By Gopilal Acharya
Many India-Bhutan-China watchers closely followed the recent visit to Bhutan by the Chinese Vice Foreign Minister Kong Xuanyou. It was the first visit by a senior Chinese official after the 2017 Doklam standoff when Indian and Chinese troops faced off in the Doklam plateau for 73 days from June 16 through August 28. The territory is claimed by both Bhutan and China.
The visit therefore was significant.
The general election is looming close, and the government formally dissolved on 1 August. Speculations are rife about what Mr Xuanyou’s visit means at such a critical juncture. More so because the Vice Foreign Minister met with all the most important individuals—His Majesty Jigme Khesar Namgyel Wangchuck, His Majesty the Fourth King, Prime Minister Dasho Tshering Tobgay, and Foreign Minister Damcho Dorji.
The Chinese Ambassador to India Luo Zhaohui accompanied him on the trip from 22 through 24 July.
What did the two sides discuss?
The Bhutanese government divulged little information about the visit. On its part, the Chinese government posted a statement on its foreign ministry’s website mostly detailing what Mr Xuanyou conveyed to Bhutan on behalf of his government.
While one could interpret the visit as a relations-mending move, it also spells out China’s continuous wooing of India’s best ally in the region. Within the traditional diplomatic exchanges that mainly tethers on bilateral border talks, it’s not unusual for high-level Chinese officials to visit Thimphu.
The Bhutan-China boundary talks did not happen in 2017 because of the Doklam crisis. The two countries have held 24 rounds of boundary talks so far. The last round took place in August 2016 in. Further, the visit to Bhutan by Mr Xuanyou is his first since he took office in January 2018.
The Chinese MFA statement noted that Mr Xuanyou “conveyed the warm regards of Chinese leaders to Bhutanese leaders, and expressed that the China-Bhutan relations have maintained a sound development momentum in recent years, with exchanges and cooperation in all fields achieving new progress”. It added: “China highly values its traditional friendly relations with Bhutan, and will as always respect Bhutan’s independence, sovereignty and territorial integrity, respect the political system and development path chosen by Bhutan based on its own national conditions, and respect the independent foreign policy of peace upheld by Bhutan.”
The most noteworthy signal the news release sends is perhaps China encouraging Bhutan to be part of the Belt and Road Initiative (BRI) and “share China’s development dividend”. It also mentions Bhutan’s admiration of China’s development achievements and outcomes of the BRI.
The two sides also discussed the boundary issue. The Bhutanese side is supposed to have reiterated the country’s recognition of one-China policy and commended China’s increasing role in international affairs. Bhutan also reportedly promises to maintain communication on bilateral relations with the Chinese side and deepen exchanges and cooperation with China.
One certain outcome of Mr Xuanyou’s visit is that the next round of boundary would possibly happen soon after the 2018 polls.
Bhutan’s has to be wary about China’s “debt-book diplomacy”
The BRI, known until 2016 as One Belt One Road (OBOR) Initiative, is President Xi Jinping’s signature development project mainly focusing on cooperation and connectivity.
India boycotted the first BRI Summit in Beijing in May 2017 which was attended by representatives of 60 countries, including the US and Japan. So did Bhutan. However, while India is a founding member of the Asian Infrastructure Investment Bank (AIIB), Bhutan is yet to apply for membership. Or it might choose not to do so until the foreseeable future.
But there are concerns that Bhutan could in fact be missing the opportunity to deepen direct engagement with China by avoiding BRI and AIIB membership. Come to think of it, the AIIB currently has 86 member states from around the world, including the UK, Australia, Germany, South Korea, and most SAARC member states.
A number of BRI projects are already underway in the region. The new Silk Road City in Colombo, built on land reclaimed from the Indian Ocean, is reportedly the largest single foreign direct investment in Sri Lankan history. It is a USD 1.4bn project undertaken by the state-owned Chinese engineering firm China Communications Construction Company. A huge China-Pakistan Economic Corridor (CPEC) project is underway in Pakistan. The CPEC is primarily a multi-infrastructures project currently estimated at USD 62 billion.
Given the tempting glitters of ‘dividend’ from China’s rise, there are those who see economic opportunities, especially in terms of FDI inflows and infrastructure development. In fact, Bhutan’s trade volume with China has been steadily increasing in the past few years. And Chinese tourists are among the top international arrivals in Bhutan, up from 2,896 in 2011 to 9,220 in 2016. According to Bhutan Trade Statistics, China is Bhutan’s third biggest import destination, with imports increasing from Nu 611m in 2010 to Nu 1.47b in 2016.
Many Bhutanese today feel the country must diversify its engagements with China, while continuing to maintain its strong ties with India. In fact, could Bhutan’s opening up to China be another of its just-in-time response to the developments already taking place up north? The economic importance of the railroad that China has long announced it is building—from Gyantse to Phari (in the Yadong county, where Chumbi valley is located)—cannot be underestimated. It is noteworthy that Phari was a traditional trading hub for Bhutan, and is about an eight-hour walk from the Bhutan-China border.
But there are risks associated with Chinese promises.
Sri Lanka’s big-time international port in Hambantota, the ancestral home district of former Sri Lankan President Mahinda Rajapaksa, is a case in point. Seen as a failed project, critics say it was the first Chinese loan that brought Sri Lanka to its knees. Unable to afford the repayments, the Lankan government handed control of the strategically important port to China for 99 years.
A recent report by a pair of Harvard University scholars has warned that China has targeted 16 countries in Asia and the Pacific for its “debt-book diplomacy”. It cited Sri Lanka, Pakistan, and Djibouti as particularly vulnerable. The authors of the report stated that when the countries found themselves unable to pay back the debts, Beijing then deftly leveraged the loans to “acquire strategic assets or political influence over debtor nations”. Again, Sri Lanka’s Hambantota Port is the case in point.
Therefore, it becomes a matter of deep concern for a small and poor country like Bhutan to gamble with foreign debts. Even without Chinese loans, Bhutan’s external debts are already worryingly high. As of June 2017, Bhutan’s total outstanding external debt stood at USD 2.51 billion. This is 108.64% of GDP. The Government of India remains Bhutan’s largest creditor with 73.53% of overall external debt at Nu.118.77 billion or 100 percent of total Rupee outstanding debt.
On the flipside, should Bhutan not worry about the heavy Indian loans?
Should Thimphu host a Chinese embassy?
The boundary talks will continue to be the major official business between Bhutan and China. The two countries do not have formal diplomatic ties and Bhutan, like India, has unsettled border disputes with China. China, however, is been keen to establish a mission in Thimphu.
The Chinese MFA statement noted: “Both sides should continue to promote the boundary negotiations, abide by the already-reached principles and consensus, and jointly maintain peace and tranquility in border areas so as to create positive conditions for the final settlement of the boundary issue.”
This clearly hints at resumption of the bilateral boundary talks although no date has been announced as yet.
There are conflicting sentiments in Thimphu about the boundary issues vis-à-vis formal diplomatic exchange between the two countries. Many see it as closely related. Longtime Bhutan watchers say the country must first settle its border disputes with China, and then think about exchanging diplomatic missions.
The big questions are: Would trading diplomatic recognition expedite the border settlement between the two countries? Should Bhutan and China first settle the boundary issue and then establish diplomatic ties? Is one a prerequisite for the other?
Does China want diplomatic relations with Bhutan as a ‘quid pro quo’ for border settlement? May be not, since China had already offered a package deal in 1996 where it wanted to take over the smaller western sector and relinquish to Bhutan the bigger northern and eastern sectors. Many say that had it not been for India’s security burden that Bhutan steadfastly shoulders, the country would have accepted the Chinese offer.
There are independent voices in Bhutan that have expressed a strong desire for Bhutan to work toward a full diplomatic relations with its northern neighbor. They feel Bhutan tends to show a little too much of respect to India. Indeed, they say Bhutan, once it has formal diplomatic ties with China, could act as the promoter of peace between the two competing giants.
The bottom line, however, is that Bhutan should continue to maintain a strong sovereign state presence. This means raising its voice at world forums, and working with other nation-states to promote international peace. And perhaps, learning to say ‘no’ to India on certain issues!
Gopilal Acharya is the creator of The Talking Hills. He is an award winning journalist and has written for CNN, South Asian Monitor, The Straits Times, The Telegraph, Kuensel, Bhutan Times, and The Journalist, among others. He is the author of Bhutanese Folk Tales (From the East and the South) and Dancing to Death (a book of poems). The manuscript of his debut novel, With a Stone in My Heart, was longlisted for the 2009 Man Asian Literary Prize. His poetry and fiction have appeared in Asia Literary Review and Himal Southasian.