China fear stalls India-Lanka deal
Apr 27, 2017
India is in no hurry to complete the economic and technical cooperation agreement (ETCA) with Sri Lanka. Officially, India has said it would proceed "at a pace comfortable for Colombo". But there are other, bigger reasons for India to guard its flanks while negotiating a second generation free-trade agreement (FTA) with Sri Lanka.
China has evinced interest in an FTA with Sri Lanka as well. This has given India pause, as it wants to see the details of that deal. This could include, according to sources, Chinese companies setting up manufacturing bases in Hambantota and Monaragala areas of Sri Lanka and using the India-Lanka FTA to push Chinese goods into India. "We have to be careful," said sources familiar with developments.
The ETCA has also run into trouble in Sri Lanka with some opposition building up against it. India's nontariff barriers, bureaucratic delays etc have not endeared it to Lankan business.
Chinese companies are apparently being given 15,000 hectares in Hambantota, a fact former foreign minister G L Peiris told TOI in an interview was nothing short of a "bad deal". If the deal had been done the way former president Mahinda Rajapakse had intended, Peiris said, Hambantota would have been a sustainable entity .
"There was no agreement to hand over 15,000 hectares to a Chinese company .The agreement as structured at the time did not involve the wholesale leasing of the port,but only a terminal of the port," Peiris said.
Answering questions on the huge debt that Rajapakse left behind, Peiris said, "Loans taken by this government is far in excess of what Rajapakse had taken. There was something to show then -today there is nothing. The government has admitted that the money to be paid by China for the port ($1.4 billion) is not to be used for retiring this debt.So the government argument of doing this (giving the land) to pay off the debt doesn't stand."
Instead, India will focus more on infrastructure development in Sri Lanka.New Delhi is working on projects in roads, railways, ports etc. In this, Japan may prove to be a valuable ally for both India and Sri Lanka. Japan will work with India on the Trincomalee port, while Singapore is expected to help develop Trincomalee city .
Peiris said the payment scheme as set out by the Sirisena government is unsustainable. "In the proposed agreement, the Chinese company will not pay any money for the next 15 years.At the end of 15 years, the Sri Lanka Ports Authority will get money from the Chinese company only if a dividend is declared," he said.
