South Asia after COVID-19: A great power game lies ahead, says new study

How has the novel coronavirus affected South Asia, the world’s poorest and most populous region, where almost 1.9 billion people live in eight countries? Healthwise, the numbers are far better than what was projected at the start of the pandemic, but the economic downturn is a looming spectre. There will be massive slowdowns in many of the countries, and some are expected to go negative in its financial growth outlook, which could massively destabilise the region. 

According to a Hudson Institute think-tank report jointly authored by Indian-origin Hudson research scholar Aparna Pande and former Pakistan Ambassador to the US Husain Haqqani, the US and India must develop a plan to counter a possible effort by China to strengthen its position in the Indian Ocean by deepening ties with Pakistan and Sri Lanka by taking advantage of their economic woes due to the coronavirus pandemic.

There have been considerable concerns in India over China's growing presence in the Indian Ocean region. India has been trying to expand maritime cooperation with countries of the region including Sri Lanka, Maldives, Indonesia, Thailand, Vietnam, Myanmar and Singapore, primarily with an aim to check the growing Chinese assertiveness. According to the report titled 'Crisis from Kolkata to Kabul: COVID-19's Impact on South Asia', the coronavirus pandemic threatens not only lives and livelihoods in South Asia; it could also be the precursor of significant political and strategic shifts in the region.

The Bangladesh and Indian economies will survive the devastation, but their governments will have to restore growth by protecting and encouraging investment.

"Pakistan and Sri Lanka will likely move in the direction of negative growth and will need debt relief from their international creditors. Without it, Sri Lanka faces the prospect of a sovereign debt default. Both countries are likely to look to China as their benefactor, as their leaders have tended to do for a while," it said. China will most likely press its advantage by bailing out South Asia's indebted governments, "in exchange for its pound of flesh". 

"This would come at the expense of India's security and US influence in the region. India and the United States must develop a plan to counter efforts China will likely make to strengthen its position in the Indian Ocean by deepening ties with Pakistan and Sri Lanka," said the Hudson report.

Pakistan and Sri Lanka have been a target of Beijing's ambitious Belt and Road (BRI) scheme, criticised for creating 'debt traps' by burdening fiscally weak countries with unsustainable debt. The BRI is Chinese President Xi Jinping's signature global infrastructure policy. First announced in 2013, the project promises to build ports, roads and railways to revive the ancient Silk Road and create new trade corridors linking China to Asia, Africa and Europe. The BRI also includes the China-Pakistan Economic Corridor (CPEC), which India opposed as it goes through Pakistan-occupied Kashmir (PoK).

In December 2017, Sri Lanka handed over the control of the southern sea port of Hambantota to China on a 99-year lease, triggering concern over Beijing's efforts to expand influence in the Indian Ocean region. Beijing has recently granted an "urgent" loan of $500 million to Colombo to help it fight the virus, which has infected over 1,465 people and claimed 10 lives in the country.

Earlier this month, China inked a $5.8 billion deal with Islamabad to build a dam in Gilgit-Baltistan, a move strongly opposed by India which said that carrying out such projects in territories under Pakistan's illegal occupation was not proper. "Given that Pakistan has fewer resources to further its military buildup against India, it is likely to escalate the use of sub-conventional warfare [terrorism] in an effort to gain the upper hand against much-larger India," the report noted.

Pakistan, it said, might seek relief from terrorism-related strictures on grounds that it needs space to deal with the coronavirus emergency.

In the past, Pakistan has used natural disasters to expand terrorist infiltrations into Kashmir and India. Indian officials are concerned that Pakistan could use the COVID-19 crisis as a distraction to do the same, the report observed. "Although a full-blown war in the subcontinent is unlikely, tensions between India and Pakistan will probably continue to impede efforts for regional cooperation. Such cooperation could ease the task of economic reconstruction that will almost certainly take place when the pandemic has died down. India could, and probably will, try to work with other countries in the region, but not Pakistan," the report said.

India

The report highlights Modi's centrepiece coronavirus policies—limited testing combined with strict quarantine of those with a travel history or symptoms, a strict nation-wide lockdown. It noted that managing the COVID-19 crisis well is politically important for Modi and the BJP, given its recent defeats in state elections, CAA protests, economic slowdown and "unrest over communal majoritarian policies". But, it noted that states not run by the BJP have been more proactive since the beginning of the virus outbreak. 

On the economic side, the IMF has predicted India's GDP growth to plunge to 1.9 per cent, with fears that it could go negative. On May 19, Modi announced an all-encompassing economic relief package of $264 billion (20 trillion Indian rupees) and states like Gujarat and Uttar Pradesh announced "labour reforms". The report lauded these measures: "If these changes spread to other states, they could provide manufacturing with the requisite boost it needs and also help with employment and job creation. Many countries and investors want to move their manufacturing out of China. India, with a large labor force and proximity to China, could become the venue for relocation."

The report, citing Delhi riots and TV news channels blaming COVID-19 on Muslims, also called for mending of communal policies and bringing about "social cohesion". 

On the external affairs side, the report noted the SAARC COVID-19 fund with Indian contribution of $10 million, medical teams in Nepal, Maldives, emergency supply of hydroxychloroquine, as positive regional outlook measures by India that could reap dividends.

Pakistan:

The report notes that Pakistan faces the biggest threat from the coronavirus, in the number of cases, the slow response to the pandemic, continuing religious congregations as opposed to social distancing, sluggishness in closing borders with China, and evacuating its citizens. Discrimination against minorities is growing, the military is now actively intervening in the civilian government affairs and, on the economic side, growth is expect to touch negative 1.5 per cent. 

"In late March, the government announced a relief package of 1,200 billion Pakistani rupees ($5.5 billion). The government’s relief package did little to deal with the underlying weakness of the economy, including the potential for diminished exports and remittances and high indebtedness. Since 2018, loans from the IMF and from Saudi Arabia, the UAE, and Qatar have proven insufficient to boost Pakistan’s economy, burdened by years of heavy military spending and debt servicing," according to the report. 

On the foreign policy side, Pakistan is still obsessed with the Kashmir issue. "Pakistan remains weak, having put most of its eggs in China’s basket. Although India faces international pushback over rising intolerance and its policies in Kashmir, there is little support for Pakistan’s stance against India." Moreover, it is still waiting to become the sole power in Afghanistan (via Taliban), after US withdraws its armed forces. 

Afghanistan

It responded sluggishly to the pandemic, late to close its borders, with weak healthcare system courtesy the constant wars, and a spiralling economy. "In an attempt to fight the pandemic, the government set aside $25 million to cover immediate expenses, but according to the IMF, the country will need $2 billion. The Afghan economy is dependent on external assistance," the report noted. 

The country also has to deal with Taliban insurgency, rise in attacks after the signing of the US-Taliban “peace deal” on February 29, 2020, and “Washington’s disregard for Afghanistan’s political and electoral politics/calendar in favor of its “peace” deal with the Taliban”. 

Bangladesh

One of the fastest growing economies in South Asia, it could face serious issues due to the coronavirus. "Bangladesh’s economy is heavily dependent on the ready-made garment industry, which contributes 86 percent of its exports," the report noted, adding that “overdependence on a single sector and weak global demand will complicate Bangladesh’s efforts of diversification".

"India and Bangladesh have had good relations over the last decade. In the months before the pandemic, the rise in anti-Muslim rhetoric and attacks on Muslims in India, the Citizenship Amendment Bill (CAB) and the National Population Register that target primarily Bangladeshi migrants in India’s north east, has created political tensions between both countries. All this has risked fueling an anti-Indian resentment inside Bangladesh which will not only hurt India-Bangladesh relations but also help Islamist extremist groups like Jamaat e Islami," the report noted.

Nepal

With a weak healthcare system and rising popular discontent over the handling of COVID-19, Nepal could face political issues. "Since 2008, with the abolition of the monarchy, Nepal has attempted to build a stable political and social system," the report noted. "This has been challenged, not only by the India-China rivalry and natural disasters, but also by the Madhesi issue, the issue of refugees [from Bhutan, Tibet, and Sikkim], and the reluctance of the Maoists to fully integrate within the existing system."

The post-pandemic era will have huge implications on Nepal's foreign policy choices, On the geopolitical front, the report notes that “the contending initiatives of China’s BRI and the US Indo-Pacific strategy will have implications for Nepal’s foreign policy choices”.  

Sri Lanka

According to the report: "Sri Lanka, despite one of the highest scores on human capital and a critical geostrategic location in the Indian Ocean region, was hurting economically well before the COVID-19 pandemic hit. Its economy, according to the World Bank, was growing at three percent—the lowest growth rate in South Asia. In addition, Sri Lanka is highly indebted, and China is a major creditor."

"The lion’s share of Sri Lanka’s external debt is in the form of sovereign bonds. Talk of a debt moratorium creates concerns that the country is heading towards a sovereign default."

-Inputs from agencies