June 14, 2017 11:51 pm JST

The SCO welcomes rivals into its fold

Membership for India and Pakistan raises bloc's profile, but may invite friction

ISSAKU HARADA, Nikkei staff writer and GO YAMADA, Nikkei senior staff writer

Indian Prime Minister Narendra Modi, far left, and his Pakistani counterpart Nawaz Sarif, far right, pose with other leaders at the Shanghai Cooperation Organization summit in Astana on June 9. (Pool) © AP

ASTANA/TOKYO -- India and Pakistan have joined the Shanghai Cooperation Organization as the bloc's first new members in its 16-year history. But while the addition brings the SCO a new level of international relevance, it may also invite internal upheaval.

The SCO, which was founded in 2001 by China, Russia, Kazakhstan, Uzbekistan, Tajikistan and the Kyrgyz Republic, formally admitted India and Pakistan into its ranks at a two-day summit in Kazakhstan's capital, Astana, in early June.

The newcomers bring the organization's total population to more than 3 billion, or about 40% of the world's total, and its combined gross domestic product to around 20% of global GDP. Geographically, the SCO now stretches from the Far East to Central Asia to South Asia.

SHIFTING PRIORITIES  

The SCO's initial objective was security, but cooperation has since expanded to the economic field. The participation of India and Pakistan is expected to spur greater cooperation in natural resources and infrastructure development, and encourage trade and investment.

But the two countries have been at odds over the Kashmir region for decades. This animosity poses a significant risk for the SCO, which requires unanimous agreement when making decisions.

"I am convinced that as the members of the SCO, India and Pakistan will not just get closer to the resolution of certain minor problems, but will solve them," Belarusian President Alexander Lukashenko said. Belarus is one of the countries with observer status at the SCO.

For India, the biggest advantage in joining the organization is access to Central Asia. Prime Minister Narendra Modi has adopted an "omnidirectional" approach to economic diplomacy, and Central Asia is an important piece of that puzzle, as are Indian Ocean nations. Modi toured five Central Asian countries in July 2015 and promised economic cooperation.

Rupakjyoti Borah, visiting research fellow at the National University of Singapore, said, "Membership [in the SCO] can be a useful step toward resource-rich Central Asian countries. Of course, India has concerns it could be isolated in the region."

ONGC Videsh, the overseas business unit of India's state-run Oil and Natural Gas Corp., has been developing an offshore field in the Kazakh region of the North Caspian Sea. In March, Pakistan and Afghanistan started front-end engineering and design for the long-awaited Turkmenistan-Afghanistan-Pakistan-India, or TAPI, gas pipeline project. The 1,800km-long project is estimated to be worth $10 billion. India has apparently concluded that teaming up with China and Pakistan will help it become involved in other expected projects in Central Asia.

Diplomatic relations between India and China are tense -- the two exchanged fire in 1962 in a border conflict. But they have close economic ties: China is India's largest trade partner, and many Chinese smartphone makers and IT companies are doing business in the subcontinent. Although India did not send a delegation to the Belt and Road Forum held in May in Beijing, it is a member of the China-led Asian Infrastructure Investment Bank and has an interest in securing Chinese investment.

Beijing is likewise keen to tap India's economic vitality. The Chinese Foreign Ministry announced that President Xi Jinping and Modi held talks on the sidelines of the SCO summit on June 9 and agreed to boost cooperation in a wide range of fields within the forum's framework. The ministry quoted Xi as saying that he wants to enhance mutual political trust, while Modi reportedly stressed that the two sides should tap into the potential for cooperation.

The SCO's shift in focus to economic cooperation was a factor in India's admission to the bloc. At the SCO Council of Heads of Government meeting in the Kyrgyz capital of Bishkek last November, Chinese Premier Li Keqiang presented a six-point proposal for accelerating regional economic cooperation. These included boosting regional trade and facilitating investment, establishing an SCO free trade zone, and taking advantage of regional financing platforms. Prospective projects include joint development of infrastructure, such as power grids and roads.

The stalled South Asian Free Trade Area also played a part in India and Pakistan gaining membership. The SAFTA connects the eight members of the South Asian Association for Regional Cooperation -- Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka -- but the free trade initiative has been stymied by fraught bilateral ties between its two most important members. A free trade zone within the SCO, the thinking goes, could supplement the SAFTA.

MORE IS BETTER  

Pakistan, for its part, is looking to attract even more foreign investment. It already stands to benefit greatly from the China-Pakistan Economic Corridor, a huge China-led infrastructure project with an estimated investment of over $50 billion.

The southern Pakistani port of Gwadar was developed with Chinese money. A container terminal has been completed, and a power station and a road leading to the port are under construction. Gwadar will be used mainly as a gateway to the sea from inland China. But, an influential Pakistani politician said, "the port facilities are not only for Chinese companies. They are also open for Central Asia's companies."

"The greater South Asia is already emerging. This includes China, Iran and the neighboring Central Asian republics," Mushahid Hussain Syed, a lawmaker in Pakistan's ruling party, told reporters during his visit to the U.S. in late 2016, indicating that Pakistan chose to join the SCO when it did in order to weaken India's influence in South Asia.

SCO leaders discussed the possibility of granting Iran membership as early as at its next summit, to be held in Beijing next June. Iran's admission would give added momentum to regional cooperation in oil, natural gas and other energy projects.

The World Bank in a report last year described South Asia as a global growth hot spot. China is looking to invest there in hopes that the region will soak up some of its excess production capacity. Resolving the India-Pakistan rift and creating a more stable South Asia would serve China's national interest. "The SCO will become an ideal platform for members with disputes to solve their problems bilaterally based on the Shanghai Spirit," Li Wei, an anti-terror expert at the China Institute of Contemporary International Relations told the Global Times in early June.

Modi and Pakistani Prime Minister Nawaz Sharif greeted each other during the welcome ceremony in Astana on June 8. The two have not held talks since December 2015.

China was a major presence at the summit, thanks in part to its Belt and Road Initiative, which aims to create an economic zone linking Asia and Europe. A statement released after the meeting said, "The heads of state welcomed the One Belt One Road initiative and, praising highly the outcomes of the Belt and Road International Cooperation Forum held in Beijing on 14-15 May 2017, spoke in favor of implementing them."

Xi met Russian President Vladimir Putin on June 8 on the sidelines of the summit. Russia's TASS news agency and other media outlets reported that Xi described the bilateral ties as strategic and stable, and said they are of great significance to the peace and stability of the world. Putin said Xi's visit to Russia, scheduled for July, will be a major event in bilateral relations.

Iranian Foreign Minister Mohammad Javad Zarif and U.N. Secretary-General Antonio Guterres also attended the summit. The SCO has raised its international profile by admitting India and Pakistan. Its challenge now is to manage the tensions and competing ambitions of its members as it attempts to move forward.

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