(From THE FAR EASTERN ECONOMIC REVIEW)
By Sarah Davison
China, not India, is winning the new "Great Game" in Afghanistan. Though India will have donated well over $1 billion in aid by the end of next year to help destitute Afghanistan -- the two share a common history of more than 500 years -- it is China that is making the greatest political strides in the country and the region.
Instead of providing aid, China is emphasizing trade and foreign-direct investment. In April, China made the largest FDI in the history of Afghanistan when state-owned China Metallurgical Construction Corporation paid $3.5 billion -- more than double the expected amount -- for the Aynak copper mine 30 miles south of Kabul in Taliban-controlled Logar province.
"Just as China's is a story of diplomatic and political success, India's has been a chronicle of dismal failure," says M.K. Bhadrakumar, a former Indian diplomat. He added that China is winning because it has remained relentlessly focused on its goals. India, meanwhile, is distracted by its ongoing hostility with Pakistan, thereby preventing closer ties with Kabul that could work to Afghanistan's benefit.
The most compelling example is the Iran-Pakistan-India gas pipeline, which New Delhi shunned despite a desperate shortage of energy or oil equivalent. This major project could have helped alleviate India's power crunch and stabilize regional relations. Running directly through Afghanistan, this major project would have generated thousands of jobs for poor Afghans while promoting badly needed technical capacity. But India was concerned about a possible dependence upon a gas line running through Pakistani territory.
This is where China is leaping ahead; while New Delhi views Afghanistan as a forum in which to play out its dispute with Islamabad, Beijing sees it as a supplier of oil, gas and mineral wealth and a future trading partner.
Thus, China's regional strategy, particularly toward resource extraction, appears more consistent, coherent and pragmatic. This, combined with a muscular financial arsenal, creates regional confidence.
As emerging superpowers, both India and China inevitably find themselves competing for access to regional resources, especially energy. China imports 50% of its energy while India imports 70%. Both China and India have learned, however, that intense competition for resources drives up prices, so they are now trying to bid jointly, or cooperatively, on the most promising energy targets.
But Afghanistan offers some illuminating examples of how China's more pragmatic approach works to its advantage. India has spent a whopping $1.2 billion in aid to Afghanistan since 2002, while China has donated a mere $175 million.
It is the type of projects funded, and not just the scale of the programs, that hints at very different national agendas. However, with more than 11 million tons of copper, Aynak is the second largest copper deposit in the world. In addition to an expected 8,000 direct jobs, China has promised to provide a 400 megawatt power plant, an onsite copper smelter, a railroad up to Tajikistan, and substantial investment in schools, houses and health clinics.
The investment is typical of the way China is approaching regional development, both in Central Asia and in Africa; it is using jobs and economic development to promote stability, while also meeting its own growing need for natural resources. Chinese diplomatic sources in Kabul say the investment is evidence of China's conviction that Afghanistan, while currently troubled, has the potential to stabilize. China is also interested, they say, in supporting neighbors who are having difficulties, in the hope that this support will translate into the stability that allows future trade of mutual benefit.
"You have to see this in the context of China's great western development program, which has led to major investment into the western provinces (of China) and, of course, also cross border connections to Central Asia, South Asia, and Iran," Niklas Norling, a China and Central Asia expert at Stockholm's Institute for Security and Development told Eurasianet.org, the pro-democracy organization funded by billionaire George Soros.
Mr. Norling says the Karakorum highway in Pakistan, the Gwadar port near Karachi, the gas pipeline from Turkmenistan to Xinjiang, and a $100 million 25-year energy contract with Iran are other examples of this approach.
But it is India that built the transmission lines that brought 24/7 power to Kabul, ending constant power outlets and heavy dependence upon diesel generators. Now, power is shipped directly from Uzbekistan thanks to an expensive and difficult new transmission line constructed over the Salang Range at heights of more than 4,000 meters.
This project is hugely popular in Afghanistan. Until April this year, the country had only an estimated total of 800 MW of generating capacity, obviating any significant industrial development in the country while presenting a challenge to ordinary Afghans needing heat, lights and power. Demand is well in excess of 1,000 MW.
India also is funding a series of small community-based aid projects, the majority of them concentrated around the volatile northern Afghan-Pakistan border. And it is investing heavily in health and food-aid programs that provide services far superior to those available to its own citizens in India.
These efforts have done nothing to ease India's presence in Afghanistan, though. On October 8, a huge suicide car bomb exploded outside the Indian embassy -- the second time the embassy had been struck in just over a year.
Blamed on the Al Qaeda-linked Haqqini faction, the two bombs have killed well over 150 people and wounded hundreds more. They are considered a reaction to India's escalating profile in Afghanistan, a country Pakistan considers its own backyard.
While India pursues a high diplomatic profile with a large embassy downtown and four consulates across the country, China has taken the opposite tack. Its embassy is small, skeleton-staffed and hidden behind a red gate that rarely opens. Its aid profile is similarly low key. Moreover, China has spent much less on aid over the past six years, and none of it appears motivated by a desire to establish political influence. The largest project is the $25 million, 350-bed Republic Hospital in Kabul which was inaugurated in August and is now the best-equipped hospital in the country. Instead, China's major investments are directed toward projects that yield an obvious, and direct, return for Beijing while also spurring local economic development.
There is some evidence that Indian companies are about to give China a run for its money. Some substantial new deposits are being discovered in Afghanistan, including two more copper deposits, some copper-gold deposits, and the 1.8 billion-ton Hajigak iron deposit 80 miles west of Kabul, which is currently up for bid.
Five Indian companies are competing with one state-owned Chinese company for the site, which is close to a coking plant and could become the pillar on which to build an Afghan steel industry. Kabul is demanding a steel plant, a rail link, and a fertilizer factory as well -- projects that will again act as a jobs force multiplier.
Afghan sources say the Chinese are now looked upon favorably for the bid because of the Aynak mine deal. The scale of these projects and the jobs they bring with them inevitably increase the profile of the nation involved, especially in a country playing host to more than 100,000 Western troops. Indeed, how China and India will fare in their relations with Afghanistan will be decided partly by political events now playing out on the ground there, but China seems to be getting a higher return on investment thus far.
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Sarah Davison is a free-lance writer based in Kabul.
