US vs China as aid givers

Aid is a necessary evil for Sri Lanka at this juncture, as it grapples with a declining economy, while in the grip of the Covid pandemic. Our economy was good in 2014, and we could have survived without much aid if not for the pandemic and the five years of ‘yahapalana’. The latter ruined the economy and brought down the GDP from a healthy 5-6%, in 2014, to 1-2%, in 2019. It robbed its own bank, opened the doors to the West to interfere in our internal affairs, antagonised China, and adopted a pro-West policy — without receiving anything in return from the West. The pandemic has further destroyed the economy and now it is tottering with a minus GDP. If a man is dying of respiratory failure, due to Covid, he has to be given oxygen, via a ventilator, nothing else would work. Similarly, Sri Lanka needs substantial financial aid if it is to survive. We are fortunate in that now there is a choice of aid givers, there was a time when we had no choice but get into the aid trap of the Western powers, via Bretton Woods twins.

The ‘yahapalana’ government, in order to come out of its economic woes, almost signed the MCC, SOFA and ACSA agreements with the US, and the then Prime Minister wanted to sign them before the elections in 2019. The present government refused to sign the MCC but is being helped by China in a big way. Do we have a choice? Only alternative is to align with the US and sign the MCC. If ‘yahapalana’ had signed the ACSA, SOFA, and MCC Sri Lanka would have been in a situation where it could be converted into a military base at the whim of the US. ACSA and SOFA are designed to give the US military visa-less entry into Sri Lanka, and do as they please without coming under the jurisdiction of the country. MCC would have given them access to land and opened the doors for economic exploitation.

There seems to be a well-orchestrated opposition to the Chinese involvement in Sri Lanka. It is being said that the proposed Colombo Port City Commission would make the tiny piece of land, that has been reclaimed from the sea, a colony of the Chinese. If one compares the ACSA, SOFA, MCC combination with the Colombo Port City project, it would be like comparing a multi-barrel rocket launcher with a hand pistol. That is if what the detractors say about it is true. What is envisaged in the Bill to establish the Colombo Port City Commission is mainly facilitation of foreign direct investment into the project. For this purpose, most of the red tape involved in the approval of investment has been done away with, in order to expedite the process and avoid delay. The Commission would exercise the powers and functions of relevant regulatory authorities, such as the UDA, Municipal Council, etc. The Commission would also be granted exemption from the Inland Revenue Act, Betting and Gambling Act, Foreign Exchange Act and Customs Ordinance.

Constitutional experts, who made a mess of the 19th Amendment to the Constitution, have said the Colombo Port City Commission Bill is unconstitutional. Well that would be decided by the Supreme Court. However, from a layman’s point of view, the UDA and Municipality rules, for instance, are an impediment to rapid development and would discourage FDI. Similarly, tax concessions are a necessary evil to attract foreign investment. Whether a relaxation of these rules and regulations, within the confines of the Colombo Port City, would be a violation of the Constitution and the fundamental rights of the citizens, will have to be decided by the courts. Perhaps the courts may suggest necessary modifications to the Bill so that it conforms to the requirements of the Constitution. Of course, the people of Sri Lanka would want the CPC to come under the writ of the government and the law of the country. It is the responsibility of the Supreme Court to ensure that the Colombo Port City does not breach the sovereignty and independence of the people and the territorial integrity of the country.

If, on the other hand, investment does not flow into the CPC, all that effort and expense would be wasted, and what is worse Sri Lanka may not be able to recover from the economic abyss it has fallen into. The CPC is the only viable major project that we have at present, which has the potential to give a much-needed boost to the economy. We cannot do without foreign funds at this juncture, as our foreign debts are huge and we have to earn foreign exchange to service them. We cannot keep on taking loans to pay the existing loans, as successive governments have been doing. China has already given us a huge loan.

As Sri Lanka badly needs foreign aid, it has to make the correct choice in picking its aid givers. It must know that aid does not come without strings – there is nothing called a free lunch. It must look at the strings, how bad are they, how would it affect the people, the independence of the country and its resources. We must look at the aid giving profile of the major donors. Researchers, like Emma Mawdsley (2007), Mark Engler (2006), Susanne Soederberg (2004), have commented on the real intentions of the US in pushing countries to accept MCC on their terms. For instance Mawdsley says that the first five MCC compacts in Cape Verde, Honduras, Madagascar, and Georgia is using a new security development paradigm to legitimate more spending on “development” programmes, which are primarily intended to serve the interests of US consumers, manufacturers and investors, and that poverty reduction at best is a secondary objective. These researchers say that security improvement projects in recipient countries are really intended to serve US defence and military goals. Further, they reveal how the World Bank contrives to show bad business of these projects as good business.

Dreher A. et al (2017) in a study has found that Chinese aid was effective at producing economic growth in recipient countries. China’s aid during the period from 2000 to 2014 amounts to USD 350 billion (AidData 2017). One fifth of this had been outright grants. 45% of their aid goes to African countries which have benefited enormously from Chinese aid in recent times. For instance, Rwanda which was a country torn apart by a civil war, is now recording a GDP of 12 % and there is peace as well. Several African countries are recording similar growth rates with Chinese aid at present. Let me quote from the White Paper, China Foreign Aid (2014) “China adheres to the principle of not imposing any political conditions, not interfering in the internal affairs of the recipient countries and fully respecting their right to independently choosing their own paths and models of development. The basic principles China upholds in providing foreign assistance are mutual respect, equality, keeping promise, mutual benefits and win-win”

Could we say the same thing about the Western aid givers? They helped to bring ‘yahapalana’ into power but did not give a cent, though they grossly interfered in our internal affairs, going to the extent of meddling in constitution making. They wanted to punish the leaders and armed forces responsible for the victory in the war against the LTTE, based on unsubstantiated evidence. At present they are busy in the UNHRC gathering fabricated evidence in support of non-existent human right violations in Sri Lanka. Could we take the grave risk of accepting financial assistance from such donors? Do we have a choice in this matter, but turn to our good friend China in this hour of need?

N. A. de S. AMARATUNGA