South Asian Insider
As China courts central and eastern Europe, whither India?
The main obstacle, other than scale, is the lack of exposure and knowledge about opportunities in each other’s countries among business communities in India and the CEE states. Greater political engagement can help to rectify some of that. In a rare high-level engagement by India in an increasingly pivotal region, President Ram Nath Kovind is on a visit to Bulgaria and the Czech Republic. Long seen as an area of competing Russian and western interests, central and eastern Europe (CEE) has not always featured prominently in India’s foreign policy agenda. Despite trips to 11 western European countries since 2014, Prime Minister Narendra Modi is yet to visit central or eastern Europe. In part, this is because economic and people-to-people links remain weak. The region accounts for only 1.2% of India’s exports. While Indian investment is slowly growing — consider Apollo Tyres’ $557-million investment in a greenfield facility in Hungary in 2017 — it is still modest. Despite these constraints, the CEE countries appear keen to bolster business ties with India in agriculture, energy, transportation, cyber security, and information technology. While Indian engagement with the CEE to date has been mostly economic, it is natural that it should start assuming a strategic character as well, not least because of China’s sustained outreach. In July, Bulgaria hosted the seventh ‘16+1’ Summit, a meeting of central and eastern European leaders with China that saw participation from Poland, the Czech Republic, Slovakia, Hungary, Romania, the Baltic States, Albania, and six former Yugoslav countries. Since its initiation in 2012, the ‘16+1’ framework has been somewhat controversial. Although Chinese Premier Li Keqiang has stated that the mechanism is not a geopolitical tool, many western European officials have raised concerns about Beijing using the body to drive a wedge between the European Union and some of its member states, 11 of whom are participants. For Beijing, the region’s true significance lies in Europe being the endpoint of the network of infrastructure projects that comprise China’s ambitious Belt and Road Initiative (BRI). While many European leaders initially welcomed Chinese investments as part of BRI, some have started to express doubts. British Prime Minister Theresa May recently emphasised that China needs to adhere to global standards. Similarly, French President Emmanuel Macron has argued: “The ancient Silk Roads were never only Chinese…If they are roads, they cannot be one-way.” But despite the considerable coverage — and growing anxiety — over BRI and 16+1 in Europe over the past few years, a few realities need to be kept in mind about Chinese engagement with the CEE. First, as in other regions, there are significant gaps between the amounts of Chinese investment promised and the amounts delivered. A special $11.15 billion fund established by China has not been tapped, grand plans for a Budapest-Belgrade railway line have been derailed for potentially violating EU tendering rules, and talk of China financing a new airport in Warsaw appears to have lost steam. Meanwhile, China’s economic relations with western Europe dwarf those with the CEE states. Beijing’s largest trade relationship in the region is with Poland, but its exports there are still less than a quarter of its outgoing trade to Germany. The disparity applies equally to investment. In the UK alone, China has been involved in deals worth over $70 billion, compared to just $3.3 billion in the nine CEE states for which reliable data is available.
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