May 13, 2019
China has been Sri Lanka’s biggest lender over the past decade. But despite its controversial role in the island nation’s largest development projects, it is barely being mentioned on the rowdy campaign trail.
Sri Lanka will go to the polls on November 18, with Sajith Premadasa from the ruling United National Party competing against Gotabaya Rajapaksa to be the next president.
The silence on China is a far cry from five years ago when it was front and centre of the elections. Back then Rajapaksa’s elder brother, Mahinda Rajapaksa, ran for an unprecedented third term but was defeated by Maithripala Sirisena.
Mahinda Rajapaksa revelled in the glow of being a China favourite. He campaigned on the apparent success of the large development projects including Port City, a USD 1 billion land reclamation project rising from the sea just over the horizon on Colombo’s western beach front. Other major projects included an airport, a port, several city hotels and highways funded through Chinese financing. The crowning glory of the relationship was when Rajapaksa hosted President Xi Jinping in Colombo in September 2014.
The Sirisena faction attempted to paint Chinese loans to Sri Lanka as strangleholds damaging to the country’s long term financial interest. They were particularly critical of the Port City development in Colombo, and the Mattala Mahinda Rajapaksa Airport in Hambantota district. They called the airport a vanity project and made accusations that Chinese interests were helping the Rajapaksa campaign.
When the Sirisena administration took office, it suspended the Port City project. And when international airlines stopped coming to Mattala, it was used for a while to store rice. But China worked itself back to prominence, in large part because Sri Lanka depended on its financial largesse. The Port City recommenced, and in 2017 when Sri Lanka found loan payments too hard to meet, China wrote off USD 1 billion in debt to the Hambantota port, which it financed to gain a 99-year controlling lease on the strategically located hub.
Observers in Colombo don’t think that China’s influence over Sri Lanka has diminished. “I don’t know if it has reduced or increased, but it has perhaps changed. China still plays a key role in many public infrastructure projects financed through Chinese loans, and participation in the Hambantota port operations,” said Anushka Wijesinha, a Colombo-based economist and former government advisor.
He sees China’s footprint in Sri Lanka widening with investments “in private sector construction projects on commercial terms”.
Wijesinha also feels that presidential hopefuls now know better than to attack China for political gains.
“I don’t think either party wants to vilify the big regional players – China and India – in this election. They know it’s a bad idea.”
It is estimated that China accounted for over half of Sri Lanka’s international borrowings between 2009 and 2015, worth close to USD 5 billion. In the last decade it has ousted traditional lenders like Japan as the economy has reached middle-income status and concessionary loans have dried up. Whoever comes to power next month will have to deal with these loan repayments just like Sirisena had to four years back.
China’s ambassador to Sri Lanka, Cheng Xueyuan, defended investment in the country at an event in Colombo last week with journalists and academics. He said that low-interest rates from China were helping Sri Lanka pay off higher rate loans from Western countries.
China has also shifted its public diplomacy to subtler terms. Since the 2015 elections, the Chinese mission in Colombo has been currying favour among the Sri Lankan media. Several dozen journalists have been on sponsored tours of mainland China while others have been offered scholarships for higher studies and training.
“They really don’t tell you anything on politics, but the indications are that they expect you to be on their side,” one participant said.
No wonder there isn’t a murmur on China in the media and on the campaign trail.