Sri Lanka's President Gotabaya Rajapaksa has slashed taxes in Sri Lanka in a bid to boost the economy. Photo: AFP/Lakruwan Wanniarchchi

The Millennium Challenge Corporation (MCC) is a US government entity established by Congress in November 2002 (then referred to as the Millennium Challenge Account). It is a component of the George W Bush administration’s US National Security Strategy introduced after the terrorist attacks of September 11, 2001, linking economic development with defense and diplomacy. The MCC states its mission as “reducing poverty through growth” and chooses countries to receive funding based on MCC criteria on economic freedom, good governance, and social investment. Eligible countries must apply to the MCC with specific proposals showing their “ownership” of the compacts they propose.

However, critics claim that there is little deviation of country proposals from the MCC “blueprint”: “every single country independently identified agribusiness, rural entrepreneurial development, and transport infrastructure as their key priorities.” They argue that the MCC’s primary commitment is not to poverty reduction but to “reshape the legal, institutional, infrastructural and financial contexts of poorer countries to better suit US economic interests.” Thus the MCC is seen as an instrument of the “new imperialism” pursuing “economic hegemony through the extension and ever-deepening penetration of neoliberal capitalism.”

Sri Lanka compact

Sri Lanka was selected to develop an MCC compact in December 2016 and the MCC board approved a five-year Compact for Sri Lanka on April 25, 2019. A November 2017 “Constraints Analysis” completed by the Center for International Development at Harvard University for the compact identified policy uncertainty; poor transportation and inadequate access to land, especially “the difficulty of the private sector in accessing state-owned land for commercial purposes” as the major constraints to ‘private investment and entrepreneurship” in Sri Lanka. According to the Harvard Constraints Analysis:

“Access to land is a binding constraint to growth and economic transformation as well. The state reportedly owns approximately 80% of the land in the country and it is held by multiple ministries. Government coordination is poor and the process of acquiring rights to develop land is slow and unclear, resulting in an inability of the government to meet the demand for land needed for new private-sector investment, including for export-oriented FDI [foreign direct investment]…. Problems with land use and titling are prevalent throughout the country and affect manufacturing, agriculture, construction, residential and commercial development, and tourism. Restrictions on land parcel size, the absence of land titles, and long-standing laws affecting rural land use all reduce agricultural productivity and rural well-being.”

The MCC Compact would offer US$480 million to Sri Lanka to undertake transportation and land management. Article 1 of the draft compact states the objective of the Transport Project as to “facilitate the flow of passengers and goods between the central region of the country and ports and markets’ and the objective of The Land Project as to ‘increase the availability of information on private land and under-utilized State Lands in order to increase land market activity.’”

MCC funding is to be used to change Sri Lanka’s land policy through the creation of a state land inventory based on a “Parcel Fabric Map,” the conversion of paper deeds into electronic titles and a “computerized mass appraisal system” for land valuation. MCC funding would support “the creation of a digital folio for each land parcel that includes the legal records on land transactions and a linkage to spatial data that identifies the location of each land parcel where possible.” The goal is to speed up land privatization and commoditization giving easy digital access to investors including foreign corporations.

According to the draft agreement between the MCC and Sri Lanka’s Ministry of Finance, MCC funding would be used to provide titles to state-owned land held by individuals, mostly smallholder farmers, thereby facilitating the sale of their lands to any buyer.

“Conversion of state lands to the private domain, creating a marketable and bankable title to this land in the name of the land holder. The Government shall register the absolute land grants in the title registration system, allowing the use of land as collateral for loans and the free transfer of this land without excessive government restrictions. The Land Special Provisions Act (LSPA) is expected to define the process the Government shall use for this conversion of land rights. The availability of MCC Funding for this Activity is dependent on the enactment of the LSPA.”

Colonial land expropriation

The MCC compact brings to mind the early stage of capitalist development in Sri Lanka when the British colonial state introduced legislation, infrastructure and other measures to establish the plantation economy. Those measures opened up the hitherto isolated Kandyan Highlands, bringing a fundamental social and economic transformation that benefited the colonizers and a small stratum of local entrepreneurs and administrators. The infamous “Ordinance No 12 of 1840: to Prevent Encroachments upon Crown Lands” was introduced to provide the juridical and administrative framework to expropriate land from local people who had customary rights but could not prove ‘ownership’ and titles to their land as required by the British.

As noted by this author in Colonialism in Sri Lanka, Appendix 4, the ordinance stated: “Whereas divers persons, without any probable claim or pretense of title, have taken possession of lands in this Colony belonging to Her Majesty, and it is necessary that provision be made for the prevention of such encroachments.”

Another controversial ordinance, No 1 of 1897, the so-called “Waste Lands Ordinance,” overlooked traditional sustainable cultivation practice of letting land in fallow to maintain the natural productivity. Seeking commoditization and calling uncultivated lands “waste land,” the ordinance introduced a policy that “any land or lands … in respect of which no claim is made … be deemed the property of the Crown and may be dealt with on account of the Crown” (The Legislative Enactments of Ceylon, Vol II, AD 1889-1909).

British colonial policymakers and their latter-day apologists have argued that colonial policies helped advance peasant proprietorship by giving land titles to peasants that previously lacked them. However, as demonstrated in this author’s book Colonialism in Sri Lanka, the long-term results were great confusion and conflict over land rights, large-scale dispossession from ancestral land and impoverishment of the Kandyan peasantry. Subsistence agriculture and local self-sufficiency were undermined and the natural environment was disrupted.

Now, US and Sri Lankan proponents of the MCC agreement are claiming that the distribution of 1 million deeds granting outright ownership to individuals holding state land under the Compact is a poverty-alleviation measure. Moreover, the draft agreement states, without any elaboration, that its Land Project “is unlikely to have adverse environmental and social impacts.”

However, MONLAR (Movement for Land and Agricultural Reform), the National Joint Committee and many other Sri Lankan and diaspora organizations see a set-up for a massive modern-day land grab, displacement and peasant pauperization: “large multinational companies have made small time farmers bankrupt and are buying off their agricultural land…. By giving desperate people an asset that they can sell, the government has ensured that these lands will be sold off.”

Under the MCC compact, there are plans to hand over the task of drawing land survey maps and creating the streamlined digital database of 3.6 million parcels of state owned land to Trimble Inc, a US-based geological information and mapping firm, for a period of 15 years. Survey Department trade unions have gone on strike opposing this move which they see as a threat to their employment, national security and a wasteful expenditure. Again, these plans bring to mind the early stage of colonial plantation development when a single British “planter-official class” determined rules on land ownership, surveyed and accessed land from the colonial state, employed cheap labor and developed highly profitable plantation companies producing exports for the global market.

The Sri Lanka Physical Plan (2018-2050) and a projected Physical Spatial Structure Map for 2050 upon which the compact is based have also raised alarm. There is concern that the proposed “economic corridor” and highway from Trincomalee to Colombo, reported to cover more than 485,000 hectares, could “splinter” Sri Lanka into two separate entities. Given the relationship of the MCC to the US National Security Strategy, there is fear that the compact could facilitate greater US control undermining Sri Lanka’s sovereignty, unity and territorial integrity.

In response to persistent public demands for transparency, a draft of the MCC agreement was at last published on the website of the Sri Lankan Ministry of Finance last November 5, just 11 days before presidential elections. It reveals a range of questionable clauses that severely impinge on the rights of Sri Lankan people and the independence of the country. Only a few of the clauses can be mentioned here.

According to Annex 1, after the compact’s signing, a new company called MCA-Sri Lanka is to be established (under the Sri Lanka Companies Act of 2007) as the Sri Lankan government’s “primary agent responsible for exercising the Government’s right and obligations to oversee, manage, and implement the Program and Projects.” In other words, the democratically elected Sri Lankan government is asked to voluntarily abdicate its powers and responsibilities to a yet-to-be created private company thereby contravening its constitutional mandate to protect the country’s sovereignty, territory, security and the well-being of its people.

Section 6.4 states that the compact will be governed by international law and Section 6.8 states that the “MCC and the United States Government or any current or former officer or employee of MCC or the United States Government shall be immune from the jurisdiction of all courts and tribunals of Sri Lanka for any claim or loss arising out of activities or omissions under this Compact.” This affirms that the compact and all its activities will be above the Sri Lankan law and Sri Lankan citizens would not be able to seek legal assistance from their country’s judicial system. Moreover, Sri Lanka could be taken to international court if it backs out of the compact or contravenes any of its clauses.

Section 3.9 states that ‘The [Sri Lankan] Government grants to MCC a perpetual, irrevocable, royalty-free, worldwide, fully paid, assignable right and license to practice or have practiced on its behalf … any portion or portions of Intellectual Property as MCC sees fit in any medium, now known or hereafter developed, for any purpose whatsoever.” Does this mean that the MCC can claim intellectual-property rights over any information or intellectual goods that Sri Lankans create in any area where the MCC Compact operates?
Article 5.1 states that either party may terminate the compact without cause by giving 30 days’ notice, but it specifies that only the MCC can terminate the compact and withdraw funding in whole or in part when it wants.

Section 5.4 states, “If the Government fails to pay any amount under this Compact or the Program Implementation Agreement when due … the Government shall pay interest on such past due amount.” This contradicts the statement made by the US ambassador to Sri Lanka that the $480 million is a “A gift, not a loan … from the people of the United States.”

Article 7.3 requires the compact “to be submitted to and enacted by the Parliament of Sri Lanka,” which would mean that once the compact became law, it would be exceedingly difficult to make changes to land and other polices it introduced.

Struggle over the compact

The struggle over the MCC compact brings to mind the long history of popular resistance against colonial land policies in Sri Lanka. The rebellion of 1848, for example, was a nationalist revolt against policies, such as, the Ordinance of 1840 which helped expropriate peasant lands to develop the plantation economy. Today, Sri Lankan activist groups, such as, the National Joint Committee and Sri Lanka Diaspora groups are demanding that the Sri Lankan government withdraw from the MCC Compact. They are encouraged by the decision taken by the Sri Lankan Supreme Court on the State Land Special Provisions Act (LSPA) in July 2019 referring the Act to the Provincial Councils, as it would impact passage of land provisions envisaged in the MCC Compact.

Anticipating the electoral defeat of the US-backed Sri Lankan government and in a hurry to seal the MCC Compact, the US Embassy in Sri Lanka issued a statement last November 6 stating that “the United States anticipates working toward grant signing and parliamentary approval with the Government of Sri Lanka after November 16, 2019.” Also on November 6, the Government Medical Officers Association (GMOA) filed a Fundamental Rights petition seeking to stay all approvals and decisions in respect of the MCC Compact as well as the ACSA (Acquisition and Cross Services Agreement) and SOFA (Status of Forces Agreement) military pacts with the United States. The petitioners state that if signed or executed, the MCC Compact would violate the fundamental tenet of sovereignty of the country, which the constitution expressly upholds to be “free, sovereign and independent.”

Gotabaya Rajapaksa, Sri Lanka’s former defense secretary who led the armed victory over the Liberation Tigers of Tamil Eelam (LTTE) in 2009, was elected as the president of Sri Lanka on November 16, 2019. His massive victory was a response to growing concern over national security and widespread opposition to external interventions represented by the MCC Compact, ACSA, SOFA and other measures undertaken by the previous US-backed Sri Lankan government.

President Rajapaksa promised to discard the MCC compact during his election campaign. However, upon coming into office and under pressure from the US to sign it, his government has appointed a cabinet subcommittee to study the Compact and has informed the Sri Lankan Supreme Court that the MCC Compact would “be revisited and reviewed.” Meanwhile the charges of nationalist forces that the MCC Pact is a tool of “new imperialism” and “neoliberal capitalism” and the demand to discard the pact, are escalating.

Asoka Bandarage's latest book, Crisis in Sri Lanka and the World: Colonial and Neoliberal Origins: Ecological and Collective Alternatives, was released by De Gruyter Contemporary Social Sciences on May 22, 2023.

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