I present four news items preceded by my own Preamble and followed by Rajan Philips’s appraisal as essential reading.
- China grants 500mn Yuan symbolizing Sino-Lanka friendship
- Yuan to enter Colombo
- Ranil appoints top-level committee to facilitate Chinese investments
- Economic strategies between Sri Lanka and China finalized
- Ben Blanchard: “Sri Lanka requests equity swap for some of its $8 billion China debt”
- Rajan Philips: “PM’s China visit: Two-timing diplomacy for Indo-China investments
I. Preamble by Michael Roberts
The term kow tow has been an act of Chinese penetration, so to speak, into the English language, being a corruption of the Cantonese Chinese term kau tau (koutou in Mandarin Chinese) which denotes the act of deep respect shown by prostration, that is, kneeling and bowing so low as to have one’s head touching the ground. In the early 15th century the Ming Emperor despatched a huge fleet under Cheng Ho – one that would have simply dwarfed the ships and numbers under Columbus – across the Indian Ocean and captured Vira Alakesvera, the King of Kotte, and transported him to China in order to instill China’s “tributary overlordship” over the island. So, kow-towing, or what we would call dakum, obeisance from inferior to superior, was forcibly imposed on that occasion. Dutch ambassadors in däkuma before King of Sihalē, 1785…https://thuppahis.com/2013/10/09/tributary-overlordship-and-cakravarti-figures-in-pre-british-lanka/
Today WHAT do we find with the morning dew! ….. without any imperial military expedition on the part of the Chinese
- China gift us 500 million yuan or Rs.11198,215,952
- The Yuan as currency is promised a spot in the SL money market on a par with the dollar
- Several bilateral trade agreements are signed
- The Port City is back on track …. [but with what “bites” due to the economic cost of delays triggered by the Yahapalanaya?]
- The Chinese investments and old arrangements in the development of Hambantota are re-affirmed
So, today, in April 2016, China received däkuma from Sri Lanka’s leaders (and attendant ministers) without sending even one sampan to the island. After 14 months of huff and puff about China’s Port City Project in Colombo, as well as genuflections towards USA, the EU and big brother India, our leaders have somersaulted like the best of circus artists and gone cap in hand// kow towing // däkum-sahita-pirivarāgena to China.
It is extremely funny.
It may also be extremely wise and necessary. This may be just what the doctor ordered for Sri Lanka: a middle course between great powers ….. a pragmatic course, necessary course. I lack the economic expertise and the information on foreign affairs to gauge this issue, so my passing thoughts must be viewed with caution. But I present readers with some of the hot hot kow tow items and suggest careful attention to Rajan Philips’s evaluation.
II. “China grants 500mn Yuan symbolizing Sino-Lanka friendship,” news Item in Island, 10 April 2016, http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=143520
Chinese Premier Li Keqiang has pledged a grant of 500 million Yuan to Sri Lanka symbolizing Sino-Lanka friendship, the Prime Minister’s office announced. Chinese Premier has told the Sri Lankan delegation that the Free Trade Agreement is expected to be signed soon reducing the trade gap between the two countries. Keqiang has also pledged to support the development of the second stage of Hambantota Port. Following an invitation extended by Wickremesinghe, the Chinese premier is expected to visit Sri Lanka next year.
In addition to bilateral discussions held with the Chinese Premier, several agreements were also signed. Minister Malik Samarawickrama signed an MoU between the Ministry of Commerce of China and the Ministry of National Policy and Economic Development on fully promoting investment, economic and technical corporation between the two countries. Foreign Minister Mangala Samaraweera signed the treaty between China and Sri Lanka on extradition. Governor, Central Bank Arjuna Mahendran signed the Comprehensive Corporation agreement between China Development Bank and the Monetary Board of the Central Bank. Prof. Sirimali Fernando, on behalf of National Science Foundation, signed an agreement with the China National Science Foundation for research funding. Karunasena Kodituwakku, Sri Lankan Ambassador to China, signed an exchange of letter for a kidney mobile screening vehicle project between China and Sri Lanka.
III. “Yuan to enter Colombo,” http://www.sundayobserver.lk/2016/04/10/new01.asp
The Chinese Yuan will be made a convertible currency in Sri Lanka soon after the China Bank sets up operations in Colombo, Central Bank Governor Arjun Mahendran said. Mahendran was a member of the high profile Sri Lankan delegation visiting China with Prime Minister Ranil Wickremesinghe. During the visit, representatives of the Sri Lankan government had extensive discussions with the Chinese government to strengthen bi-lateral ties between the two countries on the political and economic fronts.
Mahendran told the Sunday Observer, that with this new move, the Chinese Yuan will have the same status in Sri Lanka as the US Dollar. The Central Bank Governor, however, did not disclose exact time-frames of the new arrangement. “This decision is significant on many grounds. While it allows China to consolidate its economic position in this part of the world, it also enables Sri Lanka to have more interaction with China, financially, in terms of soft loans and other short and mid-term financial measures. It is a step in the right direction as China is positioning itself to be the global economic super-power in the coming years,” a senior economic analyst, who wished to remain anonymous told the Sunday Observer.
Meanwhile, Prime Minister Ranil Wickremesinghe told a business forum in Beijing, China, that the Sri Lankan government was looking at a public-private partnership and the government will play the role of a regulator. “We like to see Chinese entrepreneurs coming here and would offer a level playing field for them to carry on with their business without any hindrance,” the Prime Minister said.
The IMF, in November, last year, gave the greenlight to include the Chinese Yuan (RMB) among major currencies in the SDR basket alongside the US dollar, Japanese Yen, Sterling and Euro.
IV. “Ranil appoints top-level committee to facilitate Chinese investments,”10 April 2016, http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=143514
A high-powered three-member committee has been appointed to ensure that all Chinese investments and projects in Sri Lanka are methodically facilitated and expedited, Prime Minister Ranil Wickremesinghe told Chinese President Xi Jinping and premier Li Keqiang in Beijing yesterday. Special Projects Minister, Dr. Sarath Amunugama, Development Strategies and International Trade, Malik Samarawickrama and Adviser to the Ministry of Economic Development, R. Paskaralingam have been appointed as members of this top-level committee, the premier said.
V. “Economic strategies between Sri Lanka and China finalised –PM,” Sunday Observer, 10 April 2016
The seven agreements signed by the two countries are; MoU on Trade and Investments, technical cooperation agreement, MoU between the Chinese Development Bank and Central Bank Sri Lanka, second phase of the Southern Highway, extradition treaty, a kidney mobile screening unit and an MoU between the Natural Science Foundation of China and National Science Foundation of Sri Lanka. China has also offered a grant of 500 million Yuan to Sri Lanka as a gesture of friendship and assurance that China will continue to extend their support to Sri Lanka’s investment zones and the industrialisation projects. “We have finalised comprehensive economic strategies between Sri Lanka and China for the next two decades,” Prime Minister Ranil Wickremesinghe said.
Addressing journalists at the China World Hotel in Beijing, he said “This visit follows President of the People’s Republic of China Xi Jinping visit in 2014 and that of President Maithripala Sirisena in 2015.”
Prime Minister Wickremesinghe flanked by Ministers Mangala Samaraweera, Malik Samarawickrema, Sajith Premadasa during a discussion with Chinese Minister of the Communist Party International Department, Song Tao Diaoyutai
Economic co-operation: “There are a few details to be finalised such as the Free Trade Agreement and other important MoUs. These agreements would be finalised when the Chinese Prime Minister visits Sri Lanka next year at our invitation,” he said.
“This has now set the foundation for economic co-operation between our two countries, I would like to call this the second Rubber-Rice pact. The original was signed between Sri Lanka and the People’s Republic of China in 1952. It was one of the earliest agreements that the People’s Republic of China entered into with another country.
Deepening ties: In 1977, Sri Lanka embarked on the second round of economic reforms and a year later China also made a successful bid to reform its economy under the then President of the People’s Republic of China. Now we have come to a stage, where the global economic crisis has changed the economic order of the world where emerging markets and developing countries show more dissidence than expected. At present both our countries are moving towards deepening ties and integrating further into the global economy and we find synergies in the ‘One belt, one road’ policy of the President of the People’s Republic of China and we are making Sri Lanka the hub of the Indian Ocean under the stewardship of President Sirisena.
What is important to recall is that when the whole world was plunged into an economic crisis in the recent past, China emerged as a resilient force to stabilise the global economy,” he said. “Our task now is to build our economy and we have come up with a comprehensive plan which fits in with that of the ‘One belt, one road’ policy of China, the Singaporean concept and the ‘Made in India policy of India’,” he said. “In this context, we are moving to becoming the financial, economic and logistics hub of the Indian Ocean.
Our discussions with President Xi Jinping and the Prime Minister and others of the government were successful. Our primary focus was on the economy but it would expand to other areas as well such as cultural, people-to-people and a whole range of other areas,’ he said.
VI. Ben Blanchard: “Sri Lanka requests equity swap for some of its $8 billion China debt,” 9 April 2016, http://www.reuters.com/article/us-china-sri-lanka-idUSKCN0X60CH
Sri Lanka has asked China to swap some of the $8 billion it owes Beijing for equity in infrastructure projects and offered to sell stakes in its companies to Chinese ones, Colombo officials said on Saturday. The ouster of President Mahinda Rajapaksa, who steered Sri Lanka toward China until his 2015 election defeat, was a setback for relations as his successor has reviewed projects to check if they were fair and legal.
Now President Maithripala Sirisena’s government, faced with falling foreign reserves, a balance of payments crunch and few, if any, alternative investors, is heading back into China’s embrace, albeit asking for better terms. Speaking to reporters in Beijing, Sri Lankan Prime Minister Ranil Wickremesinghe said his indebted country was suffering because of global economic uncertainty. “We’ve been talking with some companies and also the government of China about the possibility of some infrastructure projects becoming public-private partnerships, in which part of the debt will become equity held by the Chinese companies,” he said.
International trade minister Malik Samarawickrama said Sri Lanka would also like additional funds from China, though they had not asked for a specific amount. “We want to reduce the current debt by inviting Chinese companies, Chinese investors, to look at some of the enterprises in Sri Lanka, the state-owned enterprises, with a view to taking at least part of that equity over,” he said. “Then we can reduce the current debt that we have and open up the opportunity for us to take more funds from Chinese banks.”
Sri Lanka upset China when it ordered a review of a $1.4 billion Colombo port city project last year, citing irregularities in the awarding of the contract to state-owned China Communications Construction Company (CCCC) (601800.SS) by the previous government. Last month, the present government, grappling with a difficult economy, ordered the Chinese firm to resume work on the project, the country’s biggest foreign investment project, that includes apartments, shopping malls and marinas.
But CCCC, which had estimated that the shutdown would result in losses of more than $380,000 a day, has sought compensation of $125 million, according to Sri Lanka, which has said it can’t pay and wants to negotiate. “The company has asked for additional compensation in view of the fact they say there has been a delay,” Wickremesinghe said. “But I think we can talk and settle it.”
Chinese projects in Sri Lanka have unnerved India, but Wickremesinghe said there was no security threat from the port. “It’s an opportunity for everyone to make money. That’s what we do in Asia.” In a joint communique released by China later on Saturday, both countries stressed they would increase their military and security cooperation.
(Reporting by Ben Blanchard; Editing by Tom Heneghan)
VII. Rajan Philips: “PM’s China visit: Two-timing diplomacy for Indo-China investments,” from Sunday Island, 10 April 2016
It is not that the world is watching Prime Minister Ranil Wickremesinghe’s visit to China. The political world is preoccupied with the Panama Papers and the unfolding saga of the estimated US$21-trillion unreported private financial wealth hidden in the world’s tax free treasure islands. The curious cats in Sri Lanka are sniffing for traces of Sri Lankan rupees that may have trickled into this global loot. Deputy Minister Eran Wickremaratne has stoked Sri Lankan curiosity by alluding to the potential presence of Sri Lankan shell companies in the Republic of Seychelles, the East African archipelago in the Indian Ocean. If indeed there are Sri Lankan shell companies in Seychelles, it would be interesting to see whether they had any connection to the shell diplomatic initiatives that Sri Lanka launched in East Africa during the previous regime, ostensibly to garner votes for the UNHRC sessions in Geneva. But there is nothing ‘shell’ about the Prime Minister’s visit to China. It is real diplomacy, and going beyond government-to-government relationship, the Prime Minister is also initiating a liaison between the United National Party and the Chinese Communist Party. Where does that leave the SLFP in Sri Lanka, and which faction of the SLFP?
If I am not mistaken, Prime Minister Wickremesinghe’s current visit to China could be the first official visit to that country by a UNP Prime Minister. It is also perhaps the first time that a Sri Lankan government has to transparently balance its overtures to and relationships with China and India at the same time. This transparent even handedness seems to be a natural trait in Mr. Wickremesinghe, who last year described Sri Lanka’s position as being “neither pro-India nor pro-China”. Both the Indian and the Chinese media are highlighting that principle in their commentaries on the Sri Lankan Prime Minister’s current visit to China. The Indian media has also quoted a spokesperson for the Sri Lankan President commenting on the importance of keeping both China and India in good humour – and according to the same source the Chinese Port City project in Colombo and the Economic and Technical Co-operation Agreement (ETCA) with India are Sri Lanka’s quid pro quos vis-a-vis the two Asian giants. But there is no humour among the local opponents of either initiative, and it is quite remarkable that the opposition to the two initiatives emanates from very different social and political strata in the country.
Globalization has emphasized the economic dimension in foreign policy everywhere and Sri Lanka is no exception. Sri Lanka’s history, its geographical location and the global economic reality involving the two Asian giants require that Sri Lanka has to deal with both China and India for trade and development far more than it has ever done in the modern era. The island country had been trading with India and China quite extensively before western colonialism intervened and rearranged the region’s traditional trading patterns. With India and China now emerging as alternative producers of tradable goods and services the advantage of geographical proximity is once again privileged as it used to be in pre-colonial times. The foreign policy challenge for Sri Lanka is in taking economic advantage of this development while carefully navigating the local political minefield made up of historical prejudices.
Foreign Policy and Economic Strategy: “All politics is local” is a famous American truism. In Sri Lanka it is also true that all foreign policy is local politics. It is fair to say that Sri Lankan foreign policy from the time of independence has been more politically impulsive and reactive rather than being economically strategic. I have earlier described the trajectory of Sri Lankan foreign policy as one that started with “Anglo mania and India phobia” under DS Senanayake, was steered along the non-alignment road by the Bandaranaikes, reversed abruptly and then turned sharply into a controversial agreement with India by JR Jayewardene, and later dragged into ‘China mania and Anglo-Indo phobia’ under Mahinda Rajapaksa. It could also be said that while much of the criticism of the China-policy of the Rajapaksa government has been on account of its economic fallouts, the opposition to any form economic co-operation with India is mostly motivated by political antipathy. In picking up the pieces from where the Rajapaksas left, the present government has got its economic thinking right, but its political strategy is all over the map.
Even on the economic front, the government seems to be sleepwalking towards economically dividing the country into two sectors – one for Chinese investment and another for Indian investment. There seems to be no thinking about what will connect the two, except the two together will automatically generate a million jobs. That is our mandate, so don’t ask questions – is all that the government offers as political strategy. We must of course wish the Prime Minister every success in negotiating with the Chinese the restructuring of debt payment that is the prodigal legacy of the Rajapaksas. At the same time, it is necessary to point out that the government must have a well thought out plan for receiving and utilizing Chinese and Indian investments in ways appropriate to the needs and priorities of the country’s different regions and economic sectors. Without such a plan and a set of priorities, the government risks turning the country into a dumping ground for second or even third rate investments, products and services from the two giants. The lack of a strategy and a plan is already forcing the government into desperate soliciting of help from China and India to tide over short-term difficulties.
There are still several unanswered questions regarding the Port City project. Whose responsibility is it to satisfy the so called 70 tough conditions that have been imposed on the project? The government’s own Chairman of the Western Region Megapolis Planning Project has warned about the huge opportunity costs that the Port City project will impose on the infrastructure needs for the rest of the Megapolis that is in dire need of infrastructure improvements. The lessons from the Norochcholai power station built by the Chinese must not be forgotten while going ahead with a new one in Sampur that is to be built by the Indians. What is good for Sri Lanka’s power system must be given greater weight in decision making than the requirement to be even handed between China and India.
After independence, economic co-operation between China and Sri Lanka began with the hugely successful Rubber-Rice agreement under a UNP government. But China was never the ideological favourite of the UNP. In the 1965 elections, the UNP campaigned and won accusing the SLFP of selling out the country to the Chinese. Tit for tat, the Chinese Communist Party periodically staged protests in front of the Sri Lankan Embassy in Beijing after the UNP came to power. It is a sign of the times that a UNP Prime Minister is now visiting China and even establishing links between the UNP and the Chinese Communist Party. He cannot do that in India because there are too many political parties in India. It also shows that political rapprochements between capitalist and communist parties have now become cosmetic and uncontroversial. The real question is about the economy and what economic benefits will accrue to the country from the government’s two-timing diplomacy with India and China.
PS: When I drafted my preamble I was unaware of the article in the Sunday Times which echoed some of my contentions. Do digest its content: http://www.sundaytimes.lk/160410/columns/no-free-chinese-takeaway-but-chinese-takeover-on-the-menu-189428.html
EMAIL NETWORK COMMENTS THAT ARE PERTINENT
From Dr. Ivan Amerasinghe, 10 April 2016: … I contacted my former Chinese colleague in Ha Noi, presently returned to Beijing FO. The story is more complex. China insists on continuation of the MR projects as the main aid assisted Sri Lankan projects i.e. Port City and Hambantota port and other Hambantota projects. The aid is subject to the conditions that China will utilize the same contractors as previously with local subcontractors chosen by the Chinese contractors. This means (a) Subcontractors used during the previous government will benefit and (b) Hambantota people with Rajapaksa partisanships will be ensured employment. RW was so eager to make his China visit a success that he invited MR to a private meeting which lasted for over an hour before he embarked on the journey. Failure to achieve anything would have meant dire straits for the UNP led government. Whether RW will extend reciprocity in kind to MR is a matter for the future.
A NOTE on Mahinda Rajapaksa’s Comment at DERANA by Philip Fernando
Referring to Prime Minister Ranil Wickremesinghe’s visit to China to strengthen ties, former President Mahinda Rajapaksa says that the government has done something good after a long time.
* He stated China has provided Sri Lanka with immense assistance to develop the country’s economy and infrastructure and that during his reign he signed agreements with the Asian powerhouse to launch development projects and establish business opportunities. We had a plan to develop the country but this government stopped them, Rajapaksa said, addressing an event in Angunakolapelessa today.
* He stated that now the government had to go and seek relief from the China even after severely criticizing the country in the past. Walk around the country and the work I did after obtaining loans is clearly visible, however the incumbent government has not even built a culvert from the loans obtained by it, the Kurunegala District MP charged