Sri Lanka, India and China: an uncertain triangle

Photo: John Hartnup

Cecilia Tortajada and Asit K. Biswas

PRAGATI | March 31, 2015 

Nowhere in South Asia has democracy been so unpredictable as in Sri Lanka. Six weeks before the election in January 2015, President Mahinda Rajapaksa appeared unbeatable, even invincible. Elected as President in 2005, he had ended a bloody civil war of 26 years with the Tamil Tigers in 2009, and the country’s GDP had grown by 7.4 percent over the past five years. Having orchestrated a change in the Constitution so that he could run for an unprecedented third 6-year term, he called an early election two years before necessary, being supremely confident of victory.

A new President was elected, Maithripala Sirisena. He was the General-Secretary of the Sri Lanka Freedom Party and Minister of Health under the ex-President, and a long-term ally. The day after Rajapaksa announced the election, Sirisena defected and announced his candidacy for the President. He went on the offensive immediately, accusing Rajapaksa family for “taking over the control of the economy, power and the party,” and claimed that the country was heading “towards a dictatorship”.

With a credible Presidential candidate, many sensed an opportunity to get rid of an increasingly authoritative regime where at least 50 percent of public spending was under the control of Rajapaksa family members. Furthermore, independent media was muzzled, minority was repressed and state power and media were used to promote himself and his family. Turnover at the election was high, 81.5 percent, and the electorate elected Sirisena with a 3.7 percent majority.

During the second-term of his Presidency, Rajapaksa increasingly became dependent on China for many reasons. First, before the build-up for the final push to defeat the Tamil Tigers, Rajapaksa had explored getting arms from India, one of Sri Lanka’s major donors. However, the United Progressive Alliance (UPA) Government was beholden to regional parties like Dravida Munnetra Kazhagam (DMK) of Tamil Nadu for its survival, and DMK had to have consistently anti-Colombo lines. When India continued to demur, Rajapaksa approached China. It helped the military buildup for the Sri Lankan army’s final assault on the Tamil Tigers.

Second, during the 2013 Commonwealth Prime Minister’s meeting in Colombo, the Indian Prime Minister deferred to domestic pressures and decided not to attend the Summit despite fervent requests from Colombo.

Third, major western donors strongly disagreed with Rajapaksa’s aggressive stand not to allow any independent and objective enquiry into human rights violations by both the Government and the Tamil Tigers. The enquiry that was carried out by the Government was superficial and not credible. An independent enquiry by the UN was rejected. Western donors were reluctant to provide funds to a regime suspected to have committed serious war crimes.

With traditional Western donors distancing themselves from Sri Lanka with Rajapaksa’s policies and India being boxed in because of its internal domestic politics, China promptly filled the void. Rajapaksa jumped into China’s embrace with its non-interventionist stands in national issues, including overlooking of war crimes. China, with help from Russia and Venezuela, had several times protected Sri Lanka from possible war crimes investigations by the UN.

China had deep pockets to support Sri Lankan development and infrastructure projects. It had no qualms on the commercial and economic viabilities of projects, especially since vast majority of the funds were given as loan which meant Sri Lanka would have to pay them back. These assertive policies cemented Colombo-Beijing relationship.

In 2009, China replaced Japan as the primary donor. China provided a total assistance of $5.056 billion between 1971 and 2012. However, 94 percent of these funds were received from 2005 when Rajapaksa became the President. Only 2 percent of these funds were grants, rest were soft loans. In contrast, nearly 30 percent of the Indian aid of $1.6 billion was grants.

India has been concerned by several developments of Chinese influence in Sri Lanka. Partly because of internal politics. First is the port at Hambantota which first elected Rajapaksa to the Parliament in 1970. It was affected by the Indian Ocean tsunami in 2005 when over 30,000 lives were lost. India was requested to help to develop the port but the UPA Government demurred. China stepped in to develop the port and is providing nearly 85 percent of the funds as loans. The first phase cost some $307 million. The second phase will be completed this year, costing some $808 million. China is also constructing its second international airport at Hambantota. Both the port and the airport are being constructed by China Harbour Engineering Company, with 85 percent funding from Ex-Im Bank of China. It is the first airport this company has ever built.

When President Xi Jinping visited Colombo in September 2014, he signed a BOT agreement for a 35-year lease for four of the seven container berths on behalf of the Chinese company. While the Indians are worried about the string of pearls strategy that ostensibly China is following, they must now regret not accepting the initial request from Colombo to develop the port.

The Chinese are constructing the new $1.4 billion Colombo Port City Project, covering 233 ha of land. Under the agreement, China will receive 88 ha on a 99-year lease and another 20 ha on a freehold basis. This means 1/3rd area will be under China’s control for 99 years. It is Sri Lanka’s largest foreign investment project ever, and was inaugurated by President Xi. Since 70 percent of the port activities are related to India, New Delhi is seriously concerned about the Chinese intentions and potential implications.

This is in addition to the South Container Terminal at Colombo Port, which is being managed by a China-led consortium on a 35-year BOT agreement. Both a Chinese submarine and a naval ship had used this China-controlled terminal, which had alarmed the Indians. Colombo had also enthusiastically endorsed the 21st Century Maritime Silk Road, which had further worried New Delhi about the Chinese intentions.

The relationship between India and Sri Lanka had steadily frayed under Rajapaksa because both the countries made numerous political miscalculations. In his election manifesto Sirisena noted Sri Lanka would be neither anti-India nor dependent on India. During his swearing-in ceremony he added his foreign policy will mend “ties with the international community.”

By visiting India first after becoming the President, Sirisena made a point that good relations with Delhi were a priority. The two countries signed four agreements. One was a landmark treaty on nuclear cooperation, the first that Sri Lanka has signed with any country. The Rajapaksa regime had considered Kudankulam nuclear plant in Tamil Nadu a “threat” because of a potential accident. Sirisena accepted India’s guarantee of safety in case of an accident. The others included trade, collaboration in different areas of agricultural and cultural and educational cooperation.

Modi became the first Indian Prime Minister to visit Sri Lanka since July 1987. He agreed to address the trade imbalance, provide an additional $318 million for Sri Lankan railways, and increase the swap agreement to stabilise Sri Lanka’s currency during any crisis from $400 million to $1.5 billion. Aware of Sri Lanka’s internal Tamil situation, he confirmed that he is a “firm believer in cooperative federalism”, and assured in his speech to the Sri Lankan Parliament that, for India, “unity and integrity of Sri Lanka are paramount. It is rooted in our interest.”

What may be strategically important in the future is the agreement between India and Sri Lanka to jointly develop petroleum storage facilities in the eastern port city of Trincomalee. Modi said India will “help Trincomalee to become a regional petroleum hub.” This could lead later to strategic access to this port, counterbalancing China’s access to Hambantota.

Modi also promised to develop a Buddhist circuit in India and requested Sri Lanka help to create a Ramayana Trail. The two countries agreed to continue with talks to solve the Indian concern of fishing rights at Palk Strait.

Thus, with Sirisena’s visit to Delhi and Modi’s visit to Colombo, there has been a reset in relations between the two countries.

Rajapaksa’s unexpected departure will provide an opportunity to reset most bilateral relationships. However, it will not be status quo ante bellum (state existing before war). China with its deep pockets, will continue to play an important role in the country’s infrastructure development, directly and through Asian Infrastructure Investment Bank of which all the three countries are founding members.

When any relationship frays because of a new third party, relationships have to be recalibrated. For India and Sri Lanka, presence of China and the fall of Rajapaksa, mean all the relationships have to be recalibrated as well.

Asit K. Biswas is the Distinguished Visiting Professor at the Lee Kuan Yew School of Public Policy, Singapore. Cecilia Tortajada is a Senior Research Fellow in the same School. Both are co-founders of the Third world Centre for Water Management, Mexico.