China issue in Sri Lanka-India relationship China issue in Sri Lanka-India relationship" /> IAS Target

Sri Lanka-India Relationship and China Factor

21 Jan 2020

Category : International Relations

Topic: Sri Lanka-India Relationship and China Factor

China issue in Sri Lanka-India relationship

Bargaining Chip China has potential to invest in various nations, and now it has shown an interest in Sri Lanka. It becomes a bargaining chip for Sri-Lankans to keep terms in their favour while signing treaty with India.
Security China’s attempts to boost its influence in India Ocean via string of pearls have Sri Lanka as a strategic place. And this is against India’s influence.

Djibouti-Myanmar-Sri Lanka Anchor China’s Maritime Silk Road The contours of Chinese MSR are swiftly unfolding. China has boosted both military and economic power through this initiative. There are some recent events- a military based in Djibouti is located and linking the Gulf of Aden and the Red Sea. China has signed a pact to build Free Trade Zones in the country. China has also signed an agreement to develop a deep-water port in Kyaukphyu and an industrial park in Myanmar. This facility in the Bay of Bengal will aid China to neglect the Strait of Malacca. The Yanbye Island Terminal and the Maday Island Terminal that China is constructing in Myanmar have already added to the energy security of China as oil and gas pipeline. China has also pointed to Colombo Port City and Hambantota SEZ project in Sri Lanka.

Hambantota Port

  • Hambantota port is located right in middle of energy supply lines in Indian Ocean, linking Middle East Asia and East.
  • Hambantota is a deep-water port in the southern tip of Sri Lanka.
  • Under the 99-year lease accord, China will invest about US $1.1 billion in the port and marine-related activities.

Hambantota Port – A fair deal for China

  • The port is likely to play a main role in China’s Belt and Road initiative (BRI), which will connect ports and roads from China to Europe.
  • This deal is beneficial for China in terms of bunkering business, which provides fuel to ships.

Implications for India

  • India is concerned that the port is a segment of the Chinese ‘string of pearls’ to surround India and dock by its military vessels.
  • The String of pearls is a geopolitical theory on potential Chinese intentions in the Indian Ocean region. These sea lines go through various maritime chokepoints such as the Strait of Hormuz, Strait of Mandeb, Strait of Malacca, and the Lombok Strait as well as other strategic maritime hubs in Pakistan, Sri Lanka, Maldives, Bangladesh, and Somalia.

India-Sri Lanka Free Trade Agreement

  • The framework for bilateral trade has been provided by the ISFTA (India-Sri Lanka Free Trade Agreement that was signed in 1998 and came into effect in March 2000.
  • The basic idea in signing the ISFTA was irregularities b/w the two economies, local socio-economic sensitivities, safeguard measures to defend domestic interests, and revenue implications so as not to impact high revenue producing tariff lines in the short term.
  • Under the ISFTA where India decided to open more tariff lines within three years as against smaller openings by Sri Lanka which was provided a longer time of eight years.

Economic & Technological Cooperation Agreement

The Economic and Technology Co-operation Agreement (ETCA) is a proposed diplomatic arrangement that seeks to add to the existing free trade agreement b/w Sri Lanka & India. It seeks to emulate a single market and a proto freedom-of-movement system. The ETCA agreement seeks to enhance cooperation in technical areas, scientific expertise, and research amongst institutions, enhance standards of goods and services able to compete on the global market, and improve opportunities for manpower training and human resource development.
The proposal is championed by supporters as a method to launch low-cost goods for low-income people in Sri Lanka and increase sales of high-end goods to India. The conclusion of ETCA with India is opposed by some political parties and interest groups in Sri Lanka. But many lobby groups have become concerned that India would fly Sri Lanka with cheaper labor, with the IT industry.

Challenges between Sri Lanka & India relationship

  • Huge trade deficit in favour of India
  • Many stake holder oppose ETCA between India & Sri Lanka
  • Sri Lanka handed over the strategic port of Hambantota, which is predicted to play a key role in China’s Belt and Road Initiative, to China on a 99-year lease.
  • In recent years, China has extended billions of dollars of loans to the Sri Lankan government for new infrastructure projects, which isn’t good for India’s strategic depth in Indian Ocean Region.

Both countries have a deep-rooted cultural, historic relationship and well functioning democratic setup. There is scope for deepening and broadening the relations. Both countries should try to work out a permanent solution to the issue of fishermen through bilateral engagements. With respect to the Comprehensive Economic Partnership Agreement (CEPA), India should take the lead and allay the concern of people especially businesses and youth about benefits. India needs to focus more on its traditional and cultural relations to improve relations with Sri Lanka. India should focus on infrastructural and connectivity projects and follow a timeline to complete a project so that cross-border people interaction will benefit both countries.
As a threat to India's national security: a. The biggest threat comes from the China-Pakistan Economic Corridor (CPEC), which is an integral part of SREB in 2 ways: i. See notes of CPEC from China-Pak notes b. MSR shows two broad challenges to India: i. Shows challenge to India's maritime presence in the Indian Ocean and South-China Sea as well. ii. The US, Australia, and ASEAN countries want India to play a major role in this region. c. It will reinforce the string of pearl; will reach Gwadar. China is also planning to expand the railway line to Nepal; will increase presence in SAARC Way forward: a. Has India joined it? b. Given India's strategic location in Asia, India is an important country for completing 'Silk Road' projects. So what must be India's response? c. India should ask China to reveal more details; d. Openly clear its claims over POK regularly, a matter that is closely connected to India's sovereignty. It should raise the issue with China at a bilateral level- ask China to re-evaluate the execution of CPEC-related projects. e. If it joins then should negotiate with China for more access to its market & take steps to tilt the balance in trade.