As China-India tensions escalate, can Sri Lanka avoid becoming a pawn in a big power game?

New Delhi’s historical influence over Colombo looks to be waning in the face of increased investment and other economic overtures from Beijing
But observers caution the South Asian island nation would be better off looking to Singapore’s example and avoid picking sides

China-India relations

Rajpal Abeynayake

Published: 11:22pm, 13 Jul 2020

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What with last year’s Easter Sunday terrorist attacks scaring away tourists and then the coronavirus pandemic disrupting travel all across the world, Sri Lanka’s economy has taken a battering recently – leaving it turning to powerful neighbours such as China for help.

The South Asian nation’s economy grew 2.3 per cent in 2019, but this year it is forecast to shrink by as much as 3 per cent, prompting the government in Colombo to ask Beijing for a US$500 million loan from the state-owned China Development Bank in March, with a further US$128.6 million in “coronavirus support” being approved by the World Bank in April.

Sri Lanka’s appeals to India for help, meanwhile, seem to have been met with a cooler response, even as New Delhi has seen its historical influence over Colombo diminish in the face of increased investment from Beijing.

Since 2003, India has poured more than US$1.2 billion into its southern neighbour, funding projects ranging from housing developments to new schools across the island. It has also emphasised the two nations’ shared Buddhist heritage, in response to China’s apparent attempts to do the same as part of its soft power manoeuvres. The landmark US$104 million Lotus Tower in capital Colombo, for instance – inspired by the Lotus Sutra, one of the most important and influential Buddhist scriptures – was paid for with loans from the state-run Export-Import Bank of China.

The Lotus Tower is seen in Sri Lanka’s capital of Colombo in 2018. Photo: Reuters

In June, Indian media reported that Delhi had yet to make a decision on Sri Lanka’s request – made four months before – for a postponement of the US$960 million debt it owes, as well as for a US$1.1 billion special swap facility to boost the country’s foreign exchange reserves.

Sri Lanka owes some US$55.9 billion in foreign debt, about one-tenth of it to China via loans to build infrastructure such as ports and motorways. Among these projects is the Hambantota port, which Colombo leased in 2017 to a venture led by China Merchants Port Holdings for 99 years in return for US$1.1 billion in debt relief.

Can Sri Lanka’s neutral foreign policy steer it clear of US-China tussles?

Recent moves by Colombo have also raised questions over whether President Gotabaya Rajapaksa is distancing himself from the US and its allies – given Washington’s wide-ranging disputes with Beijing over everything from trade to technology – and from India in light of its recent clash with China amid a flare-up in their long-standing border dispute.

Earlier this month, the Sri Lankan government cancelled a Japanese-funded light railway project in Colombo, while insisting it would not accept a US$480 million grant from independent US foreign aid agency Millennium Challenge Corporation.

Sri Lankan President Gotabaya Rajapaksa, left, with Indian Prime Minister Narendra Modi in November. Photo: DPA

Now, concerns hang over the Colombo Port, where there is an agreement between Sri Lanka, Japan and India to develop a new East Container Terminal, with port workers demanding guarantees that the facility remain under Sri Lankan control.

For observers of Sri Lanka’s foreign relations like Palitha Kohona, the country’s former representative to the United Nations, Colombo would be wise to maintain a safe distance from Delhi.

“We shouldn’t be too close to India because China is the only country that can provide us with funding. India has no money to offer,” he said.

“Our challenge will be to maintain an engagement that doesn’t offend either [India or China].”

Sri Lankan polling officers sit behind a protective screen as a health officer disinfects hands before casting postal votes for the country’s coming general election. Photo: EPA

The real test will come when Sri Lanka elects its new government after the general election in August, said Shakthi de Silva, a research assistant with the Lakshman Kadirgarmar Institute of International Relations and Strategic Studies in Colombo.

Rajapaksa’s party – widely seen to be pro-China but currently pledging a strict non-aligned policy, and led by his brother the charismatic Prime Minister Mahinda Rajapaksa – is widely tipped to win, particularly given the positive perceptions surrounding the president’s handling of the coronavirus crisis.

Sri Lanka, with its population of 21.6 million, has only had around 2,600 cases and 11 deaths – compared to more than 23,000 fatalities in India and at least 5,000 in Pakistan.

It’s like during the Cold War, [when] we were auctioning the US and the Soviet Union off against each other

Dr Susantha Goonatilake, Colombo-based scholar

Parties fighting the election will be eager to promise voters all types of initiatives and projects, using funds that can only come from either India and China – and there is a chance that both sides would want to offer such financial overtures.

“It’s like during the Cold War, [when] we were auctioning the US and the Soviet Union off against each other,” said Dr Susantha Goonatilake, a Colombo-based scholar and former president of the Royal Asiatic Society.

China-India border dispute may force South Asian neighbours to pick a side

“We got various industrial plants from the Eastern bloc, the West gave various things and so on. But it’s advisable that we maintain a positive neutrality between China and India these days.”

The business community is also concerned about Sri Lanka taking sides, saying it could result in economic repercussions.

“We should be neutral, and should not even talk about benefits we may get from either country in this situation,” said Kosala Wickramanayaka, president of the Colombo-based International Business Council.

Chinese Premier Li Keqiang, right, with then-Sri Lankan President Maithripala Sirisena at the Great Hall of the People in Beijing in May last year. Photo: Kyodo

Goonatilake said Chinese assistance to Sri Lanka would surely wane if Colombo was seen as supporting India in the current border dispute, while Delhi has similarly always found ways of sending Colombo messages about remaining neutral.

He pointed to how Indian navy commanders who were present at recent defence dialogues in Sri Lanka had made what he described as “belligerent statements”, telling Sri Lanka in effect to “watch what it is doing with China”.

Kohona, the former UN ambassador, said Sri Lanka’s policy elites could take a leaf out of Singapore’s book in dealing with larger powers like India and China by not taking sides.

“Unless we are aware of how big countries exercise power, Sri Lanka cannot survive. We have to be aware of how large and small countries are dealing with each other,” he said.

“We in Sri Lanka need to be analysing the plots others are making with reference to us, or in the region. That’s the way we can benefit from relations with both countries.”

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