By Asiri Fernando/The Sunday Morning
Colombo, February 27: Sri Lanka should not take its relations with China for granted and should pay more attention to develop its longstanding relationship with the global power, Sri Lanka’s Ambassador to Beijing Dr. Palith Kohona told The Sunday Morning. Sri Lanka and China are celebrating a milestone year in diplomacy, with a major trade, tourism, and investment event planned for April this year, while 2022 may also see a visit to China by President Gotabaya Rajapaksa following an invitation extended to him by the Chinese Foreign Minister last year.
In an interview, Sri Lanka’s top diplomat in China pointed out the need for Sri Lanka to develop a better understanding of China, be more receptive to the global giant’s needs, and not promote imaginary threats when engaging with China, which is one of the largest investors in Sri Lanka.
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Following are excerpts of the interview:
How has Sri Lanka’s foreign policy evolved over the last decade? Or has it remained unchanged?
I think under the current administration our foreign policy has evolved and been refined. Historically we have maintained a non-aligned foreign policy. I think it has been further strengthened in recent times. For us, China and India are the most important external relationships.
We have to remember that China is one of the most important relationships in our external relations framework. China is the second biggest economy in the world. It was, until this year, the biggest contributor to Sri Lanka’s development efforts. Many consider it to be a power to be reckoned with. China has got its own global perspectives and interests.
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Sri Lanka’s mission to China is one of the most critical missions for trade, economics, politics, and tourism. So our relationship with China needs to be managed at a sophisticated level. It should not be handled in a haphazard way. We need to place a lot more interest on China and have a better analysis and it is also in our interest to engage in-depth with China. That can only be done with more feet on the ground, more ears at the discussion tables, and more analysis.
Of course it can’t be done with two third secretaries and a deputy at the mission. In comparison, the Pakistani mission has 46 diplomats, India has 26 and Israel has 18 in China. The way we staff our mission in Beijing may also send a wrong message to our host, the Chinese; they may think we are not taking them seriously.
I think the current Government recognizes the importance of the relationship, but it needs to pay more attention to China. There are other major players active in our region, like the United States, who also need to pay attention to them.
At the end of the day, we need to understand that it is crucial that we protect our interests, sovereignty, and territorial integrity and survive as a sovereign nation.
How will the growing geostrategic competition in the Indian Ocean affect China-Sri Lanka relations for Sri Lanka in 2022?
China is sensitive about certain things, like its borders and its territory. We have committed to the ‘One China’ policy a long time ago. It is very important that we stick by that. China values that commitment, because when China was weak, Sri Lanka was one of those countries that steadfastly supported the ‘One China’ policy. Also, when China was making legitimate efforts to resume its seat at the United Nations, Sri Lanka was a vocal supporter of that effort.
So we have a good background, a foundation with China. I think we need to be conscious about China’s sensitivities. Another factor is that China has not stated anywhere that it is interested in territorial acquisitions or building bases. It has one base in Djibouti, which services the anti-piracy efforts of not only China, but a number of other countries.
Many countries involved in the international maritime trade have established bases in that area. It has of course built harbors in Bangladesh, Pakistan, and Sri Lanka, but nowhere has China said that it wants these harbors for military use. I think we need to be aware of what China has stated publicly and said in private. That is very important in formulating our approach towards China.
Therefore, there is no need to hype up imaginary threats when no threat exists. In my view, it is unfortunate that we see some segments in Sri Lanka hyping up an imagined threat. Perhaps our policymakers should steer clear from such segments. At the end of the day, if we are to raise our heads as an economically strong nation, we need the assistance of countries like China. I feel that China’s support to Sri Lanka has been genuine and sincere.
What are the key areas with regard to relations with China that need to improve and how are you pursuing them?
There are four key areas that we need to improve. We need to improve our investment framework for Chinese investors. In terms of bilateral trade, we need to improve Sri Lanka’s exports to China. We need better engagement on tourism.
Then there is the bilateral political relationship. It is at an all-time high. It is a close and warm relationship. President Xi Jinping has telephoned our President as recently as last week. He recently sent a message to his political contacts in Sri Lanka, congratulating them on the 65th anniversary of diplomatic relations between the countries and the 70th anniversary of concluding the Rubber-Rice Pact.
However, no relationship should be taken for granted. I worry that some parties may be doing just that. Every relationship has to be worked on consistently. We need to be sensitive to the needs of our partner and respond appropriately.
I have noticed in some instances we (Sri Lanka) simply go and ask for aid from some countries. But when they require our assistance, we either don’t pay any attention or we don’t respond adequately. I think this is a weakness in our foreign policy establishment, because foreign relations are not only about our needs, it is also about the needs of our partners.
I think this message is not being taken seriously enough. China has needs as an emerging power and we need to respond to those. It can’t be a one-way street. We always turn to China in our hour of need. China too has needs from us, as small as we may be. In the past we have responded to such needs, whether at the UN or elsewhere.
China is the biggest source of Foreign Direct Investment (FDI) today; $ 146 billion flowed out of China last year. We need to attract a fraction of that. Investments are essential for us to pull ourselves out of the difficult situation we are in at present. We need FDI, it may be from any part of the world. However, China brings the biggest FDI in the world and we have a good relationship with them.
I have been able to speak to 60-70 major companies in China to promote Sri Lanka as an investment destination. The embassy works closely to develop that. Sri Lanka is ideally situated with access to Indian, South East Asian, Middle East, and African markets, with several Free Trade Agreements (FTAs) with them already.
Trade with China is an area in which Sri Lanka has performed poorly in the last decade. China exported $ 4 billion worth of goods to Sri Lanka last year. However, Sri Lanka only exported around $ 280 million worth of goods last year, so there is a long way to go. We know that ‘balancing trade’ between the countries is not something that is ever going to happen. However, we certainly can export more to China and we are making an effort by talking to the relevant authorities about it. Given our foreign currency crisis, my view is that one of the best ways out of it is to increase our exports. China is the biggest consumer market in the world. However, it is not an easy market; you need to build relationships and understand the Chinese consumers. It is a slow process but a valuable market.
Tourism is a low-hanging fruit. I have been to 14 provinces in China; there is a big enthusiasm to travel. COVID restrictions have held them back. In 2019, 156 million Chinese travelled overseas; we just need a small fraction of that to come to Sri Lanka. On average, the Chinese spend $ 4,000 per head during overseas travel.
We have put a lot of effort into meeting travel agents and companies to promote Sri Lanka as a tourism destination. There has been a lot of enthusiasm. We have also requested that Sri Lanka be designated as a ‘Preferred Destination’ for Chinese travelers. Many of the large travel companies in China are State controlled and I think if we get this designation, it will give our tourism sector a boost.
China has signaled a desire to pursue an FTA with Sri Lanka. Some in the Government feel a Preferential Trade Agreement (PTA) is a better option at this stage. What is the Chinese response and progress on this?
I have repeatedly said that we need to go for an FTA with China. Of course, some may say given the size of the Chinese market, it may simply inundate our market. An FTA has to be negotiated well. There are nearly 25 countries and regional bodies that have entered into FTAs with China. Nobody has suffered inundation by the Chinese market. No negotiation process for an FTA with China has been started yet. I would like to encourage our policymakers to start the process. We don’t need to conclude the process tomorrow. We can put our best people on it and get them to analyze and negotiate. We shouldn’t shy away from it. I think if we were to start negotiating, I believe China would understand our needs and concerns.
Has Sri Lanka made a request to restructure Chinese debt? How has China responded and have negotiations made progress?
The discussion is ongoing at the Central Bank level. They are progressing. An important fact is that only 10% of Sri Lanka’s external debt is owned by China. Almost 90% are owed to multilateral institutions and financial institutions. I think it is correct that we have asked China to delay interest payments on part of the debt. We have also asked for a line of credit for our industrial imports. This is important for our garments industry, for raw materials and related machinery. I think, as a whole, we can feel confident that China will respond favourably to our request.
Further, the BRICS Bank has approached us and offered membership to Sri Lanka. Once Sri Lanka becomes a member, we will have access to considerable finance at a low interest rate from the bank.
China has historically been supportive of Sri Lanka in international forums. Do you think China will continue to be supportive to Sri Lanka in forums like the UNHCR?
China has said that it will and I have every confidence that it will support us. But as I said earlier, every relationship needs to be worked on. We should never take any country for granted.
What investments are in the pipeline for the Colombo Port City, Hambantota Port, and the adjacent Industrial Zone?
From our records and discussions over the last 12 months I can say that there is about $ 2.5 billion worth of investments in the pipeline. A major Chinese company has assured us that they will invest $ 530 million in the Financial Centre at the Colombo Port City. In addition, we are talking with a major Chinese industrial company to establish a state-of-the-art, environmentally-friendly steel manufacturing facility at the Hambantota Industrial Park. Once completed the steel plant will be worth about $ 1 billion and will create a lot of jobs.
Several companies have approached us on the renewable energy industry. One is keen to establish a solar panel manufacturing plant in Sri Lanka, as we have high quality silica in the island. A delegation was dispatched to Sri Lanka to inspect the site. A proposal that came to us which has been lingering in Colombo for several months is one to build a processing plant for mineral sands in Pulmodai, near Trincomalee. At the moment, we only do basic processing of the sand to export to other countries. The company has offered to carry out advanced processing of the minerals for export.
Both Sri Lanka and China have invested heavily in the Colombo Port City project, making it a critical infrastructure for Sri Lanka’s economic growth. How confident are you of its success?
Yes, in the next year or so you will see things pick up. However, we need to be proactive. We need to be out there attracting investment, not only from China, but from other countries as well. From India, the Middle East, from Europe, and America. We need to market the Port City better; I feel that we need to revamp its marketing.
What was the outcome of Foreign Minister Wang Yi’s visit to Sri Lanka last year and will President Gotabaya Rajapaksa visit China (there is an invitation), if so, when?
I hope so. It will be a very important visit. But right now may not be the best time for our President to visit China due to COVID-related travel and entry regulations. It would make meetings and visiting key places difficult. He may want to visit some of the major achievements of China, in particular how China has modernized agriculture with the use of technology.
Is there a proposed technology university project being planned for Sri Lanka with Chinese assistance?
We have been talking to key Chinese officials and companies about establishing a high-technology university in Sri Lanka. The discussions have progressed substantially. It will also introduce technology-driven agriculture. We are now discussing with Colombo how the faculties will be formed. The matter is now before the China International Development Cooperation Agency (CIDCA). CIDCA has expressed interest in funding this project. The University of Wuhan, Power China Group, China Great Wall Industry, and the Foreign Ministry are discussing the project that will see this high-tech university proposed to be built in Hambantota. These are the institutions involved in developing this project. Great Wall China is a multi-billion dollar company, but it has a soft spot for Sri Lanka. One of the aims of this project is to upskill our workforce as the Hambantota Industrial Zone is developed. They will need skilled persons and tech experts to operate new factories in the zone. It will also help to upskill our migrant employees. As such, it will help unemployment among youth.
How have the disputes over the controversial organic fertilizer shipment and the Central Expressway Project affected China-Lanka relations?
I think the China-Sri Lanka relationship is strong enough to withstand such situations. It is unfortunate that the problem regarding the fertilizer shipment arose and developed in the way it did. I believe that now it is behind us. On the Central Expressway issue, of course any bidder is going to be disappointed when they are not successful. It is important for us to have a mechanism to deal with such disputes efficiently and transparently. The longer such disputes are discussed in the media, the more difficult they become to resolve through a process. It is good to have a quick and transparent process to handle any disputes from foreign companies. Investors and bidders will also look at such a mechanism in a favorable way. If we deal with foreign companies in an incorrect manner, other companies will not be encouraged to come to Sri Lanka.
Several energy experts have criticized the Chinese-built Norochcholai Power Plant due to frequent breakdowns and interruptions to its operations. What is your office doing to facilitate technical assistance and maintenance of this critical infrastructure?
Norochcholai provides nearly 30% of the national power generation capacity, so it is filling a critical gap in our power supply. I think we need to be a little bit more careful about how we protect our interests and be more detailed when we go into such contracts to avoid such maintenance issues. With regard to the issues faced by the plant, I don’t know if all the criticism can be solely levelled at the Chinese contractor.
Regarding the cancellations of projects like the mixed energy project in the islands off Jaffna due to regional security concerns, a number of politicians in the north have publicly stated that they don’t want Chinese investments in the region. How is such action viewed by China and is it detrimental to China-Sri Lanka relations?
I think it didn’t matter for them given the small scale of the said projects. I don’t think the Chinese will lose any sleep over the matter. Unfortunately, it is the people in those islands who are now waiting for power, especially with the ongoing power situation.
Year 2022 is a milestone year for Sri Lanka-China relations, with the 65th anniversary of diplomatic relations and the 70th anniversary of the Rubber-Rice Pact. What is being planned?
We have planned a series of activities for the year. In January, we conducted a significant tourism promotion campaign, partnering with Sri Lankan Airlines. It saw participation of about 70 key travel agencies, tour operators, and influencers in China. We also hosted a major exhibit of Sri Lanka gems and jewellery in January. This month we are carrying out a promotion for Ceylon Tea.
We are planning a big tourism, trade and investment forum in April. Hopefully, the Covid-19 restrictions will be relaxed to permit wide participation by April. This expo/forum will not cost Sri Lanka anything as it is funded by our well-wishers. The Embassy also launched a TikTok account as TikTok has a massive following in China and nearly two billion people are on the platform worldwide. We are planning to participate in the CIIE exhibition in China this year, as we did last year. It is the biggest expo in the world. Sri Lankan businesses need to be present either physically or virtually.
Is Sri Lanka expanding its diplomatic presence in China? What new services will Sri Lanka offer its citizens in China?
We have now appointed a new honorary consul in Hong Kong. We have plans to establish a Consulate General in Chengdu (Sichuan Province), we had one until about four years ago. I don’t know why, but it was closed down. We plan to expand the two consulates to three. However, what is important is to have a stronger presence in Beijing, with more specialized staff, particularly for trade relations, tourism, and to promote investments, etc. I also feel that we should strengthen the political relations of the Embassy.
END
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