While this may be good news for both countries, observers in Sri Lanka view President Maithripala Sirisena’s pro-China tilt as an act of desperation after his administration had failed to bring in substantial foreign investments. The government’s U-turn on Colombo Port City Project by giving it green light in March this year has angered greens who view it as a sellout to China.

COLOMBO–Taking a leaf from his predecessor Mahinda Rajapaksa’s book, Sri Lankan President Maithripala Sirisena appears to have finally joined the pro-China bandwagon.

Work resumes for the $1.5 billion port city project in Sri Lanka about a year after it was suspended over environmental concerns

He recently granted several large-scale development projects to China in his hometown, Polonnaruwa, some 228 kilometers from Colombo.

Prior to coming to power, Sirisena was a harsh critic of Rajapaksa for granting huge infrastructure development projects including ports, airports and highway projects to China.

Sirisena, who defeated Rajapaksa in the January 2015 presidential elections, has awarded Chinese companies contracts related to road network, drinking water supply, railway extension and reservoir improvement projects in his hometown district for which China will provide loans.

During the election campaign, he had promised that tenders will be open for all development projects and contracts will be awarded to the best bidders. Seventeen months later, Sirisena appears to have gone back on his promise.

After Sirisena’s sudden tilt toward China, President Xi Jinping has invited him to Beijing.  His visit may be later this year. He first visited China in March 2015, just months after being elected to power, when he was indifferent to China.

Mahinda Samarasinghe, a government minister who announced Xi’s invite to Sirisena, said the visit will “further strengthen” the friendship between China and Sri Lanka.

But observers see Sirisena’s pro-China tilt as an act of desperation after his administration had failed to bring in substantial foreign investments.

“Sirisena and his Prime Minister Ranil Wickremesinghe thought that with them balancing the (country’s ties with) international community well, it will also result in significant foreign investments coming into the country, but this is not what happened, so out of desperation, they too are leaning toward China, following in the footsteps of Rajapaksa,” an analyst, who did not want to be named, said.

Like Sirisena, Wickremesinghe too wanted to stall all projects proposed by former president Rajapaksa. One such was the Chinese funded $ 1.5 billion Colombo Port City Project.

But almost a year after construction work was stopped citing procedural irregularities and environmental concerns, he finally gave green signal to the project in March this year. China and Sri Lanka are now going to make it an international financial outpost in the Indian Ocean.

But Wickremesinghe’s sudden approval of the project has sparked outcry among environmentalists who view it as a sellout to China.

In May, Sri Lanka’s reserves fell further to $ 5.6 billion from $ 6 billion in April, the lowest since February 2012.

According to Shiran Fernando, leading economist at Frontier Research, Sri Lanka, as a post-conflict nation,  has not attracted as much as it could in terms of foreign investments.

“Investors look for clarity and a stable macro economy picture. But there has been uncertainty on this front,” he told Asia Times.

Citing reasons as to why the country’s reserves keep falling, Fernando said this was mainly due to the level of debt repayment which the economy is not accustomed to, outflows from the local government securities market and a more volatile global outlook.

“While we have secured an IMF loan, we have to take on some key reforms, to improve our export earnings and FDI so we do no rely on raising debt to build reserve buffers,” he said.

In April this year, the International Monetary Fund agreed to loan $ 1.5 billion in support of Sri Lanka’s economic reforms aimed at reversing a two-decade decline in tax revenue and reviving growth.

“The Sri Lankan authorities and the IMF have reached a staff-level agreement on a 36-month Extended Fund Facility (EFF) for a $1.5 billion loan,” Todd Schneider, IMF mission chief for Sri Lanka, said.

The loan, however, came with a series of conditions, including slapping an additional 4% value added tax on the public and increasing the tax from 11% to 15% on almost all goods and services.

Meanwhile, in an effort to attract more Chinese investments into the country, Sri Lanka’s Board of Investments has decided to revamp its Chinese sector promotion division.

The revamped unit will have several officers who are conversant in Chinese. Steps have also been taken to further promote Sri Lanka in China in an effort to attract more Chinese investments into the country.

 Munza Mushtaq is a journalist based in Colombo, Sri Lanka. She is the former news editor of two leading Sri Lankan newspapers; The Nation and the Sunday Leader. She writes extensively on Sri Lankan current affairs with special focus on politics, human rights and business issues. She is currently the Colombo-based correspondent for International News Services, the Los Angeles Times and the Nikkei Asian Review.

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