Thursday, 14 April 2022

Sri Lankan crisis: Gotabaya needs a political master plan, rather than a game plan

Rajapaksas need to adopt a different style of politics where they engage constructively with the Opposition. Are they ready to bite the bullet?

R Hariharan |Opinion| Firstpost | April 13, 2022 

https://www.firstpost.com/opinion/sri-lankan-crisis-gotabaya-needs-a-political-master-plan-rather-than-a-game-plan-10552311.html 


Gotabaya Rajapaksa’s presidency probably reached the point of no return, after 41 members of the ruling Sri Lanka Podujana Peramuna (SLPP) coalition partners withdrew their support to the government on 5 April. Two days earlier, the President had disbanded his cabinet, in a bid to form an all-party government to tide over the financial crisis. His call had no takers because the Opposition parties see Gotabaya as a loser and want him out of office. The main opposition, Samagi Jana Balawegaya (SJB), the 10-party alliance as well as the JVP-led National Peoples Power (NPP) are in no mood to help him out at least for the time being. So, a temporary government led by his brother, Prime Minister Mahinda Rajapaksa, assisted by four essential ministers, is in place now.

The 31 March night public protest near the President’s residence in Colombo suburb has now snowballed into a nationwide protest movement against the Rajapaksas. It reflected the people’s total loss of faith in their handling of continuing shortages of food, fuel and essential goods including medicines.

For the first time, Gotabaya must be feeling lonely at the top. Having been accustomed to fawning public hailing him as a national hero for over a decade, it must be a rude shock to see ‘Go back Gota’ as the unifying cry of the people protesting all over the island. He now appears to be groping in the dark to find answers to the economic crisis, he does not seem to understand.

President Rajapaksa’s control over the situation probably reached the inflection point in the aftermath of the Mihirina protests. It is falling as rapidly as the chaotic situation that continues in the country. The incident showed the limitations of tear gas and water cannons used to quell public anger by force. It also showed the limitations of the government ban on social media sites like Facebook, Twitter, YouTube, WhatsApp and TikTok in the era of VPN. The gory visuals of the Mihirana protest beamed on social media and the TV helped the spread of spontaneous protests turning into a people’s movement.

Of course, it was aided by the government’s hapless handling of the aftermath of the protest. In Rajapaksas’ signature style, the government blamed “unknown extremist elements” from the Opposition and social media bloggers as the culprits. The arrest of protestors, in particular the arrest of popular social media activist Anuruddha Bandara, whose #GoHomeGota2022 was espoused by the student community, added energy to the protests. It evoked the solidarity of white-collar workers, even government staff, trade unions, religious leaders, civil society and legal community to march in support of the protestors. Even the Rajapaksa scion and former minister Namal Rajapaksa voiced his opposition to the banning of social media.

In short, the protests have unified the nation that was divided due to ethnic and religious animosities during Gotabaya’s rule. People are now voicing a single demand — Rajapaksas should quit. The Opposition parties dare not offend the protest movement; even the Rajapaksas have adopted a conciliatory tone. The Opposition has quickly adopted ‘Go Gota Go’ slogan as their own. In a studied response, the Rajapaksa government seemed to have “sacrificed” Basil Rajapaksa and Rajapaksa loyalist and Central Bank governor Ajith Nivard Cabraal, seen by the public as “arch-villains” for their woes.

What is Gotabaya’s game plan?

First, Rajapaksas’ political game planning should not be underestimated. They have strong survival instincts. Led by Gotabaya, they bounced back to the centre stage of power after spending time in political wilderness when Mahinda failed to get elected for a third term as President in 2015.

Second, Gotabaya is a fighter, though of the military kind. He will be hard put to be persuaded to resign. Chief Government Whip and Highways Minister Johnston Fernando made this clear in his strident speech in parliament. “President Gotabaya Rajapaksa will not resign just because Anura Kumara Dissanayake [JVP leader] and his men shout slogans. The president is elected by the people and he will not step down. Even Madam Sirimavo Bandaranaike faced a similar crisis in 1971. Thousands of youth were killed because of the JVP uprising. Then another 60,000 youth perished in the 1988-89 period. Do not push the country back to that situation again,” he added. Was Fernando flexing the muscle to discourage JVP from indulging in any direct action? But the reality: 2022 is not 1971 and Gotabaya is no Sirimavo. Nor the JVP anymore the wide-eyed revolutionary movement it was.

During the course of veteran Gotabaya’s tenure as president, he pampered the armed forces and veterans by closing the cases of misuse of power against them and brought them within the ruling power structure. They are now playing a key role as trustworthy foot soldiers of the President in the government. They are ensuring his will is writ in the country’s foreign policy, development, defence and even in the fight against the Covid pandemic. After Gotabaya restored the presidential executive powers, he has set a precedent for military to have a role in the government.

This has given rise to apprehension, not only among the public, but even among the international community that the military might be used to bail out Gotabaya. To remove any such apprehension, Chief of Defence Staff General Shavendra Silva addressed a gathering of foreign defence advisers and attaches in Colombo on 4 April. He said, “The armed forces of Sri Lanka would always comply with the Constitution and the Army is no exception.” As a professional outfit, the army is always prepared “to provide security and protection to the State as necessary”, he added. The assurance was very much needed when Sri Lanka is seeking the help of the international community to get out of its financial logjam.

Hopefully, Sri Lanka with its strong democratic credentials will discourage any such misadventure. On the flip side, the message can also be seen by Rajapaksas’ detractors as an ominous hint that the army is closely watching those who are shouting “Go Gota Go”.

Gotabaya’s game plan seems to be a work in progress. For the time being, it is to make do with a temporary cabinet government under Prime Minister Mahinda Rajapaksa to facilitate the forthcoming talks with the IMF. Out of the four ministers sworn in, finance minister Ali Sabry resigned his office within 24 hours; however, he has been ‘persuaded’ to remain in office. Evidently, he will be handling the forthcoming talks with the IMF. The Opposition has welcomed the appointment of Dr Nandalal Weerasinghe as the new governor of the country’s central bank and KMM Siriwardhana as the treasury secretary. Both have the knowledge and experience to manage the present crisis and deal with the international bodies.

The President has formed an advisory group with former governor of the central bank and former director of economic affairs department Indrajit Coomaraswamy, former chief economist of World Bank Shanta Devarajan, and former deputy director of African Department of the IMF Sharmini Coorey as members. Hopefully, the members will strategise the way out of the economic morass in Sri Lanka.

But for any strategy to succeed the country needs stability. Ali Sabry, the reluctant finance minister, pointing out this, said: “We must discuss with the World Bank and we must have bride-financing plan with ADB. If we don’t have stability, who will conduct the talks?” Political stability is the need of the hour to survive the demands of $1 billion bond maturing on 25 July, while $ 7 billion odd debt needs to be serviced during the year.

With China not very keen to extend further financial help, Sri Lanka has been increasingly depending upon India to meet its immediate needs of fuel and food. Since January, India has helped Sri Lanka with $2.4 billion, including $ 400 million currency swap and a $500 million deferment. In March, India extended a credit line of $1 billion for the procurement of food, medicines and other essential items. People have welcomed India’s timely help in sending urgently needed fuel and rice supplies on real-time basis. The credit line for supply of petroleum will be exhausted in April. But how long and how much India can help Sri Lanka is the moot point.

Moreover, external help comes with conditions: Corruption-free administration, good governance with rule of law, accountability for aberrations in governance, war crimes and human rights, and meeting the just aspirations of minorities.

Does Gotabaya’s game plan cater for these demands? That would probably require a political master plan, rather than a game plan.

It is doubtful whether the Opposition baying at his heels has the patience to allow even the temporary government to survive, at least till the government evolves a workable economic plan to be implemented.

That may require the support of the Opposition, which can only be facilitated if Rajapaksas adopt a different style of politics. Are they ready to bite the bullet? Only time will tell.

The author is a retired 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. Views expressed are personal.

 

 

 

 


Monday, 4 April 2022

China's BRI Loans Becoming 'Big Headache' for South Asian Nations - Ex-Indian Intel Officer

 Sputnik News| April 4, 2022 | 

https://sputniknews.com/20220404/chinas-bri-loans-becoming-big-headache-for-south-asian-nations---ex-indian-intel-officer-1094460651.html


The Belt and Road Initiative (BRI) is a series of overland and maritime connectivity and infrastructure projects being developed across the globe with the financial backing of China. Nearly 140 countries in Europe, Asia, and South America have signed up for the BRI so far. Chinese investments in BRI projects could reach $1.3 trillion by 2027.

A former military intelligence (MI) specialist in the Indian Army has blamed the "liberal loans" extended under the Beijing-backed Belt and Road Initiative (BRI), or the One Belt One Road (OBOR), for worsening the economic crisis in Sri Lanka.

"China's offer of liberal loans for Sri Lanka's ambitious infrastructure projects, with marginal profitability, are one of the reasons why the country finds itself saddled with unviable foreign debt", Colonel R. Hariharan, an expert at the Indian security think tank Chennai Centre for Chinese Studies (C3S) who served as an intelligence chief of the Indian Peacekeeping Force (IPKF) to Sri Lanka, told Sputnik.


At present, the Colombo International Container Terminal (CICT) is being developed by Beijing's state-backed China Merchant Port Holdings, a Hong Kong-headquartered company. Hariharan also highlights that Colombo was "forced" to award a controlling stake and a 99-year lease in the Hambantota port to the same Chinese company in 2017 for its inability to repay a previous debt.

Another state-backed enterprise, the China Harbour Engineering Company (CHEC), is developing the state-of-the art Colombo International Financial City on land reclaimed from the sea near the Sri Lankan capital.

"Servicing these loans is becoming a big headache of governments across South Asia, be it Sri Lanka, Nepal, Maldives, or Pakistan", reckons Hariharan. "Other countries like India and Japan have given aid on concessional terms whereas China's commercial lending carries higher interest".

Hariharan notes that another drawback of Chinese loans under the BRI relates to the lack of emphasis on empowerment of local communities, who could build economic resilience in times of crisis such as the one Sri Lanka currently faces.

"The Chinese companies mostly employ Chinese labour. So, in a way, benefits of the project in the near-term flow back to China. Other countries employ local contractors", the think tank analyst says.

Estimates of the Chinese loans as well as sovereign bond payouts owed to China are between 15-20 percent of Colombo's overall foreign liabilities, as per the Indian expert.

While Sri Lanka is obliged to pay a $1 billion repayment on sovereign bonds in July, debt repayments to the tune of $7 billion are due at the end of the year. In comparison, data from Sri Lanka's Central Bank pegged the current foreign exchange reserves at $2.3 billion, as reported by Reuters.

Since February, India has extended two credit lines of $1 billion and $1.5 billion to Sri Lanka to purchase essential items to help overcome the crisis. Nearly $1.4 billion has been separately provided by Delhi since January in the form of current swap and loan deferments.

On the other hand, Beijing is yet to take a final call on Sri Lanka's debt restructuring request or an economic assistance package, the Chinese Ambassador to Colombo Qi Zhenhong said at a press briefing on 21 March.

The request was made by Sri Lankan President Gotabaya Rajapaksa during Chinese Foreign Minister Wang Yi's trip to Colombo in January of this year.

Saying that Beijing may ultimately grant Colombo a "loan package" to help it tide over its economic difficulties, he expresses concerns about the terms of any future assistance from Beijing, given Sri Lanka's plummeting attractiveness for investors.

"Sri Lanka has been losing the lure of China lately", he says.

'Poor Fiscal Management' by Sri Lankan Government to Be Blamed as Well

The Indian expert says that the Sri Lankan government's "poor fiscal management, [alleged] corruption, and financial indiscipline" were also factors behind the "huge borrowing" and sent out the wrong signal to investors, thus compounding the crisis.

Sri Lanka's public debt rose from 94 percent of GDP in 2019 to 119 percent in 2021, amid dwindling forex reserves which affected its tourist-reliant economy during the COVID-induced travel curbs.

Dwindling currency reserves, ballooning public debt, and current account deficit caused the value of the Sri Lankan rupee to plunge by more than 36 percent last month, resulting in runaway inflation.

Lack of fuel supplies resulted in 10-12-hour power cuts besides shortages of food items, triggering street protests across the country.

The economic crisis soon spiralled into a political issue, with the entire federal cabinet resigning on Sunday.

Only President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa haven't stepped down from their positions, as the country awaits a new cabinet which may comprise politicians from all of the nation's political factions in a bid to assuage rising public anger over economic mismanagement.

'China Heavily Invested Across South Asia Now'

Hariharan says that it's not only Sri Lanka, but servicing the Chinese loans extended under the BRI is becoming a problem for other South Asian nations such as Nepal, Pakistan, and the Maldives, with all of them being part of the BRI.

India has been critical of the BRI, with Foreign Minister S. Jaishankar in February warning smaller nations to be careful of "debt-trap" diplomacy. The remarks were made by Jaishankar during an appearance at the Munich Security Conference.

"Undoubtedly, China has bigger financial clout than India. But China's BRI commitments are huge and already it is invested in South Asia for around $60 billion", he notes.

In Nepal, local media outlets have been pointing out that none of the nine agreements signed between Kathmandu and Beijing during Wang Yi's visit last month concerned the BRI.

"While stressing the country's economic priority, the prime minister during his meeting with the Chinese foreign minister and state councillor said that a loan is not what Nepal prefers at this point and sought more projects from China under grant assistance", Govinda Pariyar, the publicity chief of Nepali Prime Minister Sher Bahadur Deuba, quoted the Nepalese leader as telling Wang.

In the Maldives, around 80 percent of overall debt payments were owed to China, as per 2021 budget data reported by ex-president and current parliamentary speaker Mohamed Nasheed.

Similarly, the International Monetary Fund (IMF) has said that in the case of Pakistan, a fifth of its public debt is owed to China, which amounts to around $18.4 billion.

The China-Pakistan Economic Corridor (CPEC), the flagship project of the BRI, traverses the length of Pakistan and ends at the port of Gwadar.

During his visit to Beijing this year, Pakistan's interim Prime Minister Imran Khan is reported to have requested that Chinese President Xi Jinping roll over debt to the tune of $4.2 billion owing to Islamabad's inability to service the loans. Reportedly, the request was agreed to during Wang's trip to Pakistan last month.

Under CPEC, Beijing has extended loans to develop infrastructure and connectivity projects, including power plants, highways, and railway lines.

Let's stay in touch no matter what! Follow our Telegram channel to get all the latest news: https://t.me/sputniknewsus

 

India Legal Editor Inderjit Badhwar on the cover story of April 4 issue

Gotabaya’s existential challenges continue

Col R Hariharan

Sri Lanka Perspectives March 2022| South Asia Security Trends, April 2022| www.security-risk.com

 

President Gotabaya Rajapaksa’s political survival has become a huge question mark, as the country neared bankruptcy towards the end of the month. The month saw 10-hour power shutdowns almost every day, at petrol pumps endless ques waited for hours for petrol, surgical operations were halted due to lack of medical supplies, daily newspapers facing newsprint shortage went on line mode and cancellation of public exams in schools for want of paper. Adding to the woes, hydropower generation dipped as water sources dried up and annual agriculture production farm fell by 40 percent due to ill-timed ban on import of chemical fertilizers and pesticides.

To handle the fiscal crisis, the Central bank floated Sri Lanka rupee during the first week of March. It resulted in the devaluation of the rupee by 36 percent, pushing up the prices of daily necessities. In a bid to save foreign exchange, authorities expanded the list of banned imports to include fruits, vegetables and milk powder.  The essential items ran out of stock in stores adding to the agony of the public.

These events have become symbolic of the failure of the national leadership to manage the worst ever economic crisis Sri Lanka faces since independence in 1948.  They also demonstrated the national leadership’s inability to evolve a coherent strategy and get its act together to handle the national crisis. It was reflected in the administration’s failure to monitor and coordinate its response system when supplies were running out of stock.

A typical example of such failure is the case of import of urgently required diesel shipments. The Daily Mirror quoted sources within the Ceylon Petroleum Corporation to say that the diesel shipments received at the port could not be cleared as the treasury did not have funds to pay for the demurrage. According to the report, the vessel carrying the shipment refused to enter Sri Lankan waters unless payment was made upfront. “President Gotabaya Rajapaksa had given a guarantee that funds would be released for the shipment, but the captain has refused to accept this guarantee,” the report added. It said the government was expected to pay a sum of $52 million to clear the diesel shipment.

India is reported to have agreed to Sri Lanka’s request to increase the $500 million credit facility to $750 million for import of diesel from India. Accordingly, another two consignments of 40,000 tonnes of diesel each are expected to be delivered to Sri Lanka on April 5 and 14. But the moot question is, has the administration got its drill taped up to receive and dispatch the shipments to reach the consumer in time?

Public anger at the government’s apathy has snowballed into massive protests. There were huge public rallies organised by the opposition Samagi Jana Balawegaya (SJB) and the JVP led National people›s Party (NPP), where there were loud slogans raised against the Rajapaksas. In the coming days, we can expect it to erode Gotabaya’s loyalist Sinhala nationalists who had overwhelmingly voted him as President. Leaders of disgruntled coalition partners of the ruling Sri Lanka Podujana Party (SLPP) are also lining up to bring down finance minister Basil Rajapaksa. Udaya Gammanpila, leader of the Piyithuru Hela Urumaya (PHU) party proposes to present a draft of the 22 Amendment to the Constitution next month in parliament. It is aimed at making it illegal for a dual citizenship holder like Basil Rajapaksa, who is an American citizen, to take up any work related to governing the country.

An all-party conference convened by President Rajapaksa on March 23 to seek other parties' support to overcome the present economic crisis was attended by almost all parties, barring the main opposition SJB and the NPP. Party leaders and representatives presented their proposals and statements at the conference. They promised their maximum commitment for the benefit of the country.

The beleaguered government has decided to eat the humble pie and overcome its reluctance to approach the International Monetary Fund (IMF) to overcome the financial crisis. Similarly, it has approached Bangladesh for an additional $250 million line of credit in addition to the $250 million LoC already sanctioned. India has already extended$2.5 billion plus assistance in various forms. It is also considering Sri Lanka’s request for an additional $ one billion LoC, which could materialize in April. China is considering offering a $1.5 billion credit facility to Sri Lanka and a decision is expected soon. According to a top Chinese official, Sri Lanka was offered a loan of $500 million from the China Development Bank on March 19. But Sri Lanka will have to strategize its approach to managing its economy as it has to repay about $4 billion worth of debt this year, including an international sovereign bond of $1 billion maturing in July.

Unfortunately, on top of the continuing Covid-19 pandemic threat, the Ukraine war and the slapping of stringent sanctions against Russia have made Sri Lanka’s economic recovery more difficult. Russians and Ukrainians form around 15 percent of international tourist travellers to Sri Lanka. Sri Lanka’s direct flights to Moscow had to be cancelled in the face of the sanctions and the war has added to uncertainties over their arrival.

India, usually dubbed as “Big Brother” from the small but highly vocal anti-India lobby in the country, has stepped in to meet urgent needs of Sri Lanka. Minister for external affairs S Jaishankar flew in from Maldives on a two-day visit to Sri Lanka. The Minister, an old Sri Lanka hand as a diplomat in Colombo during the crucial days of Indian Peace Keeping Force’s operations (1987-90), had a packed schedule on March 28. He called upon President Rajapaksa on March 28 and assured him of India’s continued support in Sri Lanka’s economic recovery process. The President thanked the Indian government for the economic assistance to the tune of $2.5 billion. They agreed to deepen economic and commercial linkages with special emphasis on Indian investments. Their discussions also covered defence and energy cooperation as well as Sri Lanka government’s talks with Tamil National Alliance (TNA), indicating India’s sustained interest in the Tamil devolution issue.   

The Indian minister joined PM Mahinda Rajapaks at a special event in Temple Trees to virtually inaugurate the Jaffna Cultural Centre, built with Indian funds. He also met with his counterpart Prof GL Peiris and FM Basil Rajapaksa to discuss foreign policy and economic issues. They witnessed the signing of six memorandums of understanding. The MoUs included implementation of Sri Lanka Unique Digital Identity (SL-UDI) programme with India’s grant assistance, providing Maritime Rescue Coordination Centre, implementation of hybrid power projects in three islands off Jaffna which was earlier given to a Chinese organisation, cooperation on development of fisheries harbours in Sri Lanka and the establishment of modern computer labs and smart boards with customized curriculum software in 200 schools in Galle district.

Sri Lanka ministry of defence has announced it had signed maritime security pacts with India on March 16. It underlined the pacts “will not result in hindrance or threat to national security “. It said the pacts included the receipt of a floating dock facility and Dornier reconnaissance aircraft free of charge from India.

The Indian EAM’s visit culminated with participation in the 18th ministerial meeting in hybrid mode of the Bay of Bengal Initiative for Multi-Sectoral Technical & Economic Cooperation (BIMSTEC) held on March 29, hosted by Sri Lanka, the current chairman. It was held ahead of the 5th summit meeting of BIMSTEC to be held later. The forum provided an opportunity for Sri Lanka to renew its linkages with other members – Bangladesh, Bhutan, India, Myanmar, Nepal and Thailand.

In conclusion, three things are clear: (1) President Rajapaksa will have to clean up his act if he is to survive; (2) India seems to be investing in Rajapaksas, particularly when Sri Lanka is losing the lure of China. (3) India-Sri Lanka strategic relations are poised to grow, considering the strategic reset in the Indian Ocean region in the wake of the war in Ukraine.

The coming months are going to be crucial for not only Rajapaksas but Sri Lanka as a whole as it faces an unprecedented economic crunch. It is hoped that it would retain India’s goodwill and support. [Written on March 31, 2022]

[Col R Hariharan, a retired 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. Email: haridirect@gmail.com  Website: https://col.hariharan.info]