Editorial

The debt trap

Hot on the heels of President Mahinda Rajapaksa's State visit to India, comes the official visit of China's Vice Prime Minister to Sri Lanka. This might fuel some excitement among the diplomatic community and strategic studies analysts, but whether one need read too much into this co-incidence is best left open.

In view of Sri Lanka's deepening involvement with India on the one hand, and China on the other, the separate visits will inevitably trigger discussion in geo-political terms.

India being a democracy and more open with public debate, we know it is concerned about China's growing influence in and around the Indian Ocean. When it comes to political matters and particularly its foreign policy, China remains a closed book. Only its State Council (Cabinet) knows what it's about, and the visiting Vice PM is indeed an influential member of that State Council. Hence the significance of his visit.

In Colombo, a terse statement from the Cabinet spokesman laid out that upon a memorandum put forward by the Acting Minister of Finance, the Cabinet agreed to accept an offer of 50 million yuan (Rs. 800 million). Whether this was a grant, loan or what was left to the people's imagination.

This announcement comes in the wake of another announcement that Sri Lanka is accepting commercial loans from India in the billions. This has been a serious flaw in the Government's approach to accepting foreign 'aid'. The people just do not know on what terms such aid is being accepted. Coincidentally, Malaysia's ex-Prime Minister Dr. Mahathir Mohamed, someone Sri Lanka's leaders wish to emulate for his strong patriotism intertwined with his drive towards modernizing his country -- who was in Sri Lanka over the week -- counseled that "Sri Lanka must not depend on borrowings to build the country".

As the Sunday Times reported in December 2009, China has bagged the largest chunk of Sri Lanka's post-war development projects estimated at several billion rupees and "contrary to popular belief that these are grants (aid) they are not". They are in fact, borrowings on commercial rates from China's Exim (Export-Import) Bank.

In India, the joint communiqué issued following President Rajapaksa's visit this week - a communiqué said to have been prepared even before he arrived -- bears a heavy Indian hand in its drafting. Even the words 'crore' which is not a term Sri Lankans are familiar with -- to denote the sum of 10 million -- is included. The Government has played the issues contained in the unusually lengthy joint communiqué very close to its chest. The Opposition is so embroiled in its own squabbles that national issues are not important. The leadership itself opts not to offend India for reasons best known to them. Only the CEPA (Comprehensive Economic Partnership Agreement) has entered the public domain for discussion.

In the joint communiqué President Rajapaksa has agreed to "various infrastructure projects" (these are words from the communiqué) - whatever they may be. It says that he "expressed his appreciation for the generous concessionary credit facilities amounting to about US$ 800 million (Rs. 91 billion) offered by India…". Did he, really? And if so will the country not know on what terms these 'concessionary credit facilities' are going to be, or is it none of the people's business?

The President seems to have, however, succeeded in delaying signing the CEPA by merely agreeing to discuss it further and side-stepped the 13th Amendment issue while agreeing to support India's bid for a permanent seat at the UN Security Council. But the essence of the joint communiqué, it is patently clear, is heavily loaded towards India and its desire to be part and parcel of Sri Lanka's domestic affairs.

India has promised Rs. 500 crore (Rs. 12.5 billion) for humanitarian relief etc. for the Internally Displaced People. . Here again, the joint communiqué says the Sri Lankan President expressed appreciation for India's "substantial and generous assistance". The fact of the matter is that if not for India's "substantial and generous assistance" to the LTTE and the entire northern insurgency in Sri Lanka, these IDPs would not have been in such a pathetic plight in the first place.

The Indian Prime Minister might have wanted to express his 'appreciation' for Sri Lanka not demanding reparation for 30 years of conflict.

That apart, there were several outstanding issues that do not seem to have been raised at least by Sri Lanka during the visit. There are reported to be at least 100 Sri Lankan fishermen languishing in Tamil Nadu and Andhra Pradesh jails for straying into Indian waters while Sri Lanka promptly sends back Indian fishermen without charges.

The Fishing Agreement of 2008 seems to have superceded the Indo-Sri Lanka Maritime Boundary Agreement that even resolved the Kachchativu issue. The issue of Kachchativu itself is being raised once again by prominent Tamil Nadu politicians. There has been no attempt to re-iterate that its sovereignty lies with Sri Lanka to put an end to this agitation in Tamil Nadu. India seems to have said a diplomatic 'No' to a Sri Lanka request for experts to discuss the issue of possible oil fields straddling the maritime boundaries, and there has been a deafening silence over the controversial Sethusamudra Canal project that is detrimental to Sri Lanka's interests. On the issue of visas, Indians get visas on arrival here, but there is no reciprocal arrangement. These have all gone by the board.

Overall, there is the feeling that President Rajapaksa was rushed into all this, and the Lankan side was thoroughly unprepared - and unwilling, to withstand the weight of India's South Block (External Affairs Ministry) pressure. The reason for India's acceleration process may have been aimed at dispensing with internal discussion of issues in Sri Lanka that could de-rail its End Game.

Both the Sri Lankan and Indian political leaders and officialdom might want to learn from contemporary Indo- Lanka relations. In 1964 when the Sirima-Shastri Pact was signed on the issue of repatriating those of recent Indian origin to India, Prime Minister Sirimavo Bandaranaike telephoned then Opposition Leader Dudley Senanayake from New Delhi and obtained his consent before she signed the agreement. That agreement stood the test of time. In sharp contrast, in 1987, President J.R. Jayewardene was arm-twisted into signing a peace accord with India which now is in shambles having created innumerable problems for both countries ever since.

This week, the Government signed six agreements with China going into further billions in loans - payable within 20 years. If these were loans taken from the World Bank or IMF there would have been a howl that the country and future generations are being pawned. In committing future generations to a debt of billions upon billions of rupees for what would otherwise look like essential development projects to rebuild and modernize war-ravaged Sri Lanka, President Rajapaksa and his Government should have the confidence to let the people know the details of what he is signing on their behalf.

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