China lurks in Sri Lanka’s future through its controversial Belt and Road initiative

Having just visited Sri Lanka and in the context of the terrorist attacks in April 2019, I can confirm two things. As a country I have had long ambitions to visit, it didn’t disappoint. Secondly, things have pretty much returned to normal and my family never felt insecure at any time, even though extra security measures are heightened and obvious

However, the visit did prompt me to think more deeply about China’s Belt and Road initiative and how smaller, less economically enabled countries are playing their role in enabling it - perhaps to their detriment.

This month, the Lowy Insitute published an article which observed:

“The BRI can be maddeningly obtuse, with vague messaging and even vaguer key performance indicators. Whether out of chaos or by design, those of us watching the evolution of the BRI from outside of Beijing’s policymaking discussion circles have precious few tools to make sense of what we are seeing. Are we looking at a connectivity project? An infrastructure project? A development assistance initiative? A geopolitical flex grounded in cultural imperialism? Some mixture of everything?”

These were precisely the questions my recent visit raised in my mind. The vast and controversial Hambantota port development, commenced before the announcement of the Belt and Road initiative, but later wrapped into it, has been well documented, so better to Google for more informed commentary than for me to regurgitate here. But having seen it, I can confirm it is much more than a port. Rather it is a new port city that will, with Colombo, essentially create a commercial and industrial axis across the south-west of the country.

The question is: where do developments like the massive Hambantota port development and the myriad of others throughout the capital, Colombo, and beyond leave Sri Lanka and its citizens?

Investors, whether Chinese or other, expect a return somewhere down the line. Where and in what form does Beijing expect to derive its return on investment? An article in the South China Morning Post in May 2019, The truth about Sri Lanka’s Hambantota port, Chinese ‘debt traps’ and ‘asset seizures’, proposes that the Chinese intention in relation to Hambantota has never been to effectively hold Sri Lanka to ransom:

“… if Sri Lanka is debt distressed, it owes more to American and other Western entities than to its Chinese counterparts. Yet, as both a past and a present governor of Sri Lanka’s central bank stressed to us in interviews, Sri Lanka has never defaulted on any loan payment and has not sought to have any external debt rescheduled.

The Hambantota port lease was not a result of any inability to service the loans, nor was it a debt-for-equity swap — the Sri Lankan government still owns the port. And funds received for the lease were not used to repay port-related debt, but to pay off more expensive loans, generally to Western entities.”

The article also points out that China holds only between nine and 15% of Sri Lanka’s external debt and that there is no Chinese military base at Hambantota. You might say this is the sort of response you would expect from the Chinese, albeit through Hong Kong’s long-respected newspaper. But these assertions are a snapshot in time, with no indication that these circumstances are immutable forever.

You cannot escape the potential commercial and geo-political value of Sri Lanka’s location in the Indian Ocean and the many trade routes in close proximity, not to mention that China’s historical Asian rival, India, lies only 32km off the north-west Sri Lankan coast at its closest point.

Within China’s ‘belt’, Sri Lanka can geographically be regarded as the buckle, the lock binding the whole thing together. Rapidly re-emerging economic and political power, India, is closely monitoring the form and nature of how the Chinese embed within the Sri Lankan economy and others, particularly its flagship China-Pakistan Economic Corridor (CPEC) project.* Western powers most certainly have a watching brief on the geo-political significance of these.

The destabilising political tension between Sri Lanka’s the legislative and the executive arms of Sri Lankan government, brought into sharp focus in the aftermath of the April attacks, both appear to be losing the confidence of their electorate, doubling down on the ‘maddeningly obtuse’ predictability of where Sri Lanka’s ties and dependence on the Chinese will lead.

Greg Raymond and Alice Dawkins, What the rest of Asia thinks about China’s Belt and Road Initiative, The Lowy Institute, 23 July 2019

Barry Sautman, The truth about Sri Lanka’s Hambantota port, Chinese ‘debt traps’ and ‘asset seizures’, South China Morning Post, 6 May 2019.

* Bansari Kamdar, What to Make of India’s Absence from the Second Belt and Road Forum? The Diplomat, 9 May 2019.