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China emerges as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India

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Xijin_bridge in yongkang, China. (Representational Image). Wikimedia
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China, April 10, 2017: China has emerged as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India — it was 17th largest in 2016, up from the 28th rank in 2014 and 35th in 2011.

In 2011, the total Chinese investment in India was $102 million. Last year, a record $1 billion of Chinese FDI reportedly flowed in, but official Indian and Chinese statistics differ on cumulative figures. The Department of Industrial Policy and Promotion (DIPP) last year estimated that total FDI from China between April 2000 and December 2016 was $1.6 billion. Indian industry analysts and media reports have estimated the figure to be over $2 billion.

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‘Actual Chinese investment in India is at least three times higher than the official Indian figure,’ Santosh Pai, partner at Gurgaon-based Link Legal India Law Services, which provides legal services to members of the China Council for the Promotion of International Trade, told IndiaSpend.

Indian statistics capture direct investments from mainland China, but a majority of Chinese overseas direct investment, Pai noted, flows through tax havens such as Hong Kong. Last year, Chinese Vice-minister for Finance Shi Yaobin was quoted saying China has cumulatively invested $4.07 billion in India, and India has invested $650 million in China.

‘China will be one of India’s top 10 investors shortly,’ Pai said. He recalled his experience of building a clientele in Beijing in 2010. The Indian firm he worked for had no clients in China. He would drive up and down Beijing’s best-known road, Changan, noting down companies’ names on buildings along the way. Later, he would track down those companies online and approach them for business. In six years, his firm’s Chinese clientele grew from zero to 120 companies (the firm has since merged with the one he works with now).

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Six years ago, investors from the world’s second-largest economy were hard to find in India. Today, India’s largest digital payments company Paytm is 40 per cent-owned by Chinese e-commerce firm Alibaba and its affiliates, and Alibaba is reportedly raising its stake to 62 per cent. China’s fourth-largest mobile phone company Xiaomi assembles one phone every second at a new factory in India.

Sixty percent of Chinese FDI is concentrated in the automobile industry. Several companies’ regional offices are located in Ahmedabad, although Chinese companies are gradually moving away from an initial preference for Gujarat towards Maharashtra, Andhra Pradesh, Tamil Nadu and Haryana. Seven smartphone companies from China have launched, or plan to launch, factories in India, according to a February 2017 Chinese media report, Rise and Coexist.

Nonetheless, Chinese investment flows into India remain relatively low, both in terms of total FDI flows into India and Chinese outward investment globally. China’s share of total FDI in India is only 0.5 per cent, despite its being the second-largest economy in the world and India’s largest trading partner, according to DIPP.

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This pales in comparison with fellow Asian powerhouse Japan (7.7 per cent). Meanwhile, the US, which China recently replaced as the world’s largest economy in purchasing power parity terms, has a 6.13 per cent share in total FDI in India.

While China’s FDI flow into India last year showed a relatively significant rise, the figure was negligible when viewed against China’s outbound investment of over a trillion yuan or $170 billion across 164 nations last year — including $45.6 billion in the US alone.

Chinese FDI in India has increased even as India and China have picked new points of political disagreement in the last two years. India objects to China’s $46 billion investment in the China-Pakistan economic corridor that passes through parts of Pakistan-occupied Kashmir. Last year, Beijing obstructed India’s efforts to get membership of the Nuclear Suppliers Group, and China has repeatedly blocked a proposal at the United Nations to blacklist Jaish-e-Mohammed chief Masood Azhar, implicated in terror strikes in India including the 2016 Pathankot attack.

‘There is no drop in the activity of Chinese companies evaluating India because of political relations between the two countries,” Sridhar Venkiteswaran, CEO of Avalon Consulting in Delhi, told IndiaSpend. ‘Increasingly, the Indian political establishment too does not want to place any roadblocks on Chinese investment into India… but Indian companies tend to push back when there is negative news about the Sino-Indian relationship.’

Chinese commentary on India today reflects this combination of geopolitical rivalry and enhanced commercial interest. China’s government-backed newspaper Global Times published a record-setting 80 opinion pieces on India in 2016, and its coverage of India is on the rise. The articles are a mix of political warnings against antagonising China and business reports evaluating investment in India. Though New Delhi has refused to endorse China’s One Belt, One Road initiative to build infrastructure to link Asia with Europe and Africa, sections of the Chinese media have projected an upcoming industrial park in India’s Gujarat as part of the same Chinese initiative.

Faced with double-digit increases in labour costs, an ageing workforce and a record slowdown in economic growth, Chinese companies have been searching for alternative manufacturing destinations and new markets since the economic downturn of 2008.

India is a ‘hot investment opportunity’, Li Bojun, a counsellor at the Chinese embassy was quoted saying in the People’s Daily in February 2017. Chinese companies are showing more confidence in the Indian economy as it grows faster than their own and narrows the gap in competitiveness between the two Asian giants. India ranked 39th compared with China at 28th in the World Economic Forum’s Global Competitiveness Report on 138 nations in 2016-17, raising its rank by 16 positions from the 55th in 2015-16.

‘The fact that the Indian economy is now the fastest-growing has had a positive signalling effect in China,” Pai said.

A 2015-16 joint report by Indian industry association Confederation of Indian Industry (CII) and Avalon Consulting estimated that labour costs for manufacturing personnel are 1.5 to 3 times higher in China than in India. The report noted that China is ‘losing competitiveness’ to India in several light engineering-related industries, which is attracting Chinese investors to India.

‘The relative competitiveness of India compared to China is increasing, especially for Chinese companies to shift production from China to India in the automotive, chemical and electronics value added chain,” Venkiteswaran said. For example, he said, imports from China have been 35 per cent costlier since 2013, and the cost of labour in China is increasing by 18-19 per cent since 2014, compared with 8-10 per cent in India.

Chinese businesses have noticed. One of the most-shared articles in March on the Global Times website warned: ‘China should pay more attention to India’s increasing manufacturing competitiveness’.

However, it is far from smooth sailing for Sino-Indian investment. India’s attempts to gain market access in China for its information technology, agricultural and pharmaceutical industries have hit a wall for over a decade. India’s deficit in trade with China bloated to $46.56 billion last year. Bilateral trade remains below the target of $100 billion that both sides were aiming to achieve in 2015. At $70.08 billion in 2016, bilateral trade was 2.2 per cent lower than the $71.63 billion in 2015. The CII-Avalon study forecasts that the trade deficit will hit $60 billion by 2018-19.

In 2014, Chinese president Xi Jinping committed to a $20 billion investment in India over five years. If fulfilled, this would increase China’s economic footprint in India. But it would still be a small percentage of Xi’s more recent promise that China will invest $750 billion overseas in five years. (IANS/ IndiaSpend)

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Can Flourishing Islamic State (ISIS) be Stopped in Afghanistan?

The truth about IS and Afghanistan is definitely no picnic

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Taliban fighters react to a speech by their senior leader in the Shindand district of Herat province, Afghanistan, May 27, 2016.
Taliban fighters react to a speech by their senior leader in the Shindand district of Herat province, Afghanistan, May 27, 2016. The rise of IS in Afghanistan has become such a priority that U.S. and Afghan forces sometimes support the Taliban while battling IS, VOA
  • Depending on the location, the proliferation of IS has drawn varied resistance from the Afghan military, U.S. air support and ground troops, local militias, Taliban forces and other militant groups
  • Afghan army planes on Wednesday night accidentally air dropped vital supplies of food and water to IS militants in the Darzab district of northern Jouzjan province instead of to their own besieged troops
  • In the Tora Bora area, where IS has made a strong stand in recent days, local villagers and militias joined with Taliban to rout IS

June 25, 2017: The Islamic State group is rapidly expanding in parts of Afghanistan, advancing militarily into areas where it once had a weak presence and strengthening its forces in core regions, according to Afghan and U.S. officials.

Depending on the location, the proliferation of IS has drawn varied resistance from the Afghan military, U.S. air support and ground troops, local militias, Taliban forces and other militant groups.

Attacking IS has become such a priority in the country, that disparate forces sometimes join together in the ad-hoc fight, with Afghan and U.S. forces finding themselves inadvertently supporting the enemy Taliban in battling IS.

Confusion leads to mistakes

All too often, officials say, mistakes are made due to confusion on the ground.

Afghan army planes on Wednesday night accidentally air dropped vital supplies of food and water to IS militants in the Darzab district of northern Jouzjan province instead of to their own besieged troops, provincial police chief, Rahmatullah Turkistani told VOA. The supplies were meant to help Afghan forces that are countering twin attacks by IS and Taliban militants but were used instead by IS.

“It’s not getting better in Afghanistan in terms of IS,” U.S. Chief Pentagon Spokeswoman Dana White told VOA this week. “We have a problem, and we have to defeat them and we have to be focused on that problem.”

Reinforcements for the IS cause reportedly are streaming into isolated areas of the country from far and wide. There are reports of fighters from varied nationalities joining the ranks, including militants from Pakistan, India, Iran, Iraq, Syria, Russia and Central Asian neighbors.

Confusing scenarios

Still, the Islamic State-Khorasan (ISK) as IS is known in Afghanistan remains a fragmented group composed of differing regional forces with different agendas in different parts of the country.

“IS-K is still conducting low-level recruiting and distribution of propaganda in various provinces across Afghanistan, but it does not have the ability or authority to conduct multiple operations across the country,” a recent Pentagon report said. But where it operates, IS is inflicting chaos and casualties and causing confusing scenarios for disparate opponents.

In the Tora Bora area, where IS has made a strong stand in recent days, local villagers and militias joined with Taliban to rout IS. IS regained ground after a few days, leading to U.S. military air attacks on IS positions in conjunction with Afghan intelligence instructions and army operations.

IS fighters reportedly have fled from mountain caves of Tora Bora, where al-Qaida’s leader Osama bin Laden hid from U.S. attack in 2001.

Families displaced

IS fighters were also reportedly advancing in neighboring Khogyani district, displacing hundreds of families, according to district officials. It is one of several areas in Nangarhar province, near the Pakistani border, where IS has been active for over two years.

Fierce clashes in the Chaparhar district of Nangarhar last month left 21 Taliban fighters and seven IS militants dead, according to a provincial spokesman. At least three civilians who were caught in the crossfire were killed and five others wounded.

“IS has overpowered Taliban in some parts of Nangarhar because the Taliban dispatched its elite commando force called Sara Qeta (Red Brigade) to other parts of the country, including some northern provinces to contain the growing influence of IS there,” Wahid Muzhda, a Taliban expert in Kabul, told VOA.

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Recruiting unemployed youths

IS has also expanded in neighboring Kunar province, where, according to provincial police chief, it has a presence in at least eight districts and runs a training base, where foreign members of IS, train new recruits.

Hundreds of miles from Nangarhar, IS is attempting to establish a persistent presence in several northern provinces where it has found a fertile ground for attracting militants and recruiting unemployed youths, mostly between the age of 13 and 20.

IS has been able to draw its members from the Pakistani Taliban fighters, former Afghan Taliban, and other militants who “believe that associating with or pledging allegiance” to IS will further their interests, according to the Pentagon report.

Hundreds of militants have joined IS ranks in northern Jouzjan and Sar-e-Pul province where local militant commanders lead IS-affiliate groups in several districts.

Darzab district

Qari Hekmat, an ethnic Uzbek and former Taliban militant who joined IS a year ago, claims to have up to 500 members, including around 50 Uzbek nationals who are affiliated with the Islamic Movement of Uzbekistan (IMU) — previously associated with al-Qaida and Taliban in Afghanistan.

IS and Taliban are reportedly fighting over the control of Darzab district in Jouzjan which they stormed this week from two different directions and besieged scores of government forces. The Taliban has reportedly captured the center of the district while IS militants control the city outskirts.

Afghanistan faces a continuing threat from as many as 20 insurgent and terrorist networks present or operating in the Afghanistan-Pakistan region, including IS, the Pentagon said.

“In areas where the government has limited influence and control, IS attempts to emerge and expand there,” Ateequllah Amarkhail, an analysts and former Army general in Kabul told VOA.

Hit-and-hide strategy

IS has also claimed responsibility for several recent attacks in urban areas, however, with a hit-and-hide strategy that is proving effective. And it is engaging too in more skirmishes with U.S. forces that initially were sent to the country to help Afghan forces halt the spread of Taliban.

Three American service members based in eastern Afghanistan were killed in April during operations targeting IS militants, according to the Pentagon.

“ISIS-K remains a threat to Afghan and regional security, a threat to U.S. and coalition forces, and it retains the ability to conduct high-profile attacks in urban centers,” the Pentagon said. (VOA)