Sri Lanka: Playing host to India and China

When India's Commerce Minister Anand Sharma visited Sri Lanka in early August heading a powerful official and business delegation, the ‘talk’ in Colombo was that the Indians were putting pressure on a delayed trade agreement.

Later in the month, when China’s Defence Minister General Liang Guanglie’s visited Sri Lanka, the first-ever visit by a Chinese Defence Minister, discussion in the ‘cocktail circuit’ centred on China’s growing role in both Sri Lanka’s economic and defence sectors.

The Chinese are smart. Not wanting to offend the Indians, the visiting dignitary, also went to New Delhi, probably explaining (to some extent) what he was doing in Colombo.

Sri Lanka has become a hot potato for India which is worried about China’s growing expansionist role here and in the region. The same power play is seen in neighbouring Maldives where both countries are involved in the economics and politics of the country.

While the Indians are brash, outspoken and to some extent open (to the media), the Chinese are ‘ quiet’, non-committal and most of all - visits are low-key and there is no meeting with the media. China’s involvement in defence or economic issues is through state-owned companies while India’s involvement is mostly through the private sector.

At the heart of the struggle for a slice of the action for economic, political or regional reasons are flashpoints like the Colombo, Hambantota and Trincomalee ports, Jaffna and real estate in Colombo.

Recently this newspaper reported how Indian officials had complained to the Sri Lankan Government about the sale of a Colombo property to a Chinese company, which had been earmarked for an Indian project.

Our story on the previous page captures the realities in Sri Lanka’s relations between the two Asian and global economic giants, and the dilemma it faces through the projects in which both countries are involved.

New Delhi (India’s political administration) has been at Colombo’s doorstep ever since the 1980s when then Indian Prime Minister Indira Gandhi frowned on then President Junius Jayawardene’s attempt to hand over the old, unused oil tank farm at Trincomalee to a US company, fearing the base would be used as a re-fuelling and recreation stop for US warships in the region. This subsequently led to the estranged relationship between Sri Lanka and India and India’s central government either encouraging or turning a blind eye to the training of Tamil militants in South India.

The famous ‘parrippu drop’ and the induction of Indian troops in Sri Lanka under the Indo-Lanka peace accord is now history. But India’s close watch on Sri Lanka still continues with southern Indian politicians using the pro-Tamil issue to woo voters.

The Bandaranaike Memorial International Conference Hall (BMICH), a gift of the Chinese government in 1973, is a testament of the support given by China to Sri Lanka, but this was not backed by a political and economic role.

That came when President Rajapaksa went looking for non-Western allies to support the war effort and upcoming economic development. With the West up in arms over human rights issues, the government shifted gear and went shopping for arms, loans and credit lines to China, India, Iran and Libya among others.

In this phase, China’s financial support has been phenomenal and eventually led to its involvement in the Norochcholai power plant; Hambantota harbour, airport and allied services there; Colombo port development; railway services, the extension of the southern expressway to Matara from Galle and a range of other activity. The list is growing.

In fact China now has a bigger economic role in Sri Lanka than India whose icing on the cake is the finalization of the proposed Indo-Lanka Comprehensive Economic Partnership Agreement (CEPA) providing for the entry of services into both countries.

That agreement however has been dragged into an internal political game with Sri Lankan powerful business interests, most of whom are financial backers of the government, opposing the CEPA on the grounds that it is inimical to Sri Lanka’s economic interests. The core objection is the free flow of skilled and professional cadres including barbers, carpenters, lawyers, etc and the fear that foreign workers will swamp the country.

This week government spokesmen and officials involved in the CEPA discussions were expressing contrasting views on the progress of this planned pact. While spokesmen told the media that CEPA is alive and would be finalized soon, officials, who declined to be named, had a different story to tell – the focus is now on strengthening the old free trade agreement with India and keeping CEPA on the backburner.

Dillydallying on the CEPA is not going to work and would further antagonize India, at a time when China is getting a larger share of the economic pie. The government needs to explain this proposed deal and its status since its negotiations began in 200506 and ever since has been kept out of the ‘prying eyes’ of the public.