China may be replaced by India and the West as the leading development partner.
Ranil Wickremesinghe, the president of Sri Lanka, will meet with Fumio Kishida and other Japanese officials during his visit to Japan from May 24 to 27. The visit is anticipated to mark a significant shift in Sri Lanka’s foreign policy as it turns away from China and collaborates with the West and India to carry out its development goals.
According to a press release from the Japanese foreign ministry, Kishida and Wickremesinghe would “exchange views on bilateral relations between Japan and Sri Lanka as well as regional and international affairs.” According to the statement, Japan anticipates that President Wickremesinghe’s visit would “further deepen the friendly relations between Japan and Sri Lanka.”
This will be Kishida and Wickremesinghe’s second summit in less than a year. The first one took place in September 2022, just before former Prime Minister Shinzo Abe’s burial.
The US$ 2 billion Light Railway Transit (LRT) project for Colombo, which was abandoned by the Sri Lankan government led by Gotabaya Rajapaksa in 2020, a year after Japan had agreed to fund the project with a very soft loan with a long grace period, is anticipated to be announced as a result of the Wickremesinghe-Kishida talks this time around.
According to knowledgeable political sources, the commissions problem was the reason the LRT project was shelved. In addition to this, Japan also suffered since the government did not take it into account before declaring cancellation.
When it came to the East Container Terminal (ECT), which was being built at Colombo port in collaboration with India, the Gotabaya Rajapaksa government led Japan along the proverbial garden path. The Gotabaya administration reneged on the deal under pressure from labor unions that were supposedly working with a foreign force, citing its electoral platform. It said that Sri Lankan organizations will build the ECT.
Coincidentally, Japan abandoned a proposal in July 2021 to upgrade the Bandaranaike International Airport in Colombo at a cost of $1 billion. The Japan International Corporation Agency (JICA) opted not to make future financial disbursements, citing the Sri Lankan government’s inability to repay the loan, which led to the suspension of the BIA Development Project Phase II Stage 2. In April 2021, Sri Lanka has stopped making payments on its foreign loans.
Seeing an opportunity, the China Harbor Engineering Company (CHEC), which had built Colombo Port City, submitted a BOT proposal for the airport project and pledged to finish it quickly.
The CHECs had to be placed in cold storage at that time due to the shifting political and economic landscape in Sri Lanka. Sri Lanka was affected by the epidemic at that time. It had fallen behind on borrowing from outside. Significant economic shortages existed. Unrest in politics was the order of the day.
India jumped in with a US$ 4.5 billion assistance package with haste after seeing an opportunity in this. Additionally, it assisted Sri Lanka in negotiating a US$ 2.9 billion bailout with the IMF with Western nations.
It is incredible that China failed at this crucial point. China was irritated by Sri Lanka’s decision to approach the IMF at the behest of India and the West, and brashly encouraged Sri Lanka to practice financial restraint while only providing a temporary reprieve from debt service. It took a long time to coordinate with the Paris Club of lenders, who were working on Sri Lanka’s debt restructuring.
With the assistance of India, President Wickremesinghe, who is pro-Western and has a history of disagreement with China over its investments in Sri Lanka, disregarded China’s advice and continued with the IMF discussions.
In order to look into allegations of corruption, Wickremesinghe ordered the suspension of Chinese projects in 2015, during his last year as prime minister. However, after a hiatus of a year and a half, the investigations were stopped and the projects picked back up.
The Chinese sponsored anti-Wickremesinghe and anti-Indian politicians like Wimal Weerawansa, Vasudeva Nanayakkara, Sarath Weerasekara, and the Janatha Vimukthi Peramuna (JVP) because they were put off by Wickremesinghe for this and his alleged ties to India. The politicians mentioned above gave the controversial Chinese “research” vessel “Yuan Wang 6” a warm welcome when it moored at Hambantota port in August 2022 despite India’s protests.
According to rumor, the Chinese want Wickremesinghe to lose his position as prime minister and the Rajapaksas to take over. However, due to Wickremesinghe’s support for the IMF’s requirements and the Rajapaksa-led Sri Lanka Podujana Peramuna’s (SLPP) dominance of the Lankan parliament, this desire is unlikely to be realized anytime soon.
China’s influence on Wickremesinghe is waning while India’s is growing. The desire for commissions by Sri Lankan authorities was identified as the reason why a number of Chinese proposals in a range of industries are now in a lurch, according to a front page item in the “Daily Mirror” on May 22.
However, a knowledgeable source said that President Wickremesinghe’s rejection of China-funded projects is the underlying cause. India and the West, two of Wickremesinghe’s international backers, view initiatives with Chinese funding with suspicion. In addition to raising security concerns, they contend that despite how appealing these projects may be, Sri Lanka is already heavily indebted and will remain so if the government continues to borrow money from China.
According to sources close to Wickremesinghe, his goal is to get commercial loans and investments from reputable organizations like the World Bank, ADB, and others that provide sustainable solutions and have clear terms and conditions as opposed to the “opaque” Chinese ones.
The Chinese will still continue to expand and strengthen their presence on the island given its geostrategic importance and China’s aspirations in the Indian Ocean. They are especially interested in opposing India’s intention to rule the Northern and Eastern provinces on the grounds that there are a disproportionate number of Tamils in these areas.
China is fostering a number of groups in the North and East for this purpose, including fishermen, universities, and educational institutions. The Chinese have collaborated with locals to establish sea cucumber and shrimp farms in the north. However, their attempt to build wind energy facilities on three islands near to India was unsuccessful because the Sri Lankan government decided against it after India voiced security concerns.
India is worried that China is interested in the Trincomalee port in the Eastern Province, which New Delhi considers essential for its security and control over the Bay of Bengal. An earlier attempt by Sri Lanka and China to build an air force aircraft maintenance station in Trincomalee had been thwarted by India.
Anuradha Yahampath, the former governor of the province, recently proposed a connection between Eastern Province and Yunan Province in China, but Wickremesinghe allegedly shot it down because it upset New Delhi.
Senthil Thondaman, a pro-Indian Tamil politician, recently took over Yahampath’s position as governor. Along with reducing Chinese influence, Thondaman is anticipated to get along better with the Tamil leaders in the East. In addition, Mahinda Rajapaksa, the most significant Rajapaksa, is close to Thondaman.
The Rajapaksas are shrewd enough to learn from the past and avoid alienating India and the West whose support is essential for Sri Lanka’s advancement, despite the Chinese belief that they are inherently pro-China and that it would be beneficial to have them back in power.
This does not imply, however, that any of the aforementioned elements favor China’s eradication in Sri Lanka. As the G7 decided recently at its summit in Hiroshima, the goal of the West (and India, too) is to “de-risk” China so that it no longer poses a danger, rather than to eradicate it or “decouple” from it.
China’s operations in Sri Lanka will be carefully monitored by India and the West, who will also pressure the Sri Lankan government to take remedial measures anytime China violates security thresholds.
Colombo is likely to meet the expectations of India and the West given Sri Lanka’s economic dependency on exports to and imports from the West and India as well as concessional trade agreements (GSP plus with the EU and FTA with India).
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