Quad, led by India, can save Sri Lanka from its “Made in China” crisis. But timing is the key

Wang Yi is on the move. On his first overseas trip this year, the Chinese foreign minister will visit several Indian Ocean states, including the Maldives and Sri Lanka. As Beijing well knows, New Delhi will keep an eagle eye.

Omens are not good. Sri Lanka faces an economic crisis, while the Maldives are heavily in debt with China holding the bills. But there is enough room for maneuver for India, provided it moves quickly and positively. Meanwhile, others will be watching too. The Indian Ocean is, after all, today a major contestation area.

Visiting the Maldives

Wang is in the Maldives to celebrate 50 years of diplomatic relations, for which he has allocated two full days in an extremely busy schedule. Even as his tour was announced, a “Go India Go” was hosted by former President Abdullah Yameen, whose intensely pro-Chinese stance led to debt to China reaching $ 1.4 billion, representing 38%. of the country’s national debt and 78 percent of its external debt. The current government of Maldives is taking a more cautious stance, although total debt still stands at 125 percent of GDP. He wants to renegotiate the terms with China, but there is no mention of this in a singularly tasteless press release that did not indicate any major results.

Beijing has proposed visa-free status, which doesn’t matter much, but gives Ibrahim Solih’s government a certain cachet locally. The desalination plant proposal was signed last year, but there is an economic and technical cooperation agreement on grants, totaling 400 million yuan (about $ 63 million) to be used also for infrastructure projects. Beijing is already crowding out the archipelago with a host of projects that include the China-Maldives Friendship Bridge and the expansion of Velana International Airport (which moved the Indian GMR) in addition to the huge housing units at Hulhumale, not to mention Chinese companies moving to lease Feydhoo Finolhu Island for 50 years for a pittance, another similar lease of Kunvaashi Atoll, and a huge stadium in the capital. An earlier proposal for the Makunudhoo Observatory raised the thorns of New Delhi and was ultimately scrapped.

Maldivian Foreign Minister Abdullah Shahid thanked Beijing for 200,000 Covid-19 vaccines, but he also gratefully accepted the United States Pfizer and AstraZeneca. Meanwhile, with the suspension of 26 weekly flights by China to the archipelago, it is Russian and Indian tourists who have taken over, to allow tourism which is the basis of financial stability, to levels almost pre -pandemic. Meanwhile, Foreign Minister Shahid praised the Belt and Road initiative and is due to attend the 2022 Winter Olympics in Beijing in his capacity as chairman of the General Assembly of United Nations. It’s an eye for the United States.


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Wang in Lanka

Wang’s visit to Sri Lanka was already eclipsed to some extent, when Lankan companies refused to accept contaminated fertilizers from China. A huge row ensued, with the People’s Bank of Sri Lanka blacklisted by the Chinese Embassy, ​​and threats to negatively influence the country’s credit rating. The row arose amid a courageous decision by President Gotbaya Rajpaksa to switch entirely to organic fertilizers, which reportedly resulted in a significant drop in the harvest. True or not, it became a political scandal, and Colombo relented, paying $ 6.9 million ahead of Wang’s visit.

Wang’s meetings were not without political embarrassment, as President Rajapaksa called for debt restructuring and “concessional terms” for his exports. Earlier, Sri Lanka’s Ambassador to China Dr Palitha Kohona stressed the need to learn from Pakistan and Bangladesh and opt for a free trade agreement with China, which Sri Lanka does has so far resisted, due to its fear of being overwhelmed by the might.

Some six meetings have taken place, and Wang has raised the issue again, with his Ambassador in Colombo a little more forceful on the subject. The request for China to allow its tourists to return to the island is unlikely to be granted, given that Beijing is unlikely to ease its strict Covid restrictions. Meanwhile, India topped the list of tourist arrivals in 2021.

The Foreign Ministry’s reading ultimately made no reference to any of these critical issues, simply stating that “discussions” had taken place on investments, trade promotion and tourism, and particularly on “promoting links. Buddhists ”with the nation. The agreements signed did not appear exceptional and included an agreement on economic and technical cooperation, letters of exchange on the subsidized housing project for low-income groups in Colombo and a completed project on ambulance vehicles for kidney disease screening and a conference center.

the embassy, however, reported a subsidy of LKR 25.5 billion (GNI 800 million), which appears to be Ambassador Zhenhong’s overall assessment of the agreements. He also chose to stress that “no third party can derail the close Sino-Lankan ties.” No prize for guessing who it was for. He also re-insisted on the FTA and considered a $ 15 billion investment in the port city in the future. The Chinese Foreign Ministry only praised and did nothing.

In the final analysis, the visit did not give in on debt rescheduling, which is Sri Lanka’s most pressing issue at the moment. Foreign debt repayments alone amount to more than $ 4.5 billion a year through 2025, absorbing about 40% of annual merchandise export earnings. Official figures indicate that only 10 percent of the total of $ 35.1 billion is held by China. This does not cover a recent 10 billion RMB (US $ 1.5 billion) exchange that saved Sri Lanka from a severe forex crisis at the end of 2021, which highlights how dependent Colombo has become. help from Beijing. This figure also does not cover Chinese aid through the Asian Development Bank. China is also the biggest investor, accounting for 23.6% of total FDI.

The end result, however, emerges from the facts, namely that China took over Hambantota (99 years ago, that’s practically it); that a Chinese company is the first to have a highway on the island; that Beijing owns 88 hectares of the port city of Colombo (CPC), still with a 99-year lease; that the clauses of the CPC led the Supreme Court to order the Parliament to proceed to a reassessment of questions of sovereignty; and that India and Japan were both kicked out of the Eastern container terminal at the end of 2021, apparently due to “resistance” from the unions. In other words, China’s dominance of infrastructure is far more important than what debt statistics or FDI figures show.

More curious still, the Chinese seem to be investing in projects that the host country cannot develop, like Hambantota, which was practically overgrown with weeds until the Chinese took over, and the international airport of Mattala called “The most empty airport in the world”. The CCP will again demand that Colombo depend on Beijing. All of them, however, are extremely strategic and when combined with other projects like the container terminals at the Port of Colombo, China is everywhere, and for its own benefit, rather than for the benefit of Colombo.


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Beijing’s new tactic

Meanwhile, Beijing is learning. Previously, the Chinese Ambassador to Sri Lanka, Qi Zhenhong, had chosen to visit the predominantly Tamil Northern Province and perform a puja, shirtless, dressed in traditional white silk. vetti (scarf), something unheard of, even among the warrior-wolf diplomats of China. The reason is not far to seek. Tamil politicians have been the most critical of the CCP in parliament, including former Northern Province chief minister CV Wigneswaran, Tamil National People’s Front leader Gajen Ponnambalam and Tamil National Alliance MP and senior lawyer MA Sumanthiran, among others. In addition, getting closer to the Tamils ​​is probably seen as another way to undermine Indian influence.

President Rajapaksa once said that other countries could invest in Sri Lanka. “This is how you can counter, complaining will not be enough.” This is partly true, but India has invested, as has Japan, and has been turned down. Although devoid of Beijing’s deep pockets, New Delhi has recently raised its profile, extending lines of credit and modest grants, rather than massive loans. But India’s big banks are cautious about extending lines of credit given the Sri Lankan central bank’s severe dollar shortage, which means investments are not available when they are needed most.

In the Maldives, India has been more aggressive with the larger male connectivity project and grants of over $ 100 million. Japan followed with assistance, as did Australia to a lesser extent, and the United States. Obviously, Male has options presented to him. But Sri Lanka has garnered little US interest, and Australia is virtually invisible. Japan is a strong partner, and the three could do more, with India, provided Colombo decides that excessive reliance on Beijing is bad for its health. But timing is everything. If the “Quad” is to mean anything, the Four must act smart to save Colombo from its “Made in China” crisis and save Sri Lankan sovereignty for itself. As for the Maldives, the four of them must plan the vacation periods of their respective populations in search of pleasure. It is that simple.

The author is Distinguished Fellow at the Institute of Peace and Conflict Studies, New Delhi. She tweets @kartha_tara. Opinions are personal.

(Edited by Prashant)

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