Bangladesh Institute of International and Strategic StudiesAshequa Irshad and Marufa Akter Role of...

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INDIA’S AFGHANISTAN POLICY

Volume 34Number 4

2013

ISSN 1010-9536

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273 BANGLADESH-CHINA RELATIONS: SCOPES FOR ATTAINING NEW HEIGHTS S M Sha�uddin Ahmed

293 REALISING THE POTENTIAL OF BANGLADESH’S LOCATION THROUGH CONNECTIVITY

Mahfuz Kabir Shaheen Afroze

311 INDIA’S AFGHANISTAN POLICY: RAMIFICATIONS FOR REGIONAL POWER BALANCE IN SOUTH ASIA

Md. Muhibbur Rahman

331 ROLE OF THE WORLD BANK IN COMBATING CORRUPTION IN THE RECIPIENT COUNTRIES: ACHIEVEMENTS AND CHALLENGES

Ashequa Irshad and Marufa Akter 351 EXPLAINING THE RISE OF ISLAM IN MALAYSIA: CONTEXT PRECEDES IDEOLOGY Moinul Khan

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VOLUME 34

Bangladesh Institute of International and Strategic StudiesDhaka

NUMBER 4 OCTOBER 2013

Chief EditorSM Sha�uddin Ahmed

EditorShaheen Afroze

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Assistant EditorsSegufta Hossain

M. Ashique RahmanNazmul Arifeen

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TABLE OF CONTENT

VOLUME 34 NUMBER 4 OCTOBER 2013

S M Sha�uddin AhmedBangladesh-China Relations: Scopes for Attaining New Heights 273

Mahfuz KabirShaheen AfrozeRealising the Potential of Bangladesh’s Location through Connectivity 293

Md. Muhibbur Rahman India’s Afghanistan Policy: Rami�cations for RegionalPower Balance in South Asia 311

Ashequa Irshad and Marufa Akter Role of the World Bank in Combating Corruption in the Recipient Countries: Achievements and Challenges 331

Moinul Khan Explaining the Rise of Islam in Malaysia: Context Precedes Ideology 351

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BIISS JOURNAL, VOL. 34, NO. 4, OCTOBER 2013: 273-292

S M Shafiuddin Ahmed

BANGLADESH-CHINA RELATIONS: SCOPES FOR ATTAINING NEW HEIGHTS

Abstract

Bangladesh and China are partners in the new Asian Age. Both countries enjoy time tested, all weather relations and friendship. Though this relationship is rooted in history, but like all relationships between states, it also has to be renewed and reinvigorated from time to time. Therefore, it has become imperative to analyse this relationship in order to find out ways to improve this excellent relationship even further. Considering political, economic, diplomatic and geo-strategic perspectives, mutual interests of both countries are overlapped leading them to strengthen their friendship regardless of any domestic or international circumstances. Taking into account the significance of both countries to each other, this paper attempts to analyse the present state of relations and the importance of Bangladesh-China relations from the perspective of both the countries finally, putting forward some suggestions for enhancing mutual benefits.

1. Introduction

China is the most talked about country in the world today. The unprecedented economic growth for last thirty-eight years has raised the international profile of China.1 Bangladesh, being a developing country, can benefit from China’s rise. Bangladesh and China enjoy time tested, all weather relations and friendship. Since establishing diplomatic ties in 1975, the understanding between the two countries remained very cordial. In the last thirty eight years, all successive Heads of Governments of Bangladesh visited China, some even on several occasions, to pave the way for broad based cooperation developed through years with added depth and dimension. The top-level state visits, both by the ruling party and the opposition leaders to China have always

S M Shafiuddin Ahmed, ndu, psc is Major General in Bangladesh Army currently serving as Director General of Bangladesh Institute of International and Strategic Studies (BIISS). His e-mail address is: [email protected]

© Bangladesh Institute of International and Strategic Studies (BIISS), 2013.

1 China’s phenomenal rise as a global economic power has drawn attention of the international community. China has already replaced Japan as the second largest economy of the world and assumed that it could become the world’s largest economy at some point in the future. It has been the fastest-growing nation for the past quarter of a century with an average annual GDP growth rate above 10 per cent. Currently, it is the largest manufacturing and exporter country in the world. For the rapid development, every year more than 10 million people are becoming urban population in China. See, David Barboza, “China passes Japan as Second Largest Economy”, The New York Times, 15 August 2010; “World Economies: China”, available at http://www.dawn.com/2011/03/21/world-economies-15.html, accessed on 22 July 2013. Also see, M. Jashim Uddin, “Bangladesh–China Relations: The Way Forward”, Paper presented at a Roundtable Discussion on Bangladesh-China & Bangladesh-Myanmar Relations: Political and Economic Dimensions, organised by BIISS on 01 September 2013.

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been on the foreign policy priority of Bangladesh.2 Similarly, the Communist Party of China (CPC) has traditionally maintained close working relations with major political parties in Bangladesh. Often analysts look at Bangladesh-China bilateral relations in the light of Sino-Indian and Sino-US complexity in South Asia.3 However, Bangladesh sees China as a close friend as well as maintains strong ties with her largest neighbour India with respect to political, economic, security and strategic issues. Therefore, Bangladesh seems to have developed a more independent course of foreign policy, which is balanced in nature, with regard to China and India. Notably, China and Bangladesh have not even established a strategic partnership and have kept their relationship “unarticulated and flexible” thus allowing Dhaka to reap the benefits of a strategic partnership with a nuclear power without involving itself in any formal defence arrangement.4

The Sino-Bangladesh relation is equally important for China. The nurturing and promoting diplomatic linkages with Bangladesh provide China with a number of strategic advantages in addition to economic gains. Bangladesh and China are partners in the new Asian Age and should look for every opportunity to further strengthen this relationship. Bangladesh has painstakingly built its relations with China over decades starting when China was a developing country. Though this relationship is rooted in history, but like all relationships between states, it also has to be renewed and reinvigorated from time to time. Owing to the foregoing, the paper aims to analyse the significance of the Bangladesh-China relationship in the perspectives of both the countries and put forward some suggestions for enhancing mutual benefits.

Bangladesh-China relation is a very open and vast subject as such to be reasonable and specific, the scope of the paper is limited to aspects like bilateral history, highlighting the present state of the relations and thereafter, highlighting the importance of this relation to each other. Finally, the paper also makes some suggestions for future mutual benefits thereby enhancing Bangladesh-China relationship towards attaining new heights.

2. Overview of the Bangladesh-China Relations

China and Bangladesh are close neighbours and after years of bilateral interactions they have emerged into traditional friends to each other. Bangladesh and China’s friendship has overcome the problems of the past and do not face any conflicts at present. Their commonality of interests strengthens their cooperation and with concerted efforts, they have made every opportunity available in transforming their bilateral potentials into reality.

2 Sreeradha Datta, “Bangladesh’s Relations with China and India: A Comparative Study”, Strategic Analysis, Vol. 32, No.5, September 2008, p. 761.3 Vijay Sakhuja, “China-Bangladesh Relations and Potential for Regional Tensions”, China Brief, Vol. 9, Issue 15, 2009.4 Ibid.

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2.1 Background

In 1971, China was not in favour of Bangladesh’s Liberation War. In fact, up to August 1975, there were no official relations between the two countries. The underlying cause lay in Bangladesh’s close relations with India and the former USSR and the stand of China-Pakistan-US axis regarding the Liberation War of Bangladesh. The global politics of US vs. USSR and regional politics of India vs. Pakistan during the 1970s directed the position of China against the liberation of Bangladesh. During the regime of Bangabandhu Sheikh Mujibur Rahman, China exercised its veto power while Bangladesh was trying to obtain United Nations (UN) membership. Though China did not agree to give formal recognition to Bangladesh during that time, it stopped opposing Bangladesh’s membership to the UN after a treaty was signed between Bangladesh, Pakistan and India on 28 April 1974.5 It officially established diplomatic relations with Bangladesh on 04 October 1975.

Interestingly, China’s move towards a more open foreign policy coincided with Bangladesh’s eagerness to get closer to Beijing. By the mid-1980s, China had forged close commercial and cultural ties with Bangladesh and also supplied it with military aid and equipment. On 04 October 2000, Bangladesh issued a postal stamp marking the 25th anniversary of the establishment of Bangladesh-China diplomatic relations. In 2002, the Chinese Premier Wen Jiabao made an official visit to Bangladesh and both countries declared 2005 as the “Bangladesh-China Friendship Year,”6 reaffirming a time-honoured friendship between the two countries. In the wake of the twin floods that submerged two thirds of Bangladesh and the devastating tropical cyclone that wreaked havoc on the coastal belt of the country in 2007, China offered emergency and long term assistance to assuage plight of the victims.7 In November 2008, China even acted as a mediator in the Bangladesh’s disputes over Exclusive Economic Zone (EEZ) with Myanmar.8 On the other hand, Bangladesh provided full political and diplomatic support to hold the Beijing Olympic.

2.2 State of Relations since 2009

Since 2009, when Sheikh Hasina took over as Prime Minister for the second time, the comprehensive and cooperative partnership between Bangladesh and China began to achieve steady growth. During this time, a number of high level visits took place including at the level of heads of government to strengthen this relation. The visit of Bangladeshi Premier Sheikh Hasina to China in March and China’s the then 5 Kazi Ihtesham and Mohammad Mahabubur Rahman, “Sino-Bangla Relations and Bangladesh’s Look East Policy", The Daily Star, 23 May 2005.6 Ibid.7 In 2007, China donated US$ 1 million for relief and reconstruction in cyclone-hit areas. See, “China donates US$ 1m to Bangladesh”, cctv.com, 21 November 2007, available at http://www.cctv.com/english/20071121/102321.shtml, accessed on 10 December 2013.8 Bangladesh and Myanmar deployed their navies in a standoff in the Bay of Bengal over Myanmar’s decision to issue licenses to oil companies to undertake survey activity in disputed waters.

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Vice President Xi Jinping’s visit to Bangladesh in early June 2010 were most significant among those. The military of both countries also continued high level of visits to cement this relation.9 The economic cooperation between two countries has grown from strength to strength. Investments by Chinese entrepreneurs have gradually increased in various fields. The 12th meeting of the Joint Economic Commission (JEC) between the two countries took place in Beijing on 28 July 2009 after a long hiatus of four years.10 The 13th meeting of JEC was scheduled to be held in September 2013 but due to some unavoidable reason it did not take place.

Bangladesh has also offered to set up Special Economic Zone for Chinese investors to boost Chinese investment in the country whereas China expressed its intention to relocate labour-intensive industries to Bangladesh.11 Dhaka-Beijing relations reached new heights as China became the largest trading partner of Bangladesh overtaking India in 2009-2010. But the bilateral trade between them is highly tilted in favour of Beijing. Bilateral trade volume in 2011 reached US$ 6.26 billion, with an increase of 17 per cent compared to 2010. Trade between Bangladesh and China surpassed US$ 8 billion in 2013. The Bangladeshi export to China reached US$ 449 million, an increase of 67.5 per cent. With the implementation of duty-free treatment provided by China and China’s ongoing economic structural adjustment, the growth rate of Bangladesh’s export to China is 4 point higher than the general growth rate. Still trade deficit remains significant. During 2012-13, Bangladesh exported goods worth US$ 458.12 million to China while imported goods worth US$ 6307.2 million from China.12 During the first quarter of 2013, trade volume reached US$ 3.3 billion with a year-on-year increase of 36 per cent.13 Chinese investment in Bangladesh is also increasing. The total amount of FDI from China doubled in 2013, reaching nearly US$ 1 billion. However, there are many new potential areas where China can invest heavily. Therefore, Bangladesh can and should engage all its efforts to obtain more and more advantages from the second largest economy in the world.

Grants and soft loans from Chinese side are also quickly increasing. All the China-assisted projects in Bangladesh made positive progress since 2009. Bangladesh was designated as the ‘theme country’ in the first China-South Asia Expo held in Kunming in June 2013. In addition, China is playing a responsible role by making

9 Vice Admiral Jia Ting’an, Deputy Chief of the General Political Department of the PLA, visited Bangladesh in April. Lieutenant General Wang Chaotian, Vice President of the PLA NDU, visited Bangladesh. Chiefs of Staff of Bangladesh Navy and Bangladesh Air Force went to China in 2009 for the parades and celebrations marking the 60th anniversary of the Chinese Navy and Air Force. Later, during 2012-13, all the Chiefs of Staff – Army, Navy and Air Force – of Bangladesh visited China. 10 Embassy of the People’s Republic of Bangladesh, Annual Report–2010, Beijing.11 Ministry of Foreign Affairs, “Press Release”, available at http://www.mofa.gov.bd/PressRelease/PRDetails.php?txtUserId=&PRid=618, accessed on 03 November 2013. 12 Dan Steinbock, “Bangladesh Plays Key role in China’s Rebalancing of Southeast Asia”, available at http://www.scmp.com/comment/insight-opinion/article/1345375/bangladesh-plays-key-role-chinas-rebalancing-southeast-asia, accessed on 03 November 2013.13 Ibid.

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a contribution of US$133 million as loan for decentralisation of government of Bangladesh. China has helped Bangladesh build six bridges and one conference centre, which have become symbols of friendship between the two countries. The seventh Bangladesh-China Friendship Bridge (Kazirtack Bridge) of 1,063.36 metres of length over Arial Kha River is ongoing signalling pragmatic cooperation of the two countries. Consultation over the construction of 8th bridge (2nd Meghna Bridge) and 2nd China-Bangladesh Friendship Exhibition Centre is also going on. Beijing has also been cooperating with Dhaka regarding upgrading of airport at Cox’s Bazar. China has increased the number of scholarship for the Bangladeshi students from 80 to 160 from 2012.14

With regard to cultural exchanges, Dhaka held Beijing Night Art Performance and Charming Beijing Photo Exhibition in the city in 2011. The Executive Programme of the Cultural Exchange between China and Bangladesh for the Year 2009-2012 was signed in December 2008. The Bangladesh Shilpakala Academy attended the 11th Asian Arts Festival in China in August 2009. The Confucius Institute in Bangladesh continued to contribute in spreading Chinese language and culture. The two countries also maintain close cooperation in Asia Pacific Space Cooperation Organization (APSCO) and International Network for Bamboo and Rattan (INBAR), which are headquartered in Beijing.15

3. Significance of Bangladesh-China Relations

The Bangladesh-China relation is quite significant for each other. Considering, political, economic, diplomatic and geo-strategic perspectives, mutual interests of both countries are overlapped leading them to strengthen their friendship regardless of any domestic or international circumstances. Both the countries mutually benefit from each other’s development. Each country’s importance to another is appended below:

3.1 Importance of China to Bangladesh

China as a good friend welcomes a prosperous, stable and united Bangladesh and continues to take active part in Bangladesh’s social and economic development. In recent years, China has provided Bangladesh valuable support in gaining observer status in ASEAN Regional Forum (ARF). Besides getting all sorts of diplomatic cooperation, Bangladesh looks at China from the following perspectives:

Economic opportunities Strategic considerations Defence cooperation

14 ‘China to help Bangladesh become middle-income country by 2021’, Bangladesh Sangbad Sangstha (BSS), available at http://www1.bssnews.net/newsDetails.php?cat=0&id=287976$date=2012-10-21&dateCurrent=2012-10-29.15 Embassy of the People’s Republic of Bangladesh, op.cit.

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3.1.1 Economic Opportunities

First, economy is the guarantee clause for national security. China is the second largest economy in the world and has the potential to be the largest economy in future. It is expected that, China’s GDP will be 25 per cent of the global economy by 2020. The growth of Chinese economy has captured the attention of Bangladesh as means to grow its own economy. Bangladesh wants to capitalise on this opportunity and benefit from the exceptional economic rise of China. Chinese investments in Bangladesh are rising. In 2011, it amounted about US$ 200 million.16 In 2013, it reached US$ 1 billion. The two countries have agreed to boost investment cooperation in technology, agriculture and infrastructural development. Bangladesh made an agreement with China to set up Shahjalal Fertiliser Company in 2011 with the credit-assistance of Tk. 3,987-crore (US$ 500 million) from the latter. About 35 per cent of the construction work of the Tk. 5,409-crore (US$ 670 million) factory has been completed by June 2013.17 The factory is expected to go into operation in February 2015.

The two countries are also working closely on expansion of 2.5G and 3G networks. China is providing US$ 133 million in loan to Bangladesh for developing the country’s Information and Communication Technology (ICT) infrastructure network that will not only bring all government offices at the district and upazilla level under a single network but will also carry out maintenance of about 100,000 km of rural road. China is also providing concessional loan to Bangladesh Shipping Corporation for buying six ships that will cost about US$ 171 million.18 This is likely to increase bilateral and regional coastal trade for Bangladesh. Recently, China has expressed its intention to invest in building power plant in Bangladesh. A Chinese firm, Wuhuan Engineering Company Limited, has showed interest in establishing liquefied natural gas (LNG) based power plant in Maheshkhali Island in Cox’s Bazar. Discussion of Chinese delegations with Prime Minister Sheikh Hasina about a joint venture project with S. Alam group in Bangladesh to install coal-based power plant worth producing 1,320 MW of electricity at Pekua, Cox’s Bazar is also going on.19 The Premier has already accepted a proposal by Chinese team to implement the country’s first LNG-based power project at Cox’s Bazar with capacity to generate 760 MW of electricity.20 It reflects the fact that investment cooperation between the two countries is on the rise. In addition, Beijing is also assisting Dhaka by providing soft loan of US$ 200 million in developing airport in Cox’s Bazar.21 This is expected to have widespread implications for the tourism sector in Bangladesh.

16 Statistics Department of Bangladesh Bank and Statistics and Research Division of Export Promotion Bureau, available at http://www.epb.gov.bd/details.php?page=4, accessed on 01 December, 2013.17 “Construction of Shahjalal Fertilizer Factory Progressing Fast”, Bangladesh Sangbad Sangstha, 29 June 2013.18 Ministry of Foreign Affairs (MOFA), “Foreign Office Briefing Notes: October Issue”, available at http://www.mofa.gov.bd/Docx/FOBN%20October%20Issue.pdf, accessed on 01 November 2013.19 “Prime Minister Welcomes Chinese Investors to Install Power Plant”, The Daily Samakal, 29 January 2014.20 “Chinese firm Offers to Build LNG-fired Power Plant”, The Daily Sun, 29 January 2014. 21 Ibid.

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Second, China has already become the largest trading partner of Bangladesh. The country may be a good option for Bangladesh in dealing with its trade deficit with neighbouring countries.22 Bangladesh’s bilateral trade deficit with India has been increasing rapidly on average at about 9.5 per cent annually and now stands at US$ 4 billion.23 Therefore, increasing export to China and increasing Chinese investment in Bangladesh, in the potentially emerging sectors of cooperation can be a powerful way to further deepen the relations as well as develop economically. During an official bilateral meeting between Bangladesh and China on 26 June 2013, the Chinese delegation mentioned that China had already offered zero tariffs to 95 per cent of Bangladeshi goods that are being exported to China. In order to reduce the existing trade deficit, the Bangladesh delegation, however, urged the Chinese government to grant further duty free access to a list of 17 major Bangladeshi items. In response, China assured to consider the Bangladeshi request.24 According to a Chinese estimate, if the preferential trading arrangements between Bangladesh and China continue in the coming years, Bangladeshi RMG export to China will increase to US$ 1 billion from the current US$ 100 million in the next 3 to 5 years. China’s own RMG market is over US$ 200 billion and given China’s sky-rocketing labour costs, this projection is very much attainable by Bangladesh.

Third, China and Bangladesh have the prospect to build the 900 km Kunming Highway linking Chittagong with Kunming through Myanmar to facilitate greater trade. The mutual transit will give Bangladesh a much shorter route to China and an initiative to link Chinese province of Yunnan with Bangladesh. Kunming, the capital of Yunnan province is a gateway for Bangladesh to Chinese market and a bridge with Southeast Asian countries. In addition, the Bangladesh-China-India-Myanmar (BCIM) corridor offers Bangladesh an exposure to make utmost use of its geo-strategic location as the centre point of the region. The BCIM Forum, which took off as a Track-II initiative with the focus of transport connectivity has now transformed into a BCIM Economic Corridor with the objective of greater economic integration in this region receiving tremendous impetus from the government of the respective countries. Moreover, the Chittagong port has the potential to become a modern busy port like Singapore. The deal between Bangladesh and China regarding upgrading the Cox’s Bazar Airport, the fourth international airport, has been signed on 25 October 2013.25

Fourth, in October 2010, Bangladesh formally sought Chinese assistance to build a deep water sea port in the Bay of Bengal near the southeastern island of Sonadia. Such a port could become a key shipping hub for northeast India and China’s Yunnan Province, as well as for Nepal, Bhutan and Myanmar.26 Since Chinese enterprise has shown willingness to invest in this project in a commercial manner, it is evident that this will provide both sides with significant economic and security benefits.22 Kazi Ihtesham and Mohammad Mahabubur Rahman, op.cit.23 According to Bangladesh Bank, in the FY 2012-13, trade deficit is US$ 4 billion.24 M. Jashim Uddin, op.cit. 25 “Cox’s Bazar airport awaits Chinese Credit”, available at bdnews24.com, accessed on 19 April 2013.26 K. Alan Kronstadt, Paul K. Kerr, Michael F. Martin, Bruce Vaughn, “India-U.S. Relations”, Congressional Research Report, 27 October 2010.

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Fifth, there are some potential areas where China can play an important role in bringing opportunities for Bangladesh. Bangladesh has huge unexplored offshore gas and oil which can contribute to its economy enormously if properly explored and used. As a trusted friend and having advancement in maritime technology, Chinese support can be useful for exploring those valuable resources. Bangladesh has already sought Chinese support for exploring resources under sea-bed. The Chinese side suggested exchanging mutual delegations and also signing a Memorandum of Understanding (MoU) on maritime affairs.27

Bangladesh has some reputed pharmaceutical companies including the Square Group of Bangladesh and the Incepta Pharmaceuticals, which export medicine worldwide.28 The Incepta Pharmaceuticals is now planning to establish a raw material company with the Chinese assistance. This company believes that China and the US will be very important for contributing to its growth.29 Since both countries realise that Bangladesh needs to increase its export to China to reduce the trade deficit, China with a huge population, can be a potential market for Bangladeshi medicines/pharmaceutical products. During Chinese Premier Li Keqiang’s recent visit to India, China agreed to open its market for importing Indian medicine. Therefore, Bangladesh can explore the same opportunity.

With China’s rapid economic development, the labour costs therein are going up. To maintain the pace of economic development, China is now restructuring its economy and planning to relocate its labour-intensive industries in foreign countries. Therefore, the idea of China+1 can be proposed, which means placing Chinese production facilities in a place where China can produce goods at much lower prices than in China itself. For this purpose, Bangladesh can be a good choice as the labour costs are cheap in this country. Chinese retailers of the apparel industry can purchase readymade garment (RMG) products from Bangladesh and sell those in Chinese markets. The annual outbound Chinese investment has been around US$ 100 billion in the last few years. Bangladesh can be one of their best destinations. For an even easier access for the Chinese investors, an exclusive EPZ for China will be much helpful. It can help Bangladesh raise its export of RMG to China thereby generating more employments for garments workers.

Due to the availability of cheap labour, investment-friendly government regulations, good quality and low production costs, the shipbuilding industry in Bangladesh has good prospects. The country has already received orders from and also exported some ships to countries like Japan, Germany and Denmark. It is claimed that shipbuilding is 15 per cent cheaper in Bangladesh than China.30 As the largest 27 M. Jashim Uddin, 2013, op.cit.28 In 2012, the export earnings of the Square Group and the Incepta Pharmaceuticals stood at around 47 and 48 crores taka respectively. See “Bangladesh pharmaceutical export business 2012”, SlideShare, available at www.slideshare.net/197/bangladesh-pharmaceutical-export-business-2012, accessed on 05 June 2013. 29 “Bangladesh Seeks Capital Investment,” The China Daily, 20 August 2012.30 “Prospects of Shipbuilding Industry in Bangladesh,” The Daily Sun, 11 February 2013.

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trading partner of Bangladesh, China can be an important source of investment in this sector to build ships in joint venture and import from Bangladesh.

3.1.2 Strategic Considerations

Bangladesh maintains a very balanced approach with regard to India, China and the United States. Currently, the Bangladesh-China relations are regarded as within “acceptable bounds” by both India and the United States.31 Increasing US and Chinese interests in South Asia and Pacific region has offered Bangladesh with a unique opportunity to get involved actively with all crucial players of the region. Beijing’s engagement in massive infrastructural development in Bangladesh, particularly, planning to build a deep sea port could bring enormous economic benefits for Bangladesh. It can also increase strategic depth of the country and raise its bargaining capability. For India, Bangladesh is the entry to its often turbulent Northeast region as well as a support in dealing with insurgency there. Hence, Bangladesh falls within the internal security matrix of India32, and India cannot ignore the necessity of Bangladesh in dealing with its less developed northeast region. Although there remains some irritants between Bangladesh and India regarding various bilateral issues like water sharing, land border demarcation and killings in the border, mutual cooperation in the last few years in trade, investment, power and counter-terrorism has increased. The political will of both sides has continued to play a vital role in this regard. On the other front, the US also wants a stable South Asia and China looks into the possibility of Bangladesh connecting Southwest China to South Asia and an access to Indian Ocean, thus, to the future of Asian century. Therefore, the geo-political dynamics of South Asia demand the regional players to engage with Bangladesh. Bangladesh, being a centrally located country in South Asia would have to play such a role to satisfy its long-term interests keeping these geo-political considerations in mind.

3.1.3 Defence Cooperation

The defence cooperation between Bangladesh and China has traditionally been very strong. A Defence Co-operation Agreement was signed between Bangladesh and China in December 2002 to enhance cooperation in training, maintenance and some areas in production. Military to military cooperation is an important part of overall bilateral relations between Bangladesh and China.32 The tanks and artillery guns of Bangladesh Army are mostly of Chinese origin. Beside, its navy has Chinese frigates and missile boats and the Bangladesh Air Force flies mainly Chinese fighter jets. Bangladesh is emerging as a major buyer of weapons made in China. In the continuous changing global political and security situations, it has become important for Bangladesh to modernise her defence forces further. This was also made clear by the Bangladesh’s Prime Minister Sheikh Hasina during her speech on the Armed 31 Ruksana Kibria, “Strategic Implications of Bangladesh-China Relations”, available at http://wakeupbd.wordpress.com/2011/02/14/strategic-implications-of-bangladesh-china-relations/, accessed on 01 November 2013.32 Vijay Sakhuja.op.cit.32 Chinese Foreign Minister Yang Jiechi, “China Keen to Build Rooppur Nuclear Power Plant”, Bangladesh News, 27 April 2008.

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Forces Day on 21 November 2013 where she mentioned that her government was determined to do whatever necessary for building an efficient, strong and modern Armed Force in Bangladesh.33As part of a broader plan to that end, Bangladesh has finalised a deal to purchase submarines from China to develop a three-dimensional navy. The deal will cost Bangladesh US$ 203.3 million.34 Recently, two newly procured 053H2 Frigate ships from China has joined Bangladesh navy fleet.35

Military exchanges between the two countries are also signalling friendly success. In 2011, Air Chief Marshal Ma Xiaotian, Deputy Chief of the General Staff of People’s Liberation Army and Vice Admiral Ding Yiping, Deputy Commander of Navy of People’s Liberation Army visited Bangladesh. During 2012-13, all the Chiefs of Staff – Army, Navy and Air Force – of Bangladesh visited China.36 Chinese PLA Chief of the General Staff is scheduled to visit Bangladesh in 2014 at a mutually convenient time. Most importantly, China provides interest free loans to Bangladesh for buying weapons. Therefore, maintaining stable relations with China is crucial for Bangladesh.

3.2 Importance of Bangladesh to China

Bangladesh has proved to be the calmest country in the region and is also emerging as a responsible international actor. Bangladesh also emerges as an important member of the developing world. It plays a unique role in safeguarding the legitimate rights of developing countries, in maintaining world peace and advancing counter-terrorism and anti-extremism initiatives thereby presenting itself as a crucial partner for China in the South Asian region. The Chinese approach of systematically nurturing and promoting diplomatic linkages with Bangladesh, however, provides it with a number of strategic advantages:

First, India and China together account for one-third of the world’s population and are seen as rising 21st century powers and strategic rivals and remain so for foreseeable future.37 As analysts note, India has sought to expand its strategic horizons in recent years—eyeing influence over a vast region from Iran and the Persian Gulf states in the west to the Straits of Malacca and Gulf of Thailand in the east—it increasingly finds itself in a discomfortingly conflicting position to a rapidly

33 “AL govt never used Armed Forces in its interest: PM,” 21 November 2013, available at http://unbconnect.com/pm-senakunja/#&panel1-6, accessed on 10 December 2013.34 “BD to Purchase two Submarines,” banglanews24.com, 22 December 2013, available at http://www.banglanews24.com/English/detailsnews.php?nssl=ef62047ee19cf5571e075049e313bc7b&nttl=2212201383539, accessed on 25 December 2013.35 Tarek Mahmud, “BNS Abu Bakar, BNS Ali Haider De-commissioned”, Dhaka Tribune, 22 January 2014. 36 Chief of Army Staff General Iqbal Karim Bhuiyan visited China from 27-30 August 2013, Chief of Navy Staff visited from 05-12 January 2013 and Chief of Air Staff visited China from 02-07 September 2012.37 It is contended that regardless of the thrust and pace of mutual engagement (Cooperation), a relationship between the two largest Asian countries will inevitably have strong undercurrents of contest and rivalry as they seek the same economic and political space for future interaction. More so, India is the only country with whom China is yet to solve land border problem on which they fought war in 1962.

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spreading Chinese presence in the same area.38 This, in turn, raises the importance of Bangladesh in Beijing’s political-military calculus.39

Second, Bangladesh commands natural road and railway links between Southeast Asia and Central Asia and other parts of South Asia. Bangladesh can play a crucial role in connecting South-Western China with South Asia by a land route. This link will have enormous economic and connectivity opportunities. Bangladesh is a key player in the proposed Bangladesh–China–India–Myanmar Forum for Regional Cooperation and Economic Corridor (BCIM-EC) that will link the four Eastern South Asian countries and expand trade, investment and people-to-people contact among these countries. The BCIM can be seen as a nodal point of three emerging regional blocs: South, East and Southeast Asia.40 In her latest visit to China in October 2013, the then Foreign Minister of Bangladesh reinforced the discussion on the BCIM-EC. The BCIM first Joint Study Group Meeting of high-level officials held on 18-19 December 2013 in Kunming, China was a landmark progress in this regard where all involved parties agreed to start joint research to settle on ways to establish the economic corridor. The first joint working group meeting of BCIM-EC, represented by senior level officials of the four countries, held in December 2013 anticipates that construction of a highway from Kunming in China to Kolkata through Myanmar, northeast India and Bangladesh, will turn it into a gateway for boosting trade and investment in South and Southeast Asia.

Third, Bangladesh is in a position to provide China with access to the Bay of Bengal and through it, the much-coveted access to the Indian Ocean. For China, the ‘Irrawaddy Corridor’ that links Kunming in Yunnan to the Bay of Bengal through Myanmar and Bangladesh offers land-based maritime access that is critical for the development of its Western and Southern regions. The corridor also gains salience in terms of transporting gas from Myanmar’s offshore platforms to Yunnan as well as in overcoming the vulnerability of its shipping in the strategic Southeast Asian choke points. In strategic terms, access arrangements particularly in Chittagong and in Myanmar’s ports in the Bay of Bengal ensure a strategic initiative of China.41 In addition, Dhaka offers Beijing with an easy access to the energy houses in Middle East, Africa and Iran through Indian Ocean. As a growing economy, China has a vast demand for energy and Bangladesh is its link to ensure security of hydrocarbon as it provides access to Indian Ocean via the Bay of Bengal.42 The potential deep seaport at Sonadia holds special strategic significance to China. On that equation, Bangladesh has been an obvious choice for partnership.

Fourth, good relations with Bangladesh are an urgent requirement for China since in case of a conflict between India and China, the Siliguri corridor, will turn out to be a determining factor. Indian analysts often bring forward the possibility of the

38 K. Alan Kronstadt et al., op.cit.39 Vijay Sakhuja, op.cit. 40 Dan Steinbock, op.cit.41 Vijay Sakhuja, op.cit.42 Bhasker Roy, “The Dragon comes to Bangladesh”, available at http://www.sify.com/news/the-dragon-comes-to-bangladesh-news-columns-kgxpUagehbe.html, accessed on 01 November 2013.

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emergence of Assam as the second Muslim-majority state within the Indian Union. In such a scenario, China may adopt a strategy to get Tawang, an administrative district of Arunachal Pradesh of India to come closer to the Siliguri corridor so that it can establish link with Bangladesh from the north.43 Such a possibility may be an underlying factor for Bangladesh’s significance to China.

Figure 1: Bangladesh’s strategic location between siliguri corridor of India and access to Bay of Bengal for China

Fifth, Bangladesh is strategically situated between South and Southeast Asia and is located in proximity to both India and China. Bangladesh’s natural gas deposits, estimated at between 32 trillion and 80 trillion cubic feet, increase Bangladesh’s strategic importance. Besides, Bangladesh’s geographic proximity with Myanmar makes these reserves accessible to China. India’s access to Myanmar’s gas reserves also hinges on Dhaka’s willingness to allow a passage for laying a gas pipeline – a fact not lost on Beijing.44

Sixth, Bangladesh, a pro-active member in the UN having served the UN Security Council twice in 30 years, is a major player in the war against global terrorism. It is party to some notable UN Human Rights and Disarmament Conventions and

43 “Why Assam Bleeds”, available at sify.com, accessed on 10 November 2008..44 Tarique Niazi, "China's March on South Asia", China Brief, 26 April 2005.

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also the leading troops contributing country in UN Peace Keeping Operations. Despite the global economic downturn, Bangladesh continued to post impressive economic growth rates. In September 2010, Bangladesh’s Premier Sheikh Hasina was presented an award by the United Nations for exceptional progress towards meeting the Millennium Development Goals. The success of receiving international awards continued for Bangladesh in 2013. In August 2013, the United Nations Educational, Scientific and Cultural Organization (UNESCO) awarded the Dhaka Ahsania Mission with the Confucius Literacy Prize 2013 for promoting adult literacy in the country.45 On the other hand, Premier Sheikh Hasina brought home two prestigious awards. In June 2013, she won the Rotary Peace Prize and in September 2013, she received the International Organisation for South-South Cooperation (IOSSC) Award for her contribution particularly in poverty reduction.46All these validate that Bangladesh’s respect in the international community is well deserved.

Seventh, Bangladesh has exhibited impressive economic performance in recent years. It has maintained 6 per cent plus GDP growth rate in the past decades and successfully transformed itself into an export-oriented economy. With more than US$ 20 billion foreign reserve, Bangladesh has now emerged as the second largest foreign currency reserve country in South Asia after India. The geographic location of Bangladesh and the abundant labour forces suggest that the nation has huge potential for further development. Moreover, the country also possesses a gigantic 40 million middle class population i.e., the consumers. All these factors have the potential to enable Bangladesh transpire as a vast market for China.47

Eighth, Bangladesh’s role in the South Asian Association for Regional Cooperation (SAARC), BIMSTEC and its impending membership in the ARF have made Bangladesh critically important for any country which wishes to engage in South and South East Asia. In view of China’s eagerness to join the SAARC, Bangladesh supported for Beijing’s entry into the SAARC.48 Today, China stands as an observer in SAARC owing much to Bangladesh's support.

Ninth, as one of the world’s largest functioning democracies and a moderate Muslim country, Bangladesh has considerable influence among the Islamic countries. Closer tie with the third largest Muslim nation can be an aiding tool to China as a proven friend of Muslims which will assist it to solve its current religious problem with Uighur Muslims.49

Tenth, China has also benefited diplomatically from its growing relation with Bangladesh. Bangladesh is committed to the “One China” principle and continued to

45 “Hasina becomes first Bangladeshi to receive Rotary Peace Award”, The Independent, 10 June 2013. 46 “PM received Int’l award for poverty reduction,” The Daily Star, 25 September 2013. 47 Bangladesh is the 3rd largest trading partner of China in whole South Asia. 48 Tarique Niazi, op.cit.49 Major Momtazur Rahman, “China-Myanmar Relationship and Impact on Defence Policy of Bangladesh”, NDC Journal, Dhaka, December 2010.

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firmly support China on vital issues concerning Taiwan, Tibet, Xinjiang and human rights.50 Bangladesh supported China on running for positions in many international organisations, including the United Nations Committee against Torture and the Council of International Maritime Organisation. Bangladesh played a very supportive role behind China’s entry into the World Trade Organisation.

Finally, Asia is considered as China’s neighbourhood and China appears determined to build an Asian community of common interests, common destiny and common responsibility. A friendly Bangladesh is crucial for China since it is deeply committed to friendly relations with its neighbouring countries. China believes in Chinese saying: water afar cannot put out a fire at hand. Meaning, a distant relative is not as helpful as a near neighbour. To follow through this dictum and to achieve the overarching goal of common development, China needs Bangladesh. In the age of economic globalisation, no Asian countries can achieve development in isolation, still less they can pursue development as a “zero-sum” game. Rather, with their interests closely entwined, Bangladesh and China, both the Asian countries need to seek mutually beneficial cooperation.

4. Suggestions for Enhancing Mutual Benefits

Stronger Bangladesh-China relationship will boost the effectiveness of China in playing its role in the region. Beijing’s move to play effective role in 2014 post-election politics of Dhaka and its message to ‘join hands’ to ‘advance the Sino-Bangla comprehensive and cooperative partnership to a new height’ is indicative of the fact that China is eager to rephrase its relations with India and Bangladesh and play greater role in the geopolitics of the Asian region.51 It is believed, China always pursues her independent foreign policy of peace, advocating that all countries are equals. It will persist in building good-neighbourly relationships and partnership and continue pursuing the policy of bringing harmony, security and prosperity to neighbours. Both should do everything possible to maintain these painstakingly built relations. China may actively support Chinese enterprises in expanding investment in Bangladesh thereby increasing interdependency. Tariff-free access to 4,721 Bangladeshi products certainly has helped trimming down the trade deficit and created better investment environment.52 As a bigger economy, leverage is always expected from China. Speedy completion of ongoing projects and submission of details for new projects by Bangladesh government would fetch more Chinese investments in various big projects in Bangladesh.

50 The Department of Asian Affairs, People’s Republic of China, “China and Bangladesh”, available at http://www.mfa.gov.cn/eng/wjb/zzjg/yzs/gjlb/2681/t15842.htm, accessed on 18 January 2010.51 Subir Bhaumik, “A Difficult Victory”, The Telegraph (Calcutta, India), 26 January 2014, available at http://www.telegraphindia.com/1140126/jsp/opinion/story_17864058.jsp#.Uuh18PtxVWG, accessed on 28 January 2014.52 Tariff-free access to 4,721 Bangladeshi products to China has been permitted from July 2010.

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China and Bangladesh should promote tourism, cultural and educational exchanges beyond the public sector to increase people to people exchanges in order to further cement the already existing bond of friendship. While engaging in the political spectrum, China needs to pursue policy that connects with the people of Bangladesh. The CPC needs to continue giving utmost considerations to the interests of the people of Bangladesh as the party has always done in the past.

Growing Bangladesh-China relationship on the other hand, is often reckoned by some analysts with heightened concerns affecting India's strategic interests in the South Asian region. It is to be noted that, India-China relations in recent years is growing too. Since 2008, China emerged as India’s largest trading partner and in 2010, the two countries exceeded their US$ 60 billion bilateral trade target driven largely by increasing Indian imports from China. Bangladesh, therefore, needs to strike a balance between its relations with China and India, and make every effort possible to enhance India's confidence enabling our mutual growth all-together. Bangladesh should be careful not to escalate tension with India. Maintaining good relations with both the countries are crucial for Bangladesh.

Bangladesh and China should fight terrorism and transnational crimes, share information, exchange intelligence and cooperate in law enforcement to ensure peace and stability in the region. Over the years, the two sides have signed a plethora of bilateral agreements including economic engagements, soft loans, social contracts, cultural exchanges, academic interactions, infrastructural development and military sales at “friendship” prices.53 Both the countries should be sincere in materialising all the agreements specially those affecting scientific, technological and agricultural development cooperation. The two countries may consider cooperating in export of pharmaceutical products and promotion of joint oceanographic research activities. Further cooperation in the areas of shipping may include joint investment in shipbuilding sector in Bangladesh.

Due to the lengthy process for obtaining Chinese visa, the business community of Bangladesh sometimes faces difficulties to visit China. Hence, Bangladesh should pursue the regular exchange of consular consultation for easing the visa procedure. More FDI on part of China towards Bangladesh to compensate trade deficit can be another option. Opening up of new consulates in major commercial cities like Shanghai and Guangzhou, for further bolstering of economic relations with provinces in China can be another good option. Both the countries can also think of cooperating in dealing with climate insecurities. In Bangladesh’s security calculus, China plays a vital role as the main supplier of military hardware and resources. Defence structure of Bangladesh is evolved around Chinese military hardware, technology and resources. Bangladesh, therefore, also needs to strengthen defence cooperation with China.

53 Vijay Sakhuja, op.cit.

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Moreover, Bangladesh and China should also promote bilateral security dialogue and consultation, strengthen cooperation on non-traditional security issues, including disaster management, maritime search and rescue, counter-terrorism and combating transnational crimes and actively explore the establishment of a regional security cooperation framework in Asia.

The BCIM-EC should emerge as a regional arrangement for the member countries and an engine of growth pulling Bangladesh-China cooperation into a new height. The Economic Corridor, however, must not be confined in transportation only, although, transportation connectivity will lay an important foundation. The EC can be a connectivity of development policy, market, industrial layout as well as cultural and people-to-people exchanges. In brief, BCIM needs to transform itself into a connectivity of relative advantages and a dynamic industrial production and supply chain for the regional countries. Both Bangladesh and China needs to play decisive roles in this regard. Again, due to its location, Bangladesh can serve as a bar of dumbbell that connects the two weights – Chinese market and the Indian market.

5. Conclusion

The bitterness of history, in terms of China’s opposing Bangladesh’s Liberation War and also holding up Bangladesh’s UN candidature for quite a while at a time when it was extremely needed for Bangladesh, has gradually faded away. Ever since China and Bangladesh established diplomatic relations in 1975, the bilateral relations between the two countries have grown very rapidly covering a wide spectrum of affairs. The relationship is characterised by its comparative stability and continuity setting it as an example of good inter-state relations. The Chinese principle of non-intervention in Bangladesh’s internal affairs has helped develop closer relations and mutual trust between the two nations.

All prominent state and political leaders of Bangladesh have visited China as a priority on their foreign policy agenda (see Annex A). A series of high level visits are also on schedule in the year 2014. From Bangladeshi side, the Honourable President is to go to Shanghai in the end of May 2014 for Asia Confidence Building Summit. The Honourable Prime Minister and political Party leaders are also invited to visit China in a mutually convenient time. From Chinese side, Vice Chairpersons of China’s National Congress and National Military Commission will successively come to Bangladesh in the mid-2014. A very high level military delegation will also visit Bangladesh in May 2014. Vice Minister of China’s Ministry for Water Conservancy is planned to visit Bangladesh in 2014 for renewing the agreement of hydrological data and information exchanges between the two governments. People to people exchanges have also crossed 70 thousands in 2013 and the number is still increasing.

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The CPC has traditionally maintained close working relations with the major political parties in Bangladesh. The economic cooperation between the two countries has grown from strength to strength. The defence cooperation between two countries is also getting stronger. Bangladesh has always maintained its unequivocal support to “One-China” policy and hoped for peaceful reunification of Taiwan with the mainland. It has consistently stood by China on the question of Dalai Lama and Tibet. The two countries have always maintained sound working relations within the UN framework and also in other international and regional forums. Bangladesh looks to China for economic prosperity and strategic necessities. On the other hand, Bangladesh offers China a strategic foothold in shaping the future of the South Asian region.

It is quite evident that Bangladesh and China will remain as reliable friends and good neighbours for the foreseeable future. And it is expected that their bilateral relations will grow and the “Comprehensive Partnership of Cooperation” will deepen and expand over time to serve each other’s interest. Bangladesh and China can become partners in the new Asian Age and the mutual cooperation would further cement this relationship. Bangladesh-China relations, although have a deep-rooted history, need to be re-energised from time to time. Therefore, it is imperative that the two countries work together to ensure continuous development of their friendly relations through generations.

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ANNEX: A

LIST OF HIGH-LEVEL VISITS DURING 2009-2013

Dignitaries visited from Bangladesh side:*

Date Visiting Personalities Occasion

2009 09-14 Mar. Jahangir Kabir Nanok, State Minister for LGRD & Cooperatives

At the invitation of the Communist Party of China (CPC).

2010 08-15 Apr. Syed Abul Hossain, Communications Minister

To attend the BOAO Forum for Asia Annual Conference

2010 17-21 Mar. Sheikh Hasina, Prime Minister of Bangladesh.

At the invitation of Chinese Premier Wen Jiabao.

2010 17-19 May Abdul Mannan Khan, State Minister for Housing & Public Works

Led a 5-member delegation

2010 23-30 May Abul Kalam Azad, Minister for Information & Cultural Affairs

To attend the 7th Asia Media Summit

2010 15-21 Jun. Rezaul Karim Hira, Minister for Land Led a 12-member high-level delegation

2010 25-27 Jul. Syed Abul Hossain, Communication Minister

Led a 10-member high-level delegation to attend the 1st Annual Meeting of DIANCHI Cooperation for Opening Asia (DCOA)

2010 18-22 Sept. Muhammad Faruk Khan, Commerce Minister

To attend the Shanghai World Expo

2010 26-30 Sept. Dr. AFM Ruhul Haque, Minister for Health and Family Welfare

To attend the International Symposium on Population and Development

2010 14-20 Oct. Syed Abul Hossain, Communication Minister

To promote issues of bilateral interests.

2010 17-20 Oct. Begum Matia Chowdhury, Minister for Agriculture

To attend second session of Joint Agricultural Committee between Bangladesh and China.

2010 17-22 Oct. Dilip Barua, Minister for Industries To promote Chinese investments.

2010 19-23 Oct. Dr. Hasan Mahmud, State Minister for Environment and Forests

Led a six-member delegation to China.

2010 04-08 Nov. Dr. Muhammad Abdur Razzaque, Minister for Food and Disaster Management

To discuss bilateral issues.

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2010 12-17 Nov. Ahad Ali Sarker, State Minister for Youth & Sports

To attend the opening ceremony of 16th Asian Games

2011 15-20 Jun. Dr. Dipu Moni, Foreign Minister Official visit

2011 11-16 Oct. Abdul Hamid, Speaker of the National Assembly

As guest of Wu Bangguo, Chairman of the NPC Standing Committee

2011 15-20 Oct. Khaleda Zia, leader of the Opposition

At the invitation of the Communist Party of China (CPC)

2013 26 Jun-01 Jul

Md. Shahidul Haque, Foreign Secretary

Led a delegation for bilateral consultation

2013 19-22 Oct. Dr. Dipu Moni, Foreign Minister At the invitation of Chinese Foreign Minister

*List is not conclusive

Dignitaries visited from Chinese Side:*

Date Visiting Personalities Occasion

2009 14-15 JuneXi Jinping, Vice President and Member of the Standing Committee of the CPC Central Committee Politburo

Official visit.

2010 24-27 Jan. Tong Zhiyan, Deputy Secretary General of Yunnan Province

Led a 20 member delegation

2010 31 Jan.-7 Feb. Cai Jianhua, Director General, Training and Communications Centre of NPFPC


2010 09-10 Feb. Huang Xiaoxiang, Deputy Governor of Sichuan Province

To promote Bangladesh-China relations.

2010 28 Feb.-02 Mar.Liu Jieyi, Vice Minister, Department of International Cooperation of the Communist Party of China


2010 June Xi Jinping, Vice PresidentAt the invitation of Bangladesh Prime Minister Sheikh Hasina.

2012 20-22 October

Li Changchun, member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China (CPC)

At the invitation of Bangladesh Awami League

2013 MarchDr. Zhang Wei of Asia Pacific Space Cooperation Organisation (APSCO) and his delegation

To discuss potential for cooperation in space research with SPARRSO of Bangladesh.

*List is not conclusive

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ANNEX: B

Bangladesh-China Trade Statistics (2003-2013)

Figures in Million Tk (in Million US$)

Year Export Import Total Trade Trade Ratio

2002-03 1129.15(19.50)

45211.00(779.50)

46340.15(799) 1:41.79

2003-04 2692.05(45.65)

66762.83(1132.72)

69454.88(1178.37) 1:24.81

2004-05 3448.85(56.07)

101092.00(1643.77)

104540.85(1699.84) 1:28.58

2005-06 4324.96(64.35)

139458.90(2078.99)

143783.86(2143.34) 1:32.31

2006-07 6420.35(92.97)

177587.9(2572.62)

184008.25(2665.59) 1:27.67

2007-08 7336.49(106.95)

215178(3136.70)

222514.49(3243.65) 1: 29.33

2008-09 6677.73(97.06)

237461(3451.47)

244138.73(3548.53) 1: 35.56

2009-10 12357.9(178.63)

264217.9(3819.28)

276575.8(3997.91) 1:21.38

2010-11 22750.06(319.66)

420796(5912.55)

443546.06(6232.21) 1: 18.49

2011-12 31793.45(401.94)

508867(6433.21)

540660.45(6835.15) 1:16

2012-13 36612.95(458.12)

505460(6324)

542072.95(6782.12) 1:13.8

Source: Dhaka Chamber of Commerce and Industries (DCCI), “Bangladesh and China Bilateral Trade Statistics”, available at http://www.dcci.org.bd/Bilateral/China-Bangladesh%20Bilateral%20Trade%20Statistics.pdf, accessed on 17 October 2013.

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Mahfuz KabirShaheen Afroze

REALISING THE POTENTIAL OF BANGLADESH’S LOCATION THROUGH CONNECTIVITY

Abstract

Bangladesh is geographically located between two Asian economic power houses — China and India. The gravity model of international trade theory implies that geographical proximity leads to higher volume of bilateral trade. However, very little or no trade takes place among the smaller countries in South Asia that are closely located even though individually they trade more with distant industrialised countries. This clearly implies that there may be other factors, such as lack of transport connectivity and related logistical constraints that give rise to high transaction costs leading to low trade. Nevertheless, Bangladesh has the potential to establish itself as a regional economic and financial hub. It has also been stipulated in the Vision 2021 of the Government of Bangladesh and demonstrated political will through a number of initiatives. Given this backdrop, this paper tries to explain the avenues for tapping the potential of Bangladesh’s location through greater connectivity. It also attempts to uncover the whole issues of connectivity given the locational advantage of Bangladesh, identifies the existing bottlenecks that are hindering in deriving multiple economic benefits and suggests how to address these constraints. It reveals that the country has got unique location in the middle of two economic power houses, which, if wisely utilised, can provide wide ranging benefits to vibrate economically.

1. Introduction

In the age of globalisation when the promising countries are proceeding towards rapid integration with regional and global economies, an increased propensity is seen towards utilising a country’s geographical location through connectivity. Incidentally and perhaps blessed with contemporary history of the ‘Asian century’, Bangladesh is geographically located between the two contemporary economic power houses — China and India that speaks volume about the imperatives of Bangladesh to have greater connectivity with them in all possible ways. One of the five building blocks of a successful ‘free trade area’ is geographical immediacy,1 given

Mahfuz Kabir, Ph.D is Senior Research Fellow at Bangladesh Institute of International and Strategic Studies (BIISS), Dhaka. His e-mail address is: [email protected]; Shaheen Afroze, Ph.D is Director Research at Bangladesh Institute of International and Strategic Studies (BIISS), Dhaka. Her e-mail address is: [email protected]


1 Nihal Pitigala, What Does Regional Trade in South Asia Reveal about Future Trade Integration? Some Empirical Evidence, Policy Research Working Paper No 3497, Washington, DC: World Bank, 2005.


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that the neighbours have greater connectivity. The gravity model of international trade theory implies that geographical proximity leads to higher volume of bilateral trade as the ‘distance elasticity’ of trade turns out to be negative.2 Indeed, the countries in relative geographical nearness tend to trade more with each other than with distant countries due mainly to lower transport and communications costs in standard case.3 Regional trade in South Asia tends to be India-centric, which is the immediate neighbour for all other countries except Afghanistan. However, very little or no trade takes place among the smaller countries in South Asia that are closely located even though individually they trade more with distant industrialised countries. This clearly implies that there may be other factors, such as lack of transport connectivity and related logistical constraints that give rise to high transaction costs leading to low trade. Beside trade, lower investment and other mutually beneficial economic collaboration are at sub-optimal level due to significant connectivity constraints.

Bangladesh has the potential to establish itself as a regional economic and financial hub. It has also been stipulated in the "Vision 2021" of the Government of Bangladesh (GoB) and demonstrated political will through a number of initiatives that include forming a National Core Committee and conducting a study for offering regional transit facility. Given this backdrop, the present paper tries to explain the avenues for tapping the potential of Bangladesh’s location through greater connectivity. Thus, the paper has been structured as follows. Apart from the brief prelude, section 2 describes the advantages of Bangladesh’s location as a gateway of South, Southeast and East Asia, and as a trade and transport corridor for landlocked countries and territories through land, water and sea. Section 3 explains the existing drawbacks in the area of connectivity and infrastructure that include land, water and electricity grid connectivity. Given the opportunities and constraints, section 4 suggests how to derive maximum benefits out of the country’s location. Finally, concluding remarks have been made in section 5.

2. Advantages of Bangladesh’s Location

Bangladesh’s geographical position is very important in the region for economically highly beneficial exchange and cooperation. Cooperation literally means that one party would provide some benefits to the other on a reciprocal basis. Geographic location is an important factor both in trade and communication for an individual country in a regional/sub-regional grouping.4

2 See, for example, J. E. Anderson, Gravity, Productivity and the Pattern of Production and Trade, Working Paper No 14642, Massachusetts: National Bureau of Economic Research, 2009.3 A. Deardorff and R. M. Stern, “Multilateral Trade Negotiations and Preferential Trade Arrangements”, in A. Deardorff and R. M. Stern (eds.), Analytical and Negotiating Issues in the Global Trading System, Ann Arbor: University of Michigan Press, 1994.4 M. Rahmatullah, “Regional Connectivity: Opportunities for Bangladesh to be a Transport Hub”, Journal of Bangladesh Institute of Planners, Vol. 2, 2009, pp. 13-29.

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REALISING THE POTENTIAL OF BANGLADESH’S LOCATION

Map 1: Bangladesh’s Geographical Position

Central location of a country in a regional grouping provides her not only with cheaper transportation, communication and trade facilities but also the option to choose the goods or services and the location or countries which best suit its economic and political interests. Thus, the geographic centrality of Bangladesh to China, South, Southeast and Central Asia can bring enormous benefits for Bangladesh.5

2.1 Transit

Considering the significant potential of economic benefits, the Government of Bangladesh has demonstrated positive approach and will to have a sub-regional transit including India, Nepal and Bhutan. The primary objectives of the transit package are to provide passage and logistic support in exchange of user fee through improving infrastructure in land, inland water and sea, promote investment and economic development in extremely backward bordering districts and accumulate regional social capital through greater trust and cooperation.

5 M. Kabir, A.B.M. Ziaur Rahman and S. M. Hossain, BIMSTEC-Japan Cooperation in Energy Sector: Bangladesh Perspective, Discussion Paper No 24, Kolkata: CSIRD, 2007.

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Map 2: Proposed Transit Route with North East States (NES) of India

Legend: Existing route Transit route

Currently, Bangladesh has large trade deficit with India and some deficit with both Nepal and Bhutan with increasing trend. Trading in transport services with these countries can lessen this deficit considerably. In this backdrop, it is important to realise that these transport services are less likely to have any market elsewhere

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outside this sub-region. At the same time, it is also important to recognise that these opportunities of trading in transport services may not continue for long because there might be alternative cost-effective means through technological advancement and contract with another country like Myanmar. Therefore, this issue has to get urgent attention of the policymakers and the relevant governments. If this opportunity is tapped carefully, Bangladesh can easily emerge to be a “transport hub” of the sub-region consisting Nepal, Bhutan and Northeast India.6 This would result in a win-win situation for all the sub-regional countries.

As a gesture of friendship and cooperation towards India, the continued operation of a “Protocol on Inland Water Transit and Trade” was approved in 1972 allowing India to make use of the six designated inland water transport routes for transit of India’s freight traffic across Bangladesh. It required India to pay transit fees for maintenance of the river navigability and use of Bangladeshi vessels. It was subsequently renewed in the early 1980s. Additional demand for broad-based multi-modal transit transport operation across Bangladesh, utilising all modes of transports (sea and river ports) requires a comprehensive Transit Agreement.

The ‘transit’ proposal now in place is comprehensive that includes India, Nepal and Bhutan and intends to utilise Bangladesh’s road, rail, inland waterways and the sea and river ports. It would entail multi-modal transport operation at Chittagong, Mongla and Ashuganj ports and onward clearance of traffic both by road and railways.

Effective implementation of transit agreement hinges on two main preconditions. First, transit will be a functional procedure through Bangladesh that will allow unhindered movement of goods between West Bengal and the North Eastern States (NES) of India, with no significant waiting time at the border or en route due to inspections or trans-loading. Second, Bangladesh will have adequate mechanisms to recover the costs associated with required infrastructure and services, according to agreed international principles on freedom of transit.

India would gain much from lower transport cost for its own trade as well as international trade with the NES. Transit would also benefit Nepal and Bhutan to carry out international trade through using river ports and Mongla and Chittagong sea ports with much lower time and transportation costs. Bangladesh would benefit significantly from better utilisation of its port facilities and associated fees, reduced trade costs with India resulting in higher volume of trade and opportunity to upgrade its transport network financed by user charges. It would bring about two major dynamic benefits: (a) much better economic relations with India and scope of reducing enormous trade deficit and (b) larger investment opportunities in Bangladesh, especially in the bordering districts which are lagging behind.

6 M. Rahmatullah, op.cit.

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How would transit help reduce trade deficit? It would be primarily through export of services. The transit from India through Bangladesh to India (or ‘in transit’) is similar to the use of port services. Also, Nepal and Bhutan will use Bangladesh territory for trading with India and rest of the world. Therefore, Bangladesh will export services of using road, rail and waterway infrastructures and earn ‘user fees’ or ‘service charges’. Consistent with WTO rules, the service charge would be based on the principle of cost recovery, rate of return on investment in infrastructure and environmental pollution charge among others.

A recent study of gravity model indicates the statistically significant growth of Bangladesh-India bilateral trade if transit is allowed. The study also shows that Bangladesh’s total exports to India would be increased by 182 per cent in the case of Bangladesh-India full FTA, while Bangladesh-India full FTA with improved connectivity would increase Bangladesh’s exports to India by almost threefold (297 per cent); in the case of India the corresponding increases would be 126 and 172 per cent, respectively. Thus, improved connectivity would increase Bangladesh’s exports to India at a higher rate than that of India to Bangladesh.7

The other dynamic benefit that Bangladesh can gain would be larger investment in lagging regions because of vibration in the bordering local economy. Most of the bordering districts belong to backward regions that have low connectivity with growth centres. There is a strong positive relationship between connectivity and development of lagging regions.8 A good example is Bangabandhu Jamuna Bridge that helped improve socio-economic performance of northwestern districts of Bangladesh significantly through connectivity with growth centres. Investments in infrastructure for providing transit to Bhutan, Nepal and India especially for connecting the NES with the mainland through the ports in Bangladesh is also likely to improve connectivity for the relevant lagging regions of Bangladesh. This would connect the lagging regions with nearby growth centres and attract investments in the bordering areas in trade and establishing new industries as feedback effect. This would help address the developmental constraints of these areas.

2.2 Sea: Gateway to the World

Keeping other things constant, the countries that have access to sea have the scope to economically perform better than the land-locked countries. International experience suggests that the contribution of important sea ports, such as Rotterdam, Singapore and Hong Kong to development of the respective countries/territories is

7 P. De, S. Raihan and S. Kathuria, Unlocking Bangladesh-India Trade: Emerging Potential and the Way Forward, Policy Research Working Paper 6155, Washington, DC: World Bank, 2012.8 For example, see, General Economics Division, Outline Perspective Plan of Bangladesh 2010-2021, Dhaka: Bangladesh Planning Commission; and Planning Commission, Creating a Place for the Future: Paper Supporting the Framework for Economic Growth Pakistan, 2010-2021, Islamabad: Government of Pakistan.

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significant.9 Even though Bangladesh has some drawbacks as a downstream country in terms of flow of water of trans-boundary rivers, it has a considerable advantage of accessing sea and scope of using it as the gateway between Central, South and East Asia. In addition, Bangladesh can utilise a dynamic source of revenue for economic growth through opening up its two sea ports and investment further beyond the purview of proposed sub-regional transit.

The huge container traffic in the Chittagong sea port gives an idea that it is over-utilised. But actually it is not so. The fact is that a study found over-utilisation of the manual container handling capacity of this port.10 Expert opinion revealed that there is still significant overall capacity of the port currently being unutilised, which can be used through opening up the port for regional countries with pragmatically determined user fees.11

The Chittagong Port is the largest sea port in Bangladesh, located by the estuary of the Karnaphuli River in Patenga near Chittagong city. It provides a major gateway for the country’s external trade. Its present handling capacity is 32,017 TEUs (Twenty Foot Equivalent Unit) and storage capacity is 79,000 metric tons. On average about 40 per cent of the container holding capacity and 45 per cent of the cargo storage capacity are remaining unutilised daily. In other words, this significant unused holding and storage capacity can easily be used by the interested landlocked neighbouring countries and territories.

Mongla Port is the second largest sea port of the country located at Bagerhat district. The present handling capacity is 6.5 million metric tons of cargo and 50,000 containers per year. In FY2011-12 it handled some 2.48 million metric tons of cargo and 30,000 TEUs of containers. It means that there is large excess capacity of 61 per cent of cargo and 40 per cent of containers handling. Cargo can be transported in all seasons from the port through road and river ways. Containerised traffic can be transported through the Inland Water Transport (IWT) routes as specified under Inland Waterways Protocol Agreement.

2.3 Between India and China

Bangladesh is located as a bridge between Central, South and East Asia. Through better land, air and sea connectivity Bangladesh can become an Asian commercial hub. It is clear that geography can be a hugely positive asset for

9 S. Ahmed, “The economics of transit”, in Global Economy: Anniversary Issue (Part Five), Dhaka: Policy Research Institute of Bangladesh, 2011, available at http://www.pri-bd.org/index.php?option=com_content&view=article&id=269:the-economics-of-transit&catid=46:global-economy&Itemid=60, accessed on 12 June 2013. 10 S. Munisamy and G. Singh, “Benchmarking the efficiency of Asian container ports”, African Journal of Business Management, Vol. 5, No. 4, 2011, pp. 1397-1407.11 Interview with Dr. Mozibur Rahman, CEO of Bangladesh Foreign Trade Institute and the Chair of the National Core Committee on regional transit proposal.

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development of Bangladesh. Exploiting this locational advantage by improving and expanding port services and by providing connectivity between Central, South and East Asia can add a new source of economic growth for Bangladesh.

The ongoing changes in the Chinese economy indicate two strategic opportunities for Bangladesh — first, many of the labour intensive manufacturing are going to migrate out of China and so Bangladesh could position itself as an effective alternative, and second, global investment funds previously going to China are now on the move and are looking for new countries and Bangladesh could grab this opportunity.

China’s growth was largely driven by the state-owned companies in its initial period. This was not the case in India. China took an early lead and used its strength in technology and knowledge to adapt new technologies to increase its economic growth rate. India, on the other hand, was left behind and it is only recently that it accelerated its economic growth using its strengths in the services sectors particularly in the software technology, education and health care.

Table 1: Regional Gateways of Bangladesh

Division Key Features

Chittagong Commercial capital Largest sea port Road links with Myanmar Rail links to TripuraTruly the gateway to Southeast Asia

Rajshahi Connects to mainly the Indian state of West Bengal

Khulna Connects to mainly the Indian state of West Bengal

Sylhet Gateway to the Eastern Indian states with direct road linkages

Rangpur Gateway to North Eastern part of West Bengal, Nepal and Bhutan

China and India are now two giants with possibility of becoming among the top economies of the world in the next decade. Bangladesh could take advantage of such a shift in the global economy by quickly integrating with these two big economies. The proximity of Bangladesh to India and China could be strength for Western investors who are eyeing on developing goods and services for these two giants. In this regard, while Bangladesh is developing healthy economic ties with India, it should also use road and rail links to connect to China using transit routes. Such a move will help Bangladesh to attract investment with no additional costs.

Using locational advantage, Bangladesh can devise strategies to establish

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itself as a regional hub for banks, finance and insurance markets and related services to businesses, design expert level services for enterprises — like architectural, forecasting, marketing, education, training and research services. Such services, when provided outside the country from Bangladesh shall be treated as net ‘export’. This will help Bangladesh establish itself as a global hub for knowledge-based services utilising local and also foreign expertise.

2.4 Dividend from Myanmar

Myanmar is traditionally seen to be Bangladesh’s ‘distant neighbour’. However, recent political atmosphere in the country reveals that its economy is likely to vibrate in near future. Major international powers like the USA, European Union and Japan have already expressed their interests while the US President and Japanese Prime Minister have recently paid visits to Myanmar. Immense interests of the Western economies in trade and investment with this country implies that it is only a matter of time for Myanmar to become visible as a business and economic player in Southeast Asia. It is also preparing to become the next chair of ASEAN in 2014. It is now high time to utilise Bangladesh’s proximity with this country through greater connectivity, especially through land linkage.

Bangladesh is currently suffering from increasing trade deficit with Myanmar. Even though Bangladesh has a good export potential of pharmaceuticals, leather goods, vegetables and textiles and readymade garment (RMG) items to bridge the unfavourable trade gap, the existing poor connectivity has been restraining to realise the untapped potential. The road linkages between these two neighbours could be facilitated through the southern route of proposed Asian highway. In addition, up-gradation of roads connecting land customs station at Teknaf should be improved to facilitate cross-border trade and human movement. On the other hand, inland water and sea route transportation should be promoted to increase bilateral trade flow.

2.5 Electricity Grid Connection

Bangladesh’s potential to become a middle income country as per ‘Vision 2021’ critically hinges on power generation. Even though the country has made some progress in electricity supply, there is a considerable gap between demand from industrial sector and supply from within. Most of the recent progress is due to a short-term measure of ‘quick rental’ whose cost-effectiveness and long term viability remains a big question. Therefore, it is imperative for the country to import electricity from the neighbours like India, Myanmar, Nepal and Bhutan.

Hydropower is the dominant source of commercial energy for Bhutan and its major revenue comes from hydroelectricity exports to India. Nepal and Bhutan have

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potential to export electricity to Bangladesh. Nepal has large untapped hydroelectric potential (estimated at 43,000 MW), which could be developed to provide for the 60 per cent of the population without electricity, as well as for export. Bhutan’s hydropower potential is estimated at 30,000 MW.12 To realise their potential, there is a need for starting consultation to construct gridline through India from which India can also benefit through electricity import to NES.

Grid connectivity is also important to import power from India. Bangladesh has already taken a major positive step by reaching an agreement with India to allow electricity imports in the short to medium term. Currently, West Bengal has a surplus power of 750 MW which could be imported immediately if the grids were already compatible.

3. Constraining Factors3.1 Implementing Sub-regional Transit

The government has in principle agreed to provide regional multi-modal transit including road, rail, Inland Water Transport (IWT) and sea. As mentioned above, a National Core Committee has been formed by the Government of Bangladesh to suggest modalities, routes and possible transit fee. However, the process was stalled following the unsuccessful attempt to conduct the Teesta water sharing treaty when Indian Prime Minister visited Bangladesh in September 2011. Since then no effective attempt has been made to implement regional transit, which seems to be the case of “water for transit”. Some progress was, however, achieved for undertaking transit individually with Bhutan and Nepal. A draft agreement has already been exchanged with Bhutan.

Bangladesh highway system is characterised by small inter-district road connectivity with a very high congestion. It is built with inadequate attention to design standard, required for a rising level of traffic. Road building in Bangladesh is prohibitively costly. The country is devoid of basic building materials, such as aggregates, bitumen, etc. Standard of road required for operation of container load of transit traffic will be very high, hence expensive to build and maintain. Heavy road traffic will also inflict serious environmental damage. Besides, costs of fuel, vehicles, bitumen, all import items will further go up over time. Consequently, cost of transit requiring multiple transfer and trans-shipment need costly short-haul clearance into India.

12 M. Kabir et al., 2006, op. cit.

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Table 2: Road Congestion in Bangladesh13

Division Population User per km roadBarisal 9,560,965 8,149Chittagong 28,412,959 7,400Dhaka 45,671,403 11,259Khulna 17,201,007 9,336Rajshahi 19,130,454 5,375Rangpur 16,197,295 7,915Sylhet 9,286,812 6,071Bangladesh 145,460,895 8,614

Railway has been suggested to be the most beneficial for transit.14 Despite recent initiative to rejuvenate Bangladesh Railway (BR), it is yet to be revived from the moribund condition. However, the potential demand for transit services suggests that BR can tap into a large and profitable market. This is a unique opportunity to revive the BR and undertake a concerted effort to reclaim its share in the freight market. Nevertheless, transit clearance operation by BR may result in a short-haul operation with high unit cost, which is likely to add to the BR’s yearly loss.

India intends to use the Chittagong and the Mongla sea ports as well as the river port of Ashuganj. Transit traffic seeking multimodal operation would be costly because of trans-shipment operation. A container load will require the use of expensive cargo handling equipment, specialised jetties, cranes and trained manpower, warehouses, etc. Onward clearance out of Ashuganj or the Chittagong port would entail short-haul operation, by road or rail and not enjoying economy of scale, will prove costlier. Chittagong port has limited prospect of natural expansion and constrained by limited draft virtually all ships have to be lightered at the outer anchorage. Mongla is a cheaper deep-water port, about 60 miles inland with minimum tidal effect. It would provide direct transfer of Indian transit cargo from ships on to river barges for their up-country dispatch for delivery into India. Mongla port suffered due to withdrawal of water by India and long period neglect in maintenance dredging. It may need one-off capital dredging and with regular maintenance, the port can be brought back to its potential handling capability.

Given the overall status of road and railway, the Core Committee has suggested that transit is not possible in the next three years due to inadequate infrastructure, thereby offering trans-shipment so that the overall infrastructure to support transit can be developed in the interim. The Committee estimated that 17.3 million cargos can be transported per year when ‘full transit’ is provided, but 10 per cent (1.8 million cargos) can be transported in trans-shipment. The Committee suggested 17 routes

13 E. Haque, G. Pananek and M. Kabir, Transforming Bangladesh – from Plans to Actions, Dhaka: FBCCI, 2011. 14 K.A.S Murshid, “Transit and Trans-shipment: Strategic Considerations for Bangladesh and India”, Economic & Political Weekly, Vol. XLVI, No 17, 2011, pp. 43-51.

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through road, rail and waterways and investment of Tk. 470 billion would be required for infrastructure development.

Finding a good time for offering has thus become uncertain. Also, it is important to address the persisting popular perception which is considerably against it. In the midst of not achieving a national consensus, the full support from all corners is not likely to happen, which would pose barrier in reaping full benefit of it.

3.2 Transit Fee

Transit fee is one of the key debated issues for everyone concerned, especially the stakeholders and civil society in Bangladesh. It is believed that the ‘user fee’ of transit services should sufficiently cover the rate of return of investment in a reasonable period. To convert the sea and inland water ports into international ports, a range of investments will be needed in terms of road, river and rail networks to establish connectivity between regional countries. Investments in port capacities, port facilities, dredging, etc. will be needed. Costs can be fully recovered along with a reasonable rate of return on investment through port fees and other infrastructure use charges.

The Core Committee has suggested the following items to be covered in the fee: (i) ¢8-11 per ton/km fee for goods transport through road, (ii) ¢5-6 per ton/km fee through rail and (iii) ¢2-3 per ton/km fee through water. Two types of fee/costs are involved: fixed and variable. Fixed costs include customs and land port services and entrance of foreign vehicles. Variable costs for road and rail involves land acquisition, land damage, administrative, institutional, security, accident, traffic/container jam and environmental and noise pollution. Variable costs for waterways is slightly different, which include design of river route with dredging, administrative, institutional, security, accident, traffic/container jam, environmental and noise pollution, water pollution and fuel price adjustment. Some important cost items such as time cost (saving) and opportunity cost of investment on infrastructure have been left out of the proposed fee.15

3.3 Connectivity with BCIM

Bangladesh, China, India and Myanmar (BCIM) forum has turned out to be a new hope for Bangladesh in the midst of slow progress of South Asian Association for Regional Cooperation (SAARC) and non-demonstrated results of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) to connect the region with Southeast Asia. The promotion of the development of an economic corridor has now become a key interest of regional leaders that will physically connect the sub-region to promote trade and investment. Bangladesh is surrounded mostly by

15 M. Kabir, “Transit to India: How to Optimise Benefits”, Paper presented at BIISS-IDSA Dialogue, BIISS, Dhaka, 28 March 2012.

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India on all sides except for a small border with Myanmar to the far southeast and the Bay of Bengal to the south. It provides a unique opportunity to establish connectivity with India and China via Myanmar through land routes and directly through sea. Integration of strategically located sub-regional areas, viz. NES of India, Bangladesh, Myanmar and southwest of China that constitute a natural economic zone, is widely believed to have significant potential to generate considerable economic benefits through trade, investment, energy, transport and tourism.16 The recent performances and dynamism of India and China as Asian economic powerhouses can provide wide range of prospects for growth and development of Bangladesh if tapped carefully.

Table 3: Welfare Gains from BCIM Economic Corridor (US$ million)17

Country Only FTA FTA + 10% Reduction of Transport Cost Bangladesh -191.5 857.21China 4,032.93 10,100.26India -1,024.33 4,726.32Myanmar -212.74 782.25

The BCIM economic corridor can allow the countries to reach many Asian markets due to its advantageous geopolitical position. If established, this corridor would help the countries in utilising advantages of each other to boost economic growth and open up for the wider global and regional markets, viz. Southeast and East Asia. Bangladesh is seen to be the bridge in the economic corridor connecting India and China. Trade distance between China and South and Southeast Asian countries would be significantly reduced through land connectivity between China and Bangladesh and China’s access to the Bay of Bengal through Chittagong due to China’s proximity with Bangladesh. The economic corridor hinges on two critical pillars, viz. industrial zones and infrastructure construction and cooperation. Industries such as processing, manufacturing and commercial logistics would be expanded through developing industrial zones along the corridor, thereby accelerating growth of large and medium-sized cities along the corridor. Many Chinese enterprises and foreign enterprises in China are likely to move to Bangladesh once the corridor is established due to very high wage rate in China compared to that of Bangladesh.18 Only a small percentage of reduction of transport cost along with a free trade area would lead to significant welfare gains for Bangladesh.19 However, currently there is no bilateral Most Favoured Nation (MFN) transit among these countries. Formal initiatives are yet to be taken to establish road and sea connectivity to facilitate the corridor.

16 M. Rahman, H. Rahman and W. B. Shadat, BCIM Economic Cooperation: Prospects and Challenges, Paper 64, Dhaka: CPD, 2007.17 P. De, “Cooperation in the Areas of Trade, Investment and Finance: Challenges, Prospects and the New Agenda”, Paper presented at the 11th BCIM Forum Meeting, Dhaka, 23-24 February 2013.18 B. Shihong, “Trade corridor helps rejuvenate Asia”, available at http://www.globaltimes.cn/content/786402.shtml, accessed on 22 June 2013.19 P. De, op.cit.

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3.4 Grid Connectivity and Power Trade

Besides promoting domestic production, the Government of Bangladesh has initiated regional approach in power generation and grid connectivity to bridge the gap between ever increasing demand for and domestic supply of electricity. Cooperative measures have been initiated bilaterally with India and regionally through SAARC, South Asia Subregional Economic Cooperation (SASEC) and BIMSTEC sharing of hydropower through cross-border connectivity and capacity development. It is expected that hydro power potential of Nepal, Bhutan and NES of India could be utilised for the benefit of the entire region as sub-regional electricity grid could enable flow of surplus electricity within the countries and minimise the gap between national demand and supply.

An MoU has been signed between Bangladesh and India to promote exchange of power through grid connectivity between the two countries and encourage joint venture investment in power generation especially in NES. These would allow establishment of grid connectivity for power trading between the two countries. Study revealed that the most effective option would be to establish an interconnection between Bheramara in Bangladesh and Baharampur in India. The project aims to establish a 400 KV, 30 Km double circuit line from Bheramara to Baharampur and establish a 500 MW 400/230 KV back-to-back high voltage direct current (HVDC) substation at Bheramara. In proposed Bheramara HVDC centre, existing Ishwardi-Khulna (South) 230 KV double circuit transmission line was designed loop in-loop out 5 km. The transmission line was designed for an ultimate power flow of 1000 MW. This cross-border trading with India opens up possibility for power trading with Nepal and Bhutan as well. A negotiation for power trading with Myanmar is also going on to import 500 MW of hydropower from Myanmar by 2017.

Despite these positive events, implementation of grid connectivity is taking much longer time given the mounting demand in the country. Also, realising the hydropower potentials of Nepal and Bhutan for Bangladesh’s consumption is remaining far from reality.

3.5 Potential Economic Losses through Trade Diversion

One of the biggest apprehensions regarding regional transit is that it would damage the NES of India as a captive market for Bangladesh. However, counter-arguments reveal that trade with captive market today may be growing but still remains modest as may be expected from one of India’s most underdeveloped regions. Opening up the NES through better transit facilities would expand Bangladesh’s opportunities for trade, not reduce it, because it would stimulate economic growth in this region. In near future improved connectivity with NES would enable eastern Bangladesh to emerge as a more competitive source of supply to NES than the rest

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of India. Indian businessmen would, within a more open trading system, find it more profitable to set up joint ventures across the Bangladesh border, to supply the North East or to process the abundant raw materials of the region. Also, Bangladeshi transport companies can be established as the principal carriers of India’s transit traffic to eliminate controversy over heavy Indian trucks.

It is also suggested that rather than the narrow NES, Bangladesh should look more into the entire Indian market which is almost open due to duty-free access despite the fact that recent countervailing duty imposed on Bangladesh’s RMG items has raised heavy criticism among the business community and triggered anti-Indian sentiment in the country.

4. Way Forward

The above discussion reveals that Bangladesh has got a unique geographical location that can be utilised to derive multi-prong benefits through better connectivity. Therefore, a number of pragmatic measures have to be taken into consideration in order to establish multi-modal connectivity to become a regional hub of trade, investment and services.

4.1 Investment in Infrastructure

Bangladesh requires substantial investment in connectivity-related infrastructure to achieve double-digit growth, which would also serve the purpose of transit. Even without transit traffic Bangladesh will need massive investments in road, rail and waterway infrastructure to graduate to a middle income country by 2021. Thus, there is an argument that Bangladesh should invest significantly on quality infrastructure that would be a double dividend to provide transit to regional countries. However, Bangladesh should carefully assess whether it has necessary financing options for benefiting regional countries given its other competing sectors, such as education, health, agriculture and social safety and security. Also, since transit is required by the neighbouring countries, they should come forward with finance to develop necessary infrastructure. There are multilateral institutions like World Bank, Asian Development Bank, Japan International Cooperation Agency, etc. which would be highly interested to finance transit infrastructure.

There are apprehensions regarding utilisation of the sea ports and inland waterways as well for transit. The use of Chittagong port and the Ashuganj river port would require container handling and inter-modal transfer and trans-shipment and onward clearance on uneconomic railway and road transport, their use may be exceptional, not routine for transit. Indian freight traffic would benefit optimally from the use of low cost Bangladesh IWT system. IWT operation was popular even during

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the Bengal River Services (BRS) operation on the comparable routes during the British days. Given the expertise in ship building, Bangladesh can help build suitable vessels for India. IWT operation can be further enhanced if the related river channels are regularly dredged. India should be seen to have great interest in maintaining the navigability of the Bangladesh rivers, which it can help accomplish by augmenting the flow of water on all the international rivers, e.g., the Ganges, Teesta, Brahmaputra, etc.

Both Chittagong and Mongla would earn substantial revenues from the use of their facilities. The substantial untapped capacity of Mongla port can be made good use of through capital dredging and developing a connecting rail route. Chittagong sea port needs significant capacity expansion.

To the benefit of the two parties (a ‘win-win’ proposition) inter-modal optimality needs to be adequately looked into. Also, there should be fuller understanding of the origin/destination of the transit traffic, its commodity composition, economic cost of each individual transport of both the countries and economic cost of the relatively backward NES, the ultimate user of the facility, so that optimum economic benefits can be derived.

4.2 Determine Pragmatic Transit Fee

As believed by many, the regional transit agreement would be beneficial for increasing trade, promoting Bangladesh to utilise its advantageous geographical location to access the sea by regional countries and help the backward regions in accessing better connectivity and access to adjacent growth centres. However, the most sensitive issue is to set a pragmatic transit fee that would benefit both providers and users.

Even though the Core Committee has suggested a number of items in the transit fee by mode of transport in road and waterways, a number of further items and issues need to be further considered to determine a reasonable transit fee. It should consider resource cost for the provision of transit facility, based on engineering quantity and cost estimates, covering civil works and equipment and resource cost then adjusted upward to incorporate financing charges to include cost of borrowing, both foreign and local.

Pricing for the transit should be based on cost covering principle. Prices should also reflect the fully costed infrastructure and equipment items procured and set up and put to operation. Final set of prices may be subject to project completion, on actual costs incurred and adjustments made against cost overrun. Therefore, prices to be reviewed annually and inflation-adjusted, maintenance costs of both periodic and regular and costs of asset acquisition which have future rate of return.

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Transit fee should consider India’s ‘savings’ due to transit/trans-shipment. It should also cover ‘savings’ due to transportation cost saving, time saving of user countries. If the regional countries do not come forward with finance, the fee should also include cost of not to devote financial resources for essential physical infrastructure, transport and traffic equipments and their maintenance. It will also include savings to avoid the insurgency-prone northern long and roundabout route, thus avoid ‘risk and uncertainty’ in the transportation of its goods. Thus, Bangladesh’s position as the ‘third degree’ price discriminator should be utilised as there is no other lucrative alternative than Bangladesh for the sub-regional countries.

4.3 Form Task Force on Connectivity with BCIM

Greater connectivity among BCIM is widely believed to be a new hope for Bangladesh for boosting growth and economic vibration in the midst of slow progress of regional cooperation that the country belongs to. The government is now considering it quite seriously. To realise the benefits rapidly out of the conceived economic corridor, the government should immediately form a high level task force including scholars, professionals and civil society actors in the relevant field to devise the connectivity options and undertake projects to materialise it with funding from domestic and international sources.

4.4 Start National Dialogue

In the last few years a number of irreversible achievements have been observed in the realm of Bangladesh-India relations. However, there is still considerable negative popular perception regarding transit in Bangladesh. Therefore, it is very important to commence national dialogue through all means — print and electronic media, seminar and symposium and scholarly deliberations so that a national consensus and ownership can be developed regarding this extremely sensitive issue. National institutions like Bangladesh Institute of International and Strategic Studies (BIISS) can take part in organising dialogues and public learning. It would help reduce the gap between imagined dangers and real benefits of transit.

5. Conclusion

The paper tries to explore the issue of connectivity given the locational advantage of Bangladesh, identifies the existing bottlenecks that are hindering for deriving multiple economic benefits and suggests how to address these constraints. It reveals that the country has got unique location in the middle of two economic power houses in Asian century, which, if wisely utilised, can provide wide ranging benefits to vibrate economically. Providing transit to the neighbours is likely to open up the scope of export of transport services for which there is currently no market

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outside the region. It can be used to reduce the trade gap with India, Nepal and Bhutan. But there are certain caveats like export diversion from the NES of India, huge investment is required which would compete with other critical social sectors to get public finance, uncertain timing and risk of omitting important items like time savings of user countries, avoiding risks and uncertainties and opportunity cost of investment to develop required infrastructure. These drawbacks can be addressed through looking at the entire Indian market rather than narrow NES, letting the lagging regions through connecting with the nearby growth centres that would enable them to perform well, introduce multi-modality of transit rather than adding congestion on the roads and devise a pragmatic user fee so that Bangladesh can use its geographical location as the third degree price discriminator.

Beyond the regional transit, BCIM economic corridor is considered to be one of the biggest opportunities that can be used for exporting transport service, boosting cross-border trade and commerce, expanding the market to Southeast and East Asian countries and becoming a regional hub between India and China. High level task force has to be formed by Bangladesh government to determine modalities, timing and investment requirement to respond to this opportunity of sub-regional cooperation. Finally, there is a need for national understanding, consensus and ownership regarding the benefits of greater physical connectivity to realise advantages of the strategic location which must be obtained through national dialogue, debate, information sharing and public learning.

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Md. Muhibbur Rahman

INDIA’S AFGHANISTAN POLICY: RAMIFICATIONS FOR REGIONAL POWER BALANCE IN SOUTH ASIA

Abstract

Regional security dynamics undergo significant transition with the shifting alliance formation within the geopolitical setting of South Asia. Traditional ‘balance of power’ argument sees a potential for stability in the emerging distribution of power, whether it is a ‘unilateral hegemonic distribution’ or a ‘pluri-lateral bipolar or multi-polar distribution’. But a growing Indo-Afghan partnership in South Asia offers, as the paper argues, a more complicated case. Indian stronghold in Afghanistan is enhancing already asymmetric distribution of power in the region, granting a more favourable power balance for India allowing the country to pursue its objective of emerging as a major world power. The maturing of Indo-US defence ties and the US approval of Indian stronger presence in Afghanistan provide India with enlarged incentives and enthusiasm to dominate the regional security matters. On the other hand, Pakistan’s critical stake in Afghan security and its likely antagonistic reaction to Indian pre-eminent position in the region might lead to prolonged instability in South Asia. Besides, China’s growing presence in Afghanistan and Central Asia will also complicate India’s regional leadership potential. The paper makes an attempt to assess the competing claims on the regional ramifications of India’s Afghan policy in South Asia with a view to unravelling emerging security atmosphere in the region in the wake of US withdrawal of troops from Afghanistan in 2014.

1. Introduction

September 2001 has changed many things in the world. The foremost of all is the US invasion of Afghanistan and toppling of Taliban regime accused of harbouring Al-Qaeda, the perpetrator of 9/11 attack in the USA. Since then, Afghanistan allowed India an opportunity to regain its lost influence in the country as well as to underscore its role as a regional power. With many ups and downs, India’s stake in Afghanistan has grown steadily ranging from aid, reconstruction and capability building to influence in the political decision making of the Afghan government.1 India has been showing firmness in deepening a long term partnership with Afghanistan. The 2011 India-Afghanistan strategic partnership agreement underlines India’s commitment to maintain a positive momentum in Delhi-Kabul ties.2

Md. Muhibbur Rahman is Research Officer at Bangladesh Institute of International and Strategic Studies (BIISS). His e-mail address is: [email protected]


1 William Dalrymple, “Forget NATO v the Taliban. The real Afghan fight is India v Pakistan”, The Guardian, 26 June 2013, available at http://www.theguardian.com/commentisfree/2013/jun/26/nato-taliban-india-pakistan, accessed on 28 October 2013.2 Harsh V. Pant, “India’s Changing Afghanistan Policy: Regional and Global Implications”, SSI Monograph,


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A growing Indo-Afghanistan partnership will have significant implications for regional power distribution in South Asia, granting a more favourable balance of power for India. While Indian protagonists suggest that India’s active role in Afghanistan can serve as a pacifying factor for security externalities3 emanating from Afghanistan4, Pakistani counterparts argue for more destabilised scenarios in which conflict would escalate in a more antagonistic direction.5 Both Indian and Pakistani perspectives tend to be overwhelmed by the nationalist interpretations of underlying motives and consequences of Indo-Afghan partnership. “In light of the disputes between India and Pakistan and between Pakistan and Afghanistan, India’s involvement in the Afghan conflict is probably the most critical test case for India’s leadership potential.”6

In this context, the paper tries to see the development in Afghanistan in general and India’s involvement in the country in particular by going beyond a state-centric approach and looking from a regional strategic perspective. The central hypothesis underlies a proposition that the Afghan policy of India is not necessarily a response to the post-Taliban Afghanistan’s internal and humanitarian needs. The Indian motive is complicated by the gradual shift in Indian approach to Afghanistan as a new member of South Asia, appraised in terms of long term strategic goal of setting a more favourable regional environment for India’s rise as a major world power. Critically dissecting the positions taken up by both Indian and Pakistani scholars, the paper tries to see the possible implications of these new developments into the distribution of power, the likelihood of relative stability, security externalities, leadership and conflict management structure and extra-regional response to the evolving regional order in South Asia.

The paper is based on secondary literature taken from both Indian and Pakistani scholarly works on the issue. Several published works by American and European scholars have also been consulted particularly in the conceptual part of the paper. To bring the discussion in a logical perspective, the paper is divided into few sections. After introduction, the second section sketches out a conceptual framework to delineate a regional argument of balance of power theory by examining notional properties and analytical perspective of the concept of balance of power in general and South Asian regional order in particular. In the third section, India’s engagement in Afghanistan was detailed out. Particular emphasis was given on the post-Taliban phases and components of India’s Afghan policy. Then, the paper distinguishes India’s strategic objectives in Afghanistan and motives for a stronger involvement in the country in section four. In the fifth section, an attempt has been made to assess the

Pennsylvania: US Army War College Press, December 2012, p. 32. 3 Security externalities include the spread of cross-border terrorism, narcotics and drug trafficking, refugees and humanitarian crisis and so on.4 Melanie Hanif, “Indian Involvement in Afghanistan in the Context of the South Asian Security System”, Journal of Strategic Security, Vol. 3, No. 2, 2010, pp.13-26.5 Qadar Bakhsh Baloch and Abdul Hafeez Khan Niazi, “Indian Encroachment in Afghanistan: A New Imperialism in the Making”, The Dialogue, Vol. 3, No. 1, 2008, pp.16-33. 6 Melanie Hanif, op. cit., p. 14.

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competing claims on the regional ramifications of India’s Afghan policy in South Asia with a view to unravelling emerging security atmosphere in the region in the wake of US-withdrawal of troops from Afghanistan in 2014.

2. Regional Balance of Power in South Asia: Conceptual Framework

Relative capability distribution and transition in the power setting, either in the form of increasing power of one or more geopolitically significant actors7 or due to shifting alliance formation within a geo-strategic frontier, influence substantively the prospects for both chaos and stability. The centrality of power in this argument informs the key objective of countries acting in the process as to maximise power to offset any odds against their national interests. There are several positions taken by the scholars arguing on the realist approaches to power distribution. While classical standpoint of both Morgenthau and Waltz8 advocates for a more equal sharing of power as a balance which warrants peaceful conditions for stability, other strands including ‘power transition theory’ of Organski and Kugler9, ‘hegemonic decline theory’ of Gilpin10 and ‘global cycle hypothesis’ of Thompson and Modelski11 see the balance of power as more chaotic and transitory conditions conducive for war and instability.12 Despite the fact that many contemporary empirical studies tend to grant more validity to power transitions approaches, the classical formulation of balance of

7 Geopolitically significant actors are geopolitically catalytic states with comprehensive and planned objectives to achieve a central goal or vital assets of military significance. Brzezinski distinguishes them as either ‘active geostrategic players’ (states that have the capacity and the national will to exercise power or influence beyond their borders in order to alter the existing geopolitical state of affairs) or ‘geopolitical pivots’ (states whose importance is derived not from their power and motivation but rather from their sensitive location and from the consequences of their potential vulnerable condition for the behaviour of strategic players). See Zbigniew Brzezinski, The Grand Chessboard: American Primacy and its Geostrategic Imperatives, New York: Basic Books, 1997, p. 41.8 Kenneth Waltz considers that “balance-of-power politics prevail wherever two, and only two requirements are met: that the order be anarchic and that it be populated by units wishing to survive”. See Kenneth N. Waltz, Theory of International Politics, Reading, MA: Addison-Wesley, 1979, p. 121. 9 Power transition theory refers to dynamic distribution of power where a big power gap between the dominant nations and the next layer of powerful states are vital for maintenance of international stability. According to this hypothesis, dissatisfied powers are responsible for international conflicts and changing power balance. See A. F. K. Organski and Jacek Kugler, The War Ledger, Chicago: The University of Chicago Press, 1980.10 Hegemonic decline theory denotes that asymmetric distribution of power maintains stability within a system as long as there is a hegemon to provide public goods and to design the system to its own advantages. On the other hand, when the hegemonic country reaches its last limit of expansion, it faces immense difficulty in maintaining the system and eventually declines. See Robert Gilpin, War and Change in International Politics, Cambridge: Cambridge University Press, 1981. 11 Global cycle hypothesis suggests that power distribution is defined neither by uncertainty nor by a challenger’s intention, rather by the global power cycles each of which lasts around one hundred years. See George Modelski, “The Long Cycle of Global Politics and the Nation State”, Contemporary Studies in Society and History, Vol. 20, No. 2, 1978, pp. 214-235 and William R. Thomson, On Global War: Historical-Structural Approaches to World Politics, Columbia: University of South Carolina Press, 1988. 12 Vesna Danilovic, When the Stakes are High: Deterrence and Conflict among Major Powers, Ann Arbor: The University of Michigan Press, 2002, pp. 71-98.

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power provides more comprehensive analytical tool to understand the behavioural pattern of the rising powers in both global and regional settings. Particularly, the motive of balancing underlies a continuous pursuit of checking the rise of any adverse forces and at the same time to maintain stability by granting incentives to forces complementing the augmentation of favourable outcomes.

For the analytical design of this paper, it would be methodologically useful to contextualise the meaning of ‘balance of power’ before going to fundamental conceptual positions of the theory in general and to construe a regional argument of balance of power in particular. One of the key conceptual difficulties in delimiting a precise definition of balance of power lies in its multiple, even contrasting, meanings attributed by the scholars who pioneered the idea. Morgenthau in Politics among Nations outlined a set of four diverse meanings, defining balance of power as (i) a policy aimed at certain state of affairs, (ii) an actual state of affairs, (iii) an approximately equal distribution of power and (iv) any distribution of power.13 But in his definition he emphasised that balance of power is generally an actual state of affairs in which power is distributed approximately in an equal manner.14 However, a more dualistic characterisation of balance of power by Quincy Wright as both static, meaning ‘conditions for balancing’ and dynamic, referring ‘policies taken by actors to sustain that conditions’, offered a more inclusive and pragmatic approach to the understanding of the balance of power process.15 However, this paper considers balance of power as any form of power distribution within a given geo-political setting that maintains relative stability, be it ‘unilateral hegemonic distribution’ or ‘pluri-lateral bipolar or multi-polar distribution’.

Key to the balance of power theory is the method of balancing and the position of a balancer within the act of balancing. Morgenthau identified two possible ways of balancing: “either by diminishing the weight of the heavier scale or by increasing the weight of the lighter one.”16 First one involves containment strategies (i.e., divide and rule) and the latter one requires expansion strategies (i.e., armament, alliance building, strategic partnership, aid diplomacy and so on). The latter strategies can also be employed by relatively powerful actors to dictate more favourable balance to their side. A balancer, which is the holder of the balance with a consistent objective of maintaining the balance, is required in a definite structural setting.

A regional balance of power is a sub-order balance reflecting the similar notional properties and techniques used in global balance of power. With the end of the Cold War, the US and Russia or any other big powers for that matter not only lost grasp but also faced reduced legitimacy of involving in the regional matters, leaving weak countries to look for local masters for security guarantee. Importantly, with

13 Hans J. Morgenthau, Politics among Nations: The Struggle for Power and Peace, New York: Knopf, 1948, p. 134. 14 Ibid. 15 Quincy Wright, A Study of War, Vol. II, Chicago: University of Chicago Press, 1942, p. 743. 16 Hans J. Morgenthau, op. cit., p. 172.

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the intensification of regionalisation of both bilateral and multi-lateral interactions, geopolitical regions have emerged as distinct and autonomous subsystems requiring unique analytical formulations to understand intra-regional power distribution. Newer forms of alliance formation, arms race and aid diplomacy are getting new momentum at the regional level. Unlike the global balance, regional balances are determined largely by the countries that are located in the given region, though a dominant hegemonic state outside the region may also play a role in the given region.

South Asia is one of the significant geopolitical regions in today’s world. It has become a geopolitical pivot of Eurasia particularly after the War on Terror and growing US interest in the region. The region’s geo-strategic appeal has been demonstrably increased due to its pivotal location in the ‘Inner Crescent’ of what Spykman in his famous geopolitical theory called as ‘Rimland’.17 The South Asian regional balance of power is characterised by at least three competing factors: an asymmetric distribution of power, Indo-Pak rivalry with bipolar nuclear constellation and emerging security complexes determined by exogenous interest factors.

The South Asian region is asymmetrical in all respects – geographic, economic and military. India’s physical size is almost equal to that of other countries combined. Its population, GDP, armed forces are also asymmetrically bigger than those of all other countries in the region. India accounts for more than seventy five per cent of the region’s population, Gross Domestic Product (GDP) and military expenditure.18 Moreover, India’s geographical position puts it in the centre of South Asia: it shares borders with almost all the countries of the region and no other country shares border with another except Afghanistan and Pakistan.19 Though asymmetric distribution suggests a uni-polarisation of the region, India has never been able to rise in a hegemonic fashion by transforming its material superiority into political preponderance. Two inter-related factors have obstructed Indian unilateral supremacy: firstly, due to crisis prone nature of South Asian regional order which has been heavily influenced by Indo-Pak bipolar constellation, Indian apparent preeminence remained illusory; and secondly, smaller countries, though do not have any collective balancing effort strategically,20 have always acted in a constant fear of Indian hegemony and thus limiting the efficacy of

17 Rimland is a geopolitical theory championed by Nicholas J. Spykman to describe the strip of coastal land that encircles Eurasia including the Asiatic monsoon what he thought as more important than the central Asian zone, the Heartland of Halford Mackinder, for the control of the Eurasian continent. The Rimland’s defining characteristic is that it is an intermediate region, lying between the heartland and the marginal sea powers. This amphibious buffer position, along with the region’s demographic weight and natural resources, gives Rimland immense power potential. See Nicholas J. Spykman, America’s Strategy in World Politics: The United States and the Balance of Power, New York: Harcourt, Brace and Company, 1942. 18 World Bank, “World Development Indicators”, available at http://devdata.worldbank.org/data-query and Stockholm International Peace Research Institute, "SIPRI Military Expenditure Database,” available at http://www.sipri.org/research/armaments/milex/milex_database, accessed on 12 October 2013. 19 See Harun ur Rashid, Bangladesh Foreign Policy: Realities, Priorities & Challenges, Dhaka: Academic Press and Publishers Library, 2005. 20 SAARC is more of an economic and development venture by the regional small states and India actively participates in this regional organisation instead of rebalancing using its relative supremacy.

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Indian bandwagoning. However, with respect to Indian relative control, the regional order can be divided into two sub-orders: bipolar sub-order between India and Pakistan in the western theatre, on the one hand, and unipolar sub-order between India and its smaller neighbours in the eastern theatre, on the other.21 Unlike the western theatre, states in the eastern theatre (Bangladesh, Nepal, Sri Lanka, Bhutan and the Maldives) were too weak to resist Indian superiority.22 As Pakistan, after India, is still disproportionately strong compared to the remaining South Asian states, Indian advantage of using the principle of non-reciprocity with other smaller countries have been reduced substantially.

Indo-Pak strategic rivalry, in particular, demands much deeper attention in understanding the regional strategic dynamics in South Asia. It is a region in which two big and very dissimilar countries with nuclear weapons often have sharp disagreements.23 Indo-Pak rivalry both in conventional and nuclear arena makes the region a nuclear flashpoint. A constant debate over the defining of nationality based on religious identity along with the historic trauma of partition in 1947 makes the prospect for cooperation and compromise very unlikely. The demographic pattern markedly dividing people into a common fault line of Hindu versus Muslim, except Buddhists, defines the regional politics both in colonial and post colonial nation-building experiences in the Indian Subcontinent. Issues ranging from terrorism to nuclear arms race are also influenced by a Hindu-Muslim narrative. Both share common and disputed boundaries with each other. Besides, the uncompromising dispute over Kashmir has exacerbated the bitterness of their relations further.

South Asian security complexes are also characterised by several exogenous forces and interest factors in addition to intra-regional struggle for power. South Asia is in the top priority of Chinese foreign policy where it follows a policy similar to that of former US President Clinton’s regime: “Policy of Engagement and Enlargement”. China has been trying to make stable and deepening relations with the small South Asian countries in the neighbourhood of India: Nepal, Myanmar, Bangladesh and Sri Lanka. Its primary focus though involves economic transactions but it also purports to increase its strategic influence over the region. Into the bargain, China has uneasy political relations with India as the country faces a contested border, while it enjoys an enduring friendship with Pakistan which it considers a trusted ally. India assesses its security position in the light of China’s strength, while Pakistan defines its security concerns against India.24 Besides, militarisation of the Indian Ocean also determines South Asian geopolitical dynamics. The strategic importance of the Indian Ocean is increasing for many reasons viz. its role in connecting the oil-rich Persian Gulf with

21 Kanti Bajpai, “Managing Conflict in South Asia”, in Paul Diehl and Joseph Lepgold (eds.), Regional Conflict Management, Lanham: Rowman & Littlefield, 2003, p. 231.22 Melanie Hanif, op. cit., p. 19. 23 Ron Chepesiuk, “Renewed US Interest in South Asia: Impact on Bangladesh”, The Daily Star, 15th Anniversary Special, 19 February 2006. 24 Harun ur Rashid op. cit.

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growing energy markets in East Asia. Indian Ocean has also transformed South Asia into a bridge between Washington’s European-Atlantic strategy and Asia-Pacific strategy. The United States began to contemplate the need for a new European-Asian strategy to deal with potential threats stemming from the uncertain futures of both Russia and China. India is playing a key role in this new strategy.25

A crucial change in the security-dynamics of South Asia lies in the redefinition of South Asian boundary: the inclusion of Afghanistan into the South Asian Association for Regional Cooperation (SAARC) in 2007. Afghanistan, situated at the axis of South Asia, Central Asia and the Middle East, bears enormous geo-strategic significance as well as security externalities for the neighbouring countries. While historically Afghanistan was considered excluded from what naturally constituted South Asia by the British colonial rule due to its failure to gain control over the territory west of the Indus26, the process of linking Afghanistan with South Asia started with US involvement in Afghanistan during Soviet invasion of the country in 1989. Using Pakistan as sanctuary for US clandestine support for Afghan Mujahideen against Soviet Union, it linked the security externalities of Afghanistan with Indo-Pak conflict postures. More importantly, US war on terror after the 9/11 terrorist attack did much about the change than the mere inclusion of Afghanistan. The US invasion of Afghanistan in 2001 served its objective not only to destroy Al-Qaeda or to overthrow the Taliban regime from power, but also to establish US security and strategic centre in the heart of middle-southern Asia. It has included both India (using carrot of regional leadership) and Pakistan (using stick of invasion) in the anti-terrorist campaign and thereby in the effort to contain any influence either by China or Russia in the region. Regional balance of power in South Asia has become extensively linked with the Afghan dynamics in the post-Taliban period.

3. India’s Afghanistan Policy

India’s Afghan policy has a long tradition starting from the colonial era. Historically, India enjoyed friendly relations with Afghanistan throughout much of the reign of King Zahir Shah (1933-1973), except a short interlude during the 1965 Indo-Pakistani conflict.27 This excellent phase of relations continued even during the communist regime that had overthrown the King. India was in good condition in Afghanistan as well throughout the period of Soviet invasion of the country.28 It was the fall of the puppet regime of Mohammed Najibullah after the withdrawal of

25 See Zhang Guihong, U.S. Security Policy toward South Asia after September 11th and its Implications for China: A Chinese Perspective, Hangzhu: Zhejiang University, 2003. 26 Stephen P. Cohen, “Geostrategic Factors in India-Pakistan Relations”, Asian Affairs, Vol. 10, No. 3, 1983, pp. 24-31. 27 Sumit Ganguly, “India’s Role in Afghanistan”, CIDOB Policy Research Project, Norwegian Peacebuilding Resource Center, Norwegian Ministry of Foreign Affairs, January 2012, p. 2, available at www.cidob.org/es/content/download/.../OK_SUMIT+GANGULY.pdf, accessed on 24 September 2013. 28 Nicholas Howenstein and Sumit Ganguly. “Pakistan and Afghanistan: Domestic Pressures and Regional Threats: India-Pakistan Rivalry in Afghanistan”, Journal of International Affairs, Vol. 63, No. 1, 2009, pp. 127–140.

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the USSR that undermined Indo-Afghan relations significantly. Subsequently, India had limited influence in both the Burhanuddin Rabbani (1992-1996) regime and the Taliban rule (1996-2001). India did not recognise the Taliban government because of its tilt towards Pakistan.29 During the Taliban period, Indo-Afghan relations were badly affected by the Taliban-Pakistan close rapport and India forged a functional relationship with the Tajik-dominated Northern Alliance that opposed the Taliban. India’s relations with the Taliban were dominated by the lack of trust and confidence on each other. In the wake of US War on Terror, though United States exclusively relied on Pakistan’s Musharraf regime to pursue its strategic goals in Afghanistan, India maintained strong relations with the Northern Alliance that offered the US with logistical support for military action against the Taliban regime.30 India finally got its chance to re-establish its former ties with Afghanistan after the toppling of the Taliban regime and the establishment of Karzai government.

Indian policy in Afghanistan is, however, a manifestation of Indian major foreign policy doctrines – Indira Doctrine, Rajiv Doctrine and Gujral Doctrine – all of which advocated an expanded Indian role in the neighbourhood, checking the influence of any outside power in its extra-territorial sphere of influence.31 India considers its influence and stronghold in Afghanistan as inextricably linked with its national interest. The country’s involvement in Afghanistan has been multi-pronged and involves issues ranging from past memories to present shared interests. Indian Prime Minister, Jawaharlal Nehru once remarked about Indian relations with Afghanistan:

Ever since India’s independence, we have grown closer to each other, for a variety of reasons. The long memory of our past was there, and the moment it was possible to renew them, we renewed them. And then came mutual interest, (our common hostility towards Pakistan) which is a powerful factor.32

With regard to Indian policy in the post-Taliban Afghanistan, Harsh V. Pant distinguished three different phases of engagement. In the first phase, what he calls soft engagement, India started to engage multidimensionally after the installation of an interim authority in Afghanistan in 2001. It upgraded its Liaison Office in Kabul to a full-fledged embassy in 2002 and started to participate in the Bonn Conference to play instrumental role in the post-Taliban Afghan governance. During this period, India pursued “a policy of high-level engagement with Afghanistan through extensive and wide-ranging humanitarian, financial, and project assistance, as well as participation in international efforts aimed at political reconciliation and economic rebuilding of the country.”33

29 Fahmida Ashraf, “India-Afghanistan Relations: Post-9/11”, Strategic Studies, Vol. 27, No. 2, 2007, p. 6. 30 Madhav Nalapat, “Why the US Fumbled Afghanistan”, The Diplomat, 09 October 2011, available at http://the-diplomat.com/2011/10/09/why-the-us-fumbled-afghanistan/, accessed on 30 June 2013. 31 Qadar Bakhsh Baloch and Abdul Hafeez Khan Niazi, op. cit., p. 16. 32 Ibid., p. 17. 33 Harsh V. Pant, SSI Monograph, 2012, op. cit., p. 6.

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In the second phase in which India was marginalised in Afghanistan, New Delhi had little or no strategic space to maneuver, experiencing rapid deterioration in its security environment in the country. During this period, “the balance of power shifted in favour of Pakistan and its proxies, Indian interests, including personnel and projects, emerged as viable targets.”34 On the other hand, Pakistan succeeded in convincing the West that the best way towards reconciliation between Kabul and the Taliban is by means of negotiation and settlement. The United States publicly endorsed the idea of negotiations with the Taliban, while it actively discouraged India from assuming a higher profile in Afghanistan for fear of offending Pakistan.35 Though India continued to help the Afghan government in its reconstruction efforts, but this increasingly became harder to sustain. One time India was considering a stronger military presence as a security measure to support its humanitarian endeavours in Afghanistan.

In the final phase, India fought back to reclaim its previous stronghold in the Afghan matters and undertook several significant policy measures including decisions to initiate trainings for Afghan forces, to manage greater policy coordination with states like Russia and Iran and to establish linkages with all sections of Afghan society.36 This phase started with the deteriorating relations between the USA and Pakistan after the killing of Osama Bin Laden on 02 May 2011. During this phase, India signed a strategic partnership agreement with Afghanistan, announced a new commitment of US$ 500 million for the country’s development37 and agreed to enhance political cooperation as well as institutionalise regular bilateral political and foreign office consultations. New Delhi strengthened its partnership with Kabul, recognising the immediacy of US plan for a pull-out from Afghanistan.

India’s policy in Afghanistan is based on several interconnected components such as aid and development assistance, civilian and military capability building, inclusive and political settlement, connectivity and infrastructure development and strategic partnership. India is the fifth largest aid donor to Afghanistan, total amount being around US$ 2 billion.38 Much of the Indian aid was provided in the form of developmental assistance in the areas of education, health and infrastructure. India has made substantial contribution in the training of Afghan diplomats, judges, police officers, doctors; developing Afghanistan’s civil aviation and transport sectors; construction of roads, dams, hospitals, educational institutions; and in establishing telecom and power transmission lines. Some notable assistance include Afghanistan’s new parliament building, 218-kilometre long highway linking the town of Zaranj near the Iranian border, a power transmission line to Kabul, a

34 Ibid., p.11.35 “US Seeks to Balance India’s Afghanistan Stake”, Reuters, 01 June 2010, published in the Express Tribune, available at http://tribune.com.pk/story/17662/us-seeks-to-balance-indias-afghanistan-stake/, accessed on 05 October 2013. 36 Amit Baruah, “Karzai Keen on Indian Expertise,” The Hindu, 22 January 2002, available at http://hindu.com/2002/01/22/stories/2002012201240900.htm, accessed on 05 October 2013. 37 Harsh V. Pant, “India’s ‘Af-Pak’ Conundrum: South Asia in Flux”, Orbis, Vol. 56, No. 1, 2012, pp. 105-117.38 Ibid.

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hydroelectric project at the Salma Dam and other various forms of humanitarian assistance to Afghanistan.39 India is providing 500 annual scholarships to Afghan students under the supervision of the Indian Council of Cultural Relations (ICCR).40

India is employing money and personnel to bolster Afghanistan’s security capabilities in order to discourage and prevent the rise of militancy in general and the Taliban in particular. India is also concerned about the safety and security of its aid workers and investment in Afghanistan. The country has provided US$ 8 million worth of high-altitude warfare equipment to Afghanistan, shared high-ranking military advisers and helicopter technicians from its clandestine foreign intelligence and counter-espionage organisations.41 India is also heavily investing in physical connectivity and transport infrastructure building in Afghanistan to facilitate its trade with Afghanistan via Iran. It is constructing the Zaranj-Delaram road which will provide Afghanistan’s access to the Iranian coast. This road will be vital to facilitate trade not only with Afghanistan but also with the Gulf region and Central Asia. Besides, India is building an US$ 80 million road, linking Afghanistan’s Kandahar province with the Iranian port at Chabahar.42

Another big priority for India is an inclusive and political settlement for the Afghan problem. For India, military options are less effective, though a handful of members of India’s strategic community are enthusiastic about a future Indian military role in Afghanistan. India’s disappointment with the deployment of the Indian Peace Keeping Force (IPKF) in Sri Lanka in the 1980s still remains vivid within the policymaking circles in New Delhi. 43 With the changing condition in Afghanistan and in the wake of US withdrawal, India has shifted its thinking from a military to political solution of the Afghan war. It has expressed its support for a “national unity” government based on reconciliation and politically inclusive order.44 Vishal Chandra suggested a need for Indian balancing between different ethnic groups in Afghanistan:

The fact that India does not have borders contiguous with Afghanistan puts India into a dependency mode. India needs to build bridges with all the major ethnic groups in Afghanistan. India should balance its relationship with both the Pashtuns and the minority ethnic groups. The idea of engaging anti-

39 Sumit Ganguly, 2012, op. cit., p. 4. 40 C. Christine Fair, “Under the Shrinking U.S. Security Umbrella: India’s End Game in Afghanistan,” The Washington Quarterly, Vol. 34, No. 2, 2011, pp.179-192.41 Shashank Joshi, “India’s Af-Pak Strategy”, RUSI Journal, Vol. 155, No.1, 2010, pp. 20-29.42 Marvin G. Weinbaum, “Afghanistan and Its Neighbors: An Ever Dangerous Neighborhood”, USIP Special Report 162, Washington DC: United States Institute of Peace, June 2006, p. 16, available at http://www.usip.org/sites/default/files/resources/sr162.pdf, accessed on 27 September 2013. 43 Sumit Ganguly, 2012, op. cit., p. 8. 44 Pankaj Singh, “Indian Involvement in Afghanistan”, From the Selected Works of Pankaj Singh, June 2010, JASON Magazine, No. 2, 2010, pp. 14-16, available at http://works.bepress.com/pankaj_singh/6, accessed on 26 September 2013.

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India politico-military formations in Afghanistan should not be considered as untenable in the changed and changing scenario in Afghanistan.45

India’s Afghan policy reaches to a new height with the signing of Indo-Afghan strategic partnership agreement in October 2011. Under this agreement, India commits to training, equipping and capacity building of the Afghan security forces.46 Besides, both agreed to establish a strategic dialogue between their respective national security advisers “to provide a framework for cooperation in the area of national security.” This opens up a new chapter in bilateral relations in that it allows both countries to discuss both regional and global strategic issues.47

Above all, India has devised its Afghan policy in a way so that it can become the most vital player in the ‘endgame’ in Afghanistan. But, post-2014 Afghan policy of India would face two fundamental limitations: (1) fluidity of Afghan condition leading Indian consideration of multiple options including military and (2) the US escaping posture in the post-withdrawal Afghanistan. Obama’s “surge and withdraw” strategy indicates that the administration is burdened with, and consequently, is focused on extricating itself from the situation, while ensuring that a stable form of government apparatus remains functional in Afghanistan. But it would be unrealistic to expect the Afghanistan National Army (ANA) to pick up from where the United States left off, defend the country and deter the Taliban from expanding its influence. The uncertain landscape of post-2014 Afghanistan makes India wary about the security of its men and material in Afghanistan as well as its strategic objectives. Indian Prime Minister Manmohan Singh on 04 October 2011 reiterated India’s commitment to assume the responsibility for Afghan governance and security after the withdrawal of international forces in 2014.48

4. Indian Objectives in Contemporary Afghanistan

Indian objectives in post-Taliban Afghanistan are complicated and multi-faceted. Indian concerns range from political to security to economic issues. One of the complicating factors is that different analyses suggest differing priorities for India; some focus more on political and strategic aspects, while others stress on economic and security imperatives. However, an analysis that accommodates varying claims over Indian objectives in Afghanistan recognising their underlying

45 Vishal Chandra, “The Afghan Elections and the Bonn Process: Assessing India’s Options”, Strategic Analysis, Vol. 29, No. 4, 2005, pp. 723-731, available at http://www.idsa.in/strategicanalysis/The Afghan Elections and the Bonn Process Assessing Indias Options_vchandra_1005, accessed on 24 September 2013. 46 Harsh V. Pant, SSI Monograph, 2012 op. cit., p. 17. 47 Bhashyam Kasturi, “India’s Role in Afghanistan”, State of Pakistan Blog, 20 February 2012, available at http://www.stateofpakistan.org/indias-role-in-afghanistan, accessed on 10 October 2013. 48Arvind Thakur, “Beyond 2014: India’s Security Concerns and Indo-U.S. Strategic Partnership in Afghanistan”, manuscript submitted as a fulfillment of the requirements of the Master of Strategic Studies Degree, United States Army War College, 2012, p. 1, available at http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA562576, accessed on 12 October 2013.

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merits and contextual relevance should discuss four issues of concern for India in post-Taliban Afghanistan.

Firstly, favourable and stable domestic power structure in Afghanistan: India considers peaceful and stable Afghanistan vital for its long term strategic interests both regionally and globally. One crucial interest for India is to offset an inimical rise of Afghanistan. Afghanistan, located in a geopolitically vital location, has enormous potential to rise as a big regional power if the internal stability persists for a long period. A hostile powerful Afghanistan would exert further pressure on India’s regional ambition by creating a possibility of two front balancing – Pakistan and Afghanistan – for India. For that end, India seeks to ensure that the regime in Kabul is not fundamentally hostile towards India by undertaking four tactical objectives: (a) to prevent the restoration of any form of a resurgent Taliban regime, (b) to thwart the rise of Islamist militancy, (c) to build capacity of Afghan security force capable of preventing Taliban rise and (d) to limit Pakistan’s influence over any emergent regime.49

Besides, for internal stability in Afghanistan, India also supports inclusive and coordinated approach to both domestic power distribution and regional arrangement to facilitate a peaceful post-war transition in Afghanistan. India is promoting a plural government in Afghanistan representing all the ethnic groups.50 It is also interested to engage regional countries in finding a solution to Afghanistan and to support Afghan government’s multilateral political and economic initiatives. India in recent years has earned enormous goodwill and is not perceived by the Afghan people and its political elite as a country with hegemonic ambitions.51 This has set a positive ground for India to play a vital role in the internal affairs of Afghanistan.

Secondly, India’s regional ambition in South Asia and its strategic depth vis-à-vis China: Indian objectives in Afghanistan are propelled by its growing regional and global ambitions in which it is redefining its foreign policy priorities in the neighbourhood with intent to reshape regional strategic environment according to its own interest.52 Christine Fair concludes that “India’s interests in Afghanistan can be seen as merely one element within India’s larger desire to be able to project its interests well beyond South Asia.”53 To realise Indian dream of a big power status, it vies

49 Bhashyam Kasturi, op. cit. 50 Smruti S. Pattanaik, “Afghanistan and Its Neighbourhood: In Search of a Stable Future”, PRIO Paper, Oslo: Peace Research Institute of Oslo (PRIO), 2013, p. 37, available at http://file.prio.no/publication_files/Prio/Pattanaik,%20S%20(2013)%20Afghanistan%20and%20Its%20Neighbourhood,%20PRIO%20Paper.pdf, accessed on 15 September 2013. 51 Ibid., p. 36. 52 Harsh V. Pant, “India’s Challenge in Afghanistan: With Power Comes Responsibility”, Contemporary Readings in Law and Justice, Vol. 2, No. 1, 2010, pp. 36-67.53 C. Christine Fair, “India in Afghanistan and Beyond: Opportunities and Constraints”, A Century Foundation Report, New York: The Century Foundation, 2010, p. 6, available at http://tcf.org/assets/downloads/IndiainAfghanistan.pdf, accessed on 15 September 2013.

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for power and market in South Asia as well as other neighbouring regions. Given the persistent hostility in two fronts both with China and Pakistan, Afghanistan can play a vital role in India’s extra-territorial objectives and in maintaining favourable regional power setting for India. Harsh V. Pant considers Indian involvement in Afghanistan as testing ground to assess its capacity to emerge as a great power based on its strategic capability to handle the regional instability.54A successful accomplishment in Afghanistan would give credence to India’s credibility and legitimacy by the international community as regional balancer in South Asia. Thus, Afghanistan lies in the Indian overall big power strategy that divides the world into three homocentric circles:

In the first, which encompasses the immediate neighborhood, India has sought primacy and a veto over the actions of outside powers. In the second, which encompasses the so-called extended neighborhood stretching across Asia and the Indian Ocean littoral, India has sought to balance the influence of other powers and prevent them from undercutting its interests. In the third, which includes the entire global stage, India has tried to take its place as one of the great powers, a key player in international peace and security.55

Besides, India’s influence in Afghanistan cannot be considered in isolation from its opposition to China and Pakistan, just as China’s influence in Afghanistan cannot be considered in isolation from its influence in Pakistan.56 China, though initially reluctant to explore its interest in Afghanistan, has shown substantial priority to post-war development in Afghanistan. Its growing interest is manifested with Beijing’s giant US$ 3.5 billion investment in Afghanistan, the far largest foreign direct investment in the country’s history.57 China which shares boundary with Afghanistan, like India, considers Afghanistan as a source of strategic competition in South and Central Asia and a key factor for its energy security. Indian stronghold in Afghanistan would reduce China’s impunity in the greater South-West Asian energy and geo-strategic dynamics. India’s posture as counterweight to China complements the US objectives of preventing Chinese influence over the Central Asian republics; the US has in turn encouraged Indian trade, investment and assistance to the Central Asian states and Afghanistan.58

Thirdly, the Pakistan factor and India’s counterbalancing of Pakistan’s influence in Afghanistan: Historically, India’s drive to cultivate strong partnership with Afghanistan has been fuelled by Indo-Pak socio-cultural and political conflicts starting from traumatic partition experiences in 1947. While Pakistan has always

54 Harsh V. Pant, 2010, op. cit., p. iii.55 C. Raja Mohan, “India and the Balance of Power,” Foreign Affairs, Vol. 85, No. 4, 2006, pp. 17-34.56 Kevin Govern, “The ‘Great Game’ and the US-Afghan Strategic Partnership Agreement”, Jurist Forum, 23 May 2012, available at http://jurist.org/forum/2012/05/kevin-govern-us-afghan-spa.php, accessed on 10 October 2013. 57 Nicklas Norling, “The Emerging China-Afghanistan Relationship”, Central Asia-Caucasus Institute Analyst, 14 May 2008, available at http://www.cacianalyst.org/?q=node/4858, accessed on 13 October 2013. 58 Qadar Bakhsh Baloch and Abdul Hafeez Khan Niazi, op. cit., p. 19.

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been unsuccessful in establishing a strong foothold except during the Taliban period, India’s success to maintain a favourable regime in Kabul has been consistent till the Soviet defeat by the US supported mujahedeen. After the fall of the Taliban regime, India is given another opportunity to link its present with the past. Pakistan factor gets emphasis in the similar direction, as India is interested to monitor and cultivate assets to influence activities in Pakistan by retaining Afghanistan as a friendly state.59 India seeks to offset Pakistan’s unique advantages in maneuvering with the US to form alliance in the War on Terror by effectively marginalising India’s role in Afghanistan.60 Indian support to current Afghan regime is seen as counterbalancing Pakistan’s help to Kashmiris and other insurgencies in India, given the Indian support to Pakistan’s Afghan adversaries has potential to affect the security of the federally administered areas in Pakistan. Besides, “Indian solid positioning in Afghanistan politics would enable India to become a formidable part of Central Asian oil and gas distribution network, thereby, acquiring a strong foothold in the region and marginalizing Pakistan’s unique position in this regard.”61

Finally, energy security and opportunities in Central Asia: Like almost every other major power, India wants a slice of the pie, since anyone who controls Afghanistan controls the land routes between the Indian subcontinent, Iran and resource rich Central Asia.62 Afghanistan is of fundamental geo-strategic importance to India due to its location as a land bridge not only to the Central Asian Republics but also to and from Caucasus and further on to Russia. Afghanistan can serve India to reap the opportunities of rich resources of energy (oil and gas), enormous mineral resources and a large consumer market of the Central Asian countries. Particularly, the natural gas from Turkmenistan and other energy pipeline routes between Central Asia and the subcontinent makes Afghanistan a ‘particularly critical country’ for India to meet its growing energy needs.63 India plans to secure an easy access to the energy rich Central Asian states, through Afghanistan as an overland conduit, to the Iranian coast. Through such arrangements, India can compensate its strategic disadvantage concerning Pakistan as a bridging country in both the proposals of Iran-Afghanistan-Pakistan (IPI) pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.64 India’s goals reflect the desire to control overland routes to maritime ports for Central Asian resources by denying both China and Pakistan the ability to threaten Indian assets in the region.65

59 C. Christine Fair, 2010, op. cit., p.8. 60 D. Choudhury, “India-Afghanistan: Strategic Stakes”, Seaford House Paper, Royal College of Defence Studies, July 2011, p. 18, available at http://www.da.mod.uk/colleges/rcds/publications/seaford-house-papers/2011-seaford-house-papers/shp11choudhury.pdf., accessed on 15 September 2013.61 Qadar Bakhsh Baloch and Abdul Hafeez Khan Niazi, op. cit., p. 19. 62 K. N. Tennyson, “India-Afghanistan Relations during Soviet Intervention in Afghanistan”, Air Power Journal, Vol. 1, No. 5, 2010, pp. 153-183. 63 For a detail analysis on the Afghanistan geopolitical significance as a potential hub of energy pipeline see Robert D. Kaplan, Monsoon: The Indian Ocean and the Future of American Power, New York: Random House, 2010. 64 D. Choudhury, op. cit., p. 14. 65 Nicholas Howenstein and Sumit Ganguly, op.cit., pp. 127-140.

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5. Ramifications for Regional Balance of Power

Hanif investigated the implications of India’s involvement in Afghanistan from a conflict management perspective using two approaches: Regional Security Complexes (RSC) and an associated regional security management system called regional hegemony. Hanif, using the analytical underpinnings of Buzan and Waever,66 defined RSC based on the notion of security externalities. These externalities are measured in terms of costs and benefits that accrue not only to the actors that cause them, but also imperil the safety of neighbouring states, that continually affect a set of inter-related states in a given geographical area.67 On the other hand, the concept of regional hegemony, derived from hegemonic stability theory, argues that power asymmetry (the structure of power distribution) leads to peace and stability when power is exercised in a benign manner.68 Her arguments based on the study findings suggest that the distribution of power and the resultant regional order in South Asia have been influenced by the inclusion of Afghanistan in the South Asian regional security order. India’s active role here can serve as a pacifying factor for security externalities emanating from Afghanistan. On the regional hegemony viewpoint, she considered India as a soft regional hegemon capable of playing security manager’s role. In that process, she argued that India’s Afghan policy would favour the regional power distribution in India’s favour enabling India to reach a unipolar hegemonic position necessary for South Asian peace and stability.

One of the substantive implications for South Asian regional stability is the shifting conflict theatre from an Indo-Pak to an Indo-Af-Pak centric dynamics. In South Asian regional setting where Kashmir issue has been dictating the terms of conflict between India and Pakistan for last many decades, now any developments in Afghanistan front would create destabilising condition for the traditional regional enemies. The outcome of a strong partnership between India and Afghanistan may turn into a further antagonistic direction between India and Pakistan, leaving less room for resolving disputed matters and causing more hostilities in any conflicting bilateral issues. Pakistan has a constant fear concerning Indian encirclement and has been protesting stridently about India’s expanding presence in Afghanistan.69 Its reactions to the Indian long term engagement in Afghanistan are fuelled by its fear of losing “strategic depth” vis-à-vis India. One of the key concerns for Pakistan is the likelihood of Indian involvement in fostering an insurgency inside Pakistan’s Baluchistan province where the Chinese-built port Gwadar stands. Pakistan considers this port as central to a new international route for sea traffic

66 Regional Security Complex theory of Buzan and Waever views that security is clustered in geographically shaped regions. Intra-regional security interdependence creates regional security complexes where regional actors play the vital role. See Barry Buzan and Ole Waever, Regions and Powers: The Structure of International Security, Cambridge: Cambridge University Press, 2002. 67 Melanie Hanif, op. cit., p. 14. 68 Ibid., p. 15. 69 C. Christine Fair, 2010, op. cit., p. 4.

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that could serve China, Afghanistan and Central Asia.70 “Islamabad wants a ‘friendly’ government in Afghanistan post-2014; one which is stable and does not threaten its national interests. But more importantly, it would not want to see Afghanistan closely allied with its arch-enemy India.”71

Pakistan, therefore, would consider limiting India’s presence and influence in a post-US and post-ISAF Afghanistan in order to prevent India from obtaining land access to the resource-rich states of Central Asia, gathering intelligence on Pakistan’s western reaches and would also limit India’s ability to exert any possible military pressure alongside a future Afghan regime whose interests might be aligned with those of India.72 However, Indo-Af-Pak dynamics would depend on how inclusively India can maneuver Pakistan and effectively convince the country about its security apprehensions. Hegemonic tendencies and the use of Afghanistan by India to cultivate its anti-Pakistani assets would bring destabilising situation for both the countries, since Pakistan cannot afford to have another India on its western border, nor can it allow a War against Terror to spread and spill over to Pakistan.73 Sumit Ganguly’s opinion qualifies reasonable doubt for a collaborative position by India and Pakistan in the post-2014 Afghanistan:

Whether or not India, Pakistan and Afghanistan can actually work in concert to ensure Afghanistan’s stability and security in the aftermath of the US and the ISAF’s withdrawal, of course, remains the most critical question confronting policymakers in many capitals well beyond the subcontinent. Given the depth of distrust and hostility that has long characterized the Indo-Pakistani relationship, the prospect of any imminent diplomatic breakthrough that might enable the two sides to reach a modus vivendi on their respective positions in Afghanistan seems rather doubtful.74

However, the successful establishment of an Indian stronghold in Afghanistan and the marginalisation of Pakistan’s assets in the country would give India a leverage to play more powerfully both in Afghanistan’s matters as well as other regional issues. There are two possible scenarios with regard to Indian ‘soft hegemony’ in South Asia: (1) India’s emergence as the sole dominant regional power undermining Pakistan’s assets and influence in Afghanistan and Chinese influence in the region, or (2) a cooperative India as regional leader following a policy of engagement with the US, China and Pakistan in devising a peaceful transition in Afghanistan in post-2014 period. Either way, Afghan policy of India has potential to provide the country with its long aspired position as an Asian power moving towards great power status. A

70 Marvin G. Weinbaum, op. cit., p. 16.71 Claude Rakisits, “The End Game in Afghanistan: Pakistan’s Critical Role”, Associate Paper, Future Directions International, 21 May 2012, p. 7, available at http://www.futuredirections.org.au/publications/associate-papers/529-the-end-game-in-afghanistan-pakistans-critical-role.html, accessed on 19 October 2013.72 Sumit Ganguly, 2012, op. cit., p. 5.73 Qadar Bakhsh Baloch and Abdul Hafeez Khan Niazi, op. cit., p. 29. 74 Sumit Ganguly, 2012, op. cit., p. 6.

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favourable Afghan government would facilitate India to overcome India’s inability to dominate regional affairs proportionately to its material superiority.

This furthering of asymmetric distribution of regional power could lead to a new polarisation granting India a unilateral position in the region. To support this hypothesis, four factors can be attributed to relative growth of Indian power: Firstly, it will enhance India’s credibility as a big Asian power to the extra-regional powers including Russia and the USA. India will enjoy increased strategic appeal from both the USA and Russia, while its confidence to compete with China in the greater Asian and Indian Ocean frontier will be augmented. Secondly, India will exert more legitimacy and incentives to deal with the regional issues particularly those involving smaller and developing regional countries. Thus, smaller South Asian states will have lowering tendency to form joint balancing or “bandwagoning” among them, either because of the lack of security compulsions in one hand, or mounting pressure from a regional hegemon on the other. Thirdly, due to loss of strategic depth vis-à-vis India, bipolar nuclear constellation in the region will be less functional in effectively deterring India from playing the role of regional policeman.75 And finally, India’s relative disadvantages emanating from the lack of physical connectivity with the resource rich Central Asia and Middle East will be reduced substantively. India will be able to marginalise Pakistan’s unique position in this regard and to satiate its growing energy needs from the Central Asian gas and oil supplies.

Another fundamental development in the wake of Afghanistan-India partnership that counts on Indian favour is the shifting alliance formation from US-Pakistan to US-India. Pakistan’s ties with the US have deteriorated sharply since May 2011. Obama administration decided to suspend a portion of US aid to the Pakistani military. It has also shifted its Afghan baggage from the shoulder of Pakistan and is backing a more robust Indian involvement in Afghanistan, signalling a long-term commitment to Afghanistan’s future. “Now Washington is making it clear that it views Pakistan as part of the problem and India as part of the solution.”76 The US and India announced regular trilateral consultations with Afghanistan as part of the third US-India Strategic Dialogue in June 2012.77 In the wake of troops’ withdrawal in 2014, Washington is showing more inclination towards greater Indian involvement in shaping Afghanistan’s future. Washington-Kabul strategic partnership, on the one hand, and New Delhi-Washington partnership on the other, are likely to provide India with crucial space for diplomatic maneuvering so as to regain lost ground and expand its footprint in the neighbouring state.

75 Bhashyam Kasturi, op. cit.76 Harsh V. Pant, SSI Monograph, 2012, op. cit., p. 38. 77 Chidanand Rajghatta, “America persuades India to expand Afghan footprint,” The Times of India, 14 June 2012, available at http://articles.timesofindia.indiatimes.com/2012-06-14/us/32234576_1_afghanistan-and-pakistan-afghan-national-army-afghan-military-personnel, accessed on 12 October 2013.

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India-Afghanistan partnership will also complicate China’s position in South Asian regional power balance. In an evolving Asian economic and security architecture, most Asian countries would be looking towards China or India for future economic and security alignments.78 India has been shifting its policy from their decades-long Pakistan focus to a China centric security and regional posture. India increased its defence budget in 2012-2013 fiscal year stating the changing realities and the necessity to prepare against Chinese growing capabilities.79 As India has exposed its confidence in terms of its military capabilities vis-à-vis Pakistan, Delhi is increasingly able to more substantively address other regional security issues beyond the traditional concerns about its rival to the west. India is now preparing for “a multi-front confrontation along both the disputed India-Pakistan ‘Line of Control’ (LOC) and sectors of the disputed India-China ‘Line of Actual Control’ (LOAC) and expanding India’s naval presence in the Indian Ocean Realm”.80 US willingness to provide India greater latitude within Afghanistan may also stem from concerns about China’s attempts to penetrate the country in the quest for influence and natural resources.81 The US is less likely to keep its troops in Afghanistan for longer term and therefore, it will take resort to India to encounter Chinese attempt to penetrate Afghanistan and South-Central Asian region. India’s growing future role and alignments in Central Asia will be determined by the actions of the US and China and their military involvement with Pakistan.

6. Conclusion

Historically, Afghanistan stands in a difficult neighbourhood. The security dynamics of the country has undergone complicated transformation mostly shaped by the interests and role of external forces. Much of the political instability and misery of its people can be traced to external powers seeking to realise their own strategic, ideological, and economic interests in the country.82 A new episode of similar kind has been staged since 2001 with the US invasion of the country, where India gets its long aspired opportunity to reclaim its influence in the country. India’s contemporary role is entangled with its all-out effort to transform a reactive India’s Afghan policy of responding to a strategic environment shaped by other actors in the region into proactive policy-engineering intended to reshape the strategic landscape centering Afghanistan. As the US-led NATO forces prepare to leave Afghanistan in 2014, India stands at a crossroad as it remains keen to preserve its interests in Afghanistan. For Afghanistan, it is both a security question as well as a partnership dilemma. While 78 Gulshan Sachdeva, “India’s Attitude towards China’s Growing Influence in Central Asia”, China and Eurasia Forum Quarterly, Vol. 4, No. 3, 2006, pp. 23-34.79 K. Alan Kronstadt and Sonia Pinto, “U.S.-India Security Relations: Strategic Issues”, Congressional Research Service, 24 January 2013, p. 8, available at http://www.fas.org/sgp/crs/row/R42948.pdf, accessed on 12 October 2013. 80 Ibid. 81 Sumit Ganguly, 2012, op. cit., p. 7. 82 Marvin G. Weinbaum, op. cit., p. 5.

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the country’s security dynamics is inextricably linked with Pakistan due to Pashtun connection and Pakistan’s long established influence within the domestic armed factions, the Karzai government’s economic and strategic objectives have long-term convergence with the Indian interest in the region. In the wake of US withdrawal from Afghanistan, Afghan position has already tilted towards India particularly after the signing of strategic partnership agreement in 2012.

In South Asia, Indo-Afghan partnership has been undergoing a dynamic transition creating a more complicated scenario than a mere deepening of bilateral relations between the two countries. Indian extensive aid, reconstruction and capacity building activities inside Afghanistan, coupled with US shifting of dependence from Pakistan to India to deal with Afghan matters, allowed India to play more active role in the post-war transition of the country. There has been a broader maturing of the US-India defense ties. While this could be a big factor to rebalance the traditional regional order, a bipolar distribution marked by Indo-Pak nuclear constellation with relative stability, a counter-balancing on the part of Pakistan and other small states along with shifting alignment of interests of the extra-regional powers notably China with countries likely to part outside the Indian game plan could bring an unstable transition period in the region. The argument advocated by the Indian protagonists that India’s vigorous role can serve as a pacifying factor for security externalities emanating from Afghanistan is reduced to an optimistic projection that could possibly be obstructed by the fact of how Pakistan responds to the emerging US-Indo-Afghan partnership in its backyard. Pakistan can only accept an India-centered order if its own security vis-à-vis neighbours, external powers, and most importantly India itself is granted.83 Otherwise, the outcome of a strong partnership between India and Afghanistan might turn into a further antagonistic direction between India and Pakistan, leaving less room for resolving disputed matters and causing more hostilities in any shared but conflicting bilateral issues.

Looking at the regional security complexes from an extra-regional standpoint suggests that Chinese future posture in Afghanistan and its neighbouring Central and South Asia would greatly influence the regional power distribution and affect any potential for an Indo-centric soft hegemony in South Asia. Indian leadership in the region is increasingly seen as a counterbalance to China in Asia and the Indian Ocean region. On the one hand, India has a keen interest in minimising the influence that potentially adversarial external powers are able to exert in the region and thus, it sees Beijing’s strengthening aid, trade and even military links with its sub-continental neighbours as a big challenge to New Delhi’s aspirations of expanding its regional influence.84 On the other hand, China has been continuing to deepen its engagement with the South Asian countries, particularly Pakistan, Sri Lanka, Afghanistan and the neighbouring Myanmar, both as an alignment of interests and its desire to dictate the emerging strategic landscape in the greater Indo-Pacific theatre. The underlying

83 Melanie Hanif, op. cit., p. 22. 84 K. Alan Kronstadt and Sonia Pinto, op. cit., p. 23.

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strategic competition between China and the US has created the broader context of the regional power distribution in South Asia. Given the cultural, religious and domestic-political divergences among India, China and the US, the three giant claimants of major position in the Asia-Pacific ‘Great Game’, it would be interesting to see the shifting alliance formation dynamics in the greater Indo-Pacific region.

However, while Afghanistan provides a unique window of opportunity for India to realise its aspiration of a powerful place in the international high table, India still lacks a clear vision to devise a set of policies and incentives that will make that future more likely than not. India’s policy to capitalise Indo-US ties to build a long term Indo-centric regional order could face considerable limitations due to US inability to address the paradoxes of its ‘War on Terror’ leaving political climate in Afghanistan more uncertain and fluid. The US earnestness in wanting to “de-hyphenate” India and Pakistan and its somewhat random cooperation with one frustrating the other85 would continue to complicate the creation of a shared policy agenda for Washington and New Delhi in South Asia. Besides, to make Afghanistan a stable entity in the post-2014 period, managing Pakistan and its fear of encirclement by both Washington and New Delhi would be crucial in the coming years. What is needed is an Indo-Pak regional arrangement independent from the extra-regional influences to device a peaceful and stable post-war transition in Afghanistan.

85 Council on Foreign Relations and Aspen Institute India, “The United States and India: A Shared Strategic Future”, Joint Study Group Report, September 2011, p. 41, available at http://www.cfr.org/content/publications/attachments/USIndia_jointstudygroup_IIGG.pdf, accessed on 18 October 2013.

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Ashequa Irshad and Marufa Akter

ROLE OF THE WORLD BANK IN COMBATING CORRUPTION IN THE RECIPIENT COUNTRIES: ACHIEVEMENTS AND CHALLENGES

Abstract

This paper discusses the anti-corruption regime of the World Bank and the processes of mainstreaming good governance and anti-corruption programmes in the core functions of the Bank. The major question that the paper answers: how effective the World Bank is in combating corruption in the context of its global aid regime. The paper describes the effectiveness as it is measured by the existing indicators of the World Bank’s performance appraisal set by the Bank and other critical secondary literatures. The sequence of the paper is: first it describes the World Bank’s approach to combating corruption and the different anti-corruption initiatives of the Bank and its institutional framework to fight corruption in the recipient countries. It then analyses the mainstreaming of anti-corruption considerations into the Bank’s operational framework. This discussion also deals with the country specific experiences of the World Bank in promoting anti-corruption and good governance measures. Finally, the paper explains the major challenges that the World Bank experiences in implementing its anti-corruption regime. Although the Bank has achieved significantly in combating corruption, the investigation through this paper reflects the fact that the Bank fails to address the political consequences of combating corruption in some cases. The Bank has failed to create a long-term political commitment among the recipient countries to fight corruption in exchange for Bank’s development assistance. The paper suggests that the Bank should focus more on protecting the integrity of its development funds and plan long-term anti-corruption policy measures, thereby utilising funds properly in reducing corruption.

1. Introduction

The World Bank1 (WB) provides large amount of loans each year to help countries to alleviate poverty and promote economic and social progress. The Bank supports specific projects as well as aids broader economic and social reform initiatives thereby enhance the development process of a country. In addition to

Ashequa Irshad is the Chair and Professor at the Department of International Relations, University of Dhaka. Her e-mail address is: [email protected]; Marufa Akter is currently Program Officer at Centre for Gender and Social Transformation (CGST), BRAC Development Institute, BRAC University. Her e-mail address is: [email protected]


1 The “World Bank” and “Bank” refer to the World Bank Group of institutions. The World Bank Group (WBG) is made up of the original “World Bank” - the International Bank for Reconstruction and Development (IBRD) - as well as the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).


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extending loans, the Bank provides advice and technical assistance to borrowing countries. The WB in 2011 managed a portfolio of development projects in 187 member countries valued at about US$ 523.6 billion.2 In 2013, the Bank provides US$ 52.6 billion in loans, grants, equity investments, and guarantees to its members as well as private businesses.3 Nevertheless, the Bank operates in a challenging environment in countries where transparency and accountability are grossly absent and officials abuse public resources for private gains. In this circumstance, the Bank often performs the dual role of providing development assistance as well as promoting good governance backed by its anti-corruption regulations.

This paper analyses the anti-corruption regime of the WB and the processes of mainstreaming governance and anti-corruption measures into the Bank’s core operations. The paper seeks to answer the question of how effective the WB is in combating corruption in the context of its global aid regime. Being “effective” is subject to interpretation. In this paper, effectiveness is measured by the existing indicators of the World Bank’s performance appraisal set by the Bank and other critical secondary literatures. The paper is arranged in three broad sections in addition to introduction and conclusion.

Section two explains the WB’s approach to combating corruption. It discusses different anti-corruption initiatives of the Bank and its institutional framework to fight corruption in the recipient countries. This section also analyses the critical issue of the reliability of the Bank’s lending strategies. Section three analyses the mainstreaming of anti-corruption considerations into the Bank’s operational framework. This section also deals with the country specific experiences of the Bank in promoting anti-corruption and good governance practices. It investigates the Bank’s policy of non-interference in domestic politics of the recipient countries in relation to its mission to prevent corruption and the abuse of Bank’s resources. This section also discusses the supply-driven nature of the anti-corruption regime. The major challenges that the WB experience in implementing its anti-corruption regime are discussed in section four of the paper. Among the challenges, this section discusses the issues: the complexity of the anti-corruption efforts in lending procedures, the WB-national government (GO)-Non-Government Organisation (NGO) nexus, reluctance of the national government in bringing top-down reforms, fighting corruption within the Bank, lack of coordination among the donors and the democratisation vis-à-vis the development debate.

As revealed in the paper, despite the importance of combating corruption in achieving sustainable development, the Bank fails to address the political consequences in undertaking this task. Regardless of strengthening the supply side in its anti-corruption prescriptions, the Bank has failed to create a long-term political commitment among the recipient countries to fight corruption in exchange for

2 See World Bank, The World Bank Annual Report 2010, Washington DC: World Bank, 2011. 3 World Bank, The World Bank Annual Report 2013, Washington DC: World Bank, 2013, p. 2.

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ROLE OF THE WORLD BANK

Bank’s development assistance. Furthermore, the Bank still struggles in building the managerial capacity of the borrowers to effectively implement its projects. However, this paper does not suggest that the Bank should abscond from its concerns about corruption. Rather, the Bank should focus more on protecting the integrity of its development funds, plan long-term anti-corruption policy and measures, thereby, utilising funds properly in reducing corruption.

2. Combating Corruption: The World Bank Approach

Prior to 1997, anti-corruption was regarded as too difficult and controversial to deal with within the context of the bank-funded projects, or as not important enough to warrant Bank’s explicit attention.4 However, significant research established links among the development initiatives taken by the Bank and the impact of corruption and mal-governance on development.5 This linkage inspired the Bank to formalise its anti-corruption campaign.

In 1997, the WB officially announced a systemic framework for addressing corruption as a development issue in the assistance it provides to countries and in its operational activities.7 The same year, WB adopted the anti-corruption strategy and in January 1999, introduced an anti-corruption action plan. Under the jurisdiction of its anti-corruption regime, the Bank requires borrowers to establish and maintain effective management controls over the project funds. The Bank exercises oversight of project implementation and reviews the eligibility of project expenditures. It further aims to bring anti-corruption reforms to the aid recipient countries through its advocacy and capacity development programmes. The Bank claims that it continuously bolsters its efforts against global corruption and since 1999 it has publicly debarred 415 firms and individuals for corruption charges.7 It has also frozen aid installments to the departments and ministries of national governments because of corruption allegations. Despite this progress, critics claim that the pacing of the Bank’s investigations can still be ponderous. Donor and NGO communities have strongly criticised the Bank for allowing corruption to continue in many countries despite its noble declarations and strategy papers. A different claim has also been made that the WB “neither has the mandate, the legitimacy, nor the capacity to

4 P. Bottelier, “Corruption and Development”, Remarks for the International Symposium on the Prevention and Control of Financial Fraud, Beijing, 19 October 1998, p. 1, available at http://www.worldbank.org/html/extdr/offrep/eap/pbsp101998.htm, accessed on 27 March 2011.5 D. Gould and J. Amaro-Reyes, “The Effects of Corruption on Administrative Performance: Illustrations from Developing Countries", World Bank Staff Working Papers No. 580, Washington DC: World Bank, 1983. The 1983 World Development Report also mentioned the link between corruption and development and necessitated the intervention of the WB. For details, World Bank, World Development Report 1983, Oxford: Oxford University Press, 1983.6 World Bank, Helping Countries Combat Corruption: the Role of the World Bank, Washington DC: The World Bank, 1997, p. 2.7 Barry Sabin, Maria Barton and Matt Cronin, Transnational Justice: The World Bank Group’s Recent Efforts to Combat Corruption, USA: Global Anti-Corruption Task Force, 2011, pp. 1-2.

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become a global arbiter on corruption.”8 Therefore, challenges remain so far as the function and success of the anti-corruption regime of the WB are concerned.

2.1 Development and Corruption Linkages: The Bank’s Conceptual Inspiration

Corruption is considered to be one of the main challenges to the efficiency and sustainability of any development effort. It hinders attaining the rule of law and weakens the institutional base in a society on which economic growth depends. Therefore, it became imperative for the Bank to consider anti-corruption as a significant policy option. Two scholarly works have influenced the Bank in defining its approach to combat corruption and integrate anti-corruption policies into its development framework. The impact of corruption on development was researched by two consultants of the WB, Susan Rose-Ackerman and Robert Klitgaard. They see corruption primarily in terms of bribery and preferred to explain the corruption-development nexus with the principal-agent model, “where an agent acts on behalf of a principal vis-à-vis a client, where all may act corruptly if the likely net benefits from doing so outweigh the likely net costs.”9 Furthermore, corruption impedes the livelihood of poor people in developing countries. It spreads poverty by denying them their rightful share of economic resources or life-saving aid. Corruption puts “basic public services beyond the reach of those who cannot afford to pay bribes. By diverting scarce resources intended for development, corruption also makes it harder to meet fundamental needs such as those for food, health and education.”10 R. Klitgaard commented, “When government agencies suffer from systematic corruption and inefficiency, most citizens lose, even though corrupt politicians, businesses and officials may gain.”11 According to Rose-Ackerman and Klitgaard, the free market is essential for combating high levels of corruption and that “corrupt incentives are the nearly inevitable consequence of all government attempts to control market forces.”12

Klitgaard proposed to link anti-corruption measures to the development agency’s main missions.13 Rose-Ackerman’s recommendations were more direct and focused in tackling corruption in the development projects of the Bank. She suggested the Bank to cancel its projects if corruption is detected, support international efforts to reduce bribery and establish universal financial management standards.14

8 European Network on Debt and Development (EURODAD), “NGO Letters to World Bank on Governance and Anti-Corruption Framework", 16 August 2006, available at http://www.eurodad.org/whatsnew/articles.aspx?id=328, accessed on 22 April 2011.9 Susan Rose-Ackerman, Corruption: A Study in Political Economy, New York: Academic Press, 1978;Robert Klitgaard, Controlling Corruption, Berkeley: University of California Press, 1988.10 GTZ, Fighting Poverty and Corruption, GTZ: Eschborn, 2004, pp. 5-74.11 R. Klitgaard, “Cleaning up and invigorating the civil service”, Public Administration and Development, Vol. 17, No. 5, 1997, pp. 487-509.12 R. Klitgaard, Controlling Corruption, op. cit., p. 24; and Rose-Ackerman, op. cit., p. 9. 13 R. Klitgaard, ibid., pp. 183–189.14 Susan Rose-Ackerman, “The Role of the World Bank in Controlling Corruption", Faculty Scholarship Series Paper No. 591,

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However, Johnston proposed that the Bank should promote democratisation that would combat corruption through constructive political competition.15 According to him, development takes place in societies where economic and political liberalisation exists with sustainable institutional frameworks and is backed by a strong anti-corruption movement. The Bank’s approach, based on Johnston’s proposal, reflects the idea of neo-liberalism.

2.2 Governance and Anti-corruption

The anti-corruption strategy adopted by the Bank in September 1997 emphasised four key areas for the Bank’s intervention. These are: (a) the Bank would make every effort to prevent fraud and corruption in the projects and programmes it finances; (b) the Bank would assist countries that ask for help in curbing corruption; (c) it would mainstream its concern for corruption directly into its country analysis strategies and lending decisions; and finally, (d) the Bank would contribute to the international effort to fight corruption.16 Therefore, anti-corruption assistance programmes of the Bank adopt a holistic approach to development prescribed by the Comprehensive Development Framework (CDF)17, also laid out by the Bank. This is also supported by the long-term commitment of the Bank in building the capacity of states to combat corruption. The CDF considers reforming structural issues that include good governance, the justice system, financial systems and social safety nets. Inspired by the CDF approach, the Bank also incorporates good governance into its mainstream activities. For example, in the Bolivian case, the Bank did advocate for the adoption of a National Integrity System (NIS) working in partnership with Transparency International (TI).18 The NIS is a brainchild of the Bank’s CDF approach that includes improving regulations, privatisation, participatory projects, decentralisation and institutional and judicial reforms.19

There are some significant changes introduced in the Bank’s Articles of Agreement to accommodate the mandates of the 1999 and 2000 Anti-corruption Action Plans. The changes stipulate that the Bank loans would only be employed for the purposes for which the loan was granted and that due attention is given to considerations of economy and efficiency without regard to political or other non-

1997, pp. 95-96, available at http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1581&context=fss_papers&sei redir=1#search=The+Role+of+the+World+Bank+in+Controlling+Corruption, accessed on 26 March 2011.15 M. Johnston, Corruption and Democracy: Threats to Development, Opportunities for Reform, Colgate University, 2000, p. 19, available at http://people.colgate.edu/mjohnston/MJ%20papers.htm, accessed on 26 March 2011.16 World Bank, Helping Countries Combat Corruption, op. cit., p. 2.17 To know more about the CDF, see, World Bank, Reforming Public Institutions and Strengthening Governance, Washington DC: WB, 2000, p. 62.18 Catherine Weaver, “The Discourse of Law and Economic Development in the World Bank”, Paper presented at the MacArthur Conference on the Changing Role of Law in Emerging Markets and New Democracies, University of Wisconsin, Madison, 24–26 March 2000, p. 19.19 Ibid.

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economic influences or considerations.20 The Articles of Agreement introduces the definitions of “corrupt practice” and “fraudulent practice.” The clauses also address the malpractice in procurement and partial loan cancellation as remedial measures. The Bank will cancel the portion of the loan allocated to a contract for goods, works or services if, at any time, it determines that corrupt or fraudulent practices were engaged in by representatives of the borrower or executing agency during the procurement or selection process or execution of that contract, unless the borrower has taken timely and appropriate action satisfactory to the Bank to remedy the situation.21

In its anti-corruption regime, the Bank can declare “a firm or a consultant ineligible, either indefinitely or for a stated period of time, to be awarded a Bank financed contract.”22 Furthermore, the Bank can “reject any proposal for award if it determines that the bidder or consultant proposed for award of the contract has engaged in corrupt or fraudulent activities in competing for the contract.”23 Finally, the Bank holds “the right to require that in all Bank-financed contracts, suppliers, contractors or consultants must permit the Bank to inspect their accounts and records related to the performance of the contract and to have them audited by auditors appointed by the Bank.”24

As part of the institutional reform, the Bank’s the then-President James Wolfensohn established the Department of Institutional Integrity (INT) and the Sanctions Committee in 1996. The Department is responsible for conducting all investigations of corrupt or unethical behaviour within the World Bank Group (WBG) and in connection with Bank-financed contracts. INT is given institutional independence to perform as an internal audit committee. It is run by a Vice President and it reports directly to the President.25 By the creation of the INT, the Bank succeeded in consolidating all its investigative work to combat corruption. The Sanctions Committee, on the other hand, is responsible for determining whether contractors, bidders, suppliers, consultants and individuals have engaged in fraudulent or corrupt practices in connection with Bank-supported projects. The committee can recommend an appropriate sanction to the President of the Bank upon the evidence that shows with reasonable sufficiency that fraud or corruption has occurred. These institutions have been very active during 2009-10. The INT vice-

20 See Article III, Section 5(b) of IBRD Articles of Agreement, available at http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20049557~menuPK:63000601~pagePK:34542~piPK:36600~theSitePK:29708,00.html, accessed on 25 March 2011.21 Ko-Yung Tung, The World Bank’s Institutional Framework for Combating Fraud and Corruption, Remarks delivered at Seminar on Monetary and Financial Law, International Monetary Fund, 08 May 2002, p. 3.22 Ibid., p. 4.23 Ibid.24 Ibid. 25 See, Website of the Department of Institutional Integrity, The World Bank, available at http://www-wds.worldbank.org/external/default/main?pagePK=64193027&piPK=64187937& theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&theSitePK=523679&entityID=000160016_20040805133244&searchMenuPK=64187283&theSitePK=523679, accessed on 29 March 2011.

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presidency has finalised 95 cases of corruption charges, filed 85 sanction notices and 71 referrals to countries for further investigation and prosecution.26

The WB provides two types of assistance to countries. These are lending and technical assistance programmes and learning programmes. Under its lending and technical assistance programmes, the Bank supports countries in a wide variety of areas. These are: “deregulation and expansion of markets, infrastructure privatisation, environmental regulation, tax reform, public expenditure reduction, civil service reform, legal and judicial reform and opening up of civil society and the independent media.”27 For example, the Bank has provided assistance for legislative reforms in China, Russia, Georgia and Indonesia; legal education in Zambia and Thailand; and has trained judges in Cambodia and Argentina.28 The learning programmes are arranged in two basic categories. First, the Bank organises training courses and workshops for government officials. Second, it conducts diagnostic and research works, such as surveys of households, government officials and business enterprises and disseminates the results to wider audiences.29 These approaches are more advocacy and awareness raising programmes. With such a multidimensional approach to its anti-corruption regime, the Bank assists the governments in exploring the pitfalls in their institutional frameworks.

3. Mainstreaming Anti-corruption into the Bank’s Operational Framework: The Achievements

Mainstreaming anti-corruption measures reflects the process of incorporating it explicitly or implicitly in all the sectoral levels of the Bank to implement its global aid regime. Mainstreaming is also necessary to secure sustainable impacts in each supported sector of development. Former President of WB, James Wolfensohn started to address the impact of corruption in every sector of the Bank’s activities. He initiated reforms of the Bank’s public sector management, popularly known as New Public Management (NPM). Through this programme, the Bank initiated fundamental reforms in the civil service and elected executives of the state to create a government that is under contract and accountable for development outcomes.30 The idea of NPM, as one of the Bank’s primary initiatives, operationalises the ideas of anti-corruption and citizen-centred governance. The major argument is that citizen empowerment in a representative political culture holds the key to enhance accountability and reduce opportunities for corruption.31

26 See the interview of Leonard McCarthy, World Bank Vice President for Integrity, posted in YouTube on 24 September 2010, available at http://www.youtube.com/watch?v=VsMmxRWXiok, accessed on 29 March 2011.27 Ko-Yung Tung, op. cit., p. 5. 28 Ibid.29 Ibid., p. 6.30 Anwar Shah, “On Getting the Giant to Kneel: Approaches to a Change in the Bureaucratic Culture”, in Anwar Shah (ed.), Fiscal Management, Washington DC: World Bank, 2005, pp. 211–229. 31 Matthew Andrews and Anwar Shah, “Citizen-Centered Governance: A New Approach to Public Sector Reform”, in Anwar Shah (ed.), Public Expenditure Analysis, Washington DC: World Bank, 2005, pp. 152–182.

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Empowering government and local expertise are also critical to the management of funds. The Bank has adopted an operating system that would help ensure a better management of funds in recipient countries. A strong management system in these countries would complement the responsibility of the Bank’s anti-corruption strategy, which is aimed at improving the fund management systems, especially in the areas of procurement and financial management.

In implementing its anti-corruption measures, the Bank uses the sanctions regime mentioned in the Articles of Agreement. In the year 2010, the WBG agreed to “cross debar” firms and individuals with other multilateral banks and each bank would honour the other’s debarment lists.32 The Bank, along with other multilateral development banks, has been quite successful in drafting common definitions of sanctionable practices and sharing information relating to the investigation of the corruption cases. The new cross-debarment accord,33 under the leadership of Robert B. Zoellick, is considered to be a significant global step in combining the Bank’s resources to identify states and non-state actors who are involved in corrupt financing and exploiting advantages from the bank-financed projects. Such debarment implies strong measures on the accused party and makes it ineligible to do business with the WBG for a specified period of time. In 2010, 45 firms, individuals and NGOs have been debarred from participating in the Bank’s projects for varying periods of time.34

Apart from the debarment, there are settlements of corruption allegations under the voluntary disclosure programme. The most well-known and significant settlement in the history of the WBG is the Siemens AG case of 2010.35 The company wrapped up its outstanding corruption issues in a Russian project involving a Siemens subsidiary. The settlement included a commitment by Siemens to pay US$ 100 million over the next 15 years to support the Bank’s anti-corruption work, an agreement of up to a four-year debarment for Siemens’ Russian subsidiary and a voluntary two-year shut-out from bidding on the Bank’s businesses.36 This is an incredible success story for the Bank in mainstreaming its anti-corruption sanction regime. However, the results at the individual country level so far have been mixed.

3.1 Anti-corruption Experiences of the Bank at the Country-level

The WB has employed significant amount of resources to examine the root causes of corruption in loan recipient countries and evaluated the impact of the

32 World Bank, Annual Report, Integrity Vice Presidency, Washington DC: The World Bank Group, 2010, p. 12, available at http://siteresources.worldbank.org/INTDOII/Resources/INT_AnnualReport_web.pdf, accessed on 27 January 2011.33 Ibid., p. 35.34 Maria Barton, Latham and Watkins LLP, “Understanding the World Bank Group’s Anti-Corruption Measures in Project Financing”, Bloomberg Law Reports, Vol. 4, No. 1, 2011, p. 3.35 Ibid., p. 4.36 Ibid.

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Bank’s efforts to reduce corruption in those countries.37 These studies determine that in highly corrupt states the role of the government is often contested and “fails to rise above the private interests to protect the broader public interest.”38 The patron-client relationship that exists in the political and bureaucratic culture in these countries promotes favouritism. The rule of law is weak and unable to establish a just society. It undoubtedly spreads public sector corruption where justice is not equal for everyone. Huge ineffectiveness grasps the institutional culture and the accountability mechanism in these states. Finally, there is a lack of commitment from the national leaders and civil society groups to combating corruption.

In such a grievous situation WB’s approach to counter corruption seems to be quite popular in some countries. The Country Assistance Strategy (CAS) is the three-year business plan for each nation prepared by the Bank that draws its detailed anti-corruption plan. However, the CAS does not always reflect the holistic anti-corruption measures. For example, a 2004 WB report identifies that some CASs do not provide a detailed analysis of corruption, but suggested broadly the appropriate measures for the country’s level of corruption.39 Ukraine’s CAS identified fundamental causes of institutional weaknesses and poor governance and integrated the corruption issues into the Bank-country dialogue. India’s CAS also had a thoughtful diagnosis and proposed assistance appropriate to reduce corruption. On the other hand, some CASs provided a detailed analysis of corruption e.g. Bangladesh’s CAS. But it has failed to provide a guideline for how to combat corruption in the WB-financed projects.40 Therefore, the Bank is having a hard time in finalising a standard format for the CAS.

Public sector management reforms and judicial reforms are potentially relevant to the anti-corruption strategies adopted by the Bank. The Operation Evaluation Department of the Bank has identified Budget Systems Modernisation Projects in Algeria and Yemen as successful cases.41 The Department also praised the Guinean Capacity Building for Service Delivery Project that had an impact on corruption through its reform policy measures.42 However, there are some unsuccessful examples that raise criticisms about the future of the Bank’s anti-corruption measures. For example, Indonesia is considered a prime example of a corruption-ridden country that is affected by irresponsible and bad lending from the WB. The Bank has made a huge amount of improper loans to the former Suharto regime in Indonesia.43

37 In 2004, the World Bank investigated the Bank’s activities in Guatemala, Kenya, Latvia, Pakistan, the Philippines and Tanzania. See World Bank, Mainstreaming Anti-Corruption Activities in World Bank Assistance: A Review of Progress Since 1997, Washington DC: The World Bank, 2004.38 Cited from Anwar Shah and Mark Schacter, “Combating Corruption: Look before You Leap”, Finance and Development, Vol. 41, No. 4, 2004, pp. 40–43.39 World Bank, Mainstreaming Anti-Corruption Activities in World Bank Assistance: A Review of Progress Since 1997, 2004, op. cit., pp. 28-29.40 Ibid., p. 29.41 Ibid., p. 30.42 Ibid.43 Josef Hanlon, “Wolfowitz, the World Bank and Illegitimate Lending”, The Brown Journal of World Affairs, Vol. 13, No. 2, Spring/Summer 2007, p. 51.

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A great deal of the money has been embezzled by the ruling regime. Apart from the widespread political and administrative corruption that the Indonesian regime pursued at that time, the Bank remained equally responsible for the decisions related to bad lending and the failure of its development projects in Indonesia. Uzbekistan, being the worst human rights violator in the region, received a US$ 3 million loan from the International Finance Corporation in 2006.44 Therefore, the Bank’s lending practices remain inefficient and the corrupt regimes have taken advantages of it.

Furthermore, an over-reliance upon a common anti-corruption strategy impedes the Bank’s success in achieving its development goals and eventually increases more corruption in the society.45 Inspired by the neo-classical approach, the Bank advocates absolute economic liberalisation to the borrower countries. There are success stories for this approach. In Mali and Senegal, economic liberalisation seems to have helped reduce customs fraud when combined with institutional reforms and relatively high salaries.46 On the contrary, in Tanzania, economic liberalisation has increased petty and grand corruption. In Ecuador and Tanzania, the anti-corruption strategies of the Bank included the benefits of the long-term growth and literacy efforts, combined with legal reforms and institutional strengthening.47 However, such a long list of activities raised questions about the prioritisation process of the Bank in its reform efforts. Inappropriate prioritisation leads to misery and more corruption.

3.2 Is Mainstreaming Anti-corruption a Successful Strategy for the Bank?

Apart from the initial success of the holistic development approach, the prime controversy for the Bank in mainstreaming the anti-corruption measures lies in the CDF-based approach. It has often divided the experts within the Bank on anti-corruption measures “who believed that discrete anti-corruption activities were more likely to be effective, at least until current political and economic conditions within countries became more favourable and those who agreed with Wolfensohn that such activities would waste money in the long term unless seen as part of a wider reform process.”48 Therefore, the debate led to a very significant concern regarding the Bank’s agenda (i.e., anti-corruption emphasis versus broad public sector reform agenda). This concern was raised in the late 1990s and continued throughout the first decade of the 21st century. Paul Wolfowitz became the President in 2005 and his approach to anti-corruption was criticised on the grounds that he made anti-corruption the prime objective of the Bank’s development agenda, rather than a key

44 Ibid.45 Alan Doig and Stephen Riley, “Corruption and Anti-corruption Strategies: Issues and Cases from Developing Countries”, in Corruption and Integrity Improvement Initiatives in Developing Countries, New York: UNDP, 1998, pp. 50-54.46 Ibid. 47 Ibid. 48 Heather Marquette, “The World Bank’s Fight against Corruption”, The Brown Journal of World Affairs, Vol. 13, No. 2, Spring/Summer 2007, p. 31.

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component in the drive to reduce poverty and improve governance.49 For example, Wolfowitz cancelled an US$ 800 million loan for maternal and child health in India during his presidency.50 This decision was quite controversial, as he was accused of undermining women’s and children’s health, poverty reduction and India’s ability to meet the Millennium Development Goals (MDGs).51 Moreover, an INT investigation also indentified elevated risks of fraud and corruption in the Bank-financed Indian health sector projects.52 The Bank failed to adapt to the conditions imposed by the crisis and had to stop lending. Nevertheless, an overemphasis on curbing systemic corruption diluted the developmental agenda of the Bank.

The WB adopted a new Governance and Anti-corruption (GAC) Strategy in 2007. This strategy paper proposes a detailed action plan for the Bank to address governance and anti-corruption issues in the recipient countries from its mandate to reduce poverty.53 The GAC strategies are essential in the life cycle of the Bank’s lending mechanism. It implies a strong supervising mechanism from designing a project until the final audit of the Bank’s development venture. Therefore, the Bank has designed its GAC programme to strictly observe and monitor its aid-engagements in different countries. However, the 2009 Group of the External Advisors’ Report alleged that “the Bank has yet to measure systematically whether GAC is being ‘mainstreamed’ in its diverse units and complex culture.”54 It also mentions that the Bank has not properly addressed several concerns about the GAC strategies. For example, exploring the demand-side of the anti-corruption measures in the development projects from a fund-receiving country is still overlooked.55 Lack of demand would create less political commitment from a national government to fight corruption.

The non-political mandate of the WB is a controversial issue in mainstreaming its anti-corruption venture. According to the Articles of Agreement, the Bank is not eligible to involve itself in the political affairs of its fund recipient countries.56 In fact, this non-political mandate prohibited the Bank to intervene in the corruption issues of a country prior to 1997. However, in the post-1997 scenario, the Bank started working in the areas of good governance and anti-corruption without any major amendment to its non-political mandate. This has raised accusations against the Bank that it is interfering in the internal politics of a state. The level of allegation against the Bank was even stronger in the mid-2000s, which says that the Bank is becoming

49 Steven Weisman, “Wolfowitz Corruption Drive Rattles World Bank”, New York Times, 14 September 2006, available at http://www.nytimes.com/2006/09/14/business/14wolf.html, accessed on 31 March 2011.50 Marquette, op. cit., 2007.51 Ibid.52 Department of Institutional Integrity, World Bank, Detailed Implementation Review India Health Sector 2006-2007 Volume I, Washington DC: World Bank, 2007, pp. 37-39.53 World Bank, “Strengthening World Bank Group Engagement on Governance and Anti-corruption”, Washington DC: World Bank, 2007.54 The Group of External Advisors for GAC Implementation, Report on the World Bank’s Implementation of the Governance and Anticorruption, Washington DC: GAC, World Bank, 2009, p. 2.55 Ibid., p. 3.56 M. Miller-Adams, The World Bank: New Agendas in a Changing World, London: Routledge, 1999, p. 22.

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overtly political.57 There exists a serious negligence in addressing this sensitive matter and a lack of international consensus to solve it. This hampers the credibility of mainstreaming anti-corruption regime of the Bank into its operational framework. However, there are other factors constraining this process as well.

4. Challenges for the Bank’s Anti-corruption Regime

The Bank advocates collective action to promote its anti-corruption activities at different levels. Nevertheless, several challenges exist despite the Bank’s commitment to collective action against corruption. One of the real challenges involves relying heavily on the implementation of anti-corruption initiatives at the national level, where every other aid-related consideration typically prevails over anti-corruption and good governance components. This gap continues because of the lack of consensus and trust among the stakeholders regarding the terms and conditions of the anti-corruption measures.

4.1 Complex Nature of the Bank’s Lending Procedure

In 2010, the Bank declared that it would move away from its traditional investment lending (approximately 70 per cent of the Bank’s total portfolio) to programmatic or result-oriented lending (e.g. budget support or policy development lending).58 The investment lending has been severely criticised on many grounds especially because of its complex approval process. The new lending reform has been undertaken to consolidate the types of loans and grants that a country can avail from the WBG. However, it is alleged that the new lending mechanism would become an instrument for the Bank and the borrowers to continue development projects with a non-functional checks and balances system. Identifying risk factors in the Bank’s lending is a complex task. All investment and programmatic lendings are subjected to many risk factors. The Bank, with the adoption of the reformed lending investment, will use a new Operational Risk Assessment Framework for its operations in which there are 38 types of risks grouped into four categories.59 Such an explicit framework would have both positive and negative impacts on the borrowers. Moreover, the complexity of the lending mechanism exposed the Bank’s projects to few other diversified risks. There is always a tendency from the Bank to promote a “one size fits all” lending policy. In this context, using programmatic lending investment would be an even more ambitious replication of the same model to different places, and hence, de-contextualise the demands of the recipient countries. This can influence borrowers to avoid the formal procedure to gain access to the Bank’s lending mechanism.

57 Heather Marquette, “The Creeping Politicisation of the World Bank: The Case of Corruption”, Political Studies, Vol. 52, 2004, pp. 413-414.58 The Group of External Advisors for GAC Implementation, op. cit., p. 2.59 Nancy Alexander, The World Bank Reboots: Sweeping Investment Lending Reforms in the Works, Washington DC: Heinrich Boell Foundation, 2010, pp. 3-4.

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4.2 Social Accountability: Unfinished Agenda of Civil Society Participation

The WB has promoted the idea of social accountability over the last decade with the help of civil society groups.60 This agenda complements the Bank’s ongoing initiatives on good governance and anti-corruption. Social accountability supports in designing the social development strategy of the Bank and makes the stakeholders (i.e., the Bank and the recipient government) accountable to civil society and people. Thus, the Bank incorporates civil society groups in various capacity enhancement activities to enable them in operationalising social accountability mechanisms in order to improve transparency, accountability and performance of public institutions.61 However, the growing involvement of civil society and NGOs in the Bank’s activities creates a caveat. The standard of the Civil Society Organisation (CSO) involvement and its progress in terms of achieving the development objectives are far from universal. As Rita Abrahamsen discusses, the placement of civil society within the discourse of good governance in the Bank is “romanticised” and over-simplified.62 Therefore, it is very unlikely to bring about the Bank’s desired changes but could exacerbate existing political and economic problems.

4.3 Governance Indicators—One Size Fits All

The Worldwide Governance Indicators (WGI) are the most widely cited cross-country governance indicators used by the Bank to prepare index of countries on the basis of state of governance.63 These indicators are prepared using a variety of research methods and in conjunction with other organisations. However, the WGI have generated criticism when applied universally. Critics say that the WGI are not “comparable over time and across countries.”64 The indicators use units that set an identical global standard for all periods. Furthermore, data-source bias underestimates the WGI. For example, it is alleged that the indicators are arranged to favour business-friendly regimes and disfavour a left-wing socialist governance structure.65 The definition of governance is a very complex issue. Therefore, critics argue that any set of universal governance indicators are methodologically inconsistent.

60 World Bank, World Bank-Civil Society Engagement: Review of Fiscal Years 2002-04, Washington DC: World Bank, 2005. 61 Ibid.62 This is cited from J. Hearn and M. Robinson, “Civil Society and Democracy Assistance in Africa”, in P. Burnell (ed.), Democracy Assistance: International Co-operation for Democratization, London: Frank Cass, 2000, pp. 241–262.63 Daniel Kaufmann, Aart Kraay and Massimo Mastruzzi, “Governance Matters VI: Aggregate and Individual Governance Indicators for 1996 – 2006”, Policy Research Working Paper 4280, Washington, D.C.: World Bank, 2007. 64 Critical aspects of the WGI are cited from Daniel Kaufmann and Aart Kraay, “Governance Indicators: Where Are We, Where Should We Be Going?”, The World Bank Research Observer, Vol. 23, No. 1, Spring 2008, p. 15. However, Kaufmann and Kraay have refuted the criticisms in the same text.65 Ibid.

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4.4 Lending to Civil Society Organisations: Implications on the Bank-GO-NGO Relations

Robert Zoellick, former President of WB wanted the Bank to invest in development projects run by CSOs.66 Such a policy measure is aimed at strengthening the accountability and transparency mechanism in the Bank’s global aid regime and ensuring active citizen participation. Moreover, Zoellick emphasised the significance of CSOs in service delivery in the developing states.67 If this is approved as an official policy of the Bank, this would be a significant paradigm shift from aiding national governments and the private sector. However, the Bank has already started diverting its funds to CSOs in many countries, regardless of its failure to make the standard universal due to the presence of strong anti-CSO governments in China, some countries in the Middle East and Africa.68 Furthermore, it is not yet apparent whether the Bank could convince its board to support this transformation in the nature of funding.

This CSO concentration of the Bank has two other significant repercussions. First, such a decision would raise questions regarding the violation of the 2005 Paris High-Level Forum on Aid Effectiveness (Paris Declaration). Here multilateral aid agencies and donor country governments committed to take specific actions to sustain country ownership, harmonisation, alignment, managing for development results and mutual accountability for the use of development aid.69 However, the Bank refutes the criticism by arguing that national strategy development, ownership and capacity building include broad national governance (i.e. civil society and private sectors of the nation).70 Second, there are skeptical voices who do not appreciate the tendency to control CSOs and their development plans through the Bank’s lending and conditionality process.71Regardless of these arguments and counter-arguments, this policy remains a significant challenge for the WB.

4.5 Corruption and Inefficiency within the Bank

The 2008 Report on the WB’s GAC Strategy revealed that the Bank’s management lacked an institutional commitment to its anti-corruption strategy.

66 “World Bank Loans to Civil Society?”, The Sherpa, 08 April 2011, available at http://www.sherpatimes.com/index.php?option=com_content&view=ar ticle&id=391:world-bank-suppor ting-civi l-society&catid=64:human-rights&Itemid=73, accessed on 14 April 2011.67 Ibid.68 Mark Lyons and Ian Nivison-Smith, “Does Foreign Funding of Civil Society Encourage Democratic or Good Corporate Governance? Some Evidence from Asia” Paper presented in ISTR Conference, Barcelona, Spain, 9-12 July 2008, available at http://www.istr.org/conferences/barcelona/WPVolume/Lyons.Nivison-Smith.pdf, accessed on 20 March 2011.69 World Bank, “Paris Declaration at a Glance”, available at http://info.worldbank.org/etools/docs/library/238766/H&A%20Menu%20rev%202%20English.pdf, accessed on 14 April 2011.70 See the text of the Paris Declaration and the meaning of ownership and national strategy for a county in OECD, The Paris Declaration on Aid Effectiveness and the Accra Agenda for Action, available at http://www.oecd.org/dataoecd/11/41/34428351.pdf, accessed on 13 April 2011.71 “World Bank Loans to Civil Society?”, op. cit.

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The implementation report concluded that the GAC strategy was not integrated effectively into the Bank’s operations.72 Moreover, the 2009 Independent Evaluation Group (IEG) report of the Bank concluded that IDA, which lends and grants about US$ 10 billion annually to governments in Africa, Asia, Latin America and Eastern Europe, could not protect its funds adequately from theft, mismanagement and diversion.73 The IEG review states that the CAS and strategy papers do not always systematically and seriously address fraud and corruption risks at the country level.74 For example, the WB assessed India’s health care projects for corruption risk in 2006 and found that all the Bank-financed projects were spectacularly vulnerable to fraud and corrupt practices. In a Detailed Implementation Review (DIR) Report, the Bank found that there were significant levels of oversight deficiencies, including inadequate financial, audit and internal controls both by the Government of India (GoI) and the Bank.75

However, the DIR report was rejected by both the GoI and the Bank and did not address the corruption concerns of the project.

Further, the IEG report identifies a very crucial issue regarding staff members’ skills and training.76 The WBG staffs do not always have the skills to protect development projects from corruption. As a result, the Bank’s management often fails to take timely actions to follow up on audit, investigatory and evaluation findings of impropriety. The whistleblower protection policy is also not very effective.77 Therefore, challenges remain in a complex institution like the WBG amidst the success that it has achieved in curbing corruption.

4.6 Weak Internal Performance Management

Internal oversight to ensure effective management of the aid business is very significant for the Bank in detecting and preventing corruption. Although the Bank has long had an internal audit function and a system of management controls, the 2000 United States General Accounting Office (GAO) report determined that the Bank’s internal oversight mechanisms were weak.78 The Bank management has been struggling to determine the indicators of an ineffective management control. It falls

72 GAC, Report on the World Bank’s Implementation of the Governance and Anticorruption (GAC) Strategy, Washington DC: World Bank, 2008, available at http://siteresources.worldbank.org/EXTPUBLICSECTORANDGOVERNANCE/Resources/GEA_Group_Report_Final.pdf?resourceurlname=GEA_Group_Report_Final.pdf, accessed on 12 April 2011.73 IEG, Review of IDA Internal Controls: An Evaluation of Management’s Assessment and the IAD Review, Washington DC: World Bank Group, 2009, p. 23, available at http://siteresources.worldbank.org/EXTOED/Resources/ida_controls_full.pdf, accessed on 12 April 2011.74 Ibid.75 World Bank (Department of Institutional Integrity), Detailed Implementation Review India, Health Sector, Volume I Washington DC: World Bank, 2006-2007, available at http://siteresources.worldbank.org/EXTDOII/Resources/WB250_Web_Vol1_012408.pdf, accessed on 12 April 2011.76 IEG, op. cit., p. 23.77 Ibid.78 USGAO, World Bank: Management Controls Stronger, but Challenges in Fighting Corruption Remain (Report to Congressional Committee), Washington DC: GAO, 2000, available at http://www.gao.gov/new.items/ns00073.pdf, accessed on 19 March 2011.

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short in addressing the key performance problems reported by external and internal auditors.79 The GAO report also mentions that the challenges for the Bank remain and “further action would be required before the Bank can provide reasonable assurance that project funds are spent according to the Bank’s guidelines.”80 The 2009 IEG report claims that the reformed investigation unit in Department of Institutional Integrity is not credible.81 The most recent staff survey shows that the Department of Institutional Integrity has the lowest morale of any Department of the Bank, which affects its entire anti-corruption effort.82 Furthermore, the Bank fails to build borrower’s managerial capacity for implementing Bank projects. This is very important for the efficient management of funds. Recently, the Bank has produced strict guidelines for its staffs to exhibit professionalism in anti-corruption measures.83 However, the Bank does not have a strong monitoring mechanism to oversee the performance appraisal of its staffs.

4.7 The Overarching Top-down Approach of the Bank

The traditional belief implies that corruption is a symptom of weak states affected by weak institutions and infrastructure, where the Bank is supposed to concentrate its anti-corruption reform measures.84 In these cases, the Bank prescribes governance reforms that are mostly top-down in nature. For example, the Bank advocates reform measures to achieve government effectiveness (i.e., quality of policy making, public service delivery and easing the regulatory burden) and establish rule of law (i.e., judiciary and civil service reforms).85 These reforms involve only a handful of actors of the national governments. Therefore, it systematically avoids the necessity of a bottom-up approach to anti-corruption, which negatively affects the success of anti-corruption measures. Moreover, failing to raise the grass-root voice against corruption, the Bank is often unsuccessful in bringing the governments into a consensus about the holistic efforts required for the anti-corruption reform programmes.

79 Ibid., p. 6. 80 Ibid., p. 5.81 IEG, Review of IDA Internal Controls, op. cit., p. 27. 82 Nancy Alexander, Beatrice Edwards and Bruce Rich, Evaluation of World Bank Finds Evidence of Failure to Control Corruption: “Significant Deficiencies” in Compliance with Charter, North America: Heinrich Boell Foundation, 2010, p. 6, available at http://www.boell.org/downloads/4-21_FINAL_FINAL_IDA_controls_on_LTRHD.pdf, accessed on 13 April 2011.83 Mario A. Aguilar, Jit B.S. Gill and Livio Pino, Preventing Fraud and Corruption in World Bank Projects (A Guide for Staff), Washington DC: World Bank, 2000, available at http://www.gao.gov/new.items/ns00073.pdf, accessed on 12 April 2011.84 Daniel Kaufmann, “Anti-corruption Strategies, Starting Afresh?,” in R. Stapenhurst and S. J. Kpundeh (eds.), Curbing Corruption, Toward a Model of Building National Integrity, Washington DC: EDI Development Studies, 1998, p. 146.85 World Bank, Anti-Corruption Core Programme, Washington DC: World Bank Group, 1999.

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4.8 Lack of Coordination among International Partners

Coordination and coherence are big challenges for the WB. The Bank has done extensive work in building up international partnerships and interests to fight against corruption. According to Heather Marquette, “It is the only donor with the kind of resources and scale to deliver this kind of impact.”86 The WB has significantly added value to the supply-side of combating corruption. It has assisted the OECD in drafting its anti-bribery convention, Transparency International (TI) in designing the Bribe Payers Survey and contributed to the growing international consensus on the donor’s role in anti-corruption campaigns.87 Apart from the central level communication, TI works at the country-level with the Bank. TI-South Africa organised 9th International Anti-corruption Conference in partnership with the Bank.88 TI-Bangladesh and the Bank jointly organised and sponsored seminars between parliamentarians and civil society groups throughout South Asia.89

Nevertheless, coordination among the international development partners is a remarkably difficult task. Many times, they contradict the decision regarding the mandate of the task and terms of responsibilities. Often they fail to reach a consensus on the measurement of success in achieving the objective of a particular development project. The United States government has declined to continue its funding on the basis of a report published by the Senate Foreign Relations Committee in 2010.90 The reason was the lack of consensus on undertaking reform measures within the Bank.

If the partners underestimate the resource implications of anti-corruption activities, which is time consuming and requires a multidisciplinary approach, coordination is not possible among donors. The WB and the European Union (EU) have long been struggling to coordinate their anti-corruption efforts in jointly designed development projects. Since 1999, both the EU and the Bank received a special mandate for the coordination of bilateral and multilateral donors in the Balkan regions.91 However, the lack of European coordination with the Bank has affected the overall effectiveness, quality and visibility of the work.

86 Heather Marquette, Corruption, Politics and Development Role of the World Bank, New York: Palgrave MacMillan, 2003, p. 80. 87 Ibid. 88 Cited from Transparency International, “TI Country Activities”, TI Newsletter, June 1999 and Heather Marquette, ibid., p. 83.89 Ibid.90 Cited in U.S. Government Printing Office, “The International Financial Institutions: A Call for Change, A Report to the Committee on Foreign Relations of United States Senate,” 10 March 2010, 111th Congress, 2nd Session, in Alexander, et al., op. cit., p. 1.91 For details of this joint collaborative project in Brussels, see the website www.seerecon.org.

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4.9 Fighting Corruption, or Promoting Democratisation? Prioritisation of Tasks

Promoting development by establishing rule of law, ensuring transparency and fighting corruption has emerged as an attractive concept in the universal discourse of democratisation and public policy. However, the Bank has experienced difficulties in defining its approach to the issue of democratisation and the process of attaining it in practice. Recently, on anti-corruption matters, the Bank has become more explicit in referring to the role of democratic governance in combating corruption. The Bank’s development policy advocates more competitive electoral democracy in the transitional countries to combat corruption.92 Former Chief Economist of the Bank Joseph Stiglitz has advocated its work on corruption and democratisation by mentioning that “corruption, though a matter of politics, is at the heart of underdevelopment.”93 In fact, Heather Marquette refers to the overly ambitious aims of the Bank’s leadership in amending its Articles of Agreement to establish democratisation as a requirement for lending to states.94

Therefore, to accommodate this transformation, the Bank needs to alter its entire culture. It must restructure with new staff with diversified background viz. political science, anthropology and sociology and equip them with new monitoring systems, qualitative and quantitative measurement tools for performance assessment. This transformation process will be complex and it will re-establish the Bank’s formal political engagement with individual states. On the other hand, the Bank has deliberately avoided those research findings that say excessive privatisation and uncontrolled liberal market structure would promote corruption and those that argue immature electoral democracy would influence corrupt practices and social divisions.95 Such policy prejudice has two repercussions. First, it is alleged that the Bank has diverted from its prime goal of development. Second, the Bank is overemphasising the relationship between democracy, development and corruption, hence, is genuinely using one-sided view of the relationship debate to justify its own work on corruption. The Bank is thus falling short of its genuine goal.

5. Conclusion

The WB’s governance and anti-corruption programme has made substantial progress in minimising corruption in its development projects. The Bank has quite successfully sold its ideas of transparent procurement, capacity building of the stakeholders and the protection of whistle-blowers to many recipient countries. The institutional framework of the Bank i.e., INT and Sanctions Committee is an important

92 Heather Marquette, 2004, op. cit., p. 419.93Joseph Stiglitz, “Introduction”, in C. Gilbert and D. Vines (eds.), The World Bank: Structure and Policies, Cambridge: Cambridge University Press, 2000, p. 3. 94 Heather Marquette, op. cit., p. 420. 95 Ibid.; Carolien M. Klein Haarhuis and Frans L. Leeuw, “Fighting Governmental Corruption: The New World Bank Programme Evaluated”, Journal of International Development, Vol. 16, 2004, p. 549.

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step towards mainstreaming its anti-corruption initiatives. The Bank has also raised awareness among many stakeholders regarding the need for external evaluators that address fraudulence in the Bank’s lending procedure.

Nevertheless, the Bank’s dealing with overall corruption issues in a particular country is inadequate, incoherent and often flawed. The WB has drafted action plans for its GAC Strategy but lacks proper enforcement and monitoring guidelines. Moreover, the Bank has been inefficient in applying an effective sanction regime, such as debarring a state from further lending if found to be misusing Bank funds. There is no investigation into the reluctance or inefficiency of the Bank in adopting proper sanctions and the potential impact of such measures. The WB has also been inattentive in addressing its past moral hazards regarding the harmful and irresponsible lending culture. A quote from Wolfowitz, “Every corrupt transaction has, unfortunately, at least two parties,”96 implicates the Bank as a part of the corrupt activities.

The Bank’s non-political mandate is gradually turning out as a myth. The complex nature of the WB as an institution and its political affiliation with governments in various capacities are misunderstood due to the partial analysis of conceptual linkages among development, democracy and corruption. Still, the Bank is unfortunately very far from realising the fact that corruption is not an entirely economic issue. It has political and social elements intertwined with the other causes of underdevelopment. Thus, the Bank’s entire global aid regime for development is plagued because of the distortion of its anti-corruption campaigns by the so-called non-political mandate.

Finally, the Bank requires a reliable and independent enforcement system of its existing anti-corruption guidelines. In addition, the Bank should realise that the formulation of anti-corruption policy measures, implementation of those policies in practice and the supervision process of its operations must be in compliance with a responsible and holistic development paradigm. It is not possible to combat corruption only by strengthening the supply-side of the anti-corruption campaign by the Bank. The demand-side of such campaigns should be endorsed with the long-term political commitment of the governments and sustainable cooperation with civil society groups. The Bank should also consider the chances of a more effective international partnership with donors that helps increase the legitimacy of its anti-corruption campaigns. The Bank has already become the leading voice in combating corruption and now it is high time for the Bank to persuade other stakeholders to share the responsibility.

96 Cited by Heather Marquette, 2007, op. cit., p. 51.

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Moinul Khan

EXPLAINING THE RISE OF ISLAM IN MALAYSIA: CONTEXT PRECEDES IDEOLOGY

Abstract

Malaysia, since the 1970s, saw a trend of increasing adoption of Islamic values both at private and public levels, often referred to as the Islamic resurgence. This has led to an academic interest whether this upsurge of Islam in that country has been driven mainly by Islamic ideology that aims at establishing a universal Islamic order or other circumstances specific to Malaysia. This paper seeks to provide an illuminating explanation to this riddle. Having reviewed the trends of Islamic profile and the main reasons behind it, this paper finds that the ethnic conflict over material interests between the local Malays and non-Malays, political rivalry between two main parties, UMNO and PAS and the consequences of widening gap between the rich and the poor as a result of massive economic programmes, have all prompted the urge for mounting Islamic profile. Had there been no such competition, Islam would have remained marginalised as happened till the 1970s. However, in later times, Islam came as a means or instrument to express discontent by these competing interest groups towards each other. The key element of this analysis is to show that it is context that has largely stimulated the profile of Islam in Malaysia rather than eagerness, the inherent association with Islamic ideology, to establish an Islamic state and a universal order. Findings of this paper reinforce the view that Islam is not necessarily one and uniform and is not essentially linked to politics of ruling and resisting.

1. Introduction

When Malaysia achieved independence in 1957, there was a view that the country would follow the secularist model in politics, throughout, subordinating the religious issues. The main reason of this line of thinking was that the United Malays National Organization (UMNO), which pioneered the independence, was led by the Western-educated liberal think-tank and represented by a wide variety of groups, including religious minorities. This leadership was in favour of Western-style development that advocates secularism and more pertinently the marginalisation of the role of Islam in politics. The other reason was that the non-Malays who were mostly Chinese and Indians were non-Muslims and had significant stakes in the Malaysian contexts including businesses and politics. The rise of Islam, in any form, may largely cause alienation of those minorities in nation-building. However, this thesis has, as this paper demonstrates, proved a sham. Islam appears to have become “progressively more important in the daily lives of Malaysian Muslims and in the country’s politics”.1 Moinul Khan is Director General, Customs Intelligence and Investigation, Government of Bangladesh and a Ph.D candidate at the Centre for Policing, Intelligence and Counter Terrorism (PICT), Macquarie University, Australia. His e-mail address is: [email protected]


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This paper seeks to explain this riddle as to why this is the case. While reviewing the rise of Islam, this paper also argues that it is primarily the contexts in Malaysian politics, not the ideology in Malaysia, that have led the course of what is called ‘Islamic resurgence’.2

The main objectives of this paper are to find answers to the following questions:

• What explains the major trends of the phenomenon of the rise of Islam in Malaysia?

• What are the inherent factors that contribute to the Islamic resurgence in this muslim country?

• Do they have necessary connection to the traditional notion of uniform and monolithic Islamist ideology that seeks to establish a global order?

• If not, how are they specific to the Malaysian contexts?

In doing so, this paper has been organised into five sections. Following introduction, section two gives an overview of the major trends of the phenomenon of Islamic resurgence in Malaysia since the 1970s. Section three deals with a discussion of inherent factors that have contributed to the Islamic resurgence. Section four highlights that these factors are more specific to this country than a commitment to the Islamic ideology. Section five concludes the discussion.

2. An Overview of the Islamic Resurgence

Malaysia saw a shift towards the resurgence phenomenon since the 1970s, particularly with the advent of Dakwah (proselytising) movement in late 1960s, which began with the initiative of the university students led by Anwar Ibrahim who later

© Bangladesh Institute of International and Strategic Studies (BIISS), 2013.1John Funston, “Malaysia”, in Greg Fealy and Virginia Hooker (eds.), Voices of Islam in Southeast Asia: A Contemporary Sourcebook, Singapore: Institute of Southeast Asian Studies, 2006, p. 51.2 Islamic resurgence denotes the adoption of some Islamic values in both private and public life. Malaysian eminent politician-turned-academic Chandra Muzaffar characterises this phenomenon as referring to a number of manifestations including an effort to bring “Islamic values, practices, institutions, laws, indeed Islam in its entirety, in the lives of Muslims everywhere”. See Chandra Muzaffar, “Islamic Resurgence and the Question of Development”, Sojourn: Journal of Social Issues in Southeast Asia, Vol. 1, No. 1, 1986, p. 57. A variety of forces have contributed to the higher profile of Islam in Muslim countries and beyond since the 1970s. The main objective of such resurgence is to recreate a social order based on Islamic religious values dictated in the Qur’an and Hadith (saying of the Prophet). Such trend has prompted political implications in international relations, including an attempt to rule and resist with the Islamic ideals. See Jean-Paul Carvalho, “A Theory of the Islamic Revival”, available at http://tuvalu.santafe.edu/~bowles/TheoryIslamicRevival.pdf, accessed on 20 July 2013; Bernard Lewis, The Crisis of Islam, London: Weidenfeld and Nicholson, 2003; Bernard Lewis, What Went Wrong? Western Impact and Middle Eastern Response, Oxford: Oxford University Press, 2002.

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EXPLAINING THE RISE OF ISLAM IN MALAYSIA

became Deputy Prime Minister of Dr. Mahathir Mohammad.3 The movement got impetus with the establishment of Angkatan Belia Islam Malaysia (ABIM, Malaysian Islamic Youth Movement) in 1971. There were other similar groups who advocated conservative approaches of Islam at the personal and political levels. This Dakwah movement gave rise to the embracing of living in accordance with conservative interpretation of Islam in the society and polity.4 For example, by the 1980s, many Malay women wore Islamic attires including mini-Telekung which is “a triangular head-dress that comes down to the chest or a round one that comes down even further to the waist” along with Hijab which is made of “an ankle-length one piece long sleeve robe .... Only the face and hands are visible, the robe hiding completely the shape of the body.”5 Similar picture was also evident in other personal life of most Malay muslims.6 John Funston sums up this trend:

Many Muslim men now grow beards. It is no longer sufficient for food to be pork-free; it must be strictly halal (prepared in accordance with Islamic prescriptions). Attendance at mosques and attention to prayer times are much more rigorously adhered to. Islamic programs take up a large part of radio and television time. And alcohol is no longer served at government functions, which now invariably start with prayers. ... Federal and state Islamic departments often seek to provide protection against such evils [as sites of Western music and television programs], regularly raiding night-clubs and other centres of vice and arresting Muslims for consumption of alcohol or (in the case of women) immodest attire.7

At the public level, this picture is quite apparent particularly with regard to the interpretation of the Constitution and its use in political purpose. Mahathir’s statement at the 1982 UMNO General Assembly, indicating the reinforcement of Islamic values, is an example of such emphasising higher profile of Islam at the public life.8 When the Constitution was drafted, Islam was made as ‘the’ religion of the country, but at the same time, the religious freedom of other faiths was guaranteed. The Constitution also left the responsibility of Islam in the hands of the states9 rather than in the federal 3 Mahathir Mohammad was the architect of modern Malaysia. He administered the country for about 22 years from 1981 to 2003. Mahathir is known for the adoption of modernisation programmes which steered the economic growth of the country which has later assumed the label as an ‘emerging tiger’ in Southeast Asia. 4 John Funston, op.cit., pp. 56-57.5 Zainah Anwar, Islamic Revivalism in Malaysia: Dakwah among the Students, Kuala Lumpur: Pelanduk Publications, 1987, p. 33.6 Barry Wain, Malaysian Maverick: Mahathir Mohammad in Turbulent Times, New York: Palgrave Macmillan, 2009, pp. 219-220.7 John Funston, op.cit., p. 57.8 At the 1982 UMNO General Assembly, Mathathir Mohammad stated that “the biggest struggle [s] is to change the attitude of the Malays in line with the requirements of Islam in this modern age... UMNO’s task now is to enhance the Islamic practices and ensure that the Malay community truly adheres to Islamic teachings.” See Barry Wain, op. cit., p. 222. 9 Malaysia, which obtained independence in 1957 from the British colonial legacy, is a federal constitutional monarchy. It consists of thirteen states located in two regions, Peninsular Malaysia and Eastern Borneo. These states are: Johor, Kedah, Kelantan, Pahang, Perak, Selangor, Terengganu, Negeri Sembilan, Perlis, Melaka,

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system. These provisions have had implications for the role of Islam in public life in Malaysia in later days. More significantly, the label of Islam as the state religion in the Constitution has created a debate as to whether Malaysia would be an ‘Islamic state’. The state control over the Islamic affairs has also made it open to politicisation by different groups competing for power. These provisions have provided a space to green the Islamic profile of Malaysia.

Despite the freedom of religion guaranteed in the Constitution, it has later been qualified within that religious provision. All ethnic Malays are regarded as Muslims who are subjected to Sharia courts and they are in a sense denied to leave Islam or convert to other faiths. In fact, apostasy or conversion to other faiths is treated as a punishable offence in most states with fines or jail sentence or both. Although the terms of the references of the Constitution specify the secular status of the federation, the declaration of Islam as official religion has become instrumental for “the government to fund certain Islamic activities – building mosques, holding Qur’an-reading competitions and organizing the hajj, the annual pilgrimage to Mecca in Saudi Arabia that every Muslim is expected to make at least once.”10 The other gestures by the government to show its commitment to Islam include introduction of the Azan, the call to prayer over state-run radio and TV, publication of Islamic literature and establishment of an Islamic Research Centre and an Islamic Missionary Foundation, sponsoring Dakwah, missionary groups which found fertile grounds especially among Malaysian young, educated, urban middle class.11

Barbara D. Metcalf points out that Malaysia saw growing activities including state support for an Islamic university, Islamic economics, Islamic courts and civil law that uphold Sharia having little regard to the common ‘life world’ for all Malaysians.12 The most notable of such state sponsorship of Islam was the placing of the Sharia courts independent of the jurisdiction of the civil courts including the High Courts and taking over from the states reorganised on a federal basis in 1988 in the Office of the Prime Minister. An important move was the formation of Institut Kefahaman Islam Malaysia (IKIM, Malaysian Institute for Islamic Understanding) in 1992 under the Office of the Prime Minister, which is a think-tank that organises high-level conferences on Islam, authors regular columns in both English and Malay language newspapers, runs television programmes and is generally responsible for articulating government policy on Islamic affairs. The powers of the Islamic departments of the states have been increased to administer the enforcement of Islamic laws and regulations. After the independence, the federal government did not have any major role in the Islamic

Penang, Sabah and Sarawak and the three federal territories are Kuala Lumpur, Putrajaya and Labuan. 10 Barry Wain, op.cit., p. 218.11 Ibid., pp. 221-222.12 Barbara D. Metcalf, “Islam in Contemporary Southeast Asia: History, Community, Morality”, in Robert W. Hefner and Patricia Horvatich (eds.), Islam in an Era of Nation-States: Politics and Religious Renewal in Muslim Southeast Asia, Honolulu, Hawai: University of Hawai Press, 1997, p. 313.

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affairs. However, the Council of Rulers (the State Sultans) constituted the Majlis Kebangsaan Bagi Hal Ehwal Ugama Islam Malaysia (Malaysian National Council for Islamic Affairs) in 1968 with a secretariat in the Office of the Prime Minister. The Council chaired by the Prime Minister is responsible for formulating major policies on Islamic affairs. The activities of the Council include: supervision of federal government’s Islamic research centre and Islamic missionary foundation; supervision of federal government’s Islamic schools and the publication of Islamic materials. Later, a full minister has been appointed since 1997 to oversee its activities.13

At the same time, the individual state authorities have sought to out-Islamise each other by religious legislation and activities. In 1988, Selangor passed the compulsory two years provision for rehabilitation for new converts and 15 years old cannot convert without parental permission. In Sabah, the term of rehabilitation was extended up to 3 years.14

However, renowned scholar on political Islam Riaz Hassan in his book, Inside Muslim Minds, notes that although a greater emphasis is noticeable on the role of Islam in public life, the “Malay Islam still continues to adhere to its moderate and malleable inclinations.”15 Funston observes that Malaysian Muslims have generally eschewed extreme form of Islam and the government has dealt with extremists with iron hands.16 This is true in the case of dealing with a popular Darul Arqam17 organisation which was accused of militancy and later banned in 1994 with detaining its prominent leaders under the Internal Security Act. The government was also successful in containing the extremists belonging to the Kumpulan Militant/Mujahidin Malaysia (KMM, Malaysian Militant/Mujahidin Organisation) or Jemaah Islamiyah (JI) largely through arrest

13 John Funston, op. cit., pp. 55-57; Barry Wain, op. cit., pp. 218-222. 14 The legal/bureaucratic developments, just noted, created a strong debate and media attention over a case involving a young woman, Lina Joy, born as Azlina Jailani to Malay parents and so raised as a Muslim who wished to convert to Christianity. After a long bitter administrative/legal battle in May 2007, the Federal Court rejected her appeal stating that a person who wished to change his/her religion must do so in compliance with the existing practices of that particular religion. See Yang Lai Fong, “Framing Religious Disputes: A Comparative Analysis of the Lina Joy Controversy Reported by Malaysian Newspapers”, The Journal of the South East Asia Research Centre for Communication and Humanities, Vol. 3, No. 2, 2011, p. 29. 15 Riaz Hassan, Inside Muslim Minds, Carlton: Melbourne University Press, 2008, p. 23.16 John Funston, op. cit., p. 57. 17 Darul Arqam was founded in 1968 by a charismatic leader, Ashaari Muhammed. The movement was marked by conservative approaches to Islam, that advocated the members eating Arab-style, the men wearing green robes and turbans and the women in Purdah (covering) most of the time. The members set up self contained commune with houses, mosques, schools, clinics and vegetable plots, their factories producing items for sale in their own shops. They administered 250 kindergartens and grade schools and operated enterprises of about RM 300 million. In the face of a challenge to the government, the organisation was declared a ‘deviant sect’ by a government body, the National Fatwa Council. Its leaders were detained for charges of endangering security under the Internal Security Act allegedly for their involvement in the training of a military wing in Thailand to wage a war on the Malaysian government and was later banned in 1994. With membership increasing, the Darul Arqam seemed to have presented a real challenge to the government which also sought an opportunity to contain it. See Barry Wain, op.cit., p. 226.

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and seizures. This helps in keeping Islam on a moderate course despite the trend of upsurge in that Muslim majority country.

3. Why the Islamic Upsurge in Malaysia?

Having reviewed the trends of higher Islamic profile, the paper now turns to explain the reasons behind it. The key to this explanation is that the rise of Islam has largely been a response to the contexts specific to Malaysia.

3.1 Ethnic Rivalry, Islam and Malay Identity

Malaysian population has been deeply divided between three groups, the local Malays, the Chinese and the Indian immigrants. The Chinese were brought by the British in the first part of the 19th century and began concentrating in and around Singapore, Penang and Malacca. The growing economic power and influence of the Chinese being patronised by the British was a cause of discontent among the ethnic Malays, causing anti-British movement among them. Before the 1960s, the Chinese were the numerical majority; however, afterwards the Malays started to gain slight majority.18 Despite their majority status, their socio-economic conditions have not been at par with those of the Chinese population. While the local ethnic groups are in politics and bureaucracy, the Chinese are mostly in control of the Malaysian businesses and trade. Mark Mancall observes, “...economically, socially, and educationally, the Malays always were at a disadvantage in comparison to the Chinese. They (the Malays) lived in the Kampong [village]; they were peasants.”19 So after independence, it has always been a priority for the government to adopt a policy to favour the local Malays with the objective of improving their socio-economic conditions. This has provided a necessary condition to bring the Islamic profile in politics.

Since the majority of the people are Muslims, their politics has become imbued with Islamic identity for ameliorating their poor conditions. Mark Mancall maintains, “Malay identity has, to a great extent, depended on Islam.”20 This identity has greatly allowed the Islamic institutions and practices to develop within the government and the Malaysian society. In turn, this identity has also created the conditions to advance “the economic, social and political aspirations of the country’s Malay majority” largely 18 According to ethnicity, Malays constitute 50.4 per cent while Chinese 23.7 per cent, indigenous 11 per cent, Indian 7.1 per cent, others 7.8 per cent. At the same time, in terms of religion, Muslims (or Islam - official) make up 60.4 per cent, Buddhists 19.2 per cent, Christians 9.1 per cent, Hindus 6.3 per cent, Confucianism, Taoism, other traditional Chinese religions 2.6 per cent, other or unknown 1.5 per cent, none 0.8 per cent (2000 census). See CIA’s World Fact Book, available at https://www.cia.gov/library/publications/the-world-factbook/geos/my.html, accessed on 10 July 2013. 19 Mark Mancall, “The Roots and Societal Impact of Islam in Southeast Asia”, Stanford Journal of East Asian Affairs, Vol. 2, Summer, 2002, p. 116.20 Ibid.

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through “the form of state contracts, licenses, and development grants to the Malay Bhumiputra [sons of the soil]”.21 Judith Nagata labels Malayness ‘unimaginable without Islam’ which is pushed to centre stage in response to marginal conditions of the Malays. The outcome of redefining this identity is expressed in “the form of greater public attention to Islam.”22

The Malay identity is also related to the focus of Malayness expressed in the Malaysian Constitution which defines its characteristics “by language, custom and the (Muslim) religion.”23 The Constitution requires that Malays be Muslims, indicating the primacy of Malay status deeply connected with Islam. The adherence to Islam is mandatory provision to claim Malay identity and rights as per the Constitution.24

K. J. Ratnam contends that Malay identity became prominent and linked with Islam as communal politics gained currency as a consequence of competing interests between Malay and non-Malay communities. In such competition, Islam has become the chief unifying factor among the Malays in their effort to secure and promote their pre-eminence in the country. However, such identity was absent in British Malay lands before independence since communal competition was kept to a minimum level.25 The importance of religious appeal has only increased and become more pronounced in politics as the Malays saw their communal interests were under threat from the non-Malays. In the absence of such communal interests, the religion would have played no or lesser role in Malaysia. K. J. Ratnam, thus, reinforces this view:

... religion does not derive its political significance in Malaya from the conflict between different faiths. The issue must be viewed primarily as a component of the more general rivalry between the Malays and the non-Malays. Religious appeals for political ends are confined to the Malay community and are, in the main, directed at unifying that community by emphasizing its separate identity and interests. Religious and anti-non-Malay slogans almost always go hand in hand and are aimed at persuading the Malays to be more

21 Wan Kamal Wan Napi, “The Islamization of Politics in Malaysia: How Religious Political Opportunities and Threats Influence Religious Framing and Counterframing”, Unpublished Ph.D Thesis, Southern Illinois University, Carbondale, USA, 2007, p. 19.22 Judith Nagata, “How to be Islamic without being an Islamic State: Contested Models of Development in Malaysia”, in Akbar S. Ahmed and Hastings Donnan (eds.), Islam: Islam, Globalization and Postmodernity, London: Routledge, 1994, p. 69.23 Ibid. 24 This is evident in the state Islamisation of bureaucracy which aimed at articulating a majority right out of legal authority for Muslims as recognised in the Constitution and delineated by laws. This provides a basis of identity connected with Islam to form a Malay-Muslim majority constituency in Malaysia. See Judith Nagata, ibid., p. 27; Johan Saravanamuttu, “Introduction: Majority-Minority Muslim Politics and Democracy”, in Johan Saravanamuttu (ed.), Islam and Politics in Southeast Asia, London: Routledge, 2010, p. 8.25 Before independence, the local Malays had full authority over religious matters and local customs. The non-Malays, Chinese and Indian immigrants, were essentially a transient population and did not involve themselves to any great extent in local political affairs. The representative institutions were also missing in the British Malay states. As a result, the communal politics did not have any major appeal in the daily lives of the Malay people. See K. J. Ratnam, “Religion and Politics in Malay”, in Ahmad Ibrahim, Sharon Siddique and Yasmin Hussain (eds.), Readings on Islam in Southeast Asia, Singapore: Institute of Southeast Asian Studies, 1985, p. 143.

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vigilant in safeguarding their pre-eminence in the country’s political life and, as a corollary, to be less compromising in their relations with the other communities. ... the most crucial factors that explain the political importance of religion are to be found not in the traditional versus modern but rather in the Malay versus non-Malay continuum. The conflict between traditional and modernizing interests might have become the dominant factor only if the Malays had constituted the entire population (or at least a very substantial part of it), or if the communal differences between the Malays and non-Malays had failed to assume much political significance.26

Similarly, Johan Saravanamuttu27 and Maznah Mohamad28 incline to call the Islamisation in Malaysia as inherent to majority-minority politics and a result of the competing interests between the Muslim Malays and non-Muslim groups for political authority over statehood. Both argue that the underlying objective of the rise of Islam in the Malaysian context is to articulate a ‘racial state’ rather than a religious state or anti-secular posture. This has been manifested in institutionalising Malay-Muslim supremacy in politics through various state sponsorships to the Muslim programmes and activities, including the government’s affirmative action policy to promote Malay interests. The mandated connection between the ethnicity and religion is a particular case in point with Islam as the official religion. Such articulation of ethnic majority becomes prominent because the Muslim makes up ‘not-so-large’ majority while the non-Muslims constitute a ‘not-so-small’ minority. This has placed Islam as the chief instrument of creating statehood based on Malay ethnicity.

3.2 UMNO-PAS Political Rivalry

The Malaysian politics is dominated by two main opposing political parties, UMNO and Parti Islam Se Malaysia (PAS), having different views on Islam. The UMNO, formed in 1946, emerged as the largest political party which ruled the country since its independence in alliance with other ethnic groups, the Malaysian Chinese Association (MCA) and the Malaysian Indian Congress (MIC). The UMNO leadership mainly comes from the urban middle class professionals who uphold secular interpretations of Islam and Western ideals including capitalism, culture and modernisation. In short, the UMNO believes in Islam Hadhari or Civilisation Islam29 that espouses a moderate course in opposition to its conservative interpretations.30

26 Ibid., pp. 149-150.27 Johan Saravanamuttu, op. cit., pp. 1-2. 28 Maznah Mohamad, “The Authoritarian State and Political Islam in Muslim-Majority Malaysia”, in Johan Saravanamuttu (ed.), Islam and Politics in Southeast Asia, London: Routledge, 2010, pp. 65-70.29 Malaysian first Prime Minister Tinku Abdur Rahman first established Islam Hadhari in 1957 which was later promoted by Dr. Mahathir Mohammad. After Mahathir, this concept was also advanced by his successors to drive Malaysia towards moderate interpretation of Islam. See Wan Kamal Wan Napi, op. cit., p. 20. 30 Ibid.

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On the other hand, the PAS which was formed in 1951 by the defection of UMNO’s religious department is mainly represented by the conservative religious elites.31 The PAS leadership aims at establishing an Islamic state that turns the country in accordance with Islamic values.32 They seek God’s (Allah’s) blessings in governance of the country replacing its secular status. It also believes in the Islamic doctrine of “one Ummah” regardless of ethnic background and interprets the state and nation in religious terms having no regard to the territorial boundaries of individual states.33

The position on Islam is a fundamental difference between the UMNO and PAS. They are in opposition to each other to appeal to Islam in order to attract the individual voters and groups. Mona Abuza echoes this rivalry between these two competing parties in Malaysia with attempt to appeal with the image of being ‘more religious’ to discredit each other. They used ‘doses of religiosity’ in the fight for both legitimacy and opposition with regard to the popular support on certain political issues. For example, in the 1970s the Mahathir government of UMNO engaged in the ‘political struggle’ by islamising the government machinery with an increase in sponsoring Islamic programmes and policies. Such Islamisation includes encouraging Islamic attire in schools, gender segregating in public places such as cinemas, Islamic centres and Islamic conferences.34

The PAS plays as the principal opposition party which “keeps the UMNO constantly on its moral and religious toes”. It is always concerned with Malay interests “legitimated by the moral force of Islam”.35 K. J. Ratnam maintains that the leadership of this Islamist party often accused the UMNO of collaborating with the ‘infidels’ (non-believers) and hence they are not qualified to represent the Malay interests.36 The PAS, which emerged as the protagonist of an Islamic state, became influential through recruitment of members of the past Islamic movements (Dakwah)37 which surfaced in the political scene in the 1970s with an appeal to Islamic profile.38 The UMNO has 31 Islam became prominent after the PAS proved itself as a serious contender in Malaysian politics. The party attracted allegiance from members with varied interests including religious conservatives and Malay nationals who demanded improvement of their socio-economic conditions. In the 1959 elections, the PAS captured two states - Kelantan and Terengganu surprising UMNO and permanently splitting the Malay community on political and more specifically Islamic lines. Although, there was a fluctuation, the party won between 30 to 50 per cent electoral votes in the elections. See Barry Wain, op.cit., p. 219. 32 The political view of PAS is similar to that of Jamaat Islami of Pakistan and Muslim Brotherhood of Egypt, which advocate the idea of Pan Islamic movement. The PAS stands for establishing Malaysia as a state based on the Islamic principles enshrined in the primary sources of the Qur’an and Hadith. The Sharia laws will be the guiding basis to demarcate what is legal and prohibited in the state as visualised by the PAS. See ibid., pp. 25-26. 33 Ibid., p. 24; K. J. Ratnam, op. cit., pp. 144-147. 34 Mona Abuza, “The Discourse on Islamic Fundamentalism in the Middle East and Southeast Asia: A Critical Perspective”, Sojourn: Journal of Social Issues in Southeast Asia, Vol. 6, No. 2, 1991, p. 225. 35 Judith Nagata, op. cit., p. 69. 36 K. J. Ratnam, op. cit., p. 146. 37Angkata Belia Islam Malaysia (ABIM) is such a movement born as a Malay nationalist student movement and later adopted a more non-ethnic Pan-Islamic stance. 38 The PAS has always won 30-50 per cent electoral votes since 1959. Apart from federal system, it secured the offices in some states and influenced the government policies on Islam. In the 1999 election, the party swept both Kelantan and Terengganu and won 27 seats in the federal parliament. See John Funston, op. cit., pp. 58-59.

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also responded in portraying its face with Islamic credentials in state mechanism in the face of PAS’s “crusading spirit of moral righteousness as the true protector of Islam in Malaysia”.39 In a surprise move, Prime Minister Mahathir recruited in 1982 his erstwhile enemy Anwar Ibrahim, the founder and star performer of ABIM, and made him Deputy Prime Minister.40 This move was apparently intended to raise its “Islamic credibility rating” and promote “a moderate, more innerworldly religious viewpoint conveniently compatible with that of UMNO’s own public religious posture”.41 Riaz Hassan echoes this picture during the 22 years long leadership of Mahathir Mohammad “who trumped PAS by successfully wooing the main youth Dakwah (propagation) movement headed by the charismatic Anwar Ibrahim.”42 He also notes that their Islamisation programmes include: Islamic banking and insurance and expansion of the role of Sharia courts, increase of Islamic education in educational intuitions and establishment of International Islamic University Malaysia and a number of Islamic centres from rival political postures to outbid each other with regard to Islam.43 Such rivalry over religiosity is expressed in Nagata’s observation: “The religious gauntlet is down, and both sides conduct themselves as defenders of the faith over every public policy, in a game known locally as Kafir Mengafir, or mutual excoriation as infidels.”44

3.3 Capitalist Development and Social Injustice

In the post independence period, it was an emphasis for the Malaysian government to ‘uplift the Malays’ and ‘a fully developed Malaysia’. However, the traditional belief of Islam was considered a problem to accommodate this priority. The Mahathir government in particular redefined the interpretation of Islam which not only “take[s] care of the spiritual wellbeing, but to secure material benefits for them as well”.45 This reinterpretation of Islam helped the government to take up policies consistent with modernity.46 Mahathir’s vision was reflected in the government affirmative action programme better expressed in the New Economic Policy (NEP) in

39 Judith Nagata, op. cit., p. 70. 40 The appointment of Anwar Ibrahim aimed at addressing “the steam out of ABIM” and depriving PAS of a potential ally who would have joined and strengthened the opposition. This increased his Islamic profile and emboldened his position to respond to the Dakwah movement. Thus, he appeared to have engaged in political race with the PAS “consciously to fight Islam with more Islam” that further intensified Islamisation in Malaysian politics. See Barry Wain, op. cit., p. 222. 41 Judith Nagata, op. cit., p. 70. 42 Riaz Hassan, op. cit., p. 23. 43 Ibid.44 Judith Nagata, op. cit., p. 70. 45 Barry Wain, op. cit., p. 127. 46 Mahathir thought that Islam remains central to Malay value system. However, it is also an impediment to progress and material benefits of the country. The Malay Islam, according to him, is often equated with fatalistic traditions and beliefs that are not consistent with modernity. So he urged to redefine the Islamic teachings which are compatible with the “pursuit of materialism” and modernity. He emphasised that Muslims must be equipped with knowledge and technology of the modern world to gain material benefits along with spiritual values. There is no conflict between profit making and religiosity of Islam, Mahathir noted. This is often called as Malaysian model of Islam that welds Islam with modernity. Ibid., pp. 221-223.

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line with the capitalist development.47 The core theme of these policies is to adopt pragmatism which is progressive and open to foreign investment, technology and modern concepts of capitalist development (e.g. free market, privatisation) and preparedness to learn from the West.

However, this development produced mixed results in the social structure of traditional Malay community. The government has often been criticised with a charge that the development benefitted ‘a small group of local and foreign capitalists’ and they needed reforms in accordance with Islamic social justice. The capitalist development has created an uneven distribution of wealth in most of the states. For example, in Terengganu the inflow of capital and sophisticated technology produced a coterie of new economic elites who have access to wealth and power. However, the majority people have largely remained weak and voiceless. This has resulted in hardship to the local community as the demand of the new elites has caused the prices of most goods and services including essentials to escalate while the poor are edged out of the markets in most cases. This scenario is also applicable in Kelantan, particularly in Kota Baru, the state capital. The capitalist mode of production also brings out “the growth of an acquisitive, egoistic and materialistic culture” which is “antithesis of religion and religious values”.48

As it indicates, while Malaysia saw remarkable development, the gains have not evenly been distributed among the common people. Although, many people were better educated and better off than their parents, the vast majority of Malay people have continued their social and economic status as ‘have-nots’. On the other hand, the government has often been accused of ‘favouritism’ and ‘cronyism’ in creating Malay millionaires. The financial corruption49 and scandals are endemic to the Malaysian styled development that has generated frustrations among the common people. This is also interpreted as anti-thesis of Islamic social justice and has, in turn, created an appeal of Islam to those people. Barry Wain, thus, brings out this situation pertinently: “While the power and privilege of those in the upper echelons of a prosperous urban-industrial economy were reinforced, the poor and deprived struggled. In brief, the most basic principle of governance in Islam, social justice, was missing.”50

Mona Abuza contends that the rise of Islam is also connected with the ‘feeling of failure and defeat’ in Malaysia.51 Zainah Anwar observes that the majority Malays

47 This followed the racial riot in 1969 that threatened the supremacy of the Malay community. This put an urge for the government to ‘recoup political losses’ by redefining the economic and cultural parameters for the Malaysian development. 48 Chandra Muzaffar, op. cit., pp. 68-69. 49 The Islamic groups spearheaded campaigns against government corruption that gained considerable public support and attention. In one such campaign, Harun Idris, the Chief Minister of Selangor, had to resign and eventually faced conviction in the face of public discontent. See Barry Wain, op.cit., p. 220. 50 Ibid., p. 230. 51 Mona Abuza, op. cit., p. 223.

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felt that they were “backward and left behind in the machinery of development.”52 These people often saw Islam as the answer to resolve what they consider societal injustice which resulted from the pragmatic approach of development. Chandra Muzaffar sums up the rise of Islam in the context of such capitalist development:

In the Malaysian case, a portion of the Malay “have-nots” would choose to react to capitalist inequalities through Islam. This is because Islam, in the Malays mind, is associated with the quest for justice. While it is true that the religion has been used to legitimize Malay rule, it has also often acted as an effective channel of protest. It is only Islam which enjoys sufficient credibility in Malay society to allow it to perform this function.53

The rise of Islam is often seen as the case of the ‘chickens coming home to roost’ for Malaysian context.54 The government adopted pragmatic Islam that again provides the catalyst conditions for the disgruntlement among the Malay people. The higher Islamic profile does have its root in the fertile ground of such Malay discontent. The Islamic groups including PAS expanded mainly through exploiting this discontent and gained support at the grass-root levels. This put a pressure on the UMNO’s government to lean more towards Islam and Islamic profile.

Barry Wain also notes that one of the consequences, following the pragmatic economic policies as stated above, was Mahatir’s image crisis as ‘the Great Oppressor, the Cruel One and the Great Pharaoh’. This was compensated by an inclination to Islamic profile to overcome this crisis. Mahathir, consequently, without addressing the sources of discontent attempted to engage in Islamisation with greater emphasis.55 The declaration of an Islamic state in 2001 by him offers an example of this trend.

4. Context vs. Ideology

The above analysis, thus, demonstrates that the rise of Islam in Malaysia has its origin to a number of contexts, namely ethnic competition between the local Malay Muslims and non-Malay Chinese and Indian population, the political rival postures between UMNO and PAS which have engaged to out-Islamise each other and the feeling of deprivation (as a consequence of the NEP) of the common people who have increasingly sought to find a solution from Islam with societal justice — a norm as enshrined in Islamic teachings. This indicates that the higher Islamic profile is not

52 Zainah Anwar, op.cit., p. 7. 53 Chandra Muzaffar, op. cit., pp. 67-68. 54 Barry Wain, op. cit., p. 230. 55 In his statement, Mahathir tried to “... recover Malay affection by ... offering some of the items on the fundamentalist agenda he had always opposed. Encouraged and emboldened, religious bureaucrats flexed their muscles and tried to impose a grim form of Islamic orthodoxy. The sorry saga culminated in a declaration by Mahathir in late 2001 that Malaysia is, in fact, already an Islamic state - a day that in local terms is likely to live in infamy.” See ibid., p. 218.

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necessarily a result of a Muslim commitment to Islamic ideology which champions, among other things, to establish an Islamic global order replacing the status quo.56

From the ideological point of view, Islam is inexorably connected to politics. Bernard Lewis calls this connection as “the unique Muslim attitude to politics” and asserts that “Islam is not only a matter of faith and practice; it is also an identity and loyalty – for many, an identity and a loyalty that transcends all others”. This view is similar to that of Alain-Gerard Marsot who argues that Islam does not allow the separation of the religion from politics, unlike Christianity which dictates this separation in the New Testament.57 Bernard Lewis also argues that the inherent mix of Islamic faith with politics has caused the failure of adaptation to modernity and its obvious consequence is the fate of backwardness for Muslim societies. This also brings to highlight the ‘civilization conflict’ between the West and Islam.58

However, in case of Malaysia, the Islamic upsurge appears to have been in response to certain contexts that have prompted the urge for the adoption of Islamic values at both private and public life. These contexts are primarily specific to local and socio-political contestation prevalent between rival groups within that country. This underlines the importance of mosaic nature59 of Islam that may appear to assert in Muslim countries when there exists some pre-conditions — often socio-economic and political in nature. In those conditions, Islam is time and again used as a language or means to express as a sign of discontent or rivalry between interest groups. The Malaysian contexts, chiefly unrelated to Islamic ideology, highlight this variety of contextual Islam while challenging the monolithic interpretation of its universal character particularly as far the connection between the power and faith

56 According to oriental school of thought, Islam is a universal ideology that covers all Muslims under one platform. In other words, Islam is a monolithic ideology and the Islamic resurgence is often characterised as a response to its inherent connection to a blue-print, drawn from the holy books and the early Islamic values, particularly those of the first four Caliphs, representing the ideal model to restore a ‘golden age’ of ‘pure Islam’. Islamic ideology does not recognise the national demarcation of states and looks to transnational authority. The Islamist goal is to establish the supranational arrangement based on Islamic society. The main broad goals of such Islamic ideology are: “1. Eliminating all non-Islamic, especially Christian and Jewish, influences in the Islamic world; 2. Re-creating a worldwide caliphate or Islamic state; 3. Recovering all the territories that were ever under Islamic occupation (including the Iberian Peninsula, Sicily, Crete, most of the Balkans and most of India [also Western China]; 4. Applying a strict interpretation of Islamic law for all Muslims everywhere; 5. Overthrowing governments in Muslim-majority countries that do not accept and apply these conditions; and 6. Embarking on a holy war to enforce these goals.” See Michael Radu, Major Muslim Nations: Islamism and Terrorist Groups in Asia, Philadelphia: Mason Crest Publishers, 2010, p. 35. 57 Alain-Gerard Marsot, “Political Islam in Asia: A Case Study”, Annals of the American Academy of Political and Social Science (AAPSS), Vol. 524, November, 1992, pp. 156-158.58 Bernard Lewis, “The Roots of Muslim Rage”, The Atlantic Magazine, September, 1990, pp. 1-9; Bernard Lewis, 2002, op. cit.; Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order, New York: Simon and Schuster, 1996.59 Vartan Gregorian, Islam: A Mosaic, Not a Monolith, Washington D.C.: Brookings Institution Press, 2003; Mirza Tirta Kusuma, “Islam is a mosaic, not monolith”, The Jakarta Post, 12 October 2010, pp. 1-2, available at http://www.thejakartapost.com/news/2010/10/12/islam-a-mosaic-not-monolith.html, accessed on 10 June 2012.

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is concerned. As noted earlier, had there been no condition, for example, the ethnic competition between the Malays and the non-Malays, the appeal to Islam would not have been created the way it has appeared today. The analysis also put forth another reality that Malaysia has consistently followed democratic traditions and at the same time presents a developmental model, popularly known as a tiger economy, by which the country has experienced a fast and steady economic growth.60 This does not seem to have confirmed the key assumptions of the ideological thesis such as the intrinsic connection of Islam to ‘backwardness’ and ‘anti-modernity’ particularly in the case of Malaysian Islam.

5. Conclusion

The paper suggests that the rise of Islam in Malaysia is specific to the country and has little connection with the traditional interpretation of ideological Islam as a monolithic faith. The resurgence phenomenon is evident since the 1970s in the wake of a racial riot in 1969 where the Malay supremacy was felt threatened due to their marginal majority over the non-Malay population. This necessitated the government to link the Malay identity with Islam which increasingly became prominent as the principal factor in the effort to advance Malay interests. The Islamic profile has got a momentum largely due to rivalry between the two competing parties, the UMNO which represents wider interests including the non-Malays and the PAS which advocates promoting Malay interests based on Islamic credentials. At some point, the UMNO-led coalition government employed Islam as an instrument to appeal to Malay voters and raised Islamic profile in an effort to outbid PAS.

The higher Islamic profile has also its root in the consequences of uneven distribution of wealth with a few controlling the means while the vast majority have been living in poverty. This has often been seen as breeding ground for Islam to take root in creating the religious appeal for those who interpret Islam in the light of societal justice. The pragmatic capitalist approach taken up by Mahathir Mohammad who saw no conflict between Islam and modernity backfired in the form of replacing Islam with more Islam resulting in the ‘chickens coming home to roost’. Before the independence, Malay states did not experience any religious issue since there were no groups competing for political eminence. However, this has become more pronounced in the post-independence period as the Malays saw their communal interests being marginalised by the non-Malays. The Malay communities began to link their identity with Islam primarily as a means to uphold their interests. Had the Malays constituted the whole population, there would have not been an issue of competing interests to promote Islamic credentials in politics. Hence, the rise of Islam is inherently connected with the local contexts among different competing interest groups mainly between

60 See Jan Stark, Malaysia and the Developing World: The Asian Tiger on the Cinnamon Road, London: Routledge, 2012.

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two communities, the Malays and the non-Malays, rather than a conviction to Islamic ideology with a motivation to establish an Islamic state or a universal Islamic order.

Finally, the paper has demonstrated the mosaic nature of Islam in the Malaysian context while challenging the universal characterisation on a single platform to perceive Islam based on ideology. The findings of this paper reinforce the view that Islam is not necessarily one and uniform. This also highlights the need to reconstruct the global perception of Islam and Muslim countries especially in line with the mosaic nature of Islam.

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