Bottomline | Master Bluff

By conducting diplomacy on the crest of our economic well being alone, we are bluffing ourselves

Pravin SawhneyPravin Sawhney

I am struck by the different approaches adopted by China and India to build indigenous aviation. For instance, as reported in the International Herald Tribune, Jeff Immelt is the chief executive of General Electric, the 130-year-old US industrial engine giant that signed a joint venture agreement in commercial aviation during the recent visit of Chinese President Hu Jintao to the United States. It seemed business as usual until you place Immelt’s understanding of China in context. Reported in the International Herald Tribune newspaper, he says that the biggest “Chinese challenge is their adaptability. It is the speed with which they move, it is the unanimity of purpose, it is the productivity of thought.” Adding, he says that when he visits his interlocutors at the ministry of rail in Beijing, the bureaucracy are at work on Sunday.

While China’s lucrative commercial aviation market, expected worth USD 400billion over the next two decades, cannot be overlooked, predicament confronts both the US government and its industry. Given the Chinese condition that foreign companies provide high technology and know-how to gain access to the Chinese market, the US government worries about the close ties between the Chinese commercial and military sectors and their expertise at reverse-engineering. The US industry is jostling with the risk-and-reward calculations: today the Chinese need GE engine for its new C-919 airliner; tomorrow with the acquired know-how, the same airliner will give competition to Boeing and Airbus by being able to produce good quality for less money. Given that export-led growth is the key to national power, China is indeed moving furtively.

To recall another example of Chinese’s purposefulness, they probably gained the most with the demise of the Soviet Union. For a full decade until President Vladimir Putin assumed office in 2000, Russian top nuclear and military scientists were in disarray; out of jobs and many on verge of penury, they were an available commodity. China transported many of these, gave them shelter and dignity; in return China got ignited minds to jump-start its archaic scientific and military complex. China bought less and acquired more by its innovative talent in reverse-engineering. Similarly, the European Union embargo on military sales to China since the Tiananmen massacre in 1989 is hurting Europe more than it bargained for. Europe cannot sell its military wares, but China still manages to garner technology through fair and not so fair means.

India’s case is just the opposite. Given the traditional warm ties between India and the Soviet Union, India stood ahead of China in reaching out to Russian talent to assist in indigenous military-industrial complex. We did nothing of the sort. Worse, to Moscow’s discomfiture, the Indian media, with establishment’s backing, went gung-ho starting with defence minister Sharad Pawar’s tenure in 1991 crowing about India’s growing ties with the US. Early acquaintance between the defence set-ups was portrayed as a cosy relationship. Word was leaked that the US will soon give high-end defence technologies to us. The truth is that we never desired it desperately as the Chinese have done, as otherwise we would have worked around it in all these years. We ought to appreciate the stark truth that China’s rise is because of its government, while our fitful progress has largely been despite the government. This suggests enormous talent in our private sector, and hence the imperative to provide a level playing field to it in resurrection of the national defence industry. This has not happened because the government for ulterior reasons does not want to lose control over the hen that lays the golden eggs. This is not all. Given our lucrative market, we should make transfer of technology necessary for doing business. This surprisingly has been kept outside the purview of offsets in defence contracts, and transfer of fabrication is being passed over as technology transfer. One reason why this is being done is because the government is conscious that public sector entities do not have the capability, talent and infrastructure to absorb high-end technology. To make things more difficult for technology transfer, foreign companies have little incentive to do so. It is ridiculous to expect foreign companies with 26 per cent foreign direct investment to part with their high-end technology without a decisive say in management.

Take the case of relations with the US defence industry. Years ago, a senior Raytheon executive who had served in the US state department told me that Indian defence will find it difficult to meet the Chinese military challenge without US’ technology. He had a point. However, to get US’ technology, we are required to sign certain defence agreements mandatory under US domestic laws. Moreover, as we do not fall in the category of US allies like Japan and South Korea, we are required to politically align ourselves to US’ strategic goals in the region. Both conditions are anathema to us as we desire an equal relationship with no strings attached. This will never happen. There is thus a drift where on the one hand, we are doing little to strengthen our defence industry. On the other hand, we are unsure of what should be a mutually acceptable relationship with the US. Consequently, we are bluffing ourselves by conducting diplomacy on the crest of our economic well-being. Without a credible defence industry, whose litmus test is exports, few will take our diplomacy seriously.


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