COULD CHINA HELP SRI LANKA TO BECOME A DEVELOPED NATION? (PART C)
Posted on June 1st, 2020

BY EDWARD THEOPHILUS

When the country was in a difficult time after ending the civil war, the Rajapaksa regime was given strong support by China and Russia, if a situation to let down Sri Lanka arose, both countries promised to exercise their power, most probably veto power against the international attempts to condemn Sri Lanka. India was also concerned about the international developments against Sri Lanka which might later direct to India too.   However, the election campaign in 2015 was manipulated to a hidden motivation of international forces against China, but the frustrated domestic politicians got caught to international forces with knowing or without knowing of undisclosed hidden objectives of foreign forces.  The politics of the domestic front to defeat the Rajapaksa regime was formed by an unholy collision with contradictory hidden objectives, and they used to criticize China against the Rajapaksa regime in the political platform.  That was the mistake that the yahapalana regime was done during the election period in 2015.

Current Sri Lanka’s economy has gone to backwardness in many areas such as foreign assets, international trade, employment generation, inflation, interest rate, poverty, and many other areas. The live television shows indicate that people were demanding the government to reduce inflation and reliefs for day to day difficulties.  The president and the prime minister of the current regime need to tell the truth to people. The Public might disappoint on the condition created by the COVID pandemic and they should understand that the president or the prime minister cannot order economic growth or to reduce the prices of goods and services or to away the corona pandemic they are an effect on the market process. 

The solution to this backwardness is increasing the pace of economic growth and current Sri Lanka needs injecting the US $ 100 billion or more to the economy during the next ten years, however, the economy of the country has no such a capacity and the COVID pandemic has flattened the incoming flow of foreign exchange to the country. Many political reforms, which were taken after 1980 increased spending, which was covered by corruption in previous regimes and no gains received from such spending. 

China provides about the US $ 400 billion foreign assistance to 140 countries it is obvious from current international aid statistics that Sri Lanka cannot get a large sum of cash aid from China during the next 10 years, but Sri Lanka can share this requirement with China using non-cash supports opening the country to Chinese investments in private business and the government sector. 

Many cash assistance needs to pay back and it would impact the repayment capacity of the country.  The attraction of cash and another form of loan for investments have a positive impact on debt services. The policymakers of Sri Lanka need to understand how a country could get supports from China without going into a debt trap. There are many techniques, which could be used to avoid the debt burden to the country, however, Sri Lanka needs to get assistance from China without gaining debt burdens.

Sri Lanka urgently needs Chinese helps for several vital areas.  Tourism development based on cultural and religious-based would enhance foreign exchange earning quickly, however, there are several barriers in the area.  When there is a feeling about the risk of movement, the motivation for travel may be a downward trend. To deal with this trend the government needs to obtain support from the Chinese government to encourage tourists from China to Sri Lanka.

Tourism has identified as an effective to foreign exchange earnings and employment generation, nevertheless, the tourism sector suffered from constraints of planning and investments because the policymakers are lacking knowledge and skills in planning sectoral policies to competitively improve the industry.  The tourist arrivals from China should be annually increased to 5 million.  The current economic trend in the region shows that this is an achievable target with many improvements in the sector with supports of China, the industry needs direct injections of ideas to attract people and investment should be cooperative with China sharing the benefits to both sides. To attract tourists from China and the inflow of investment need changes in the style of business management.

The government may be looking for cash injections like how did Gorbachev seek cash when the Soviet Union collapsed in the early 1990s, it would not happen.  Sri Lanka needs broad support from China to make a positive impact on society.  

Sri Lanka requires tourism sector employees with the ability to speak in the Chinese language. Chinese tourists are not concerned about the English language and want to converse with their language.  Although Sri Lankans treat English as superior Chinese tourists don’t care about it.    Educating the Chinese language to the Sri Lankan tourism sector employees is an essential condition to attract tourists from China while expanding tourism infrastructure, which needs large scale hotels as well as many medium-sized and small hotels. The revenue of tourists is the major factor in selecting residence and usually people tours once in three years or four years.  Chinese tourists like the place where they visit, if places have an environment with a Chinese style speaking in Mandarin language, opportunities with light gambling services, leisure activities, good security, excellently clean services in a residential environment. Many residential services in the tourism industry in Sri Lanka have no clean environment.  

Sri Lanka has thousands of religious places related to all religions and they need to organize and develop as shrines and worshiping places to domestic and foreign tourists. Many religious administrators have no clear understanding of the management of places the management of the environment, religious programs and finance, and many matters. The most significant characteristic of Shinto Buddhism in Japan is to maintain a very clean attractive place to visitors of the shrines bring them the second time.  It needs training in religious administrators.  The best example for this is Japan how they use shrines as an attractive place for tourists.  Although these activities are costly, they will generate a massive volume of employment for the country.

The other essential requirement is the abolition or reduction of the charges for a tourist visa to US$10 for 30 days period because Sri Lanka needs to maintain the sustainability of the industry rather than exploiting tourists. As a result of radical changes in the tourism industry, the country can increase tourist arrivals from China to five million annually during the next ten years.

Without cash injecting into the economy of Sri Lanka, China can encourage its business community to invest in Joint ventures in Sri Lanka.  The concept of joint ventures directly helps Sri Lankans to learn business management and the application of technology.  The process should not be limited to a specific area of the country. 

There are potentials to develop joint ventures for agriculture, industry, construction, and services, and the investment ratio in a joint venture should be limited to or specified to a ratio identified by the government. Chinese investors can offer shares of the business to Sri Lankan and convert the business project to joint ventures.  This type of investment would not affect the debt level of the country and the government’s role is to protect such ventures and liberalize to control the repatriation of earned profits.

The current government of Sri Lanka has no intention to make serious damage to the port and industrial park developments initiated during the Rajapaksa regime before 2015. It is quite clear that Sri Lanka would not gain any advantage through impediments enforcing against Chinese investments. The country needs investments from China and India. Both countries could offer supports to Sri Lanka.  Whichever the political party in Sri Lanka needs understanding that short-term political rhetoric should not mix with long-term economic development policies.

China has effectively and massively engaged in economic development in the Asian region without involving political or ideological differences.  Chinese investments in Korea, Taiwan Vietnam, Singapore, Malaysia, and the Philippines positively impacted economic development and similar way Sri Lanka must allow Chinese investors to engage in economic activities.  In this way, Sri Lanka should allow Chinese banks to open branches in Sri Lanka because the baking system in the country has no sufficient capital to finance for foreign investors.  A massive volume of lending capacity of trading banks in Sri Lanka stuck with non-performing credits to government and private sectors, the saving capacity of Sri Lanka is not sufficient to maintain required capital adequacy to make massive quantum of investment finance.  The basic incentive to attract Chinese private investments is allowing Chinese banks to open branches in Sri Lanka and allow such branches to attract deposits from Chines people from all over the world. This strategy would massively increase foreign exchange reserves supporting to increase and stabilize the international value of Sri Lanka Rupee.  

When the market economic system began in 1978, Sri Lanka’s government allowed foreign banks to open branches, despite the opposition directed by domestic banks for paying interest on current account balances, liberalized credit conditions of foreign banks, many American and European bank branches were opened but they left the country after July riots in 1983.  Now Sri Lanka’s war is over, and there is a good environment for investments despite the opposition to Chinese investments.

Do Chinese investments limit to industrial activities?  This is a critical question because of political opinion concerns that investments in agriculture and plantation industry should be in the hands of Sri Lankans, however, agriculture especially the production of rice and agriculture-based industries such as sugar production and many others desperately need modernization with new technology, product invention and cost minimization with improved product qualities. Agriculture and plantation industry alone could be double the production and product quality if the right innovations and qualities applied, therefore, Sri Lanka could massively improve agriculture and plantation sectors with Chinese investments and need opening these two sectors for Chinese investment as joint ventures.

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