by Shakthi De Silva
After purportedly falling victim to China’s ‘debt-trap diplomacy’, the island of Sri Lanka took the international limelight in July 2017. Many observers referred to the Sri Lankan Government’s decision to hand over the strategically located Hambantota Port on a 99-year lease as indicative of a malicious plan to indebt countries to China. Scholarship discussed the case as depicting the seemingly nefarious nature of the Chinese Belt and Road Initiative and in many narratives, the island was portrayed as having no agency – a small power which ‘suffers what they must’ in Thucydides’ words.
The 2015 ousting of Pro-China President Mahinda Rajapakse by a former minister of his own party – Maithripala Sirisena – ostensibly signalled a shift in the country’s foreign policy. The optimism of such a ‘foreign policy reset’ was overshadowed by the outcome of the 2019 Presidential election which resulted in Gotabhaya Rajapakse’s victory. Western scholars ruefully reasoned that Sri Lanka would shift overtly towards China under Gotabaya Rajapakse, having witnessed a Pro-China foreign policy during the tenure of his elder brother – Mahinda Rajapakse (2005-2015).
This conjecture has not been borne out by facts. A few days after the election, Gotabaya welcomed Dr. S. Jaishankar, India’s External Affairs Minister – the first Foreign Minister to meet and personally congratulate him on his victory. Rajapakse also chose India as the first country to visit as head of state and after meeting Prime Minister Modi received a $400 million line of credit to fund several development projects on the island. Since then, he met with Wang Yi, the Chinese Foreign Minister, Sergey Lavrov, the Russian Minister of Foreign Affairs as well as welcomed the U.S Principal Deputy Assistant Secretary of State for South and Central Asia, Alice G. Wells in the same week.
Complying with the much-iterated policy of ‘Non-alignment and Mutual Friendship and Trust among Nations’ was a core tenet of Gotabaya’s election manifesto. In several public pronouncements after the election, President Gotabaya expressed his desire to adopt a balanced approach in his foreign policy; welcoming investments from and striving “to maintain friendly relations” with all parties. As China and the United States expand their presence in the Indian Ocean, what must they keep in mind when they engage with the new Sri Lankan administration?
Rationalising the Sino-Sri Lankan relationship
Western powers should take note of the fact that Sri Lanka has been in dire need of investments to kick start its economy since the end of its internal armed conflict in 2009. Foreign direct investments (including foreign loans received by companies registered with the country’s Board of Investment) during the first half of 2019 amounted to $501 million – significantly lower than most neighboring Asian countries.
A World Bank report detailing the projected GDP growth of South Asian countries ranked Sri Lanka just above the bottom, with a real GDP growth rate of less than 3% for 2019. Since the island reached upper-middle-income status, it has had to borrow on commercial terms; thereby intensifying its debt crisis. In such circumstances, policymakers are attuned to attract as much investment as possible to spur an economy that has consistently lagged behind other regional powers. In so doing, China emerges as an attractive partner and, thus, increased its investment in Sri Lanka from $ 178.5 million in 2012 to $ 579 million by 2017. Although the United States is the largest source of foreign direct investment in the Indo-Pacific, its cumulative foreign direct investment inflows to Sri Lanka between 2013 and 2018 amounted to only $134 million. The economic rationale behind the close Sino-Sri Lankan relationship is clear to see.
Secondly, Western narratives portraying Sri Lanka’s predicament as a manifestation of Chinese ‘predatory lending’, ‘checkbook diplomacy’, or ‘debt-trap diplomacy’ hardly resonates with the local public. Numerous studies by Sri Lankan economists have uncovered how Sri Lanka’s debt crisis is not ‘wholly’ or even ‘largely’ caused by China. In fact, a much larger percentage of Sri Lanka’s external debt are loans raised through external sovereign bonds and foreign currency financial facilities. Locals are also prone to blame Sri Lankan politicians, particularly members of the United National Party, for finalizing the 99-year lease agreement of the Hambantota port.
Moreover, the West must also understand that Sri Lankans do not generally perceive China’s presence in the Indian Ocean as pernicious to the island’s security. Despite establishing a base in Djibouti, China’s engagement in the Indian Ocean has been relatively limited and benign, owing to the fact that Beijing’s primary security interests reside in the South China Sea and Taiwan Strait. In consequence, the island welcomes China’s presence in the region and has sought ways in which the two economies can closely integrate so that the island can benefit from China’s rise. Furthermore, the substantial quantities of medical supplies delivered by China after the outbreak of the COVID-19 virus exhibit Beijing’s desire to cultivate an image as a friendly benefactor.
Beijing’s support during the final phases of the internal armed conflict in Sri Lanka is another major factor driving the local public’s relative lack of apprehension towards Chinese activities in the region. Political engagement between the two countries has been robust. As of 2018, Sri Lanka had nine ‘sister-city agreements’ with China and 2013 saw the inking of a comprehensive cooperative partnership between the two countries. One report also suggested that between 2000 and 2017 there were 130 political visits between Sri Lankan and Chinese governmental leaders. This year also marks the 63rd anniversary of the inauguration of diplomatic relations with China.
Intensified allegations from the West against the state armed forces have also pushed President Gotabhaya to declare his intention of withdrawing from international institutions if they continue to press for transitional justice or demand for impartial investigations into the last stages of the war. For example, in his speech at the 2020 National Ranaviru Day commemorations, he emphatically stated: ‘In a small country like ours where our war heroes have sacrificed so much, I will not allow anyone to exert undue pressure on them or harass them.’ Therefore, continued pressure from the West on the human rights front will only push Rajapakse towards China – an outcome which the West nor Rajapakse are necessarily inclined to welcome.
However, this does not imply that Rajapakse will be beholden to Beijing. A pro-China policy stance is not an indelible position for most countries. Beijing would be wise to understand that a pro-China foreign policy can change if the leader is replaced by an alternative candidate in a democratic election or when the local ‘pro-China’ elite has a change of heart. To continue its robust relationship with Sri Lanka, it would be advisable for Beijing to enhance investments while also promoting people-to-people ties, particularly in the sectors of professional training and higher education
A pawn on the chessboard of great power politics?
Sri Lanka’s location has often been lauded as its most important asset but policymakers cannot solely avail on ‘strategic location’ if they wish to position the island as the hub of the Indian Ocean. In this complex and fluid environment, strategic astuteness has become a necessity for policymakers. Sri Lanka’s favorable location needs to be matched by a stable and coherent foreign policy as well as structural reforms to promote the island’s investment and business climate.
As great power presence in the Indian Ocean is unlikely to dissipate in the near future, misreading the landscape can prove costly for Sri Lanka. The island will witness increased presence and engagement with regional and extra-regional powers, which may create a situation where the island’s leadership might have to choose between one party over another. Local policymakers need to have hard-headed assessments of contemporary geopolitics, conduct unsentimental audits of the benefits and negative implications of diverse forms of engagement with regional and extra-regional powers, and resist a situation where Sri Lanka’s policy choices are constrained by external powers.
As China’s economy has entered a phase of gradual slowing down, Rajapakse would do best to remember that there are limits to what China can offer economically in the long run and therefore, diversifying ties with other regional and extra-regional powers would be in the island’s best interest.
Mr. Shakthi De Silva currently serves as an Assistant Lecturer at the Department of International Relations, University of Colombo. His previous work has appeared on the South Asian Survey (SAGE), Journal of the Indian Ocean Region (Taylor & Francis), and the Diplomat Magazine.