Bhutan, China and India on border, fuel and economy

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Govindarizal-150x150Bhutan, China and India share several outstanding issues and the border issues top the list. Earlier this year in August, Chinese Vice Foreign Minister Liu Zhenmin led a delegation to Bhutan for the 21st border talk. He also talked on opening Chinese embassy, increasing tourist flows, increasing exchange visits, among others. Before visiting Bhutan, VFM Liu’s delegation visited India, met the officials there including Sujatha Singh, the Indian Foreign Secretary, who had been in Bhutan just a week back. While in India, Chinese delegates engaged their Indian counterparts with the issues of line of control in Ladhak region where the armies of two countries had a face-to-face situation for three weeks in April 2013, import of buffalo meat from India, exchange visits and formation of BCIM (Bangladesh-China-India-Myanmar) economic corridor. On the issue of Bhutan, Chinese delegation clarified that it would deal bilaterally, means without India. The profiled Chinese delegation flew from India to Bhutan to sort out border mismatch and offer some tips of financial support to the new government in Thimphu for a price.

A week prior to Sujatha-Liu meeting, Sujatha Singh and Shivshankar Menon (National Security Adviser) delegations were in Thimphu to study the strength and orientation of Bhutan’s newly elected government.

In China, VFM Liu is becoming an unfailing officer in handling border disputes. After the change of guards in Beijing in March 2013 VFM Liu made remarkable progress in China’s bilateral relations with Myanmar, Thailand, Japan, Philippines, Nepal and India. Bhutan-China border issue remains to be solved.

Bhutan-China border talks that began in 1972 have taken many important decisions. Since 1984 the talks took place without the presence of Indian delegates in Bhutanese team unlike in the past. In 1998, the two countries signed “Agreement on The Maintenance of Peace and Tranquility in the Bhutan- China Border areas-1998”. During the period of transition from the fourth king’s abdication to fifth king’s coronation with first democratic election in between, the first interim government for first election published the country’s map without Kulakangri, which is Bhutan’s tallest peak. And, the news unnerved the Bhutanese populance, yet, had to agree willi-nilly. It unofficially looks like ceded to China. However, China had been seeking the 269 sq km lands in the western Bhutan including Dramana, Shakhatoe and Sinchulung for which China would barter 495 sq km of Pasamlung and Jakarlung in Bhutan’s North, a vivid evidence of the Bhutan-China border mismatch. For five years (2008-2013) the government neither accepted the idea to exchange lands nor tried to regain the cartographically ceded land. This time too, Bhutan-China foreign minister level meeting could not come to any conclusion. FM Rinzin Dorji, who hails from Sarbang constituency, which too has unsolved border issue with India, led the Bhutanese team. After a humble deadlock, the VFM Lui resorted to the audience of the Fourth king, who was behind the secret cede of Kulakangri and is above the law. After the discussion, the teams seem to have agreed to take up the demarcation of border of Pasamlung and Jakarlung. The result of the settlement in the northern border will determine the strategy and course of action for settling the differences on the western border.

The Vice foreign minister of China Liu Zhenmin with the fourth monarch of Bhutan Jigme Singye Wangchuck. Zhenmin called on K4 on August 22, 2013 in Thimphu (Photo: MOFA-PRC)
The Vice foreign minister of China Liu Zhenmin with the fourth monarch of Bhutan Jigme Singye Wangchuck. Zhenmin called on K4 on August 22, 2013 in Thimphu (Photo: MOFA-PRC)

Bhutan-China border settlement is under India’s scrutiny; Bhutan alone cannot decide to further cede the land from its west and expect India still friendly. The intimacy of Bhutan-India relationship was not realised seriously until July 1, 2013, when India declared end of subsidy on petroleum and cooking gas that it was providing to Bhutan.

Recent recession in western countries was instrumental in flowing money out of US to developing economies including India. It initiated a confidence in the economic growth. The US changed its policy for financial resilience and back flow started making the developing economies vulnerable once again. Rupee has plummeted low with a rapid decline since May 2013. It is lowest since 1991. India may have to resort to IMF like financers for rescue from it’s at least $ 170B short term loans to be paid by March 2014, unless it decides to roll its US$ 180B reserve. Economists in Delhi were censoring the less productive public investments. Cut on the subsidy on fuels given to Bhutan was a small cut for India but it caused a political topsy-turvy in Bhutan. It had a direct effect on Bhutan’s national election on July 13. The ruling party lost two third of the seats secured in 2008 election, when it had 45 out of 47 seats in the lower house, the national assembly. The withdrawal also showed that Bhutan had Nu 200B only at its coffer for the new government to survive. The new government has all first timers in its cabinet, which makes it difficult to win the trust of the economic player(s). The border issue is pegged with the financial graces.

By June 2013, the banks in Bhutan were without enough Indian Rupee notes to keep the bank counters open. India took long time to respond to Bhutan’s request for Indian currency assistance to alleviate the rupee crunch. The government responded by selling its dollar reserves. On June 26, 2013 Bhutan government sold USD 200M earning INR 11.93B enough to meet the election costs. India saw friendship with Bhutan cracking. On the same day, India offered INR 3B as excise duty refund (EDR) of fiscal year 2010-2011. Government of India (GoI) refunded excise duty paid by Bhutan to import goods from India. Manufactured goods purchased from India by Bhutanese importers were given EDR, 100 percent for goods purchased directly from factories and 40 percent for goods bought from market. Four days later, it slashed the subsidy.

When the new government took the office in Thimphu, Indian leaders were in Bhutan to judge the new government’s orientation. The delegates from China reached there to iron out the creases in the border and to open her embassy. Thimphu government has limited options to satisfy both neighbours whatsoever, it must listen to the Bhutanese people- provided if democracy should benefit people to its true definition.

Editor’s Note : Govinda Rizal, originally from Lodrai, Gayglegphug is one of the Contributing Editors of the Bhutan News Service. He writes about the Bhutanese people in the country and in exile, and about Bhutan’s international border. He blogs at: http://redroom.com/member/govinda-rizal