Crouching Tiger, Hidden Dragon: How Delhi is losing the Indian-Chinese soft power game in Sri Lanka
Sri Lanka has increasingly become a focus of China’s Belt and Road Initiative in the last decade. The Hambantota port development project is a notable example, an ambitious but costly endeavour by former President Mahinda Rajapaksa, which was in the end handed over by the government to a Chinese enterprise on a 99-year lease in 2017 to reduce its spiralling debt burden. To that end, the Chinese hold over the nation, particularly in relation to Colombo’s mounting debt to Beijing, has become a matter of contention in local and international politics. At the same time, Colombo appears to be steering away from its traditional ally and close neighbour, India. On 4 February 2021, Sri Lankan President Gotabhaya Rajapaksa abruptly backtracked on the plans for the Colombo Port East Container Terminal project in a trilateral agreement with India and Japan, citing a lack of government funds owing to the Covid-19 induced economic downturn. It is likely that the Sri Lankan government will once again turn to Chinese President Xi Jinping for the project, which, to India’s alarm, will steadily increase Beijing’s influence in Sri Lanka and, in extension, the Indian Ocean, potentially threatening crucial Indian shipping routes. As a result, both India and China have stepped up their soft power game in Sri Lanka, vying for favourable political conditions and lucrative economic partnerships with the country.
Vaccine diplomacy
Both India and China have been taking advantage of the current Covid-19 pandemic and domestic production of vaccines, competing for Sri Lankan favours on the vaccine front. After India gifted the country 500,000 doses of its domestically manufactured Covishield vaccine in January 2021 as part of its “Neighbourhood First” policy. China quickly jumped the vaccine train by gifting Sri Lanka 300,000 of its Sinopharm vaccine. However, as the Chinese vaccine has yet to be approved by the government, the Chinese Embassy in Colombo allegedly attempted to influence the government to get approval for Sinopharm. This seems to have been unsuccessful so far; on 23 February 2021, Ramesh Pathirana, the spokesperson of the Sri Lankan government, announced that the government had ordered 13.5 million doses of the AstraZeneca coronavirus vaccine for its next round of vaccination, out of which 10 million are produced in India, citing issues with Chinese documentation related to its phase three trials as a reason for forgoing the Chinese vaccine. However, while India appears to have gained political ground on the vaccine front, it has lost momentum with recent economic development projects, largely because the Sri Lankan economy has not yet recovered from two successive hits in the last two years.
Sri Lankan President Gotabaya Rajapaksa, second right, receives a box of COVID-19 vaccines upon arrival from India, in Colombo, Sri Lanka, Thursday, Jan. 28, 2021. Source: https://apnews.com/article/sri-lanka-india-coronavirus-pandemic-colombo-coronavirus-vaccine-e48e5de02fec9a91f929cbfd0355a3a1/gallery/4de7bd12694b4d13afdf1b7474d1b3be
A struggling island economy
Following the 2019 Easter terrorist attack and the successive Covid-19 pandemic, which largely ground the tourist sector to a halt, the Sri Lankan economy has faced an economic downturn. In addition to tourism, exports and remittances fell to historical lows, leading to intensified downward pressure on the rupee and a 4% fall in GDP in 2020. The country’s debt is an ongoing issue, having increased from 70% of its GDP in 2010 to over 98% by 2020, half of which is comprised of foreign debt. With the tourism sector unlikely to recover in 2021, Sri Lanka’s economic recovery hinges on international trade, with the country’s most significant trading partners being the US, Europe, UK, India and China. While US exports are expected to reach pre-crisis levels by the middle of 2021, the only other export market having reached pre-crisis levels is China, thus further cementing Sri Lanka’s immediate dependency on China. Faced with reduced exports and a large amount of debt, the Sri Lankan government’s change in rhetoric therefore comes at no surprise: On 12 February 2021, the Sri Lankan Foreign Secretary Admiral Jayanath Colombage stated that he considered the Chinese Belt and Road Initiative a “great prospect for Sri Lanka to be more connected to the global supply chain”. With most of the world economy, including India, still ailing from the Covid-19 crisis, there is little to stand in the way of China’s slow encroachment in South Asia. On 18 January 2021, the Sri Lankan government approved a proposal for a Chinese hybrid energy project on three islands off Jaffna peninsula in close proximity to the Indian coastline, ringing alarm bells in Delhi, considering that India is already facing growing Chinese assertiveness on its Himalayan border.
The Indo-Pacific frontline
Other nations under Beijing’s auspice are also seeking to further push Colombo into Beijing’s sphere of influence. At the end of February 2021, the Pakistani Prime Minister Imran Khan visited Sri Lanka in a bid to boost trade and investment between the two South Asian nations. Pakistan hosts one of the Belt and Road Initiative’s flagship programs in the form of the China-Pakistan Economic Corridor (CPEC), receiving over USD 60 billion from China for the infrastructure projects. During his visit, Khan reportedly urged Sri Lanka to participate in the CPEC project and tempted Colombo with promises of building a “robust economic partnership characterised by enhanced bilateral trade, investments, and commercial cooperation.”
Visiting Pakistani Prime Minister Imran Khan called on President Gotabaya Rajapaksa at the Presidential Secretariat, 24th February, 2021. Source: http://www.dailynews.lk/2021/02/25/features/242488/epoch-making-visit
Overall, with Sri Lanka occupying an advantageous position alongside important trade routes between the Bay of Bengal and the Arabian Sea, the island nation is certainly in a position to navigate between the interests of India and China for its own benefit in the medium term. At present, India’s reluctance to invest in its domestic port networks to strengthen crucial transshipment links with Sri Lanka appears to have created a void for China to readily step into, thus exacerbating Indian fears of a security challenge on its doorstep. As such, Delhi would likely turn to increased support from its US ally in the medium term, and, given the continuity of the Biden Administration on Donald Trump’s anti-China policy, it is likely that Sri Lanka will become a partial focus of Biden’s Indo-Pacific strategy to foster economic opportunities for Colombo in order to counteract China’s expanding footprint in South Asia.
