Colombo’s biggest source of China-dependence is to service its external debt; it already owes China over $5 billion in past loans, writes N. Chandra Mohan for South Asia Monitor
China has developed huge stakes in Sri Lanka considering its strategic location in the Indian Ocean. The island nation, for its part, is banking heavily on the dragon to bolster its dwindling foreign exchange reserves to manage its massive debt service obligations. But China can also make missteps that provide an opening for powerful neighbours like India to re-set its strained relations with Sri Lanka.
One such misstep was when Sri Lanka halted a 96,000-tonne shipment of fertilizer from a Chinese company last month, citing poor quality. India promptly supplied nano nitrogen liquid fertilizers made by the Indian Farmer Fertilizer Cooperative (IFFCO).
Beijing did not endear itself to Colombo when it resorted to coercive tactics when its shipment of organic fertilizers was found to have a harmful microorganism, identified as 'Erwinia', that is harmful to crops. Sri Lanka adopted an organic fertilizer-only policy in May to conserve scarce forex as it spends $ 300-400 million annually on fertilizer imports.
Chinese strong-arm tactics
On September 29, Sri Lanka’s Minister of Agriculture Mahindananda Aluthgamage announced the suspension of fertilizer imports from China. The latter’s embassy ratcheted up pressure tweeting that Sri Lankan authorities’ “hasty conclusion” lacked scientific basis and was “questionable”.
As if all this weren’t bad enough, earlier this month the Chinese fertilizer company sent a letter of demand to the National Plant Quarantine Service – that did the testing – for $8 million in reparations. China has also blacklisted the People’s Bank of Sri Lanka for failing to make the payment. The ship bearing this fertilizer consignment is still in Sri Lankan waters.
The statement by the Ambassador, Qi Zhen Hong, that the Chinese fertilizer company and Sri Lankan authorities have come to an agreement to re-test the stock of fertilizer through a third party has been contradicted by Sri Lankan Director General of Agriculture Dr Ajantha Silva.
After the suspension of this particular shipment from China, India swiftly responded to Sri Lanka’s request as fertilizers were urgently required for the second major agriculture season that began on October 15.
The first consignment of IFFCO’s nano nitrogen liquid fertilizers reached the country on October 20, coinciding with Prime Minister Narendra Modi’s inauguration of the Kushinagar International Airport for connectivity between the two nations for the Buddhist tourist trail. Another consignment of 100 tonnes of fertilizers was flown by two Indian Air Force C-17 Globemaster aircraft to the Bandaranaike International Airport on November 4.
By seizing this opening, India certainly has burnished its credentials not just as a net security provider in the Indian Ocean but also as a first responder to meet Sri Lanka’s critical requirements. As India’s Foreign Secretary Harsh Vardhan Shringla underscored in his visit to Colombo in October, New Delhi has met Sri Lanka’s requests in recent cases of fire and marine pollution in its waters.
The Indian Navy also deployed its assets for rapid delivery of medical grade oxygen in August to deal with its Covid situation. During the pandemic period, India kept its air space open for travel for specific and urgent medical needs of Sri Lanka.
India must take more steps
India’s timely supply of fertilizers must be followed by getting stalled projects underway to re-set its frayed ties with the island nation. In his remarks at Temple Trees, the official residence of the Sri Lankan Prime Minister, Shringla said the easing of the pandemic was an opportune moment to work on connectivity initiatives like the Jaffna to Chennai flight, ferry services between Karaikal and Kankesanthurai, and Dhanushkodi and Talaimanar.
This was important in connection with the resumption of tourism. India has been Sri Lanka’s top source of tourists making up about 18 percent of total tourist arrivals in pre-Covid 19 years.
New Delhi has also been concerned over Colombo reneging on the East Container Terminal deal in Colombo along with Japan. Recently, however, the Adani Group has taken a 51 percent stake to develop the West Container Terminal. India is also interested in the development of port and oil tank farms in Trincomalee.
Shringla dedicated 1,235 houses as part of the Indian Housing Project in the central hill country. A total of 14,000 houses are being built in the area, which is home to thousands of hill country Tamils whose ancestors hail from south India in addition to the 46,000 homes built for families affected by the civil war among others.
China’s growing stakes in the island nation, however, is unlikely to diminish due to the fertilizer imbroglio. It is looking to build a military base or logistical facility in Sri Lanka, according to Pentagon. Colombo’s biggest source of China-dependence is to service its external debt; it already owes China over $5 billion in past loans. Unless India too resorts to checkbook diplomacy, the dragon will continue to have the upper hand in Sri Lanka.
(The writer is an economics and business commentator based in New Delhi. His views are personal. He can be contacted on firstname.lastname@example.org)