Ceylon Today Editorial

Beijing factor

11 April 2017

Premier Ranil Wickremesinghe left for Japan on an official visit yesterday.

This marks his second visit to Japan since his October 2015 visit.

Japan, in the immediate aftermath of the election of Wickremesinghe's uncle J.R. Jayewardene at the 1977 Parliamentary Election, became Sri Lanka's largest aid giver, in the form of grant and concessional aid, driven by its gratitude to the speech made by Jayewardene at San Francisco in 1951, where he pleaded for mercy for war defeated Japan, whereas the then Soviet Union and its allies were demanding war reparations.

The new Parliament complex, the 1001-bed Sri Jayewardenepura Hospital, Sri Lanka Rupavahini Corporation, the development of the Colombo Port to a hub port in South Asia and post-Jayewardene, the Samanalawewa Hydro Electric Power Project (HEPP), the Kukule Ganga HEPP, the Colombo-Galle Highway (co-funded together with the Asian Development Bank) are a few of the lasting monuments, bequeathed to Sri Lanka by Japan.

But with the advent of the Mahinda Rajapaksa regime in November 2005, Japan, together with other donors, was relegated to the back benches, with China taking precedence, because of its 'no questions asked' policy, and only willing to lend, albeit on commercial terms, if it had the assurance, that the Government of Sri Lanka (GoSL) had the strength to repay the loan and/or the collateral provided, more often than not in the form of real estate, was sufficient to cover any losses, in the event of default.

The viability of projects funded by Beijing, with commercial loans being the norm rather than the exception, was however secondary. A few cases in point are the Hambantota Port and the Mattala Airport.

One reason why Sri Lanka's finances are in a mess is due to the huge cost incurred by GoSL in servicing these Rajapaksa engineered Chinese commercial loans, such as in the building of the above-mentioned white elephant projects.

One way that Colombo is trying to get over this morass is by converting those debts into equity, more often than not in the form of long term leases favouring Beijing. A case is the Hambantota Port, where Colombo is working with the Chinese to exchange the loan for a long term lease, because of difficulties in repaying this loan.

China's presence in the island, in the form of taking over a port, though only for a limited period of time, is cause for concern to at least Sri Lanka's closest and giant neighbour India, and also to Japan. China which borders India, in a war in 1962, captured thousands of square miles of Indian territory without much effort.

With hostile neighbours in the North-East of India in the form of China and in the North-West, Pakistan, while borders in the East and West largely comprising the Indian Ocean, the least that it would want, South of its border, where its closest if not its only land mass is Sri Lanka, is for Beijing to get a foothold, even though that may be only for a while.

It may be these fears that beset Tokyo too which has an acrimonious relationship with Beijing, dating back at least to the 1930s, when it invaded Manchuria. Currently the dispute between China and Japan is over an island chain on the East China Sea known as Senkaku by the Japanese and Diaoyu by the Chinese. These uninhabited islands are at present administered by Japan.

Aside from Japan, China also has territorial disputes with the South-East Asian countries over the ownership of some islands on the South China seas. From East to West, i.e., at least up to certain developing countries in Africa, China has laid claim to pieces of real estate, either in the form of islands or due to the inability of certain African governments to repay loans taken from Beijing, thereby ceding territory in lieu of loans, in a quid pro quo arrangement. Thereby, China has been increasing its dominance in the Afro-Asian region.

Japan, like India, feels that it too is surrounded by enemies. To its North is Russia, which captured the Kuril Islands which formerly belonged to it after the USA dropped atomic bombs over this East Asian country in August 1945 and to its West, are China and North Korea and to the East and South, Japan is largely surrounded by the Pacific Ocean.

Sri Lanka, which was once a close friend of Japan's, moved in to the Beijing orbit in the Rajapaksa era. But these shackles were seemingly broken after the regime change in Colombo on 8 January 2015, only to be reinstituted, first with the revival of the Beijing funded US$ 1.4 billion Colombo Port City Project, now known as Colombo International Financial City, over which project, too, China has lease rights and the Hambantota Port debt to equity swap, as Colombo realized that it had no other option if it wanted the wheels of development turning, coupled with getting out of the Rajapaksa debt trap, other than by entering into these agreements.

It's this Beijing factor that is worrying Delhi and Tokyo, vis-à-vis Colombo.