We should become the ‘Hong Kong of India’ – this is not to state that Sri Lanka should become a satellite state of India
Posted on February 13th, 2024

Chanaka Bandarage, International Lawyer (chanakab@hotmail.com)

No one would disagree that Hong Kong rode to its prosperity on the back of China (after the Chinese Revolution, Hong Kong underwent a rapid and successful process of industrialization, from the late 1940s, and became a rich ‘state’).

After the liberalisation of China’s trade (Chairman Deng’s Open Door Policy’ in the late 1970s), Hong Kong grabbed the opportunity and increased its trade with China by tenfold.  Within few years, the tiny Hong Kong’s exports to China surpassed its imports from China.

When it comes to India, Sri Lanka is today placed in a similar position as that of Hong Kong.

India is a significant global player and it is estimated that economically it could  surpass China (given China’s fast ageing population and the gender imbalance), and India has the ability to become the world’s 2nd biggest economy (after the US).

Unlike how Hong Kong prospered thanks to China (Hong Kong is located in very close proximity to China); Sri Lanka (located in very close proximity to India), has thus far been unable to grab the opportunity and capitalise on India’s growth.

India had somewhat closer to a double digit GDP growth in the past 15 years, but, as stated before, Sri Lanka failed to capitalise on this.

In the past twenty years Sri Lanka ‘put all its eggs only in the China basket’.  After the war, under M Rajapaksa, Sri Lanka sadly developed a relationship of mistrust and annoyance with India (true, Thamilnadu created the problem over the fake Chanel 4 videos, but, Sri Lanka diplomatically failed to secure New Delhi’s support).

Sri Lanka failed to realise that it cannot rise to prosperity solely on the back of China, but, it could comfortably do so on the back of India.

Indeed, China is an excellent friend for Sri Lanka. This has been the case historically. Sri Lanka should be ever grateful for China’s help afforded to Sri Lanka during many difficult times. It is China who gave us rice when the country was almost ‘starving’ without rice in 1962.

In 1952 we signed the China – Ceylon Rice Rubber Pact. This was very much in favour of Sri Lanka.

But, China is too far away from Sri Lanka and it is very different from Sri Lanka.  On the other hand, Sri Lanka and India are very similar when it comes to many things such as culture, food, attire, language (English is well spoken in both countries; also, Sinhala (a Sanskrit) and Tamil, an Indian language), sports (cricket), religion (Buddhism/Hinduism), values, traditions and physical characteristics of the people.  The fact that Sri Lanka’s first King (Prince Vijaya) was an Indian (from Bengal) and that Sri Lanka’s third King, Panduwasdewa, was married to a blood relative of Lord Buddha (Princess Bhaddha Kachchayana of the ‘Shakya Wangsha’), are notable and significant features of the relationship.

Furthermore, Sri Lanka and India are separated only by a short stretch of the sea and apart from few/minor recent calamities/conflicts, excellent, brotherly relations have existed between the two nations from time immemorial (of course, there had been serious animosities between Sri Lanka and South India in the olden age – Chola, Pandya, Magha, Elara invasions). 

Northern India has never invaded Sri Lanka in a war like manner.  Sri Lanka’s Anagarika Dharmapala was a person who recently brought the two countries closer.  Another was Mrs Sirimavo Bandaranaike. Sanath Jayasuriya, Mahela Jayawardane, Amaradeva, Jacqueline Fernandez, Yohani De Silva  have also contributed to the current excellent relationship between the two nations.

In the past two decades, India’s exports to Sri Lanka almost trebled or quadrupled.  Sri Lanka failed to keep pace with the growth of its exports to India.

The recent Sri Lankan governments (in the past 25 years), rather than building a manufacturing and productivity-based economy, focused on a service-based economy (it was the ‘easy way out’).  Thus, such unproductive and non-manufacturing ventures like communication centres, beauty palours, trishaw taxis, illegal importation and distribution of dangerous drugs (with the governments’ blessing) such as heroin, cocaine, ice and ecstasy, betting centres, lottery sales centres, small-scale casinos, massage/sex parlours in the guise of Ayurveda centres, private tuition centres (even Sinhala, Buddhism and History are taught for school children therein, and Tamil/Hinduism are taught for Tamil school children), variety of international schools and tourism based ventures like hotels/motels – they are good, mushroomed the country.

These ventures became the hallmark of the country’s economy. They created jobs, but generated less GDP.

Through this useless economy, the country only generated Sri Lankan rupees; there was hardly any US dollars or other currency.

Foolish governments by trying to reduce the country’s unemployment, gave public sector jobs to thousands of people; that was also not based on merit – to those who supported them during elections. Hence, a very corrupt/lethargic public service has emerged. Public servants received two Rs 10,000 a month salary increments within a short spell of time, but their productivity did not improve. Very seldom that a telephone call to a government office is properly/politely answered.

In the middle of a serious economic crisis Gota gave new public service jobs to over a lakh of people. He unnecessarily reduced the VAT significantly.

The governments believe that by increasing public sector wages the cost of living will come down. They seem less concerned about the plight of the private sector employees, the self-employed and the unemployed.

The governments not knowing how to create employment for the citizens (both skilled and unskilled workers) encourage them to leave the country in search of greener pastures.  Lots of our women ended up working as domestic maids in Middle Eastern countries (we know stories where some of them have been treated like slaves). Lots of youth were dspatched to South Korea, Japan, Israel etc. This was in order to develop those countries at our expense.

There is a huge scarcity of qualified tradespeople here – masons, carpenters, plumbers, electricians, electronic technicians, welders, IT workers,  hairdressers, chefs, medial/laboratory technicians, radiologists, pharmacists, nurses, agriculturalists etc. The governments have absolutely no solution to address this problem.

We have 17 or more state universities now (most of them produce BA, Business Administration/Management Studies graduates),  They all seek professional, white collar jobs. Then, a considerable number of private universities.

The country only has a handful of good, high standard technical colleges. They produce few  technologists/technicians a year. As soon as these diploma/certificate holders are passed out, they leave for overseas.

The current government wants to set up further 4 or 5 universities.  It has invited the private sector to set up universities also. SLIT has been promised the newly built (by public funds), modern Presidential House in KKS to set up a private university there.

What about the urgent need of establishing new technical colleges for the country?

Governments have been unconcerned in paying attention to the adverse socio, cultural and psychological effects of the family members that were left in the country owing to the mass temporary migration of workers.  Drastic stories have been heard about the plight of the children and elderly who had been left behind in Sri Lanka by those workers.

Governments like the idea of its citizens leaving shores as their remittance become the biggest source of revenue for them.  In the last 45 years, the rulers plundered and mismanaged the public wealth from left, right and the centre.

Why did the Central Bank in January 2022 settle a debt of US$500 to a group of mysterious sovereign bond holders when the country was facing imminent bankruptcy? Who were those beneficiaries?

Especially in the past 20 years the governments borrowed unbelievably heavily.  The injection of some of such monies to the economy (ie, the unplundered money) created somewhat an artificial growth in the GDP (of 6%).

But, today, Sri Lanka is a hugely debt-ridden country and is also bankrupt. Our foreign debt alone has exceeded US$90 billion (?), which is far too high for a country of our size.  The country owes money to other sources too, including local banks and various employee trust funds. We have failed to successfully negotiate with lenders on the settlement of outstanding loans.

When will the Volcano erupt?

Unlike in the 1960s and 70s, where governments helped to build a strong manufacturing/productivity base economy, in the last 35+ years, large numbers of small factories, textile mills and small businesses were compelled to be closed down.  Local businesses were unable to compete with the influx of cheap Chinese, Taiwanese and Indian exports to the country.  Unlike few third world countries in the past 20 years, Sri Lanka failed to become a newly developed country.

Corruption, mismanagement, maladministration, incompetency, stupidity, lethargy, complacency, waste, nepotism, cronyism,  30-years of civil war, attacks on innocent Muslims, the Easter Sunday attack,  Corona and the failed Gota regime are some of the reasons for us to become a failed state.

Today we basically import everything – from needle to the motor car.

The government boasts that we will become self-sufficient in rice this year. If this is true, full kudos to the government – a remarkable achievement.  There was a very low rice harvest in 2022, owing to lack of fertilizer.

We must build a strong productivity/manufacturing base. Sadly, the country is producing very few things. During the past 45 years we almost destroyed everything what we built after the independence – during the 50s to 70s.

There is a lot of potential in Sri Lanka to build, rebuild and improve, and to ‘take off’ to become the ‘Hong Kong of India’. The biggest asset we have is our workforce.

Basically Sri Lanka today has very few items available to export to India (or to any other country); except things like fish harvested from the sea, some agricultural/horticultural products, readymade garments, and a few value-added items imported from other countries for the sole purpose of re-export. 

The irony is that this is a country that once produced fine electrical and electronic items, textile, furniture, handicraft, confectionary, tyres, bicycles, batteries, razor blades, perfumes and even motor cars.

The land master tractor was our invention (by Mr Ray Wijewardane), but, Japan has taken the credit for it.

The total bilateral trade between India and Sri Lanka is earmarked to reach $10 billion in the near future; the trade balance will continue to be very much in India’s favour, say in the range of 8:2.

Since of late, India has been pressurising Sri Lanka to sign a new trade agreement with them in addition to the current ISFTA (India – Sri Lanka Economic and Trade Engagement) signed in 1998. They want something similar to the failed CEPA (Comprehensive Economic Partnership Agreement) of 2014. 

No doubt that such a new agreement would provide Sri Lanka preferential access to the very large Indian market, but it was feared that due to the old (discarded) CEPA, the country would be flooded with cheap Indian exports.  False alarms were raised that even Indian hairdressers, cobblers and lawyers would land here in droves.

True, we have to be very careful. A bad agreement could destroy the remaining, very small production/manufacturing economy that we have. 

The writer does not say that Sri Lanka should flatly say ‘No’ to a new CEPA; he states Sri Lanka should use the new CEPA as a bargaining tool to obtain more favourable trade advantages from India – we should try to improve the current  ISFTA to our utmost advantage.  

Two examples:

  1. We can demand that we should be given export access to the entire Indian market, with zero tariffs.

If we are successful, this means the ability to cater to 1.3 billion people! 

If this could be achieved (a difficult task, but a possibility), it will be a goldmine opportunity for us.

In that case, Sri Lanka should sign the new CEPA type trade agreement with India.

Again, it should be well scrutinized by our legal luminaries (we rarely do proper due diligence before signing international trade agreements).

2. Sri Lanka should seriously ask India to stop poaching on our waters. This causes at least US$1 billion loss to us per year (this could be a pre-condition to signing the new CEPA type agreement).

Prior to signing any new trade agreement with any country, Sri Lanka should ensure adequate measures to protect our local industries from the possible massive scale intrusion especially by giants like India, China, Russia and the US.

Only an intelligent and a tactful Sri Lankan leadership could achieve best outcomes for Sri Lanka. If their minds are filled with bribery, corruption. jealousy, vengeance, deception, power hungriness, stupidity etc, we will not achieve anything.

It will be the innocent public who will pay the ultimate price for the huge misdeeds and blunders of the politicians and bureaucrats.

If Sri Lanka foolishly enters into trade agreements, international contracts etc with overseas countries/companies (including that of India), without obtaining competent legal counsel (some of the past foolish examples are the Hedging deal, Air Lanka agreement, Cairns oil contract, Shell gas deal, IOC deal, Kerawalapitiya liquid gas deal, New Diamond/ X-Press Pearl deals, Adani deals, Chinese fertilizer deal (the list is endless), the country will doom.

The lawyers that the country would engage apart from being fully qualified, must be 100% patriotic. Foreigners may not work in the best interests of Sri Lanka. True, some have provided yeoman services.

The few examples cited above brought forth billions of dollars of losses to Sri Lanka.

Now that the Sri Lankan government has a fairly good relationship with India, the JVP leaders’ successful visit there, and Mr Modi extending a true hand of friendship to Sri Lanka, if wise and intelligent, we should grab the opportunity and try to become the ‘Hong Kong of India’ (note the remarkable turnaround in the relationship between the two nations – in 2013 India even boycotted CHOGM held in Sri Lanka; the year prior to that they co-sponsored (with the US) a resolution against Sri Lanka at the UNHRC in Geneva).

If Sri Lanka (a chronic third world country) wants to become rich  capitalising on India’s massive economic growth (the Indian middle class alone is more than 350 million, by 2030, this number is likely to increase to 500 million); before signing the new CEPA type or any agreement, we must evaluate what goods and services we will be able to produce/provide for the Indian market. 

For example, if properly planned, Sri Lanka can be a large-scale food and agro business supplier for India (notably, things like tea, spices, fresh fruits, vegetables and flowers, betel leaves, arecanuts.  

True India is the world’s largest tea producer, but, there is a scarcity of tea in India, and there is the tremendous potential to introduce ‘Ceylon Tea’ (the world’s finest) in India, in a big scale.

If Sri Lanka is to sign a new CEPA type trade agreement with India, we should ask as a precondition that India should assist Sri Lanka in every way to become the logistic hub to various production chains in India.  Few industry examples that come to mind are automobile, IT components, manufacturing of pharmaceutical products, electrical machinery and parts and food processing products.

In this regard, the Sri Lankan government must work hard in creating opportunities for Sri Lankan companies, without favouratism and involvement in corruption. 

Creating new economic zones solely for the purpose of manufacturing products for India is a good idea.  Since land is in scarcity here and Sri Lanka is closely located to India, such economic zones can be established (with Indian aid) in the North, South and East of Sri Lanka (for example, in Kilinochchi, Puttalam, Biyagama, KKS and Trincomalee). Sri Lankans must be given the foremost priority to work in these ventures.

It should be stated that even without signing a new CEPA type agreement, we should still be able to become the ‘Hong Kong of India’.

India has spent money on Sri Lanka’s Railway projects, massive scale housing developments in the North and the Centre, it is a pity that we stated ‘No’ to the Sampur Coal Power plant project. India has offered billions of dollars as lines of credit to Sri Lanka, especially when we were in very dire strait. India has also offered us very fair  currency swap arrangements, these are now in in place.

Sri Lanka should accept India (and other countries’) gifts with gratitude. But, we cannot go round the world with a begging bowl forever. This bad mentality was introduced by Ronnie De Mel.

What is most important is India’s private sector involvement in Sri Lanka. There are Indian companies ready to invest millions of dollars in Sri Lanka including in the tourism sector.

India is Sri Lanka’s largest source of foreign tourists.

Rather than working on securing foreign investment, our governments are keen on selling off our valuable assets to foreign companies. That has also been to paltry amounts. This shows the foolishness of our leaders.

It is rumored that India’s Amul will only pay US$ 35 to purchase Milco (about 5 milk factories and hundreds of milk chilling centres + almost the whole of NLDB Farms).

Some say it will be a lease out; the writer is unaware of the intricacies.  

In any case, US$35 is too small. Amul should pay us about 20 times more.

Leasing out assets to foreign companies is different than selling.

Leasing may be ok, but not on too long-term leases like for 99 years.

Even on leases, we should not be afraid to demand good money. There are always other interested parties.

The amount we received from China (US$ 1 Billion) for leasing out the Hambanthota port for 99 years is too little. We should have demanded US$6. China would have still paid.

Rather than selling our precious assets, what the governments must do is to secure foreign capital. This means facilitating foreign companies to start their own businesses here or for them to enter into joint ventures with local companies.

This is how Unilever, Whitalls, Browns, Carsons, Ceylon Tobacco, Rowlands, Hayleys, Walkers, Walker & Greig, JL Morison Son & Jones, Mackwoods, BCC, United Motors, George Steuart, Bata (the list is very long) established here in the 40s and  50s. They brought in foreign capital here (US$, Pound Sterlings etc). The country never sold its assets to them, perhaps provided them with land to set up factories/offices.

Those who oppose foreign investments at any cost must realise that in order to develop our country we must attract foreign capital. This rationale applies to any country in the world (especially the 3rd world).

Without foreign funds (eg US$, Aus$, CNY, INR), we will not go anywhere. We will be in eternal poverty – say, for the next 100 years.

It is refreshing that the JVP has realilsed this.

Let’s hope that the Peratugamis will too realise.

It is not sensible for Sri Lanka to say ‘Yes’ to the rail and road link that India wants to build at its own cost over the Palk Strait from Dhanushkodi to Talaimannar. Naturally, due to Thamilnadu hostility, people in Sri Lanka have a strong reservation about this proposed mega-project; despite the fact that it could bring huge and unprecedented level of economic benefits to Sri Lanka, including a tenfold increase in tourist numbers, especially thousands of new European/Australian, NZ and US tourists that will travel from India to Sri Lanka by rail or road (overland). Sri Lanka having fought a bitter civil war where India offered support to the terrorists in the 80s, people are fearful that a rail/road bridge will be harmful to Sri Lanka. Above everything else, our Sovereignty, Territorial Integrity and National Security are important. 


I am aware that this article will be subject to criticism.

I am not at all suggesting that Sri Lanka should become a satellite state of India. What I outline is purely an economic arrangement – supplying goods and services to the huge Indian market of 1.3 billion people. This is creating a Win/Win situation for both countries, the benefits to Sri Lanka will be huge.

We cannot continue to live in 3rd world conditions, especially now we are under bankruptcy.

It is time that we become a rich nation. This can be achieved soon, within our own lifetime.

This Indian opportunity that I am proposing is the best available one at the moment.

It is a shortcut to prosperity.

I believe all 3 major political parties – SJB, JVP, UNP think in this line.

If we miss the ‘bus’ (again), there may be no other bus to catch. Either Nepal or Bangladesh can become the ‘Hong Kong of India’; so. again, we should not let this golden opportunities go by.

We have to do this in friendship and co-operation with India (that is how Hong Kong did it with China, especially during China’s ‘Open Policy’ period). And now is the best time to do it. India is ready, why aren’t we?

Our  President should visit India more often, so should Sajith. The JVP visit was very good, it was a groundbreaking visit.

Emphasis added – I am not proposing that Sri Lanka should stop trading with other nations like China, Russia, US, Japan etc. We should trade with the whole world. I am stating it is only for India that we can become a hub to export goods and services. There is no other country available (proximity is the key).

One can say hundreds of negative things about India, but, they will not take us anywhere. India today is vastly different to what it was 35 years ago.

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