India-Sri Lanka relations: Time for a more robust partnership as China continues to loom large

 By Soumya Nair
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Even as India is embroiled in a months-long military standoff with China in the Himalayas, signals from across the Palk Strait offer no succor either as Sri Lanka under the Rajapaksas has been swiftly re-engaging with ‘old friend’ Beijing. Just a fortnight after Prime Minister Narendra Modi held a virtual summit with his Sri Lankan counterpart Mahinda Rajapaksa in September, the island nation hosted a “high-powered” team from China with an aim to boost ties to fight the pandemic and to revive economic relations between the two countries. [1]  Following the visit, Colombo is set to receive a grant of $90 million from Beijing and is in talks for more financial help to combat a worsening financial crisis [2] further deepening Sri Lanka’s dependence on China. Given China’s increasingly aggressive post-pandemic posture, India needs to ramp up efforts and chart out a bolder course of long-term strategic cooperation with its southern neighbour.

Courting the Dragon

During his meeting with the Chinese delegation, led by a senior foreign policy official and a Politburo member of the Chinese Communist Party, President Gotabaya Rajapaksa hailed “China’s selfless help” and said he was seeking a China-style development for Sri Lanka even as he sought to reject perceptions that the strategic Hambantota port, which had to be leased out to a Chinese company for 99 years after it came under heavy debt, was a “debt trap”. [3] Besides revival of discussions on a Free Trade Agreement, the two sides have also agreed to expedite work on two major projects – the Hambantota Industrial Zone and the Port City in Colombo. The Port City, a $1.4 billion flagship project under China’s Belt and Road Initiative, was inaugurated in 2014 by Chinese premier Xi Jinping and Mahinda Rajapaksa, then President of Sri Lanka. [4] As per reports, China has pumped in around $15 billion for various projects in Sri Lanka from 2005 to 2017. [5]

In dire straits

With the pandemic denting an already fragile economy, Sri Lanka is in dire need of money with around $55 billion foreign debt on its books and an average annual repayment of around $3 billion, as per the 2019 data.[6] The Sri Lankan government, instead of reaching out to the IMF, is seeking further loans from China which has already granted an “urgent” loan of $500 million in May which is part of a $1.2 billion syndicated loan from China Development Bank secured two years ago. The second tranche of $700 million is expected by the year-end, as per reports. In the past 55 years, Colombo has sought 16 IMF bailouts, of which only 9 have been completed. [7] Downgrading of its credit ratings has only added to the country’s woes leaving it with few options. Sri Lanka has also reached out to India for a currency swap facility worth about $1 billion and a deferment of debt repayment of around $960 million, both of which are under consideration. A $400 million currency swap facility has already been provided by India this year. [8]

Recalibrating ties

With the Rajapaksas back in the office, it is little surprise that the country is once again looking toward Beijing. It was during Mahinda Rajapaksa’s 10-year tenure as President (2005 – 2015) that the two countries deepened their ties, with Beijing pumping in billions of dollars for various infrastructure projects in the island nation that was limping back to normalcy after a decades-long civil war. With its proximity to some of the busiest shipping lanes in the Indo-Pacific, Sri Lanka is a strategically important link in China’s Maritime Silk Road initiative, a component of its ambitious Belt and Road initiative. China’s increasing influence in the Indian Ocean Region has been a cause of concern to New Delhi raising fears of encirclement in its strategic backyard. India, however, has been pragmatic enough to reach out to the Rajapaksas in the last two years and has been resetting its engagement with Sri Lanka with some urgency particularly following Sri Lanka Podujana Peramuna’s (SLPP) massive victory in the local elections in 2018. In August, when Mahinda Rajapaksa was all set to win the polls, Modi was the first to congratulate him even before the final results were announced.

As followers of small state realism, the Rajapaksas recognize all too well the merits of balancing between the two Asian giants and have sought to reset ties with Delhi. Allaying India’s concerns, [9] Sri Lanka’s newly appointed Foreign Secretary Jayanath Colombage reiterated in recent interviews to Sri Lankan media outlets that his country will always have an “India first approach”: “That means Sri Lanka will not do anything harmful to India’s strategic security interests.” However, Colombage has also been categorical that his country will have to “engage with all” significant players as far as “economic development” goals go. “China is the second-largest economy…and India the sixth. We are between two economic giants. How we benefit from both is diplomacy,” he said. [10]

Building a more robust partnership

Although Sri Lanka stresses an India-first approach, New Delhi needs to engage more robustly with its southern neighbour, particularly in areas of economic and security cooperation, so as to make the island nation uphold the policy in both word and deed even as India ensures that it delivers on its Neighbourhood First policy with speed and efficiency. It may not be able to keep up with China’s financial might, but India needs to deepen economic interdependence with Sri Lanka more aggressively. To achieve this, besides extending continued support for Sri Lanka’s housing, health, education and transport sectors, India should leverage its geographical closeness and expand its connectivity and soft power initiatives. In a bid to connect with various sections of the Sinhala Buddhist majority, India has recently offered a grant of $15 million for the promotion of Buddhist ties.

India could encourage Sri Lanka to play a more active role in regional institutions like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (Bimstec) and Indian Ocean Rim Association (IORA), etc. Last year India offered Sri Lanka “a line of credit of US$400 million for development projects and another US$50 million for counter-terrorism efforts”. [11] In September this year, India offered a line of credit worth $ 100 million to Sri Lanka for three solar projects. [12] At the Prime Ministerial summit, the two countries have agreed to further strengthen their defence and maritime cooperation, personnel exchange and training. [13] Besides fresh initiatives to boost trade with Sri Lanka, which stood at $6.2 billion in 2018-19, India has also partnered with Japan to make investments in the teardrop nation.

The Tamil minority question remains a thorny issue which was all too evident in the differing perceptions in the joint statement issued at the end of the Modi-Rajapaksa meeting. While Modi emphasised the need to implement the 13th Amendment to Sri Lanka’s Constitution, the Rajapaksa government, all too aware of its massive mandate, underlined the reconciliation will be “nurtured as per the mandate of the people of Sri Lanka”. Notably, a subsequent statement released by the President’s office made no mention of the 13th Amendment, which envisaged power-sharing with the provinces based on the Indo-Sri Lankan Accord of 1987. [14] At a time when the pandemic continues to disrupt lives across the world, and as nations struggle with domestic challenges and revival of economy, it would be pragmatic for India to put contentious issues on the backburner at least for now.

Way forward

Given its strategic location, Sri Lanka has become a battleground of geopolitical rivalry playing out between China and the US led allies including India. As media reports indicate [15], US has been increasing pressure on Sri Lanka to follow its agenda in the Indo-Pacific or face heat over its dismal human-rights record during the civil war, while China has been steadfast in standing by Sri Lanka at international fora. Increasing pressure to toe the US line and making assistance conditional is only going to push Sri Lanka further into China’s orbit.

Irrespective of the crosscurrents of international relations and great power rivalries currently playing out in the Indo-Pacific, as neighbours, it is in India and Sri Lanka’s interests to maintain peace in the Indian Ocean Region.

[1]Meera Srinivasan/Ananth Krishnan (2020), High-powered Chinese delegation visits Sri Lanka, The Hindu, Oct 08, available at: https://www.thehindu.com/news/international/high-powered-chinese-delegation-visits-sri-lanka/article32806216.ece

[2] Bharatha Mallawarachi (2020), China grants $90M to Sri Lanka after visit by top official, AP, Oct 11, available at https://apnews.com/article/sri-lanka-indian-ocean-yang-jiechi-china-archive-2d37f38de6dd2e92dba860b12a8e5aac

[3] Hindustan Times (2020), Hambantota port: Sri Lankan prez rejects concerns of getting caught in Chinese ‘debt trap’, Oct 10, available at: https://www.hindustantimes.com/world-news/hambantota-port-sri-lankan-prez-rejects-concerns-of-getting-caught-in-chinese-debt-trap/story-ODvP2H3zj5HpGH2j9RLS9M.html

[4] Meera Srinivasan (2020), Expect China-style development for Sri Lanka: Gotabaya, The Hindu, Oct 09, available at: https://www.thehindu.com/news/international/expect-china-style-development-for-sri-lanka-gotabaya/article32816165.ece

[5] Saurabh Singh, (2020), ‘China’s Strategic Relations with Sri Lanka’, South Asian Voices, July 10, available at: https://southasianvoices.org/chinas-strategic-relations-with-sri-lanka/

[6] Central Bank of Sri Lanka (Data External Sector) available at: https://www.cbsl.gov.lk/en/statistics/statistical-tables/external-sector

[7] Marwaan Macan-Markar (2020), Sri Lanka turns to China rather than IMF to avoid default, Nikkei Asia, Oct 12, available at: https://asia.nikkei.com/Politics/International-relations/Sri-Lanka-turns-to-China-rather-than-IMF-to-avoid-default

[8] Sri Lanka asks India for new $1 billion currency swap facility, deferred debt repayment, The Hindu BusinessLine, Sept 26, available at: https://www.thehindubusinessline.com/news/sri-lanka-asks-india-for-new-1-billion-currency-swap-facility-deferred-debt-repayment/article32702210.ece

[9] Press Trust of India (2020), Sri Lanka will adopt ‘India first approach’: Foreign Secretary Jayanath Colombage

 available at: http://www.ptinews.com/news/11755873_Sri-Lanka-will-adopt—India-first-approach—-Foreign-Secretary-Jayanath-Colombage

[10] Shastri Ramachandran (2020), ‘For Sri Lanka, India Is ‘Relation’, But China And Pakistan Continue To Be Friends’, Outlook, Sept 15, available at: https://www.outlookindia.com/website/story/opinion-for-sri-lanka-india-is-relation-but-china-and-pakistan-continue-to-be-friends/360343

[11] Deepak Saini (2020), Sri Lanka’s Dependence on China Adds to India’s Security Dilemma,  Future Directions, available at: https://www.futuredirections.org.au/publication/sri-lankas-dependence-on-china-adds-to-indias-security-dilemma/

[12]NDTV (2020), India Offers $100 Million Line of Credit To Sri Lanka For Solar Projects, Sept 26, available at: https://www.ndtv.com/india-news/india-offers-100-million-line-of-credit-to-sri-lanka-for-solar-projects-2301258

[13] Dipanjan Roy Choudhury (2020), India extends $15 million grant for promotion of Buddhist ties with Sri Lanka, Economic Times, Sept 26, available at: https://economictimes.indiatimes.com/news/politics-and-nation/india-extends-15-million-grant-for-promotion-of-buddhist-ties-with-sri-lanka/articleshow/78334018.cms

[14] MK Bhadrakumar (2020), US, India seek to press Sri Lanka into the Quad, Asia Times, Oct 02, available at:https://asiatimes.com/2020/10/us-india-seek-to-press-sri-lanka-into-the-quad/

[15] Ibid