Washington tweets its
concern of the strategic island’s indebtedness to Beijing

Prime Minister Mahinda Rajapaksa and his brother have a difficult economic path ahead of them but can count on financial favors as China, India, the U.S. and Japan vie for influence.

MARWAAN MACAN-MARKAR,

Asia regional correspondent , Nikkei Asian Review

BANGKOK — Sri Lankan voters have already detected a whiff of what the electoral landslide won by the country’s most influential political clan earlier this week means to the international community, or at least what it means to India, the U.S. and Japan.

Indian Prime Minister Narendra Modi set the tone by going on a charm blitz. He called and tweeted at his counterpart, caretaker Prime Minister Mahinda Rajapaksa, part of that political clan, even before the final results were in, giving the Sri Lanka Podujana Peramuna, a Rajapaksa political vehicle, 146 seats in the 225-member legislature.

“We will work together to further advance all areas of bilateral cooperation and to take our special ties to ever new heights,” Modi tweeted on Thursday, one day after the general elections.

Hours later, the U.S. embassy in Colombo, the island’s commercial capital, reached out, also on Twitter. “As the new parliament convenes,” the tweet says, “we hope the government will renew its commitments to building an inclusive economic recovery, upholding human rights and the rule of law, and protecting the country’s sovereignty.”

That “sovereignty” nudge was a reminder of the massive amount of loans Sri Lanka has taken from China for infrastructure projects, one of which two years ago prompted The New York Times to write this headline: “How China Got Sri Lanka To Cough Up A Port.” That was a dig at the $1.5 billion southern port in Hambantota, built with Chinese loans, that the debt-strapped Sri Lankan government gave to the Chinese on a 99-year lease as part of a $1.1 billion debt swap.

The Sri Lankan public was not privy, however, to the mood inside the Chinese embassy on Friday, following the pro-China Rajapaksas’ triumph. They are “so happy,” was the sentiment making the rounds within some Colombo-based diplomatic circles.

Foreign policy insiders in the country regard these rhetorical cues as a hint of the “diplomatic balancing act” that looms for the new government in Sri Lanka, increasingly wooed by China, India, the U.S. and Japan, all covetous of the island’s strategic location in the Indian Ocean.

Yet, the foreign policy insiders are sanguine. The decisive electoral mandate won by the Sri Lanka Podujana Peramuna, or SLPP, will afford the Rajapaksas enough political stability to chart a firmer diplomatic course.

“One thing out of the way with the general elections is we will not have partisan quarrels over foreign policy,” said a veteran Sri Lankan diplomat, referring to the previous coalition government, one marked by disunity when it came to foreign relations with China, India and the U.S. “The people’s mandate gives the government a stable domestic platform to deal with foreign powers.”

The elections cemented the Rajapaksas’ political comeback after a five-year lapse. In November, Gotabaya Rajapaksa, Mahinda’s younger brother, won a sweeping mandate in the presidential election. The brothers had risen to dominate the country for a decade during Mahinda’s two terms as president, which came to an end in January 2015.

It was during Mahinda’s presidency that Sri Lanka tilted

toward China, ending decades of influence that India had enjoyed. Beijing poured in military assets that enabled the Rajapaksas to end Sri Lanka’s 30-year civil war and followed it up with billions of dollars worth of infrastructure loans to help revive the war-shattered economy.

The general elections also serve as a reminder: Foreign-funded infrastructure projects and foreign assistance have become political fodder and will pose an early foreign policy challenge for the Rajapaksa brothers’ new administration.

On the eve of the elections, a Colombo port trade union with ties to the Rajapaksa camp launched a protest to stop the development of a container terminal that India, Japan and Sri Lanka agreed to build last year.

Likewise, speakers on SLPP platforms during the campaign opposed Sri Lanka signing a deal for a $480 million grant from the U.S. government under its so-called Millennium Challenge Corporation, which is aimed at improving logistics and transportation on the island. Anti-U.S. sentiment was also stoked by Washington’s Indo-Pacific strategy, which mentions Sri Lanka and a need to counter China’s presence in the nation.

According to Palitha Kohona, a former Sri Lankan foreign secretary, it will be difficult to ignore the national mood laid bare during the elections. “There is pressure on the government not to hand over the terminal to Japan and India … and the political mood is entirely against the MCC,” Kohona said. “It is also a reaction that you cannot conduct foreign policy by giving out bits and pieces of our real estate.”

Seasoned geopolitical observers reckon that New Delhi, Tokyo and Washington recognize the edge China will enjoy under a Rajapaksa administration. “India, Japan and the U.S. have long been concerned that Sri Lanka may go down Pakistan’s path: become another country in South Asia that is heavily indebted to China,” said Aparna Pande, director for the Initiative on the Future of India and South Asia at the Hudson Institute, a Washington-based think-tank.

“[But] what Delhi-Tokyo-Washington will need to understand is that Colombo has access to a constant tap of dollars from Beijing,” Pande added, “and that they will need to be willing to disburse more money if they want to play the game.”

Well-placed sources within Sri Lanka’s financial sector point to the country’s need for a financial lifeline as the $88 billion economy teeters on the brink of a worsening crisis. The island’s international reserves have shrunk to $6.5 billion, and growth is forecast to contract by 1.3% this year, a further drop from the 2.5% in 2019, the worst in 18 years.

Gotabaya has already made desperate appeals to India and China for relief from mounting external debt payments that will average over $4 billion a year until 2024. China has already stepped forward with a $500 million loan. India has pledged $450 million.

“We need every dollar we can lay our hands on,” said the head of a Colombo-based financial sector company. “The Rajapaksas cannot antagonize our allies — they need foreign friends, not foreign enemies, to tap funds.”

Japan, which holds 10% of Sri Lanka’s debt, a share matched by China, will matter in this equation. It appears not to have been lost in Tokyo’s tweet to congratulate the new Rajapaksa administration.

“Japan, as a long-standing friend of Sri Lanka, will continue to support Sri Lanka’s effort towards further development as a hub of the Indian Ocean region,” it said.