China’s Economic Development Assistance

By Lakshman I. Keerthisinghe | Published: 2:00 AM Oct 26 2020
Columns China’s Economic Development Assistance

By Lakshman I. Keerthisinghe

“If you ask an economist what’s driven economic growth, it’s been major advances in things that mattered - the mechanisation of farming, mass manufacturing; things like that. The problem is, our society is not organised around doing that.”

Larry Page-US Software Engineer (Co-founder of Google)

“Sustainable development is the pathway to the future we want for all. It offers a framework to generate economic growth, achieve social justice, exercise environmental stewardship and strengthen governance.”

Ban Ki-moon-Former UN Secretary General

Media reported that  President Gotabaya Rajapaksa has asked China to purchase more goods to reduce a large trade deficit and also invest in a technology university during the recent visit of a delegation led by ex-Foreign Minister Jang Jiechi.“Sri Lanka has a strong private sector…They manufacture various products. Open the Chinese market for these items. Encourage Chinese investors to invest in Sri Lanka. Promote Chinese people to visit Sri Lanka.” President Gotabaya had said. Responding China announced it was providing a $90 million grant to Sri Lanka, disproving the perception China-funded mega projects are debt traps. Calling the financial assistance a timely grant, the Chinese Embassy in Colombo said it would be used for medical care, education and water supplies in Sri Lanka’s rural areas and it would “contribute to the well-being of Sri Lanka in a post COVID-19 era.”

Bridging the trade deficit

It was reported that Sri Lanka intends to commence discussions with China on a China Sri Lanka Free Trade Zone and also complete an industrial zone in Hambantota. Enhancing exports of Sri Lankan products to China would undoubtedly result in bridging the trade gap between the two countries. President Gotabaya had said that he looked forward to seeing visible progress in the Port City project over the next four years. Port City is awaiting the passing of a Special Economic Zone Law by Sri Lanka to attract investors.

Diplomatic ties between Sri Lanka and China have been very close especially during SLFP Governments. China and Sri Lanka established diplomatic relations on 7 February 1957. In 1996 at the invitation of Chinese President Jiang Zemin then President Chandrika Bandaranaike Kumaratunga paid a State visit to China. 

The two sides signed two agreements to enhance economic cooperation. In 2005 because of President Mahinda Rajapaksa’s pro-China stance relations between countries grew resulting in the signing of many agreements. 

China’s investments 

Recent developments show a pro-China tilt in Sri Lanka’s current foreign policy evident in the continued Chinese investments in Sri Lanka and the country’s support of China’s position in the South China Sea Dispute. Sri Lanka is a major country on the ‘String of Pearls’, which is part of the Chinese strategic initiative in the Indian Ocean, known as the Maritime Silk Road and is part of the bigger development strategy known as the One Belt, One Road also known as the Belt and Road initiative of China.

In the aftermath of the ethnic conflict when Sri Lanka was looking for new Foreign Direct Investments (FDIs) China proved to be one of the largest investors. These projects were both stand-alone projects and some linked to China’s Belt and Road initiative. These infrastructure investments include the Hambantota Port, the Hambantota International Airport, the Norochcholai Power Station and the ambitious Port City project, which Chinese President Xi Jinping launched in 2014.   

China has been a continuing source of military equipment to Sri Lanka, and is helping to modernise and expand the Armed Forces. China also aids in the training of Sri Lankan military personnel. Currently the China National Aero Technology Import-Export Corporation is helping the Government in constructing an Aircraft Maintenance Centre. Even though the location has not yet been finalised, Katunayake, Mattala, and Trincomalee are possible locations. When the US ended military aid in 2007 over Sri Lanka’s human-rights concerns, China provided Sri Lanka $1b (£690m) to become the island’s biggest donor, giving tens of millions of dollars’ worth of military equipment.

China funded buildings

Sri Lanka’s friendly relations with China have led to the construction of the Bandaranaike Memorial International Conference Hall (BMICH) which was gifted to Sri Lanka by China to honour former Prime Minister SWRD Bandaranaike in 1973. The 2000s and 2010s saw a substantial inflow of foreign investment in Sri Lanka by China. During President Mahinda Rajapaksa’s Government one of  China’s major project was the Colombo National Performing Art Theater, the Nelum Pokuna Mahinda Rajapaksa Theater.

In conclusion, President Gotabaya’s request for a modern technology university from China would result not only in gaining expert knowledge but the technological advances acquired can boost Sri Lanka’s future economic development.

The writer is an Attorney-at-Law with LLB, LLM, MPhil [email protected]

By Lakshman I. Keerthisinghe | Published: 2:00 AM Oct 26 2020

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