America’s Vice-President Mike Pence has warned that Hambantota ‘may soon become a forward military base’ for the PLA Navy. In a speech at Hudson institute, Pence launched a broadside against China’s ‘predatory’ trade, ‘debt diplomacy’, ‘coercion’ and military ‘aggression’; he referenced to the Chinese-funded Hambantota port, of which the majority stake is owned by China’s state owned port operator, China Merchants. Though these concerns are usual American refrain, the latest might have much do with buttressing President Trump’s plan to levy taxes on an additional US $ 250 billion of Chinese imports and play the tough guy before America goes to the mid- term elections. After all America under Trump is retreating from AsiaPacific, and slapping taxes on its alliance partners, and is sending mixed signals on its
Prime Minister Ranil Wickremesinghe has rebuffed those claims - Some people are seeing imaginary Chinese naval bases in Sri Lanka, he had said speaking at the Oxford Union.
American concerns of China manipulating regional geopolitics through its construction spree date back to the early 2000. In 2004, American defence contractor Booz Allen Hamilton argued that China is building ‘spring of pearls’, potentially turning littoral states (such as Sri Lanka, Maldives, Bangladesh and Pakistan) into outposts of a maritime design. Since then this argument has been liberally deployed to characterize the Chinese construction activities in the region. China has in fact undertaken major port building projects and construction activities such as Gwadar in Pakistan, Hambantota and a shallow water port in Chittagong. China’s flagship project in Pakistan,China-Pakistan Economic Corridor ( CPEC) among other amenities, offers, China an all -weather land route to the Arabian sea, via Chinese built Karakolum highway. However, China’s investment in headline- grabbing geostrategic projects are a fraction of the total Chinese investment in the region. For instance, over 75% of China’s official development assistance to Pakistan during 2000 to 2014 was spent on power plants. Similarly, in Sri Lanka,67% of Chinese development loans obtained during 2010-2015 were spent on roads, and another 15% on power and energy.
Predatory or not, Chinese loans are less concessionary in nature. The lion’s share of Chinese loans does not count as official development assistance, which need to be ‘concessional in character and conveys a grant element of at least 25%’ The ODA component of Chinese development assistance extended during the period of 2000-2015 to Sri Lanka, Bangladesh, Nepal and Pakistan is 7, 15, 27 and 9% respectively, based on data available on Aid data project.
However, mercantilism of loans and alleged claims of geopolitical designs of projects are quite apart. Countries borrow from China not just because money comes with no strings in the form of preconditions of political and economic reforms, attached. China is, in fact, filling a gap in demand and supply for infrastructure funding. The western financing for infrastructure projects have declined steadily since early 2000, and there exists an approximately US $2 trillion deficit in the global infrastructure budget. South Asia itself has to invest around US $ 2.5 trillion by 2020 to upgrade its infrastructure.
In each country that China cultivated a thaw, that relationship has unravelled with the domestic political change. In SL, the collapse of the Rajapaksa regime saw the suspension of Chinese funded projects
Sheer scale of the Chinese economy and extent of its loans provides for greater economic presence for China in the region. However, the process of converting the material power into influence is not linear. Power resources in their utilization to achieve preferred state goals are subjected to and are conditioned by rigours of other extraneous details such as quarrelsome domestic politics, popular impulses and electoral calculations etc. That is where much of the fear- mongering over the Chinese presence is faulty. In each country that China cultivated a thaw, that relationship has unravelled with the domestic political change. In Sri Lanka, the collapse of the Rajapaksa regime saw the suspension of Chinese funded projects. Recently in the Maldives, the defeat of pro-Beijing former president Yameen in the recent election saw the Indian Ocean atolls renewing its vows of allegiance to India. In Malaysia, Dr. Mahathir Mohammed is scrapping a multi-billion dollars worth Chinese funded rail project.
However, it is also the weak states, their capricious fiscal policies and domestic institutions that make these countries potential targets of geopolitical designs. Giving Hambantota port on a 99- year lease was not a Chinese demand, but was a decision made by the current government in the pretext of easing debt service cost. That was after the same government, increased public sector salaries by Rs. 10,000 causing an implosion of government spending. Implications of those populist decisions are still felt. A saner economic policy could have saved the country from these troubles and their potential geo political complications.
South Asia’s political duopoly also makes it easier for the incumbent government to borrow as much as they want, and build vestige projects, and pass the buck of debt servicing to its predecessor. Mahinda Rajapaksa invested a sizeable portion of Chinese loans in projects which lacked immediate to medium term economic viability. And boisterous public reactions also make it harder to undertake requisite adjustments to turn such projects into profitable ventures. South Asia has a track record for protesting against its own economic interests. However, these domestic impulses, and Indian security concerns also tend to push back against China whenever it digresses from the implied economic role. South Asia’s domestic systems do not create conducive domain conditions for enhanced defence cooperation with an eye on balance of power manoeuvering.
However, the preponderance of Chinese economic presence and influence is worrying for that it cultivates an exceeding level of dependency on China by small countries, which are often forced to do so due to the absence of other alternatives. As things stand, neither America , nor Europe is in a position to offer a substantial economic balancing to China in South Asia. From Chinese merchandisers to mega construction projects, this influence is growing day by day. New Pax Sinica is more likely to be heralded by those commercial ventures than gunboats. Whether that new order would serve the interests of smaller states would be decided by how those states strategize their relationship with China for mutual gain. But, small countries, Sri Lanka being a classic case, lack a long term vision, and cohesive and effective apparatus to implement policy. This aggravates the unequal status quo in their relationship with China, and relative gains of their partnership. More than the prospect of Chinese gunboats in Hambantota, Sri Lankans ( and South Asians) should worry about their weak states and feeble institutions, which give them a raw deal in their workings with China.
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