There seems to be a big hoo-ha and a ding-dong going on in the media in the last few days, about Chinese investments in Sri Lanka. The primary cause for this appears to be the recent New York Times article, which pointed towards the Rajapaksas getting election campaign money via project funding. The story has taken sensational proportions probably due to its timing, as once again the country is on the verge of going into election season.
But what no one seems to remember (strangely) is that this is really an old story. An article titled ‘CID bust massive money transaction during presidential election’ appeared in a state-run newspaper back in July 2015 - yes, three years ago. In response to this story, China Harbour Engineering Company Limited (CHEC), two days later, issued a statement, which was published in another national newspaper.
The newspaper reported, “While asserting that the allegations against CHEC were baseless and unfair, the company said that as a large international infrastructure company, which operates in more than 80 countries, CHEC went in accordance with the laws and regulations of these countries and it is CHEC’s firm policy not to get involved in politics and the elections of any country.”
Now the story has popped up again, probably following the old journalistic adage ‘Repetition is the soul of journalism’ and it certainly seems to have got the desired affect!
In the meantime, the Chinese Chamber of Commerce in Sri Lanka issued a statement saying, “Both CM Port and CHEC went in accordance with the local laws and regulations. The biased report ruins the image of Chinese companies in Sri Lanka, which have worked so hard for Sri Lanka’s development and prosperity for the past decades. It will also send a wrong signal to the investors from China and all other countries.”
The fear that many of the western reports express that there are various geopolitical machinations going on and ports like Hambantota may be used for naval ships, essentially Chinese, to enter the harbour. It is also ironic that the first ship to come into the Hambantota port after the Chinese company took over its management was a Japanese naval vessel. Leaving that aside, what needs to be understood once and for all is that any naval ship wanting to enter a Sri Lankan port needs to have approvals from our Defence and Foreign Ministries.
Be that as it may, there is a growing fear in the west about China’s Belt Road Initiative (BRI). Particularly because this will be one of the driving forces to propel the Chinese economy to be a world leader by the year 2050. In an article written by Geoff Colvin, for the Fortune magazine, he quotes a new study by Price Waterhouse Coopers, which forecasts that China’s economy will become bigger than America’s before 2030 (or well before then), while India’s will also become bigger before 2050. The article says the US will then rank third and as speculated by researchers, Indonesia could be in the fourth place just after the US.
The China Daily quoted Fitch Ratings Chief Economist Brian Coulton, who was speaking at Fitch’s Global Sovereign Conference in New York, in September 2017, as saying that China is becoming more of an influence on the world economy, as the country becomes a major trading partner for many nations and a growing source of foreign direct investment. Fitch is one of the ‘big three’ US credit rating agencies, alongside Moody’s Investors Service and Standard & Poor’s.
“China is dominant in global commodity imports,” Coulton said.
“When China’s import growth recovers, which we saw in the second half of 2016, that’s when all the global economic numbers began to look better.”
He said that the next year would see the fastest global growth rate since 2010, spurred by the rising levels of investment and consumer spending and that it is “about as good as it gets”.
So, it is not surprising that countries like Sri Lanka are aligning their big projects to the BRI. As a matter of fact, multibillion dollar projects like the Port City were conceived long before the BRI initiative. The idea had been conceived as far back as 2004, when a Singaporean company had been asked to draw up a plan for one by the then government. The same goes for the Hambantota port, for which the idea had come about, way before the BRI, with the intent of developing the country’s ports, although today both these projects stand to gain by connecting to the BRI initiative.
At a recent symposium, Chinese Ambassador Cheng Xueyuan reminded the local media that as at end-2017, Chinese companies have completed many iconic infrastructure projects in Sri Lanka, in key areas such as transportation, water, electricity, ports, etc. and made great contributions to the economic and social development of this country.
“I would like to mention some significant progress. The completion of the Norochcholai power station (or the Puttalam power station) provided about 40 percent of the nation’s electricity supply and ended the history of frequent power cuts in the island. The Colombo International Container Terminal, a Sino-SL joint venture, became one of the fastest growing container terminals in the world. The newly-completed Moragahakanda Project, which is the biggest reservoir in Sri Lanka, has brought great benefits to local agriculture and people. Section-I of the Southern Railway and the extension of the Southern Expressway are going to be completed and opened, which will give a strong impetus to southern region development.”
It is a foregone conclusion that Sri Lanka needs to attach its wagon to a winning horse and China certainly fits that bill. Of course there has to be transparency and good governance involved, an example being the Supplementary Environmental Impact Assessment (SEIA) by the Port City.
The environmental issues were addressed in the SEIA 2015, which had 214 responses from the public, when they were put up for scrutiny. These were taken up and 72 conditions were laid out for the project proponent to comply with. The Colombo Port City Project is being implemented under the Megapolis and Western Development Ministry, keeping to the planned schedule and complying with the 72 conditions laid in the permit. There are 26 government agencies monitoring and reporting on the different aspects of the Port City Development Project.
Looking at the environmental impact assessment of this project, one could say that it has surpassed any of its kind done for other projects in Sri Lanka. Massive Chinese projects are here to stay and their impact on the economy is phenomenal. The latest tranche of US $ 584 million, which went towards balancing the country’s account books, is clear proof of this.
Whilst one can look at this from a negative perspective, projects like the Hambantota port and Colombo Port City are mega foreign direct investments that will have a massive trickledown effect, impacting the economy not only directly but bringing value addition to create opportunity for other investors, where even non-Chinese companies can benefit from the impetus it has created.
(Neluka Jayasinghe, a keen follower of socio-economic and political developments both locally and internationally, can be reached at nelukasinghe