The newly elected Sri Lankan government is seeking to be a “bridge” between its giant Asian neighbors — India and China — in the Indian Ocean, a region where they are generally viewed as competitors, the island nation’s finance minister has said.
In an interview with the Nikkei Asian Review, Ravi Karunanayake said Sri Lanka followed a non-aligned, neutral policy for both countries and referred to his country as a “genuine friend of India and China.” At the same time, Karunanayake said Sri Lanka envisioned a greater role for itself in the economic regionalism of the Indian Ocean. “Singapore brought China and Taiwan together. If we bring China and India together in Sri Lanka, what a platform it would be!” he said, adding that one is a powerhouse, the other a consumer hub, with Sri Lanka in the middle. “India is looking at the export market, China is looking at the silk route, we can prove to be a nodal point.”
“Our input [in Indian Ocean economic regionalism] would be a genuine working relationship with India and other regional neighbors. [We will] keep the leadership that they expect from us and give a sense of confidence that things can be done here,” he added.
Karunanayake belongs to the United National Party that swept into power in the August general election, smashing hopes of a political comeback by former president and “pro-China” leader Mahinda Rajapaksa.
On coming to power, the new leadership, under Prime Minister Ranil Wickramasinghe, moved to stall some infrastructure projects, including the $1.13 billion China-funded Colombo Port City, on the grounds that the agreements entered into by the previous government needed to be investigated.
However, construction on the controversial project is likely to begin soon following some amendments to the earlier agreement.
“For Colombo Port City … freehold land will no more be given at all. Now it will be leasehold. There will be amendments to the present model. China has accepted it and are going forward. It is already in motion, now it is up to them to begin construction,” Karunanayake said.
He added that now was the time for India to come forward and build another port city, promising cooperation as long as the projects brought “economic return.” He said Sri Lanka was open to investments from any country with good intentions.
“China, Japan, Korea. Why exclude anybody? We have a friendly foreign policy. Friends with all, enemies with none,” the finance minister said.
Colombo has been working on a “rebalancing” act, resuming ties with India while not completely distancing itself from China. Located virtually at the center of the Indian Ocean, the island nation is strategically important as it stands as a maritime gateway to Africa, the Middle East and Europe.
China has already invested billions of dollars in Sri Lanka, with an eye to transforming the country into something of a “Maritime Silk Road,” in line with its strategy of building a “string of pearls” along vital Indian Ocean shipping routes.
The Sri Lankan government sees the balancing act as key to its domestic economy too, as it aims for economic expansion at around 6.5% next year and a narrower budget deficit. The country is also grappling with a high external debt, to the tune of 8.9 trillion Sri Lankan rupees ($62 billion).
“We will be putting a lot of focus on the services industry, financial services, tourism, into the areas of education and then we will look at the industrialization of agriculture and going to industries such as shipping, and ship breaking,” Karunanayake said. “We intend to make Sri Lanka a hub for financial services. So instead of people going to Dubai and Singapore for their money, we want them to come to us.”
He listed affordable living, stability and coherence as some of the immediate priorities for his government, while also seeking foreign direct investments and portfolio investments instead of depending on external aid.
The island nation is also hoping to catch a piece of India’s “Make-in-India” initiative, becoming a focal point for India’s export activities.
“Why do we want to compete when we can work together? Why do you want to build 10 ports in India when you can use Colombo’s port? Why just compete and double your costs?” he reasoned.