China, India and the Indian Ocean: Sri Lanka’s Foreign Policy Challenges Part II
Posted on May 20th, 2018

by Dr Palitha Kohona  Courtesy The Island

(Continued from Saturday)

The need to develop and catch up

Today, dragged behind in the development race by 30 years of terrorism, (terrorism resulted in $200 billion in lost opportunity costs for Sri Lanka) mismanagement, credibility gap, and increasingly poor governance, the country, with the economy struggling, is seeking to attract foreign investments to fast track its economic development. When the new government was elected to power in 2015, misguided attempts were made to attract Western resources through ill-considered international commitments made at the Human Rights Council, and an unfortunate effort to crudely distance Sri Lanka from China, a long standing and reliable friend which had begun to finance our infrastructure development with endorsement at the highest levels in China. With not much relief coming from the West, now a concerted renewed endeavour is being made to reengage with China. While there is doubt whether the initial damage can be undone, there is some nervousness that India and the West might not view this development too enthusiastically. Neither India nor the West, though provided the opportunity to do so, are in a position to infuse the large capital inputs necessary to enable Sri Lanka to push its way up the development ladder within an acceptable time frame.

One Belt One Road

President Xi Jinping’s One Belt One Road (OBOR) also known as the Belt and Road Initiative (BRI) provides Sri Lanka with a unique opportunity to fast track its economy along the path to development. The investment bonanza that is being made available under the BRI could revive the glory days of the ancient Silk Route for Sri Lanka. China’s BRI investment ambitions, focused mainly on cooperative infrastructure and connectivity enhancement, have been compared with the post World War US Marshall Plan. But the funds available under the BRI make the Marshall Plan pale in to insignificance. The Marshall plan provided over $140 billion, at 2017 dollar values, and was designed to assist selected Western European economies recover from the devastation of the World War. The BRI expects to make available a stunning USD 4-8 trillion. While the Marshall Plan achieved much, the BRI funds can be expected to realize substantially much more by creating a vast region of shared prosperity, the clear beneficiaries being a large number of developing countries.

Additionally, the Chinese Yuan has now been recognised as a reserve currency by the IMF and China appears to be increasingly moving towards international payments in Yuan.  The IMF elevated the Yuan, also known as the renminbi, or “people’s money”, on the same day that the Communist Party celebrated the founding of the People’s Republic of China in 1949.

The Yuan joins the U.S. Dollar, the Euro, the Yen and British Pound in the IMF’s special drawing rights (SDR) basket,which determines currencies that countries can receive as part of IMF loans. This would be the first time that a new currency has been added since the Euro was launched in 1999. It is an impressive achievement as the Yuan had very little credibility as recently as thirty years ago.

Challenge before policymakers

The challenge confronting the policy makers is to sensitively manage our international approach to benefit from the BRI without unnecessarily causing discomfort to the West or India or both. Developing countries in a hurry appear to have little choice but to join a bandwagon such as China’s BRI .

Historically, Sri Lanka has had close relations with China stretching over two Millennia and seeking to renew those connections would seem to be the natural thing to do.

The copious writings of the fifth century scholar monk Fa Xian from China who spent six years at the Jetawanaramaya Monastery in the ancient capital, Anuradhapura, tell a tale of bygone prosperity and complex international diplomatic and trading relations. Fa Xian carried a ship load of religious texts from Sri Lanka to China.

Sri Lanka, like other countries of South Asia, had developed important relations, religious, trading and social, with the Middle Kingdom from early days, and the writings of scholars, soldiers, monks, travellers and traders suggest a strong Chinese interest in Lanka from times immemorial. The country also attracted waves of traders, businesses and holy monks seeking the sublime teachings of the Buddha over the centuries, from far afield as ancient Rome on the one side and Khan Balik on the other, not to mention rapacious invaders. Those who came from, especially from China, not only left detailed observations which have been used to corroborate our own historical records but also bits and pieces of their own cultures, enriching ours. The Chinese traders and Shaolin monks probably introduced Chinese martial arts. One word in Sinhala for the indigenous martial arts is Cheena – Adi. This is too much of a linguistic coincidence. The Chinese account “The Biography of Bhikkunis” written in the sixth century details a visit by Sinhala nuns to Nanjing to inaugurate the order of nuns in China. Four embassies were sent from Lanka to the Chinese imperial court in the fifth century. The Lankan King sent an embassy with a valuable Buddha statue to the court of Emperor Xiaowu.

The Arab geographer Edrisi details the extent of Lanka’s international trade during the time of Parakramabahu the Great who also sent a royal princess to the court of the Emperor. The great Kublai Khan dispatched an envoy to Lanka asking for the alms bowl of the Buddha venerated by the Sinhala people but the Lankan king refused this request.

Lions and the Chinese

The lions at Yapauwa are very much Chinese influenced. The troves of Chinese coins and porcelain being recovered from various parts of the country suggest a thriving trade. A large number of Chinese vessels lie beneath our waters, having sunk in rough weather. Admiral Zheng He’s visits and his involvement in the replacement of the Lankan king with Parakramabahu vi who was later ousted by Parakramabahu vii are well recorded. Parakramabahu vii sent six missions to the Ming court.

More recently, particularly during the time of the domination of Asia by Western powers, many Chinese migrated to other countries in search of a better life. Some came to Ceylon (Sri Lanka) and settled down to become the Sri Lankan Chinese community.  In 1950, independent Ceylon became the 13th country to recognise the People’s Republic of China and, since then, has unconditionally endorsed the

One China Policy

One China Policy. Subsequently, in 1952, Ceylon breached a Western embargo and concluded the Rubber Rice Pact with China to swap rubber (listed as a strategic material) for rice. Prime Minister Zhou En Lai visited Sri Lanka in 1957 and established the framework for a lasting solid relationship which flourished particularly during the stewardship of Prime Minister Mrs Sirimao Bandaranayaka. The Bandaranayaka Memorial Conference Centre stands proudly as a symbol of the bonds developed during this period. It is said that Chairman Deng Xiaoping sent a delegation to Sri Lanka to study the Greater Colombo Economic Commission before setting up the spectacularly successful Shenzhen Special Economic Zone. During Sri Lanka’s conflict with the terrorist LTTE, China provided weapons and other assistance unconditionally to Lanka while Western countries progressively distanced themselves from Sri Lanka and withheld weapons and funding as a means of exerting pressure on the government. China’s generosity contributed in no small measure to the eventual defeat of the LTTE and the elimination of the terrorist threat.

China also provided unqualified support to Sri Lanka at international fora, including the UN. Subsequently, as the country sought desperately to recover and reconstruct and Western assistance continued to dry up, an economically resurgent China, contributed magnificently to Sri Lanka’s recovery efforts. In addition to the Hambantota Harbour, the Mattala Airport, the roadways, the Performing Arts Centre in Colombo and the Lotus Tower bear testimony to the economic and cultural relationship that blossomed during this period.

The key lesson for us is to cultivate assiduously  those countries that are genuinely interested in working for the mutual benefit but also be cautious of those whose interests are not our own.

BRI and regional prosperity

While traders from distant lands sought mutual prosperity, invaders sought and succeeded in grabbing the country’s wealth and stunting the development of the people. The BRI initiative can be compared to the multitude of traders who visited us in the past and gave us the opportunity to prosper.

Despite muttered reservations and orchestrated criticisms, already the countries of the region, especially in Africa, are reaping the benefits of China’s investments. Economists agree that the recent rapid upward movement of the economies of a number of African countries has been the result of significant Chinese investments. Many African economies are prospering for the first time in years and analysts ascribe this development to Chinese investments in infrastructure in Africa. By 2014, that had risen more than 20-fold to $220 billion according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies in Washington. It is likely that this trend will accelerate as China also learns from experience, irons out irritations and responds more to the aspirations of the people of the region.

Africa and Chines loans

Since 2000, Ethiopia has been the second-biggest recipient of Chinese loans to Africa, with financing for dams, roads, rail and manufacturing plants worth more than $12.3bn, more than twice the amount loaned to oil-rich Sudan and mineral-rich Congo. The BRI while raising some concerns, especially among the former colonial powers who ruthlessly ravaged Africa, can be used by countries of the Indian Ocean region and beyond to enhance their mutual prosperity without being constrained by fears and suspicions inculcated by the colonial past.

Australia received AUD 15.4 billion in Chinese investments involving 103 deals. Australia is the second biggest country recipient of Chinese investments after the US and investors have grabbed hotel assets, real estate, agri business, healthcare, infrastructure, etc. The port of Melbourne is now controlled by a Hong Kong-Chinese concern.

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