Extricating ourselves from ‘China’s grip’?

I was perplexed by the absurd claim made by G. A. D.Sirimal that China has been purposely trying to place Sri Lanka in a debt trap. This myth, most probably invented by Sinophobia groups, has been circulating in the media for some time. In Sri Lanka, certain political groups have picked it up when they ran out of other issues.

Let us look at some of the arguments.

(1) China’s overseas investments have a geopolitical motive: This is what an unnamed ‘African Research Assistant’ says. There is no clear evidence presented. At most this is no more than a private opinion.

(2) Most consequent investments are undertaken by the Chinese state-owned companies: What is wrong with that? We must remember that until recently China had a state run economy, and the financial organisations capable of investment in foreign countries are partly or fully owned by the state. Besides this, who said that all the funds invested in Sri Lanka in the past by the other countries, including several Western Countries in major development in projects, came from private sources? If that is the case, those countries must be having wonderful, highly philanthropic private investors.

(3) China has been ready to fund projects which were not financially viable (presumably with a view to keep Sri Lanka under debt obligations for long periods so that the investor can dictate its own terms): This is perhaps the strangest assertion made by Sinophobiacs.

The choice of capital projects, their study and formulation is always the function of the recipient country. The investor comes into the picture only after that. Unless Sri Lankans are a set of idiots who cannot decide, by themselves, on what to do about the economic development of the country, that work will not be entrusted to a prospective investor. If so, accusing China of deliberately choosing financially non-viable projects to fund is highly untenable. If someone has to take the blame for choosing financially non-viable projects, it is the recipient country authorities who have to take the blame. In any case, whether the major projects funded by China are non-viable is in my view a debatable issue. As far as we can see, most if not all China funded major projects (mentioned in Mr Sirimal’s letter) are infrastructure projects with long gestation periods. Their financial viability depends on the time horizon considered. In any case, their social benefits are usually much higher than their social costs. It is a great mistake to say that they will make the country poorer.

In this connection, it is necessary to point out a fact that has been often overlooked. If a proper planning procedure is in place, a public sector project will be subjected to a thorough technical study, which invariably shows the future cash-flow, and answers the question how the loan will be repaid (in the case of a loan funded project). Then a situation where a future owner comes along and declares his inability to amortize the debt cannot arise. If such a situation has arisen in the case of some of the large public sector infrastructure projects, it strongly suggests that the government of the day did not bother with the project planning part, rushed the project, by-passing the established good planning practices.

I am aware, through my long association with the National Planning Department, that there was a time-tested project approval procedure in operation, under which no capital project got included in the Government Budget unless it was first included in the Government’s Public Investment Programme. This means that the project would have been subjected to a good technical study and appraisal. In such a scenario, it will be a great mistake to blame the lender for funding non-viable projects. The lender came in because it trusted the borrower – a sovereign government guarantee about its repayment.

Those who blame China for certain ulterior motives in coming out to assist Sri Lanka should remember that China had always been a good and consistent friend of Sri Lanka – a country which has not asked for anything in return. The earliest instance which comes to our mind is the Rubber-Rice-Pact during the 1960s. The Government of the day faced a serious problem of supplying enough rice to the people, because the traditional suppliers failed to meet their obligations at a time when our country faced severe foreign exchange shortages. When we asked China to help, they came up with a brilliant proposal involving a barter arrangement: to exchange our rubber for Chinese rice. The older generation in our country will remember how some powerful Western countries strongly opposed this arrangement and did many things to sabotage it. (The barter arrangement was to pre-empt a powerful country from using its influence to intercept the flow of payments.) They also found some strong allies in Sri Lanka who, like the present day Sinophobia crowd, warned of dire consequences. But Mr R.G. Senanayaka, as Minister of Trade, gave bold leadership to implement the proposal. He had to wage a great struggle even against some members of his own Government. However, he somehow pushed it through. In the end, we avoided a serious shortage of food in this country and the rubber industry received a substantial boost, which lasted a number of years, perhaps a decade.

We also remember that during our struggle against the vicious terrorist outfit – the LTTE, most of our so-called special friends refused to sell us urgently needed arms. That is understandable, because one of them had a history of helping the LTTE terrorist group to establish itself by opening up training camps within its territory, and openly supplying them funds needed for their criminal activities.It was only China that came to our assistance at that time, and offered us whatever we asked for. Some people in this country seem to have already forgotten the fact that friendship with China was a critical factor in our success in the war against terrorism.

During the period following the defeat of terrorism, the LTTE Rump managed to organise a highly effective anti-Sri Lanka campaign in some of the Western countries, to punish us for winning the war and ending the life of the most dangerous terrorist leader. They were actively supported by the Darusman, Moon and Pillai group, and the Tamil diaspora crowd at the Geneva UNHRC. While all our traditional friends deserted us at Geneva meetings, and Sri Lanka’s own official response to the wild accusations of war crimes remained lukewarm and timid, it was China and Russia who unwaveringly stood by us.

Unlike some other powerful countries which try to enter into various kinds of cleverly drafted agreements with small countries, such as ours, by offering bribes (deceptively labelled development assistance) for the purpose of converting them eventually into military bases, China has never tried to draw us into great-power political conflicts in a similar manner.

There are several more such instances when China came to help Sri Lanka, and perhaps other similarly placed countries, displaying that country’s sincerity and maturity in conducting its foreign policy. Therefore, it is necessary to find every opportunity to express our gratitude to the great country – China, instead of pretending to find ways to extricate ourselves from non-existing traps.

S.A.K