Smart business

A FRESH turn was seen in the ongoing port city project dilemma, with the Government landing firmly on the side of practicality by ordering a comprehensive Environmental Impact Assessment (EIA) and deciding to be guided by it in making a decision on the venture. 

The key $1.5 billion project is seen as important to bolster Sri Lanka’s consistently flagging foreign investment and could well become a landmark venture if it can be completed within environmental and legal limits set by a transparent Government. Given the global tilt towards China the Cabinet decision can be viewed as both practical and progressive.    

Doing business with China has become a global imperative. Despite growth slowing down in the “workshop of the world,” more and more countries are opening themselves to Chinese investment. However, Sri Lanka’s vacillating stance on its relations with the world’s second fastest growing economy could result in missed opportunities.

Just the number of trade deals signed around the world in the last month shows how bullish everyone is on engagement. China has wrapped up at least $88 billion in deals, including agreements signed with jet makers, solar cell manufacturers and film studios, during recent visits by its leaders to Russia and Latin America plus a visit by Indian Prime Minister Narendra Modi to China.

Russia and China signed 32 agreements including a $25 billion deal to boost Chinese lending to Russian firms, rail contracts and an agreement to cooperate on international information security.

Brazilian President Dilma Rousseff signed a series of deals worth $11.1 billion. The mind boggling list also includes Chile, Peru, Columbia and former President Rajapaksa’s buddy Belarus.

Even India, which has border issues with China, signed 26 business deals worth more than $22 billion in areas ranging from ports to renewable energy to financing. 

India, which expressed its displeasure at Sri Lanka obtaining Chinese investment for the Hambantota projects and later the controversial $1.5 billion port city venture, has little hesitation in deepening its economic relations with the country that is arguably its biggest rival in the international arena. In such an environment it is vital for Sri Lanka to reset its relations with China by promoting a strategic and professional partnership.

Corruption is perhaps the biggest hurdle to open relations between the two countries. The clear involvement of former President Mahinda Rajapaksa’s Government in projects mired in corruption allegations makes it a hypersensitive topic.  But the Government has to shake off these issues fast to steer a careful path in making sure projects and future investment does not have negative consequences.  Already China has lent Sri Lanka an estimated $ 5 billion for massive infrastructure projects over the last seven years, making it the main development partner.

With many of the Rajapaksa regime’s projects such as the Mattala Airport failing to earn their keep, the Government is faced with the challenge of tough fiscal consolidation to manage its medium-term debt repayment obligations. But this has to be balanced against, engagement with China that is also crucial for Sri Lanka to expand its exports and grow economically in the long-term. By improving its relations with the West the Government is giving the country a chance to balance its foreign relations as never before and creating the best opportunity for Sri Lanka to join the world in doing smart business with China.