The Belt And Road Initiative: Is Sri Lanka A Poster Child For The Negative Impacts?

Rasika Jayakody

Huong Le Thu, a senior analyst from the Australian Strategic Policy Institute in Canberra, points out, in an article in the South China Morning Post (SCMP), the possibility of the Hambantota Port project between Sri Lanka and China becoming a poster child for the negative impact of China’s Belt and Road Initiative (BRI).

The reason for this, he explains, is the debt-driven nature of the project: Under the Hambantota port deal, signed in July 2017, China Merchants Port (CM Port) was tasked with running the US$1.5 billion Chinese-built port on a 99-year lease. The US$1.12 billion total price of the port is to be used to reduce the Sri Lankan government’s debt to China.

Sri Lanka’s move to hand over the Port, located at a key strategic point in the Indian Ocean, on a 99-year lease to China may have sent shock waves across many small nations enmeshed in the Belt and Road Initiative, launched almost five years ago.

In light of this, Malaysian Prime Minister Mahathir Mohamad has already cancelled two China-financed megaprojects; namely the US$20 billion East Coast Rail Link and two gas pipeline projects worth US$2.3 billion. Explaining the rationale behind cancelling the projects, Mahathir said his country could not afford the two projects at this point in time.

Pakistan’s Prime Minister Imran Khan too, said yesterday the country is in the process of reviewing the projects under the China-Pakistan Economic Corridor (CPEC), in order to safeguard the interest of the people in the Balochistan province. The USD 50 billion CPEC, is a planned network of roads, railways and energy projects linking China's resource-rich Xinjiang Uyghur Autonomous Region with Pakistan's strategic Gwadar Port on the Arabian Sea.

The future of China’s projects in the Maldives also hangs in the balance as the country’s new President Ibrahim Mohamed Solih has promised to renegotiate the Chinese-funded projects in the country. During his eclectic election campaign, Solih alleged that China had pulled the Maldives into a “debt-trap” - from which he pledged to rescue the country.  

All these governments took Sri Lanka’s Hambantota Port project as an example to show why they should tread cautiously on China’s generosity.  Their argument was that they did not want to find themselves in Sri Lanka’s position, and cede control of their assets to China.

These developments crystalize the fact that five years since its launch, China’s Belt and Road Initiative has run into a turbulent season and Beijing will have to rethink some of the elements of its grand strategy encompassing 65 countries. It also means that Sri Lanka will have to adjust its game-plan to reap the benefits of the BRI, without letting China enjoy a ‘free ride’ in the country, at the expense of its sovereignty.

US Vice President Mike Pence’s remarks on Hambantota sounded the alarm last week. In his address to the Hudson Institute, a top American think-tank, he said, “China uses the so-called ‘debt diplomacy’ to expand its influence. Just ask Sri Lanka, which took on massive debt to let Chinese state companies build a port with questionable commercial value. Two years ago, that country could no longer afford its payments – so Beijing pressured Sri Lanka to deliver the new port directly into Chinese hands. It may soon become a forward military base for China’s growing blue-water navy.”

Pence’s observations come as the US, as a counterweight to China’s BRI, has expanded its infrastructure drive in the Asia-Pacific region, with new investment programmes that doubled the global spending cap for a proposed merged agency, the US International Development Finance Corporation, to US$60 billion.

Executive Vice President of the Overseas Private Investment Corporation (OPIC) David Bohigian, who recently visited Sri Lanka, said the United States could offer Sri Lanka investments backed by its development finance agency,  as an alternative to Chinese loans.

“Investments backed by the U.S. government provide a financially-sound alternative to state-led solutions that lead nations like Sri Lanka into debt traps,” he said.

Running parallel to the US-led initiative, the European Union has also launched its own connectivity programme with Asia, with a strong focus on sustainability and transparency – two features the BRI has been accused of lacking. Although it is still not clear how Sri Lanka will benefit from that initiative, it is certain that the EU’s fresh approach presents new opportunities to a country entangled in a Beijing debt-trap.

From a foreign policy perspective, one of the biggest disappointments for the UNP-led government is its inability to generate the initially expected economic support from the West during the first three years of the Sirisena-Wickremesinghe administration. As the UNP rose to power after a hiatus of over a decade, many assumed that the West would offer robust financial support to offset the overbearing Chinese influence in the country. Unfortunately for the government, the pendulum swung the other way.

With scarce support from the Western bloc, the Sri Lankan government started leaning more towards China and this over-reliance threw the country deeper into this so-called debt-trap. Perhaps the US and EU’s visceral reaction indicates that they have come to the realization that the game will drift away from them - unless there is rapid corrective action.  

What matters to Sri Lanka, however, is the manner in which the country should strike a balance between the Chinese BRI and the US-EU development programmes. While it is clear that Colombo is attempting to tap into the US Asia-Pacific infrastructure drive, it is not clear how the two countries will go about clinching a mutually beneficial deal.  While exploring opportunities on the freshly-opened US-EU front, Colombo should also engage with China to rethink the debt-driven nature of their massive infrastructure projects, which has come under fire in many parts of the world.

 

(The writer is the former Editor of Daily News and the former Editor-in-Chief of Asian Mirror. He may be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it.)


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