Interest on 61.5% of China’s loans to Lanka is far below market rate, says Chinese scholar
Posted on December 17th, 2018

Courtesy NewsIn.Asia

Colombo, December 17 ( The interest on 61.5% of China’s loans to Sri Lanka is far below the international market rate, according to Prof. Huang Yunsong, Associate Dean at the China Center for South Asian Studies in Sichuan University.

Huang told the Colombo Shangri-La Colloquium 2018 held here on Sunday, that as of December 2017, Sri Lanka owed China US$ 5.5 billion which was about 10.6% of the island nation’s total foreign debt of US$ 51.8 billion.

Of the US$ 5.5 billion, US$ 3.8 billion (61.5 % of the total loan) was provided at a rate far below the international market rate.”

Thus, the major part of China’s loan was taken at a concessionary rate,” Huang emphasized.

More importantly, US$ 1 billion had been taken at a concessionary rate of 2% which means that the interest on the major part of the loan was not excessive at all,” he added.

Interest on 61.5% of China’s loans to Lanka is far below market rate, says Chinese scholar

On the issues of Sri Lanka’s taking US$ 307 million at the London Interbank Offered Rate plus 0.75% pushing up the interest rate to 6.3%, Huang said that the commercial loan interest rate was based on a mutual agreement between Sri Lanka and China as per established principles of the international market.”

Misinterpretation of 99 Year Lease

Referring to the description of China’s taking over the Sri Lankan port at Hambantota as neo-colonialism”, Huang said that if one were to Google port 99 year lease”, the first result one would get is a 99-year lease on the Port of Darwin in Australia’s Northern Territory, a deal worth Australian Dollar 506 million with a Chinese company.

Besides, port terminals in New York and Long Beach are managed by Chinese companies. But people do not term Darwin and Long Beach as China’s colonies!” Huang remarked.

The China Merchant Holdings now holds a 70% stake in Hambantota port for 99 years, with the remaining shares in the hands of Sri Lanka. But the lease agreement provides for the purchase of shares held by China if Sri Lanka so decides at a future date, the Chinese scholar pointed out.

Huang described the charge that China is trying militarize Sri Lanka’s ports, as baseless speculation”.

He pointed out that between 2009 and May 2018, 422 warships had arrived in Lanka’s ports for operational, training and formal visits.  These ships belonged to 27 navies in the world.

Being a neighbor and having close ties with Sri Lanka, India tops the list with 83 visits . Japanese naval ships undertook 69 visits. China is at the distant third place with 33 visits followed by Bangladesh with 29 visits. Russia and Pakistan come next with 27 and 24 visits respectively. All these naval vessels have followed the same procedure of applying for logistic and operational requirements, which proves that China’s dual-use of ports for both military and economic purposes is baseless speculation,” the Chinese scholar said.

He pointed out that according to the latest paper of a prominent US think tank, it is unlikely that the Kyaukpyu port in Myanmar and the Hambantota port in Sri Lanka will become dual use ports. This is due to political and legal restrictions in Myanmar and Indian pressure on Sri Lanka, the think tank had said.

Furthermore, the agreement between China and Sri Lanka on Hambantota port contains a clause that strictly prohibits” the Chinese from using the port for military purposes.

It also states that the security of the port shall be with the Sri Lankan navy, Huang pointed out.

Reacting to a remark made by a former Indian National Security Advisor Shivshankar Menon that ports might begin as commercial ventures but ultimately end up as military bases also, Huang said that he is certain that at least in the short and medium terms, China has no plan to put the ports it is building overseas to military use.

Prof. Swaran Singh, Senior Fellow at the Institute of National Security Studies Sri Lanka (INSSSL), said that while India and China have differences on many maters, their navies are cooperating at the operation level on the high seas.

Anti-piracy operations off the Somalia coast  have brought the Indian and Chinese navies together, Singh said narrating an incident in which an Indian naval helicopter escorted a Chinese naval ship to help its crew board a pirate vessel.

India and China discussed bilateral maritime security in September 2014 during Chinese President Xi Jinping’s visit to India, but US President Barack Obama’s visit to India in January 2015 and the development of an Indo-US strategic alliance put paid to the China-India maritime security dialogue, Singh said.

The Indian scholar said that India should recognize the asymmetry between India and China, and instead of stressing the negatives, build on the positives as in the case of combating piracy.

Asanga Abeyagoonasekera, Director General of the Institute of National Security Studies Sri Lanka (INSSSL) described Asia as a geo-political hotspot” with increasing militarization following the rise of China as an economic and naval power. He pointed out that China’s naval growth has outstripped that of all major powers. The arms build up in the region has been unprecedented in history, he added.

Sirimavo Bandaranaike, Sri Lanka’s Prime Minister in the 1960s and 1970s had foreseen the present scenario and had proposed that the Indian Ocean be declared a Zone of Peace.

The region is currently divided into the Chinese and the US camps. To complicate matters, there are new threats from terrorism, piracy, gun running, human smuggling and illegal fishing. Globalization is taking place at a time when there are transformational changes” taking place in the region, Abeyagoonasekera noted.

He wondered if in the midst of all these transformational changes, a new security architecture can be created. He quoted India’s former National Security Adviser Shivshankar Menon to say that it would be illogical to impose stability in a changing environment.

Earlier, inaugurating the Colloquium , Sri Lanka’s Defense Secretary Hemasiri Fernando stressed the need for high quality independent research” into national, regional and international security issues.

Given the strategic geographical positioning of Sri Lanka, the island nation should play a pivotal role in ensuring the security of the Indian Ocean Region (IOR) he said, and called for international cooperation.

Sri Lanka should maintain friendly relations and cooperate with all nations but without compromising its territorial integrity,” he said.

(Photo Credit: Tang Lu)

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