Update Country Report Maldives 04 Dec 2020

• The Economist Intelligence Unit expects the incoming US administration to undertake a more comprehensive foreign policy approach towards South Asia.
• We believe that the US government's reluctance to increase military deployment in Afghanistan will lead to a more assertive Taliban, causing the US to deepen engagement with Pakistan to counter the rebel group.
• The US will expand its interaction with India and the rest of South Asia to counter China's growing influence in the region, under the umbrella of the "Indo-Pacific" strategy.

We expect the policies of the US president-elect, Joe Biden, towards South Asia to be largely in line with those of his predecessor, Donald Trump. The region plays a central role in the Indo-Pacific strategy set out under the Trump administration in 2017, by which the US hopes to counter China's increasing influence in the region. Mr Biden's incoming administration has already adopted the Indo-Pacific phrasing in its foreign policy statements, suggesting that the policy will be cemented.

Nevertheless, there will be some changes in approach under Mr Biden. The president-elect is committed to a more comprehensive foreign policy approach than the largely strategic engagement with South Asia under Mr Trump. He has also hinted at a more value-based foreign policy, suggesting that human rights will be accorded a higher priority. Under Mr Biden, US policy in South Asia will be dominated by two issues: the conflict in Afghanistan and the perceived need to increase engagement with India and other countries in the Indian Ocean region-specifically Bangladesh and Maldives-to counter the growing influence of China.

A more assertive Taliban

Mr Biden, as he did during his time as vice-president, favours a reduced US military presence in Afghanistan. However, we expect the incoming administration-unlike that of Mr Trump-to accord a high priority to ensuring a reduction of violence by the Taliban. Nevertheless, Mr Biden's policy towards Afghanistan will be constrained by the current administration's effort to reduce personnel levels to 2,500 by January 2021, days before Mr Biden is sworn in.

We expect the incoming administration to maintain the number of personnel in Afghanistan that it inherits from the Trump administration for counter-terrorism purposes and to be reluctant to increase it meaningfully. A downsized US military presence will lead to the Taliban becoming more assertive against non-US forces, in a bid to strengthen its hand in the peace talks. The outlook for these talks will remain dim, as there are significant differences on both sides. Nevertheless, there remains a risk that the Biden administration will send in more troops if the Taliban breaches key terms of the agreement (through, for example, continued collaboration with Jihadi groups such as al-Qaida or an irreversible breakdown in peace talks between the Taliban and the Afghan government).

Increased reliance on Pakistan

After relatively frosty US-Pakistan relations in the first half of the Trump presidency, signs of rapprochement emerged in 2019 as a result of Pakistan's role in supporting the US-Taliban deal and bringing to bear its influence over the rebels. We expect the Biden administration to continue to defuse relations with Pakistan, as it looks for the latter's support and influence in facilitating the peace process in Afghanistan and preventing a return to large-scale violence.

Pakistan will face increasing criticism over human-rights violations and its relations with various extremist groups as the Biden administration pursues a more values-based foreign policy. But for now, we do not expect this to translate into meaningful action against the Pakistani government, as the administration prioritises bilateral efforts to counter the Taliban. However, there is a downside risk that ties could deteriorate again in the coming years; if the situation in Afghanistan worsens considerably, the US and other NATO countries could increase pressure on Pakistan to curb its support for the Taliban (and other non-state actors) by restricting foreign investment and multilateral and bilateral lending support. We expect such measures to be used only as a last resort; they have proved ineffective in the past, and they would affect Pakistan's fragile balance-of-payments position.

Broadening of relations with India

US efforts to defuse tensions with Pakistan will not act as an impediment to US relations with India. One success of the Trump administration was, to some extent, removing the issue of Pakistan from its bilateral relationship with India. At the same time, its deteriorating relationship with China has encouraged the US to take steps to shore up its influence elsewhere in Asia, and cultivating closer ties with India has been a priority. We expect these trends to be maintained under the Biden presidency. The strengthening of relations with India enjoys support from both political parties in the US, as seen by the signing of foundational defence agreements between the two countries under successive US governments.

Mr Biden's more comprehensive approach to countering China will challenge the Indian diplomatic establishment's inertia over its long-standing policy of non-alignment. We expect Mr Biden's approach, coupled with border tensions between India and China, to lead India to take much more of an overt stance towards the US, permanently increasing India-China tensions. A stronger Indian presence in the Quadrilateral Security Dialogue (the Quad, an informal security framework between the US, Japan, Australia and India) will probably be one manifestation of this.

Mr Biden's more nuanced approach will also lead to improvement in various sectors other than strategic co-operation. Trade relations will be much more stable under the incoming administration, and we expect the US and India to agree a trade deal in 2021 or 2022, thus reducing tariffs applied during the Trump presidency. A less stringent US work visa policy will also be of benefit to Indian information technology (IT) firms that rely on it for operations in the US. Climate policy co-ordination will also improve as the US, under Mr Biden, re-joins the Paris climate deal, under which India receives investment into its renewable-energy initiatives. However, this would also increase the pressure on India to accept a more ambitious carbon-reduction target, which it would be reluctant to do.

One area of disagreement between the US and India will be human-rights issues, which will face increased scrutiny under the Biden administration-especially in regard to the Indian government's policy on Kashmir and in relation to the Citizenship Amendment Act. However, as with Pakistan, we do not expect such criticism to come at the cost of the bilateral relationship. This is because the incoming administration will prioritise strategic relations with India in an effort to counter China, which will remain the primary point of engagement.