BY EDWARD THEOPHILUS

Some analysts have expressed many debatable comments in relation to the agreement of the Hambantota Port Development Project, which was signed by the government of Sri Lanka and the Chinese Merchant Port Holding Company owned by the Chinese government based in Hong Kong.  A major point highlighted by analysts was that the agreement contains an unmitigated risk, which is beyond the tolerable level to Sri Lanka.  The clauses of the agreement indicate that it is a long-term development and management related project, which involves in a legally leasing of Hambantota port and adjoining Sri Lanka’s government lands of 15000 acres to the company for more than 50 years period.  Other analysts were of opinion that it was an effort of privatizing or selling government assets to a foreign company, completely eyewash of the public, who have little understanding about the project.  Many ordinary people in Sri Lanka assume that the project has ample of similarities to the lease agreement had between China and Britain for Hong Kong Island and when the island returned back in the early 1990s, Hong Kong was a huge developed country adding a massive economic strength to China.  An imperative political truth about the Hambantota agreement is that the original lease was initiated by the Rajapaksa regime during the civil war, which incurred a monumental infrastructure destruction in the country, when foreign donors were reluctant to help Sri Lanka.

It was widely propagated that the original agreement was wisely renegotiated by the current government elected in 2015 with a view to changing potentially disadvantaged clauses in the original agreement in a way Sri Lanka’s government wanted to attract more benefits to the country. In fact, the original agreement was slightly altered and the project was given to another company which is also owned by the Chinese government. The fundamental point assimilated with the agreement is that whichever the company is involved in the project management, it is fully owned by the Chinese government.  The project is a big plus to Sri Lanka because the country was able to sign a strong agreement with the second-largest economy in the world gaining not only economic benefits but also a deep security brace to the country and the region.

It is further revealed that the Port Development Project covers not only the Hambantota port development but also include a massive investment in an industrial park surrounding lands of the port. What is wrong with a massive investment project that Sri Lanka desperate to attract.  People who have a good understanding of the pattern of world economic development evidence that many countries in Asian region such as India, Philippines, Malaysia, China, Taiwan, South Korea and Indonesia became richer in foreign assets and employed a huge volume of workforce developing industrial parks. Sri Lanka too reduced its high unemployment rate adopting the concept and creating industrial parks in Katunayake and Biyagama.  I read many criticisms and different opinions on this development project and the most attractive vision I have seen was the project would be led to establish another SHANGHAI city in Sri Lanka.

When Mr. Xi Jingping, current Chinese leader visited Sri Lanka in 2014, he promised to invest US dollars 2.0 billion in the country while $ 20 billion to invest in India.  China already agreed to develop Colombo Port City which is now working after restarting the project. The latest fashion of economic project developments in the world seems ports development with multiple economic activities, China had already developed a highly attractive port city in Sakhalin, which was criticized by certain international media showing covetous attitudes. Sri Lanka also has a potential to develop tourist parks in the seaside area between Yan Oya to Maduru Oya and Chilw to Mannar in the entire Puttam District, which will attract millions of Asian tourists to Sri Lanka and billions of dollars to foreign exchange inflow making Sri Lanka as a foreign asset rich country like Taiwan, if the government considers attracting massive Asian investments flow and to appreciate the foreign value of Sri Lanka Rupee possibly to SLR 60.00 = US $ 1.00.

When people express opinion on Chinese investments in Sri Lanka, it should not ignore the fact that only China came forward to generously support Sri Lanka ending the terrorist war despite many Western countries supported to prosecute Sri Lanka at international courts of justice instead of helping the country to rebuild war damages. China positively expressed supports to the Rajapaksa regime and agreed that when Sri Lanka needs help, it would help the country, which means that China was ready to protect Sri Lanka, in spite of the allegations made against the country for defeating LTTE.  Some NGO crooks, who were enjoying dollars from the West and neighbouring countries too joined hand with the prosecution effort purely based on hegemony.

It is natural that people have different opinions as well as criticisms against the Hambantota project and certain views may have originated with the support of international influences. The past experience always reminds that any business involves with Chinese assistance was subject to severe criticism of India and the West.  I read an article written by Prof Swaran Singh in Asian Tribune, Why is India Worried about China Consolidating in Sri Lanka”. The article expressed some strange opinion to Sri Lanka. As Prof Singh stated, “Sri Lanka’s policy of equidistance itself generates anxieties against India’s policy makers”. India also expressed the opposition to Pakistan’s Gwadar Port development project, which is similar to Hambantota Port Development Project. Why India opposes to economic projects assisted by the Chinese government, inadvertently assuming that such economic projects would be a threat to Indian security.  No country surrounding India wants to engage in a war with India or even China has no intention to declare a war with India. The blatant truth in the Indian assumption might be Indian policy makers’ patrimonial attitudes rather than a vicious hate of Indian neighbours.

The rapid economic development of neighbouring countries opens Indians to expand business and would strengthen the economic stability of India with a strong support of trade with surrounding countries. Aristocracy was a bygone practice that would not appropriate in the modern era, which needs the cooperation and equality in association than hegemony with surrounding countries.  The attitudes of Indian policymakers need briskly changes with a view to establish new cooperation and strengthen mutual trust between India and neighbours.

The views of politicians in the government and the opposition appear to be very weak as they are concerned on the short-term impact of the project and look at how the project will impact on their political life.  It needs looking at a broader spectrum of analytical views and especially, the point of views of economists, who are concerned about the long-term positive impact, which will be vital benefits to the people of Sri Lanka. The dream of common people of Sri Lanka is to initiate a massive economic development process, which will bring the economic prosperity to the nation.  People of Sri Lanka always look at developed past in Anuradhapura and Polonnaruva eras assuming that current economically backward country could be defeated by socially and economically advanceable investments, if successful policies are developed and implemented in the country.  It is visible and leads to imagining from historical ruins and information uncovered from archaeological excavations that Sri Lanka was a prosperous nation with a small volume of population in the history and people believe that modern governments have vehement challenges to regain the prosperity status back. The way to achieve the prosperity is no other way than developing economic projects which can generate enormous economic benefits to the country.

I also watched a TV program in Sri Lanka in which a person of an NGO group, who supported to defeat the Rajapaksa regime, made a wrongful and malice statement that massive development projects such as Colombo Port City and Hambantota Project were illegitimate children of former president Rajapaksa. I don’t think any patriotic person to Sri Lanka happy with such a fraudulent and insulting statement. People of Sri Lanka love to develop mega projects as they are the beneficiaries of such projects. People have no political differences or party politics in regard to economic project developments.  NGO people want to create contentions with a view to gaining unfair advantages from Western countries showing that they are real promoters of democracy.  Australia also has given its Darwin Port Management to a Chinese company but neither Australian has made such a dirty statement against the leaders of Australia as Australian government gave the Darwin Port to a Chinese Company for the management of the port with a view to attracting foreign investments for economic activities in Australia.

As a result of the Hambantota port development and industrial park, two nations would be interacted in the future in relation to the project management and employing skilled labour. I read certain politicians comments on the social impacts of the project concentrating the possible changes in a demographic setting in Hambantota District in the future.  It is a vital point that intelligently deal with but the political platforms engross in the possible demographic changes with more racist attitudes.  Sri Lanka has a past experience in regard to the importation of Indian labour for the plantation industry and later it became a serious issue between India and Sri Lanka.  When the import of Indian labour incurred, Sri Lanka was governed as a colony of the British government and Sri Lankans had no power to independent decision making or ability to influence the decisions of the colonial rule.  Now Sri Lanka is an independent state with the supreme power to make right laws, regulations, and policies for the interest of the country and its own people.  The potential demographic impact or the possibility of incurring demographic disadvantages by the import of Chinese labour have to be analysed not from a racist point of views but considering the possibility of check and control maintained by the government of Sri Lanka.

Before explaining the economic impact of the project, it is quite useful to consider a point raised by Dr. Dayan Jayatilake, who is a respected political analyst, university academic and foreign diplomat. His opinion was that Sirisena and Wickramasinghe government wouldn’t have to lease the Hambantota port if the government implemented the COPE report in regard to Bond scam, which imaginably covered more funds than the borrowings for Hambantota port project.  His indirect opinion was that Chinese involvement forced Sri Lanka because the corruption in domestic borrowings of the government created additional debt burden to the country forcefully going to China for leasing the port. This was a controversial point the political platform but not an intelligent forum.

The borrowing for the Hambantota Port Development Project was less than the US $ 500 million and the total debt to China remains about the US $ 8.0 billion.  The Hambantota project began several years ago with financial supports from China and the Central Bank bond scam first incurred in February 2015 and the second scam took placed in March 2015.  The COPE report on this matter clearly analysed how a massive loss created to EPF, Central Bank and even to other trading banks. If the government recovered the lost money or if the bond scam did not happen, the Hambantota project related debts could have been paid easily.  It was certainly unpredictable suggestion because the government borrows from China not only funding for the spending of the project but also know how and management skills, which are not available in Sri Lanka.   The argument of Dr. Jayatilake attempts to blame the government highlighting a point that the indebtedness was a created crisis in spite of the economic environment prevailed in the country. The project generates a massive revenue and many other economic benefits to the country.  Debt retirement is not a significant issue in the proceeds of debt are used to generate a positive cash flow to the country.  The argument of Dr Jayatilake is a point for political platforms and there are many economic strategies to tackle debt repayments.

When people talk about debts in relation to economic projects, it generally needs to understand a significant point.  Economic growth and the total debts of a country are positively correlated factors which mean that debts of Sri Lanka have positive association with the economic growth, which supports the macroeconomic advancement of the country. It will be based on the value of correlation coefficient.  If debts are used for economic projects that generate an excellent positive revenue flow, which can be used to repayment of debts. Ignoring this fact, party politics in Sri Lanka shows that debt is a vicious devil. As I was a policy making banker in Sri Lanka I personally know that rich people in Sri Lanka did never achieve richness bring money from home but from debts obtained from credit sources.  Researchers found that Sri Lanka economy positively correlated with debt until it equal to 60% of GDP and under the Rajapaksa regime, treasury economists and the Central Bank planned to reduce Sri Lanka’s total debt to 60% of GDP in response to the research findings. If Sri Lanka’s debt level goes unreasonably higher lever as result of the borrowing for the Hambantota Port Project, the best option will be converting the debt to equity rather than holding the project. It was an original strategy developed by the Rajapaksa regime.  Selling of shares of the Hambantota port to China would be a right strategy to successfully manage Sri Lanka’s debt level at less than 60% of GDP.

(To be Continued)