Govt’s ambitious economic plans and China’s great game in region | Sunday Observer

Govt’s ambitious economic plans and China’s great game in region

Hambantota deep sea port
Hambantota deep sea port


The Sri Lankan government’s agreement with China over the development of the Hambantota harbour has stirred many debates in the political and diplomatic circles, over the past few months.

The Sirisena-Wickremesinghe administration had a logical reason to enter into the agreement. Under the previous government, Sri Lanka walked into a serious debt-trap, mainly due to former President Mahinda Rajapaksa’s penchant for large-scale development and construction projects which made little sense in terms of business.

Hambantota, the hometown of the former first family, was home to many large-scale projects, including the Hambantota International Harbour and the Mattala International Airport, dubbed by ‘Forbes’ as the world’s emptiest airport.

When a new government came to power in January, 2015, it was entrusted with the task of monetizing these projecting, while pulling the country out of the debt-mire.

That prompted the government to enter into economic partnerships with China, which has now earned the ire of some sections of the political fold.

It was against this backdrop that the Joint Opposition group, led by former President Rajapaksa, launched a series of protests in Hambantota to hamper the government’s ambitious plans.

It was widely alleged that the Rajapaksa camp was behind the port workers who staged a Sathyagraha campaign at the Hambantota harbour and detained two merchant vessels, causing a staggering financial loss to the government.

The Navy was called in to ensure the release of the two merchant vessels and the drama that ensued was grist to the Joint Opposition mill.

Recently, they organized another protest in the Hambantota district, against the government’s move to set up a Special Economic Zone in the southern city, in partnership with China. Suddenly, anti-China slogans started playing a pivotal role in the Rajapaksa camp’s propaganda campaigns.

While the Joint Opposition leaders were busy propagating anti-China slogans, former President Rajapaksa held a meeting with the Chinese envoy in Sri Lanka, at the former official residence in Colombo 7.

At the meeting, the former President assured the Chinese Ambassador that he had nothing against China or the Chinese economic activities in Sri Lanka.

Court case

It was in this context that MP Vasudewa Nanayakkara, a Rajapaksa ally, filed a Fundamental Rights petition seeking an order to quash the Framework Agreement entered into by the Government of Sri Lanka with two Chinese companies.

The petition was fixed for support on February 13 by the Supreme Court.

When the petition was taken up before Chief Justice K. Sripavan and Justice Anil Goonaratne, Additional Solicitor General Sanjay Rajaratnam appearing for the Sri Lanka Ports Authority informed Court that the Memorandum of Understanding (MOU) pertaining to the Hambantota harbour had been signed in 2012.

“The original MOU was signed in 2012. This is a continuous and uninterrupted process from 2012. The petitioner has concealed this fact through his petition and he was a member of Cabinet at the time the Cabinet paper was presented,” Rajaratnam added.

The Supreme Court directed the Secretary to the Ministry of Ports and Shipping to have a copy of the MOU signed in 2012 submitted in Court on the next support date.

The petitioner cited members of the Cabinet of Ministers, members of the Cabinet Appointed Negotiating Committee (referred to as the CANC and also sometimes referred to as the Committee of Secretaries), the Director General of the Department of External Resources of the Ministry of National Polices and Economic Affairs, Sri Lanka Ports Authority, China Merchants Port Holdings Company Limited and China Communications Constructions Company as respondents.

The Petitioner said his petition relates inter alia to the infringement and imminent infringement and continuing infringement of the Petitioners fundamental rights guaranteed in terms of Article 12 (1) of the Constitution, by the arbitrary, capricious, mala fide and illegal and unlawful decision of the respondents to enter into an agreement with the People’s Republic of China for the promotion of investment in Sri Lanka by Chinese investors and lease and convey and enter into an agreement or in any other manner dispose approximately 15,000 acres of land and/or 50 square kilometres.

Nanayakkara further sought a Declaration that the Framework Agreement dated 08.12.2016 as null and void, and declare that the said agreement has no force of law until the same is approved by Parliament, as required by Article 157 of the Constitution.


While Nanayakkara was busy at the Hulftsdorp, a body called the Federation of Trade Unions to Protect Harbours staged another protest in Colombo, on Wednesday, against the government’s MoU with China, on the Hambantota harbour.

As a result, several roads leading to the Colombo Fort area were blocked on February 1, a day before the commencement of the Independence Day rehearsals.

As the protest started moving towards the Presidential Secretariat, the Police used tear gas and water cannons to disperse the protesters.

The protests and the court case have made it clear that the implementation of Sri Lanka’s economic plans with China will not be a cakewalk.

However, it is also important to understand that the political resistance will not be a major deterrent for the Chinese government, when it comes to its economic activities in Sri Lanka.

It is important to analyse Sri Lanka’s place in China’s larger economic plans.

It was while on a state visit to Kazakhstan in September 2013 that China’s incumbent President Xi Jinping, at a speech on China-Central Asia foreign policy at the Nazarbayev University in Astana, first spoke of a ‘Silk Road Economic Belt’ between China and Central Asia.

Evoking a ‘golden opportunity for deeper corporation’, Xi Jinping said the proposed economic belt, inhabited by “close to 3 billion people”, represented the “biggest market in the world with unparalleled potential”.

A month later, during a speech to the Indonesian parliament, while on his first state visit there since accepting office, Xi Jinping encouraged a “maritime partnership”, inviting Indonesia to join efforts to build the “Maritime Silk Road of the 21st century.”

The ‘One Belt One Road’ initiative, as is it has evolved today, is a two-pronged plan for greater land and sea connectivity: The ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road’ are expected to enhance relations between China and the continents of Asia, Europe and Africa.

The Silk Road Economic Belt is the land route China will take to access larger markets in Asian, European and African markets.

The Action Plan unveiled by the Chinese government in March 2015 stated, the Belt would: 1. Link China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and 2. Connect China with Southeast Asia, South Asia and the Indian Ocean.

Towards this end, China has said it would jointly build a new Eurasian Land Bridge and also develop economic corridors between China-Mongolia-Russia, China-Central Asia-West Asia and China and the Indochina Peninsula.

While in May 2014, the China and Kazakhstan logistic terminal went into operation, China has also since worked towards aligning itself with Kazakhstan’s development strategies, Kazakhstan’s ‘Bright Road’ initiative as well as to synergize with the goals of the European Economic Union (EEU) and the Central and Eastern European Countries (CEE).

The 21st Century Maritime Silk Road is the sea route Chinese goods will take to Central Asia and Africa.

China’s Action Plan revealed that the 21st-Century Maritime Silk Road is designed to go from 1. China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from 2. China’s coast through the South China Sea to the South Pacific in the other.

Towards this end, China has stepped up relations with key countries situated on this route; In September, Thailand approved a draft MoU on railway cooperation while in November, the China-Pakistan Economic Corridor became operational and construction to revamp the Tanzania-Zambia Railway (TAZARA) also began.

Sri Lanka falls into this ‘great game’ China is playing to advance its economic prospects. Sri Lanka is strategically important to China as the island nation is located at a critical point on China’s Silk Road Economic Belt. Therefore, irrespective of political fluctuations in Sri Lanka, China will strive to enter into economic partnerships with Sri Lanka.

Sri Lanka to benefit from PPC model

At the World Economic Forum (WEF) in Davos, Switzerland, China Merchant Group President Li Xiaopeng revealed a PPC model China hoped to share with local partners for a ‘win-win’ situation: “First a port, then an industrial park, and beyond the park, a modern city,” he said, describing the concept as ‘PPC’ model.

Chinese President Xi Jinping stoutly defended China’s policy of globalization and revealed Chinese plans to invest a further USD 700 billion in outward direct investments over the next 5 years.

The PPC model is what China is adopting in relation to Sri Lanka.

From an economic standpoint, the China Merchant Group has substantially invested in Sri Lanka – two of Sri Lanka’s five ports are in Chinese hands – Colombo and Hambantota.

The Sri Lankan government has secured with China to run the Hambantota deep sea port and Mattala International Airport as public-private-partnerships (PPP) that will be driven by monumental debt-for-equity swaps.

Colombo’s South Container Terminal is a 35-year Build-Operate-Transfer (BOT) arrangement with China Merchants Holdings, the same company that’s taking over the Hambantota port.

Plans are also underway for China to be given a long-term lease on 15,000 acres of land in Hambantota for an industrial zone, a $1.4 billion development project.

In Colombo, China is constructing the Colombo Port City, a massive investment project for a 269-hectare financial district. It is designed to be a financial center of skyscrapers, luxury hotels, shopping malls, and a marina that was destined to shake up Sri Lanka’s economic and geopolitical landscape.

With these three large scale projects, China has successfully adopted the PPC model in Sri Lanka.

The Sirisena-Wickremesinghe administration, currently stuck in an unprecedented debt-trap, aims to capitalize on the PPC model, assuming it would be a win-win deal.

This, however, poses another challenge to Sri Lanka, on the foreign policy front. That is to counterbalance Sri Lanka – China relations with India and the United States.

India’s fears

This laid the foundation for Sri Lankan Navy Commander Vice Admiral R.C. Wijegunaratne’s visit to India, which came three months after Indian Navy Chief of Staff Admiral Sunil Lanba’s visit to Sri Lanka.During his visit, the Indian Navy Chief of Staff met with President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe, the Chief of Defence Staff and the Commanders of the three forces.

Wijegunaratne also made news when he took bold measures to ensure the release of the two merchant vessels amid the protest against the Chinese presence in the Hambantota harbour. He came under criticism for assaulting a provincial news correspondent at the heat of the moment.

Although, on the face of it, the Sri Lankan Navy Commander’s visit does not seem to be aimed at easing Indian fears over the Chinese presence in Sri Lanka, the Sri Lankan Navy Commander did use the opportunity to share some views on regional security.

During bilateral discussions with the Indian authorities, he assured them that the presence of Chinese nuclear submarines in his country was for “purely economic reasons”, thus attempting to allay India’s fears of expanding Chinese military capabilities.

“The age-old tradition of Sri Lankans going to the Staff College in Wellington in the Nilgiris district of Tamil Nadu has stopped. We are negotiating with India to try and resume this process”, Wijegunaratne said, in a bid to show India that Sri Lanka was committed to maintaining Indian ties.