RSTV - India ' s World: Can India match China in Sri Lanka ' s infrastructure market?

The focus of this discussion is on China’s increasing economic and strategic influence in Sri Lanka which has triggered alarm bells in India. Recently, Sri Lanka has leased out its strategically important Hambantota port to a Chinese state owned firm. China now practically owns every major infrastructure project from Hambantota to Colombo. It is in this context that India is trying to further its existing strong ties with Sri Lanka by enhancing its investments to counter China’s rising influence. For example, India has recently announced a joint venture with Sri Lanka to help revamp and operate its second international airport at Mattala, an ambitious project that was launched 4 years ago but failed to generate traffic or revenue. In this regard, we need to evaluate whether India can deliver on its promises.

India plans to help Sri Lanka to turn the loss making airport at Mattala into a profitable enterprise in order to gain a hold on strategic infrastructure in the region. India’s approach has to be different from that of China because China’s investments in small South Asian countries and in Africa have largely failed to take off and have ended up creating a huge debt on the host country. Thus China has merely turned into a land owner in these countries while the projects by and large have become a financial burden to the host governments. Hence, India’s approach has to break away from this imperial mind-set and should bring mutual dividends to both partners.

China’s strategic inroads into IOR

While Maldives has accepted the Chinese approach of developing financially unviable strategic projects to enhance its influence, Sri Lanka on the other hand is trying to evaluate the feasibility of this approach under the Sirisena government. This is good news to India as it can project itself as an alternative to China and provide assured mutual benefits by investing in economically viable projects to create strategic assets in the region.

But the problem for Sri Lanka lies with the unviable commitments made by the previous Rajapaksa administration during its close embrace of China at the cost of India. The current Sirisena government is trying to make a course correction but the commitments of the past is holding it back and thus China continues to play a significant role.

India v/s China: Pattern of Investments

India has previously focussed its investments exclusively on the Tamil regions in Sri Lanka i.e. Northern and Eastern Provinces and had largely ignored the majority Sinhala areas of South and South Eastern Sri Lanka. For example, Indian investments like the housing project for IDP’s in the conflict hit North and East provinces, revival of Trincomalee port etc. Whereas, China has focussed largely on the majority Sinhala areas in the South and East. India off late has realized the limitations of this approach and is trying to diversify its investments by focussing on the South and South East regions of Sri Lanka as well. It’s not a question of competing directly with Chinese investments, because China clearly outdoes the scale of Indian investments due to its sheer economic might. But India has a unique advantage in Sri Lanka – it’s ‘Soft Power’ and the general goodwill it enjoys amongst Sri Lankans. India is further trying to leverage this by diversifying its investments. Thus the airport project at Mattala and the Trincomalee oil farm project with Japan is crucial to enhance India’s footprint.

Sri Lanka is also a part of China’s OBOR project, which is an ambitious plan involving 68 countries that aims to revive the ancient silk route. As a result, China puts a lot of thought into its investments. They are driven not just by economic considerations but rather by strategic calculations. India can work with like-minded partners in the region to invest in economic-strategic projects and leverage the natural soft power and goodwill that it enjoys to counter China’s influence. India’s cooperation with Japan to build the Asia Africa Growth Corridor is one such example. India can also take advantage of Trump’s new South Asia policy and his recent visit to the region to further its ties with the littoral states of the Indian Ocean.

India’s Failures

The biggest drawback of India’s foreign policy has been the alleged failure to deliver on promises made to our partners. India has failed at times to complete the projects on time and even if completed the quality of construction has been poor. India needs to address this delivery deficit in South Asia and IOR, especially in Sri Lanka because even though we enjoy a great amount of goodwill due to our historical ties, India is still seen in Sri Lanka in the context of being a supporter of the Tamil cause which led to the ethnic conflict in Sri Lanka. So India has to continue its approach of delivering positive outcomes via wide ranging developmental assistance to win the hearts and minds of the people in Sri Lanka.

The Way Forward

India needs to pay attention to the development indicators of its neighbours. It should assist these friendly countries to grow socio-economically and capitalize on the goodwill it generates to build strategic ties in order to counter China’s massive commercial and strategic investments in the region.

India should carefully watch the internal politics of Sri Lanka as well because China is already deeply involved and is an active supporter of Rajapaksa and he is desperately trying to make a comeback and this could be detrimental to India’s interests. Previously, Rajapaksa’s government has consistently undermined India’s security and strategic concerns and has enabled a greater role for China in India’s strategic backyard. India’s challenge will be to ensure that Sri Lanka and other neighbours will be mindful of India’s concerns vis-a-vis China and India should offer timely delivery of beneficial projects in return.

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