CHINA MAKES FORAY INTO MAURITIUS / THE FINANCIAL TIMES ( HIGHLY RECOMMENDED READING )

China makes foray into Mauritius

By James Lamont in New Delhi

Published: January 25 2010 03:11

China’s state-led approach to foreign investment is muscling India aside in its traditional “backyard” by investing $700m in a special economic zone in the Indian Ocean island of Mauritius to service Beijing's expansion in Africa.

Ramakrishna Sithanen, the vice-prime minister of Mauritius and minister of finance, said China was “extremely aggressively” pursuing its objectives in Africa via Mauritius with a wave of strategic investments on the island.

He said China’s “different approach”, which forcefully combined business and government interests, was in contrast to India’s more fragmented style that had less backing from the state.

So strong was his government’s relationship with Beijing that he said the island had been able to call on the personal intervention of Hu Jintao, China’s president, to sort out problems.

“We were having some difficulties. We called ... the president of the People’s Republic of China and we resolved the problem,” Mr Sithanen told the Financial Times on a visit to New Delhi.

China’s participation in Mauritius is a key part of the island’s diversification away from a sugar cane and tourism economy into logistics, information technology and financial services. There are plans to build a logistics and services hub in the economic zone, together with a university and an oceanographic research centre.

Mr Sithanen said the Mauritian government had secured China’s consent that the economic zone would not be exclusively for Chinese companies but could be used by others seeking to invest in the region.

The Mauritian government is marketing itself heavily to both China and India, the world’s two fastest-growing large economies, as the “gateway” into eastern and southern Africa.

Mauritius is already important to the Indian economy as much of India’s in-bound foreign investment is channelled through the offshore financial centre. Mauritius, which has a population mainly of Indian origin, also plays a part in India’s maritime dominance of the Indian Ocean.

However, China’s growing relationship with Mauritius and other Indian Ocean countries, together with Beijing’s strengthening naval power, threaten to dilute India’s influence in the region, according to some defence analysts.

Vice Admiral PS Das, former commander-in-chief of India’s Eastern Naval Command, said Chinese port developments in the region were for the civilian purposes of trade and securing energy supplies. But he warned “they could be turned over to military facilities”.

“Chinese naval power in this part of the world will only increase. We need to do our own thing to increase our own power,” he said.

Some Indian officials lament that New Delhi has been slow to prioritise its relations with Africa, where a large Indian diaspora resides in countries such as South Africa and Kenya.

They say that India’s assistance to Africa has been considerable over the decades but has been made in piecemeal ways that have denied it the same impact as China’s growing interests in recent times.

One former Indian diplomat said the Foreign Service’s high-flyers were usually not sent to Africa. But he said that reports penned 20 years ago, when India had a deeper engagement with Africa, were now being dusted off as the government woke up to the potential opportunities Africa presented to India’s growing economy.

“It’s easier to make friends when you are not in desperate need to do so,” he said.

Copyright The Financial Times Limited 2010.