Maritime Silk Road -- A Chinese repackage!

China has repackaged its ambitious project to build a 21st Century Maritime Silk Road (MSR) to get Sri Lanka on board.

Chinese President Xi Jinping, who concluded his two-day visit to the island on Sept 17, has made the economic development of Sri Lanka part and parcel of the MSR concept.

This is apparently to allay fears, generated by Western strategic thinkers, that the “String of Pearls” or Chinese-built ports across Asia, is in fact, a military project aimed at the establishment of China’s hegemony over countries which straddle its expanding trade routes.

In a statement issued ahead of his talks with Sri Lankan President Mahinda Rajapaksa, President Xi wove the economic development of China and Sri Lanka into the fabric of the MSR.

“The two countries should coordinate development strategies and work as partners in pursuit of common dreams. Mahinda Chinthana, which represents Sri Lanka’s dream of national strength and prosperity, has much in common with the Chinese dream of national rejuvenation.

“Sri Lanka has envisaged itself becoming a five-fold hub: maritime, aviation, commerce, energy and knowledge, which coincides with China’s proposal to build the 21st. Century Maritime Silk Road ,” Xi said in his message to Sri Lanka’s state-owned newspaper Daily News on Sept 16.

The Chinese president said China’s development should benefit Sri Lanka “ to a greater extent” than now, and added that China will “continue to do what it can to assist Sri Lanka in its economic and social development.”

And linking all this to the MSR, Xi said: “I believe that the ship of China-Sri Lanka friendship and cooperation is bound to brave the wind and the waves along the magnificent 21st. Century Maritime Silk Road to pursue the dream of national development.”

After witnessing the signing of 27 agreements, mostly relating to infrastructural development, Xi and Rajapaksa stressed the need to build ports and coastal industrial parks and to ensure maritime security.

Of the agreements signed, four are related to ports development, three to roads, two to power generation, and one to the setting up a coastal and marine research centre.

Chinese and Sri Lankan central banks agreed on currency swap and the two governments pledged to initiate talks on a Free Trade Agreement.

China is already heavily involved in Sri Lanka’s infrastructural development. In 2013-14, the projects to be financed by the EXIM Bank of China are valued at $ 2619.7 million, and those financed by the China Development Bank are of the order of $ 6620 million.

The EXIM Bank had earlier said that 21 agreements to be signed during Xi’s visit will be worth $ 1.6 billion. The Chinese have already funded the building of the Humbantota Port, the Mattala Airport, a power plant, expressways and some railways.

Flip Side

But the heavy financial and technical dependence on the Chinese is worrying sections of the Sri Lankan intelligentsia.

Dr Harsha de Silva, economist and a Member of Parliament from the opposition United National Party (UNP), has told Daily Mirror that the cost of Chinese loans is “very high”.

It is 2.2 percent plus 0.25 percent as service charge and the repayment period is 20 years. Japan gives loans at 0.1 percent and the repayment period is 40 years with a grace period of 10 years.

The Asian Development Bank disburses loans at 1 percent interest, de Silva pointed out.

Chinese cost estimates are “massively inflated”, he charged. And there are dark hints of heavy kickbacks. The inflated estimates result in Chinese projects being more expensive than those funded by the Japanese and Indians.

Many of the projects are “unsolicited” and the terms and conditions are not placed before parliament. Those deemed as “strategic development” projects are given lavish concessions.

While many Chinese projects have had a smooth run, the country’s biggest power plant at Noraichcholai has suffered too many breakdowns as the Chinese had allegedly supplied a substandard plant.

According to Sunday Times, Sri Lankan sub-contractors in Chinese projects are kept in the dark about many things.

Debt Trap

Dr de Silva has warned of a debt trap waiting for Sri Lanka.

“With the debt to revenue ratio being 590 percent, Sri Lanka is a high debt country. Interest payment is 38 percent of revenue, whereas the peer-median is 8.8 percent,” he said.

But there is a school of thought among the Sri Lankans which believes that there is nothing wrong in going in for massive infrastructural development with Chinese money.

China has a deep pocket and it has significant financial involvement in Australia, Canada and the US too, says Ranga Jayasuriya, who is working on China’s relations with South Asia at Central China Normal University in Wuhan.

There are many countries, including India, which are vying for Chinese investments, and China could opt for them if Sri Lanka is fussy.

“Sri Lanka is not the only girl on the beach” Jayasuriya warned in an opinion piece in Daily Mirror.