India, US, Japan play significant role in SL

1
771

The US Biden Administration has demonstrated a keen interest in Sri Lanka of late. With the arrival of the new US Ambassador, Julie Chung, who came during the worst financial crisis since Independence in 1948, Sri Lanka is seeing the three Quadrilateral Security Dialogue (Quad) countries comprising India, the US, and Japan (Australia expressed security concerns only on the illegal migration of Sri Lankans to Australia by boat) come in to play a significant role in Sri Lanka in the new geopolitical sphere focused on strengthening and on freeing the Indo-Pacific region from the potential threat of regional imbalance, mainly because of trade rivalry with China.

US, the Quad, and Indo-Pacific concerns

The Indo-Pacific strategy outlines US President Biden’s vision to more firmly anchor the United States in the Indo-Pacific and strengthen the region in the process. Its central focus is sustained and creative collaboration with allies, partners, and institutions, within the region and beyond it and that’s exactly what US Envoy Chung is entrusted to do.

At the Quad Joint Leaders’ meeting in Japan in 24 May 2022 held in Japan, it was pledged that they would be seeking to extend more than USD 50 billion of infrastructure assistance and investment in the Indo-Pacific, over the next five years. Prime Ministers Anthony Albanese of Australia, Narendra Modi of India, Fumio Kishida of Japan, and President Joe Biden of the United States – convened in Tokyo to renew their steadfast commitment to a free and open Indo-Pacific that is inclusive and resilient.

Since her arrival in Sri Lanka, US Envoy Chung has been meeting all factions of Sri Lankan society, political parties, and she has been tirelessly seeking support for Sri Lanka, including pushing the IMF. She is also using her Twitter handle to advocate for reforms, speaking out against attacks on peaceful protesters, and pushed for USD 100 million in medium-term assistance to Commercial Bank to help small businesses grow and addressed the Ceylon Chamber of Commerce, urging to drive economic growth with US trade partners.

Last week, the Envoy held productive meetings with Treasury Secretary Mahinda Siriwardana and Central Bank Governor Nandalal Weerasinghe about the present economic crisis. She said the US continues to support Sri Lankan efforts to work with international partners like the IMF to get SL back on the path to economic stability and growth. She also said the US continues to support Sri Lankan efforts to promote economic growth, while she met Prime Minister Ranil Wickremesinghe to explore ways to strengthen bilateral relations, and to discuss US efforts to provide millions of dollars in humanitarian assistance directly to low-income communities in Sri Lanka.

Sri Lanka is in the grip of a crisis. India, one of the Quad countries, demonstrated its strength over China. Despite being one of the most closed infrastructure developers under the Belt and Road Initiative (BRI), China has stated that funding is limited. Indeed, China played a significant role during the peak times of Covid-19 in 2020 and 2021. China’s slowdown gave India the advantage to get closer to Sri Lanka.

The Chinese Embassy on Thursday Tweeted the Chinese Government Spokesperson’s tweet that the first batch of rice has arrived to Colombo. They tweeted: “As a traditional friend and neighbour, China has been closely following the difficulties and challenges faced by Sri Lanka and feel deeply. We have provided support to the best of our capacity. The Chinese Government announced RMB 500 million emergency humanitarian assistance to Sri Lanka. It was the 1,000 MT of rice, the first batch of a total of 10,000 MT pledged by China.

On Wednesday, US Envoy Chung said US President Biden has announced additional assistance of USD 20 million to Sri Lanka, as well as nearly USD 12 million in recent US commitments in economic and humanitarian assistance, totalling USD 32 million from 16 June 2022 to date.

But the visit of the high-level delegation representing the US Department of the Treasury and the US Department of State from 26-29 June was more significant. The delegation comprised Robert Kaproth, Deputy Assistant Secretary of Treasury for Asia, and Ambassador Kelly Keiderling, Deputy Assistant Secretary of State for South and Central Asia who came in the interest of US President Biden, who has said he is very keen about the future of Sri Lanka and has instructed to stand with Sri Lanka. Their arrival focused on the present economic crisis in the country, the social crisis, and the progress of the ongoing discussions with the IMF.

Meanwhile, Hamilton Reserve Bank Ltd, a holder of Sri Lankan bonds, filed a lawsuit in the US District Court in Manhattan for breach of contract by failure to make the payment. The complaint draft’s Civil Action No. 1:22-cv5199 notes a breach of contract action arising from Defendant Sri Lanka’s default on its USD 1 billion 5.875 per cent International Sovereign Bonds due on 25 July 2022. The plaintiff owns bonds worth USD 250,190,000, which is more than 25.0 per cent of the total principal amount of the bonds. The bonds are subject to New York law and are enforceable in this Court. This dispute is also considered as an additional problem to Sri Lanka, which defaulted on its USD 52 billion debt.

Re-entry of Japan

The entry of Quad member Japan, after being humiliated over the Sri Lankan Government revoking their targeted East Container Terminal and the Light Rail Transport (LRT) system is not to miss.

It was Japan that conducted the Preparatory Survey for the Project of Development of the East Container Terminal in the Colombo South Port in Colombo and submitted the report in July 2021. Japan International Cooperation Agency (JICA), the Overseas Coastal Area Development Institute of Japan, Japan Port Consultants Ltd., and the Oriental Consultants Global Co., Ltd prepared the final report. The report said, GOSL submitted to the Government of Japan the official request for a Japanese ODA loan for the ‘Project for the Development of the East Container Terminal in the Colombo South Port’ on 12 September 2019 in accordance with MoC.

However, the new Administration, which took office after the Presidential Election in November 2019, announced that the BOT (Build-Operate-Transfer) method instead of the ODA loan would be adapted, to which the preparatory survey was conducted. In the later phase, however, changes in the situation surrounding the East Container Terminal resulted in a reduced possibility of utilising a Japanese ODA loan or JICA’s Private Sector Investment Finance scheme for the Project. For this reason, JICA decided to cut down the scope of the survey and to terminate the survey.

It was Prime Minister Wickremesinghe who expressed he would hold discussions with Japan to regain their confidence and secure their support and rebuild broken ties. Moreover, Minister of Ports, Shipping, and Aviation Nimal Siripala de Silva when he met the Japanese Ambassador last week expressed his regrets on the cancellation of Japanese projects and urged Envoy Hideaki, to invite investors to establish the proposed Trincomalee Industrial Zone.

The Minister said, Japan has always assisted in development for closer political and socio-economic ties between the two countries, for which Sri Lanka is grateful to the people of Japan, who have always come forward.

Ambassador of Japan Mizukoshi Hideaki is presently meeting interested parties in Sri Lanka. He visited the Northern Province and met members of the Tamil National Alliance to learn about the concerns of the Northern people. ITAK MP Mavai Senathirajah said, they had informed the Japanese delegation about the Tamil issue, and that the present political and financial crisis is also due to the Government’s failure to address their concerns.

During a discussion at a hotel in Kokkuvil on 29 June, the TNA had urged Japan to assist Sri Lanka during this time of crisis because people are facing unimaginable hardships. Japan is well-regarded in Sri Lanka, so Japan can be of great assistance, Senathirajah added. According to the Japanese Ambassador, they are interested in the IMF bailing out Sri Lanka. TNA has said Japan’s role as a Quad member in resolving Sri Lanka’s ethnic and economic issues is critical, and the Japanese Envoy had said once the IMF talks are over, Japan will assist Sri Lanka.

The Japanese Envoy also visited Vishwamadu in Mullaitivu to inspect a coconut oil production factory funded by Japan. He inspected the machines worth Rs 2 million that contributed to the production of coconut oil. The Ambassador met Minister of Fisheries Douglas Devananda, Jaffna Mayor V. Manivannan, Commander of Security Forces Headquarters Jaffna, Major General W.M. Wijayasundara and several others. According to the Japanese Embassy, the meetings broadened the Ambassador’s knowledge of the Northern Province.

India’s support greater than before

While competing for more infrastructure projects, the Indian Government’s front man, Adani Group agreed to take over the West Container Terminal on a tripartite basis, as well as the two top renewable energy projects, the Trincomalee storage farm, and so on. In the midst of economic experts urging international players to invest in Sri Lanka to improve investor confidence through a balanced foreign policy, it all came crashing down with China taking over a few megaprojects that paved the way for the Dragon to remain a watchdog over its geopolitical rivals – India, the US, and Japan for the next 100 years in two different choke points of the South Asian BRI network.

India’s assistance to Sri Lankans has been exceptional in recent months, but India has also said it cannot continue the game of lending more finance, as the Sri Lankan economic crisis has worsened. Even Prime Minister Wickremesinghe admitted that India has limits and its geopolitical interests and Adani’s entry has been subjected to major criticism, however, India took charge of the crisis and backed the IMF in its efforts to assist Sri Lanka. In fact, India stood as a guarantor. Despite the fact that the IMF has yet to show up and bail out Sri Lanka with the requested USD 4 billion, the US, India and Japan’s recommendations have been a great deal.

On the final day of their visit to Sri Lanka, IMF officials said the country’s economy is expected to contract significantly in 2022, while inflation is high and rising. In the end, no agreement was reached.

IMF’s Peter Breuer and Masahiro Nozaki on 30 June said, because public debt is assessed as unsustainable, the IMF Executive Board approval would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored.

Despite reaffirming their commitment to support Sri Lanka at this difficult time in line with the IMF’s policies, they pointed out that the critically low level of foreign reserves has hampered the import of essential goods.

The IMF said, there is a need to reduce the elevated fiscal deficit, while ensuring adequate protection for the poor and vulnerable. Given the low level of revenues, far-reaching tax reforms are urgently needed to achieve these objectives. Other challenges that need addressing include containing rising levels of inflation, addressing the severe balance of payments pressures, reducing corruption vulnerabilities, and embarking on growth-enhancing reforms. The basic call was for debt restructuring and to step up structural reforms to address corruption.

Chinese Ambassador Qi Zhenhong also welcomed the IMF bailout package for Sri Lanka. However, they have their concerns too. One of the key matters for IMF is not to go for more development projects and the lending countries including China to restructure its loans offered to Sri Lanka. China has not yet expressed its views about it. It is concerned about the IMF’s recommendation that Sri Lanka not take any more loans or development projects from lending countries will stymie their BRI. China is concerned about being trapped by the IMF, which is why the Quad countries are pushing for an IMF bailout for Sri Lanka. It is believed that half of Chinese lending to developing countries is not reported to the World Bank or the IMF. Prime Minister Wickremesinghe recently said there is a USD 105 million Chinese loan that was previously unknown. This matter was reported on the BBC last week. The COPE recently revealed that the Government of Sri Lanka has not included the loans obtained from China, totalling USD 1.89 billion in principal and interest, in its official accounts of external debt.

“China is a stickler for agreements as far as investment is concerned. And Sri Lanka’s bankruptcy does not make it attractive for China to defer loan repayment or write them off. So, it probably wants Sri Lanka to use its yuan loans that would directly benefit China,” says Military Intelligence Specialist on South Asia, Col. R. Hariharan. He further added, “IMF will help Sri Lanka rationalise its payment of loans and interests, in the long-run China stands to benefit from such rationalisation. But the IMF financial oversight can become a big nuisance to China in pushing through some of the opaque financial deals with Sri Lanka as in the past. So, we can expect China to watch carefully the results of international financial agencies help in Sri Lanka in the coming months, before taking a major move on the economic front.”

On the Quad operations, Col. Hariharan said, the Indo-Pacific had emerged as the focus of strategic concern for India, the US and its allies over China’s increasingly belligerent conduct. It resulted in the Quadrilateral (Quad) framework of four nations – Australia, India, Japan and the US – for cooperation and coordination of their response to the challenges posed by China. Though it is not a military pact like NATO, functionally the member countries have improved their military interoperability and coordination of their response systems. Sri Lanka is at the heart of Indian Ocean Region because it dominates the sea lanes of the Indo-Pacific.

He said, “So, there is a strategic logic in India, US, Japan and Australia cooperating and coordinating their plans for salvaging the Sri Lankan economy. Moreover, the Sri Lankan President and Prime Minister seem to have understood the viability of Quad members using their influence over international bodies like IMF and World Bank to help Sri Lanka. This understanding can also help Sri Lanka in UN bodies like UNHRC. So, it is inevitable that India, the US, and Japan turn out to be the immediate saviours of Sri Lanka, he stressed.

Finally, the Military Intelligence Specialist added that “Probably, President Gotabaya also understands that India’s strategic concerns under Modi cannot be ignored. Even when he was the Defence Secretary, he had to reassure India, when it objected to the entry of a Chinese submarine in Colombo Port. So, the first thing President Gotabaya did on taking over as President was to reassure India that Sri Lanka would never allow any activity that threatens India’s strategic security.

This helped growth of positive vibes in the relations. The Covid-19 pandemic and its terrible impact on Sri Lankan people, health, and economy created a positive climate for India-Sri Lanka relations to grow. Also, when the Ukraine war added to Sri Lanka’s agony, Indian leadership and diplomats seems to have fine-tuned their real-time response to Sri Lanka’s urgent needs, unlike the stodgy Chinese. This has helped India emerge as a true friend of Sri Lanka. Tamil Nadu’s large-hearted help to Sri Lankans in their time of distress is indicative of the positive change in relations.”

[email protected]

By Sulochana Ramiah Mohan

1 COMMENT

  1. The biggest obstacle to the country’s recovery is the political zoo and that is not lost on the suffering people on the street.
    The day of the sword is coming and politicians and thier sidekicks will soon be in for a day of reckoning.

Comments are closed.