Liu Guoyu, Commercial Counsellor of the Chinese Consulate in Mumbai, outlines the measures that India and China can take to boost their partnership in the infrastructure domain for a mutually beneficial relationship.
For over 20 centuries in the past, India and China have been friendly neighbours. The two ancient civilizations were once tightly connected through the bridges of Buddhism and the Silk Road. As newly emerging economies, as well as developing countries with vast territories, the two countries have become constructive partners and members in alliance in the fights against climate change and at establishing a new political and economic order. In 2013, the heads of Governments of our two countries exchanged visits which is unprecedented in the history of our bilateral relationship. 2014 is ´The Year of Friendly Exchanges´ and coincides with the 60th anniversary of joint declaration, by China, India and Myanmar, of the ´Five Principles of Peaceful Coexistence´, which would add new steam for our strategic partnership relations for peace and prosperity. It is in the above regard that China and India should further promote and deepen comprehensive, multi-tiered coope¡ration, among which infrastructure will be one keyarea.
Modernised New India warrants a boost in infrastructure construction
Since the 1990s, the Indian economy has maintained rapid growth and achieved eye-catching results. However, the bottleneck effects caused by inadequate infrastructure construction are emerging gradually .
From the perspective of energy development, insufficient power supply has been constantly restraining India´s economic development. According to the data from the World Bank, by 2010, India realised an annual GDP growth of approximately 8 per cent with the power supply growth standing at 4.9 per cent. Currently, the national electricity grid suffers from serious shortage of funds, the electricity price is yet to be at par with the market price, the relevant state-owned distribution enterprises are on the verge of bankruptcy. Furthermore, nearly 1/3 of India is yet to access power supply.
From the perspective of transportation, India´s highway and railway systems are pending for improvement. At present, 1/2 of its territory is yet to access the public road system. The mileage for expressways is less than a quarter of the total national highways. India´s railway network ranks fourth in the world, but faces the problem of aging, and most of the rails are in need of overhaul. The Indian Government plans to build 25,000 km of new rails by 2020, but only 1,750 km was constructed during the five-year period from 2006 to 2011. Due to the issue of land acquisition, it is very difficult to carry out large scale transportation projects across the country.
From the perspective of water and air transportation, currently 13 major ports, along with other 60 minor ports are handling 95 per cent of the foreign trade volume and 70 per cent of the trade value, but there are problems existing among these ports, such as inefficient operation and highly complex procedures of custom clearance, etc. The custom barriers have been dumping the incentive of the private investment. Meanwhile, the Indian aviation industry has enjoyed rapid development over the recent years, the Government allows private airports, through public bidding, to form a public-private partnership vis-a-vis management of India´s State-owned airports. However, the above bidding process has been strongly opposed by the labour unions and the relevant airline companies.
Infrastructure construction is a precondition that supports the national economic development. Due to the insufficient investment in the said industry, India´s economic growth slid to 4.8 per cent in 2013 from 10.5 per cent in 2010. Meanwhile, India´s constant increase of trade volume and the accelerating urbanisation have jointly brought about enormous pressures to the existing infrastructure nationwide. One recent report on International Competitiveness by the World Economic Forum shows that India ranks 85 out of the 148 member countries in terms of infrastructure construction, and the two biggest cities of India, New Delhi and Mumbai, both stand even behind Bangkok.
Nevertheless, the good news is that in its 12th Five-year Economic Plans, the Indian Government has allocated $ 1.1 trillion for infrastructure construction. Around 53 per cent of the required funding will be financed by the Government and the rest will be financed by domestic and overseas capital. During an interview in last April, Sanjeet Singh, senior official of the Ministry of Commerce & Industry Department, expressed his hope that China would consider India as an additional destination of its overseas investment, which would account for a large portion in its national economy.
On 18th March 2014, India and China held the Third Strategic Economy Dialogue in Beijing and exchanged views on issues i.e. policy coordination, infrastructure construction, resources & environment protection, high & new technology and energy development. The specific projects earmarked for cooperation cover projects in the railway and the relevant industry, power generation equipment service center in India, environment and energy protection, water resource management, policy coordination, city planning, urbanization, hi-tech cooperation in the IT industry, etc. To sum up, India and China have already reached consensus on cooperation in the field of infrastructure construction and the relevant departments of both countries have completed guidelines on the feasible programs. Now, it is up for the enterprises from both sides to join hands, in order to carry out the actual project cooperation, to promote the economic development of India, which would, in turn, strengthen the economic foundation of our bilateral relations.
China is a ready partner for India in terms of infrastructure construction
In the field of infrastructure construction, India needs both its domestic investment and capital from abroad. China is ready in the above regard.
First of all, China and India have similar national conditions and are in a similar stage of economic and social development. As developing countries and newly emerging economies, we are both on the way to take off. Therefore, both countries now face similar issues and problems. China started its infra¡structure construction earlier than India, and used to suffer from the same scenarios. Therefore, with China as the partner, besides technology and hardware facilities, it is also able to offer India the relevant experiences in infrastructure construction so that the latter could avoid some mistakes that the former went through.
Secondly, China has reputable achievements on infrastructure construction. In the above fields such as power generation, highways, bridges, railways and tunnels, China owns solid technological qualification as well as managerial knowhow. In 2013, for the first time in history, with a total volume of 1.25 billion kWh, China ranked No. 1 globally on power generation.
In the same year, China added 8,268 km of expressways, which contributed to an aggregated mileage of 104,468 km. Meanwhile, the aggregated operational mileage of railway exceeded 100,000 km, in which the bullet train railway surpassed 10,000 km.
Thirdly, China has mastered comparative cost-effective facilities and technologies, and has the capacity to offer project funding. In recent years, China has realised rapid infra¡structure development, accumulating rich experiences, developing cutting-edge technologies, and mastering project finance capability. Furthermore, compared to developed countries, China enjoys comparative human resources and raw material, and commands comparative advantages on equipment and project cost, which is in line with the specific requirement of India in terms of infrastructure construction as an developing country.
Meanwhile, relevant Chinese enterprises have already acquired abundant experience on infrastructure in India. Currently, some of them have been working in the infrastructure field, completed many sizeable projects, and have won awards from the Indian authorities. For example, SEPCOIII has successfully constructed 6 thermal power plants, and China Harbor Construction Group participated in Phase I project of the Sea-Link Project in Mumbai. Besides, China Railway Construction Group and some other enterprises are actively bidding for India´s Metro and railway projects, through which they could contribute to the railway construction of India. In short, these Chinese enterprises are highly experienced and have achieved remarkable achievements. Therefore, they will provide excellent services to the infrastructure construction in India.
Change the mindset, eliminate obstacles and achieve win-win cooperation Based on the above analysis, due to reasons related to history and national situation, both China and India need to change the stereotyped concepts and eliminate the obstacles vis-a-vis bilateral cooperation.
First, it is the ´security inspection´ from the Indian side. The Indian Government has set up certain ´security inspection´ mechanism pro¡grams which are tailormade for China and some other countries. The relevant authorities have been discriminatively rejecting the Chinese enterprises from the Indian market simply for ´security reasons´. The above biased mechanism has not only barred many Chinese enterprises from the chance for fair competition, but also resulted in the scenario for India to lose constructive partners who are reputed for high performance, high efficiency, advanced technology and excellent project engineering quality. Second, it is the invisible obstacles. For instance, for some projects, the Indian Government only allows Chinese enterprises to participate in bidding through local agencies, which increases the financial cost and makes things more difficult. For another example, relevant Indian laws and regulations do not allow vessels belonging to Chinese enterprises to enter the project sites, which directly denies Chinese enterprises of their chances to bid and win project construction. China is among the best in construction in terms of highways, railways, bridges and harbours, etc. Failing to include Chinese enterprises as partners will inevitably result in higher project construction costs and lengthy project construction circles.
Third, it is the issue of visa control and work permits allowance. These are the legacies left over by history. Nevertheless, they have been stumbling blocks for the Chinese enterprises to participate in infrastructure construction in India. It is a fact that visa review mechanism is too rigid and visa approval process is too lengthy. Consequently, many Chinese technicians and managing staff find it impossible to report to their portfolios, and carry out projects in line with the contract. The relevant Indian authorities purposefully withhold applications for the work permits even in line with the contract and the laws and regulations in India. It is a sad fact that the above scenarios have been drowning confidence of many Chinese enterprises in the Indian market.
All in all, there is great space for further cooperation between India and China in the infrastructure field, but there is still a long way to go before we can fully tap into the potential for win-win cooperation. It requests mutual understanding, trust and joint efforts. For that matter, we hope that India should change the existing outdated mindset and offer the Chinese enterprises a fair and square opportunity by and from which India itself will benefit for the sake of infrastructure development. Meanwhile, the Chinese enterprises will also follow the principle of mutual beneficial and common development while investing in India. The Chinese Government should encourage its own enterprises to continue following the principle of ´high credibility, excellent quality, reasonable profits and righteousness´ so that the interest of the Indian side can be protected. We believe, with joint efforts by the enterprises in both countries, China and India will definitely accomplish enormous achievements in the infrastructure field. The bottom line is that China is willing and ready to further forge the real partnership relations which would provide new steam to build up a modernised India.