For firmer growth, Sri Lanka needs China's soft power

MARWAAN MACAN-MAKAR, Contributing writer-January 9, 2014

HAMBANTOTA, Sri Lanka -- Bi !oards promise a f"t"risti# paradise on the

road that eads to this s eep$ fishing town on Sri Lanka's so"thern #oast% Smi ing pi#t"res of the #o"ntr$'s president, Mahinda &a'apaksa, appear on most of them% Others in# "de his si! ings or sons -- mem!ers of the arge &a'apaksa # an who hai from this region and effe#ti(e $ r"n post-#onf i#t Sri Lanka% A short distan#e from Ham!antota, a!o"t )*+km from the #apita Co om!o, are ear $ signs of the p anned transformation of this f at terrain of shr"!s and forests teeming with wi d ife% An internationa airport has !een #ar(ed o"t of a '"ng e inha!ited !$ e ephants% A g eaming #ri#ket stadi"m now rises o"t of a d"st !ow % The #enterpie#e of this &a'apaksa- ed de(e opment mode is a massi(e new har!or%

The president, after whom !oth the airport and port are named, is re#ei(ing k"dos

from de(o"t (oters here% ,The president is the ife! ood of this area% Look at Ham!antota, it is e(en !etter than Co om!o,, remarked #on(enien#e store owner S"'ith Sa$akkara, --% ,Before, this p a#e was nothing more than shr"! '"ng e%, He a so has China to thank% The Magamp"ra Mahinda &a'apaksa .ort is the res" t of oans from the Asian giant% The first phase of the port, #osting /-0+ mi ion, taps Ham!antota's strategi# o#ation in the 1ndian O#ean, '"st ne2t to one of the wor d's !"siest shipping anes, tra(ersed !$ 3+,+++ (esse s ann"a $% This Chinese footprint is (isi! e from most parts of the So"th Asian is and nation as it re!"i ds after near $ -+ $ears of domesti# #onf i#t% Highwa$s, rai roads, ports, and #oa and h$dropower p ants are in this mi2% The atest is the new highwa$ #onne#ting Co om!o to the #o"ntr$'s o dest internationa airport% The 42port-1mport Bank of China ent the go(ernment /056%0 mi ion to #onstr"#t the 07%8km stret#h, whi#h opened in ate O#to!er% 1t is part of near $ /5 !i ion worth of go(ernment-appro(ed infrastr"#t"re pro'e#ts, most of them f"nded !$ Chinese oans% Defender China in 0+)- !e#ame Sri Lanka's argest foreign dire#t in(estor, a##o"nting for 059 of inf ows% Co om!o had !$ No(em!er attra#ted /)%0 !i ion of a targeted /0 !i ion, a##ording to go(ernment fig"res% &a'apaksa's growing dependen#e on China is not imited to e#onomi# dea ings% Co om!o is desperate $ seeking internationa friends as it fee s the heat from the :%S%, Britain and 1ndia to address a eged h"man rights (io ations in the # osing phase of the ethni# #onf i#t, whi#h tore apart re ations !etween the ma'orit$ Sinha ese and minorit$ Tami #omm"nities% A##ording to a :nited Nations-san#tioned report and h"man rights gro"ps, an estimated 5+,+++ #i(i ians ma$ ha(e !een ki ed as go(ernment troops #r"shed the Tami Tiger separatists in the fina ons a"ght that ended in Ma$ 0++*% Sri Lanka's h"man rights re#ord wi #ome "nder s#r"tin$ again in Mar#h, at the ann"a session of the :%N% H"man &ights Co"n#i in ;ene(a% <ashington sponsored a to"gh reso "tion against Sri Lanka at the #o"n#i ast Mar#h, the se#ond #onse#"ti(e $ear that the &a'apaksa regime was taken to task% Adding to the press"re were #riti#isms e(e ed !$ :%=% .rime Minister >a(id Cameron when he ast No(em!er (isited Sri Lanka for the Commonwea th s"mmit% China re#ent $ reminded the internationa #omm"nit$ where it stands, iss"ing a statement from its em!ass$ in Co om!o #ommending Sri Lanka for ,!ig strides in promoting h"man rights and rea i?ing nationa re#on#i iation%, China's growing ro e in shaping Sri Lanka's fort"nes is rooted in &a'apaksa's rise, fo owing his first e e#tion (i#tor$ in 0++7% China had !$ 0++* rep a#ed @apan as the #o"ntr$'s argest donor% Near $ *59 -- or /5%38 !i ion -- of the /7 !i ion-p "s in Chinese oans and grants to Sri Lanka !etween )*3) and 0+)0 #ame after 0++7% The shift was mat#hed !$ mi itar$ aid Bei'ing offered Co om!o in its fina assa" t against the Li!eration Tigers of Tami 4e am, when arms sa es hit an estimated /)%6 !i ion,

a##ording to o#a so"r#es% ,China has !een he ping Sri Lanka A"ite a ot in areas of high se#"rit$ importan#e to "s against the LTT4,, said Niha &odrigo, Co om!o's former en(o$ in Bei'ing% ,B"t China has not !e#ome a means to seek a #omforta! e ! o# awa$ from the <est%, 4(en so, the ti t toward China is a so the res" t of a Sri Lankan s"##ess stor$% >espite #onf i#t, the #o"ntr$'s e#onom$ grew steadi $ on the !a#k of e2ports s"#h as tea and garments, maintaining an a(erage of a!o"t 79 ann"a growth% S"#h progress he ped the #o"ntr$'s transition into a midd e-in#ome e#onom$, !"t a so rendered it ine igi! e for oans from traditiona enders s"#h as the <or d Bank% A ,postwar !"mp, saw the Sri Lankan e#onom$ hit 69 ann"a growth in 0+)+ and 0+)) !efore it dipped to !e ow 39 in 0+)0% ,The post-#onf i#t re!o"nd he ped a se#tors !oth on the s"pp $ side and the demand side,, noted the <or d Bank% The #o"ntr$'s Board of 1n(estment has !een tr$ing to tap this fa(ora! e # imate to attra#t new foreign #apita % Some /)%- !i ion in in(estment f"nds f owed in d"ring 0+)0, a s ight in#rease from /)%) !i ion in 0+))% 1n(estments in to"rism ha(e !een the main draw, he ping the !oard #ross the /) !i ion mark for the first time sin#e it was esta! ished in the ate )*3+s% The ead pro'e#t is the se(en star, 88)-room Shangri-La Hote -- a /7++ mi ion in(estment rising rapid $ near Co om!o's most famo"s promenade% Long way to go ,F>1 Bforeign dire#t in(estmentC so"r#es are di(erse, with the main in(estors now from the Asian region s"#h as 1ndia, China and So"theast Asian #o"ntries,, >i ip Samarasinghe, Board of 1n(estment spokesman, to d the Nikkei Asian &e(iew% ,1n(estors who man"fa#t"re goods are attra#ted to the fa#t that Sri Lanka has FTAs Bfree trade agreementsC with !oth 1ndia and .akistan and see the is and as an e2#e ent !ase to a##ess these markets%, Det, the F>1 f ows do not mat#h the !oastf" e2pe#tations of the &a'apaksa regime, whi#h was hoping to reap a post-#onf i#t !o"nt$ !$ affirming !"siness-friend $ !"dgets sin#e 0+)+% ,The inf ow of F>1 has !een disma ,, said Nishan de Me , e2e#"ti(e dire#tor of Eerite &esear#h, an independent think tank% ,1n(estors are not fee ing #onfident a!o"t Sri Lanka, !"t are taking a more wait-and-see approa#h%, The man"fa#t"ring se#tor simi ar $ needs a shot in the arm, as growth fig"res mask a worr$ing dip in e2ports% ,1t is tro"! ing that Sri Lanka's e2port performan#e has !een on the de# ine,, said An"shka <i'esinha, a resear#h e#onomist at the semigo(ernment 1nstit"te of .o i#$ St"dies of Sri Lanka% ,The e2ports-to-;>. ratio had fa en from --9 of gross domesti# prod"#t in 0+++ to a!o"t 009 in 0+)+, and has sta$ed aro"nd that e(e "nti the most re#ent period%, Meanwhi e, a widening trade defi#it -- near $ /)+ !i ion ann"a $ -- has p"t press"re on Sri Lanka's /7* !i ion e#onom$% So has the nationa de!t, whi#h ho(ers at near $ 8+9 of ;>.% Fit#h ratings, an internationa ratings agen#$, iss"ed a warning in ate O#to!er a!o"t Sri Lanka's ,re ian#e on de!t-#reating #apita %,

Most dist"r!ing, a # imate of growing imp"nit$ and de# ine of reg" ator$ a"thorities ser(es as a warning to foreign in(estors #ontemp ating a #o"ntr$ r"n !$ the &a'apaksa # an% ,1f one ooks at the main reg" ators, s"#h as the #entra !ank, the$ are a po iti#a instr"ments of the go(ernment,, said @%C% <e iam"na, #hairman of Transparen#$ 1nternationa Sri Lanka% ,<ith the war (i#tor$, the priorit$ has shifted to #onso idation of power of the regime%, B"t, in Ham!antota, where Chinese oans with interest rates as high as 8%079 po"r in, s"#h #on#erns are in#onseA"entia % &esidents ike Sa$akkara, who !e ong to the is and's ma'orit$ Sinha ese #omm"nit$, ha(e ret"rned their nati(e son, &a'apaksa, twi#e to power on the !a#k of his nationa isti# rhetori#% ,<ith a these pro'e#ts in p a#e, Ham!antota is the !est p a#e,, he said%