VOL II, ISSUE III, AUGUST 2011 n ` 100

ggeeooppoolliittiiccssTHE DIPLOMACY OF MILITARY EXERCISES

D E F E N C E n D I P L O M A C Y n S E C U R I T Y

DO THEY NEED

ABOSS?DO THEY NEED

ABOSS?IT IS TIME TO TAKE A FINAL CALL ON THE POST OF CHIEF OF DEFENCE STAFF

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COVERSTORY

(P38)

Do we need a Chief of Defence Staff— a post that is an accepted normin 60-plus countries? We take aclose look at the challenges andobjections raised by a section of thearmed forces for the post.

TTHHEE CCDDSS DDIILLEEMMMMAA

SPEED DEMON

PANORAMA (P10)

The superlative X2, Sikorsky’s hybrid chopper that has broken

records is all set to be the basis for a new generation of attack

helicopters.

UNITED FRONT

PERSPECTIVE (P12)

Joint military exercises enable officers and the

troops to acquaint themselves with each other’s tac-

tics, techniques and procedures.

SPECIAL REPORT (P20)

NUCLEAR CONUNDRUM After David Headley’s confessions, it isclear that extra efforts are needed to keepIndia’s nuclear facilities safe.

DEF BIZ (P27)

MISSION ACQUISITION After the CAG’s rap on its knuckles for thelack of a modern primary trainer, the Indi-an Air Force seems keen to acquire thePilatus PC-7 II.

INTERNAL SECURITY (P58)

SYSTEMIC FAILURE The latest attacks in Mumbai prove that the political leadership of thecountry has not learnt any lessons after 26/11.

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SMALL BUTDEADLY

SPOTLIGHT (P36)

After cancelling the first tender for it, afresh set of trials is ample proof that thearmed forces just cannot do without theLight Strike Vehicle, especially for SpecialOperations.

GUARDING THEHOME FRONT (P32)INDESEC 2011 brought the bestin the homeland security industryfor the government and corpo-rates to choose some truly inno-vative products.

JUNGLE WARRIORS(54)Learning to fight a guerrillalike a guerrilla is the way forward for security forces battling the Naxalite menace.

CENTRAL ASIANCHALLENGE (P66)As they try not to offend USsensibilities both India and theSCO are in a fix about whetheror not to associate a ‘pariah’Iran.

TOUGH TASK AHEAD(P73)Yingluck Shinawatra may havewon a resounding electoral victorybut placating all the stakeholdersin Thailand may prove to be adaunting task.

G E O P O L I T I C S

g INDIA HAS TO DEVELOP A VIABLE

AID MECHANISM TO COUNTER

THE DELUGE OF CHINESE AID

AROUND THE WORLD.

REINING IN THE

DRAGON

DIPLOMACY (69)

VOL II, ISSUE III, AUGUST 2011 � ` 100

ggeeooppoolliittiiccssTHE DIPLOMACY OF MILITARY EXERCISES

D E F E N C E � D I P L O M A C Y � S E C U R I T Y

DO THEY NEED

ABOSS?IT IS TIME TO TAKE A FINAL CALL ON THE POST OF CHIEF OF DEFENCE STAFF

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Beijing is playing an increasingly important role on the international development scene byproviding aid to many developing countries that closely resembles overseas investments. Theelaborate Chinese aid system will pose serious challenges to India, particularly in Asia andAfrica, unless New Delhi develops its own aid architecture, argues GULSHAN SACHDEVA

A NEW CHALLENGEFROM CHINA

A NEW CHALLENGEFROM CHINA

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FOREIGN AID and its effectivenessin promoting growth in developingcountries has always been contro-versial. Immediately after theWorld War II when the idea of for-

eign aid gained acceptance, the internationalsystem was in transition. The process ofdecolonisation in the developing world coin-cided with the emergence of a bipolar inter-national system. One of the main reasonsbehind the idea of development assistancewas the success of American Marshall Plan inEurope. In the latter years, aid was alsoutilised as an instrument of power playbetween the two superpowers so that devel-oping countries would not go to the “otherside”. It was also a mechanism by which theEuropean powers maintained their links withtheir former colonies.

Many scholars who tested the apparentmotivations behind foreign aid found thatdonor interests dominate recipient needs.The World Bank has concluded that researchfindings linking aid and growth in the devel-oping countries are “discouraging to say theleast”. Overall, the history of developmentassistance has been dominated by geopoli-tics and evolution in development thinking.

The Development Assistance Committee(DAC) of the Organisation for EconomicCooperation & Development (OECD), whichmonitors global aid trends, defines the Offi-cial Development Assistance (ODA) as “thesum of grants and loans to aid recipients thatare: (a) undertaken by the official sector ofthe donor country; (b) with promotion ofeconomic development and welfare in recip-ient countries as the main objective; and, (c)at concessional financial terms, where thegrant element is equal to at least 25 per cent”.All major Western donors are members of theDAC. International aid is bilateral, which isgiven from one country directly to another, aswell as multilateral, which is given by thedonor country to an international organisa-tion like the World Bank or UN agencies,which in turn distribute it among the devel-oping countries.

Currently, about 70 per cent of aid is bilat-eral and the rest is multilateral. From 1960 to1990, ODA flow from DAC countries to devel-oping countries rose steadily. It declined inthe 1990s but has been rising again over thelast decade, mainly because of reconstruc-tion activities in Iraq and Afghanistan.Despite the recent financial crisis, ODA flowsreached $126 billion in 2010. Traditionally,the US has been a major donor. Other impor-tant donors have been the EU and its mem-ber states and Japan.

In recent years, aid flow from some non-

traditional donors such as China and Indiahas been a topic of discussion. Since bothChina and India are not members of theOECD, their aid figures are not easily avail-able and their activities are not analysed inscholarly aid-literature. As a result, there hasbeen relatively less understanding of their aidactivities. Although both of them have arguedthat their aid activities are part of South-South cooperation, many scholars remainskeptical about their claims. Moreover, boththe countries have never presented systemat-ic data of their aid activities to the largeraudience. It has been difficult to quantifytheir activities, particularly that of Chineseaid. Compared to western donors, their aidhas also been administered in an ad hoc fash-

ion without a regular system and fundingschedule. This, however, seems to be chang-ing, at least, in the case of China.

Recently, the Chinese governmentreleased a white paper on its aid activities.This is, perhaps, the first time that the Chi-nese government has presented its aid activi-ties in a systematic manner. The paperreveals that China’s foreign aid began in 1950,when it started providing assistance to NorthKorea and Vietnam. This was later extendedto other socialist countries. Its aid to Africastarted in 1956. In 1964, China declared “theEight Principles of foreign aid”, the core ofwhich featured equality, mutual benefit andno strings attached. In the 1970s, it fundedthe Tanzania-Zambia Railway and othermajor infrastructure projects. When the Chi-nese economy opened up in 1978, it diversi-fied its activities. In the 1990s, when its econ-omy was booming, it also diversified thesources of funding.

Actually, some of the Chinese foreignassistance resembles Western ODA. However,a major portion of its aid can be charac-terised as foreign investment. This is the rea-son why Chinese aid statistics are quite dif-ferent from many reports produced by Amer-ican think tanks. According to the ChineseWhite Paper, its aid falls into three categories:grants, interest-free loans and concessional

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CHINA HAS CREATED

A HUGE PROFILE FOR

ITSELF, IN AFRICAAND ASIA,

THROUGH AID

FLEXING ITS SOFT POWER: China has been raising its profile around the developingworld with a multitude of aid programmes in more than 120 countries. Major recipientsof Chinese aid are marked in red (see story).

PERU

MAURITANIA

GHAN

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loans. While concessional loans are providedby the Export-Import Bank of China, the oth-er two come from government financesdirectly. By 2009, China had provided foreignaid amounting to 256 billion yuan (about $40bn). This included $16 billion in grants, $12billion in interest-free loans and $12 billion inconcessional loans. In contrast, some Ameri-can reports had earlier indicated Chinese aidactivities to the tune of $75 billion only forthe period between 2002 and 2007. Obvious-ly, they had included many state-sponsoredor subsidised overseas investments intothese activities.

It seems that China has also developed itsown aid management system. Overall, it isthe Ministry of Commerce, which is responsi-ble for the formulation of foreign aid policies,regulations, approval and management ofthe aid projects. The Executive Bureau ofInternational Economic Cooperation, ChinaInternational Centre for Economic and Tech-nical Exchanges and some officials of theAcademy of International Business areresponsible for implementing projects. Allthese activities are closely coordinated by theChinese embassies or consulates. Differentdepartments including the Ministry of Com-

merce submit their projects every year to theMinistry of Finance for scrutiny and then tothe State Council and National People’s Con-gress for approval.

By 2009, China had provided concessionalloans to 76 countries, supporting 325 proj-ects, of which 142 had been completed. Outof the total concessional loans, 61 per centwere used to construct transportation, com-munications and electricity projects, 16 percent for industrial projects, while 9 per centwere used to support the development ofresources such as oil and minerals.

Chinese aid is offered in eight categories

— complete projects, goods and materials,technical cooperation, human resourcedevelopment, medical aid, emergencyhumanitarian aid, provision of volunteersand debt relief.

Since the early 1950s, when it stated itsactivities in North Korea, China has complet-ed more than 2,000 projects. By 2009, Chinahad organised 4,000 training sessions in over20 fields in human resource capacity buildingand trained over 120,000 people from a largenumber of developing countries. Currently,about 10,000 people receive training everyyear. Starting from Algeria in 1963, China hasalso sent over 21,000 medical workers to oth-er countries, and treated 260 million patientsin about 70 countries. In 2009, 60 Chinesemedical teams composed of 1,324 medicalworkers were providing services at 130 med-ical institutions in 57 developing countries.Over the years, China has also dispatchedabout 8,000 Chinese-language teachers.

By 2009, China had aided a total of 161countries and 30 international and regionalorganisations. About 123 developing coun-tries receive Chinese aid regularly. Of them,30 are in Asia, 51 in Africa, 18 in Latin Ameri-ca and the Caribbean, 12 in Oceania and 12

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CHINA’S AIDACTIVITIES INAFRICA AND

LATIN AMERICASERVE PRIMARILY

ECONOMICINTERESTS

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GHANA

MALTA

SOMALIA

COMOROS

ETHIOPIA

KENYARWANDA

TANZANIA

SUDAN YEMEN

PAKISTAN

TAJIKISTAN

EGYPT

SYRIA

CONGO

CAMEROON

ZAMBIA

BOTSWANA

SRILANKA

BANGLADESHNEPAL

MYANMAR

LAOS

CAMBODIA

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in Eastern Europe. Africa and Asia receivedabout 46 per cent and 33 per cent of totalChinese aid respectively.

China has put emphasis on building somehigh-visibility landmarks. These include theBandaranaike Memorial International Con-ference Hall in Sri Lanka, the Friendship Hallin Sudan, the National Theater of Ghana,Cairo International Convention and Exhibi-tion Centre, the Radio and Television Broad-cast Centre in Comoros, the InternationalConvention Centre in Myanmar, Moi Inter-national Sports Centre in Kenya, Multi-Func-tional Sports Stadium in Fiji and the TanzaniaNational Stadium.

Some of the more than 450 infrastructureprojects include Sana’a-Hodeida Highway inYemen, Karakoram Highway and GwadarPort in Pakistan, Tanzania-Zambia Railway,Belet Uen-Burao Highway in Somalia, DryDock in Malta, Lagdo Hydropower Station inCameroon, Nouakchott’s Friendship Port inMauritania, railway improvement inBotswana, six bridges in Bangladesh, onesection of the Kunming-Bangkok Highway inLaos, the Greater Mekong Sub-region Infor-mation Highway in Myanmar, Shar-Shar tun-nel in Tajikistan, No.7 Highway in Cambodia,

and Gotera Interchange in Addis Ababa,Ethiopia. In the industrial field, some impor-tant projects include Hama Textile Mill inSyria, Cement Factory in Rwanda, RiojaCement Factory in Peru, Agriculture Machin-ery Factory in Myanmar and Loutete CementFactory in Congo.

These facts clearly indicate that throughaid activities China has created a huge profilefor itself, particularly in Africa and SoutheastAsia. Its activities are driven primarily by itsdesire to secure and transport naturalresources for its booming economy. Its aidactivities in Africa and Latin America serveprimarily economic interests. In South andSoutheast Asia, however, activities are alsolinked with strategic objectives. Despitesome negative reporting about the increasingChinese profile in Africa, it seems that manyAfrican governments still see China as a non-imperial alternative player, which can offeran alternative route to development. Com-pared to the OECD donors and multilateralinstitutions, Chinese aid is often made avail-able relatively quickly. It is also normallywithout conditions and bureaucratic proce-dures. Instead of typical tough donor-recipi-ent negotiations, Chinese aid and investment

activities are announced at bilateral summitmeetings. In addition, China does not hesi-tate in entering into countries, areas and sec-tors avoided by western donors due to politi-cal or security reasons.

Overall, it is clear that China will be play-ing an increasingly important role in theinternational development scene. Many Chi-nese activities closely resemble overseasinvestments rather than aid. Normally FDIand commercial loans are not counted as aid.But the Chinese situation is complicatedbecause of subsidised overseas investmentsby the public sector. These contracts aresecured through government agreementsand normally do not impose risks on partici-pating Chinese companies or result in for-eign assets. They look more like aid projectsthan FDIs. So, compared to traditionaldonors, the Chinese development role isgoing to be relatively different. With its insti-tutional structure in place, its activities infuture will be more systematic. Althoughmost western donors have moved towardsuntied aid, Chinese aid continues to be tied.

The elaborate Chinese aid system posesserious challenges to India. Unless India isalso able to develop its own aid architecture, itwill be increasingly difficult to counter Chinawith ad hoc measures. India’s major aid activ-ities in Afghanistan and evolving Africa policycould provide some useful lessons. The Chi-nese mechanism also provides a lesson thatnon-traditional donors do not have to followtypical OECD guidelines. India has someexperience of implementing the Indian Tech-nical & Economic Cooperation (ITEC) pro-gramme as well as lines of credit programmethrough the EXIM Bank. Though useful, theseprogrammes are still very small compared tothe emerging needs of a rising India.

Over the years, the Ministry of ExternalAffairs (MEA) has dominated developmentcooperation programmes. The emergingIndian development cooperation architec-ture may need an independent agency toplan, coordinate and implement various aidactivities. Obviously, it will have to closelycoordinate its activities with the MEA, lineministries, NGOs and think tanks. Theagency will also have to collect and presentdata concerning aid activities to the globalaudience. Existing donors provide enoughexamples of how this agency can be organ-ised. To begin with, the Indian governmentcan also come up with its own White Paperon aid activities so that an informed debatecan be initiated.

(The author is Associate Professor atJawaharlal Nehru University)

SCRAMBLE TO AID: Unless India develops its own aid architecture the intricate Chineseaid mechanism will be the cause of potent challenges to India, especially in Asia and Africa

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