for its neighbours, diversifying its economic interests vis-à-vis greater Indian involvement will help reduce China’s overwhelming influence over its economy. Concern has grown over China’s extensive involvement in upgrading Myanmar’s ports, roads and bridges, and its appropriation of Myanmar’s gas and oil reserves.
The Kaladan project
Signed in 2008, the Kaladan Multimodal Transport Project is the first major Indian-funded project in Myanmar. It is named after the River Kaladan, which originates in Myanmar’s Chin state, flows through Mizoram state in India, and joins the Bay of Bengal. A total distance of 907km, the project will connect Mizoram state with ports in Kolkata and Rakhine state capital Sittwe. Allowing trade to bypass the Siliguri Corridor (see below) is of high economic and strategic importance. The project ought to transform Mizoram and northeast India into a trade corridor for Southeast Asia, allowing it to connect with ASEAN and establish links to Singapore and key cities across Thailand, Cambodia and Malaysia.
Maritime trade between Kolkata and the new port in Sittwe will bypass the Siliguri Corridor (circled in red), a sensitive political region bordering Nepal, Bangladesh and Bhutan.
The US $500m project is being implemented in four phases: (1) construction of a deep sea port at Sittwe; (2) dredging and modernising of a 158km section of the Kaladan waterway between Sittwe and Paletwa in Myanmar, and construction of a jetty at Paletwa; (3) construction of a 109km stretch of road from Paletwa to Mizoram on the India-Myanmar border; and (4) extension of the Indian National Highway #54 to the Myanmar border.
The project will connect India’s Mizoram state (highlighted in red) with the town of Paletwa and the city of Sittwe (image retrieved from Google Maps)
Phases 1 and 2 were initially handled by the Inland Waterways Authority of India (IWAI), but later subcontracted to Essar Group, an Indian infrastructure conglomerate. Phases 1, 2 and 4 are near completion. Phase 3, essential to the functioning of the entire project, is only due to start in October because of difficulties experienced finding a suitable contractor. Although India recently donated six vessels to the new Sittwe port, the full transit route will not be open for years. Despite the initial June 2015 deadline, in October 2015 it was extended to 2019 and the estimated budget increased sixfold.
Implementation problems
Putting aside immovable financial constraints, Kaladan has been hindered by inadequate time and resource management; inadequate fund allocation; a lack of accountability; and other planning failures like poor quality control. Unfortunately, such poor project management fits India’s track record for overseas infrastructure ventures.
The initial feasibility study, completed by the state-run Rail India Technical and Economic Services (RITES), contained several flaws. Errors include: an underestimation of the road lengths in Myanmar; ignorance of Myanmar’s Ministry of Power’s plans to construct hydroelectric dams on two tributaries of the Kaladan river (which would subsequently affect the Kaladan project); and a lack of knowledge of shipwrecks on the Kaladan riverbed (which delayed dredging). A host of land compensation claims in Mizoram have also created hindrances.
The prospect of a fully functioning port, with navigable waterways for cargo ships, and ports linked to new highway connections, remains a long way off. Given the difficulty of modernising the terrain and the absence of viable road networks in this region, concerns will have always existed around the value of such a huge investment. Yet one journalist described India’s approach as ‘lackadaisical’, when set against China’s BRI, warning the project risks were becoming a white elephant.
Ongoing tensions in Rakhine may also create potential obstacles further down the line – although theoretically, developing this peripheral borderland should help negate the attraction of insurgent activity. According to India’s ambassador to Myanmar, ‘India intends to develop the project to give job opportunities to Rakhine people and bring development to the state’. But here a coordinated bilateral effort is essential, and the available evidence suggests otherwise. Such an environment is far from conducive to promoting a healthy industrial culture.
Overall, Kaladan has suffered from a lack of coordination between the different implementing bodies: public sector departments, private contractors and external agencies. Admittedly, it is easy to underestimate the time and difficulty of forging strong bilateral cooperation. Similar problems face the equally ambitious – and significant – Trilateral Highway project, which draws together India, Myanmar and Thailand.
For India to gain regional influence – and be taken seriously as an alternative partner to China – it must take action to rectify these infrastructure-related woes. When completed, the project should help India to begin to counterbalance China’s ever-expanding regional trade network. The current disparity is vast: in 2015, ASEAN-India trade stood at US$58bn, whereas ASEAN-China trade was US$345bn. A white elephant would not only mean economic loss for India. Through Kaladan, India has staked its reputation as a new regional partner; failure to deliver could further entrench Beijing’s influence over the region.