MonitorsPublished on Jul 22, 2011
In an observation recently in the Sri Lankan Parliament, External Affairs Minister G L Peiris asserted that the country could not achieve its development goals without India, which was going to play a vital role in achieving such targets.
Sri Lanka: Recognising India's role in growth
< class="heading1">Analysis

In an observation recently in the Sri Lankan Parliament, External Affairs Minister G L Peiris asserted that the country could not achieve its development goals without India, which was going to play a vital role in achieving such targets. In this context, Minister Peiris pointed out that no country could formulate its economic development goals in isolation.

Shipping is among the service sector industries of importance for Sri Lanka to keep its promises to become a model growth-State, as it used to be before ethnic issue and economic policies interfered. At the time, a burgeoning Singapore had cited Sri Lanka as its role-model for growth and development. The island-nation had then recorded highest growth-rates in South Asia. In turn, Sri Lanka’s was among the highest and fastest growing economies in the world.

In this context, Prof Peiris told the Parliament that Sri Lanka would not be able to achieve its target of becoming a shipping hub in South Asia without the support of India. As he pointed out, shipping industry in Sri Lanka was vastly dependent on India as 70 per cent of container transhipment that reach the Colombo Port is from that country. As he pointed out, the Colombo Dockyard has managed to secure a massive order from an Indian company to build 11 vessels, costing $ 240 m. In a related development, the Indian Navy too is known to have ordered 80 fast-interception craft (FIC), worth $ 67 m from Solas Marine in Sri Lanka. The former is as huge as the latter is prestigious. Given the cost-cum-credit facility, similar demands may arise in Sri Lanka for Indian-manufactured sea-going vessels, against the current demand for buses, cars and auto-rickshaws.

Continuing with the Sri Lankan Government’s refrain in the past, the Minister said that India was one of the largest tourism markets for the country. According to him, 25 per cent of tourist arrivals to the country would be from India, by 2015. Indications are that the figure would only go up. He said the situation was the same when it came to people to people contacts. In this context, he said that a programme would be launched soon to enable low income groups in Sri Lanka to visit India on pilgrimages by train.

Prof Peiris is not alone in underlining the India-Sri Lanka relations in recent weeks. In Jaffna in the North, Fisheries Minister Rajitha Senaratne pointed out how both the Sinhalas and the Tamils in the country have historic and cultural linkages to India that dated back to centuries. In more contemporary terms, the India businesses that Minister Peiris mentioned may have more practical and immediate relevance. Caught in the web of CEPA negotiations, Sri Lanka now stands to benefit not only from shipping but also ship-building. Tourism, needless to say, would be a forex-earner for both nations, particularly Sri Lanka, now that ferry services between the two have been resumed and luxury liners could take a sweep. In a way, some of these initiatives have the potential of rendering not only opposition and criticism to the Comprehensive Economic Partnership Agreement (CEPA) draft in Sri Lanka irrelevant. They may have begun eroding on the need and relevance of a CEPA, too, taking bilateral economic growth out of the realm of any such agreement of the kind.

In the recent past, Sri Lanka’s reservations to the controversial Sethusamudram project in India’s territorial waters also owed to apprehensions of the Colombo port losing a substantial share of existing business, to one of the ports in southern India. With the Supreme Court of India stepping in for totally different reasons, and the ruling Dravida Munnetra Kazhagam (DMK) in southern Tamil Nadu losing power in the May polls this year, the ’dream project’ of the latter may not see the light of the day in the near future.

As is known, post-war Sri Lanka has set growth and development as the one sure way of achieving economic prosperity. While China has emerged as the single largest investor in Sri Lanka, particularly on the infrastructure front, much of the Chinese aid has been in the form of commercial credit. The limited Indian assistance in comparison comes with the added attraction of providing jobs to the locals, which is not the case with Chinese investments, in comparison. What more, Indian orders of the kind discussed, and also higher tourist inflows, would continue to provide more jobs in Sri Lanka, both in the organised and informal sectors, in a big way.

There is however a view in Sri Lanka, mostly unmentioned and untested, that development could be a substitute to devolution, which in turn is at the centre of the ’ethnic issue’. It is another matter that the limited development that the Government has been able to usher in in the short of two years after the conclusion of ’Eelam War-IV’ has silenced demands for devolution. A conducive environment could be created for fast-tracking development and obtaining the required funding for the same, only when permanent peace had returned to the nation, through a political solution acceptable to all stake-holders.

It was possibly the first time in recent times that a senior Minister in Sri Lanka has made such a positive observation regarding India-Sri Lanka relations, and has taken it out of the political and security issues ? as Minister Peiris has said. In the past, positive references to India in Sri Lanka had often been on the defensive ? if not apologetic. Yet, rival UNP’s Ranil Wickremesinghe as Prime Minister had gone a step further, and proposed a land bridge connecting the two nations ? though perceived in Tamil Nadu as a substitute for the Sethusamudram project.

By being frank, Minister Peiris may have laid it out for all of Sri Lanka to mull over and take decisions. Needless to say, such decisions need to be for the medium and the long-term, and there cannot be any vacillation. A nation-wide discourse, aimed at arriving at a consensus may thus be in order, considering the multi-faced nature of the emerging ties, and the need to reintroduce mutual trust and confidence in each other ? to which ethnic peace in Sri Lanka too would make a major contribution.

It is here that opinions differ in Sri Lanka. Sinhala-right JHU leader Pattali Champika Ranawaka recently ticked off the TNA for involving India in the ethnic issue. His party also had reservations about the draft of the Comprehensive Economic Partnership Agreement (CEPA) with India. Yet, as Energy Minister prophesising the need for nuclear energy in the country, Minister Ranawaka visited nuclear plants in India for a first-hand understanding. Politics and development could be the two sides of the same coin, but they are not substitutes for each other.

(The writer is a Senior Fellow at Observer Research Foundation)

< class="heading1">Country Reports

Sri Lanka
< class="heading12boldGeorgia">Sigh of relief over Hillary’s India visit

The Chennai visit by the US Secretary of State Hillary Clinton and her meeting with Tamil Nadu Chief Minister Jayalalithaa were not as fiery as feared by the Sri Lankan Government, a top External Affairs Ministry official said in Colombo. "It is not as bad as we expected," the official added.

The official said from what had transpired between the two, it appeared that the US was pushing India to take on a greater leadership role in the region and the lukewarm remarks on Sri Lanka also indicated US being aware of the close links between India and Sri Lanka.

The official said no official comment could be made on Clinton’s visit to Tamil Nadu as the Sri Lankan Government did not wish to comment on India-US relations as it was auxiliary to the direct ties between Sri Lanka, India and US. He said a final assessment on the absence of a powerful outcome from the meeting was testament to US’s lack of dominance in the region. Clinton, who voiced concern on Wednesday over the plight of the internally displaced people in Sri Lanka, told Jayalalithaa that the US was looking at innovative and creative ideas on the Sri Lankan Tamil issue.
< class="text11verdana">Source: Daily Mirror Online, Colombo, July 22, 2011

< class="heading12boldGeorgia">US panel votes to bar aid

A US congressional committee voted to ban aid to Sri Lanka unless the nation shows "accountability" over the bloodshed in the final stages of its civil war in 2009.

In a voice vote, the House Foreign Affairs Committee approved a measure that would ban all US government funding to Sri Lanka except for humanitarian aid, demining and activities to promote democracy and governance.

The measure -- sponsored by Representative Howard Berman, the top member of President Barack Obama’s Democratic Party on the panel -- would only allow aid once the Obama Administration certifies progress by Sri Lanka on key concerns. The concerns include "accountability for those involved in violations of human rights and war crimes at the end of Sri Lanka’s civil war," including members of the defeated LTTE.

Other criteria include an improved climate for freedom of the Press, an end to emergency regulations and information from the government on the fate of people unaccounted for at the end of the civil war. The US Agency for International Development (USAID) had requested close to $13 m for Sri Lanka in the 2010 fiscal year. While the House measure enjoyed broad support, it will not immediately take effect as it was in the form of an amendment for spending in the next fiscal year starting in October.
< class="text11verdana">Source: Daily Mirror Online, July 22, 2011

< class="heading12boldGeorgia">Pacts with Russia to combat international crimes

Sri Lanka has entered several bilateral mutual legal assistance treaties with Russia in the context of combating serious international crimes such as those relating to terrorism and narcotic trafficking. The External Affairs Ministry said that the third round of bilateral negotiations was held in Colombo this week between the delegations of Sri Lanka and the Russian Federation in order to conclude a bilateral treaty on Mutual Legal Assistance in Criminal Matters between the two countries.

During negotiations, the two sides exchanged views on current developments relating to enhanced cooperation on mutual legal assistance in criminal matters and emphasised the need to cooperate at the international, regional and bilateral levels, in particular in the combating of international terrorism and organized crime. At the end of the three day negotiations, the two sides initialled an Agreed Text of a Mutual Legal Assistance Treaty in Criminal Matters.

The two delegations also commenced negotiations on a fresh bilateral Treaty on the Transfer of Sentenced Persons, enabling the transfer of prisoners to their country of origin to serve their sentence, which would facilitate the rehabilitation of such prisoners.The visiting Russian delegation was led by Kirichenko Yuri, Deputy Director of the Ministry of Justice of the Russian Federation. The Sri Lankan delegation was led by Mrs. Eva Wanasundera, Solicitor-General.
< class="text11verdana">Source: Daily Mirror Online, July 22, 2011

< class="heading12boldGeorgia">US supplies via Pakistan down to 35 pc

The US has reduced its supplies to Afghanistan using Pakistani territory to 35 per cent due to increasing volatility on Pakistan’s western border with Afghanistan, where NATO tankers are constantly coming under attack. Till recently, the figure used to be 70 per cent.

As the Pentagon is working to increase its supplies through the Northern Distribution network, the figure of 35 per cent is expected to come down drastically in the coming months.

"It’s my understanding that approximately 35 per cent moves through the ground, and the other is moving through the Northern Distribution Network, coupled with also lift as we bring in supplies by air," Gen William M Fraser told the Senate Armed Services Committee.

US officials have stated in recent times that they were working on reducing their dependency on the supply routes in Pakistan after a series of attacks on NATO tankers carrying oil and other goods to western forces and Afghanistan.
< class="text11verdana">Source: Press Trust of India, July 22, 2011

< class="heading12boldGeorgia">Worries over Taliban’s return

Afghans from the Nuristan and Kunar Provinces have raised concerns regarding the return of the Taliban, as North Atlantic Treaty Organisation’s (NATO) presence reduces in the region.

By August, the first batch of US troops will leave Afghanistan, Canada will have ended its combat mission, and the responsibility of security for seven areas will be transferred to Afghan security forces.

But as the presence of foreign troops reduces, the situation in Afghanistan’s eastern Nuristan and Kunar provinces may provide the Taliban to stage a come-back. Moreover, despite strong anti-NATO sentiment, many Afghans worry about the capability of the Afghan forces to maintain stability in the area.
< class="text11verdana">Source: The Christian Science Monitor, July 21, 2011


< class="heading12boldGeorgia">Nepal’s first use of Chittagong port

In a major step towards regional connectivity, Bangladesh allowed transit of goods to Nepal. Two Indian wagon trains left for Nepal with 2,389 metric tonnes of di-ammonium phosphate (DAP) imported from Morocco by the Agriculture Import Corporation Limited of Nepal.

This is for the first time Bangladesh has allowed Nepal to use the Chittagong port, river route and railway facility in line with a decision taken by Prime Minister Sheikh Hasina and her Indian counterpart Dr. Manmohan Singh in 2010.

During Sheikh Hasina’s visit, India and Bangladesh agreed to give access to Chittagong and Mongla ports for Nepal and Bhutan.
< class="text11verdana">Source: The Daily Star, July 18, 2011

< class="heading12boldGeorgia">Controversy over census figures

The authenticity of the current Census figures has been questioned as the preliminary report putting the country’s population at 14.23 crores does not correspond to figures projected last year by different UN bodies and government high-ups. The UN Population Fund (UNFPA) had given a figure of 16.44 crores.

Agriculture Minister Matia Chowdhury claimed that the Census figures were unrealistic. She said the preliminary findings of the latest Census do not correspond with the current figures of domestic demand for food, its production and import. She said that if the population is 142.3 million, then there would have been food surplus in the country and there would have no need to import food.
< class="text11verdana">Source: The Daily Star, July 18, 2011

< class="heading12boldGeorgia">Charges framed in mutiny case

A trial court has framed charges against 430 people accused in the bloody Bangladesh Rifles mutiny. A total of 74 people, including 57 army officers, were killed at Pilkhana, the headquarters of Bangladesh Rifles (BDR), in the mutiny on February 25-26, 2009.

Out of the 430, 409 are members of the Border Guard Bangladesh (BGB) while the rest are civilians. Interestingly, charges have also been framed against former BNP lawmaker Nasiruddin Ahmed Pintu and Awami League leader Torab Ali.

Nasiruddin Ahmed Pintu and Torab Ali were indicted for instigating and planning the killings. Pintu was also charged with abetting mutineers to flee Pilkhana, attending a meeting at the residence of an accused on February 24, 2009 and masterminding the massacre and organising procession in support of mutineers.

After the mutiny the name of BDR was changed to BGB
< class="text11verdana">Source: The Daily Star, July 21, 2011

< class="heading12boldGeorgia">US committed to civil nuclear deal, but...

In New Delhi for the second round of bilateral Strategic Dialogue, US Secretary of State Hillary Clinton sought to allay India’s apprehension about the Indo-US nuclear deal saying that Washington remained fully committed to civil nuclear cooperation deal. At the same time, she also took up the cause of the US business which was finding nuclear commerce difficult because of the India’s Nuclear Liability Act. She is understood to have asked the Indian Government to ratify the Convention on Supplementary Compensation (CSC) at the earliest, a joint statement said after her talks with External Affairs Minister S M Krishna.

Clinton sought to put at rest India’s fears over troop’s withdrawal from Afghanistan saying that Kabul, Islamabad, New Delhi and Washington need to work together. Later, addressing an invited group in Chennai, she asked India to play a "more assertive" role across Asia-Pacific, noting that this was a "time to lead" by seizing the emerging opportunities.

During her stay, Clinton met Prime Minister Manmohan Singh, UPA chairperson Sonia Gandhi, Leader of the Opposition in the Lok Sabha Sushma Swaraj and others and also went to Chennai where she had a meeting with Tamil Nadu Chief Minister J Jayalalitha.The visiting leader, while sharing Jayalalitha’s concern over conditions of Sri Lankan Tamils, said that the US was looking at ’innovative and creative ideas’ to break impasse in the island nation.
< class="text11verdana">Source: The Hindu, July 20-21, 2011,

< class="heading12boldGeorgia">Talks with Pakistan on CBMs

India and Pakistan on Monday reviewed the existing cross-LoC travel and trade arrangements to ensure their effective implementation and explored the possibilities of additional steps to enhance the CBMs, ahead of a meeting between their Foreign Ministers this month-end.

The Joint Working Group on cross LoC CBMs met here on Monday and the discussions were held in a "cordial atmosphere", an official spokesperson in the Ministry of External Affairs said here.

While the Indian side was led by Y.K. Sinha, Joint Secretary, Ministry of External Affairs, the Pakistani delegation was led by Zehra H Akbari, Director General (South Asia), Ministry of Foreign Affairs.

"During the meeting, both sides reviewed the existing cross LoC travel and trade arrangements to ensure their effective implementation and exchanged views on additional measures to facilitate cross LoC travel and trade," the spokesperson said.
< class="text11verdana">Source: The Hindu, July 18, 2011

< class="heading12boldGeorgia">Iran threatens to cut oil supply

Iran threatened Monday to cut oil supplies to India by the beginning of August if billions of dollars in what it said are overdue payments for crude oil are not made. The semi-official Fars news agency quoted an unidentified senior Oil Ministry official as saying it will not authorize shipments of crude oil to India as of Aug. 1 if overdue payments are not made.

The semi-official Mehr news agency quoted Central Bank of Iran Governor Mohammad Bahmani as saying that India owes Iran about $5 billion. A plan for India to funnel oil payments to Iran through Germany’s central bank in April was scrapped at a time when Teheran faces international sanctions over its controversial nuclear program.

Faced with discontinuance of supply of oil in August, Indian refiners MRPL, Essar Oil, HPCL, IOC and BPCL have begun to search for new suppliers. With the clearing system of regional central banks no longer effective, India has to find ways to clear pending payments of around $5 billion and is in talks with the US.
< class="text11verdana">Source:, July 18, 2011, Indian Express, July 22, 2011

< class="heading12boldGeorgia">Richer by uranium reserves

Tummalapalle in Andhra Pradesh could have one of the largest uranium reserves in the world. Recent studies have indicated that it could have a reserve of 1.5 lakh tonnes of the scarce raw material, said Atomic Energy Commission chief Srikumar Banerjee on Monday in Rajasthan.
< class="text11verdana">Source: The Hindu, July 19, 2011

< class="heading12boldGeorgia">It’s in billions, not trillions, in Swiss banks

The Swiss Central has estimated the total liabilities of Swiss banks towards Indian account holders at about $ 2.5 billion in 2010 as against the $ 1.5 trillion figure as projected by some political parties and non-governmental organisations.

"The Swiss National Bank can only say that the liabilities of Swiss banks towards Indian holders according to our annual statistics? were Swiss francs 1,945 billion in 2010", the spokesperson for the Swiss National Bank President Walter Meier said.
< class="text11verdana">Source: The Tribune, July 18, 2011

< class="heading12boldGeorgia">DRP to reject Fisheries Minister

The main Opposition Dhivehi Rayyithunge Party (DRP) will vote against approving the reappointment of Dr Ibrahim Didi as Fisheries Minister in Parliament, Minority Leader Ahmed Thasmeen Ali said.

The DRP Leader argued that Dr Didi, who returned to the Cabinet a year after quitting en masse with his colleagues and rejected re-nomination by the Majlis later, "lacked sincerity" for accepting the post after pledging to devote all his time to managing the party in his campaign for the MDP presidency.
< class="text11verdana">Source: Minivan News, July 19, 2011

< class="heading12boldGeorgia">Two per cent of wage bill for political appointees

Expenditure on 244 political appointees in the Executive branch is two percent of the State’s wage bill or Rf99 million (US$6.4 million) a year, according to official figures released by the Ministry of Finance and Treasury.

The Rf1.6 billion (US$103 million) of annual spending on 20,476 civil servants accounts for 39 percent of total State expenditure on salaries and allowances, followed by 24 percent for uniformed bodies (5,949 police and army officers), 17 percent for local councils (1,091 elected councillors), 10 per cent for independent institutions (1,904 employees) and five percent for the judiciary (1,461 employees).Annual expenditure on Parliament (211 employees) accounts for two percent while administrative staff at the President’s Office (186 employees) represent one percent of the total wage bill.

A Press release issued by the ministry said that the figures were being published as ’misleading statements’ were being made on Government spending. "The economy has been adversely affected as a result of the budget deficit in past years," it reads. "One thing to be noted is the significant increase of recurrent expenditure compared to revenue. Recurrent expenditure is 12 per cent above the Government income forecast for 2011. Moreover, 49 per cent of the State’s recurrent expenditure is spent on salaries and allowances for State employees."
< class="text11verdana">Source: Minivan News, July 19, 2011

< class="heading12boldGeorgia">New monetary policy for 2011-12

The Nepal Rastra Bank (NRB) has unveiled a new monetary policy for the fiscal year 2011-12. The target for the upcoming fiscal year is aimed at maintaining the inflation rate at 7 percent and to achieve an economic growth of 5 percent. The NRB also aims at maintaining sufficient foreign exchange reserve that will support imports for at least six months while targeting a balance of payment surplus of Nepali Rs 5 billion.

At present, the NRB has reduced to cash reserved ratio from 5.5 percent from 5 percent so as to increase liquidity within the economy. The NRB also Monetary policy has also given priority to expand the branches microfinance companies to some nine districts of the country lacking financial access. To this end the NRB will be providing Rs. 1.5 million on zero percent interest for certain period to respective branches of the bank.

< class="text11verdana">Source:

< class="heading12boldGeorgia">Prachanda under pressure

The United Communist Party of Nepal (Maoist)’ standing committee has put pressure on Chairman Puspha Kamal Dahal alias Prachanda to give up the monopoly he is enjoying over the party. It also accused him of causing internal rift within the party leadership.

At the same time, the standing committee, consisting of the vice-chairpersons Mohan Baidhya, Baburam Bhattarai and Narayan Kaji Shrestha, is expected to meet at Dahal’s residence to iron out differences.

Deputy Prime Minister and Home Minister Krisha Bahadur Mahara and a few other leaders of the Maoist party have opposed the on-going signature campaign of the three vice-presidents against Chairman Dahal.
< class="text11verdana">Source:

< class="heading12boldGeorgia">US charged with ’slander campaign’

Islamabad has accused the US of launching a "slander campaign" against Pakistan over the arrest of Dr. Ghulam Nabi Fai, a US citizen of Pakistani descent on 19 July 2011 for allegedly funnelling millions of dollars to lobby US politicians on the issue of Jammu and Kashmir and working as an agent of the Inter-State Intelligence Services (ISI).

According to the US Justice Department Fai and Zaheer Ahmad, another US citizen and resident of Pakistan will face five years in prison if found guilty in the case. "Dr Fai is a US citizen. A demarche was made to the US embassy in Islamabad today to register our concerns, in particular the slander campaign against Pakistan," said the Ministry of Foreign Affairs of Pakistan in a statement. "Campaigns to defame the just cause of the Kashmiri people will not affect its legitimacy," it added
< class="text11verdana">Source: The Dawn, July 22, 2011

< class="heading12boldGeorgia">FM to meet Kashmiri leaders in Delhi

Senior separatist leaders of Jammu and Kashmir have been invited by the Pakistan High Commission in New Delhi to meet the new foreign minister of Pakistan, Hina Rabbani Khar, for a meeting on July 26.

The All-Party Hurriyat Conference Chairman, Mirwaiz Umar Farooq and veteran Kashmiri Hurriyat leader, Syed Ali Geelani, Shabbir Ahmad Shah, and Yasin Malik of Jammu and Kashmir Liberation Front (JKLF) are some of the many leaders who have been invited.

According to media sources, the leaders have accepted the invitation and will be briefing Khar over the current political scenario in Kashmir. Khar, the youngest and first woman foreign minister of Pakistan, will be arriving in New Delhi on a two-day visit on July 26.
< class="text11verdana">Source: Daily Times July 22

< class="heading12boldGeorgia">MQM sends Ebad back as Sindh Governor

In a turnaround from the his latest statements, the Muttahida Qaumi Movement (MQM) chief Altaf Hussain has asked Ishratul Ebad, former MQM Governor of Sindh {rovince, to take back his resignation and resume his duties, in what looks like a rapprochement with the ruling Pakistan People’s Party (PPP).

In a recent statement, the MQM said that President Asif Ali Zardari had called Altaf Hussain and requested him to allow Ebad back as Governor, to which Hussain agreed. However, according to sources, there were several intermediaries involved in brokering the deal, some of which included US diplomats as well.

Pakistan Muslim League Quaid (PML-Q) leader Chaudhry Shujaat Hussain, is said to have been instrumental in persuading the MQM to side with the Government’s favoured nominee for Senate opposition leader, Abdul Ghafoor Haideri of the Jamiat-e-Ulema-e-Islam.

The move by the MQM has led to speculation that the MQM will rejoin the PPP in the ruling coalition. However, MQM spokesperson Wasay Jalil said that the party will remain in the opposition benches.
< class="text11verdana">Source: The Express Tribune, July 18, 2011

< class="brown12verdana">Contributors:

Afghanistan & Pakistan: Avinash Paliwal;
Bangladesh: Joyeeta Bhattacharjee;
India: Satish Misra;
Nepal: Sripathi Narayanan;
Maldives & Sri Lanka: N SathiyaMoorthy;

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.


N. Sathiya Moorthy

N. Sathiya Moorthy

N. Sathiya Moorthy is a policy analyst and commentator based in Chennai.

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