China and the World

Colonial attitudes

Why China’s investment in Sri Lanka has irked the locals in Hambantota

Wickremesinghe-w

It’s a deal: China’s foreign minister Wang Yi with Ranil Wickremesinghe

At the end of the First World War there were 48 treaty ports on Chinese soil, a humiliation for a country that had suffered almost a century of shame at the hands of the foreign powers who ran the ports as their own sovereign jurisdictions. Sun Yat-sen, a revolutionist regarded by many as the “founding father” of modern China, described them as mini-colonies.

“China was forced to sign many unequal treaties,” Sun concluded. “Foreign nationalists are still using these treaties to bind China and as a result China fails at whatever she attempts.”

A similar sentiment has been reverberating around Sri Lanka over the past week, but this time it has been directed at China, which now has two “treaty ports” of its own after signing controversial agreements with the Sri Lankan government. One is in Colombo and the other in Hambantota, in Sri Lanka’s deep south.

The country’s prime minister, Ranil Wickremesinghe and China’s ambassador, Yi Xianliang, laid the foundation stone for a new 1,235-acre industrial zone next to the Hambantota Port last Saturday. However, the opening ceremony for the newly titled Sri Lanka China Logistics and Industrial Zone (SLCLIZ) was marred by violent protests that led to dozens of arrests and hospitalisations.

Sri Lanka’s ruling coalition government accused former President Mahinda Rajapaksa of deliberately fomenting the opposition by peddling blatant lies and organising the protest, which was led by his son Namal (Hambantota is the Rajapaksa political base). “We appeal to all Sri Lankans not to be deceived by bankrupt politicians and individuals who burgled the national heritage,” was the government’s official line.

At issue was how much land the government was “giving away” to China (rumours suggested 15,000 acres; an area equivalent in size to the enclave of San Marino) and the length of time that China will lease the land and adjoining port (99 years, or two generations as local critics complained).

Nearby India was also unhappy that its strategic rival had secured yet another foothold in the Bay of Bengal for its ‘String of Pearls’ policy (the terms coined by Indian policymakers for China’s alleged plan to encircle their nation with naval bases). Indian commentators highlighted that China – not Sri Lanka – will be in charge of security at the port and in the SLCLIZ.

Opposition MP and Rajapaksa ally DV Chanaka told Al Jazeera, “When you give away such a large amount of land you cannot stop the area becoming a Chinese colony.”

Many of the protesters were Buddhist priests incensed by unfounded rumours that religious sites would be bulldozed to make way for the Chinese development. The Reverend Magama Mahanama from a group calling itself the Monks Organisation to Protect National Assets said the clergy planned to issue a decree requesting the government to halt the deal. He hoped the latter would abide by the clergy’s decree in much the same way Sri Lanka’s ancient kings once did.

Speaking to parliament earlier this week, Wickremesinghe said Sri Lanka had no choice in leasing an 80% share in the port and SEZ to China for $1.12 billion because the country is “trapped by a massive amount of debt”. He also pointed out that it was Rajapaksa who initiated the Hambantota project in a bid to consolidate his power base by turning his arid hometown into Sri Lanka’s second major city.

“When President Rajapaksa invites China to Hambantota there’s nothing wrong with that,” he said. “But when President Sirisena does the same it’s wrong. It’s nothing but jealousy.”

As many commentators pointed out, Sri Lanka had little room to manoeuvre given it had to pay the Chinese their loans back (roughly $1.5 billion to build the Hambantota port, plus a further $209 million for an international airport, and undisclosed Chinese funding for a nearby convention centre, world-class cricket stadium and multiple tarmacked highways, which the rest of the country looks on with envy). None of the projects are paying for themselves and as the current government is at pains to make clear, all were signed off by Rajapaksa when he was in power.

Rajapaksa did win Sri Lanka’s 23-year long civil war (which ended in 2009), but in doing so was shunned by Western-backed donors. These were unhappy about the deaths of thousands of Tamil civilians in the closing days of the bloody conflict. So Rajapaksa turned to Chinese funding, the rub being it was secured on more onerous commercial terms than multilateral loans would have been.

Recent IMF figures show the country’s external debt has jumped more than $5 billion over the past five years, with public debt at 80.4% of GDP compared to a 57% average for countries of similar economic development. Sri Lanka is now under IMF tutelage, after suffering a balance of payments crisis (the Hambantota debt-for-lease agreement is a key plank in Colombo’s efforts to restore economic stability).

Wickremesinghe and the Chinese ambassador hailed the Hambantota agreement as a pivotal moment, which could bring 100,000 jobs to the area under the government’s ambitious South Development Plan. Ambassador Yi said there could be about $5 billion of Chinese investment over the next few years in the SLCLIZ, with promising business opportunities in logistics, marine services and marine products processing. To put this into context, Sri Lanka attracted $683 million in FDI during 2015 and the figure in 2016 is expected to have been even lower.

The government says 95% of the land is already government-owned so farming communities will not be dispossessed. There will be space for 1,500 factories to serve the port, with 50 international and local companies lined up to build cement plants, an LNG power plant and light manufacturing bases.

In a sign of how the political winds have changed, the government also appears to have broken apart the previously tightly knit Rajapaksa clan. Under Mahinda Rajapaksa’s presidency, his coterie of brothers all held ministerial positions.

Now one brother (a local MP), Chamal Rajapaksa, has joined the government’s ranks, at least in supporting Hambantota’s development. Last week, Wickremesinghe appointed him to a committee overseeing the allocation of land for new factories. Standing up in parliament, Chamal Rajapaksa applauded the agreement with China, suggesting people had “panicked” when they mistakenly heard 15,000 acres had been sold.

Having been occupied by foreign powers for most of the past five centuries – only to fight among themselves for the past three decades – Sri Lankans are sensitive about foreign involvement and feel they are only now in a position to begin developing the country to its full potential. Local media sources note the country is keen for much-needed investment, but – somewhat contradictorily – uneasy about the local impact of Chinese FDI. In Sri Lanka’s Daily Mirror, one social media respondent noted, “We should ensure that those employed in Hambantota are Sri Lankans and not Chinese like the previous regime when Chinese labourers were used to build roads, otherwise it will be a Chinese infestation.”

Some local residents also raise environmental concerns in what is currently one of the country’s most beautiful spots.

However, LKA Jayasinghe, head of local charity the Schools Relief Initiative, told WiC he welcomes Chinese investment because it will create jobs. He also believes the government will enforce strict environmental standards.

“We take the environment very seriously in this country and the government has already said they won’t touch areas gazetted for elephants’ home ranges,” he commented. “For example, in the last budget they introduced very high environmental criteria before anyone can get their annual vehicle permit renewed. They’ll take the same approach with Hambantota so we won’t end up with the same air quality problems as China.”

Such comments will please Sri Lanka’s ambassador to China, Karunasena Kodituwakku who told China Daily: “Chinese policy and our policy regarding foreign investment has become complementary.”


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.