China-Sri Lanka ties going strong at 60

Global Times: China and Sri Lanka celebrates the 60th anniversary of their diplomatic ties this year. As Sri Lanka assumes a strategic position in the Indian Ocean, Chinese investments in the country and the Sri Lanka-China friendship, which has lasted for centuries through the ancient maritime Silk Road, have often been viewed in the context of geopolitical competition. What is the current status of the bilateral relationship between China and Sri Lanka? How can the role of Chinese investments in Sri Lanka be evaluated objectively? Global Times (GT) reporter Yu Jincui spoke to Dr. Karunasena Kodituwakku, the Ambassador of Sri Lanka to the People’s Republic of China, on these issues. Following are excerpts

Q: This year marks the 60th anniversary of the establishment of China-Sri Lanka diplomatic ties. What is your view on the current bilateral relationship?

A: The People’s Republic of China was established in October 1949 with Sri Lanka recognising China in January 1950. The two countries established a formal diplomatic relationship in 1957. When you think about bilateral relationships, in general, between two countries, it is not always smooth; sometimes there are misunderstandings due to issues relating to border and political differences. However, in the case of the ties between China and Sri Lanka over the past 67 years, there has been an uninterrupted friendship between the two countries in the political, economic and cultural fields. The two countries have also worked together very closely at international multilateral forums in Geneva, New York and other world capitals to support and help each other. We have had a very solid friendship between our two countries.

Q: Sri Lanka hopes to finalise a Free Trade Agreement with China this year. What’s the significance of such a pact? 

A: Trade between our two countries is growing. When you form a free trade agreement, you will have more confidence psychologically. Sri Lanka has already signed free trade agreements with India, which has 1.2 billion (people), and Pakistan. China has a population of 1.3 billion, so the Chinese market is a huge and an appealing one to Sri Lankan exporters. 

We need more Chinese investments and trade with China. Sri Lanka has now emerged as the country which produces the best quality apparels. We have successfully established the apparel sector to be of high quality, and maintain good ethical and manufacturing standards. 

Today, China’s middle class consist of more than 300 million people; we need more opportunities for our apparel exports, as well for traditional exports such as tea and precious gems, to enter the Chinese market. Moreover, China is the largest tea producer in the world. It is known for its green tea while Sri Lanka specialises in black tea. Therefore, the two countries are not competitors in the global market for the same product.

Q: There are voices complaining that Sri Lanka is being too dependent on Chinese investment. What’s your view on this? 

A: China provided credit facilities to Sri Lanka but there were some mistakes made by our decision-makers in the allocation of Chinese capital in various projects. This is because these projects do not generate sufficient revenue. 

The sea port and airport projects that were funded by Chinese investors failed to generate sufficient income although Sri Lanka is under obligation to repay the loans in time. So we must find the funds for this and, therefore, taxes were increased. And recently, the rate of the Value Added Tax on consumer items was raised. So instead of these investment projects generating revenue to repay these loans, the burden is now on the general public to repay them.

Projects that do not generate sufficient income are known as “white elephant” projects, which mean that you are maintaining elephants that won’t generate any income. Therefore, the repayment has become a public issue. However, the criticism about this is not against the Chinese but rather against the Sri Lankan leaders who made unwise decisions in investments. They should have used the funding for more profitable projects rather than on ventures that don’t generate sufficient income. No one in Sri Lanka blames the Chinese or its financing institutions that funded these projects. In fact, Chinese financial institutions had warned Sri Lanka of this when they observed that the original project estimates had increased while the projects were under construction.

Q: Some observers say that Chinese investments in Sri Lanka’s Ports of Colombo and Hambantota have led to Sino-Indian rivalry. What are your thoughts on these views? 

A: Chinese investment came to Sri Lanka on our request. One of the container terminals at the Colombo Port was built by the China Merchant Holdings International (CMHI). The company invested in one of the container terminals and now they manage it very efficiently. Sri Lanka is very happy that the Colombo Port has become very competitive in terms of offering transshipment services. I don’t know how other countries view this outcome, but we view it as an investment that CMHI made in the Colombo Port that has become beneficial to both Sri Lanka and China.

Q: Cooperation between China and Sri Lanka often draws suspicions from India, which usually interprets this cooperation in the context of strategic competition. How does Sri Lanka position itself between China and India?

A: Sri Lanka holds an important position in South Asia. We have our obligations to our neighbors. Our primary position is to ensure that no other country will use our land and territorial waters against our neighbors. And we also believe the Indian Ocean must be a peaceful ocean without any disputes. Navigation in the Indian Ocean must be secured.

Sri Lanka, as any other sovereign country would be, is very concerned about ensuring and maintaining our country’s sovereignty and independence. Sri Lanka has been a non-aligned country since it regained independence, and so we will not take sides. We are a true friend of China, and Sri Lankans like China and its people.

Q: China has proposed the One Belt, One Road initiative to promote connectivity and trade with neighboring countries. What’s Sri Lanka’s attitude toward the initiative?

A: The One Belt, One Road initiative is an opportunity to connect the world, particularly the countries in Asia, Africa and Europe. With China rising to be the second-largest economy of the world, the purchasing power of the Chinese people have increased tremendously and its per capita GDP has risen.

When the countries in the region and along the One Belt, One Road become centers for Chinese exports and investments, these nations will also have opportunities to sell their products to the Chinese market. This would create a win-win situation to all the countries that are involved in the initiative. This friendly feeling among Chinese people has been displayed in their visits to Sri Lanka as tourists. In fact, last year alone, there were almost three hundred thousand Chinese tourists in Sri Lanka.

Sri Lanka believes that this is a good opportunity that we must not miss. Therefore, we are prepared to work with the initiative.