By Ernest Kithsiri –

Ernest Kithsiri

Some of the Colombo based think tanks and scholars have recently come up with various rationales to emphasize the importance of OBOR aka Belt and Road Initiatives (BRI) of China to Sri Lanka and neighboring countries.

After a careful and in-depth review of the scholar’s articles and discussions, as a summary following are the highlights of new opportunities BRI may facilitate Sri Lanka’s potential export growth jump start.

* Built infrastructure under BRI help Sri Lanka reach African markets through shorter maritime routes.

* Income due to providing docking facilities to maritime vessels passing by Sri Lanka
( Everything else such as access to Europe and America are already available to Sri Lanka through different routes).

The scholars deliberately avoid mentioning the timelines of these projects while China itself has called the BRI as a century long initiative. They also forget to highlight our own experience; plunging already debt-ridden country to its bottomless fissures surmounting to unbearable debt service creating political chaos.

Other than above, I do not garner any other valuable logical argument made convincingly to change our foreign policy aligned towards China due to the so-called western threats of our sovereignty.

Pillars Of Modern Economic Fundamentals

The above scholars need to be reminded of structural principal pillars of modern capitalist economies and how countries such as China, Singapore, Malaysia and even Japan were benefitted by successfully applying them. The underline principle was the use of “power of population”. Even though American and European governments revved up their propaganda machines against China for human right violations, businesses did not heed to it, they mobilized in China. Except Singapore other countries such as China did not fully open their markets to foreign manufactured goods but open their country wholesale to foreign investments. They facilitated new businesses employ local people, created massive stock markets for their citizens to benefit from the new arrivals. Some of these countries even created their own standards to put breaks on receiving foreign manufactured goods to their countries. Singapore adopted a rather different approach since it wanted to play the role of “Hub of Asia”, yet successfully facilitated major American and European business’s to setup their Asian headquarters. Singapore’s Lee Kwan Yew, despite having a smaller population, successfully portrayed the model as the gateway for Asia. He convinced the world Indonesia and Malaysia as his market for Foreign Direct Investments. 

In a nutshell, above countries adopted successful principles to increase the country’s middle class and its wealth. The created middle class generated the next entrepreneur not from the ground up in an undeveloped rudimentary tech world but having experienced the association and the flavor of already technically advanced companies they had associated with. The exposure to the world was obtained together with the entrepreneurs moved in. Competitive business practices and knowledge transfer were inculcated to their companies to compete with rest of the world.

In doing so, other than China, all other countries resorted to an aligned foreign policy for their national security and security of businesses in terms of guaranteed market access.

India And SAARC Countries Are The Key 

We, and India, despite having a population of 2.5 billion people, still is with mere $2 trillion economy. This is the million-dollar question investors in Europe and America pondering today hence has come forward with suggestions for India to implement investment oriented capitalist economy so that Indian market will be open to American and European investors with joint venture operations.  The region still doesn’t have a vibrant stock market. The potential is enormous. We need to align with India, help create all structural changes including harmonized standards. We need to negotiate with India such that when they build a car manufacturing plant, at least, a parts manufacturing facility to be setup in Sri Lanka; to be a partner in some form. A stock market, that Sri Lankan’s can also participate. Put breaks on wholesale imports of foreign manufactured goods. Instead more foreign direct investments. We should not repeat the crony capitalist principles JR initiated. Sri Lanka’s economic boom can be achieved only if we focus on increasing and uplifting the middle class.

In doing so, strategically our national security initiatives should never be seen to go against India. Every time we became a threat to India, political chaos erupted in Sri Lanka.

Therefore it is ludicrous even to think of aligning with China for our foreign and national security policies making India uneasy.

Risk Of Doing Business With Former Communist Countries 

Modern countries have evolved from capitalism and are moving more towards social capitalism. The capitalist business practices never intended to totally cripple its buyer or partner so that mighty power of state capitalism could be exerted on its buyer. China is a mighty state capitalist country. It’s application of fundamental business practices are yet to be seen. When did following practices become text book fundamentals of any form of capitalism?

* Even if Sri Lanka is offered the market access, what can we export to China, when they produce almost everything we produce at a much cheaper cost?

* Even if look into the service sector, our salaries are higher than Chinese. They have a much more efficient service sector at a relatively cheaper cost.

* For us to access African markets for our products, is a long shot. There will be numerous other ways and means in the future.

Private sector business partnerships naturally happen when communities of partner countries feel comfortable working together with ingenuity and are likeable to each other. As once Lee Kwan Yew said, the best way to test this by asking whether someone likes to go and live in China or Europe. Undoubted choice of Sri Lankans would be the developed Europe, America or the Australasia. The situation is similar even for Chinese origin people such as Koreans, Vietnamese, Japanese and Singaporeans. Chinese society’s social values have not evolved with more liberal qualities to tolerate or accommodate other nations. Under such circumstances, people who are knowledgeable of text book leadership fundamentals would never consider China to replace leadership of America and its allies in the foreseeable future. Likeability matters. Countries would still rely on American and European leadership and consensus building abilities.

US-China Trade Agreement 

In general, many Sri Lankans including Colombo based some of the scholars scaremonger the Sri Lankans about a possible armed conflict between China and America. Some have even publicly stated America’s “ Pivot to Asia” policy will spur the inevitability of armed conflict. These scholars should go back in the history to read founding fathers teachings of both countries to realize scholars display none other than lack of even a bit of historical knowledge.  Both Deng Xiaoping of China and Alexander Hamilton had predicted non-violent rise of both economic power houses. Sustainability of economic rise depends upon how quickly democratic and fundamentals of civil liberties could be brought into the society with structural changes to the governance. China is way far down lagging in this context. Lot of uncertainty exists about relaxation of government grip may totally unhinge the Chinese society beyond redemption. At the same time, Chinese government faces the risk of holding on to the grip since wealthy middle class has already begun to stash their wealth in more liberal democracies in America and the Europe. Family migration and buying properties in America, Canada, Australia have risen precipitously.

In short, China is changing in lot of fronts with its large aging population. It is a very risky proposition for Sri Lanka to change our foreign policy aligned with China merely due to the OBOR aka BRI initiatives. The similar sentiments have been very well articulated by Nicholas R Lardy in his “State Strikes Back”. Lee Kwan Yew had to make a similar decision in 1970s; to align with Russia backed China or the United States. He selected the matured democracy and he was right.

Third Eye View 

Many economic experts point out President Xi-Jinping’s explanation about the BRI initiatives are shallow and dishonest. He has never clarified the true motive, despite he is aware of massive project failures, political chaos in debt ridden countries. Therefore, economists have come to various conclusions. One such suggestion is that since domestic consumption of China has not increased to a level they expected by now, it may be a sage idea for China to have foothold in number of Asian countries with higher per-capita and market independent income sources such as Foreign Direct Remittances by these countries’ overseas labor forces and Tourism. Setting up businesses such as Port City in Sri Lanka, more than $1.5 billion investments in Tourism related businesses in Maldives and similar businesses in Africa provide a largess to China to divert the income to China. Initial investment provides a very lucrative short-term value to Chinas excess capital since none of these projects are grant-aid but with lucrative paybacks with higher interests.

In this scenario, having a businesses in countries with higher per-capita is analogous to an expanded China with higher per-capita. This helps them delay the required structural changes for a better capitalist society. Really? Absolutely not. These seemingly smart ulterior motives have already backfired. Countries such as Maldives, Myanmar and Pakistan are heavily negotiating ownership of those businesses and the land. Sri Lanka probably would follow the suit.

Conclusion 

In a nutshell, the Colombo based scholars need to provide more conceivable rationales with clarity for their suggestions why Sri Lanka should align its foreign policy to align with China. Their current suggestions are lame, shallow and lacking broader perspectives.