The writer is former Ambassador and Permanent Representative of Sri Lanka to the United Nations. The following are extracts from remarks he recently made at the Rotary Club Colombo West luncheon. – The Editor
COLOMBO (IDN) – President Xi Jinping’s One Belt One Road (OBOR) initiative, unveiled in 2013, provides Sri Lanka with a unique opportunity to fast track its economy along the path to development.
An investment bonanza that is being made available under the OBOR (also referred to as the Belt and Road) initiative, especially the Maritime Silk Road, could revive the glory days of the ancient Silk Route for Sri Lanka.
Today, the Sri Lankan economy is not progressing as it should. It is sluggish and, slowly, it appears to be losing its lustre, except in certain limited sectors. There are many reasons for this. Chief among them is the inadequacy of inward investment flows.
China’s OBOR grand plan, if prudently managed, provides the countries of the region, especially Sri Lanka, which is fortunately sitting strategically in the middle of the Indian Ocean and the Maritime Silk Road, the capital to propel their economies forward.
China’s OBOR investment ambitions, focused mainly on cooperative infrastructure and connectivity enhancement, have been compared with the post-World War U.S. Marshall Plan. But the funds available under the OBOR make the Marshall Plan pale in to insignificance.
The Marshall plan provided over USD140 billion, at 2017dollar values, and was designed to assist Western European economies recover from the devastation of the World War.
The OBOR expects to make available a stunning USD 4-8 trillion. While the Marshall Plan achieved much, the OBOR funds can be expected to realize substantially much more by creating a vast region of shared prosperity, the clear beneficiaries being a large number of developing countries.
The Marshall Plan allowed the United States to export its currency. The U.S. dollar was used to provide the subsidies, while European countries purchased U.S. goods with their own currencies. Over time, the U.S. dollar became a tool for stability; funds provided by the plan created the basis for future frequent easing of trade restrictions.
Additionally, the Chinese Yuan has now been recognised as a reserve currency by the IMF and China appears to be increasingly moving towards international payments in Yuan. The IMF elevated the Yuan, also known as the renminbi, or “people’s money”, on the same day that the Communist Party celebrated the founding of the People’s Republic of China in 1949.
The Yuan joins the U.S. Dollar, the Euro, the Yen and British Pound in the IMF’s special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. This would be the first time that a new currency has been added since the Euro was launched in 1999. It is an impressive achievement as the Yuan had very little credibility as recently as thirty years ago.
Today, China is the world’s largest economy by purchasing power parity, not the U.S. Its per capita GDP exceeds USD 15,500. This is a massive leap from less than USD 200 IN 1970. Sri Lanka’s per capita GDP is around USD 3800. (It was USD 270 in 1980.)
The outward looking Belt and Road initiative, seeking common prosperity, will have a massively transformative impact on the economies of the vast Asian and African regions encompassing 68 countries with over 65% of the world’s population. It will be a closely related factor as Sri Lanka seeks to realise its own Vision 2025. Vision 2025 provides the development blueprint for the country for the next seven years
The OBOR goal, backed by China’s substantial economic clout, including through the Asian Infrastructure Investment Bank (AIIB) which has 61 state members at present, will create significant opportunities for the entire region on which Sri Lanka should capitalise. Sri Lanka is a member of the AIIB.
Sri Lanka’s abundant potential as an investment destination, especially its location in the middle of the Indian Ocean adjacent to one of the busiest sea lanes in the world and in the middle of the OBOR region, must be leveraged carefully by policy makers for national economic advancement.
The clumsy foreign policy misjudgements of early 2015 must be carefully rectified and left behind. While the OBOR opens up enormous possibilities, Sri Lanka is also in a position to exploit its strategic location in the centre of the rapidly expanding South Asian economic zone.
It is important to remember that Sri Lanka is not alone in the business of seeking to attract foreign investments. The competition in the region is fierce. The vast majority of developing countries have relied on foreign direct investments to spur their development effort. Some have been much more successful than others. The critical difference may lie in the ability to create the necessary policy environment and confidence for foreign investments to be attracted to a country.
Against this background, It is important to create a professional business oriented approach to highlight what Sri Lanka has to offer as an investment destination, encourage foreign investors to think positively of Sri Lanka when making investment decisions, create a better understanding of Sri Lanka’s investment climate and opportunities, including its enormous natural and human potential, and foster closer relations between the Sri Lankan business community and its counterparts overseas. It is no longer a task for amateurs or a matter to be left to chance. Secret deals could enrich individuals but not a nation.
A former foreign minister has, to his credit, spoken of the need to make business, the business of diplomats. A reliable and transparent policy framework must be put in place and a professional facility to enable the transmission of investment related information, both inward and outward, must be instituted.
The BOI should be revamped. Petty political point scoring should be avoided for the sake of the future of the country. There are other successful models that we could emulate. Some countries from our own region have effectively attracted foreign investments to speed up their development process and even left the developing country status behind.
Successful SEIC 2017
It is with this in mind that the successful Social Economy and Investment Conference 2017 (SEIC 2017) was organized at the Kingsbury in November 2017. Judging by the media response, the key goals of SEIC 2017 were realized and it is proposed to organize a bigger event in 2018.
The expectation was that with greater awareness of the investment opportunities in the country, and a familiarity with the investment climate, more foreign investors would be attracted to Sri Lanka. The many contacts that were fostered at SEIC 2017, are expected to bring rewards to Sri Lanka and also to the foreign investors, assisting in Sri Lanka’s efforts to climb up the competitive ladder of development.
Some of the over sixty businesses from overseas attending the Conclave went on tours of the country afterwards, and had the opportunity to see the possibilities that Sri Lanka has to offer first hand.
A significant number of the participants at SEIC 2017 came from overseas, especially from China. Approximately 45 large Chinese business concerns and the China Celebrity Club were represented. Others came from Wall Street, London, Geneva, Dubai, India, Hong Kong, Singapore and Amsterdam.
The expectation is that these leaders of business will return with positive investment plans and would also bring with them advanced technology, higher skills and modern management techniques. Investments unaccompanied by these attributes will not do much to help to rapidly advance the country economically
Underlining the region-wide interest, SEIC 2017 was endorsed by the Federation of Industry and Economy of China, the Colombo Chamber of Commerce and the Indian SME Chamber of Commerce.
Like the Chinese businesses represented at the Conclave, other business communities from elsewhere are also expected to respond positively to the opportunities that emerged. SEIC 2017 sought to introduce this land of possibly endless potential, the land that gave the English language the word “serendipity”, to the world and hoped that mutually beneficial prosperity would follow.
‘Unfairly’ endowed by nature
Sri Lanka itself, despite its relatively small size, could be described as being unfairly endowed by nature. From its miles of unpolluted golden beaches, lush green countryside, misty tea covered mountains, awe inspiring archaeological sites that bear witness to a rich and glorious past, the variety of wild life, that includes the biggest animal on land, the elephant (in large concentrations), and the biggest in the ocean, the blue whale, a rich and potentially vast continental shelf, the valuable trove of minerals, including the rarest of gems, ilmenite and graphite, its spiritual background to its well educated, easily trained and smiling people to whom hospitality is second nature, this country is a visitor’s dream. An investor’s ideal.
The country enjoys a comprehensive state funded free education system that has resulted in a first world standard of literacy (and high levels of IT competency) and a birth to death state funded free health care system which has given the population an existence largely free of communicable diseases and a first world life expectancy.
The cellular phone penetration in Sri Lanka is the envy of more developed countries and could be leveraged to assist the country further in its efforts to develop faster. These are assets that should not be squandered or feebly surrendered to other countries to exploit. The large number of Sri Lankan professionals working overseas, trained under the country’s free education system, bears testimony to the absence of opportunities for them to find work locally.
A rewarding glimpse of history
Historically, traders and casual visitors waxed eloquent on Sri Lanka’s potential. Ibn Battuta, the Moor from Tangiers, who visited the island in the 14th century, was not wrong by much when he observed that this was the most beautiful island on earth and was only 40 leagues from paradise.
That paradise, which has not been lost yet, must be preserved despite the race to modernize, and achieve a higher level of sustainable prosperity for the people of the country as they seek to climb up the development ladder.
The map of the world drawn by the Alexandrian cartographer Ptolemy who had such an exaggerated impression of the island, Taprobane, made it look much bigger than India, illustrating the then prevailing impression of Sri Lanka in distant lands. The Greeks called this land Serendib. Today an impression of this lucky island is being created that is positive for the benefit of its people.
The copious writings of the fifth century scholar monk Fa Xian from China who spent a number of years in the ancient capital, Anuradhapura, tell a tale of bygone prosperity and complex international diplomatic and trading relations, especially with China. Fa Xian carried a ship load of religious texts from Sri Lanka to China. Sri Lanka had developed important relations with the Middle Kingdom from early days and memories persist.
It is clear that Sri Lanka attracted waves of traders, businesses and holy monks seeking the sublime teachings of the Buddha over the centuries, from far afield as ancient Rome and Greece on the one side and Khan Balik in China on the other, not to mention rapacious invaders.
Those who came from far, especially from China, not only left detailed observations which have been used to corroborate our own historical records but also bits and pieces of their own cultures, enriching ours. The Chinese traders and Shaolin monks probably introduced Chinese martial arts. One word in Sinhala for the indigenous martial arts is Cheena – Adi. This is too much of a coincidence. The lions at Yapauwa are very much Chinese influenced.
The troves of Chinese coins and porcelain being recovered from various parts of the country suggest a thriving trade. A large number of Chinese vessels lie beneath our waters, having sunk in rough weather. While traders from distant lands sought mutual prosperity, invaders sought and succeeded in grabbing the country’s wealth and stunting the development of the people.
The OBOR initiative invokes memories of the multitude of traders who visited us in the past and gave us the opportunity to prosper.
China impacting
Already the Chinese largesse is impacting on a swath of countries and regions.
Pakistan, described as an all weather friend by the Chinese president, has been promised USD 54 billion in investments for infrastructure projects. China-Pakistan Economic Corridor is the flagship project under this initiative. The Bangladesh-India-China-Myanmar corridor links China with the Bay of Bengal.
Africa, is reaping the benefits of China’s investments and many African economies are prospering for the first time in years. Analysts ascribe this development largely to Chinese investments in infrastructure. By 2014, Chinese investments in Africa had risen more than 20-fold to USD 20 billion according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies in Washington.
It is likely that this trend will accelerate as China also learns from experience and responds more to the aspirations of the people of the continent. Since 2000, Ethiopia where the African Union is headquartered, has been a major recipient of Chinese loans to Africa, with financing for dams, roads, railways and manufacturing plants worth more than USD12.3 billion, more than twice the amount loaned to oil-rich Sudan and mineral-rich Congo.
The OBOR concept while raising some concerns, especially among the former colonial powers who ruthlessly ravaged Africa and Asia when they had the opportunity, can be used by countries of the Indian Ocean region and beyond to enhance their mutual prosperity without being constrained by the fears and suspicions inculcated by the colonial past. More importantly, without territorial occupation, racial discrimination and forced alteration of cultures.
Further East, Australia received AUD 15.4 billion in Chinese investments involving 103 deals. Australia has been a major destination for Chinese investments after the U.S. and Europe and investors have grabbed hotel assets, real estate, agri businesses, vineyards, health care, infrastructure, etc. giving rise to a latent xenophobic anti-Asian and anti-Chinese sentiment. The port of Melbourne is now controlled by a Hong Kong-Chinese concern.
A significant share of Chinese investments has also headed to Europe. The EU whose second largest trading partner is China, received Euro 35 billion in Chinese investments in 2016 alone. Iconic facilities such as the Toulouse Blagnac airport where the Airbus 380 is assembled (sold to the Shandong Hi-Speed Group and a Hong Kong investment firm while Emanuel Macron was the Finance Minister), Volvo (to Geely), the AC Milan football club, the Piraeus harbour (owned 70% by COSCO), German robot manufacturer Kuka (now owned by a Chinese company), not to mention a number of historic vineyards and buildings are in Chinese hands.
Chinese companies are building the rail link between the Piraeus Harbour and Serbia and Hungary. Chinese trains carrying Chinese produce now travel through the Euro-Asian landmass, the modern Silk Route, to European capitals, including London, and also link up with Tehran. Natural gas from Central Asia flows along four pipelines to China.
The U.S. has received USD 90 billion since 2007. In New York, Chinese interests have acquired the Waldorf Astoria.
However, China has also tightened overseas investments, especially in real estate, hotels, film and entertainment and sports clubs, to reduce excessive capital outflows and foreign exchange risks. Those countries seeking to benefit from the Chinese gravy train should be conscious of this development.
The expansion of China’s economic and political reach has caused more than a few adverse reactions in certain international circles, especially among powers which had been used to dominating the world stage. France, Germany and Italy are leading an initiative to require the EU to scrutinise Chinese investments in Europe more carefully.
U.S. hostility towards China
Recently, it has been said that America’s focus on terrorism as the main threat has now shifted to Russia and China. According to a new Pentagon strategy released recently by Defence Secretary Jim Mattis, the United States must build up its military to prepare for the possibility of a conflict with Russia and China.
The U.S. persists in viewing the world in terms of hostile competitors. Given that China and the U.S. are closely intertwined in a complex economic embrace, the use of such terminology is curious.
The U.S. is China’s major trading partner. The bilateral trade in 2016 was worth USD 579 billion while the U.S. trade deficit was over USD 379 billion. China is the main lender to the U.S. and holds over USD 1.2 trillion in U.S. securities. Literally China has lent funds to the U.S. to purchase relatively inexpensive Chinese manufactured products to keep U.S. purchasing costs low and living standards at a high level.
China is the biggest market for many U.S. agricultural products, sustaining large sectors of U.S. agriculture and millions of Chinese tourists and students visit the U.S. annually.
Any conflict between the two countries, including a trade war, would do irreparable damage to both, not to mention the rest of the world. The two countries have a unique opportunity in history to get away from historical power based competition to cooperate for the common good.
Cooperation cannot be achieved in a hurry but the opportunity is there. Many aspects of Chinese culture, including food, eating habits, traditional health care, martial arts, dress, the arts, philosophy have been seeping in to Western and American life over the years. The U.S. has been an inspiration to China on liberal ideas, democracy, transparency, legal propriety, management style, sports, music, film, fashion, etc.
All these ideas will not be adopted by China overnight. Nor will the Chinese style of living or doing business be adopted by the West any time soon. It will take time. There are clear opportunities for teaching the two cultures to each other. Instead of breast thumping and posturing, it will serve humanity’s interests better in the long run if the two giants of the world could cooperate for mutual betterment.
India’s sensitivities
Similarly a major concern is India’s sensitivities regarding China’s outreach. The fact that the two countries fought a border war in 1962 and have skirmished along a disputed colonial border have not been forgotten by policy makers. But India’s sensitivities have impacted on the thinking of the smaller countries of the Indian Ocean region. India’s growing relationship with the U.S. has clear military implications and India does not camouflage this realignment nor does the U.S. The U.S. has recently agreed to sell Guardion drones to India for maritime surveillance.
Unfortunately, the need to convey public messages of this nature to each other appears to encourage the hawks further. India, while strengthening its naval capabilities in the Andaman and Nicobar Islands, has also quietly developed strategic relations with Australia and Japan, participating in regular joint naval exercises. India maintains a naval base in the Seyschelles and has concluded an agreement to facilitate the use of Sigapore’s naval facilities by its navy.
It seems unlikely that China, even if it wished, would be able to challenge nuclear-armed India in the Indian Ocean for decades to come. India enjoys overwhelming military superiority in the Indian Ocean. Furthermore, the U.S. maintains a mammoth base on Diego Garcia to the south of Sri Lanka. It is highly improbable that Chinese policy makers would consider challenging the existing power arrangements in the Indian Ocean any time soon, if ever. They have not done so since Admiral Zheng He’s flotilla entered the Indian Ocean in 1405 and returned many times till 1433.
To prepare to meet a challenge from China would result in expending scarce resources for a confrontation that is unlikely to happen. To be obsessed with the thinking of a bygone era and continue to rattle ones weapons to demonstrate superiority may not necessarily serve the needs of today when millions simply desire a better life, schools for their children, housing with at least essential amenities and appropriate employment.
Europe learned this lesson after the Second World War and focused its attention on improving the lives of their people through cooperation. They have succeeded to an impressive extent. We in the Third World should follow this wonderful example.
Sri Lanka, as a small neighbour eager to ascend the development ladder in the shortest possible time is caught between the sensitivities of our closest neighbour and the need to develop stronger economic relations with another. There is little doubt that as a long time friend and a country that has provided much of Sri Lanka’s religious and cultural inspiration, Sri Lanka must create and maintain an environment that makes India comfortable.
The big neighbour must feel the reassurance that the small island to the south will not pose a strategic threat, even in collusion with any other country. It should not become someone else’s large aircraft carrier! Sri Lanka’s own interests will be served well with a reliable relationship with India.
This does not mean subservience or servility or a one-way approach dominated by hectoring and gratuitous advice. The relationship, if it is to be comfortable and sustainable, must be one between two proud sovereign nations. India has a positive role to play as the bigger neighbour to the north. India’s burgeoning economy could provide an outlet for Sri Lankan businesses to expand but over-zealous and rash opening up of our economic doors with no comparable reciprocity could result in Indian industry swamping our businesses.
We must seek our own development path and that might mean seeking to collaborate with whom ever we like, including China. China, coincidentally, is India’s major trading partner. Both the Chinese and Indian leaders have made explicit overtures to each other, both recognizing the opportunities presented by cooperation than by confrontation.
A prosperous and stable Sri Lanka will be an asset to India not an unhappy and resentful neighbour to the south. Sri Lanka’s prosperity through the OBOR will be to India’s advantage as well. India could also benefit extensively from a proactive engagement with the OBOR initiative. [IDN-InDepthNews – 10 February 2018]
This article was originally published in In Depth News:
https://www.indepthnews.net/index.php/opinion/1666-one-belt-one-road-a-unique-opportunity-for-sri-lanka