Stealthy Advances

Written by Sijal Fawad  •  Region  •  May 2013 PDF Print E-mail

China and India vie for greater influence in Sri Lanka through massive infrastructural projects.

With changing global dynamics where the emerging world is gaining greater clout than developed nations, it is safe to say that no good deed is without an ulterior motive. That is why as ribbons are being cut for infrastructural projects backed by Chinese and Indian investments in Sri Lanka, analysts are skeptical of the populous giants’ intentions for rebuilding a recently war-torn nation.

In 2009, Sri Lanka emerged victorious in the war against the Liberation Tigers of Tamil Eelam. The raw end of the deal was the immense destruction and damage, the result of 25 years of havoc caused by tanks, fighter jets and other weaponry. But the silver lining was that help was only a few miles away. The Chinese and Indians are more than willing to help reboot the infrastructure and prop up the Sri Lankan economy through various projects.

Recently, Mahinda Rajapaksa, Sri Lankan president, inaugurated Sri Lanka’s second international airport. The project – a $209 million venture – is supported and funded by China’s Export-Import (EXIM) Bank. Not very far from it is the Hambantota Port - a key shipping route, which sees hundreds of oil tankers passing through every day. Once again, the $1 billion project is funded by the oriental giant. An extension of the railway line, for which further loans have been announced by China, is also on the cards. But that is not where Chinese help for the nation stops. Between 2007 and 2011, with a generous aid of $2.126 billon to the island nation, China became the largest foreign aid provider for Sri Lanka. Sri Lanka’s first communication satellite was launched last year, unsurprisingly, in partnership with a Chinese state-owned space technology firm. A $100 million Lotus Tower in Colombo, the reconstruction of the A9 highway connecting Kandy with Jaffna, a coal power project in Puttalam, and a container terminal project in Colombo, are all symbolic of China’s generous helping hand for the nation.

Of course, India is not expected to sit idle and watch as its political rival continues to extend its influence in a country much closer to the Indian borderline than any other. In a not-so-insignificant project, India will help build 43,000 houses in Sri Lanka’s northern province for displaced people, affected by the war. The Palay airbase also owes its extension and repair to India. A 200-bed hospital in Vavuniya, demining of 9,500 hectares of the northern province, and revival of an industrial zone in Jaffna, also add to India’s list of contributions.

An interesting element in both development projects is the social nature of India’s assistance as opposed to China’s infrastructural support. But no matter how much Indian policymakers defend their approach, and whether the Sri Lankan government denies speculations of extending Chinese influence in the country, the strategic interests of India and China cannot be ignored.

Sri Lanka is expected to grow between 7.5 and 8 percent in 2013/14 thus generating enhanced commercial interest. While the Tata Group and Bajaj Autos are examples of Indian conglomerates enjoying a presence in Sri Lanka, many other companies are vying for entry into the over 20 million market as well. Joint ventures with Sri Lankan companies promise China additional revenue streams from construction, management and design of various projects, as well as an expanding presence in South Asia. Opportunities in tourism, healthcare, construction and the power sector are also bustling with great prospects for investors from either country. Commercial interest aside, it is inevitable that India and China’s political motives for these measures will not go unnoticed, especially considering the recently developed rivalry between the two.

In the case of China, the extent and magnitude of assistance through infrastructural projects is colossal. The country had been generous with its military support during the war with the Tamil rebels, providing state-of-the-art military equipment. Therefore amiability with Sri Lanka is seen as a part of China’s motive of furthering its military and economic influence around the Indian Ocean and in South Asia – a concept also known as the ‘string of pearls’ for the increasing number of Chinese-funded projects from east Africa, through Pakistan to Southeast Asia.

Eyeing the oriental country’s increasing influence in the nation, India’s purpose for extending a helping hand is also to regain some of its lost influence, it previously enjoyed over its neighbor. Of course, it did not help that India voted in favor of the US resolution against Sri Lanka at the United Nations Human Rights Council, cementing diplomatic ties between Sri Lanka and China even more.

Largely, Sri Lankans are warming up to the idea of deeper ties with China, pictured as being the ‘friendlier’ nation in comparison to India. Needless to say, China’s assistance will not only help with the commercial objectives of strengthening its influence in Sri Lanka and hence around the Indian Ocean, but will help reduce the influence of rival India at the same time. Indian analyst are already labeling China’s extending influence as the ‘economic colonization’ of Sri Lanka and an opportunity loss for India.

But all is not lost for India, which still continues to be Sri Lanka’s largest trading partner. China is a close contender on the trade front and if the current pace of Chinese projects continues in Sri Lanka, China might silently take over the favored spot. It is a tricky game of influence, and one hopes China’s victory in this game isn’t made too easy due to India’s nonchalance. 

Sijal Fawad is a Research Analyst at the Business Recorder and is an external student of economics and finance at SOAS, University of London.

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