Harsh realities of Non-Alignment and Foreign aid

Our leaders say we are non-aligned and certainly do their best to stay that way, though the reality may be somewhat different. We are being forced to part with whatever little we have to one or the other of the world powers, in the name of development. It seems as if we have to give something to everybody to appear to be non-aligned. To make matters worse, our economy is in dire straits and our strength to resist these almost hostile takeovers, at this moment, is not very good. Our foreign debt component is huge and we are dependent on foreign assistance, either in the form of loans or debt/equity swaps, to settle these debts and stay afloat. And this assistance comes from countries which are interested in getting hold of pieces of our “valuable real estate”.

Third world countries, whether they call themselves non-aligned or not, are heavily dependent on rich countries for development. Unless they maintain a growth rate above 5%, creation of employment opportunities and essential infrastructure development is not possible. This, for most of the poor countries, is not possible without foreign aid. In the case of Sri Lanka, which had a GDP less than 5% during the period 2015 to 2020, and has to pay about Rs.3 billion per year to service its loans, it is a gigantic task to recover; and unless a rich country comes to its aid, it may slide down further and be more vulnerable to external interference and encroachment into its independence, sovereignty and territorial integrity. However, there is nothing called a free lunch and Sri Lanka will have to carefully manage its policy on foreign aid. The often quoted epithet “beggars can’t be choosers” may not be applicable, as we may be capable of making correct choices.

One option is the IMF and the World Bank, but their aid is not without unfavourable conditions, which are designed to help the neo-liberal policies of the Western powers who seem to have those institutions under their thumb. Joseph Stiglitz, one time Chief Economist of the World Bank, had written about the ugly face of these Bretton Woods Twins (2000). Sri Lanka may not want to get too much into the IMF debt and expose its weak economy to the international market forces. Neoliberal policies include free-market policy, less government involvement, privatisation, austerity, low public expenditure, less welfarism, and commodification . These policies help the rich to accumulate wealth, while the incomes of the poor stagnate, or decline.

Then there are the big aid donors, but some of them would want their pound of flesh. These donors are in two rival camps, and are vying for “favours,” from little Sri Lanka, in return for whatever aid they may give. Surely Sri Lanka cannot afford to please everybody, like the good hearted lady who is always pregnant. If little Sri Lanka tries to please everybody, nothing will be left of the land and its natural resources for its inhabitants. Moreover, the interested parties are ganged up into two camps and are engaged in cold war rhetoric and there is no love lost among them. This would mean if one party receives favours the other party would be hurt and angry, unless they are also given something. However, one group resorts to arm twisting while the other refrains from interfering too much in our internal affairs. Shamelessly, the Western powers resort to fabricated allegations like human rights violations, to force Sri Lanka to yield on matters like MCC, ACSA, etc. They sponsor resolutions at the UNHRC in order to get a grip on Sri Lanka and force it to obey their dictate. China on the other hand, who is our major aid giver, does not resort to such unfriendly tactics; it has not forced Sri Lanka to join their Road and Belt Initiative.

We need foreign aid to get over this economic crisis which is complicated by Covid. We have to see who could give us aid with the least strings. We know that the US and Europe did not give much during the “Yahapalana” days, though the government was pro-West. In this regard it will be interesting to look at some of the research done on aid given by the US and China in the past, and the implications for the recipients.

It is often claimed that Chinese aid is “rogue aid” guided by selfish interests with the aim of entrapping the recipient country to “cough out” its assets. One cited example is the Hambantota harbour, and several such projects in Africa and Asia are also mentioned. However, Dreher and Fuchs (2015) empirically tested to what extent self interests shape Chinese aid allocation, based on the data in Chinese project aid, food aid, and medical staff and total aid money to developing countries from 1956 to 2006. The evidence suggested China’s aid allocation does not depend on the recipient’s endowment with natural resources. Therefore, it is unjustified to condemn Chinese aid as “rogue aid” . These findings are also supported by other researchers (Brautigam, 2009).

Further evidence could be found in a two-volume publication titled “China’s Foreign Aid and Investment Diplomacy” by John F Copper (2016). These research findings show that though China has geopolitical ambitions it does not interfere in the internal affairs of recipient countries. Instead it wins over countries to its side by giving aid for mutually beneficial projects, in terms of bilateral trade and soft diplomacy. In contrast, the US aid is linked to a more aggressive foreign policy and expectations of loyalty in regard to US hegemonic agendas. For instance US would expect recipients of its aid to fall in line and lend support at the UN on controversial issues favourable to the US. Sri Lanka has been at the receiving end in the recent past at the UNHRC, on account of this attitude of the US and other Western powers. A true friend like China would not have done such treachery.

The other important consideration is who would have the ability to give aid, the US and Europe has a ruined economy due to mismanagement of the Covid pandemic, which has devastated their societies in an unprecedented manner. They may not be able to give aid for a long time to come. Remember they did not give any aid to their friend the “Yahapalana” government either. Instead they did their utmost to erode our independence and sovereignty. It would be futile to expect anything from them. Japan, Australia, Scandinavia, South Korea and India, which are in the US camp may be able to help a bit, but their domestic needs would be greater on account of Covid. China, on the other hand, has recovered from the pandemic, and according to the IMF their economy has already overtaken that of the US. China has the potential to dominate the economy of the post-Covid world. China is a true friend of Sri Lanka, and may be relied upon to come to the assistance of Sri Lanka if the latter plays its cards correctly.

It may be alright for our leaders to say in public that Sri Lanka is non-aligned, but in reality, in the present context of a global power game, we are not allowed to be non-aligned. We have to be pragmatic and choose the lesser evil if we need aid in these difficult times.

N.A.de S. AMARATUNGA