Despite India’s Warning, Sri Lanka Commits To China’s BRI

Sri Lankan President Ranil Wickemesinghe’s visit to China from October 16 to 20, has resulted in Sri Lanka reiterating its commitment to participate in China’s global development project, the Belt and Road Initiative (BRI). That is despite India’s warning on October 11 about the dangers inherent in accepting China’s developmental loans under the BRI.

The joint statement issued by China and Sri Lanka at the end of Wickremesinghe’s visit said: “Sri Lanka reiterates that it will continue to actively participate in the Belt and Road Initiative proposed by China. The two sides agreed to sign the Memorandum of Understanding on jointly accelerating the formulation of the cooperation plan on the Belt and Road Initiative.”

This understanding was reached despite Indian External Affairs Minister S. Jaishankar’s warning to Sri Lanka and other Indian Ocean Rim Association countries about the dangers inherent in accepting Chinese largesse under BRI.

“We should be clear where the dangers are, be it in hidden agendas, in unviable projects or in unsustainable debt. Exchange of experiences, sharing of best practices, greater awareness and deeper collaboration are part of the solution,” Jaishankar told a press meet at the end of the IORA Council of Ministers meeting in Colombo on October 11.

In return for Sri Lanka’s firm commitment to the BRI, China did not clarify the exact nature of its proposal to help Sri Lanka meet its debt repayment obligations. China is Sri Lanka’s single-largest bilateral creditor with a loan of US$ 7 billion.

On this issue the joint statement said that the two sides “acknowledged that China provided a financing support document to Sri Lanka in a timely manner and helped Sri Lanka obtain loans from the International Monetary Fund in March 2023.

“In late September, as an official creditor, the Export-Import Bank of China reached a preliminary agreement with Sri Lanka on debt treatment. China said that it will continue to support its financial institutions to conduct friendly consultations with Sri Lanka to reach an early agreement on the treatment of debts related to China.”

The joint statement further said that the “Chinese side is willing to work with relevant countries and international financial institutions to keep playing a positive role in helping Sri Lanka address its current difficulties; alleviate the debt burden and realise sustainable development.”

Sri Lanka, the statement added, “commended China for its support to Sri Lanka to ease its financial difficulties.”

Be that as it may, Sri Lankans are still in the dark about China’s ideas on debt repayment. This is holding up decisions to be taken by other creditors such as the Paris Club members and India, who insist that any debt relief arrangements must be uniform and that no bilateral creditor should get special treatment. They apprehend that China might pressurise Sri Lanka to agree to a separate bilateral arrangement with it.

However, earlier this month the International Monetary Fund (IMF) said that Sri Lanka will have access to US$ 330 million from them once a staff-level agreement gets the nod from the IMF Management and Executive Board.

Wickremesinghe, who was in Beijing primarily to attend the Third international Belt and Road Forum held between October 16 and 20, met President Xi Jinping and Vice Premier Ding Xuexiang and agreed to enter into a number of economic MoUs with China.

Significantly, the joint statement did not mention any discussion on bilateral security issues such as the visit of Chinese research vessels which, in India’s view, are vessels sent to spy on India. A visit by Shi Yang 6 is still pending. The only security issue mentioned in the communique was Taiwan on which China secured a commitment that Sri Lanka would stand by its “One-China” policy.

The joint statement was basically a catalogue of MoUs to be signed on a variety of economic development cooperation projects. Among others there will be MoUs on accelerating the formulation of a Cooperation Plan for the Belt and Road Initiative; on cooperation in Green and Low-Carbon Development; and on the Chinese-aided Subsidised Housing Project for the Low Income Category in Colombo.

Sri Lanka said that it would welcome Chinese enterprises and provide a favourable investment and business environment for them. On its part, China said that it will continue to encourage competent Chinese enterprises to invest in Sri Lanka.

The two sides recognised that Colombo Port City and the Hambantota Port are “signature projects of the Belt and Road Initiative.” Sri Lanka welcomed further investments from Chinese enterprises in the Colombo Port City and expressed readiness to create a conducive environment for investments in Port City including necessary legislative measures.

Port City development has suffered enormous delays mostly due to inertia on the Sri Lankan side.

The two sides agreed to conclude a comprehensive Free Trade Agreement “as quickly as possible”. They agreed to cooperate in finance “on the basis of market principles, autonomy and the Rule of Law” to further enhance financial services and economic and trade development.

The Chinese side said that it will continue to support competitive Sri Lankan industries to establish ties with relevant Chinese associations of importers and exporters; provide facilitation and support Sri Lankan exporters’ efforts to participate in Chinese exhibitions including the China International Import Expo, the China Import and Export Fair, the China-South Asia Exposition, the China International Supply Chain Expo.

China pledged to encourage Chinese and Sri Lankan enterprises to deepen cooperation on the basis of mutual benefit and bolster Sri Lankan exports to China. The two sides agreed to quicken the signing of a Free Trade Agreement.

The two sides agreed to sign the Protocol of Phytosanitary Requirements for Export of Ceylon Cinnamon to China. The Protocol on Inspection, Quarantine and Veterinary Sanitary Requirements for Wild Fishing Aquatic Products to be exported from Sri Lanka to China will also be signed.

The two sides agreed to enhance exchanges and cooperation between their small and medium-sized enterprises (SMEs), encourage their SMEs, service providers, industrial associations, and scientific and research institutes to increase communication; establish cooperation platforms for industrial cooperation in scientific and technological research and development, electronic flight services and training, and create innovative cooperation models.

The Chinese side will be ready to carry out technological exchanges and training cooperation in bio-technologies for tropical crops, plant breeding, aquaculture, agricultural processing, market development and agriculture modernization, thus helping Sri Lanka enhance its comprehensive agricultural production capacity.

The Chinese side said that it would welcome more imports of quality agricultural products from Sri Lanka. The two sides fully recognised the importance of educational exchanges and expressed readiness to further enhance exchanges of teachers, students, and researchers.

They also agreed to continue to strengthen cooperation in science and encourage educational institutions to carry out cooperative research and joint programs. The two sides agreed to support the development of the “China-Sri Lanka Joint Centre of Science and Education.”

The two sides agreed to sign the Letter of Exchange of Feasibility Study on China-Aid Project of Digital Transformation of General Education in Sri Lanka. Both sides agreed to encourage better air connectivity between the two countries.

They will take the China (Chongqing)-Sri Lanka Roundtable on Poverty Reduction and Development Cooperation as a starting point to enhance experience sharing on poverty reduction by establishing platforms, organising training and promoting think tank exchanges.

The two sides are ready to carry out closer cooperation in climate change adaptation and sustainable development, emphasising that joint implementation of green measures are effective ways to mitigate climate change.

The two sides are ready to strengthen coordination and deepen exchanges and cooperation in fields including disaster prevention and mitigation, maritime rescue, relief and research, maritime personnel training and capacity building and further explore cooperation on the blue economy.

The two sides agreed to sign the Tripartite Agreement between the Chinese Academy of Sciences and the Ministry of Water Supply & Estate Infrastructure Development of Sri Lanka and the University of Peradeniya in Sri Lanka.

The two sides reiterated their firm commitment to upholding true multilateralism, promoting greater democracy in international relations, and making global governance more just and equitable.

The two sides agreed to strengthen cooperation within the United Nations and other multilateral mechanisms to uphold the common interests of developing countries. The two sides expressed their support for the multilateral trading system, opposition to protectionism and readiness to make economic globalisation more open, inclusive, balanced and beneficial for all and to build a community with a shared future for mankind.

The two sides reiterated mutual support on issues regarding each other’s core interests and major concerns. China firmly pledged to support Sri Lanka in upholding its independence, sovereignty and territorial integrity, and respect and support Sri Lanka’s independent development path that suits its national conditions.

Sri Lanka said that it firmly supports and actively participates in China's projects like the Global Development Initiative (GDI), the Global Security initiative (GSI), and the Global Civilization Initiative (GCI). China said that it is ready to conduct in-depth discussions with Sri Lanka on specific measures to implement the above-mentioned initiatives, and work together for global and regional peace, security, development and prosperity.

Wickremesinghe had earlier told the Chinese media that he expects Sri Lanka to join the China-led Regional Comprehensive Economic Partnership (RECP). But there is no mention of it in the joint statement.