India and BRI | Vying for Attention

Sri Lanka’s strategic position in IOR makes it a much sought after ally for India and China

Palak Gupta

The closest distance separating Sri Lanka and India is 26km. The north of Sri Lanka is connected to India by a chain of islands and sandbars known as Adam’s Bridge. It is divided into an inland Vani region and the Jaffna peninsula on Palk Bay, a 15,000sqkm area nestled between Sri Lanka and south-eastern part of India with a coastal length of 250km on the Indian side. This geographical proximity and historical ties with India have made Sri Lanka a strategic partner. But more significantly, its strategic location in the Indian Ocean Region (IOR) makes it a much sought after partner.

Prime Minister Narendra Modi with the President of Sri Lanka Mahinda Rajapaksa during a meeting at Hyderabad House in New Delhi

The country is located along east-west sea lanes and sits near the centre of the Indian Ocean just northeast of the Maldives island chain. Also, Sri Lanka is a signatory to Beijing’s ambitious Belt and Road Initiative (BRI) which is sometimes billed as the New Silk Road. Proposed in 2013 by China’s President Xi Jinping, the project is estimated to cost USD4-8 trillion. It aims to connect Asia with Africa and Europe via land and maritime networks along six corridors. Along with India, China is investing on a large scale in the island nation.

 

Ties with India

Sri Lanka is one of the largest trading partners of India in South Asian Association for Regional Cooperation (SAARC). The bilateral trade between India and Sri Lanka amounted to USD4.59 billion in 2019. However, in 2018, according to the Sri Lankan Customs, Colombo’s bilateral trade with New Delhi amounted to USD4.93 billion.

The signing and entry into force of the Free Trade Agreement (FTA) in 1998 and 2000 respectively gave much of the impetus to the current level of economic interaction between the two countries.

The Indo-Sri Lanka Free Trade Agreement (ISFTA) provides duty free concessions to an enormous range of products traded between the two sides. Sri Lanka got a fully duty free access to the vast Indian market under the ISFTA since the end of March 2003. Thus, entrepreneurs based in Sri Lanka can export more than 4,000 product lines to India duty free.

Indian investments in Sri Lanka are primarily in the areas of petroleum, retail, tourism and hotel, manufacturing, real estate, telecommunication, banking and financial services. Sri Lanka, on the other hand, exports textiles, garments, tea, spices, gems, coconut products, rubber and fish to India.

With cumulative investments of over USD1 billion, India is also among the top four investors in Sri Lanka since 2003.

As recently as on 23 May 2020, Sri Lankan President Gotabaya Rajapaksa and Prime Minister Narendra Modi agreed on the need to accelerate Indian-assisted development projects in Sri Lanka. They also discussed the possibilities of promoting investments and value-addition in Sri Lanka by the Indian private sector.

 

Ties with China

The fast-growing trade relationship between China and Sri Lanka is driven by a huge influx of Chinese imports which, however, has been leading to an expanding trade deficit between the two countries.

In 2000, Chinese imports were a mere 3.5 per cent of Sri Lanka’s total imports which had risen to 20 per cent by 2017.

Nearly four years ago, in 2016 China also became Sri Lanka’s largest source of imports, surpassing India. This feat was, however, brief and transient as the value of the Indian imports had marginally increased the Chinese imports subsequently.

However, unlike India, Colombo does not have any FTA with Beijing yet. However, both Sri Lanka and China along with India are part of the Asia-Pacific Trade Agreement (APTA) which was formerly known as Bangkok Agreement.




According to Commercial Counsellor of the Embassy of People’s Republic of China in Sri Lanka, Yang Zuoyuan, “The value of bilateral trade in 2018 has exceeded USD405 billion.”

His remarks had come at the 18th Annual General Meeting of the Sri Lanka-China Business Council (SLCHBC) of the Ceylon Chamber of Commerce held in Colombo in September 2019.

China is also behind some of the largest ever infrastructure projects in Sri Lanka. These include Hambantota Port, Mattala Airport, the Lotus Tower, and the ambitious Colombo Port City among others. Some of the other infrastructure projects include rehabilitation and reconstruction of highways, Matara-Kataragama railway line extension project, Colombo-Katunayake Airport Expressway Project, Southern Expressway Extension to Matara, Norochcholai Coal Power Project (900 MW), Moragahakanda Multi-purpose Development Project (Irrigation, drinking water and electricity), Reconstruction of the Northern Highway and Nelum Pokuna Art Theatre.

Colombo has witnessed a surge in infrastructure development after the end of a 26-year-long civil war in May 2009. Beijing grants the infrastructure development loans via the Export-Import Bank of China.

Dr Ganeshan Wignaraja, executive director, Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI), conducted a study for the London-based Chatham House and estimated that ‘the cumulative value of Chinese infrastructure investment in Sri Lanka amounted to USD12.1 billion between 2006 and July 2019’. LKI is a Colombo-based think tank.

In this context, it is pertinent to mention that former US ambassador to Sri Lanka Ashley Wills had once remarked, “With Chinese investment, Sri Lanka can get ports and does not get lectures on economic reforms and human rights.”

India, in June 2010, announced that it would construct 50,000 houses as part of post-conflict rehabilitation efforts in Sri Lanka. Full grant assistance to the tune of USD270 million makes this housing project one of the largest grant assistance projects ever undertaken by India overseas.

Speaking to FORCE, Dr Wignaraja applauded the Indian Housing Project in Sri Lanka, stating that it’s a huge success and has a ‘great impact’ on the lives of Sri Lankans. Under this project, 44,434 houses have been completed as on July 2017 under the second phase.

The third phase of the Indian Housing Project involves construction of 4,000 houses for estate workers in the Central and Uva provinces through an innovative community-driven approach. In this phase, financial grant assistance of LKR 9,50,000 is being disbursed per beneficiary in instalments. Construction work of third phase houses started in October 2016.

Chinese President Xi Jinping (R) meets with Sri Lankan President Maithripala Sirisena, who is in China to attend the Conference on Dialogue of Asian Civilizations (CDAC), at the Great Hall of the People in Beijing, capital of China, May 14, 2019. (Xinhua/Yao Dawei)

 

Military Ties and Concerns

The leasing of Hambantota port to state-owned China Merchant Port Holdings Limited (CM Port) for 99 years for USD1.12 billion in 2017 made the advocates of the debt-trap theory cite Sri Lanka’s example. The linking of the debt trap and BRI amped up the regional concerns and scepticism on security fronts.

Dr Wignaraja explained that the debt trap theory holds no water and is not a Chinese-driven problem. “Sri Lanka generally has a debt problem and it has got nothing to do with the Chinese investments in the country.” On the contrary, he said, the Chinese investments “play a significant role in boosting the economy of the country.”

Sri Lanka’s foreign debt amounted to an estimated USD55 billion, which is around three–fourths of its GDP at the end of 2018.

In response to a question on Colombo’s efforts to address the geopolitical concerns that these (commercial) infrastructure projects can be used militarily and hence pose security risks, he said, “From the security perspective, I understand the concern but as far as I know there is no Chinese military base here and that it is the Sri Lankan Navy which retains the control of (Hambantota) port security.”

China has been the largest supplier of arms to Sri Lanka since the Fifties. These transactions have included small arms, ammunition, landmines, naval vessels, and aircraft. In 2007, the then-President Mahinda Rajapaksa’s visit to China led to a USD 37.6 million deal to purchase Chinese Jian-7 fighter jets, anti-aircraft guns, JY-11 3D air surveillance radar, armoured personnel carriers, and other defence equipment.

In 2012, a grant of a USD100 million was given for the construction of army camps during the Chinese defence minister’s visit to Sri Lanka. China has also provided military training to Sri Lankan officers. In 2014, two Chinese submarines and a warship docked at a port in Colombo.

“This is nothing unusual. Since 2010, 230 warships have called at Colombo port from various countries on goodwill visits and for refuelling and crew refreshment,” the then Sri Lankan navy spokesman Kosala Warnakulasuriya had said.

While Sri Lanka’s military cooperation with China is largely seen in the form of ad-hoc goodwill port calls or refuelling stops, it is more concrete with neighbouring India. According to Brigadier Ravi Palsokar (retired), who as part of Indian Peace Keeping Forces (IPKF), has operated in Sri Lanka, “With India’s often rocky relations with Sri Lanka, it should not surprise us that Sri Lanka often makes overtures to countries that are inimical to India. Would that constitute a threat? The current geo-strategic factors in the Indian Ocean and American hostility to China spreading its influence, suggest that at present we should not feel threatened, but a close eye needs to be kept on the ever-changing dynamics of the region.”

India and Sri Lanka had also discussed New Delhi investing in the development of Trincomalee, a strategic deepwater port on Sri Lanka’s east coast, and in the East Container Terminal at the Port of Colombo. Trincomalee is the deepest harbour in South Asia. Sources privy to the discussion around the project said that other countries like Japan and Singapore are working with India on this. For clarification, no final breakthrough has been reached between the concerned parties yet.

The defence and security ties between India and Sri Lanka have grown strong over the years. However, the two countries have seen a fair share of uneasiness in the past.

“India with its large Tamil population tends to be identified, often with justification, with aiding and abetting Sri Lankan Tamils. It is not therefore surprising that the military relations ebb and flow accordingly,” explained Brigadier Palsokar.

After the end of the Civil War in 2009, domestic pressure from Tamil Nadu forced the Indian government to join the international appeal for an investigation against human rights violations and war crimes. Former Sri Lankan president Chandrika Kumaratunga blamed strained India-Pakistan relationship for hurting South Asia’s peace.

“The Indo-Pak conflict has blocked regional cooperation since partition of the two countries. The mistrust has cost (us) heavily and caused instability in the region,” Kumaratunga remarked during the first edition of Raisina Dialogue hosted in New Delhi in 2016.

Talking further about the military ties between India and Sri Lanka, Brigadier Palsokar said that though the IPKF intervention has “created a rupture that is not going to heal easily, India and its military have interests in seeing Sri Lanka prosper.”

In the words of Prime Minister Narendra Modi, “The security and development of two countries (India and Sri Lanka) are inseparable. Therefore, it is natural that we should be aware of each other’s safety and sensibilities”.

Talking of security, the most recent example of intelligence-sharing between India and Sri Lanka in the public memory is that of New Delhi sending as many as three alerts to Colombo, including one on the day of the Easter Sunday attack in 2019 that left 321 people dead and 500 wounded. The then Sri Lankan Prime Minister Ranil Wickremesinghe had acknowledged that alerts were sent by India.

Notably, India is also the top training destination for officers of the Sri Lankan Armed Forces. The two countries are also members of the Indian Ocean Naval Symposium (IONS), an inclusive and voluntary initiative that brings together navies of littoral states of the Indian Ocean Region (IOR) with the aim of increasing maritime cooperation and enhancing regional security. It has 24 members and eight observer nations that are geographically grouped into four sub-regions, namely South-Asian, West Asian, East African, South East Asian and Australian littorals.

And then as recently as on 6 February 2020, Indian Navy’s INS Jamuna (J16) arrived in Colombo to carry out Joint Hydrographic Survey off the South West Coast of Sri Lanka. The Sandhayak class Hydrographic Survey ship, deployed to Sri Lanka based on a mutual agreement, is carrying out detailed hydrographic surveys and several shore-based survey activities over a two-month deployment period.

In 2017, Indian-built Advanced Offshore Patrol Vessel (AOPV) SLNS Sayurala was commissioned by the Sri Lankan Navy at a ceremony in Colombo harbour. In 2018, the Indian Coast Guard handed over an offshore patrol vessel (OPV) Varuna to the Sri Lankan Coast Guard for training and surveillance purposes. The Indian Coast Guard had earlier handed over two OPVs of the Indian Coast Guard, Varaha in April 2006 and Vigraha in August 2008.

India and Sri Lanka also hold joint military exercises like Mitra Shakti. The seventh edition of Exercise Mitra Shakti-2019 aimed at enhancing interoperability and operational efficiency amongst the armies of both India and Sri Lanka when deployed as part of United Nations peace keeping forces commenced on 1 December 2019 at Aundh Military Station, Pune.

The objective of the exercise was to conduct sub-unit level training on counter insurgency and counter terrorism operations in urban and rural environment under United Nations mandate.

India is assisting Sri Lanka in fighting the Covid-19 pandemic. New Delhi deployed air force transporters to send medical supplies to Sri Lanka, Maldives and other nations seeking assistance.

 

Tourism

According to the High Commission of India in Colombo, India continued to be the largest source market for tourists coming to Sri Lanka. The total number of tourists from India to Sri Lanka during the period January-December 2019 was 3,55,002 i.e. approximately 18.2 per cent of the total tourist arrival into Sri Lanka.

Sri Lankan tourists, too, are among the top 10 sources of the Indian tourism industry. In 2019, more than 1,07,360 tourist visas were issued by the High Commission of India in Colombo to facilitate travel between India and Sri Lanka, along with a total of 14,597 business visas.

China became the second largest tourism partner of Sri Lanka in terms of tourist arrival by 2015. By 2018, tourist arrivals from China to Sri Lanka had reached 2,66,000.

 

Connectivity

To enhance connectivity between the two nations, India and Sri Lanka entered into an Open Sky Agreement enabling Sri Lankan Airline to operate unlimited number of flights to six Indian metro airports. Sri Lankan airline is also the largest foreign carrier in India operating over 100 flights per week to 14 destinations in India.

In a joint venture with Sri Lanka, India has proposed to operate Mattala Rajapaksa International Airport in Hambantota. The USD210 million facility is dubbed as the ‘world’s emptiest airport’ due to a lack of flights.

 


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Interdependent Neighbours

For years, the Indian foreign policy experts viewed China through the lens of encirclement. The theory of ‘strings of pearls’ was propounded to explain People’s Liberation Army Navy’s (PLAN’s) forays into the Indian Ocean Region (IOR). Here China cultivated a series of friendly ports all along the islands in the IOR to further enhance the endurance of its naval vessels. Indian experts argued that all this was aimed at encircling India and restricting the Indian Navy.

However, with the launch of the Belt and Road Initiative (BRI) in 2013, China has taken the ‘string of pearls’ theory to an entirely new level. It is no longer about encirclement of any one country, but creation of multiple modes of connectivity across the world — land, sea and digital — for greater cooperation. But can this cooperation be without conflict? This is the question that the world, including India, is grappling with.

This month onwards, FORCE starts a series in which it will look at India’s ties with the countries that have signed up for the BRI. This edition we start with Bangladesh.


 

 

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