Competing with China in Sri Lanka: Part I

INTRODUCTION               

Renowned geostrategist, Admiral Alfred Mahan once said, “Whoever controls the Indian Ocean dominates Asia. …In the twenty-first century, the destiny of the world will be decided in its waters.

The Indian Ocean handles over 80% of the world’s seaborne trade in oil[i] and supplies energy to over half the world’s population. Sri Lanka is said to have some of the best ports in the world and its ports are en-route to the lucrative South East Asian markets. Hence, access to Sri Lanka is the key to seaborne trade in South-East Asia.

India has always had unfettered access to the Indian Ocean by virtue of its geography and deep historic and diplomatic ties with Sri Lanka and the other island nations in the region. India is Sri Lanka’s natural ally because of its proximity to the vast Indian subcontinent, India’s powerful navy and the volume of bilateral trade. But China has a vested interest in challenging India’s comfortable position and is vying to supplant India’s dominance in the region. The Chinese are using their ability to make multi-billion dollar investments, the Maritime Silk Route (MSR) Proposal and their ever-increasing navy to achieve their goals, forcing India to up the ante and compete.

Until recently, Sri Lanka has appeared to favour China over India. However, the recent ousting of pro-China President Mahinda Rajapaksa in favour of the seemingly more balanced Maithripala Sirisena shows that Delhi has certainly won a battle, but the question is, can it win the war?

Indo-Sri Lanka Relations:

India is Sri Lanka’s closest neighbour and their relationship goes back for over two and a half millennia. The two nations have always had a strong socio-religious, economic, cultural and ethno-linguistic relationship. There is a population of over 842,000 Indian Origin Tamils that have formed a formidable political force and are supported by political parties in India like the Dravida Munnetra Kazhagam (DMK) party from Tamil Nadu. Ties strained after the Indian Peacekeeping Force’s (IPKF) failed intervention in Northern Sri Lanka to curb insurgency by the Liberation Tigers of Tamil Eelam (LTTE) who wanted a separate homeland for the Tamil population in Northern Sri Lanka. The subsequent Indo-Sri Lankan Peace Accords of 1987 signed by Indian Prime Minister, Rajiv Gandhi and Sri Lankan President J.R. Jayawardene were also incredibly unpopular among Sri Lankans, especially in the light of allegations of human rights violations by the IPKF. Eventually, the IPKF was withdrawn in 1990 and after Prime Minister Rajiv Gandhi’s assassination in 1991, India has resisted the call to mediate or intervene in the conflict, choosing to focus on Indo-Sri Lankan economic ties instead. India had; until the end of the conflict in May 2009, supported the Sri Lankan governments right to take action against terrorist forces.

This shift ushered in a new era of friendship and cooperation, mitigating the damaging negative public opinion and bitterness caused by Indias earlier intervention. The Indo-Sri Lanka Free Trade Agreement (ISFTA) that came into force in 2000 leading to an influx of FDI[ii], enhancing trade and economic cooperation. There are Indian investments in several sectors including petroleum, retail, hospitals, telecom, vanaspati, copper and other metal industries, real estate, telecommunication, hospitality & tourism, banking and financial services, IT and food processing. India extended an $800 million line of credit for the development of railway lines and telecommunications systems in Northern Sri Lanka. India is Sri Lanka’s biggest trade partner and bilateral trade stood at $4.6 Billion in 2014. In 2015, Prime Minister Modi pledged $318 million to rehabilitate Sri Lanka’s railways[iii]. Sri Lanka’s trade deficit is in excess of $2500 million dollars[iv] in favour of India. Sri Lanka is India’s largest trade partner in South Asia. In turn, India is Sri Lanka’s largest trade partner globally.

India sent in a significant amount of humanitarian aid after the 2004 Indian Ocean Tsunami extending a line of credit amounting to $167 million. It is also assisting in the reconstruction of 50,000 houses for the 300,000 Internally Displaced People and had helped them with aid in the wake of the earlier conflict[v].

There have been several high level meetings between Indian and Sri Lankan leaders such as former President Mahinda Rajapaksa’s visit in 2012. India, Sri Lanka and the Maldives participated in the 2nd NSA Level Meeting on Trilateral Cooperation on Maritime Security[vi] making it clear that Sri Lanka definitely needs India for security. Their alliance was strengthened when India abstained from voting for a UN Resolution against war crimes in Sri Lanka, despite the domestic ramifications[vii].

Newly elected President Maithripala Sirisena’s first State visit was to India in February 2015 where he discussed issues such as defence and maritime security cooperation and civil-nuclear cooperation[viii] with Prime Minister Narendra Modi. Indian External Affairs Minister, Sushma Swaraj visited Sri Lanka[ix] in the first week of March to set the stage for a visit by Modi who visited Sri Lanka from 13th-15th March[x] as part of his three-nation tour of the Indian Ocean island nations. He is the first Indian Prime Minister to visit the island nations since Rajiv Gandhi, over 28 years ago, ushering in a new era of friendship and cooperation.

China-Sri Lanka Relations:

China and Sri Lanka’s shared Buddhist philosophy goes back for centuries. Chinese Premier Xi Jinping attributes this to eminent Chinese Monk, Fahien’s visit to China in the 5th Century and Chinese Admiral Zheng He’s historical voyages that brought him to Sri Lankan shores in 1405 AD[xi]. While China is quick to remind the Lankans of their shared history, they forget to mention the truly Confucian manner in which Zheng He demanded that the Sinhalese King Vira Alakesvara pay tribute to the Chinese Emperor. He also demanded the ‘return’ of the Sacred Bowl, Hair and Tooth relics of the Buddha that had been described by Fahein and were revered in Sri Lanka[xii]. Admiral Zheng, in the course of his two voyages to Sri Lanka even captured Sinhalese Royals and took them back ‘to apologise’ to the rulers there[xiii]. But because of China’s aggression, Sino-Sri Lanka relations remained dormant for 500 years.

After Sri Lanka gained independence from the British in 1948, their first bilateral agreement was the 1952 Rubber-Rice Agreement with China. In fact, Sri Lanka was one of the first nations to recognise the People’s Republic of China. China established diplomatic relations with Sri Lanka in 1957 and their partnership has since seen robust growth. The construction of the Bandaranaike Memorial International Conference Hall (BMICH) in 1973 was one of the first projects that saw major Chinese investment. Since then, China and Sri Lanka have entered into several trade agreements, notably: the First Agreement on Economic and Technological Cooperation in 1962 and the Agreement on Economic & Trade Cooperation in 1984. The 90’s saw The Sri Lanka-China Joint Commission on Trade that held sessions in 1992, 1996 and 2000 and the Sri Lanka- China Business Council in 1994. China supported Sri Lanka’s entry into the World Trade Organisation in 2000. They also sent a great deal of aid to Sri Lanka in the wake of the 2004 Indian Ocean Tsunami. They also sent arms and provided Sri Lanka with military assistance to fight the LTTE.

In 2005, China became its fourth largest Trade Partner[xiv]. The trade deficit in Sri Lanka stood at $2838 million in 2013[xv], which is significantly more than its deficit with India. Bilateral trade was at $3.62 billion in 2013[xvi]. Today, China is Sri Lanka’s second largest trade partner and 14% of Sri Lanka’s imports come from China, surpassed only by imports from India[xvii]. China has pledged over $6.2 billion in investments in Sri Lanka, which includes the $1.4 billion Colombo Port City financed by the state owned China Communications Construction Co. Some other projects are the Lotus Tower – A 350m communications tower that is being built in the heart of Colombo, the $1.2 billion Norochcholai Coal Power plant and other investments including a cricket stadium, an airport, ports and large highways.

Ousted President, Mahinda Rajapaksa had very close ties with China and it was primarily during his regime that Sino-Sri Lanka relations improved by leaps and bounds. Rajapaksa made a State visit to China in 2013, which was reciprocated by Chinese Premier Xi Jinping in 2014. Two Chinese submarines and a Chinese warship docked in the Colombo Port in late 2014. But these close ties were marred by domestic allegations of corruption and nepotism. The people especially disliked the Chinese for facilitating corruption via their projects. All this eventually lead to his replacement by a new president in the recently concluded elections.

The new President Maithripala Sirisena has made a lot of anti-China election promises and one of his first presidential acts was to review the legality of all Chinese projects, culminating in the suspension of the flagship Colombo Port City Project. Analysts have hailed this move as a pro-India tilt in Sri Lankan policy, but even new presidents cannot abandon investors. However, Sirisena’s reelection only reaffirms the Sri Lankan people’s preference for India.

Sirisena visited China in March, following a visit by the Assistant Chinese Foreign Minister to Sri Lanka. Sirisena held talks with the Chinese Premier during which, presumably, the sticky issue of the suspension of the Colombo Port City Project and further protection of Chinese investments in Sri Lanka was discussed[xviii].

India and China’s competing interests  in Sri Lanka will be further discussed and analysed in Part II.

Image Credits: http://www.spsnavalforces.com/images/China-Maritime-Strategy.jpg

[i] Sergei De-Silva Ramsinghe – Why the Indian Ocean Matters; http://thediplomat.com/2011/03/why-the-indian-ocean-matters/ (last accessed: 20th May, 2015)

[ii] Ministry of External Affairs – Indo-Sri Lanka Relations; January, 2014

[iii] India’s Modi visits Sri Lanka’s war torn Jaffna; http://www.aljazeera.com/news/2015/03/india-modi-visits-sri-lanka-war-torn-jaffna-150314060359843.html (last accessed: 22nd May, 2015)

[iv] Sri Lanka Customs, 2013

[v] Ibid. 2

[vi] Ibid. 2

[vii] Rama Lakshmi – India’s government loses key ally over U.N. Resolution against Sri Lanka; http://www.washingtonpost.com/world/indias-government-loses-key-ally-over-un-resolution-against-sri-lanka/2013/03/19/08e988ae-9071-11e2-9173-7f87cda73b49_story.html (last accessed: 24th May, 2015)

[viii] Shubhajit Roy – Lankan President Sirisena gets the red carpet with deals on defence and nuclear security; http://indianexpress.com/article/india/india-others/on-first-sirisena-visit-defence-security-and-n-safety-on-india-sri-lanka-plate/ (last accessed: 22nd May)

[ix] Sushma Swaraj in Sri Lanka Ahead of Modi Visit; http://www.dnaindia.com/world/report-sushma-swaraj-in-sri-lanka-ahead-of-modi-visit-2066577 (last accessed: 22nd May, 2015)

[x] Suhasini Haider – Knitting the India-Sri Lanka Relationship Closer; http://www.thehindu.com/opinion/blogs/blog-suhasini-haidar/article6989225.ece (last accessed: 24th May, 2015)

[xi] Xi Jinping – EXCLUSIVE: Xi Jinping, President People’s Republic of China, to Daily News readers- ‘Let us become partners in pursuit of our dreams’; http://www.dailynews.lk/?q=local/exclusive-xi-jinping-president-people-s-republic-china-daily-news-readers-let-us-become (last accessed: 24th May, 2015)

[xii] Patrick Mendis – China’s Buddhist Diplomacy: Why Do America and India Entangle with Tiny Sri Lanka?; http://jia.sipa.columbia.edu/online-articles/chinas-buddhist-diplomacy-why-do-america-and-india-entangle-tiny-sri-lanka/ (last accessed: 24th May, 2015)

[xiii] Ibid. 12

[xiv] Sri Lanka China Trade Relationship; http://www.asiantribune.com/index.php?q=node/7893 (last accessed: 22nd May, 2015)

[xv] http://www.pressreader.com/sri-lanka/daily-mirror-sri-lanka/20150309/282256663963605/TextView (last accessed: 22nd May, 2015)

[xvi] China-Sri Lanka FTA to be signed in June 2015; http://news.xinhuanet.com/english/china/2014-10/28/c_133749164.htm (last accessed: 22nd May, 2015)

[xvii] The Observatory of Economic Complexity: Sri Lanka; https://atlas.media.mit.edu/en/profile/country/lka/ (last accessed: 22nd May, 2015)

[xviii] Sri Lanka seeks improved Relations with China – Al Jazeera; http://www.aljazeera.com/news/2015/03/sri-lanka-china-150326081156090.html (last accessed: 24th May, 2015)

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2 thoughts on “Competing with China in Sri Lanka: Part I

  1. Brilliant summary of the issues involved and how China scripted an entry into our own backyard. This shows how short-sighted we have been about our own neighbourhood. The reversal of fortunes of Rajapaksa gives India a unique second chance – can we be trusted to not blow it?

    Like

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