Sri Lanka teeters on the edge of a grim economic precipice, entering 2022 with foreign currency reserves sufficient only for a single month of imports.

Domestic inflation rose to a decade-high record in 2021 following a surge in food prices triggered by import restrictions, a significant drop in the Sri Lankan rupee value and the government’s decision to print more money.

Sri Lanka is saddled with annual foreign debt settlements of US$4.5 billion for the foreseeable future. Notions of an investment friendly hub are satirised by the reality on the ground, with people standing in long queues waiting for daily essentials like milk powder and gas cylinders for cooking. These developments come amid an economic slowdown brought about by COVID-19, poor fiscal and monetary policies, and an abrupt decision to ban the importation of chemical fertiliser which gravely impacted local harvests.

The decision was made in April 2021 by an ‘out of touch with reality’ President Gotabaya Rajapaksa who believed that a prohibition on chemical fertiliser would increase his popularity as a promoter of organic farming and save much needed US dollars flowing out of the country. His attempt to proverbially ‘kill two birds with one stone’ backfired dramatically. Protests erupted throughout the country as farmers took to the streets demanding the continued importation of chemical fertilisers or the provision of a substitute organic fertiliser.

The Gotabaya regime reached out to China and imported organic fertiliser from Qingdao Seawin Biotech. Initial tests on samples carried out in Sri Lanka confirmed that Qingdao’s fertiliser contained a microorganism identified as ‘Erwinia’ which could cause crop failure. The Ceylon Fertilizer Company halted payments to Qingdao Seawin Biotech for the organic fertiliser. The Colombo High Court promptly ordered Sri Lanka’s People’s Bank to freeze the disbursement. The ship carrying the consignment of Chinese fertiliser was also denied entry into Sri Lankan ports.

Qingdao Seawin Biotech responded by demanding a US$8 million compensation from Sri Lanka’s National Plant Quarantine Services, asserting that failure to pay the sum in three days would result in legal action. The Chinese Embassy in Colombo tweeted that Sri Lanka’s People’s Bank would be blacklisted for freezing payments, despite the bank simply adhering to the High Court’s ruling. A local journalist observed that, ‘by slapping sanctions on People’s Bank, China could be showing disregard for domestic legal procedures, despite consistently maintaining internationally that it respects each country’s local processes, independence and sovereignty’.

The ship did not return to China after being blocked from entry to Sri Lanka. Instead, it left for Singapore and reportedly changed its name. Vessel tracking technology helped reporters locate the ship in Hambantota in southern Sri Lanka where China currently manages a port under a 99 year lease.

China’s heavy-handed approach forced the Sri Lankan government to back down. A government spokesperson stated that 75 per cent of the US$8 million will be paid out as compensation to Qingdao Seawin Biotech, despite Sri Lanka’s foreign exchange crisis. Sri Lankan Agriculture Minister Mahindananda Aluthgamage admitted that, ‘we cannot afford to damage diplomatic relations over this issue’. This highlighted the degree of leverage that China exercised.

Recent reports indicate that Sri Lanka plans to order a new consignment of organic fertiliser from Qingdao Biotech even though the company doubled the price of fertiliser that was initially agreed upon by the two parties. The Agriculture Minister also designated a committee to alter quality standards to enable Qingdao Biotech’s fertiliser to be imported and, in a move to conform to Qingdao’s demands, fertiliser samples will be tested in a laboratory recommended by China. The incident reflects Beijing’s ability to arm-twist small states when they challenge a Chinese firm or the Chinese government’s stance.

Sri Lanka’s weak economic position, coupled with the Rajapaksa family’s past connections with Chinese President Xi Jinping, undermines Sri Lanka’s ability to exercise independent agency and autonomy. The fertiliser debacle also demonstrates the likelihood that small states — particularly ones facing economic hardships relating to debt repayment — will be forced to swallow China’s ‘bitter pill’ regardless of whether it is in the national interest of the country.

*About the author: Shakthi De Silva is a Visiting Lecturer at the Bandaranaike Centre for International Studies and is currently pursuing his postgraduate studies at the National University of Singapore.

While saying that there is a minor shortage in four essential commodities, the Finance Ministry said there is an urgent need of setting up an effective mechanism where imported goods reach  the general public in a more transparent manner.

The matter was discussed in the maiden meeting of the committee appointed by the President headed by Finance Minister Basil Rajapaksa to ensure that there is no shortage of essential commodities.

The Ministry said though there is a minor shortage of four essential goods such as milk powder, LP gas, wheat flour and cement at present, sufficient stocks of all other items are in hand.

Moreover, Finance Minister Basil Rajapaksa raised the importance of displaying the prices of products clearly in shops as there is a tendency among shop owners to decide the prices as they wish.

He also highlighted that the Consumer Affairs Authority should carry out surveillance and compile report on essential food items on a daily basis and thereby, the disparity in the distribution of the imported goods could be identified.

Meanwhile, the Finance Minister said the existing forex crisis is a temporary situation.

Sri-Lanka-India relations have reached a “high point”, according to Sri Lankan foreign minister G L Peiris, who was in Delhi earlier this week. It is true that the tensions of the past do seem to have dissipated to a great extent. Colombo appears more welcoming of collaborations with India than it has been seen to in the past, especially during Rajapaksa governments.

Its economic crisis, which has led to dire shortages of essential commodities, fuel and medicines may have been a turning point in this respect. Colombo had appealed to several friendly countries for help, including India. In doing so, it also finally delivered on the Trincomalee storage tanks deal that had been held up for nearly two decades. Delhi’s financial assistance was timely. So great is the bonhomie that Sri Lanka is now talking about a closer integration of the Indian and Sri Lankan economies with more Indian investment in several sectors including ports, power, energy and tourism. In keeping with its policy since the turn of the century of supplying non-lethal military hardware, also under discussion is a proposal for Sri Lanka’s procurement of two Dornier aircraft, which will likely be deployed for maritime surveillance. India had earlier given offshore patrol vessels to the Sri Lankan coast guard. It will also help Sri Lanka launch a digital identity project along the lines of Aadhaar.

What remains troubling, however, is the continued reluctance of President Gotabaya Rajapaksa to engage with the Sri Lankan Tamil polity. He has not met Tamil parliamentarians even once since he was voted to office in November 2019. On the other hand, the government says a new draft Constitution written by a “committee of experts” could be submitted to Parliament soon. There is understandable concern in the Tamil political leadership about its contents given recent centralising tendencies, and voices demanding the abolition of the only provision that speaks of devolution of political power, namely the 13th amendment, introduced during the Indian intervention in 1987. The Sri Lankan foreign minister has said that the rivalry between Indian and Sri Lankan fishermen in the Palk Strait was the only “flashpoint” in India-Sri Lanka ties, Colombo’s foot dragging on a political settlement of the Tamil question has its own impact. A letter from Tamil parliamentarians to Prime Minister Narendra Modi seeking his intervention in the implementation of the 13th amendment, but also highlighting that provision was insufficient by the standards of “co-operative federalism” that he spoke about during his visit to Colombo, captures some of the anxiety. The upcoming United Nations Human Rights Council session may shed some light on the view from Delhi.

The Centre for Policy Alternative (CPA) and its Executive Director, Dr. Paikiasothy Saravanamuttu has filed a Petition in the Supreme Court (SC SD 13/2022) challenging the Prevention of Terrorism (Temporary Provisions) (Amendment) Bill which was placed on the Order Paper of Parliament on the 10th February 2022, The Morning learns.

The Bill to amend the Prevention of Terrorism (Temporary Provisions) Act No. 48 of 1979 was tabled in parliament on the 10th of February by Foreign Minister Prof. G.L. Peiris.

Pursuant to the relevant amendments, the aggregate period of detention of a person under a detention order will be reduced from 18 months to 12 months.

The amendments will enable magistrates to visit the place of detention to ensure that the suspect is protected to the extent provided for in the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment Act, No. 22 of 1994,

Meanwhile, a detainee will be allowed to apply for a remedy guaranteed under Article 126 or 140 of the Constitution.

In addition, the amendments will enable the suspect to be produced before a judicial medical officer to ensure that such person has not been subjected to torture and provide for holding trials on a day-to-day basis to ensure the expeditious disposal of cases.

Further, provisions will be made by the amendments for granting of bail to persons in remand or in detention and to question an Order made or direction given under the principal enactment despite the protection afforded to officers for any act or thing done or purported to be done in good faith.

The National Peace Council (NPC)in a release condemns the manner in which The Foreign Ministry has contradicted the views expressed by the Neelan Tiruchelvam Trust Chairperson Ambika Satkunanathan on freedom of speech and expression and by doing so the NPC states that the Government underscores it has its limits on legitimate public criticism of the state’s policies and actions. Full statement follows;

Freedom of speech and expression is a constitutionally protected right. The Foreign Ministry statement contradicting the views expressed by the Chairperson of the Neelan Tiruchelvam Trust, Ambika Satkunanathan, brings up issues of the limits of legitimate public criticism of government policies and actions. We do not agree with its content and tone or with the personal targeting of Ms Sathkunananthan.

In a submission to the European Parliament’s subcommittee on Human Rights on January 27, Ms Satkunanathan made a critical assessment of the human rights situation in the country and provided recommendations in that regard. Much of what she said is also contained in statements made by the political parties representing the people of the North and East, and by civil society members including the National Peace Council.

The National Peace Council believes that as a representative of the civil society, Ms Satkunanathan has the same rights and freedoms with regard to speech and expression even if her views are not in line with government thinking and priorities. We particularly regret the paragraph in the ministry statement that draws a parallel to LTTE propaganda as a method of discrediting or silencing a critic.

The National Peace Council appreciates the Foreign Ministry and government’s willingness to engage in dialogue with different sectors in civil society which has led to positive outcomes and can be further built upon and expanded. We also wish to reiterate that just as much as the government, we in civil society want the best for our country, including retaining the GSP Plus by upholding the 27 international human rights covenants that successive governments, including our present government, have pledged to live by.

India and Sri Lanka had been at odds for most of the 20th.Century. The question of the economic and political rights of the people of Indian origin troubled both pre-independence and post-independence governments in the two countries. Then, there was the dispute over Katchchativu island. From 1983, for about 30 years, the question of the political rights of the Sri Lankan Tamils bedevilled India-Lanka relations.

But now, there is a noticeable change in the ground situation that augurs well for a stable relationship between the two countries.

Questions relating to the Indian Origin Tamils’ status have been settled with the grant of Sri Lankan citizenship to them. The Kachchativu issue is a thing of the past after the demise of the Tamil Nadu Chief Minister J.Jayalalithaa. And with the elimination of the Liberation Tigers of Tamil Eelam (LTTE) in 2009, the Sri Lankan Tamil political question has also receded into the background at least as far as India-Lanka relations are concerned.

However, a new factor, the intrusion of China into the economy of Sri Lanka through its massive Belt and Road projects in 2010, raised the hackles of the Indian government. New Delhi saw these infrastructural projects, especially the ports, as having a strategic/military dimension that could, in course of time, pose a security threat to India. China’s acquisition of the strategically located Hambantota port on a 99-year lease only underscored the fear, which was fed further by the notion that China is deliberately pushing Sri Lanka into a debt trap to acquire real estate of strategic value.

The Mahinda Rajapaksa government which brought China into the picture, believed that its ouster in the 2015 elections was an India-engineered plot. The successor government of President Mithripala Sirisena and Prime Minister Ranil Wickremesinghe, were, at the outset, friendly to India. It signed many MoUs signalling a policy of being open to Indian investments also. But many of the MoUs were soon shelved and forgotten, creating disillusionment in New Delhi. The next government headed by President Gotabaya Rajapaksa, paid lip service to the commitment to give India a level playing field vis-à-vis China, but in fact, took away the Eastern Container Terminal project from India and asked India to execute the Western Container Terminal project, from scratch, at double the cost. India had no option but to accept the offer. The other MoUs signed in 2017 remained in the shelf.

However, despite these discouraging developments, the Narendra Modi government did not disengage or take a hard stand on Sri Lanka. It went in for a cooperative approach based on Modi’s oft-repeated ‘mantra’ that India will only execute those projects sought by Sri Lanka and will execute them at a pace with which Sri Lanka is comfortable.

New Delhi corrected its decades-long pro-Tamil tilt and began to address the concerns and sentiments of the Sinhala-Buddhist majority. Promotion of Indo-Lankan Buddhist ties was emphasized like never before. The primordial cultural and religious ties with India were emphasized along with a periodic demonstration of humanitarian concern which India has for Sri Lanka as part of its “Neighbourhood First Policy.” New Delhi has frequently demonstrated its claim to be the “First Responder” whenever there was a natural disaster in Sri Lanka.

On Chinese investments, the fear psychosis appears to be receding as Sri Lanka has repeatedly stated that it needs Chinese investments for infrastructural development which had been stalled by 30 years of non-development thanks to the war. To assuage India’s anxieties, Sri Lanka has been repeatedly assuring India that it will not do anything that jeopardizes India’s security.

Only recently, Colombo called off a Chinese renewable energy project on three islands in North Lanka that are close to India. The Chinese are miffed, but Colombo stood by its decision not to give the project to the Chinese. It is likely that Colombo will continue to respect New Delhi’s security concerns vis-à-vis North Sri Lanka which is largely Tamil with cultural and emotional links with India.

While there is no movement in regard to many MoUs signed in 2017, there has been significant forward movement vis-à-vis the Trincomalee Oil tanks, a long-standing issue with Sri Lankan governments. On January 6, this year, Sri Lanka and India signed a fresh agreement on the 99 giant oil tanks to supersede the controversial one signed in 2003. The 2003 agreement had given all the tanks to India for 35 years. Through the new agreement, 85 of the 99 tanks will be under the control of Sri Lanka, either directly or indirectly, the latter being through a joint venture with India in which Sri Lanka will have a 51% share. India will manage only 14 tanks.

This is a major Indian concession to Sri Lanka which should warm the cockles of Sri Lankans’ hearts. Referring to this deal at his meeting with the Indian Foreign Minister S.Jaishankar on February 7, Sri Lankan Foreign Minister G.L.Peiris said that the oil tank agreement “signals a closer integration between two countries, resulting in substantial benefits; a win-win situation for both.” The deal lays the ground for the implementation of the already envisaged renewable energy sectors.

Peiris and Jaishankar also discussed potential Indian investments in priority sectors such as pharmaceuticals, food processing and manufacturing. The two Ministers agreed on the early finalization of several agreements and MoUs in the areas of defence, culture and education, that are pending.

Peiris appreciated the financial assistance to the tune of US$ 2.4 billion that India has extended to Sri Lanka at this critical juncture when Sri Lanka is facing an economic and forex drought. He then went on to state that the “relationship between India and Sri Lanka has evolved from a transactional relationship into a strategic partnership.” Peiris stated that “it is increasingly recognized by the people of Sri Lanka that India is a true friend whom Sri Lanka can rely on at all times.”

India’s generous help during the COVID pandemic and also its US$ 1.5 billion aid to overcome the ongoing forex crisis, and Sri Lanka’s fulsome appreciation of them, indicate that the two countries have found common ground and that the fears of the past have begun to recede.

Both India and Sri Lanka are aware of their respective compulsions and national developmental and security imperatives, and both are prepared to take these into account in formulating their policies.

However, two issues which will continue to bedevil bilateral ties are the Sri Lankan Tamil demand for devolution of power and the issue of poaching of Tamil Nadu fishermen in North Sri Lankan waters. In regard to the Sri Lankan Tamils’ demand for a federal structure, New Delhi can do little because the demand will never be conceded by Colombo and India has no leverage to force anything of this sort on Colombo, especially when India is itself not a federation in the true sense of the term. India’s advice to the Tamil parties has been that even as they agitate for their aspirations, they should unitedly fight to get the existing devolution system under the 13th. Constitutional Amendment fully implemented. They should also concentrate on economic development, an area in which India can help without alienating Colombo.

On the issue of poaching, the two countries have agreed to urgently activate the dispute solving mechanisms. With mid-sea clashes taking place now, Colombo is worried. Peiris said that the situation has reached a flashpoint. The situation should worry India too partly because the impoverished fishermen of North Lanka could become anti-India, and also go into the waiting arms of China which is eyeing the North Lankan fisheries sector for its investments. Two Chinese aided projects are already functioning and more may be on the cards. The ball is now in India’s court. How India will play it, remains to be seen.