India comes to Sri Lanka’s rescue despite its China tilt. Will Colombo mend its ways now?

 With Sri Lanka facing a severe shortage of fertilizers after the import of chemical fertilizers from China was banned, Delhi steps in to speed up supply of nano fertilizer to Colombo

R Hariharan October 25, 2021 09:42:25 IST

https://www.firstpost.com/india/india-comes-to-sri-lankas-rescue-despite-its-china-tilt-will-colombo-mend-its-ways-now-10083031.html

“Sri Lanka dumps Chinese fertilizer and imports Nano Nitrogen liquid fertilizer from India,” screamed a Colombo media headline a few days back reflecting the growing exasperation with China’s increasingly high-handed conduct in the island nation.

The news item referred to the soured deal of organic fertilizer imported from China last August, from Qingdao Seawin Biotech Group which had signed a contract for the supply of 96,000 tonnes of organic fertilizer and 3,000 tonnes of powdered form of organic fertilizer. When the Department of Agriculture tested the imported cargo, it was found to contain several harmful bacterial species.

Another sample provided by the company was also found to be contaminated. Following this, the Department banned all imports of fertilizers from China, and the agriculture ministry suspended the $63 million contract awarded to the Chinese company.

As Sri Lanka was facing a severe shortage of fertilizers after the import of chemical fertilizers was banned, India stepped in to speed up the supply of nano fertilizer to Sri Lanka. Sri Lanka went ahead with the import of 3.1 million litres of nano liquid fertilizer from India, which were tested and found to be free of contamination.

The whole episode has irritated China. The Chinese embassy in Colombo condemned the test carried out by Sri Lanka’s National Plant Quarantine Service, which found the presence of Erwinia and other harmful pathogens in the Chinese organic fertilizer samples. Sri Lanka state minister Dayasiri Jayasekara, said that as now we can’t import fertilizer from China, we resorted to getting it from India. “China is questioning us as to why we are not purchasing the fertilizer from them,” he said.

The organic fertilizer episode lays bare the seamier side of Sri Lanka’s close relationship with China. Of course, Prime Minister Mahinda Rajapaksa, addressing the Communist Party of China (CPC) and World Political Parties summit on 8 July 2021, complimented China for never trying “to impose its own political views on the world” and never feeling “the need to manipulate the affairs of other countries.”

But the real-world behaviour of China with smaller countries has been manipulative and intrusive. A recent Sri Lanka news report in this context headlined

“Canadian Energy Enterprise Accuses China of Hijacking Major Project in Sri Lanka” gives the seamier story of China’s state owned firms’ conduct in compromising confidentiality agreements which forbade the use of the work products and proprietary information, to their advantage.

Close on the heels of India’s supply of nano nitrogen organic fertilizer to ward off fertilizer crisis, comes the report of Sri Lanka seeking a $500 million credit line from India to pay for its crude oil purchases. It comes in the midst of the severe foreign exchange crunch Sri Lanka is facing. The state-owned oil entity already owes $3 billion to two state-owned banks. In all likelihood, India will accommodate Sri Lanka’s request as oil shortage will have a crippling effect on Sri Lanka’s economy, already reeling under the impact of the Covid-pandemic. In this context, Sri Lanka is likely to finalise India’s long-standing offer to develop the oil tank farms for strategic energy reserves in Trincomalee.  This issue came up when India’s Foreign Secretary Harsh Vardhan Shringla called upon the President during his three-day visit to Colombo in the first week of October.

Both India and Sri Lanka seem to be keen to ratchet up their relations which had taken some beating in recent times. India’s real time help in the wake of the container ship X-Press Pearl, carrying 25 tons of nitric acid, catching fire off Colombo port on 19 May, must have come as a moment of truth to President Gotabaya Rajapaksa on firming up friendly relations with India. He probably had a rethink on the way India was sidelined in his policy priorities. First came the course correction he applied to the forgettable episode of discarding trilateral agreement with India and Japan on joint development of the Colombo Eastern Container Terminal. India’s port infrastructure giant Adani Group has obtained 51 percent stake in a deal signed with Sri Lanka’s John Keells Holdings and Sri Lanka Port Authority to jointly develop the West Container Terminal at the Colombo Port.

Then came the Integrated Country Strategy paper of the newly appointed Sri Lanka High Commissioner to India which had the President’s blessing. It speaks of elevating bilateral relationships to a strategic level, bolstering foreign investments, boosting connectivity and expanding strategic cooperation in defence and Indian Ocean security.

Many of the points in the strategy paper resonate with what Foreign Secretary Harsh Vardhan Shringla had discussed with the President, Prime Minister and Foreign Minister during his Colombo visit. In his meetings, he had underscored the importance India attaches to expeditiously taking forward mutually beneficial projects, including proposals to enhance air and sea connectivity between India and Sri Lanka. He also reiterated India’s position on complete implementation of the provisions under the 14th Amendment to the Constitution, including devolution of powers and holding of provincial elections at the earliest. His visit to Jaffna is a strong reminder of India’s continued interest in the welfare of the Tamil minority.

The Foreign Secretary’s visit was followed a week later by the visit of India’s Army Chief General MM Naravane. He met the top leadership to underscore the importance India attaches to expeditiously taking forward mutually beneficial projects. During his meeting with the President, General Naravane said that India “highly expects” the stability of neighbouring countries for regional security. Already, over 1,000 Sri Lanka army officers are trained every year in India. According to the Presidential Media Division, a specially designed training course for 50 Army officers will be provided to Sri Lanka in the near future at the request of the Chief of Defence Staff and the Commander of the Sri Lanka Army. It is interesting to note India-Sri Lanka joint army training exercise Mitra Shakthi was being held during his visit.

In April 2020, External Affairs Minister S Jaishankar had said the Quad meets India’s aspiration of becoming “a stabilising power”. He called India’s present foreign policy as “India Way” to bring the country’s capacities for global good to provide security and connectivity and firmly dealing with global challenges. India would be a “decider or a shaper” than “abstainer” on issues like climate change and connectivity. To be a stabilising power, India needs to upgrade its relations with Sri Lanka to the strategic level. The moot point is can India do it, in the face of aggressive promotion of Chinese interests, backed by economic and military muscle? India has to, because it has no other option.

Colonel R Hariharan, former MI specialist on South Asia and terrorism, served as the head of intelligence with the Indian Peace Keeping Force in Sri Lanka 1987-90. Views expressed are personal.

 

தீவிரவாதிகள் குறிவைத்து கொல்வதால் பீதி; காஷ்மீரை விட்டு வெளியேறும் பண்டி...

Sri Lanka: grappling with economic crisis

Col R Hariharan

Sri Lanka Perspectives September 2021| South Asia Security Trends Oct 2021 | www.security-risk.com

The lighting up of the state of the art New Kelani suspension bridge, linking Colombo and Katuanayake airport, was perhaps the only bright spot in Sri Lanka during the month. The country reeled under shortage of essential food items due to runaway inflation and President Gotabaya Rajapaksa declared an economic emergency on September 1. This is not surprising as the country’s foreign reserves had depleted to $four billion at the end of 2020. After meeting foreign debt obligations in March, foreign reserves further declined; now it is estimated at $2.3 billion, below the benchmark of three months requirement. These are reserve levels never experienced by Sri Lanka in modern times.

Despite stringent import controls, imports in the first seven months of 2021 amounted to $11.73 billion as against $8.97 billion for the same period last year, increasing the trade deficit. Higher international oil prices, medical imports to combat COVID, demand for essential raw material and  food items increased the import expenditure. At the same time, decline in remittances from abroad and steep fall in tourism industry resulted in fall in income. Ill-timed ban on chemical fertilisers and pesticides, particularly when the economy was on steep decline, have affected food production and tea industry which may take time to recover. These have sent the pentup demand for food imports to a steep rise, adding to the cash crunch. On top of it, import of 96,000 tons of organic fertiliser from China was found contaminated with harmful bacteria, rendering it unfit for use.

After declaring economic emergency, in keeping with his style, the President appointed an army general as the commissioner of essential services, armed with powers to seize stocks of food stuff, particularly rice and sugar, held by traders and distribute it to the public. But that did not provide immediate relief because 800 containers of imported food stuff were stuck in port, awaiting clearance. The importers lamented they did not have the money to pay as banks faced shortage of dollars. Prime Minister Mahinda Rajapaksa had to go into a damage control mode and issue orders to clear 500 containers of sugar. Importers who met him sought a long term solution to the dollar crunch and failure to do so would lead to further food shortages and price rise. After the meeting , the PM has instructed the governor of the Central Bank of Sri Lanka to minimise current import restrictions as much as possible on non-essential goods and equipment to ease the plight of entrepreneurs.

The persistent balance of payment problem calls for economic reforms and not band-aid measures adopted by the government. Sri Lanka needs to urgently find a solution to get out of the foreign currency crisis. Country’s high risk rating has precluded borrowing in the international market. International assistance from India, Bangladesh and China in the form of currency swap and yuan loan have been partially successful to tide over the situation temporarily. But that option is also running out.

The only feasible option is to get an extended facility from the International Monetary Fund (IMF) to gain balance of payment support. The low rate of interest and longer duration for repayment make IMF funding attractive. It would also help regain international confidence as it could upgrade the international credit rating of Sri Lanka.

Milinda Moragoda (present Sri Lanka High Commissioner in New Delhi)’s public policy think tank, Pathfinder Foundation, in the last economic policy commentary has emphasised the importance of moving towards an IMF-led programme to manage the declining reserves. It stated the combination of decades of weak economic management and the unprecedented adverse impact of the pandemic means that Sri Lanka does not have any easy options. “Sri Lanka’s immediate priority is stabilising the economy by restoring fiscal sustainability in the medium term, primarily through revenue enhancement, and restoring debt sustainability by reprofiling debt servicing.”

Though Sri Lanka has benefited from IMF assistance over a dozen times in the past, the Rajapaksa government has been reluctant to approach the IMF for assistance because it comes with conditions. Essentially, they are based on good economic management and structural reforms to improve accountability essential for economic stability and growth. These measures will help generate liberal international assistance from agencies like the World Bank. Apparently, the Rajapaksa government’s reluctance stems from the President’s reservations in accepting any international intervention directly or indirectly that cramps his style of governance.  

It was in this critical backdrop at home, President Gotabaya Rajapaksa delivered his first-ever address at the 76^th UN General Assembly session on September 22. In a brief speech, he covered Sri Lanka’s efforts to tackle issues the world was confronting: COVID pandemic and the economic difficulties in its wake and sustainable agriculture to overcome environmental degradation.

The President emphasised “fostering greater accountability, restorative justice and meaningful reconciliation through domestic institutions was essential to achieve lasting peace. So too is ensuring more equitable participation in the fruits of economic development.” He further added that his government was focusing on extensive legal, regulatory, administrative and educational reforms to facilitate and deliver prosperity to the people.

In fact, he has identified accountability in governance, fidelity of domestic institutions, delivery of equitable justice and ethnic reconciliation as the four essentials for economic development. What he has left out is the need for his government to regain international credibility.  Sri Lanka needs the good will of the international community, particularly when the country is passing through critical times.

Three months ago, the European Parliament passed a resolution that the GSP Plus concession of duty -free exports granted to Sri Lanka should be withdrawn if it did not show signs of progress in its protection of human rights. The resolution expressed “deep concerns over Sri Lanka’s alarming path towards recurrence of grave human rights violations as described by the most recent UN report on the country, which lists among the early warning signals the accelerating militarisation of civilian governmental functions, reversal of important constitutional safeguards, political obstruction of accountability, exclusionary rhetoric, intimidation of civil society, and the use of anti-terrorism laws.” Many in Sri Lanka would also concur with the EU parliament's perception of the Rajapaksa government. Probably, the resolution was triggered by Sri Lanka’s use of Prevention of Terrorism Act (PTA) to ban 11 organisations in March 2021, ill timed to coincide with the UN Human Rights Commissioner Council (UNHCRC) meeting.  

Many international investors  would agree with the US State Department report on investment that Sri Lanka is a challenging place to do business “with high transaction costs, aggravated by an unpredictable economic policy environment, inefficient delivery of government services, and opaque government procurement practices.” Public sector corruption is a significant challenge in Sri Lanka and a constraint on foreign investment, it adds. While the country generally has adequate laws and regulations to combat corruption, enforcement was weak, inconsistent, and selective.

Almost every project is mired in controversy, whether it is Colombo Eastern Carrier terminal or the latest project on the block - US corporate giant New Fortress Energy (NEF)’s proposal to build a new offshore LNG terminal in Colombo for receiving, storing and re-gasification. There are widespread allegations that a framework agreement on NEF project has been signed though details are shrouded in secrecy.

This has created a climate of mistrust in the government processes, because lack of transparency has been a hallmark of almost all governments -past and present. Militarisation of bureaucracy has further aggravated the trust deficit in the government's handling of issues.

Is President Rajapaksa prepared to clean up his act and adopt more democratic ways of operation? That would mean reviewing wide powers the executive presidency has acquired, more accountability to the people, crackdown on corruption, tone down militarisation, snuff out cronyism and kickstart transitional justice process and get ready for ethnic reconciliation talks. If he can do all these, he can be truly the terminator, as hailed by his admirers.

 [Col R Hariharan, a retire MI specialist on South Asia and terrorism, served as the head of intelligence of the Indian Peace Keeping Force in Sri Lanka 1987-90. He is associated with the Chennai Centre for China Studies. E-mail: haridirect@gmail.com