CALCUTTA, India, June 2 (UPI) -- Worried by the potential security threats that could rise from allowing Chinese telecom companies' to become deeply involved with the country's telecom sector, the Indian government is planning to put on hold the India expansion plans of Zhongxing Telecom Co (ZTE) and Huawei Technologies, the two largest telecom equipment makers in China.
Both these companies have operations in India and are keen to pump in substantial investments to participate in the development of the world's fastest-growing telecom market.
According to Times News Network, a local news agency, reacting to the objections from the country's intelligence agencies, the Indian government has put on hold ZTE Telecom's plan to enter wholesale trading in telecom equipment and is even planning to conduct a detailed probe into the Chinese company's activities globally.
ZTE had sought permission to enhance its equity capital and enter after-sales service and wholesale trading of telecom equipment.
But according to the report, India's Foreign Investment Promotion Board has been instructed by its security agencies, The Intelligence Bureau and The Research and Analysis Wing, not to grant permission until the agencies finish their probe.
This is the second time in the past 12 months that the Indian security agencies have moved to slow down the India expansion plans of Chinese telecom companies. Last year in August the Indian government disallowed Huawei Technologies' $60 million investment proposal in its Indian subsidiary, Huawei Technologies India Pvt. Ltd, citing the same reasons.
Subsequently the state-owned Bharat Sanchar Nigam Ltd, which is the country's largest telecom company, cancelled a $31.16 million contract bagged by Huawei for supplying equipment for 1.05 million wireless telephone lines in partnership with two Indian telecom companies.
The agencies alleged that China's intelligence apparatus and military may be using its telecom companies (which both deny) to gather intelligence from the country, and even added that the telecom companies' equipments (denied too by them) are used for debugging operation in Chinese establishments in India -- like the embassies and trade representative offices.
Indeed, for years India's fears about Chinese companies -- especially the high-technology categories -- were just subterranean. But lately it seems that the paranoia about Chinese investments in the country's telecom sector, fears of cyberwarfare and the reluctance of exposing a strategic network to Chinese telecom companies has gone on an overdrive.
India though feels that it has reasons to be suspicious. According to the Ministry of External Affairs, Huawei company officials had been caught in the past for misusing the country's visa regulations and suspected intelligence gathering activities for China.
They say that their reservations against these companies stem from the fact that Huawei in particular also helps the Chinese military in its clandestine operations in Iraq and Taliban-ruled Afghanistan, as well as in Pakistan.
Nevertheless, India is not the only country where the going has been tough for Chinese technology companies. For that matter, with the latest clampdown on the two companies, India may have also accommodated U.S. intelligence suspicions that some of the Chinese companies are indulging in espionage activities globally.
Recently in May, in a move that China's Ministry of Commerce termed as "cold war thinking," the U.S. State Department decided that it would not use for classified work any of the 16,000 computers it bought from Lenovo, the Chinese computer company that bought over the personal computer arm of IBM last year.
In fact, it was the U.S. intelligence agency that, in 2001, first tipped off the Indian government about Huawei's murky ownership and suspected military ties.
But even as Indian authorities are working overtime to address their security concerns, critics have started asking how justified is India in keeping Chinese technology companies at bay.
According to R.R. Prasad, an Indian telecom expert for instance, "India has never permitted a foreign company to manage, operate and maintain the country's telecom network; hence Chinese telecom companies-supplied equipment poses little threat."
He added that most of the country's mobile networks, which are operated by private players, are entirely built on imported equipments from global multinationals, and all such imports that generally come in knocked down condition are assembled and extensively tested on site and by Indian engineers.
The China Council for Promotion of International Trade too feels that India's fears are overstated and the country may even be losing out on benefiting from the Chinese companies' technological strengths.
"A speedy resolution will help in improving business in the sector," said Wang Jinzhen, CCPIT's vice secretary general. "The core strengths of the Chinese companies are in transmission, switching, and access to strong in telecom research and development. Huawei for instance has 15,000 software engineers all over the world including India."
Still, India appears to be adamant. Reportedly the country is now mulling a review of its foreign direct investment policy, which after years of wrangling raised the FDI in Indian telecom from 49 percent to 74 percent in 2005.
