Indo-Srilankan ties and the Chinese challenge

NewsBharati    08-May-2018   
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THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA or popularly known as Sri Lanka had been named, renamed and referred to by many names in its 3000-year-old recorded history. Siṃhāla in Bhagwat Purana, Tambapanni by the legendary prince Vijaya, Illankai in Tamil and Cerentivu in old Tamil, Sielen Diva by the Greeks, Serendip by the Persians, Ceylan by the French and as Ceylon by the occupying British forces. Shri Lanka had a brief historical record of trade ties with faraway countries from around the world. Situated in the middle of a major maritime trade route Sri Lanka had remained an important juncture for international trade throughout the recorded history and continues to remain a strategically important nation sitting right in the middle of the major trade route. Although archaeological artefacts as old as 600 BC had been found in Sri Lanka, yet the Singhalese history traditionally starts around 543 BC with the arrival of the legendary prince Vijay with 700 followers in eight ships traversing 860 Nautical miles from the legendary Capital city of Singhapura in the Vanga Kingdom (present-day Bengal). The famous chronicles of Mahavamsa, Dipavamsa, Rajaveliya, and Culavamsa provides a brief account on the turn of events along with a detailed list of native monarchs that ruled Sri Lanka from the establishment of Tambapanni kingdom by Prince Vijaya in 543 BC to the last king Vikrama Rajasinha in 1815 AD. A significant event in the Singhalese history can be identified with the establishment of Anuradhapura by king Pandukabhaya as the capital city around 380 BC. The city of Anuradhapura spanned around 120 acres successively served as the Capital of Singhalese empire for the next 1400 years. In 250 BC with the arrival of Mahinda, the son of Mauryan Emperor Ashoka Buddhism was formally introduced to Anuradhapura, followed by Sanghamitra who arrived with the Jaya Shri Mahabodhi tree and planted it in Anuradhapura which is considered as the sapling of the great Bodhi tree, under which Gautama Buddha achieved enlightenment. The Jaya Shri Mahabodhi tree remains as the oldest human-planted tree with a continuous historical record in the world. From the Ramayana to the arrival of Prince Vijaya and to the arrival of Prince Mahinda with a message of Buddha the ancient chronicles stand testimony to the concurrent ties between the ancient lands of Sri Lanka and India meagerly separated by the Palk strait of 12 nautical miles. The halt in the continuity of socio-economy exchange between the two can be attributed to the colonial era when trade operations were completely appropriated by the occupying forces hence ceasing all bilateral ties. Briefly, with the accession of the kingdom of Kandy to the British under the Kandyan convention, formal bilateral ties took another 132 years to be consecrated and canonized till both the nations achieved independence. Although the Lankans were successful in securing independence the following year of Indian Independence, yet Sri Lanka was retained as the dominion of the commonwealth for the next 24 years until May 22, 1972, when it officially became the Republic of Sri Lanka.

Lankan Attainments:

After securing independence from the British in 1948 as the dominion of Ceylon and finally becoming a Republic in 1972, Lanka went through a massive transformation cycle. Sri Lanka is also one of the pioneer countries in the south Asian region to implement economic liberalization. Being a contracting party to the General Agreement on Tariffs and Trade (GATT), Sri Lanka was also a founding member of the World Trade Organization. Sri Lanka assumed a proactive role in driving trade liberalization in the region as a member of South Asian Free Trade Area (SAFTA). Sri Lanka immensely benefited from the modern ports which were built during the British era and we’re perpetually modernized over the period.

As per Sri Lanka Export Development Board, Sri Lanka's total export stands at around $11 billion with Rubber products, knitted garments and tea as major contributors followed by precious and semi-precious gemstones. It is also the largest exporter of Tea. Sri Lankan imports stand around $21 billion comprising with refined petroleum at 12% of the total imports followed by Cement and other constructions equipment. Sri Lanka is the 81st largest export economy and is the 74th largest import economy of the world standing on the 57th number in terms of population. Sri Lanka is also blessed with the biggest density of Waterfalls in the world and the country has widely utilized its water resources for generating hydroelectric power and fulfilling its energy needs. Owing to its strategic location along with its rich natural resources the Lankan land is sometimes wisely referred to as the pearl of the Indian ocean. At around 21 million people inhabiting the Island Nation, Sri Lanka has one of the highest literacy rates in all South Asia at 98.1% and boasts of having the highest female literacy rate in the region. Sri Lanka also became the first country of Asia in 1931 to provide voting rights to its womenfolk, the Island Nation also gave the first women prime minister of the world Sirimavo Bandaranaike when she was elected as the head of Sri Lanka's government four decades ago from July 21st, 1960 to 1965. After the end of the civil war that rampaged the country for four decades, the tourism sector in Sri Lanka has started to normalize with around 2 million foreign tourists visiting the Island Nation in 2017. It is noteworthy that Indian tourists continue to remain the top source with 384,628 arrivals nearly making up 8% of the total tourists turn out followed by China and the UK. The graph of the tourism sector in both India and Sri Lanka is supposed to grow vertically over the few decades owing to the socio-political stability in the region. India and Sri Lanka also have a huge untapped potential of developing an exclusive Buddhist tourism circuit attracting seekers of a Dharmic experience, in the process both benefiting economically from the shared cultural heritage.


The strategic location of Sri Lanka in between the busiest Maritime trade route had always attracted world powers and its reference can be found all throughout the recorded history. Starting from the Portuguese in the early 15th century followed by the Dutch and finally the British all fought to keep Lanka under their respective colonial control. In the 21st century with the formation of united nations and other regional cooperation agencies, the physical invasion of countries has become extremely unchancy. During the global financial crisis of 2007-08 world economic powers like the US & UK fell to the credit crisis resulting in a global economic meltdown. On the other hand, China with $ 29.3 billion trade surpluses and with over $1.9 trillion dollars in forex reserves it remained immune to an extent. Following the economic downfall, the US and Europe were forced to cut imports and significantly decreased their overseas investments except those of strategic kind. During this period of economic transition and economic powerhouses changing hands, China started playing a global role extending debts and using it as the soft power to influence countries from first world nations like Australia to low-income group countries like Angola. In the meantime, China to realize its global ambitions recognized the strategic importance of Sri Lanka due to its tactically advantageous location. Many experts on China's international engagement policies often term this as a string of pearls policy to strategically contain India and global trade routes. The recent Hambantota port deal has raised India’s concern owing to it being located strategically to tactical locations in India, one being Visakhapatnam and another being Srihari Kota. The debt for equity swap has now placed 80% ownership of the port to a Chinese state own firm amidst fierce opposition from trade unions and opposition political parties. During the period of 2012 to 2014, China rose in ranks as the largest FDI investor in Sri Lanka crossing US and UK in the process. Chinese FDI accounted for the largest share at 24.53% of the total FDI received during 2014-15. Growing sharply at the rate of 117.87% it poised a sharp contrast to the negative growth rate in terms of FDI from other Asian countries to Sri Lanka. Similarly, China also is emerging as the third largest FDI investor in the world with $107 billion in FDI outflows.

An analysis of the issue clearly points to the fact that the debt in 2016 had reached 79.61% of Sri Lankan GDP. Around 95% of the government revenue is going directly towards international debt repayment and out of the total debt payable to countries and other monetary agencies, 1/3rd of it goes to China. The commercial loans provided by the china to Sri Lanka stands at a whopping 6.3% interest rate.

LANKAN PORT DEALS: challenges and controversies

Hambantota port was built by the British in 1800’s as a lookout the post and was last used to provide fueling services. The entire turn of events that took place around the Hambantota port deal raised questions on the deals rationality and the modus operandi involved. A closer look at the turn of events draws an uncanny similarity between the tactics employed by then imperial Britain to secure a 99-year lease of Hong Kong but in a more subtler form. The inception of the Idea to redevelop the Hambantota port can be drawn to the beginning of 2003 when a French engineer Lavalin submitting a feasibility study of the ports’ possibilities to handle international bulk cargo, following submission of the report to the official task force. The task force headed by ports authority technical advisor G. P. Weerasinghe included Prof. Samantha Hettiarachchi (Moratuwa University), Ajith Abeysekera (Deputy Director, Dept. of National Planning), Janaka Kurukulasuriya (Deputy Chief Engineer SLPA) and S. A. Abeysiriwardene (Superintendent Engineer, SLPA) rejected the report for ignoring the ports potential impact on the Colombo port, which had been handling around around 95% of Sri Lanka’s international trade and was yet to realize its full potential.

In 2004, tsunami hit the coasts of Sri Lanka and its southern districts were the worst sufferers, consecutively Sri Lanka held its Presidential Elections in 2005 and instated Mahinda Rajapaksha as its new president. Immediately after assuming office Rajapaksha government embarked on various ambitious projects as more of a political ambition rather than economical, especially in the southern districts including his home district of Hambantota. In 2006 another consultation firm by the name of Ramboll a Danish multi-disciplinary engineering, design and consultancy company was hired by the new regime to conduct a second feasibility study. In contrary to the first feasibility study, the second one advocated Hambantota Port to be developed as a major container transshipment hub. The feasibility report made projections to contain a wide variety of terminals, including a dry bulk terminal, liquid bulk terminal, break bulk terminal, Ro-Ro terminal for vehicles and a Container transshipment terminal with expectation for the port to handle around 20 million TEU’s by 2040. During the tenure of Rajapaksha regime several ambitious projects were undertaken following the port by an International Airport and an international cricket stadium. All these multi-million-dollar projects were named after Mahinda Rajapaksha as, Magampura Mahinda Rajapaksa Port, Mahinda Rajapaksa International Cricket Stadium and Mattala Rajapaksa International Airport respectively. All these projects had common attributes of involving costly Chinese debts and Chinese construction companies. The Chinese loans employed in these projects were received at a very high rate of interest at around 6.3%, while most multilateral agencies provided the same for 2 or 3 percent, raising rationality of involving Chinese loans at such high rates. It is noteworthy that all three projects have failed to live up to its expectations. The opposition along with trade unions had strongly registered their concerns with the Rajapaksha government but those concerns were not heeded. In 2015 when Sirisena government took charge it halted works on the Hambantota port, but this negatively affected the already struggling ports ability to service loans. As the government was already struggling in servicing loans and almost 95 percent of its revenue were being directly utilized for the purpose, the government had little choice but to consider swapping debt for equity. The debt for equity swap deal resulted in handing over 70 percent of its stock to China along with a large chunk of pristine coastal land. The major economic challenge posed by Hambantota port is not by any other external entities but from its own port of Colombo. The debt swap deal is a matter of concern for India because of its proximity to the Andaman Islands, Visakhapatnam port and Sriharikota, all strategically very important for India. It is a well-accepted fact that Chinese are utilizing debt as method of influencing nations worldwide for both economic and strategic benefits. Amid speculations, in 2014 a Chinese submarine on the behest of travelling to Gulf of Aden to conduct anti-piracy operations docked in the Colombo port raising alarms on the unfolding incident. The concerns raised by India are legitimate as misuse of this port facility for military advantage cannot be ruled out. As this arrangement possess a security concern to India, India also possess an indigenous solution to deescalate the threat by rendering the ports efficiency and viability useless, provided India considers using it. According to India’s domestic shipping laws or Cabotage laws, only Indian-registered ships can ply on local routes for carrying cargo. Foreign container carriers have been lobbying with the government to relax the law to allow them to operate along the country’s coast. This, according to shipping lines, was essential as India seeks to set up transshipments hubs to reduce dependence on neighboring foreign hubs to send and receive containers, entailing extra time and costs for exporters and importers. Experts are of the belief that if these cabotage laws are relaxed for ensuring greater international participation, India’s own ports would become more active and would become a negative growth factor for Hambantota as well as for the port of Colombo. On 7th March 2016 the India Ministry entrusted with the responsibility of shipping sector announced a relaxation on the cabotage law with some relaxations in restriction for transportation of import and export loaded and empty containers on foreign ships on routes for aggregation of containers to facilitate transshipments. The barriers in achieving greater relaxations can be pointed to interest within India that are generating benefits from these laws, but to protect the interests of India a tougher stand is call of the hour.


In September 2014, Chinese president and his then Lankan counterpart Mahinda Rajapaksa declared the ceremonial opening of Lanka's single largest project to be cemented by Chinese FDI. The turn of events that followed saw opposition from civil society groups, opposition parties and as well as environmentalist’s, as concerns on its impact on the local habitat were not conducted prior to signing the deal. It is interesting to note here that, the Colombo city port project is completely financed by Chinese FDI, while all the other three projects including the Hambantota port were conceived with costly Chinese commercial loans. Here it unnerving to draw a conclusion that Chinese had anticipated the probability of Hambantota ports failure and hence a debt for equity swap was inevitable. Following the 2015 presidential elections in Sri Lankan, it saw a sensational defeat of the Incumbent and appointment of Sirisena as the new president. Immediately after assuming office, the Sirisena government suspended all ongoing construction work on the controversial USD 1.5 billion Chinese funded port city project. Amidst allegation on the way the project was awarded to a Chinese state-owned firm, the Sirisena government started an investigation into the alleged irregularities including a lack of proper permits and approvals. The new government also conducted an additional environmental impact assessment study to understand the project’s impact and to study mitigation measures, while these concerns were ignored by the previous government. India also had raised concerns over China communications construction company(CCCC) taking ownership of 20 hectares of land under an earlier agreement. The original deal involved 269 hectares of land being reclaimed, including 108 hectares assigned to the Chinese investor, of which 20 hectares was granted on a freehold basis. On 9th April 2016 following a maiden visit to China by the Sri Lankan prime minister, a joint statement was released announcing the resumption of the Colombo port city project and reiterated its active participation in the Belt and Road Initiative China. China is the top source of FDI in Shri Lanka had been successful in securing two ports in the region which is considered strategic to secure Chinese fuel needs as well as securing a modern maritime silk route that is primordial for realizing its global expectations while strategically containing India. Amidst rising Indian concerns on increasing Chinese involvement in the region, on October 2014 Sri Lanka allowed a Chinese submarine to dock at the Colombo port and seriously violating a 1987 Indo-Lankan accord of not allowing their respective territories to be used for activities deemed prejudicial to each other’s unity, integrity and security. Allowing a naval submarine to dock in the waters of Colombo port is a matter of concern for India as the Colombo port is currently handling around 75 percent of India’s total cargo container transshipments amounting to around 1.2 million TEU (twenty-foot equivalent units). Such an arrangement is causing Indian Exporters and Importers to incur unwarranted expenses and consecutively causing Indian ports to incur a loss of around 1,500 crores in business annually. During the same time also losing out an opportunity to become a large hub for Asia–Africa, Asia-US/ Europe container traffic trade. Owning to possible events of conflict it is a call of the hour for India to take strong stance both economically and strategically to permanently secure Indian interest and render murky Chinese deals useless by cashing it out of future cargo traffic.

“The Sri Lankan government formally handing over control of the port of Hambantota to Chinese interests on a 99-year lease. The price was over one billion dollars, but this came mostly in the form of a reduction in the enormous debt burden to Beijing that is crippling the island nation’s economy. Strategists warn that by giving up control of the port, a strategic asset straddling Indian Ocean shipping lanes, Sri Lanka is sacrificing its sovereignty and succumbing to what one Indian analyst has labelled “creditor imperialism” by China.”

– the diplomat, January 20, 2018


The inception of formal ties between independent India and Sri Lanka happened consecutively with India gaining Independence in 1947, Shri VV Giri served as the first Indian high commissioner to then Ceylon from 1947 to 1951. Later in 1956, the famous India House that used to serve the imperial bank was bought off by the Indian government and since then it remains to be the official residence of Indian High commissioners. The antiquities of more than a two-millennium-old tie received a considerable boost post-independence. India Sri Lanka relations can be categorized into three primary phases:

1) The post-Independence era.

2) The Indian intervention (IPKF era)

3) The Post LTTE era

1) The post-Independence era

The first phase can be attributed to both the countries clearing of colonial baggage and adhering to the non-alignment principles. One of the first agreements to be signed between the two countries was to decide the future status of Indian origin people residing in the island nation. The Ceylon citizenship act of 1948 rendered many Ceylonese Tamil’s nationless. Most of whom were bought by the British as plantation workers. Consecutively the

a) Nehru-Kotelawala Pact was signed between Jawaharlal Nehru, the Prime Minister of India, and John Kotelawala, the Prime Minister of Sri Lanka, on 18 January 1954.

In the pact, India accepted in principle the repatriation of the Indian population in Ceylon. But Jawaharlal Nehru only supported voluntary repatriation of those who voluntary accepted Indian citizenship. India disagreed on Sri Lankan position that enforced granting Indian citizenship to people, who failed to qualify for Ceylonese citizenship as under the citizenship act. Following this around 9,75,000 people who didn’t register under the process were declared stateless by then Ceylon government.

b) Srimavo-Shastri Pact was signed between Srimavo Bandaranaike, the Prime Minister of Sri Lanka, and Lal Bahadur Shastri, the Prime Minister of India, on 30 October 1964. Officially, it was known as Agreement on Persons of Indian Origin in Ceylon or the Indo- Ceylon agreement. According to this agreement 30th, April 1970 was proposed as a deadline for Indian origin people in Sri Lanka to apply for Indian citizenship. The government of India had agreed to take in 5.25 lakh people but only 4 lakh applications were received by the government.

2) The Indian intervention (IPKF era)

On 27th April 1972, the then Prime minister of India Indira Gandhi Paid a goodwill visit Sri Lanka. The visit coincided with addressing of issues like repatriation of people of Indian origin and enhancing economic cooperation.

a) The Srimavo-Gandhi Pact was an agreement that was signed between Srimavo Bandaranaike, the Prime Minister of Sri Lanka, and Indira Gandhi, the Prime Minister of India, on 28 June 1974. Treated as a follow-up agreement of Srimavo-Shastri Pact that left 150,000 people of Indian origin in Sri Lanka to future account.

b) The Ethnic clashes between the majority Singhalese and Tamil minority Started with the Srimavo-Gandhi Pact ending in 1982. The following years of 1983-84 saw massive ethnic violence with its epicentre in Colombo directed towards the minority Tamils of Sri Lanka. Following the spread of ethnic violence and inception of LTTE, Sri Lanka pursued military and financial Aid from countries like USA, UK, Pakistan, China, Bangladesh and Malaysia. The Lankan government deliberately kept India in dark about it reaching out

Countries like Pakistan and Bangladesh anticipating India’s Soft corner for Tamils. As military and relief Aid, Pakistani government gave the Sri Lankans USD 10 million. Later the then Sri Lankan army chief making a visit to Pakistan followed by the Pakistani navy chief making a goodwill visit to Colombo. The incidents unfolding thereafter was an apparent looming strategic threat to India.

c) Indo-Sri Lanka Peace Accord and Indian Intervention

After the failure of the Thimpu declaration in 1985 mediated to resolve the ongoing ethnic conflicts due to the obstinacy of both the party’s, the then Indian Prime minister Rajiv Gandhi and Sri Lankan Prime Minister Jayewardene signed a peace accord named as the Indo-Sri Lanka peace accord on 29th July 1987. The Peace accord was signed in a spirit of mediating peace between the Lankan Government and the Lankan Tamils. As per the peace accord, Lankan Government forces were to be withdrawn from the northern provinces followed by federalization of power to the provinces and Simultaneous disarmament of the Tamil rebels. Sri Lankan defence expenditure dropped significantly after Indian forces started its peacekeeping operations in the region as all the expenses were bored by the government of India. With many other external players on the ground trying to influence situations against Indian initiative the following years of Indian involvement in Sri achieved an initial success, though most of the Tamil rebel fractions disarmed themselves yet the LTE was reluctant to do so. This further lead to skirmishes with the Indian Peace Keeping Forces that started several operations against LTTE. By the end of Indian Intervention in Sri Lanka after 32 months and sustaining a causality of 1200 personnel’s it coasted India an estimated $ 10 billion. After an assassination of the Former Prime Rajiv Gandhi was carried out by the Prabhakaran Led LTTE fraction, India withdrew itself from further active participation in the Peace process.

d) The Sri Lankan Monitoring Mission (SLMM)

The next significant attempt to achieve a tangible solution to the Elam Issue cab be accord to an attempt by the Sri Lankan government headed by President Kumaratunga and together with the Tamil Tigers (Liberation Tigers of Tamil Eelam) in 2000 when Norway was invited to take the role of a facilitator in the peace process. A ceasefire between LTTE and the Government was successfully established in 2002 and led the way for a Nordic civil observational delegation called the Sri Lankan Monitoring Mission (SLMM) with 20 officers from Norway and 10 from Iceland. The goal of the mission was that all ethnic groups would agree to a peaceful political solution to the violent conflict that the country had suffered for decades. This agreement was renewed in 2006 by incoming President Rajapaksa, but in 2008 the Sri Lankan government terminated the deal that prompted the SLMM to leave the country but continued seeking Norwegian aid. The total bilateral aid for 2010 was almost 23 million Euros.


The Tamil rebels and Sri Lankan government forces in total fought four wars which were infamously referred to as Elam Wars. The most significant and perhaps the most brutal war as the last or the fourth Elam war termed as Elam War 4 ended on 18 May 2009 with the Sri Lanka Army gaining control of the last bit of territory held by the LTTE and with the death of the LTTE leader Velupillai Prabhakaran. The final few days of the war near Nandikadal Lagoon in the northeast of the island saw very heavy fighting and led to Sri Lankan forces being accused of war crimes. In the later years, the then Sri Lankan Defense Secretary Gotabaya Rajapaksa briefed that ‘managing India’ was the key factor in winning the war against the Tamil rebels. The Sri Lankan side set up an arrangement named Troika – where three top bureaucrats each from both countries are constantly in touch and presidential senior advisor for Mahinda Rajapaksa “ Mr Basil Rajapaksa” led the troika. This was considered a new milestone in Indo-Lankan bilateral relations. The TROIKA arrangement managed to win India’s tacit support to defeat the LTTE. The then Sri Lankan president misjudged this arrangement and took Indian tactical help for granted. Things started Becoming Bitter when post-2009 Sri Lanka went back on promises for federalization of northern provinces and started leaning heavily towards China. This invited the fury of India and Sri Lanka failed to defend its actions without Indian diplomatic support in the US-backed human rights resolution at the UNHRC in Geneva. The relations deteriorated further when the Rajapaksha government turned neglectful to India’s strategic concerns in the region over China. The following years of Rajapaksha regimes pro-china stance increased its distance furthermore till a more India friendly government under Maithripala Sirisena came into power in Sri Lanka.


Deveni Maubima” is the name that Buddhist pilgrims from Sri Lanka use while referring to India which can be translated as Second Motherland. Such is the bond of Shared heritage that both nations share. In the words of Former Lankan Foreign Minister Lakshman Kadirgamar, Indo-Lanka relations are an irreversible excellence. Indian PM Narendra Modi also recently made a tweet where he emphasized that “the bonds of history, culture and shared values that we have are unbreakable”. As an act of securing personal political ambitions the series of Diplomatic mistakes that Mahinda Rajapaksha did in the form of bad Infrastructure loans from China is causing Sri Lanka to compromise its veracity. The recent debt for equity swap of the Hambantota port is a standing testimony of the fact. The Chinese method of influencing a country’s decision-making abilities by means of providing dubious loans is a well-known fact around the globe, while some name it debt-trap others call it Creditor Imperialism. The loans that Sri Lanka had secured from China were provided at a rate as high as 6.3 % while Recent India provided Loans just at a meagre interest rate of 1.75%. A further In-depth Analysis reveals Chinese plans of world dominance, while China provided Billions of dollars in commercial loans to Sri Lanka on Projects of little commercial viability like the Mattala airport, sea-port etc. On the other hand, they Made FDI’s in Colombo City port project as Chinese had analyzed the possible shortcomings of the Hambantota project, thus landing the ownership of a strategic port with proximity to the world’s most important Sea trade route in Chinese Hand. Since 2005, India had in total invested around 2.6 billion USD in Sri Lanka, out of which USD 436 million is in Grant in Aid while the Remaining USD 2.17 billion is under various lines of Credit. India’s developmental assistance projects are entirely based on priorities set by Sri Lanka. In the recent years India had been extensively investing in Railway infrastructure projects, hospitals and schools that will be significant in boosting capacity Building and Human Resource Development of Sri Lanka furthermore emphasizing India’s holistic approach to Diplomacy. The Chinese policy of engaging with the opposition leader and former president Mahinda Rajapaksa is in stark contradictions to rules of Bilateral Diplomacy. Hence it can be concluded that China can befriend while India will always remain a brother inspired by the singularity of Shared Cultural Heritage.