China’s investment in Sri Lanka a potential boon for region
by Ramtanu Maitra on 02 Jan 2013 6 Comments

Last June the Hambantota port in southern Sri Lanka, the country’s first Chinese-funded and built port, was inaugurated and declared ready for international shipping. Interestingly, the first cargo unloaded at the new port was a shipment of 1,000 cars imported from India. The construction agreement for the port had been signed on March 12, 2007, between the Sri Lanka Ports Authority and the Consortium of China Harbor Engineering Company Limited and Sino Hydro Corporation Limited.


The project is intended to improve shipping, trans-shipping, shipbuilding and trade facilities at the port of Colombo. China has further agreed to build a second port in Colombo, and Chinese firms have pledged investments amounting to $50 billion spread over the next 10 to 15 years, according to Sri Lanka’s trade ministry.


China has been steadily improving its relations with Sri Lanka for a number of years. However discussion of these developments was largely confined to geostrategic analysts - until 2007, when China and Sri Lanka signed the 15-year contract for the Hambantota port facilities, the foundation stone was laid and the media seized on the topic.


Dominated by the Western powers and their echoes in other countries, the media began painting this Chinese “intrusion” as the harbinger of an ominous future for India, in particular, with China “virtually occupying” Sri Lanka. Not surprisingly, the promoters, both official and private, of this notion of a Chinese “threat projection” south of the Indian subcontinent are the same old colonialists who used power recklessly during the last three centuries to occupy almost all of south Asia, India included.


Do the critics echo old colonial voices?


Unfortunately, no discussion about China-Sri Lanka relations has so far been entertained by the western “experts” or their collaborators in Asia and elsewhere on any platform that does not start off without the mention of two phrases: the Chinese “string of pearls” and the Chinese intent to control the Indian Ocean.


Despite repeated claims by Beijing, and Colombo as well, that the inland port of Hambantota was exclusively a commercial project, there is no dearth of “experts” in the West and elsewhere, who, crystal balls in hand, foresee China converting this port into a naval base from which to threaten the heavy maritime cargo passing through the Indian Ocean. “Any attempt to distort the facts would be invalid,” China’s Foreign Ministry spokesman Ma Zhaoxu told reporters in Beijing on May 12, 2009, in response to a May 2 report by the Times of London that China was building a port in south Sri Lanka “as a refueling and docking station for its navy.”


The Times of London, a historical mouthpiece of the British colonials, says categorically that Hambantota is part of China’s plan to spread its “control” over the Indian Ocean. What is readily forgotten by these analysts in their zeal to propagate the idea that China poses a threat to India and other Asian nations is the fact that Sri Lanka served historically as a key nexus in China’s maritime trade in the Indian Ocean. Sri Lanka was visited by all seven of Admiral Zheng He’s Treasure Fleets and represents one of the few places that Zheng He led troops in combat in the early 15th century during the Ming Dynasty years. Between 1405 and 1433, Zheng He had eight times been ordered to act as envoy to countries lying to the west of China. Each time he had under his command a big fleet and a staff of more than 20,000 men



In addition to these historical links and the importance for China of developing a network of port facilities because of its increasingly huge economy, there is another factor: Sri Lanka lies less than 50 nautical miles from India at its nearest point and in case of a most-unlikely serious conflict between the two, all Chinese military forces on Sri Lanka, and the imaginary naval base, would find themselves vulnerable to strikes by the Indian military.


Further, it is important to note that Hambantota is an inland port that has the potential to become one of the largest in the world. This is surely a sound reason why the Sri Lankan authorities chose to develop the port and its adjacent areas. Hambantota is also the home constituency of President Mahinda Rajapakse, so it is no wonder that he has a personal interest in seeing it emerge as a commercial and logistics hub.


President Rajapakse envisions Hambantota as a second Colombo, Sri Lanka’s largest port, in order to further economic development of his nation. That he has sought and secured Chinese funding for the project should not be taken as indicator that a large foreign military presence, Chinese or otherwise, would be welcome in an area he is committed to opening up to development, trade and tourism (Sri Lanka Guardian, June 16, 2010). 


In addition to Beijing’s financial and physical input in the Port of Hambantota, China and Sri Lanka have enhanced their economic relations relatively rapidly, as well. President Rajapakse, who claims Sri Lanka will become “Asia’s Miracle” in economic growth, allegedly believes closer ties with China will help him achieve that end. He says there is a great need for Sri Lanka’s infrastructure construction and the training of its professionals. In that context he welcomes Chinese investment and would like to offer favorable policies for building large infrastructure projects such as the railway, ports and power generation stations. There is no doubt that China has shown increasing interest in assisting Sri Lankan development.


The Sino-Sri Lankan bilateral trade volume reached $3.14 billion in 2011 - up 49.8 percent year-on-year, according to China’s Ministry of Foreign Affairs. China is involved in almost all the large-scale projects under construction in Sri Lanka. Some of the biggest projects financed by China include a $1.3 billion coal power plant on the northwestern shore and a host of other investments in the south, including the Hambantota port and a $209 million airport, according to figures from the Chinese government. China has also pledged $760 million to improve the country’s road network and is heavily involved in highway construction.


Another large project in Sri Lanka where China is cooperating is the Norochcholai Coal-fired Power Project. That project involves the construction of a 300-megawatt coal-fired generator, with the potential for expansion to 900 megawatts. The plant would help meet likely Sri Lankan power requirements for the coming decades. Interestingly, Sri Lanka produces no fossil fuels of its own and will therefore need to import the coal needed for the plant.


Beyond economic ties, President Rajapakse is also seeking China’s assistance to modernize the Sri Lankan military. China’s news daily Xinhua reported last September, citing the Sri Lankan Defense Ministry, that following a meeting between the visiting Chinese Defense Minister Liang Guanglie and Secretary to the Sri Lanka Ministry of Defense Gotabaya Rajapakse, brother of President Rajapakse, it was agreed that Sri Lanka and China  would strengthen their military ties. Long before this agreement, China had provided military equipment to the Sri Lankan government to defeat the Liberation Tigers of Tamil Eelam (LTTE) terrorists of Sri Lanka.


During the meeting between Gotabaya Rajapakse and Liang Guanglie, the Chinese defense minister said that the political trust between the two countries had deepened with the rapid expansion of exchanges and cooperation in various fields. Liang expressed the hope that the two sides would continue to work hard to maintain close and friendly relations, strengthen exchanges and cooperation in the field of nontraditional security and improve the ability to respond to crisis together, so as to contribute to regional peace, stability and development (Sri Lanka, China seek to strengthen military ties Xinhua: September 03, 2012).


On Nov. 27, Sri Lanka’s first communications satellite was launched as the result of a partnership between SupremeSAT (Pvt) Ltd. and the China Great Wall Industry Corp. The Sri Lankan government has emphasized that the launch was a private effort. The joint launch marked the latest in a series of economic and military ties between the two countries.


String of Pearls: A hoax?


According to a 2011 Congressional Research Office report, China might be building, or may want to eventually build, a series of naval and other military bases in the Indian Ocean to support Chinese naval operations along the Sea Lane of Communications (SLOCs) linking China to Persian Gulf oil sources. In fact, China is building commercial port facilities in the Indian Ocean and has not yet established any naval bases there, instead pursuing what US officials call a “places not bases” strategy. In The Military Balance 2011 by the International Institute for Strategic Studies, a retired Chinese naval officer suggested that the People's Liberation Army Navy (PLAN, or PLA Navy) could set up China's first permanent overseas base in an unspecified location in the Middle East. But the Chinese Ministry of National Defense subsequently distanced itself from these comments, stating that it has no plans for an overseas naval base (Is China's String of Pearls Real?: By Vivian Yang, July 18, 2011: Foreign Policy in Focus).


Nonetheless, as the theory introduced in 2004 by Booz Allen Hamilton, an American consulting firm based in Fairfax County, Va., goes, China's “string of pearls” consists of port and airfield construction projects, diplomatic ties and force modernization. These “pearls” range from the coast of mainland China to the recently upgraded military facilities on Hainan Island, China’s southernmost territory. They extend through the South China Sea to the Strait of Malacca, over to the Indian Ocean and along the coast of the Arabian Sea and Persian Gulf. An airstrip on Woody Island in the Paracel archipelago east of Vietnam; a container shipping facility in Chittagong, Bangladesh; a deep-water port in Sittwe, Myanmar; and a potential naval base in Gwadar, Pakistan are also “pearls,” all of them representing Chinese geopolitical influence or military presence (Is China's String of Pearls Real?: By Vivian Yang, July 18, 2011: Foreign Policy in Focus).


According to Billy Tea, in a March 11, 2011, Asia Times article, “Unstringing China’s Strategic Pearls,” the “String of Pearls” theory is based partially on the fact that China possesses one of the world’s largest commercial shipping fleets and relies heavily on international maritime commerce. “Energy imports carried on tankers from the Persian Gulf and Africa traverse often treacherous regions, including the threat of long-range pirates operating from Somalia. In accordance with those threats, China has developed diplomatic, economic and military relations with respective Indian Ocean countries. However, it is a large hypothetical leap to assert these relations are driven by a longer-term desire to construct actual military bases along its SLOC,” Tea argues.


Nonetheless, former colonial powers and the United States continue to harp on the string-of-pearls theme, primarily to create a fear psychosis of a “rising China” among the Asian countries in particular. This fear-mongering is expected to grow in the coming years since US President Barack Obama, challenging China, has come up with a long-term plan, his “Asia Pivot,” to shift Washington’s focus on Asia.


A deeper motive behind the “string of pearls” fear-mongering is to convince the world public that China’s rising naval power is a threat not only to the countries situated in China’s vicinity, but also to  those countries’ “protectors” - aka, the Western naval powers, and the United States in particular. Needless to point out, some of these “protectors” have used their naval power as gunboats to colonize vast sections of Asia during the past three centuries.


The real reason China is developing its navy is not abstract. It is right in front of everyone’s eyes. China is already the second-largest economic power in the world, and if the crystal ball-gazing of the US National Intelligence Council’s latest report turns out to be right, China’s economic strength will exceed that of the United States. Meanwhile, the reason why China must develop a very powerful navy lies in the fact that Beijing has become increasingly dependent on foreign imports to fuel and sustain its economy. China became a net oil importer in 1993, the second-largest consumer of oil in 2003, and the third-largest importer of oil by 2004. In 2012, Chinese oil imports are expected to total close to 270 million tonnes. This past year China bought 7.1 per cent more than a year earlier, at 224.07 million tons, or about 5.36 million bpd, the data show. Much of this oil is brought to China by tankers from the Persian Gulf via the Indian Ocean and the Strait of Malacca.


There is yet another reason why the West looks unfavorably on closer relation between China and Sri Lanka, which is directly tied to the elimination of the Liberation Tiger of Tamil Eelam (LTTE) supremo V. Pirbhakaran and his terrorist group. It has been widely reported over the years that the LTTE raised its money to buy weapons and war-fighting equipment from the West. The organization also carried out “black-ops” dirty work for some foreign intelligence agencies, a few claim. Some colonial powers - Britain, in particular - lent their support to the LTTE under the rubric of protecting human rights. It is arguable whether Britain and some other European colonial powers were looking at the LTTE-promoted Tamil Eelam as a base for their future operations against their former colonies.


Last March, the United Nations Human Rights Council adopted a resolution calling on Sri Lanka to fulfill its legal obligations toward justice and accountability, implement the recommendations of its Lessons Learnt and Reconciliation Commission, and address alleged violations of international law. India surprised its neighbor and the international community by going against its tradition of abstaining from country-specific resolutions and voted in support of the motion. (Sri Lanka: The Noose Tightens: Charu Lata Hogg, Associate Fellow, Asia Programme: Chatham House: April 18, 2012).


Chatham House and India


In an April 18 article, “Sri Lanka: The Noose Tightens,” published by Britain’s Chatham House, Charu Lata Hogg went hammer and tong against the Rajapakse government. Hogg argues that the Indian vote was a setback for the Sri Lankans, leaving them “reliant on China alone as a bulwark against international attempts at scrutinizing Sri Lanka’s conduct during its war with and defeat of the LTTE in 2009.”


She adds: “But Sri Lanka appears to be in no mood for a rapprochement with India, nor is it taking any steps to offset western criticism about its human rights record. The situation of Tamil minorities continues to remain precarious. Reports of ‘disappearances’ of those considered ‘anti-national’ have escalated sharply since the start of 2012. The government continues to repress basic freedoms, and the media remains under attack. The wave of anti-western sentiment sweeping through Sri Lanka caused pro-government media to lead a virulent campaign against journalists and activists participating in advocacy at the UN Human Rights Council in Geneva.”


It is also evident that China’s building the Hambantota port is surely for the benefit of the large Chinese maritime traffic that brings in fuel from the Persian Gulf and Africa. But there is not an iota of indication that China is keen on establishing a “string of pearls” to facilitate its military intentions. That is purely a fig of imagination, planted by an American company. Yet there is no end to takers for this concept. In India, for instance, some of the policymakers and those who walk the corridors of power remain extremely vulnerable to western  propaganda, particularly that launched against China. Brought up with the British-taught geopolitics, most of them have little interest in knowing about China in depth.


China, more so than India, is undergoing rapid transition. From a desperate nation as late as the 1970s, it is fast becoming the supreme economic power in the world. To understand China should be the prime objective. To abuse China, or make abstract accusations about China based on West-propagated geopolitical abstractions, may earn some kudos among the contain-China circle in the West, but it will do nothing good for India.


Those in India, or elsewhere, who echo the western voices about the growing threat of China’s presence in Sri Lanka should also note that the difficulties that exist in the India-Sri Lanka relationship have nothing to do with China building a port in Hambantota. Those difficulties emerged years before Sri Lanka and China signed various agreements, including the building of the Port of Hambantota.


Despite the fact that at one point in time, years ago, India used the LTTE with the aim of reshaping Colombo’s foreign policy, that policy mistake was later rectified. One Indian former prime minister was assassinated by that terrorist gang; and it was India that helped Colombo at the end-stage to eliminate the terrorist group. Also to note is that due to the Free Trade Agreement (FTA), which became operational in 2000, bilateral trade has crossed the $5 billion mark, establishing Sri Lanka as India’s largest trading partner in South Asia and India as Sri Lanka’s largest trading partner anywhere. Many Indian companies are in Sri Lanka, and others are expanding their footprint there. Indian tourism contributes significantly to Sri Lanka’s economy. In addition, military relations between the two nations are deep, including joint military exercises, sharing intelligence and training. The two countries undergo an annual defense dialogue.


India and Sri Lanka also signed a joint venture deal to build a 500 MW coal-fired power plant at Sampoor in Trincomalee in 2011. Although the plant construction is yet to take off, it will be the second coal-fired power plant in power-short Sri Lanka. The Indian partner in the project, the National Thermal Power Corporation, has completed the feasibility study and is preparing the ground for construction.


In essence, what is emerging in Sri Lanka in terms of Indian and Chinese joint efforts to improve the economic situation is not altogether different from what the joint efforts of these two most-populous Asian nations bring to Myanmar. As with Myanmar, China and India can work together to bring Sri Lanka into the mainstream of economic development and to prevent the country from becoming a roadblock to the establishment of a hub where China, India and Southeast Asia meet.


The author is South Asian Analyst at Executive Intelligence Review                    

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