Col R Hariharan
Sri
Lanka PM’s visit to China
Prime
Minister Ranil Wickremesinghe’s four-day visit to China from April 6 to 9 had
kindled a lot of interest as Colombo-Beijing relations had taken a down turn after his government
came to power. An article on
the eve of Sri Lanka Prime Minister’s visit published in the Chinese Communist
Party mouthpiece Global Times emphasized Sri Lanka’s strategic
importance . It said “Currently, the
China-funded constructions in Pakistan cannot serve as a strong foothold for
China, given the calamitous state of Pakistan’s security. Sri Lanka can be of
great importance for China in the security strategic layout in the Indian
Ocean. It will not only provide security assurances for nearby navigation
channels, but will also promote the 21st Maritime Silk Road.”
However,
the Sri Lanka prime minister’s focus during the
current visit were on three urgent issues facing him: repairing the national
unity government’s fractured relations with China and restructuring Chinese
loans to the tune of $ 8 billion and seeking further economic assistance to
bale the country out of severe economic crunch.
During
the visit, Wickremesinghe called on Chinese President Xi Jinping and Premier Li
Keqiang. He also met with Zhang Dejiang, the third-ranking Chairman of the
Standing Committee of the National People’s Congress. The joint statement of
Prime Minister Wickremesinghe and Premier Li issued at the conclusion of the
visit touched upon the following key issues that are of special interest to
India.
Colombo Port City Project: Both sides agreed to enhance their
cooperation in the fields of transport, power and other infrastructure,
industrial parks, and manufacturing industry etc. Sri Lanka announcing the
resumption of work of the Colombo Port City Project, expressed its willingness
to facilitate its implementation. It was also willing to cooperate with Chinese
companies to promote major projects as provided for in the MOU between the PRC
Ministry of Commerce and Sri Lanka Ministry of Development Strategies &
International Trade signed during the visit. [Comment: According to media
reports the project construction would probably resume in September-October after
the monsoon. Sri Lanka probably hopes to resolve the gritty issue of
compensating the Chinese construction firm for losses suffered when the
government halted the construction for a year for reviewing allegations of
corruption and other irregularities.]
China-Sri Lanka Free Trade Agreement (CSFTA): After
reviewing bilateral economic and trade cooperation, the two countries agreed to
hold the 7th Meeting of the China-Sri Lanka Joint Trade
Committee to formulate the development plan on bilateral economic and trade
cooperation for next five to ten years. The two countries have also agreed to
hold the third round of the CSFTA negotiations and work towards its conclusion.
The negotiations would include economic co-operation, trade in goods and
services and investment.
Chinese investment: Sri
Lanka welcomed further Chinese investment and would continue to create
investment climate and business environment favourable for Chinese enterprises.
The Chinese side agreed to encourage its financial institutions to provide
financial support to infrastructure construction in Sri Lanka. [Comment: This
would indicate that China would continue to retain its competitive edge in
infrastructure sector in the island. As the Sri Lankan prime minister has
reaffirmed his support for the Belt and Road initiative as well as the 21st
Century Maritime Silk Road, we can expect the Chinese finances would probably
be forthcoming to fulfil the two projects in Sri Lanka.]
Prime Minister Wickremesinghe has indicated to the press in
China that he had asked the Chinese to swap part of the outstanding $8 billion
loan owed to them into shares in Sri Lanka ventures jointly with the
government. Chinese are tough negotiators; but as the outstanding Chinese loans
relate to strategic infrastructure construction, Chinese are likely to be
tempted to accept the offer as it would give them a firm foothold in Sri Lanka.
That should be worrying to India.]
Getting out of economic gridlock
In the midst of gloomy economic outlook, the government had
some cheerful news from the International Monetary Fund (IMF) which announced
that it had reached a staff-level agreement to grant a $ 1.5 billion loan to
Sri Lanka in support of the government’s reform agenda over the next three
years.
According to the IMF, the 36-month Extended Fund Facility (EFF) for 185
percent of Sri Lanka’s quota in the IMF (about $ 1.5 billion) would be coming
up before the IMF board for formal approval in early June. The EEF would
support government’s economic programme aimed at fundamental changes to tax
policy and administration to reverse a two-decade decline in tax revenues and
put public finances on a sustainable medium-term footing, easing the pressure
on the balance of payments.
This would involve implementing unpopular tax reforms and
restructuring State owned enterprises (SOE) to make their working transparent
and commercially viable. It would also imply reforming Sri Lanka’s lax tax
system — eliminating exemptions, holidays, and special rates to broaden the tax
base and reform VAT and the customs code. This is going to be a difficult
proposition for the government carryout such radical reforms in a country
accustomed to populist policies.
Federalism
controversy
The Tamil National Alliance (TNA) R
Sampanthan’s call for federal solution to resolve the long pending issue of
political independence for Tamil minority while speaking to TNA representatives
at Jaffna has once exposed the limitations of Tamil leadership in thinking out
of the box to evolve viable solution to the ethnic question. Coming in the wake
of a resolution in the Northern Provincial Council calling for a federal
constitution for Sri Lanka and merger of Northern and Eastern provinces into a
single unit, it has triggered strong negative sentiments from Sinhalas. While
Sinhala right wing parties were vocal in their criticism, even moderate
elements of the two major national parties the Sri Lanka Freedom Party (SLFP)
and the United National Party (UNP) found it an unfeasible proposition in the
constitution making process now underway. In fact, it is going to make their
work a little more difficult while trying to structure the constitution in an
equitable way. On the whole, it seems Sampanthan’s call was more a political
knee-jerk response after NPC chief minister CV Wigneshwaran stole the thunder
of federalism with a strong resolution calling for a federal constitution.
Written
on April 30, 2016
[Col R Hariharan, a retired MI officer,
served as the head of intelligence of the Indian Peace Keeping Force from 1987
to 90. E-mail: haridirect@gmail.com Blog: http://col.hariharan.info ]
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