Did the Chinese Model of Growth Defeat Rajapaksa?

Mahindra Rajapaksa lost to his rival and one time ally Maithripala Sirisena in the Presidential elections held on 8 January 2015. Sirisena of the New Democratic Front (NDF) won 51.28 percent of the votes against the 47.58 percent secured by Rajapaksa of the United People’s Front Alliance. Given Rajapaksa’s popularity in the aftermath of the decisive victory against the Liberation Tigers of Tamil Eelam (LTTE) in the summer of 2009, Sirisena’s triumph in these elections has come as a surprise to many. But a peak below the surface brings out a different reality of the Sri Lankan political landscape.

China emerged as Sri Lanka’s most benevolent friend during the reign of Rajapaksa. This friendship reached its zenith when in September 2014 Xi Jinping became the first Chinese President to visit Sri Lanka. Between 2004 and 2014, domestic changes in Sri Lanka, coupled with China’s expanding global ambitions as well as capability, created a fertile ground for greater engagement between the two countries. This greater Chinese engagement with Sri Lanka was also facilitated by the inability of successive NDA and UPA governments to forge better relations with Sri Lanka in the defence arena – a consequence of the constraints imposed upon them by coalition politics. India limited itself to giving non-lethal weapons and humanitarian assistance to Sri Lanka, whereas China emerged as a major defence supplier of that country.
The aftermath of victory over the LTTE was not exactly sweet as the all-out war had nearly drained the Lankan economy, while charges of human rights violations and the global economic slowdown led to reduced investments. Once again, it was Beijing that came to Colombo’s rescue. It is at this point that Rajapaksa adopted the Chinese model of growth – massive infrastructure investments in roads, energy, air and sea ports – which was moreover largely funded by Chinese banks. Since 2009, Sri Lanka has received a total of $4 billion from China in the form of aid, soft loans and grants. Nearly 70 per cent of infrastructure projects in the country have come to be funded by Chinese banks and institutions and are being built by Chinese companies. Sri Lankan observers have noted that these loans would have gotten stuck in legal work or environmental or some other regulations if they had been from the Asian Development Bank or the World Bank. However, the ease of process and the swiftness of work had also guided the Rajapaksa government to accept loans that were too costly for projects that had too long gestation periods. During the same time frame, 16 per cent of Sri Lankan imports have come to originate from China whereas Sri Lanka’s own exports to China remained stagnant at 1.2 per cent of its total exports. In contrast, Sri Lanka’s total exports to India rose from one to six per cent of its total exports during the same period.1
It is noteworthy that President Rajapaksa’s brother Basil Rajapaksa was Minister of Economic Development since 2010 and various political and media establishments in and outside Sri Lanka had raised concerns about the nature of Sri Lanka’s business ties with China. Chinese loans came with strict conditions, leading to benefits to Chinese companies which were in turn building these projects with a labour force brought in from China, many of whom were moreover believed to be convicts.2 Thus, Sri Lanka also experienced jobless growth, similar to the experience of many African countries where Chinese investment had increased exponentially in the last decade.
The opposition UNP led by Ranil Wickramasinghe had consistently raised questions about the functioning of the Rajapaksa government as well as about allegations of corruption and nepotism in this form of the growth model adopted. In the run-up to the elections, Wickramasinghe also pledged to scrap the ambitious $1.34 billion Colombo Port City project, funded, built and to be operated eventually by a Chinese lead consortium.3 How and whether the new government does that and what happens to the other Chinese investments in Sri Lanka remains to be seen. It will also be interesting to see if the allegedly hasty clearances and graft and cost overestimation allegations linked to Chinese investments are indeed probed by the incoming government. If the new government walks the talk in this regard, then the Sri Lankan economy should take a turn towards a more open, equitable, participatory and affordable development.