By Rasika Jayakody –

Rasika Jayakody

The Sri Lankan government’s move to seek a billion dollar loan from China to construct an 88 km railway line from Kurunegala to Polonnaruwa – the hometown of President Maithripala Sirisena – is likely to go down in history as the costliest project the island-nation has ever embarked upon.

The project, incorporated into the ‘Pibidemu Polonnaruwa’ development drive launched by Sirisena in his political backyard, will be carried out by the China State Construction Engineering Corporation Limited (CSEC) and is the latest addition to a slew of Chinese-funded projects currently underway in many parts of the country.

In August this year, the Central Bank announced it had secured a further one billion USD on loan from the China Development Bank on an eight-year loan, which carried a 5.25 percent interest rate with a three- year grace period, contributing further to Sri Lanka’s mounting Chinese debts.

As of July 2018, China had officially announced that its loan portfolio in Sri Lanka was USD 5.5 billion just over a tenth of the country’s total USD 51.82 billion external debt. This ratio, it must be noted, is rapidly increasing.

Last year, Sri Lanka granted a 99-year lease on its Hambantota port to Beijing over its inability to repay Chinese loans r on the USD 1.4 billion project. It is clear, growing Chinese debts will soon swallow many strategic aspects of the country’s economy – but, is it only the economics that will be affected? This is the pertinent question.

Dijibouti, a country of dry shrublands on the horn of Africa, is approximately one-third Sri Lanka’s size with a population of ust under one million and GDP ess than 0.01 of the world economy. One way in which Dijibouti draws strong parallels with Sri Lanka is in the way it is an unquestioning beneficiary of China’s lavish generosity.

The Ethiopian-Djiboutian electric railway line, completed last year—the first of its kind in Africa—was constructed , on a USD 04 billion loan from Chinese banks. The Export-Import Bank of China also funded a water pipeline system to transport drinking water from Ethiopia to Djibouti. The amount of money poured into these projects is astounding, but China can still justify them as strategic investments under the Belt Road Initiative (BRI).

In July this year, Djibouti opened the first phase of the Djibouti International Free Trade Zone (DIFTZ), a USD 3.5 billion project spanning an area of 4,800 hectares.

The USD 370 million, 240-hectare pilot zone coming under the first phase of the project consists of four industrial clusters which will focus on trade and logistics, export processing, business and financial support services and manufacturing and duty-free merchandise retail.

Parallel to these massive projects, China also set up its first overseas military base in Dijibouti. The base is located a few minutes’ drive away from the commercial port at Doraleh, another Chinese-funded project in the country. In Dijibouti, China made it abundantly clear that almost all of its lavish infrastructure projects on the BRI route are intertwined with its military interests. This is to indicate there’s an underlying military aspect to the Belt Route Initiative.

After Dijibouti, China is well-positioned to construct its second overseas military base in Gwadar, Pakistan, which Beijing considers a key part of its ‘String of Pearls’ strategy for the Indo-Pacific. Other “pearls” in South Asia include Myanmar’s Kyaukpyu port and Hambantota in Sri Lanka.

South China Morning Post (SCMP), in an article on Sunday, quoted Zhang Jie, a researcher at the Chinese Academy of Social Sciences, who wrote in 2015 about the concept of “first civilian, later military”, in which commercial ports would be built with the goal of slowly being developed into “strategic support points” that could “assist China in defending maritime channel security and [control] key waterways”.

It also explains how China is using port investments as vehicles through which the country can cultivate political influence, constrain recipient countries and build infrastructure meant for military as well as civilian use to facilitate Beijing’s long-range naval operations.

Chinese media has already claimed that the country will increase the size of its marine corps from about 20,000 to 100,000 personnel to protect the nation’s maritime lifelines. This four-fold increase in the size of its maritime corps indicates China is about to enter into a major military expansion drive running in sync with the BRI.

It is against this backdrop that we should analyze the manner in which China positions itself in and around the Colombo and Hambantota ports, and its massive investments in infrastructure development in many other parts of the country. A careful examination of these projects signal that Beijing is rapidly moving towards the possibility of military positioning in Sri Lanka, all the while pushing the government against the wall.

Prime Minister Ranil Wickremesinghe, in a media statement a few months ago, said in no uncertain terms,there would not be a Chinese military base in Hambantota – a port whose operations are fully handled by China. But it is not clear how Sri Lanka will be able to keep its nose above water.. Sri Lanka’s bargaining power has been seriously compromised with the number of Chinese-funded projects springing up in various sectors from railway to rural infrastructure and plantation.

Does Sri Lanka have an alternative? No. Although India is still a ‘counterbalance option’ its pockets are not as deep as China’s and it cannot fight the ‘might’ of BRI. For Sri Lanka, it is a matter of balancing short and mid-term targets against the possibility of a larger threat of Chinese military presence in the country. Unfortunately, Colombo is now playing the game with very limited options.