The most popular Chinese aid comes with the condition of Chinese labour being used in those projects and the interest rates of those loans are also on the high side comparable to some other multilateral donors, according to an eminent economist.
“There are no strict conditions associated with Chinese aid other than the visibility (the project) and the usage of Chinese labour. Interest rates of some of these loans are also on the high side,” said Institute of Policy Studies Executive Director Dr. Saman Kelegama.
Meanwhile, the Chief Government Whip, Dinesh Gunawardena speaking in parliament recently said at least 26,000 work visas have been issued to Chinese since 2005.
“But no data available as to how many have gone back,” Dr. Kelegama observed.
Although Sri Lanka has been receiving Chinese aid since 1972, it really took off between 2005 and 2012. Sri Lanka has obtained as much as US $ 4.8 billion Chinese aid during this period which is 94 percent of the total aid obtained since 1972.
While some concessional assistance from China was given at just 2.00 percent interest rate, the majority of loans from Exim Bank of China and China Development Bank came at interest rates of US LIBOR + 2.4 percent and US LIBOR + 2.9 percent, respectively. Industrial and Commercial Bank of China is also among the lenders.
“Even if the interest rates are relatively high, governments would like to go with fewer conditions. And these loans have 15 to 20-year repayment period and the fact that these are China’s state banks, governments could always negotiate the flexibility when it comes to repayment,” he noted.
Dr. Kelegama further said that unlike other bilateral aid, the technology transfer associated with Chinese aid is also at a very minimum level and it was amply evident at the time of the breakdown of Norochcholai coal power plant where local engineers could not immediately attend to it.
“I consider Chinese assistance is not very strong in technology transfer compared to the assistance from other countries. Most of the times Chinese projects do come with substantial Chinese labour.”
“This is in contrast to Indian assistance,” said Dr. Kelegama addressing a gathering of businessmen at the Sri Lanka-Italy Business Council organised by the Ceylon Chamber of Commerce.
Dr. Kelegama observed more than 75 percent of technology transfer from India’s Ashok Leyland investment in Sri Lanka back in 1982, which even led to manufacturing of Lanka Ashok Leyland buses. So was the investment by the Indian tyre manufacturer CEAT.
However, some argued in favour of Chinese labour in Sri Lanka at a time when Sri Lankan economy has a near full employment with the unemployment level at just under 4.0 percent.
“Whether we really face a labour shortage or Chinese labour is coming at the expense of the Sri Lankan labour, only our construction sector can tell,” he responded.
However, he said that Sri Lankans had so far not protested against Chinese labour coming to Sri Lanka the way we did for Indians. “It seems that we have no problems with Chinese labour,” he observed.
In a recent survey by Verite Research showed that between 2011 and 2012 the number of jobs in the country has in fact dropped by 68,222 and 195,000 people too have given up on looking for work, fed up with no opportunity despite the fact that the economy is growing.
“But decreasing jobs in a growing economy, especially one with a low level of technology does not make sense,” Verite said.