Is Sri Lanka a Large Piece of Real Estate?

By N Sathiya Moorthy | Published: 2:00 AM Oct 6 2020
Columns Is Sri Lanka a  Large Piece of Real Estate?

By N Sathiya Moorthy

President Gotabaya Rajapaksa has once again defended Chinese investments in Hambantota, saying that it was just that and nothing more. At a time when the Nation is seeking investments from across the world, that is not how other investor-nations will be viewing it.

It is not about the size of Chinese investments, or Chinese investments alone. It is even more about the size of Sri Lanka, where everywhere you turn, there is a China-funded project, including the Colombo Port City. There is no way the rest of the world is going to accept the China of President Xi Jinping as they did in the case of Deng Xiaoping and his successors – at least over the short and medium terms.

Just as the West cannot convince Sri Lanka about their perceptions about China, Xi’s ambitions for his Nation in the geo-political and geo-strategic space, Sri Lanka, too, is going to find it even more difficult to convince them about Colombo’s own intention and approach in the matter. 

It is for China to convince the non-Chinese investor-nations (or Nations from where such investors are likely to come). The convincing argument need not have to do with Sri Lanka in any which way. If anything, it has nothing to do with Sri Lanka in the strictest sense of the term, the Hambantota project finance and even a ‘debt-trap’ included. 

Omnipresent, omnipotent 

It is about China’s omnipresence in Nations like Sri Lanka, which foreign Governments feel uncomfortable with. Their big-ticket investors, too, feel the same way just now, though they and their Governments had actually invested in and worked with China for the past four decades, making the Chinese economy what it is today, and Chinese political and military ambitions, reach and out-reach what they have become. 

To the West, an omnipresent China is also omnipotent and omniscient. Maybe, the SLPP Government now has continued on the same positive relations with the West on the lines charted out by its predecessors, especially, the pro-West, ‘Right-Liberal’ UNP Prime Minister Ranil Wickremesinghe.

Unfortunately for Sri Lanka, as much as the COVID-19 pandemic needed more investments than might have been needed and hoped for, Chinese aggression in the South China Sea and incursions along the India land-border, too have come as a spoil-sport. The world sees them as a ‘new China’ approach that needed to be discouraged in every which way. 

This aggression of China has another meaning for the West. They now fear the possibilities of Chinese economic espionage more than ever before. For a few years now, the US first and some European Nations began singing in chorus that China was stealing their technology on their land and from their labs – and not from their facilities in Chinese mainland.

This means a lot for the West especially. One, their State structure has always felt insecure on espionage of every kind – with even common pharma technology added to the list in recent years. Then, there is cyber security, which to them has become cyber insecurity. 

In times of adversities, such sense of insecurity is bound to attack their conscious even more. As a Nation under the virtual threat of the LTTE for three decades, Sri Lanka knows it better than any other – and has felt it even more. Maybe, the levels are different, but that does not reduce, leave alone mitigate, the final effect. 

Chinese funding

It is in this context that the US wants what to the layman reads like the kind of concessions that Sri Lanka had offered China on Hambantota. If their MCC proposal expects what reads like land-possession rights on the lines of Hambantota, part of the blame should go to the previous Wickremesinghe Government. 

That’s because it was Ranil & Co that converted a concession-cum-concession agreement on Hambantota into one of debt-equity swap. It suited Ranil and his party even more as they could blame it all on the predecessor regime of President Mahinda Rajapaksa, now Prime Minister, once they began charging the other with creating a ‘debt trap’, owing to which they had to settle for the swap. 

So when the Rajapaksas stalled the MCC proposal, which had received at least in-principle clearance from Wickremesinghe in his time, the US seemed to rely on among other things, the continuance of a unified Sri Lanka State structure, and how under international law and practices, the commitments of one political party in power is to be carried on by another and others, too. 

So, they cannot be blamed for their perception about China-funded projects in Sri Lanka and expecting a similar treatment from the Sri Lankan State when they too come up with their own money-bags. This is here that the Wickremesinghe formula means doom for Sri Lanka, if taken up as a precedent. There can be criticism that the Mahinda Rajapaksa regime was wrong in inviting China to Hambantota. Such criticism was/is based on global and regional concerns about China’s geo-strategic behaviour and future exploitation, treating Sri Lanka as a foothold for launching on into the larger Indian Ocean, with or without Colombo’s knowledge and acceptance. 

One immediate concern was that China could use the Hambantota possession to keep an eye on the Indian Ocean, the world’s busiest sea-lanes of communication (SLOCs). For neighbouring India, such concerns were not just academic alone. Given their historic adversity, and China’s unwillingness to accept India as an emerging global power, late and slow by a few years, brought with it perceptions that are hard to deny.

It is here  the decision of the predecessor Wickremesinghe regime to hand over possession of the Hambantota part of the sovereign territory of Sri Lanka to China, as if it was just another Colombo Seven piece of real estate, becomes even more unpardonable. It is worse than selling the family silver to meet daily expenses. 

It is anybody’s guess why the previous regime did not take the people into confidence, or go to Parliament, on such a critical decision, but did everything behind the scene. President Maithripala Sirisena, who was at Wickremesinghe’s throat all the time, made only noises but did not protest in public. 

According to media reports of the time, then Ports Minister Arjuna Ranatunga, the cricket veteran, was opposed to the swap deal, but stopped it all within the Cabinet. He also acquiesced to the idea of being shifted out of Ports Ministry and continuing in another portfolio. 

If the armed forces or any other arm of the Sri Lankan State had reservations and also expressed the same, nothing came out in the open. Anyway, nothing came out of it, either. Better or worse still, no Sri Lankan, including all those that have now moved the Supreme Court on 20A, thought of challenging the former Government’s decision to hand over ‘Sri Lankan territory’ that was not a part of the Chancery, authorised by the Vienna Convention.

Piece of the cake…

It is not about this Government or a successor, now or later. But the precedent having been set, any Nation approached for investment seeks some guarantee, like with personal or corporate loans; he can always cite the Hambantota precedent and demand another piece of Sri Lanka for the purpose. 

Given the Sri Lankan economy is in a mess, and COVID-19 has added to the woes, no Nation or investor is going to be satisfied with pious words and promises on a loan (called as investment in a sophisticated manner). Ditto it could well be in terms of ‘sovereign guarantee’ of the Sri Lankan State, may be on a later date. 

But if a Chinese firm can take property in lieu of the debt owed, they too may want it, maybe working in tandem with their home Government, as the Chinese firms have done. Given that debt-servicing, or paying interest for the debt already owed is going to require a lot of funds in the years to come, an option – rather, the only option – available to the Government for years to come, it may not be unlikely that committing new debts for the purpose may involve issues of the kind. 

Of course, seeking loan moratorium, or extending the existing loans through other servicing arrangements may be an option, at times the only option, for Sri Lanka. That again comes with a price. That is to say, the bad precedent set by Wickremesinghe can put the Nation in the path of self-destruction if the Rajapaksas now ruling the Nation do not pull up their socks, and focus near-exclusively on the economy. The rest of it all can wait. 

There is a reason. Whether Sri Lankan Ministers ask foreign investors not to be worried by what credit-rating agencies have to say of the Nation’s economy, those investors are going to listen only to those very same agencies. The recent lowering of the Nation’s credit-rating by Moody’s does not augur well in this regard. 

Unbecoming behaviour

The alternative for slicing of a piece of Sri Lanka for future creditors is to accommodate them otherwise. That is in geo-political and geo-strategic terms, vis a vis China in particular. Here again, given the mood of the West on human rights issues, war crimes probe and even 20A, which is exclusively an internal affair of the Nation, where the Sri Lankan Supreme Court is the final arbiter, for even UN agencies to comment on the same is just unbecoming. 

That is also a reflection on the state of Sri Lanka’s economy. Gone are the days the Nation could use its locational advantage to get favours alternatively out of foreign suitors. Today, the West should also remember, that their pushing Sri Lanka as a Nation to the wall on war crimes probe at the UNHRC, can lead only to one of the two, or both.

Firstly Sri Lanka, as President Gotabaya publicly indicated in his Independence Day address on 4 February, Sri Lanka may be forced to walk out on its detractors and walk out of the UNHRC itself. Secondly, whether it is in the UNHRC or later in the parent UN body, Sri Lanka needs both China – and Russia – two veto-powers, if the West is not going to change tack. Does the world want to make an Iraq, Afghanistan and now Pakistan out of Sri Lanka, too, and in such a busy maritime super-highway? 

(The writer is Distinguished Fellow and Head-Chennai Initiative, Observer Research Foundation, the multi-disciplinary Indian public-policy think-tank, headquartered in New Delhi. email: [email protected])

By N Sathiya Moorthy | Published: 2:00 AM Oct 6 2020

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