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The Sunday Times 30 April 2017

Transparency vital in ties with India, China

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Prime Minister Ranil Wickremesinghe leaves for New Delhi next week on what is a working
visit with Indian leaders in the backdrop of some controversial issues in an otherwise seemingly
friendly environment between the two countries.

It is no secret that India entertained concerns over Sri Lanka’s previous Administration cosying
up to China a little more than India would have liked. Given the nature of the situation, however,
the incumbent Government in Colombo (which India was happy to see in the saddle) has had no
option but not to jettison the widening China connection. The expansion of the Colombo harbour,
the Colombo Port City and the Hambantota harbour are all fait accompli and there is no turning
back.

To allay India’s unease at the time, former President Mahinda Rajapaksa told the then Indian
High Commissioner who came to complain of Chinese backed expansion of the Colombo
harbour; “I will give India the next project”. That sop hardly comforted India, and this
Government is trying to ‘balance’ the giveaways to China with handouts of its own to India. Put
bluntly, it is a policy of ‘giving’ China the south and India the north (and the east).

The PM’s recent visit to Japan was aimed, partly, at bringing that country – for years Sri Lanka’s
main donor, into this equation. Along with invitations to the US Pacific Command to have access
to Sri Lankan ports, the incumbent Government’s Non-Aligned policy is not, it seems, so much
as to distance itself from all the superpowers, but have them all fighting it out for a stake in Sri
Lanka. The ETCA (Economic and Technology Cooperation Agreement) is the sticky point – with
India. The Indian side is at pains to show that ETCA is something Sri Lanka wants more than
India because Sri Lanka wants products manufactured in its planned industrial zones to have
access to the huge market that is India. If ETCA is to be the natural extension to the FTA (Free
Trade Agreement) between the two countries, questions do arise. Items given concessionary duty
terms under the FTA were no match for the large scale imports of cars, tuk-tuks and foodstuffs
from India to Sri Lanka outside FTA, causing a massive trade balance in favour of India.

For Sri Lankan companies, FTA has been a bitter-sweet experience. Bitter for Maliban biscuits
and sweet for Damro furniture, for instance. India has no uniform tax structure and its many
states torpedo what FTA grants. The fundamental issue the Government faces in promoting
ETCA with its detractors in Sri Lanka is its lack of marketing ability, i.e. ‘selling’ ETCA to a
suspicious public. The lack of transparency that even the President has complained of is at the
root of often unwarranted suspicion that a quartet in the Government, some with vested interests,
is taking all the decisions.

Still, there is no way out for Sri Lanka other than to drop anchor with the emerging economic
powers of Asia viz., India and China. Sri Lanka ‘missed the bus’ in the 1960s by not aligning
itself with the emerging nations of South East Asia viz., South Korea, Singapore, Thailand etc.,
because of left-wing agitation in the country. Are we to miss the second bus as well? But this
does not mean going headlong with weak negotiation skills as it did in the Colombo Port City
and Hambantota harbour deals with China. Last week we wrote about the need for Sri Lanka to
look towards West India for a change. There is no political baggage there like there is in the
vitriolic state of Tamil Nadu. Western Indian states of Maharashtra, Gujarat and Goa are the
financial, commercial and entertainment hubs of India with a GDP of US$ 554 billion. With
ancient links to Buddhism and the Sinhala language, that part of India has a huge middle class,
some 45,000 persons from these states alone visited Sri Lanka from January to November last
year.

There is an even stickier issue than the ETCA which is not attracting opposition in Colombo as it
should, because it impacts directly in the north – even though its overall fallout is on Sri Lanka’s
economy. This is the issue of poaching by Indian fishermen in Sri Lankan waters and the
continuing rape of the marine resources in the area. Sri Lanka loses 20,000 – 30,000 metric
tonnes of fish valued at Rs. 5 billion annually as a result. However, the country has capitulated in
the negotiations with India on this vexed issue by being coaxed to have talks at fishermen’s
union level when the issue is a matter of sovereignty and territorial integrity. The Fisheries
Ministry is fighting a losing battle with little support from the Foreign Ministry, unlike in the
case of negotiations on the Kachchativu issue in the 1960s and 1970s. Those talks were
spearheaded by able, gutsy Foreign Ministry officials with bi-partisan UNP-SLFP political
backing at the highest levels.

The PM’s visit will no doubt be closely scrutinised as an MoU will be discussed on granting
Indian companies greater access to Trincomalee’s surroundings. The oil tank farm and the Liquid
Gas projects are already having differences within the Unity Government. India already has a
substantial footprint in the north. It is in the interest of Indo-Lanka relations for both
Governments to be more open because, ‘secret negotiations’ breed suspicion, and a replay of the
1987 Accord between the two countries is not the best of examples to go by, and must be
avoided, at all cost.