SQUEEZED BY BEIJING’S BELT

In a rural corner of Sri Lanka, Namini Wijedasa discovers how expansionist policies can have an impact a long way from China

In January, inhabitants of quiet, agrarian Hambantota, in Sri Lanka’s south, erupted angrily against government plans to carve out vast tracts of land for a Chinese-led industrial zone.

The authorities reacted with violence, deploying a police Special Forces unit to beat the protesters down. Among the injured were saffron-robed Buddhist monks. They took a lead in marshalling villagers who were worried that farms and settlements, some of them generations old, would be taken over and parcelled out to the Chinese.

Today, there are no demonstrations. But deep-seated insecurities about what might become of ancestral lands still remain. There is also apprehension about Colombo-based talks to hand a gleaming new port in Hambantota over to a Chinese company that is seeking near-total control of the facility for a period of 99 years.

The anxieties extend well beyond the villagers of Hambantota district. Neighbouring India and, to a lesser degree, Japan have repeatedly told the Sri Lankan government of their unease that the Chinese will one day turn what is currently a near-deserted, money-losing port into a military base. In 2010, within days of the first phase of the port being commissioned, New Delhi opened a consulate in Hambantota.

The government says national security has been guaranteed through a watertight clause in the proposed concession agreement, but the fear is that over time, Bejiing will find a way around it. Dammika Ranatunga, former chairman of the state’s Sri Lanka Ports Authority (SLPA), argued openly that port operations such as pilotage must not be handed over to the Chinese-led joint venture, because ‘it would threaten our national security’.

The Chinese are not helping to allay these concerns – quite the opposite. In April, while Indian Prime Minister Narendra Modi was on a bilateral visit to Colombo, Beijing sought permission to dock a submarine in Colombo. It was promptly turned down, but the message was not lost on anybody.

As for the envisaged industrial zone, Ven Beragama Wimalabuddhi, the outspoken chief priest of the Galvila Rajamaha Vihara in Beragama, a serene village 2km from Hambantota port, said local people were concerned about the proposals, particularly because they were so opaque. Among their questions were how the environment would be affected by industries, doubts that the promised factories would generate employment for local people, and potential disruption to their way of life.

In Hambantota and beyond, fears are rife about Chinese expansionism
In Hambantota and beyond, fears are rife about Chinese expansionism

The lands of the Hambantota district were fertile, with high-yielding paddy fields, and its villages went back centuries, according to the monk. People were suspicious about these being handed over to Chinese companies, especially when there was no word of compensation, or how the lands would be used. Inhabitants had not been shown a map of areas that would be acquired for the industrial zone. ‘It’s not sufficient for ministers or officials to know these things,’ Ven Wimalabuddhi said. ‘We are doubtful and worried. Will these Chinese companies disturb our lives?

Beijing’s intentions in this small island have been clear for years

Reflecting local fears that what they are witnessing is Chinese expansionism, the monk continued: ‘After becoming a powerful nation, China is trying to spread its authority over other countries. The government claims they will not grant citizenship to Chinese workers. How can we place our trust in any agreements we have not seen? They must tell us, the people of this country, what the conditions are. What are the types of industries that will come? What will they do with the port? We have a right to know.’

Beijing’s intentions in this small island have been clear for years, however. Following the military defeat of the Tamil Tiger rebels in 2009, China financed many of Sri Lanka’s largest, costliest infrastructure projects. Among them were a coal power plant and highways. They also lent money for a smart new airport and sprawling industrial port in Hambantota as part of a master plan for the district.

These projects were dished out without tender by Mahinda Rajapaksa, the war-winning former president, who lost power in January 2015. His administration was replaced by a coalition of the Sri Lanka Freedom Party and the United National Party, who are traditional rivals. The government now complains routinely about the towering national debt, predominantly to the Chinese, with which it is burdened.

One of the main concerns is that expensive assets, such as the Hambantota port – which cost an estimated $1.4 billion to build – are bringing no returns. The airport was only briefly used, and today lies empty. And, in 2016 alone, the port racked up around $65 million in losses; the previous year, it was $117.6 million.

With more and more loan repayments looming, the government signed a framework agreement in December 2016 that envisaged granting a Chinese-dominated joint venture comprehensive control of Hambantota port. In exchange for S1.4 billion, China Merchant Port Holdings Company (CMPort) would own 80 per cent of shares while Sri Lanka, through the SLPA, would hold the rest. The final deal was to be signed in a month.

But in an unexpected twist, Arjuna Ranatunga, the then ports minister, objected to key clauses in the draft concession agreement. There ensued heated debates about the shareholding, security, port assets, lease term, profit-sharing, erosion of SLPA powers and so on. Several conditions were changed to appease critics.

The port deal is an easier sell than the industrial zone

In May, Mr Ranatunga was replaced in a cabinet reshuffle by Mahinda Samarasinghe, another senior politician. His stance on the draft agreement is not clear. Officials said talks were continuing, with ‘both sides playing hardball at the moment’. It is unlikely that what has been negotiated so far will be reversed. However, there will be faster movement towards a final settlement, and both parties will step up efforts to market the proposed public-private partnership to Sri Lankans.

HARBOURING RESENTMENT: Buddhist monks clash with Sri Lankan security personnel during a protest in Hambantota in January
HARBOURING RESENTMENT: Buddhist monks clash with Sri Lankan security personnel during a protest in Hambantota in January

Whether this will win over people in Hambantota remains to be seen. The port deal is an easier sell than the industrial zone, which is currently in abeyance. Protests forced government surveyors to suspend mapping out lands for the rumoured 15,000 acre-park. They haven’t resumed since, and popular discussion about the zone is conspicuously absent, but the project is not off the table.

For its part, China has been tenacious. Sri Lanka is a key location in its One Belt, One Road initiative. None of the negative press, scepticism or outright resistance to its presence has shaken Beijing’s resolve to set up base, so to speak, here. CMPort already operates a profitable terminal in the port of Colombo. Another Chinese company is building a 269-hectare financial city in the capital by reclaiming land from the sea.

And then there are those debts. Foreign direct investment hasn’t matched expectations, and the coffers badly need a cash injection. ‘At some point, we should really get that money in,’ said a senior economist, referring to the three tranches CMPort has promised to pay within six months of the port agreement being signed. Bonds and syndicated loans have only bought Sri Lanka some breathing space in the interim.

Ven Beragama Wimalabuddhi, chief priest of the Galvila Rajamaha Vihara
Ven Beragama Wimalabuddhi, chief priest of the Galvila Rajamaha Vihara

Chinese investment in the port and an industrial zone will catalyse the region, he predicted: ‘The Chinese have the capacity to do that. And look what’s happening. Because the Chinese are showing an interest, the Japanese and Indians are coming in with money. The dynamics of Indian Ocean geopolitics are playing in our favour now, and we have to cash in.’

But even he stressed the importance of negotiating a deal that is balanced, rather than exploiting the financial morass in which Sri Lanka finds itself. ‘The Chinese will screw us,’ the economist said bluntly. ‘They are dealmakers, and won’t do us any favours’.

Back in his temple, Ven Wimalabuddhi stresses that nobody is against advancement. That, he says, is not what this struggle is about. It is, however, very much about equitable development, of transparency and openness, and of the wellbeing and stability of families whose roots go deep.

‘It is not good for powerful nations to exploit poorer nations with the objective of establishing their dominance,’ he said. ‘The lifestyles of our people must be protected. The quality of their lives must improve. Only then can it be treated as good development.’

So far, the government has done precious little to answer these concerns.


Namini Wijedasa, a journalist for over two decades, is an assistant editor of the Sunday Times in Sri Lanka, and also contributes to The Economist and NHK. In recent years, she has specialised in investigative journalism, but covers a wide variety of topics, including growing Chinese engagement in the country.

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