“Nepal should have independent observations on MCC”

Dr. Pramod Jaiswal

October 12, 2021


“Nepal should have independent observations on MCC”

Asanga Abeyagoonasekera is an International Security and Geopolitics Analyst and Strategic Advisor from Sri Lanka. He was Founding Director-General of the Institute of National Security Studies and Executive Director at Lakshman Kadirgamar Institute of International Relations and Strategic Studies.

He is the author of ‘Sri Lanka at Crossroads’, ‘Towards A Better World Order’ (2015). He is a keen commentator on Geopolitics, and ‘Conundrum of an Island’. He has also served as Visiting Professor at Geopolitics and Global Leadership and Colombo University.

He is an Alumnus of the US State Department IVLP, National Defense University (NESA, NDU), APCSS (Hawaii) and Young Global Leader World Economic Forum (Geneva). In 2021 Asanga was appointed to the Global Advisory Council at Apolitical Academy Global along with former New Zealand Prime Minister Helen Clark.

Dr. Pramod Jaiswal, Strategic Affairs Editor at Khabarhub, spoke to Asanga Abeya-goona-Sekera on different aspects of Sri Lanka’s Foreign Policy.

First of all, I would like to congratulate you on your new book “Conundrum of an Island Sri Lanka’s Geopolitical Challenges”. How would you like to locate your book in the entire Sri-Lankan foreign policy approach and her challenges to deal with the outer world?

My book “Conundrum of an Island” published this year highlights Sri Lanka’s foreign policy conundrum where Sri Lanka basically has drifted towards China and has formulated a bandwagoning foreign policy towards China.

The balance of the foreign policy is the missing ingredient here. From the 1960s, Sri Lanka had a non-aligned foreign policy, a balanced policy, but unfortunately due to the Chinese economic assistance and the infrastructure diplomacy carried out in the island, the present regime has been opening up many doors to China and the Chinese have found strategic in-roads in Sri Lanka.

I have called it a ‘strategic trap’ in my book. So, what do you have in Sri Lanka with its geostrategic position engaging with China’s BRI as well as the Indo Pacific at the same time. So, I capture all these areas in my book bringing in a security perspective and foreign policy perspective.

Sri-Lanka is at the crossroad for global and regional power, the two broad trends, one, Chinese growing influences through BRI and mainly, Indian and the US increasing cooperation though Indo-Pacific approaches, how have you analyzed Sri-Lankan position in two broad trends? What should be Sri Lankan approaches to deal with these trends?

During the cold war, Sri Lanka managed to have a non-aligned policy, starting from Sirimavo Bandaranaike, one of its founding members of the Non-aligned Movement (NAM).

Sri Lanka was one of the founding members of the NAM with Prime Minister Nehru. So you could say that back in the 60’s Sri Lanka did follow non-aligned foreign policy, not getting into NATO or Warsaw pact and also not inviting any big power rivalry into the island or towards the region.

So, Sri Lanka’s foreign policy posture back in the ’60s was to work towards international norms such as international law.

Diplomats such as Shirley Amerasinghe played an enormous role in the law of the sea (UNCLOS) as well as in creating the Indian Ocean zone for peace.

Back in the ’60s and ’70s, Sri Lanka was projected as one of the balanced as well as a country that follows norms and values. But unfortunately, if you observe the Rajapaksa regime 1.0 which is the Mahinda Rajapaksa and Gotabaya Rajapaksa which is 2.0, you can see a gradual drift towards China starting from Hambantota.

Many media outlets came up saying that it was a debt trap at the beginning. Even Sri Lankan scholars such as Ganeshan Vignaraja, who writes in Chatham House cautioned that we could get into a ‘debt trap’ if we go on like this.

But looking at the data points, the interviews that I have collected for my book as well as my analysis is that Sri Lanka is in a ‘debt trap’.

It’s because of the strategic assets that China has taken in Sri Lanka. One of the reasons that China was interested in the port city in Colombo or the southern Harbor (the Hambantota) was because China was interested in Sri Lanka’s geography not in the longer term.

They wanted some sort of footprint in the Indian Ocean and they were looking at Sri Lanka as one of the most strategic areas.

Apart from the Chinese establishment in Djibouti, Gwadar and Kyaukpyu in Myanmar, Sri Lanka being closed to the sea lanes of communications is a perfect strategic place.

So, Hambantota was taken for 99 years which is a serious loss for the country. Such a strategic port has been taken over due to the reason that we could not pay China.

So, debt was turned into equity. It was a debt-equity swap and so the Sri Lankan government had difficulty in paying. The previous government handed over the port for 99 years, but the same thing was done by the current government of Gotabaya Rajapaksa.

The port city was again given a special economic zone and handed to China with the extra jurisdiction of powers. When you compare such zones with the other zones, like what China has built in Djibouti, such as the Touchroad as well as many other special economic zones.

It is an initial step for China to engage economically, to bring in Chinese goods to the country and as well as to have its strategic relationship strengthen. The hybrid nature of China and the duality is the question right around the world.

So, you cannot ignore that factor in Sri Lanka. So, this is the reason that I call it more of a bandwagoning foreign policy practiced by the government although rhetorically they say it is balanced.

The new Integrated Country Strategy report (ICS report) was produced by a Sri Lankan high commissioner in New Delhi for India, the new high commissioner.

I congratulate the report but when you compare what is written on the report to the actual practice, you don’t see the actual practice of what’s written.

The report mentions balanced foreign policy, rules-based order, following the norms, and all that but I see a China tilt.

One of the reasons I was saying this from the last year was because I see a pattern of almost all the project going towards China while the Western projects such as the MCC of the US has been rejected and the Japanese LRT, the east container terminal in Colombo.

So, you see all of them have been rejected while the Chinese projects have been accepted. Now, this was again clearly identified by the Foreign Minister Dr. S Jaishankar when he was in Colombo.

He directly mentioned that a Chinese hand or an external hand is pushing these projects away. Obviously, the US MCC was a huge loss as well as the other projects also.

So, you see a gradual drift. Although they speak about Indo-pacific stating that we are with the Indo pacific or with the BRI.

So in my book, I call Sri Lanka a state that is sandwiched between the two strategies but unfortunately in practice Sri Lanka is with China.

A clear example was a few days ago at the UN Human Rights Council where Sri Lanka has clearly mentioned that it will support the Human rights concerns in Xinjiang as well as Hong Kong.

Sri Lanka has never practiced and has never gone out of its way to defend Xinjiang or Hong Kong. The reason is the reciprocal understanding that China would also support Sri Lanka’s Human rights concerns.

Recently, there has been a significant focus on China’s Belt and Road Initiative and its effects on Sri Lanka, with a particular case being the Hambantota Project and the notion of a debt trap. How have you observed China’s effort in establishing its geopolitical footprint in Hambantota and other infrastructure projects in Sri Lanka and South Asia? What can other South Asian countries learn from the Sri-Lankan experience?

There is a learning lesson from Hambantota. Even right now, they wouldn’t call it a debt trap. The government is supporting China and getting assistance, multiple loans not only for the strategic projects but after that.

So, you can see China getting into the power sector, the water sector, the roads, telecommunications where 80 percent is run by Huawei and many other sectors.

Most of these loans that come in are not transparent, they are opaque. Bringing standards is important to one’s country.

Now, this is where the B3W would be a really good example of the blue dot network. So, it is really important to bring in standards, understand the strategic traps and the long-term benefits towards your own country.

Now, the business model of Hambantota is not seen by any Sri Lankans, so we didn’t know how much returns would it generate year after year.

And you could see like certain infrastructure that is being built even Hambantota is not to the maximum benefit. We are not getting the maximum benefit out of Hambantota.

When we analyze these sorts of an issue back in Colombo even with few scholars, foreign scholars, what we saw was that, if the infrastructure does not proceed in immediate returns then, of course, is a strategic dimension to it. For e.g., the airport which was built in south Mattala does not have flights, I mean, no flights are coming in.

But China keeps on saying; you wanted the airport, so we built it. So, I think it is important that the countries should not get into debt traps like this and the South Asian countries can learn of course as well as the countries about the Chinese strategic moves and calculate its immediate benefits.

Because even the port city would generate jobs, the 90,000 or 80,000, would be in 15 years or 20 years or the years to come.

So, what you have is that the land reclaimed by China from the seafront, the heart of the capital, right next to Colombo port, so you can see, when you have a Special Economic Zone (SEZ) just closer to Chinese operated South China terminal, obviously it makes sense for China to invest as well as bring in.

Here is the thing, when I interviewed the Chinese Managing Director of the port city, what he mentioned was very interesting- he said, ‘this is not a Chinese project, it is an international project’ so that international partners can come in and it’s a project for the entire world.

Now, this is the dimension or the perception that China is trying to spread, trying to sort of work with multiple partners.

But what is important is that you should understand the long-term implications towards your country, your economy as well as your security. That is very important.

What factors have led to the current economic crisis in Sri Lanka? How is the Sri Lankan government responding to the crisis at hand? In your view, what could have stopped the Sri Lankan economy from getting into the crisis?

Former Deputy Governor of the central bank Dr. Wijeyawardena clearly says, it is not a crisis; it is a catastrophe because of the serious reduction of the foreign reserves in the country and mismanagement.

Now you can see the foreign exchange reserves are barely enough to survive or to maintain, so, we have been borrowing with Bangladesh is one country we have been borrowed 200 million, India is another currency swap through the SAARC, Sri Lanka have borrowed above 400 million.

Then you have the Chinese assistance of multiple loans of 1 billion, 1.2 billion coming in for the pandemic for various other assistances, but they are loans that you need to repay.

So, you could see the accumulation of the loans, so the revenue of the country is not enough for the 80 percent of the revenue taken for debt repayment and debt servicing.

So, we have a serious situation, because it has been growing for the last several years, it’s not only this regime. But this regime managed to push it towards a very narrow corridor where limiting the imports to the country and following malign economic practices, such as back in the 1970s, where an export-oriented economic policy was taken forward.

But unfortunately, you see many impasses coming in from external spheres, what you could see is the Sri Lankan economy is having a serious catastrophe right now.

So, the solution from the government’s policy prescription such as appointing the military persons to control crisis and the heavy militarization is not a good image for the outside.

Sri Lanka needs to go into an IMF program but keeping it away from going into IMF is an ultra-nationalist political ethos by the government.

So, you have positions change such as governors were appointed as the State Minister. The central bank is the advisory body of the government and has to be independent.

But you have a Former State Minister now serving as the governor, so you can imagine how independent that would be.

So, unfortunately, all these things are happening while they are doing some corrections, the corrections are changing positions like appointing new governors, foreign minister, new health minister et al.

But even the new Foreign Minister who was appointed for example and I expected he would speak on his values on liberal democracies as well as talk about the international norms but he went and spoke about Xinjiang, protecting Xinjiang as well as defending human rights.

Sri Lanka has not gone in that direction so I see a serious danger in this as well as inviting multiple Chinese inroads into the country through the political system, through the political model.

So the economy is heavily dependent on the vaccine diplomacy from China, none of the journalists could speak anything critical on the Chinese vaccine as they would be questioned.

My analysis recently was that Sri Lanka, unfortunately, from a quasi-democracy has moved into an autocratic regime. So, this is very sad.

For the first time, I’m seeing a situation like this and it would impact the economy; the decoupling from the international system or the GST plus or various other mechanisms that are out there. So, I think the government needs a quick recalibration of its policy prescription.

Sri Lanka’s foreign debt troubles have often been juxta-posed with concerns over the Chinese debt trap controversies. Has Sri Lanka’s current foreign debt crisis largely surfaced due to its inability to pay back the huge loans taken from China for the Hambantota port?

Yes, I have been saying that it is a debt trap. Because we could not pay back China we gave Hambantota port to China, there is no other reason to give such a strategic location and a port.

And the parliament only took 30 days to pass the port city. It is impossible that the bureaucracy and the legislature passed such a sophisticated act in 30 days.

Are there any side payments going in or to China working in various other directions? How did the MCC not go forward?

Those are the questions that we look at. For MCC, for example, the government appointed a presidential commission and the commission highlighted that there is a national security threat from the MCC.

It’s wrong to say that and it’s incorrect. So, they created a fear saying that look there is a serious concern. Obviously, it’s a grant and it was not accepted.

And these are losses for the country. So, you are borrowing more from China. You are getting loans; multiple loans and you are trying to sustain the economy as well as the projects.

So, this strategic grip will impact the Sri Lankan regime in the future. So, this is the issue. If the projects are transformative, such as the SEZ that Sri Lankans can amend then it’s fine.

The problem is the future regime will not be able to amend the port city- Hambantota, so the strategic grip is what’s concerning. And, yes there is a debt trap.

What kind of domestic and international factors existed in Sri Lanka’s decision to reject MCC? How have you assessed this phenomenon in the larger geopolitical contestation between China and the US? What will be your normative suggestion for Nepal based on Sri-Lankan experiences on the same matter?

When we were looking at MCC, we took an independent view of the entire document. We looked at it, our researcher looked at it and we gave our observation.

There was no national security threat. There were few concerning things like fixing cameras in the transport corridor that should be done by the defense and the security establishment on public security.

There were few things that we had to amend, but other than that we consulted Sri Lankan economists, as well as an expert from the University of Peradeniya.

We looked at the social side of the benefits of the transport corridor, we found it all positive, and we found that the project would give enormous benefits to the country. And it’s a grant.

Now, when we were doing this back then, there were multiple channels of media outlets, as well as many directly writing to the PM; from outside, external reports were coming in and saying that there is the US invasion coming in from projects such as MCC, as well as other US establishments.

So, there was a heavy anti-campaign against MCC. One of the documents which I looked at was very critical and we carefully looked at it.

They mentioned that this is happening in different parts of the world and it’s the US grand strategy sort of thing. It’s all rubbish.

It was I would say an anti-MCC campaign, as well as bringing in a security dimension to this development project. So it was very unfortunate that Sri Lanka lost this.

But we managed to analyze and give the actual situation that there is no security threat. But unfortunately, the new regime which came to power, their main political objective was to serve the ultra-nationalist sentiments of the Sri Lankan people; the Sinhalese Buddhist.

So, ultra-nationalism was used for national security, on protecting sovereignty. So, MCC was one of the projects that got caught in this and then the Presidential Commission which Gotabaya Rajapaksha appointed on the MCC mentioned, of course, the President’s vision on the ultra-nationalist ethos.

So, saying that there is a national security threat, from Colombo to Trincomalee, they are making a kind of security corridor, as well as having serious security concerns.

So the fear that was created, was all politicized. And then we lost the grant. One lesson for Nepal is to have independent observations on this and try to take this grant and move forward because it was a loss for us.

We lost it because of politicization. And other, what are the benefits? What are the areas that Sri Lanka could work on? That is something that we will have to navigate.

So, it will be challenging because I can imagine the number of critical views, and the national security concerns. You would go through the same I assume.

Various developments are ongoing regarding the Indian Ocean. The US, India, Japan, Australia are cooperating on Indo-Pacific approaches, and advocating the rule-based free and open Indo-Pacific region, at the same time, the rise of China has emphasized its character-based order (China labeled it as Asian characteristics). How could it unfold in the coming days? What sort of approaches should be adopted by Sri Lanka regarding the Indian Ocean region?

Well, the alliances going on right now would be the most interesting part of the foreign policy dialogue, AUKUS (Australia, the US, and the UK alliances) or the QUAD, which is going in on the discussion recently.

Obviously, the scholars would see as; Is contending China or, are these working on preserving democratic values or the like-minded countries who sort of agree on rules-based order.

So, the main point is the alliances such as AUKUS will give the military capacity to the countries like Australia; such as under-sea submarine nuclear capacity, which is a great step forward to maintain the security balance, which is being threatened right now in the Pacific, as well as what’s going on especially in South Asia.

So, after the US withdrawal from Afghanistan, there is a serious concern about the regional security balance. Will China or Russia fulfill that role?

I don’t see that China is there for the economy as they have mentioned and they will not invest heavily in the security or counter-terrorism or many other areas as the US has invested. Countries like Russia can play a huge role in South Asia.

This I have spoken at the Moscow International Security Conference a few years ago. So what you see is that the alliance has been created due to significant pressure built on certain countries; China’s belligerence in the vicinity of the Indian Ocean, around India.

So, even the activities in Sri Lanka are quite concerning to its neighbor India. The Sri Lankan government rhetorically mentioned that we believed in balanced foreign policy, as well as moving towards the rule-based order and all that rhetorically, but in action, they go on to support Xinjiang as well as bring in the Chinese models or inroads, heavy militarization going on, so it’s moving away from the democratic norms or the values or the liberal footprint that democracy in Sri Lanka has.

So these are the dangerous things. Sri Lanka should be with the alliance, of course, the QUAD, they should support because Sri Lanka has been supporting the norms of the rule-based order. And that’s the route that Sri Lanka should take.

Of course, being in the BRI, but balancing, I see Sri Lanka could maintain a balance as a nation rather than tilting towards one particular nation, which is very dangerous for Sri Lanka to engage in, especially in the security domain.

After the Easter Sunday attack, you could see a significant security issue, extremist terrorism. It happened a few weeks ago in New Zealand.

The place of the eastern province of the Kattankudy should not be a breeding ground for using extremist terror. Sri Lanka’s closest neighbor, Maldives has the highest per capita of extremists traveling to Syria.

The region is having significant security concerns and alliances are important for balance, extra-regional countries of the European Union.

You need countries in the region to balance what’s going on in the region. I would say that the importance of regional alliances is really important and Sri Lanka should be within the global norms.

In the growing complexities of India, China, and the US as a triangle in South Asian countries in general and Sri Lanka in particular, what sort of role can the middle power such as Japan, EU, Australia and ASEAN countries play in Sri-Lanka?

A few months ago, I consulted the EU Indo-Pacific policy document to the EU office in Colombo. The document is written taking a very diplomatic posture, not pointing towards China.

The position was taken by the UK on the Indo-Pacific Strategy (IPS), Germany also has the IPS. So, we carefully studied strategies and their impact on Sri Lanka.

If you look at the importance of the European Union in EU countries in the region, it is to balance the situation that’s going on.

Because what we see is the nation is moving or bandwagoning due to the significant pressure that has been created by China or the internal interference that is going on.

So, you need nations to balance, be it the Indian Ocean for security. One example, I can tell you is that; I spoke about this in France, in the French Foreign Ministry sometime back.; the importance of bringing in CRIMARIO, the project from the Western Indian Ocean towards the Eastern Indian Ocean to nations like Madagascar, Seychelles, etc.

The CRIMARIO Project should come to Sri Lanka. So, I am happy that countries in the Western Indian Ocean are working on the project such as CRIMARIO, as well as with the EU.

So the importance is that you would need stronger alliances or stronger partners, such as Germany. Germany was also mentioned on investing in Judiciary as well as various others to maintain democratic norms as well as countries values.

It’s important to bring in these countries and work with them rather than to exclude them. So, a more inclusive approach would help Sri Lanka to balance its foreign policy right now and also its institutions as well as, its capacity on the human rights issues; which has been highlighted by Michelle Bachelet in the Human Rights Council.

So, Sri Lanka would need to develop its capacity at the institutional level. It needs to have genuine reconciliation. So, those are the areas that of course, Sri Lanka could work on and also with its own Diaspora, the strategy to improve the relationship.

So for all these right now an immediate recalibration is required. But there is a rejection mentality in its government foreign policy posture, for example, its rejection of the Human Rights Council report. So, you need to have a more progressive mindset than a rejectionist mindset.

Sri Lanka will soon be assuming the role of Vice-Chair of Indian Ocean Rim Association (IORA) in the latter part of 2021 and thereafter the Chair for the tenure of 2023 to 2025, Maritime Safety and Security. With Sri Lanka also being the founder of the Indian Ocean Rim Association (IORA), how does it plan to carry out its responsibilities leading the Indian Ocean Rim Association Working Group on Maritime Safety and Security?

Maritime safety and security are very important for a maritime nation like Sri Lanka, the country’s foreign secretary has mentioned to IORA that ‘it’s time for action, not words.

That’s what we need a lot of action, but the problem is how do we take action when we don’t subscribe to international norms and values of a rules-based order.

So, how do we outlaw the sea? So, this is where the problem is. Sri Lanka can play a huge role. Sri Lanka should play a huge role as the chair and the founding member of IORA because Sri Lanka is identified as the hub for drug trafficking, narcotics as well as extremist terrorist or terrorist activity in the Indian Ocean.

As a chair, of course, Sri Lanka should voice much more about the global norms, the rules-based order as well as creating the balance in the Indian Ocean right now, rather than, making roads or giving strategic space to China.

So, this is where the danger is. It’s more of a back door created to the Indian Ocean or the South Asian region and Sri Lanka should not create a backdoor to China.

Just like the Balkans who were creating a backdoor for China to enter the EU. So, this is a danger and it’s a danger towards the regional security, it’s a danger towards the neighboring countries as well as a serious concern.

So, practicing and having clear actions on the norms and the rules in the Indian Ocean is important. And Sri Lanka can do that. Sri Lanka did it in the past, we need to revive that and follow the rules-based norm.