Sri Lanka: From Pearl Drop to Tear Drop

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While India is readily pitching in with huge forex assistance coupled with food and commodities supplies against a long-term credit arrangement, Sri Lankans are getting entangled in an unsolvable politico-constitutional crisis of their own making. What was touted as South Asia’s ‘Arab Spring’ and ‘Orange Revolution’ is getting increasingly deadlocked because the faceless organisers or their unidentified prompters did not think of the day-after.

Mr N Sathiya Moorthy, Convenor, Policy Matters – Chennai

A decade ago, the Sri Lankan government was talking to China on the Humbantota port funding. I asked a senior Sri Lankan official how they would pay back the funds. This was India’s only concern at that time. The official dismissed my apprehension and said, “Who in this country cares about paying back? This government will be in power for 10 or 15 years. Then the next government will come. Again, after 10 or 15 years, they will change roles. This has been happening for the last 40 years.”

The Chinese Loans

When we talk about the current crisis, the Rajapaksas do have a role to play but they are not the only ones. The problem that Sri Lanka is facing today is faced by all of India’s small neighbours with minimal capacity to raise resources. The Chinese is the common denominator, but the Chinese debt trap is not the only reason. There are internal, structural deficiencies. On top of that, comes the Chinese funding. China’s loan is about 10% of Sri Lanka’s loans and it is similar to that of the loan given by Japan. There are others who have given loans including the international financial institutions. But China invested without creating one single job and family income for Sri Lankans in the last 10 to 12 years. They brought not only their materials but also their men. All the jobs that were in the non-government, industrial sector went to Chinese and Sri Lankans were paying for it. May be, Covid had a role play, and so too President Gotabaya’s economic policies. He drastically cut down the number of taxpayers by about a million and the tax revenue came down by 25 to 30%. Then all of us know about the import of Chinese organic fertilizer. All these added to the nation’s woes.

Small Bits of Help

If you have observed the developments of Sri Lanka in the last one month, India is the only country that is putting in money. Others who criticised the government of Sri Lanka on human rights violation have not put in any money. It was learnt that Prime Minister Modi would take up with QUAD allies what they are going to do about Sri Lanka. Sri Lanka’s new PM Ranil Wickremesinghe has been talking to FAO, IMF and World Bank. The World Bank issued a clarification that they have only permitted diversion of 140 Mn $ funds from other projects to essentials. I feel that Sri Lanka cannot survive with such small bits of investment. Even if you get 4 Bn $ of IMF funding that is being negotiated, it cannot last long. How much time does Sri Lanka require to get back to and stabilize at pre-covid economic condition? It was believed that textile industry in Tamil Nadu might benefit by exporting to Sri Lanka. But our cotton prices have shot up. The government of India is doing a lot but India just doesn’t have deep pockets. The Sri Lankan government is talking to officials in Delhi asking for a 500 Mn$ loan.

More Politics than Economics

Unfortunately, in the last two months, every politician in Sri Lanka has conveniently diverted the world’s attention from their economic crisis to an artificially prolonged political crisis. The change of leadership of the government is not drastically going to change its economic situation. Ranil Wickramasinghe who has taken over as Sri Lankan PM is among the best the country has but he doesn’t have political backing. As observers, we have seen that Ranil has a habit of fighting with the President of the day. This is the sixth time he has become Prime Minister in nearly 30 years. He has not completed one full term. Now also, he is taking on the President and talking more of politics like curtailing the powers of executive presidency and tabling of 21st amendment to the constitution, etc., than looking seriously at the economy. Sri Lanka is witnessing an ‘Orange Revolution’ which is a public uprising for the exit of Rajapaksas (Gota Go Gama campaign). They have gathered at capital city Colombo’s Galle beachfront for over several weeks now. In Colombo, traditionally, the people are anti-left. So getting a crowd of urban middle class to protest is not difficult, particularly against the Rajapaksas, whose human rights violations or handling of law and order or other issues have been partisan. Colombo has only two sets of voters—urban middle class, anti-Rajapaksa voters and suburban lower class, JVP voters who are also anti-Rajapaksas. There are different groups involved in these protests. Even when we had the Jallikattu protest, not all of them swore by the same ideology or grouping. But it was an organized protest.

The Repercussions

On the day, the Prime Minister Mahinda resigned, there was violence by his people, which was very obvious, well documented and recorded. This happened before noon. The police, somehow, tactfully intervened. In two hours between 6:30 and 8:30 pm, the homes of nearly 80 politicians across the country were set ablaze. No one knows who did it. Suddenly the police and the politicians have woken up. But to me, it appears to be an organized crime. This takes me to the first question on the economy. Now, the mood has calmed down though not settled down. The government has said that outside Colombo, there is no dearth of resources. The prices have shot and the dollar rates have gone up. The prices have also not come down outside of Colombo. If the government continues like this, will these organized groups keep quiet? Will there be another revolution, if not an insurgency? This is my greater concern. From a purely Indian /South Indian perspective, if such things were to happen in Sri Lanka, will it inspire some groups here?

Ms Nirupama Subramanian, Senior journalist, National Editor (Strategic Affairs), The Indian Express

I was in Sri Lanka in April, last month. Within one month, there are so many developments, both political and otherwise. If you look at the roots of this crisis, everybody says that this accumulated over generations. But let me start with the cutoff date of 2009 when Sri Lanka won the war against The Liberation Tigers of Tamil Eelam. And what happened next?

White Elephants Galore

Among the things that you see in Colombo today is the Lotus Tower, a telecommunication transmission tower which is not being used for anything. It is lying closed and was built out of a Chinese loan. There were plans to start a revolving rooftop restaurant on it. It is just a piece of ornamentation sitting there. When you look at it, you wonder at the kind of things that the Rajapaksas got away with. A lot of wasteful expenditure has been made after 2009. The Hambantota is a prime example of that. The port and the conference center were built on Chinese loan. People said there was probably one conference at this big center. In fact, Mahinda Rajapaksa promised as President that he was going to build Humbantota better than Colombo. There was even speculation that he might shift the capital out of Colombo to Humbantota. There is also an unused airport and a stadium where nothing big has ever happened.

The New Enemy

At that time, they secured an IMF package for reconstruction and the market was lending carelessly to them. No one red-flagged that kind of borrowing. We see the results now. There was no effort at any post war reconciliation with the Tamil people. Instead, the Sri Lankan political establishment, cementing their hold on the Sinhalese and Buddhist majority decided to focus on finding another enemy. The enemy then became the Muslims of Sri Lanka. There were so many events and riots in 2012-2013, one after the other, over hijab, halal and some other thing on a piece of fake news in Kandy. People died and many were injured, in the South, in Kandy and in central Sri Lanka. All these incidents kept the political pot boiling as it were. In 2019, they had the Easter attacks, which increased the anti-Muslim feeling. On the back of that, the Rajapaksas returned on two platforms—fear of terrorism returning to Sri Lanka and the promise of security from the architect of the victory against the against the Tigers of Tamil Eelam, which is Gotabaya Rajapaksa, who was Defence Secretary at that time in 2009.

Lessons for Others

One of the lessons, I think for the entire South Asia, is that populist authoritarianism does not work in the long run. You cannot close yourself off from listening to your own population and people who are clamoring for your attention. For instance, I’ll compare Gotabaya’s overnight decision to switch to organic farming with PM Modi’s demonetization decision. Organic farming takes almost a year to prepare the soil to cleanse it of chemical fertilizers and to receive organic fertilizers. But he decided to turn organic, just like that. It was most likely because they had no money to import essential items and they decided to knock off imported fertilizers and bring in organic fertilizers. For the paddy crop, it was a disaster. The tea crop hasn’t suffered that badly. I am of the opinion that economic crisis is deeply connected to the political crisis and that the protests happening in Sri Lanka are not artificial. Those are real protests on the ground. All kinds of people, from middle class and upper class, are protesting. The reason they focus on the Rajapaksas is because they squarely locate the economic crisis in their rule. People in Colombo are now affected in a way differently from people in other parts of the country due to their lifestyle. For instance, more people in Colombo drive cars than any other parts of the country. So the fuel shortage affects them more. They live on 24×7 air conditioning, so power cuts affect them. They buy all kinds of imported items, including fish.

Rajapaksas Calling the Shots

It is true that India has lent money to Sri Lanka. The money, petrol, diesel and rice that India has sent have helped ease the situation a little, though it has not mitigated the crisis. The money infusion from India has helped both Sri Lanka and Rajapaksa to stay stabilised, in a sense. That is true. The President is still in power. Ranil is the Prime Minister but he doesn’t have any people in Parliament. He’s just one member and is completely dependent on the Rajapaksa’s party (Sri Lanka Podujana Peramuna) for support in Parliament. The Rajapaksas have gone nowhere. They are still around, very much in charge and running the show. Mahinda Rajapaksa has returned. His son has returned. So they are not running away. Political stability is the key to avoiding a meltdown of the kind that we see in Afghanistan. South Asia cannot have two failed States. That is a worldwide concern. It’s difficult to imagine Sri Lanka as a failed state. At some point, it had a higher per capita income than India and has better health and education facilities, fantastic public health infrastructure and universal education. So Sri Lanka cannot fail and somebody has to help it. There is a kind of sentiment that Gotabaya Rajapaksa should continue for some political stability. Maybe there is an exit plan for him later, we don’t know. Ranil becomes the face of the government and he is more acceptable internationally. He can negotiate with international partners, the World Bank, and IMF, America, India, and everybody, because people know him as an experienced person. But why is political stability important in Sri Lanka? It has a lot to do with China and its role in the Indian Ocean. Sri Lanka is part of the Indian Ocean which is an integral part of the Indo-Pacific.

What India Gets in Return

The protesters there ask why India is helping the Rajapaksas. People in India ask why we are giving them support now, when they are just thankless. But India has now got a lot in return that we hadn’t got in the last two decades since 2009, needling Rajapaksa every time to give it to us, but he would not do that then. In the 1987 Indo-Sri Lankan accord, there was a line in the annexure that India and Sri Lanka will jointly develop the Trincomalee Oil Tank Farms. India has got that now from December, the day Basil Rajapaksa came to Delhi, to ask for a loan from India to help them out. India laid out the red lines. India is going to develop that farm with Ceylon Petroleum Corporation. Adani group is now setting up a solar farm in Sampur near Trincomalee and also in Mannar in the western part of Sri Lanka. There’s going to be a solar energy farm in three northern islands of Jaffna, where they had asked China to develop solar energy from hybrid solar power farm. It may seem transactional and we’ve got a lot in return.

The Reforms

When I met Ranil Vikremesinghe in April, he asked me as to why he should become the Prime Minister, being the lone person in the whole of parliament. “How can I even form a government? Governments have to be formed with majority. Plus, who wants to be a PM in a system that has an executive Presidency. I’ll take a decision. He’ll sack me in a minute,” he said. There is a serious effort, although it sounds like a long-term plan, to reform the political system and clip the wings of the executive president. It is famously said of Sri Lanka’s Constitution that the only thing that a President can’t do is to change a man into a woman and a woman into a man. Everything else is possible. So those powers have to be reduced a lot. The Gota Go Gama protest has actually taken a leaf out of our farmers’ protests in Delhi. The fact that the farmers were sitting there for one year and finally Mr Modi had to make a U-turn on those farm bills, has encouraged people across the region to realize their own potential and that sovereignty is located in the people. Nobody believed that Sri Lankans could camp. But then, they put the tents and they are there.

Mr Srinivasa Babu, Chief Executive, S. Duraisamy & Sons, Tiruppur

Almost 50% of income for Sri Lanka is from textiles, not tourism. There are more than 1200 export oriented textile units in Sri Lanka. 20% of their workforce is employed in textile industries. Their average salary is 30 to 45K SLR (Sri Lankan Rupee) per month which is about 6K to 10K in INR. The quality of their workforce is very good and they are very efficient and disciplined in their work. They are at least 25% more productive than our workforce. Women workforce is also there, present in all the industries. People are very friendly. They have amazing infrastructure in place and the traffic system is so good. The laws to acquire land are not tedious. Climate throughout the year and access to ports and airports are good. But their political system is the problem. There are many issues in taxation and banking. A lot of black market is functioning, which is not good.

Opportunities for Indian Companies

  • Cost of labour is cheap and it is cheaper than Bangladesh
  • We can link the exports from Sri Lanka to import of yarn or fabric from India. This will help them in their export of garments to Europe and US.
  • Bangladesh has got MFN status for their garment exports. If Sri Lanka gets that leverage, their garment industry will take off and enter into US and Europe, competing with Bangladesh. This can be taken up in Quad meeting.
  • We can put pressure through FDI route by which we will also get something in return, for supporting Sri Lanka.

Mr Abbas Sathwala, Chief Administrative Officer, Export Freight Pvt Ltd (EFL Global India)

The Sri Lankan situation is very grim and for the first time, the media reporting is accurate. Luckily, work from home has helped to some extent, in segments where it is possible. There is power cut on a daily basis. From 15 hours a day, it has now come down to 5 hours. The government prioritises the work sector. There is a food crisis. Very soon, we may run out of paddy. The abrupt switch to organic farming has become the culprit. But it was done mainly to ease the foreign exchange crisis.

In Sri Lanka, the politicians in power wield huge influence. Even the ministers’ kids in schools and colleges are very powerful. Anyone speaking against the government could be taken away in the notorious white van. The political system is such that the government is a family business, managed through generations. Those in government are all old people. They are all friends and only help each other. This needs to change and youngsters must come in.

In this regard, the Gota Go Gama protests have been fantastic and it has shown the power of the people. It has united the country. Young people who migrated from Sri Lanka are willing to return and take responsibility to run the government. Good governance is important for us. Change cannot happen overnight but there are signs that over the next five years, positive changes will come.