By choosing to make Bhutan the first foreign country to visit, a month after assuming the office of Prime Minister, Mr > Narendra Modi sent a very strong message. The significance of the visit lay not in what Mr Modi said, but the symbolism of him making a visit to our smallest neighbour, which, not coincidentally, also sits in the middle of our 4,200 kms long border dispute with China. It is also the only country whose security infrastructure is most integrated with ours. During his visit, Mr Modi laid the foundation stone for the 600MW > Kholongchu Hydro-electric project . Hydro-electric power generated by Bhutan’s run-of-the river dams is the economic bedrock of the India-Bhutan relationship. India has helped finance the dams through a combination of aid and loans and buys the excess electricity at very low prices. It is the best example of a win-win in economic diplomacy that India has. Mr Modi also stressed how tourism made for good neighbours while – gesturing at other countries – terrorism made bad ones.
All of this was new to Mr Modi who was, until this visit, a stranger to Bhutan. If anything it is the Nehru-Gandhi family that has nurtured the relationship, with Nehru and Indira making an epic trek by horse, yak and foot to Bhutan in 1958. It was Indira Gandhi who supported Bhutan’s admission in the United Nations, and during the coronation of the Fifth King of Bhutan, Jigme Khesar Wangchuck, Sonia Gandhi’s whole family were among the select guests. The fact that Mr Modi chose to build on this relationship rather than shy away from the Nehru-Gandhi dynasty’s work was statesman-like. The fact that he made it his first country to visit gave an additional boost, making comparisons with Nehru’s 1958 visit inevitable. Here was an Indian Prime Minister giving pride of place to Bhutan, and signalling a personal commitment to the ties that bind India and Bhutan together.
In the year since his visit, each one of the major aspects that tie India and Bhutan together – strategic, financial and cultural – has suffered a serious blow, one by this government, one as an outcome of previous governments, and one by chance. In all of this the personal commitment signalled by Mr Modi during his first visit has been missing, casting doubts on whether the visit by him had any meaning beyond a beautiful set of photo opportunities.
Big Talk and Blowback
The most important blow to the relationship was by the intemperate remarks by Minister of State for Information & Broadcasting Rajyavardhan Singh Rathore in June, after the cross border raid by the Indian Army into Myanmarese territory. His claims, that the Indian government was now pursuing a new policy of “hot pursuit”, and that “we will carry out surgical strikes at the place and time of our own choosing” were both wrong about the past, as well as worrying about the future. Investigating his claims, the media started digging up details of past cross-border operations. One of the most prominent ones was the 2003 operation in Bhutan against National Democratic Front for Bodoland (NDFB), United Liberation Front of Assam (ULFA) militant and Kamtapur Liberation Organization (KLO) camps in Bhutan.
Operation All Clear was conducted by the Royal Bhutanese Army after eight years of negotiations failed to convince the militants to move their camps out of Bhutan. The Fourth King, Jigme Singye Wangchuck, accompanied by one of his sons, the current crown prince, Jigyel Wangchuck, personally took part, and this operation has been upheld by the Bhutanese as a sterling example of how the country was willing to risk the life of its armed forces, along with that of the King and one of his sons, to battle India’s enemies. Although there have long been knowledge of some Indian assistance – those who served in the Indian armed forces speak of coordination of operations over three-four weeks – both the Indian government and the Indian Army, respecting Bhutan’s sovereignty and the courage of its royal family and military, officially never spoke of it. That silence has now been broken, deeply insulting the sacrifices that Bhutan has made, as well as making further cooperation problematic. There exist rumours of North-East militant groups infiltrating Bhutanese territory, but if this is the way that the Indian government will behave, how happy will Bhutan be to have its sovereignty encroached upon, and its dignity dismissed in future operations?
A Ruinous Economic Tangle
The second major problem is not of this government’s making, but may be far more important. According to The Bhutanese newspaper a joint report by the Indian Comptroller and Auditor General of India (CAG) and the Royal Audit Authority of Bhutan (RAA) indicates major problems in the awarding of the 1200 MW Punatsangchu I hydroelectric dam. According to the report the Geological Survey of India knew that there might be “geological surprises” in the area, but the project was awarded to the Indian infrastructure giant Larsen & Toubro without investigating more into the extent of these surprises. Remedial measures will now cost an additional 3.5 billion Ngultrum (Bhutan’s currency is pegged to the Indian rupee, at 1 Nu = 1 INR), taking the cost of the project from Nu 94 billion to Nu 97.5 billion (at the grant of the contract the project was due to cost less than Nu 40 billion, but cost overruns and delays have led to more than double the cost already.) Moreover, the completion date of the project will be delayed, moving from November 2016 to April 2019, with the foregone profits being in the range of Nu 39 billion. The Bhutan Broadcasting Service reported that the Indian government had indicated accepting these costs, but this ignores the fact that the project is paid for by both grant and loan, with the loan accounting for 60 per cent. In other words Bhutan will have to accept the major share of the losses, as well as the higher amount of interest to be paid on the loans used to build the dams.
Although the hydroelectric dams are a win-win for the two countries there have always been some problems. For example as much of the material for the dams comes from India, a recurrent balance of payment crisis has impacted Bhutan’s economy over the last three years as rupees flow out at a much faster rate than are brought in by Bhutan. According to Bhutan’s Royal Monetary Authority total external debt in December 2014 was 112 percent of the country’s GDP, with the rupee debt accounting for 75 percent. The debt accrued by loans for hydropower dams accounted for 86 percent of Bhutan’s rupee debt burden. More problematic than delayed profits or a financial crisis that may be temporary are the possibility that there may be limited profits after all of this pain. This year, Mr Modi’s first in office, has seen a massive slump in electricity demand. Part of this is the problem of electricity loss due to bad transmission, and part of this is because of low industrial demand. Either way, it breeds fears in Bhutan that the massive investments it is making, in billions upon billions of Ngultrum, will be for nothing if India does not buy the power.
Losing Goals from Football to Corruption to China
Lastly, in the area of culture, India has suffered a defeat that is largely hidden from the public eye – in the field of football. While tourism may not be an area that India’s North East and Bhutan can connect on, football definitely is. The King’s Cup, an annual event held in Thimphu in 2014 and 2015, draws some of the finest clubs in South Asia, and sees a full capacity crowd at the Changlimithang stadium, with a seating capacity of about 25,000 – the full population of the city is about 110,000. This year Bhutan faced off against China in Changlimithang stadium in a World Cup qualifying match, in the “Battle of the Dragons”. Bhutan lost, 6-0, but it was a massive event, and created a great deal of goodwill between the two countries. India, on the other hand, lost 2-1 to Guam, population 160,000.
A football game is unlikely to change India-Bhutan, or Bhutan-China relations, but shared culture and respect go a long way. There has always been a strong minority in Bhutan which has considered that the “natural” partner for Bhutan is China, not India. It was China’s aggression in Tibet, provocations against Bhutan, and the lack of economic opportunities that have largely made sure this relationship has not taken off. This is changing as China steps up its soft power diplomacy; as its rich increasingly travel to Bhutan as tourists, and as the massive investments in Tibet make that area a possible access points for the nascent Bhutanese traders. Mr Le Yucheng, the Ambassador of the People’s Republic of China to India, made his first trip to Bhutan last week. His editorial in Bhutan’s Kuensel newspaper is full of warmth, and the Bhutanese press reported the trip with a great deal of goodwill, with a special reference to the football game between the two countries. Another area of convergence is the Chinese government’s much heralded crackdown on corruption. Bhutan faces similar challenges, and the Bhutanese government has just replaced its Foreign Minister even after corruption charges against him were proven false in a court of law. The Indian example currently looks very different.
Events versus Relationships
These problems are not major ones as yet for India-Bhutan relations, and India sends its finest Foreign Service officers to serve in the country, so they will manage the relationship. There has also been one important success story. The signing of the Motor Vehicles Agreement (MVA) among the BBIN countries – Bangladesh, Bhutan, India and Nepal – is likely to be a great benefit to all the countries involved, if the trade modalities are worked out. These will take time and require effort. The question is whether this government has the capability to manage relationships. So far the great promise inherent in the Indian Prime Minister choosing Bhutan as the first foreign country to visit has been belied by the government’s mistakes and neglect. On his trip to Bhutan, Modi tweeted, “World talks GDP but in Bhutan its about National Happiness. Am sure having India as a neighbour would be 1 of the reasons for the happiness.” In reality this is not turning out to be true, as this government has shown that while it is supremely competent when choreographing events, it is far less competent at managing relationships, turning high hopes into creeping doubts.
