China sees influence in Lanka diminish
May 08 2015 10:30 PM

By Bruce Einhorn and Anusha

To woo the island nation of Sri Lanka, China lent more than $200mn to fund a new airport built by then-president Mahinda Rajapakse near his hometown. It wasn’t one of the Chinese government’s better investments. Mattala Rajapaksa International Airport opened in 2013, but two years later there is only one scheduled daily flight, on Flydubai. In January, just after Rajapakse’s re-election campaign ended in an upset loss, state-owned SriLankan Airlines cancelled its flights to the airport.
To gain an edge over rival India, China’s leaders have spent years cultivating the governments of Sri Lanka and other nations in South and Southeast Asia. In Sri Lanka, located along the shipping lanes to and from the Middle East and Africa, China offered about $5bn in loans over six years to fund such projects as a $290mn expressway and a $360mn port. In the deal with the highest profile, Rajapakse embraced a Chinese plan to invest $1.4bn in a new port city to be built on reclaimed land near the port of Colombo, the capital.
Two visits by Chinese submarines last year highlighted China’s success in elbowing out India. But the Sri Lanka adventure has since soured. President Maithripala Sirisena has put the new city on hold, saying the government needs to investigate whether the Chinese-backed project violated rules protecting the environment and preventing corruption.
“China discounted the possibility of regime change,” says Deshal De Mel, senior economist at Hayleys, a Sri Lankan conglomerate. The airport that was so closely associated with Rajapakse “is one example of a project they may have thought twice about financing.”
China’s rivals have rushed to capitalise on Beijing’s unpopularity with the new government. Both India and the US had a stormy relationship with Rajapakse, who crushed a decades-long rebellion by the Tamil minority in 2009. India, which has a large Tamil population, and the US supported a campaign to have the United Nations Human Rights Council investigate alleged war crimes by the Rajapakse regime. The Chinese offered Rajapakse military and diplomatic assistance during the war.
Sri Lanka’s new government has been mending ties with New Delhi and Washington. The nation’s overtures paid off when US Secretary of State John Kerry travelled to Colombo on May 2, the first visit by a US cabinet member in a decade. He praised the government’s commitment to democracy. “The United States,” he said, “wants to work with Sri Lanka.”
In March, Indian Prime Minister Narendra Modi visited, the first trip by an Indian leader since 1987, and emphasised the cultural and religious links between the countries. Modi prayed at a Buddhist temple that has a tree said to descend from the one under which the Buddha attained enlightenment. He unveiled plans to help fund power plants and railroads. During the visit, the two sides agreed on a $1.5bn currency swap that would moderate volatility in Sri Lanka’s rupee.
Modi’s “deft diplomacy” helped wean Sri Lanka away from China, Kadira Pethiyagoda, a visiting fellow in Asia-Middle East relations at the Brookings Doha Centre, wrote in a May 1 column. The setback should teach China, wrote Pethiyagoda, “that its ‘tried and true’ ” tactics of commercial trade and military aid cannot succeed on their own.
Yet Sri Lanka needs infrastructure, and China has more money than India. Sri Lanka has signed on as a founder of the Chinese-backed Asian Infrastructure Investment Bank, which is based in Beijing and designed to compete with the World Bank. “Even India is going to China for financing,” says Dushni Weerakoon, deputy director of the Institute of Policy Studies in Colombo.
“I don’t think China is just going to pack up and walk away,” says Sarah Graham, a lecturer in foreign policy at the University of Sydney. While Sirisena has shown less interest than Rajapakse in a close partnership, “the Chinese will gladly engage with Sirisena’s administration.” The countries are “in the final stage” of talks on a free-trade pact, China’s official Xinhua News Agency reported on April 21. Sirisena hasn’t unfrozen the new city project, but China still hopes it can be “pushed forward steadily,” Foreign Ministry spokeswoman Hua Chunying said at a May 6 press conference.

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