Of that Chinese hub

Wednesday 3rd May, 2023

China has manoeuvred astutely to overshadow the IMF in Sri Lanka. It is never tired of waiting until the time is opportune for action. When Sri Lanka was left with no alternative but to go cap in hand to the IMF, last year, many thought that the western bloc and India had succeeded in removing it from China’s sphere of influence, and Beijing would have its work cut out to regain its hold on Colombo. The Gotabaya Rajapaksa government refused to seek IMF assistance because it was expecting a lifeline from China in the form of another loan. But the Chinese deus ex machina did not materialise; Sri Lanka became heavily dependent on the IMF and India.

China has proved that it knows more than one way to shoe a horse. It has unveiled a plan for a massive development project in the strategically important Colombo Port. The China Merchants Group (CMG), a Chinese state-owned venture, will invest in a huge logistics hub to be built at a cost of USD 392 million, which is described as the first major foreign investment here since the announcement of the debt default.

The CMG has said the proposed logistic hub will take its total investment in Sri Lanka to more than USD 2 billion. The project is to be operational in 2025. The CMG will have a 70 percent stake therein. It is ironic that the SLPP-UNP administration, which insists that ‘the government has no business to be in business’, is dependent on a Chinese state-owned venture to shore up the economy; it is also seeking investment from the Indian state-owned enterprise, the Indian Oil Company!

The Chinese must be happy that Sri Lanka has secured an IMF bailout without being a burden on them. Loans could be problematic to the lender and the borrower both, but investment in a project like a logistic hub at a busy port could be recouped easily and used to further the strategic interests of the investor. The latest CMG investment could therefore be considered a clever move by China. It, however, remains to be seen what the reaction of China’s rivals, especially the US and India, will be. A Chinese-controlled logistics hub at the Colombo Port is something they need like a hole in the head.

Given the intensity of the economic cold war between China and the US-led bloc, one can only hope that the latest Chinese project will not place Sri Lanka in the same predicament as the proverbial grass, which suffers when elephants fight. Sri Lankan governments, during the past several decades, have failed to navigate the so-called Great Power Rivalry successfully; it is a task akin to sailing between Scylla and Charybdis.

The Mahinda Rajapaksa government made the mistake of being at the beck and call of the Chinese in return for loans and other such assistance, and antagonising the US and India by involving China in the Hambantota Port project among other things. Following his unsuccessful third-term bid, Mahinda blamed a ‘RAW deal’ from India for his defeat. The Sirisena-Wickremesinghe government blundered by leasing the Hambantota Port to China for 99 years and allowing the construction of the Chinese Port City to go on, much to the consternation of Washington and its allies. The Gotabaya Rajapaksa administration also stood accused of being putty in the hands of the Chinese.

Perhaps, Sri Lanka’s current economic woes could be attributed to the big power rivalries, which manifest themselves in various forms including conflicts in the developing world. Powerful nations do not scruple to get down and dirty in defending their interests, and hence there are various conspiracy theories about the situation here, such as the one concocted by former Minister Wimal Weerawansa.

Sri Lanka finds itself in such a situation that it cannot afford to antagonise any other country. It will have to manage the competing world powers if it is to avoid trouble. It is hoped that the Rajapaksa-Wickremesinghe administration will tread cautiously in performing high-wire diplomatic acts.