South Asian Island nations feel pressure of Chinese tourist debt traps

The pandemic hit economies are struggling to revive and restructure their economic development by providing bailout packages and other stimulus measures. However economies dependent on tourism have long and tough road ahead, even more so for countries dependent heavily on Chinese tourists. The two of South Asia’s travel hotspots, Sri Lanka and Maldives, have more to provide to China than their scenic natural beauty.

The two island nations are struggling with the complete shutdown of international travel on account of the ongoing pandemic. Their economies being heavily dependent on tourism, the countries experienced enormous drops in GDP. However, these weakened economies now serve China’s ultimate strategic and geo-political objectives. Both the countries are marred with immense debt from China and the repayment of the same is becoming far from likely, as the travel ban continues.

Analysing the case of Sri Lanka first, a country with great financial distresses and defaulted debts to China, had taken actions well in time to mitigate the economic perils of “zero-dollar” tourism and other illicit Chinese businesses in the sector. Following strict crack down of these “zero-dollar tours” in travel hub of Thailand, Sri Lankan authorities are cautiously working to put in place necessary regulations to protect the local businesses, while also announcing plans to attract more Chinese tourists. There are nearly 100,000 annual Chinese tourists in Sri Lanka according to its Tourism Ministry, yet the influx has not translated into income generation for the travel industry.

Experts have coined the term “nil revenue” ruse for “zero-dollar tours”, wherein unlicensed, unregistered and unofficial tour guides from China lead the Chinese tourists in the guise of local small agents, oftentimes having links with these unofficial tour operators from China. Moreover, there have been complaints of Chinese tourists establishing travel agencies under the names of Sri Lankan locals. These deplorable acts grossly affect the businesses of locals and State’s revenue.

According to a report by the Colombo Telegraph, there are two prime authorities who have undertaken the responsibility to keep the “nil revenue ruse” at bay; viz. Sri Lanka Tourism Development Authority (SLTDA), and Tourist Police Division of Sri Lanka’s Department of Police.

SLTDA has made registration of all tourism-related service providers mandatory in accordance with the Tourism Act of Sri Lanka. Such a move ensures credibility and authenticity of the service providers, as well as aids the Authority to maintain a record of the registered tour operators. This will then help weed out the unscrupulous tour operators, like the Chinese zero-dollar scammers and agents.

To protect Sri Lankan tourism industry from dealing with the terrible consequences of “Zero-dollar tours”, such as loss of revenue generated from the industry and economical hazard to local service providers and businesses, Tourism Police Division manages the infrastructural and human capital issues.

However, despite the checks and balances in place by the Sri Lankan authorities, the tourism industry has many daunting battles to face owing to the pandemic, defaulting Chinese debts due to the construction of economically unviable Hambantota port, recent foreign exchange crisis, and overall sinking economy.

Interestingly, Maldives Government finds itself in a strikingly similar position, with only difference being Maldives is yet to default, which doesn’t seem improbable anymore. Maldives is a country where tourism-related activities contribute nearly two-third of the GDP. Resultantly, the pandemic has invariably halted the economy to a great extent.

As per Asian Development Bank report, Maldives will be the worst-hit economy in Asia due to coronavirus. The analysis further stressed on the role of the Chinese tourists in the sector. In 2019, 300,000 Chinese tourists visited Maldives, i.e. the highest number of tourists of a particular nationality. Yet, as usual the surge in tourists did not mean a surge in tourism economy. The scamming tour operators continued to profit, without any benefit to the local economy. In this context, Maldives has succumbed to the “Zero-dollar” con by the Chinese tour operators by not taking any timely action against these Chinese operators.

In a way, these unofficial tour operators from China fed on the impeccable azure beaches and scenic vista of the Maldives, leaving its economy hollow by not contributing sufficiently to the local businesses nor State revenue; while Chinese Government piles on debt. The relationship between China and Maldives extends into a debt-trap, akin to Sri Lankan.

China loaned finances to build Sina-male bridge, aka China-Maldives Friendship Bridge. The latter is considered to be a misnomer in Maldives for it has rendered the country in deep financial pains and mounting debt. However, this project further aided in China’s “Belt and Road Initiative”, which goes hand in hand with “debt trap policy” and “string of pearls” strategy. It is a Chinese strategy to gain control over the Indian Ocean Region by building its military bases and ports in the region.

Recently, to soothe the bruises left by China, India announced its decision to finance Greater Malé Connectivity Project (GMCP), the largest civilian infrastructure project in the country that will connect four islands and generate income for the local businesses. Similarly, Indian leaders have stated that they will give “special priority” to its relations with Sri Lanka and have offered a new line of credit to build its defence. Such agreements may gradually lead to the independence of the two countries from the Chinese debt-trap, and help them reclaim their tourism industries from the Chinese fraudsters, and overall economies from the Chinese self-interests.