Countries seeking loans should worry about unsustainable infrastructure projects like airports and ports that are empty, said External Affairs Minister S. Jaishankar, in a sharp riposte to Bangladesh Foreign Minister AK Abdul Momen, who asked about whether the Quad countries can offer the same kind of financial assistance that China does.
In an exchange at the Munich Security Conference on Saturday, Mr. Jaishankar also said India’s ties with China are right now going through a “difficult phase” adding that the state of the relationship stems from “the state of the border”, and China’s transgressions along the Line of Actual Control since April 2020.
“We have seen now countries including in our region being saddled with large debts. We have seen projects which are commercially unsustainable: airports where an aircraft doesn’t come, harbours where a ship doesn’t come,” Mr. Jaishankar told a panel about the future of the Indo-Pacific, in comments that appeared to indicate the debt situation in Sri Lanka, where there have been concerns over the Hambantota port and the Mattala airport, both originally developed with Chinese loans, which Sri Lanka struggled to pay back, eventually having to hand over the port on a 99-year old lease to a Chinese company.
“It’s obviously in the interest of the consumer country concerned, but it’s also in the interest of the international community because unsustainable projects don’t end there. Often the next is, debt becomes equity, and that becomes something else,” he said, in a further illustration of the problem Sri Lanka faced.
Significantly, the question of infrastructure financing was raised by the Foreign Minister of Bangladesh, who was in the audience of the panel discussion where Mr. Jaishankar shared the stage with the Foreign Ministers of France, Australia and Japan, as well as senior U.S. Senator Jeanne Shaheen.
Mr. Momen said while India had offered Lines of Credit and Japan had also helped with infrastructure financing, incoming loans had been “declining”, and it was China that had “come forward with a basket of money and aggressive, affordable proposals”.
Mr. Momen said it was hard to decide what to do, given that with the development in Bangladesh, people are demanding more infrastructure.
“We need more funding from our development partners, and that unfortunately comes with lot of strings attached and that becomes very difficult. Today, our largest loans are from the World Bank and the IMF and the ADB, but also, we are trying to get some funding from others because the need for development process is very high. Is there an easy way out?” Mr. Momen asked the panel.
While the Quad grouping has made providing sustainable, alternative financing a goal, it has not yet created a concrete mechanism to do so. The U.S. has floated the “Blue Dot network” proposal to grade various development projects on sustainability and transparency in financing options, and India and Japan have committed to work jointly on projects in South Asia.
Asked about India’s relations with China, Mr. Jaishankar repeated his contention that the situation at the LAC had come up due to China’s actions in 2020.
“The state of the border will determine the state of the relationship, that’s natural,” he said adding that as a result, “obviously relations with China right now are going through a very difficult phase”.
Asked whether the Quad had come up as a result of the tensions with China, Mr. Jaishankar pointed out that the Quadrilateral grouping from 2007 had been revived in 2017, long before tensions with China broke out in 2020, nor is it a security structure like the North Atlantic Treaty Organisation.
“I would urge you not to slip into that lazy analogy of [calling the Quad] an Asian-NATO. It isn’t because there are three countries [U.S., Japan and Australia] who are treaty allies. We are not a treaty ally,” Mr. Jaishankar said.