By Jehan Perera –

Jehan Perera

It may have been due to serendipity that the visits of Japan’s Prime Minister Shinzo Abe and China’s President Xi Jinping occurred within a fortnight of each other. As a result there seemed to be a competition between these two economic giants to be more generous to Sri Lanka.  If China has reached the number one spot in terms of economic assistance to Sri Lanka today, Japan has historically been the most generous to the country in the long haul since Independence in 1958.  Almost all of Japanese assistance has come in the form of outright grants or concessional and low interest loans. Therefore a basic sense of gratitude, which Sri Lankans are known to possess, would dictate that Sri Lanka’s leaders should be sensitive to Japanese concerns. This requires mindfulness on the part of Sri Lanka’s leaders.

While the Prime Minister of Japan, Shinzo Abe was in Sri Lanka, the first Japanese prime minister to visit the country in 24 years, a Chinese warship and a submarine docked in the Colombo International Container Terminal (CICT) at the Colombo Port.  According to media reports the two People’s Liberation Army (PLA)-Navy vessels were berthed from September 7 to 13 and left Colombo Port for international waters on September 13, three days prior to the Chinese President’s arrival.  The media also reported that the two PLA naval vessels were due in Colombo again in October and thereafter in November and has sought official clearance for these visits with approval already being granted. It was after a two week hiatus that the mainstream media reported the entry into Colombo Port of these naval vessels.

It may have been a coincidence that the entry of the Chinese naval vessels into Sri Lanka occurred during the visit of the Japanese Prime Minister.  It may also have been the case that the entry of the Chinese ships into Colombo Port during the visit of the Japanese Prime Minister was beyond Sri Lanka’s control.  Japanese concerns were made clear in the joint statement of Prime Minister Abe and President Rajapaksa at the conclusion of the Japanese Prime Minister’s visit to Sri Lanka on September 7, the day the Chinese ships entered into Colombo Port. The significance of Sri Lanka’s physical location was a prominent feature of the Japan-Sri Lanka Joint Statement.  It pointedly referred to Sri Lanka’s geographical relationship to the sea and was titled “A new partnership between maritime countries.”

The very first item in the Joint Statement referred to “the strategic geographical location of Sri Lanka in the Indian Ocean sea lanes straddling Asia and Africa. Bearing in mind the importance of ensuring the freedom and safety of navigation in the region, the two leaders decided to establish the Sri Lanka-Japan dialogue on maritime security and oceanic issues in order to effectively address issues of mutual interest in oceanic issues.” Only thereafter, having made the point about international naval security issues, did the joint statement refer to issues of Sri Lanka’s national reconciliation and trade and investment.  There is an importance that Sri Lanka has that exceeds its economic potential that both the visiting heads of government spoke about. Sri Lanka possesses a strategic location at the bottom of the Asian continent that looks into the Indian Ocean.

Deepening Involvement

The priority given in the Japan-Sri Lanka Joint Statement on maritime issues of freedom of sea lanes would seem to reflect the larger international concerns about China’s growing investments in Sri Lanka and its physical presence in the ports of the country. One of the flagship Chinese projects is the reclamation of 223 hectares land from the sea to build Colombo Port City at a cost of USD 1.4 billion. While the Chinese will bear this cost, they will get 20 hectares of land free hold in perpetuity and another 88 hectares on a 99 year lease.  This might seem to be a worthwhile economic price to pay, but it also has a diplomatic cost as this grant of land to China in the Indian Ocean itself is bound to cause concern with countries who are also dependent on the security of the shipping lanes off the Indian Ocean, most notably India.

China has invested heavily in the construction of the new Hambantota Port in which it will have control over 4 of the 7 berths for 35 years and a majority of 53 percent of the shares in the company that will operate the port.  A section of the Colombo Port is managed today by this Chinese government company which would enable Chinese interests to be given priority in that part of the port. The Colombo International Container Terminals (CICT) is a joint venture between China Merchants Holdings International and the Sri Lanka Ports Authority (SLPA), and was launched by President Mahinda Rajapaksa in April this year with the opening of a 46-metre main control tower equipped with state-of-the-art technology.

During the visit of the Chinese President Xi Jinping the two countries signed 27 agreements which would further the cooperation between them.  In addition, there are reports of other agreements which are not known to the public.  Among the 27 agreements signed by Sri Lanka and China were ones concerning not only further development of Hambantota Port and reclaiming land for Colombo Port City mega-project, but also other economic and technical cooperation, power and energy, agriculture, healthcare, urban development, highways and road development, maritime and marine research, media and arts and science and education.  This Chinese governmental involvement in Sri Lanka compensates for the limited investment by international private sector companies in the Sri Lankan economy that keep going elsewhere to the Asian regions, particularly to neighboring India and to rapidly growing countries such as Vietnam rather than coming to Sri Lanka.

The economics of these Chinese led projects, which are not based on market calculations, but rather on government to government negotiations, are not known. Some of the economic indicators are not so positive, as evident in the Chinese-built Mattala International Airport which cannot cover even its operating costs, let alone pay back on the massive loans taken.  The issues for Sri Lanka will arise when these debts fall due and it is payback time.  At that point of time, it will be necessary for political goodwill to prevail over economic obligations. This is also where Sri Lanka’s national interests can clash with its economic indebtedness. Therefore, in order to become a less indebted and middle income country with self-sustaining growth, it is also important for Sri Lanka to diversify its sources of investment funding and include the sophisticated economic and democratic practices of Japan, India and the Western countries.

Political Reconciliation

One key reason why foreign direct investment from international private sector companies has been so limited in Sri Lanka is its failure to make the transition from being a post-war country, one in which there is no war, to being a post-conflict country in which there is political reconciliation. Unlike governments which invest in other countries with geopolitical and strategic considerations in mind, private sector companies are mindful of investing their funds in countries which have not resolved their long standing internal conflicts which can once again erupt to lead to human rights violations and breakdowns in law and order.  It is therefore important for Sri Lanka’s future that it reaches reconciliation within itself, which is the surest way to woo foreign direct investment and to put a stop to international pressure by foreign governments and human rights organizations which deter such foreign direct investment.

The second item in the Joint Statement between Sri Lanka and Japan made specific mention of what needs to be done.  “Prime Minister Abe, while recognizing the progress made so far, reiterated the importance of dialogue among all stakeholders for national reconciliation and further efforts to promote the implementation of the National Plan of Action on the recommendations of the Lessons Learnt and Reconciliation Commission (LLRC). He also highly appreciated the specific actions such as holding the election of the Northern Provincial Council in September 2013, submitting to Parliament the Bill on Assistance to and Protection of Victims and Witnesses, finalizing the report of the Joint Needs Assessment on resettled IDPs, and expanding the mandate of the Presidential Commission of Inquiry on Missing Persons including the establishment of an Advisory Council comprising internationally recognized persons of eminence as domestic initiatives.”

While welcoming Chinese offers of support, Sri Lanka also needs to transcend its past war, and heal the wounds of war through national reconciliation on the lines agreed to with Japan. In the joint statement with Japan, President Rajapaksa reiterated his government’s ongoing engagement with the international community and the United Nations system and Prime Minister Abe welcomed the continuing engagement of the Government of Sri Lanka, in particular with the Human Rights Council and its mechanisms, and the Office of the High Commissioner for Human Rights (OHCHR), and its willingness to conduct high-level dialogues with the UN High Commissioner for Human Rights and the invitation extended to him to visit Sri Lanka during 2014. There is no doubt that the Sri Lankan government would value Chinese President Xi Jinping’s pledge to stand by Sri Lanka and protect it in international forums.

China has been a most friendly and supportive country to Sri Lanka.  Successive Sri Lankan governments have had close relations with China beginning with the government of Sri Lanka’s first Prime Minister the sagacious D S Senanayake who entered into the Rubber Rice Pact of 1952 in defiance of the United States which sought to isolate China at that time. China also gave invaluable military assistance to Sri Lanka during its long war. There is no disputing that Sri Lanka has a duty to be grateful to China for all it has done in the past and what it is doing in the present.  But care must be taken that this sense of gratitude will not be at the expense of other countries that have also been supportive of Sri Lanka and which are important to Sri Lanka’s wellbeing.  This would include Japan and India, both of which have security and regional big power concerns about China.  Ignoring their concerns must not be at the expense of Sri Lanka’s own national interests.