Editorial

Coinciding with the Non Aligned Movement summit today, and in the immediate backdrop of a British Government travel advisory warning its citizens on visiting Sri Lanka and Indian displeasure over certain events in the island, the visit of the Chinese Defence Minister has acquired added significance.

Not only is China a major global financial powerhouse, but its strategic interests in the region are under close scrutiny by the world. Thus, its long-term interest in Sri Lanka comes into focus.

This is a rare high profile visit of a Chinese leader. During the long years of excellent diplomatic relations between the two countries, a Defence Minister from China has never visited Colombo, even though senior Sri Lankan Defence officials and the President as Minister of Defence have made frequent stops in Beijing. These visits reached a peak during the final phase of the ‘war’ to secure arms and ammunition to combat and overcome the armed secessionist movement when many other countries (with the specific exception of Pakistan) refused to supply the arms.

The armoury of the People’s Liberation Army (PLA) was liberally opened and China offered the weaponry on ‘tick’ (credit) so that the secessionist movement could be decisively defeated on the battlefield. For this, Sri Lanka owes to China an eternal debt. Its help may not entirely be holistic, but ‘a friend in need is a friend indeed’. It was not a time to argue if China’s support was to off-set India getting a foothold in Sri Lanka. Without China’s military assistance (it was not aid, but it was available) to successive Sri Lankan Governments, terrorism would not have been overpowered in this country.

The assistance has now turned from military to economic. Similar to the military assistance at a time of dire need, China seems to have extended that policy to granting economic credit in the post-war era. Whether this can be viewed with the same warmth is, however, another matter.

The incumbent Sri Lankan Government is depending heavily on Chinese economic assistance; almost to the point of overdependence. It is also giving the Government confidence (sometimes overconfidence) to ask the West to ‘go to hell’. It can even use this clout to bargain on the leverage India keeps using – sometimes as if Sri Lanka is a Union Territory of its own.
China provided as much as a quarter of Sri Lanka’s foreign borrowings last year (2011). Chinese companies have bagged, so far, at least 14 major infrastructure projects in the country. They seem to have an edge because they bypass tender procedures, emerging suddenly as single bidders. The procedural mechanism allows for high cost over-runs.

Our front page story gives more details of China’s economic footprint on Sri Lanka with as much as US$ 6.5 billion (Rs. 859 billion) being invested primarily in infrastructural projects. Its commitments for the past five years other than infrastructural investments have been US$ 2.12 billion (Rs. 277 Billion) of which 2.1 billion was repayable loans (not at any preferential rates of interest) only offering 4-5 years grace periods. Only US$ 24 million (Rs. 3 billion) has been outright aid given to Sri Lanka.
This massive taking of repayable loans has given rise to several questions among economists and others about Sri Lanka’s repayable capacity and its subjugation to China should these loan commitments be not met one day.

While some of these projects, like the Hambantota port project and the Colombo port expansion project may, arguably be long overdue development projects for Sri Lanka, whatever the controversies enveloping them, projects like the Norachcholai coal power plant have proven to be disasters imported from China. The plant is malfunctioning and closed down just three years after its installation under controversial and suspicious circumstances. For one, the plant is highly environment unfriendly; for another, it seems it’s a dud one that China has dumped on us.

There is also this buzz about investments in real estate by Chinese ‘companies’, especially in Colombo properties. It is the antithesis of transparency and Parliament, the conscience of the public purse, is completely in the dark on these transactions. Huge deals, involving billions of rupees change hands and it is not for nothing that these Chinese enterprises have been accused of passing ‘baksheesh’ under the table for the political activities of certain political parties.

The Chinese yuan has become a powerful international currency in recent years and it is prudent to take a good hard look at pegging the struggling Sri Lanka rupee to it, but no doubt, long term consequences need to be studied and a fiscal (not political) decision taken on it.

The one outstanding subject with China that Governments in Colombo do not like to mention for fear of antagonising and offending China is – Tibet. Sri Lanka may call itself the ‘Dhammadvipa’ (land of the Buddhist Dharma) and the protector of the purest form of Theravada Buddhism. The Government will have expositions of the sacred Kapilavastu relics, but will not issue a visa for the Dalai Lama of Tibet, the current face of Buddhism to the rest of the world, to visit and venerate at the ‘Temple of the Tooth’ in Kandy because of China’s vehement objections.

A Government that is proud of this country’s Buddhist heritage might win international acclaim and acquire merit if it can persuade China to relent. The Defence Minister of China may not be the one to decide, but being an influential leader of his country, he can surely take the message back to Beijing.

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