Why have the US and India not raised yet an issue over the decision of the Sirisena- Wickremesinghe government to lease out Hambantota Port to a Chinese company for 99 years has surprised many. The Sri Lankan government has also decided to grant China 15,000 acres in the vicinity of Hambantota Port.
Since it is hard to find the real causes of the deafening silence on the part of India and the US, one may attribute it to two factors either in combination or alone.
First, India and/or the US might think that as the decision-making powers of Sri Lanka are vested in a triumvirate consisting of Prime Minister Ranil Wickremesinghe, Foreign Minister Mangala Samaraweera and former President Chandrika Kumaratunga, Sino- Sri Lanka relations could be kept at a manageable level; such relations co-exist within the Western-biased broader foreign policy paradigm.
India and the US may have legitimate reasons to surmise that President Maithripala Sirisena has been marginalised in the process, especially in foreign policy matters. Nonetheless, although subjective factors are important in international relations, this factor alone may not be adequate in explaining the conduct of the US and/or India.
The Sri Lanka Association of Political Economy (SLAPE) recently organised a symposium on divestiture of strategic local resources. It identified the leasing out of Hambantota Port as only a forerunner of a series of such handing over of country’s resources to foreign companies. If this premise is correct––many indicators show that it is––it may be legitimate to surmise that the Sri Lankan government has given a kind of an assurance that the US and India will get their share in strategic resources of the island, to be put on sale in the near future. Speculation is rife that the Trincomale Harbor, a portion of the Colombo Port and many other key resources will go to India and the US.
The Sirisena- Wickramasingha government claims that these steps are unavoidable due to two factors. First, it argues that these steps are imperative to reduce the accumulated debt, both of the government and public corporations. Second, these measures are being justified on the grounds that they are inseparably linked with country’s accelerated development effort. My principal submission in this article is that these economic argument has no rational basis as far as Hambantota deal is concerned. Moreover, I also argue that this deal is totally against the “yahapalana” (good governance) principle that was glorified during the election campaign in 2015 as one of the pillars on which the present government would rest.
Irrational Economics
Let me first discuss the economic arguments that the government and the neoliberal pundits have put forward, namely, that the Hambantota deal would accelerate economic growth, increase employment and help alleviate poverty.
- In understanding the development process, the distinction between vibrancy and dynamism is of fundamental importance. An economy may go through a vibrant period but without being dynamic. Dynamism comes within capitalist mode of production from a process that ensures constant and continuous drive to increase productivity and efficiency that, in turn, depends partly on the nature of economic activities and also on social relations. Let me give an example. Suppose Sri Lanka finds a new mineral deposit that has a substantial market value in the international market. Through mineral exports, Sri Lankan economy would receive foreign exchange and the economy will show a high degree of vibrancy but the bubble will burst with the exhaustion of the mineral deposit.
The economic dynamism is of a different nature. To achieve economic dynamism, a country should focus on growth-augmented economic activities. Nonetheless, it should also unleash a social process that compels decisionmakers to adopt more advanced systems of production. If we narrate the growth process as a complex one, the Hambantota deal is an utter nonsense as far as Sri Lanka’s development prospects are concerned. If a country is to enter a sustainable growth process, it should gradually increase its productive capacity. Of course, in increasing its productive capacity or fully utilising it the country can borrow or purchase necessary skills from other countries and these arrangements may take multiple forms. The objective of technology and skill transfer is not just operational purposes; it should lead to the advancement the level of technology and skill of the recipient. The initial learning curve may be 10- 15 years and in the process a country will be in a position to advance its learning by developing its own research and development. Hambantota deal is for 99 years. It means in the process Sri Lanka will end up allowing China to get almost all the benefits of increased productive capacity and reduce Sri Lanka to a dependent enclave.
2.
The Hambantota deal also provides for handing over on a 99-year lease 15,000 acres to China. This is quite different from a setting-up of an industrial park and inviting foreigners to make investments. In such an industrial park, although some deviations from local rules and regulations may exist the area is under the control of the host country. However, when a country leases out its land to another country, can the tax system, environmental protection laws, water rights be applied? This may be a like the arrangement that China was forced to enter with England to hand over Hong Kong for a specified period. Recently, Dr Sarath Amunugama has informed that China would set up 2,500 industries to make Sri Lanka and industrialised country. What are the kind of industries they are going to set up? Are they dirty industries that have polluted some cities China to an unmanageable level and, therefore, need to be shifted elsewhere? Will those industries violate people’s right to breath in Hambantota and adjoining areas?
3.
It is bad economics to support the contention that economic development is incessantly linked to low wages. Historical experience amply demonstrates that economies embedded with low wage have failed to take off. As I have shown elsewhere (my presentation to SLAPE), the neoliberal pundits in finding a solution to structural economic crisis that Sri Lanka has been facing suggest a renewal of archaic modes of production. Their prescription places heavy emphasis on absolute surplus value, primitive accumulation through dispossession, the role of merchant capital and dirty industries. Many studies show that although China has been a economic power house, the way in which China handles it labour issues has been unacceptable and inconsistent with modern labour norms. Its concern for environment has been equally bad.
The miracle is achieved in the form of workers’ long hours, low pay, and lack of welfare benefits. Increasing levels of inequality have gone hand in hand with widespread working conditions characterised by super-exploitation. What would be the outcome we could expect when the sole administrative power of 15,000 acres is vested in Chinese hands.
4.
It has been said the transaction will help reduce the amount total debt of the Sri Lanka Port Authority by little more than USD 1,000 million dollars since it is debt-equity swap arrangement. Nonetheless, unconfirmed information indicates the total debt of the SLPA will not change as money goes to a reserve fund of the Treasury. What does it mean? It means that this money will be used as the government always does to show an increase in foreign exchange reserve in order to raise more loans in the international capital market.
Is this Good Governance?
The Hambantota deal appears to be negotiated in violation of the principles of so-called good governance. Although the right to information Act was passed and it will be in operation from February 6, the government has so far not revealed the conditions of the agreement. The sale of the country’s most valuable resources are planned even without making proper valuation thereof. It is not correct to use the cost of the project as the basis of valuation of an asset of this nature. The China’s new silk road strategy and the construction of the Kra canal by Thailand would definitely have an impact on the future value of the Hambantota Port. It has also been unofficially revealed that the government is going to sign an agreement with company that in fact put forward more adverse terms and conditions. How could it be justified? Does the government have a mandate to sell strategic resources of the country with associated adverse impact on human lives, environment and above all its sovereignty?
Courtesy: The Island
