Originally Published 2020-06-02 09:07:24 Published on Jun 02, 2020
Developmental aid as a diplomatic tool

Sri Lankan President Gotabaya Rajapaksa’s recent request to Prime Minister Narendra Modi for a $ 1.1-billion ‘currency swap’ facility hints at the aid-route New Delhi can take to improve its diplomatic influence in the neighbourhood. Coming as it does in the footsteps of India continually supplying tonnes of medical requirements to fight Covid-19 pandemic, time may be now right for New Delhi to consider ‘developmental aid’ as a serious tool of diplomacy.

“If the government of India could provide $ 1.1 billion special SWAP facility to top up $ 400 million under the SAARC facility, it would enormously help Sri Lanka in dealing with our foreign exchange issues,” the Sri Lankan President’s office said after Rajapaksa made the request during a telephone call from Indian PM Naarendra Modi. The Indian Prime Minister also called Mauritius Prime Minister Pravind Jagnauth, another Indian Ocean neighbour, the same day to convey India’s continued support to the nation for fighting Covid19.

In their conversation, PM Modi and President Rajapaksa agreed to accelerate the pace of India-aided projects in Sri Lanka. The President’s  office said that Rajapaksa asked Modi to "direct those responsible from India's side to expedite construction of the East Terminal of the Colombo Port as soon as possible". In turn, PM Modi advised Rajapaksa to appoint an official to coordinate the projects-related work with India’s new High Commissioner, Gopal Baglay.

The new Sri Lankan request for currency-swap with India comes days after Chinese President Xi Jinping called Rajapaksa and offered cooperation in all fields. In context, PM Modi’s offer to Gota that India was “ready to help under terms that are favourable to Sri Lanka”, means a lot, especially in terms of the multiple controversies surrounding the Hambantota port project – which was/is seen as a ‘debt-trap’, by public finance experts, within the island-nation and outside.

Independent of the yo-yo nature of bilateral relations and the consequent ‘political delays’ in carrying forward India-aided projects in Sri Lanka, there has been a general neighbourhood perception that the Indian bureaucracy do not act fast as their ‘leaders promise’. There is little acknowledgement of India’s concerns about what tantamount to ‘deliberate delays’ in the Sri Lankan side keeping up its word on the accepted Indian proposals. The failure of successive governments to upgrade bilateral FTA into CEPA and ECTA, as desired by the Sri Lankan side, is not a stand-alone instance.

However, there has been visible improvement in Sri Lanka’s fast-tracking of India-aided projects, lately. For instance, the free housing scheme, first taken up in the war-ravaged North and then across the country, is a pointer in the progress made in this regard, but after avoidable delays. The Sampur thermal power project in the East, which was held up, purportedly in Sri Lanka’s attorney-general’s office, was later upgraded as a non-coal project, but that was certainly the reason for the delay.

‘Not a debt-trap’

At a conference in PM Modi’s Gujarat State, pre-pandemic, Maldives Parliament Speaker and former President Mohammed ‘Anni’ Nasheed had said that the Indian assistance to his country was “not a debt-trap".  Nasheed said: “As India rises and attains the status of superpower… We do not see how India's actions have ever been a threat to the Maldives or any of its neighbours. India has always respected our sovereignty and always treated us as equals, however small we are.” He compared India to “another super-power coming to the Indian Ocean - China. Unfortunately, the manner in which this super-power is treating the Indian Ocean islands is very, very different”.

Nasheed, though was not referring to China’s Sri Lanka funding, was making a mention of similar funding for Maldives, under the predecessor regime of President Abdulla Yameen. The Chinese loans to Maldives during the Yameen era is put at around $ 1.5-billion, which is beyond the nation’s repayment capacity, leading to Nasheed calling it a ‘debt-trap’ very long ago.

Pre-Covid-19, Maldives had announced an India-aided ‘Greater Male Connectivity’ project, linking capital Male with Vilimale’, Gulhifaru, and Thilafushi islands, in what is called the Male-Thilafushi sea-bridge. While being allotted to an Indian construction company to be chosen by Maldives, the project can be expected to employ locals wherever possible, unlike the China-funded Male-Hulhule sea-bridge connection to the airport-island. It was the case with the post-tsunami housing schemes that the two Asian powers funded in Maldives.

From the Maldivian side, MVR 231-m pre-construction geo-technical survey for the bridge project commenced pre-pandemic, with the Dutch company, Fugro, bringing in heavy equipment for the purpose. With Covid-19 coming in the way, it is unclear if the Maldivian government could float the tenders for the project, for exclusive Indian participation, in July, as originally planned.

Beyond budgetary support

In the past, India has been sensitive to its economic dominance in the region and had restricted its aid to budgetary support, as required by the host-neighbour. However, in the era of Chinese dominance and strategic theories of the ‘String of Pearls’ kind, New Delhi has re-visited its policy and has been making visible investments that the end-user population in those countries can touch, feel and directly benefit from.

It is in this context, that Indian housing scheme, started by the predecessor Manmohan Singh government, and the sea-bridge in Maldives stand out as examples. As is known, in democracies, elected governments cannot but listen to the voice of the people, eternally. The governmental response can at best be delayed, not declined altogether. All of India’s neighbours, from Mauritius and Seychelles to Afghanistan and Myanmar, are now democracies.

By offering project aid that employ local people and increase their family-incomes, India can hope to beat China in its own game. This is more so, considering that most of China-aided projects the world over seem to have been decided and designed by Chinese companies, to physical sizes that are as huge as the budget/debt.

Different strokes

The Hambantota port, the Matale airport are both white elephants by all considerations. Coupled with otherwise useful expressways across Sri Lanka, such debt-trap projects only trigger suspicions in the minds of the local population over the Chinese motives and methods – going beyond their aid-packaging.

India, too, has to face motivated political posturing by parties and groups, purportedly uncomfortable with the presence of the regional super-power. According to reports, Sri Lanka’s left-leaning JVP has questioned the choice of India for developing Colombo Port’s East Terminal. In possibly a first of its kind, the President’s Office issued a detailed statement, calling upon the JVP not to ‘disseminate fake information’.

In doing so, the President’s Office went a step further and contextualised the Rajapaksa-Modi conversation and the East Terminal agreement to what reads like a frank assessment of the Sri Lankan economy, as inherited from the previous rulers and up to the ‘pandemic present’.  If the JVP’s concerns are about India coming to occupy territory as China did, they only need to look back to the past.

The IPKF military deployment was done at the instance of the Sri Lankan government of the day, and was withdrawn, again at the instance of his successor. Murmurs, if any, were from within the Sri Lankan armed forces, who could not reconcile to what turned out to be treachery. Post-tsunami, end-2004, Indian troops were the first again to rush aid to Sri Lanka, Maldives and even Indonesia, all three among the worst-hit. Again, there was absolutely no complaint of Indian troops over-staying there welcome.

Unexplained, yet unprecedented, protests were also witnessed outside the then President’s ‘Temple Trees’ residence, days before then incumbent Mahinda Rajapaksa, now Prime Minister, was all set to sign the Comprehensive Economic Partnership Agreement (CEPA) during then PM Manmohan Singh’s Colombo visit in November 2008. The two sides had initialled the MoU in New Delhi only a fortnight earlier. Interestingly, despite successor Prime Minister Ranil Wickremesinghe’s promise to rework CEPA as ECTA (Economic and Technology Cooperation Agreement) with India, nothing came off the commitment through his near-five years in office.

It was different strokes in the case of Indian private sector involvement in the construction-cum-concession agreement for re-developing the Male international airport when Nasheed was President (2008-12). Lack of internal consultations in a small country like Maldives, where everyone otherwise knew everyone else, and the Indian infra-major GMR group’s insensitivity to the internal dynamics of politico-administrative functioning in smaller nations, cost India massive political advantage that should have accrued even earlier.

Sphere of influence

Not only did the political Opposition stall the project in Parliament and through courts, after Yameen became President in 2013, he also cancelled the work. In doing so, Yameen’s Maldives willingly paid $ 270-million in damages to GMR, as ordered by the Singapore arbitration court. Needless to point out, some of the airport construction work went to Chinese firms.

India needs to prepare for such eventualities while seeking to expand its sphere of economic influence in the region. Over the past couple of decades, the nation willingly and unwittingly surrendered its acknowledged claims to the region being ‘India’s traditional sphere of influence’.

Apart from the sea-bridge project in Maldives, India is committed to the tri-nation, India, Japan, Sri Lanka project to develop the eastern port town of Trincomallee in the island-nation. It may be one of the projects that India and Sri Lanka may have to take up for fast-tracking in the light of the Modi-Gota consultations. Given that India has had ‘internal political problems’ coming in the way of developing a joint project Assumption Island in Seychelles, it may be time looked at administrative issues more seriously than already.

New Delhi may need to identify socio-political consultants with knowledge about the working of neighbourhood nations, to advice Indian investors, including the government – or, train them from within the system, with the longer term in mind. The idea is to ensure that the Indian prestige and political standing did not suffer over the short, medium and long terms.

This is more so when the Government of India for some years now has created systems within the Ministry of External Affairs (MEA) on funds allocation for developmental projects in neighbourhood countries. Working under a senior diplomat, the ‘Development Partnership Administration’ also aims at minimising the time spent in consultations with other ministries and department, when it comes to the nation funding projects in third nations, especially Third World nations.

This commentary originally appeared in South Asia Weekly.

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