Sri Lanka’s Sovereignty & Economy Confronting An Impossible Trinity

By Ameer Ali –SEPTEMBER 1, 2017

Dr. Ameer Ali

An India-U.S. geostrategic and neoliberal economic alliance on the one hand and an aspiring-to-be world power China on the other, with a financially empowered neoliberal economic manager, IMF, acting as a third form an impossible trinity that is redefining the political sovereignty and economic destiny of many smaller nations. A debt-burdened but resourceful post-war Sri Lanka with its strategic location in the Indian Ocean is a classic victim of the pressures exerted by this impossible trinity.

When the Sri Lankan army defeated the LTTE in 2009 I described that victory as comprehensive and absolute but Pyrrhic. It was pyrrhic not simply in terms of the enormous losses, both in terms of economic resources and human lives, which were immediate, but more importantly in terms of the long term damage that the war, which was totally unnecessary to start with, was going to cost to the country’s sovereignty and economic future. This may not have been obvious at that time and certainly was not a serious concern for the victors who were physically and emotionally basking in schadenfreude, but now and within less than a decade the real cost of the war is beginning to bite politically as well as economically.

The situation that Sri Lanka is facing now is somewhat analogous, although on a tiny scale, to that of the U.S. and its allies in the aftermath of their Pyrrhic victory over Afghanistan, Iraq and Libya.  Of course to them it is not a question of national sovereignty, which in any case has to be redefined in the face of globalization with porous territorial borders, but rather the problem of domestic security in their countries that has become a nightmare. The imperative demand to secure borders and local population from so called terror attacks which ceaselessly consumes huge amount of unaffordable dollars at the expense of other more vital needs of the society such as education, health care and welfare support to the vulnerable has brought home to policy makers the real magnitude of the high-priced victory. Even though the Western leaders don’t want to admit it openly, yet, the fact remains that the steeply rising security costs are threatening to jeopardise the much touted neoliberal economic model. In that sense at least one of Bin Laden’s promises to “bleed the U.S. to the point of bankruptcy” (he said this in a videotaped speech sent to Aljazeera on 1 November 2004) may be nearing partial fulfilment.

Sri Lanka’s political sovereignty and economic destiny have been virtually compromised by successive governments since the 1980s partly because of growing geopolitical pressures in the Indian Ocean and partly because of financial indebtedness to foreign lenders, both of them are closely linked to the civil war.

In spite of Sri Lankan’s military superiority acquired through costly state-of-the-art weaponry and aggressive recruitment of soldiery that war would have prolonged even further had it not been for the covert but decisive role played by India. Future historians with access to the now secret documents on the war will have more to say on the crucial Indian variable. Delhi was prepared to betray the political support of Tamil Nadu and sacrifice the lives of thousands of Sri Lankan Tamils not because Delhi loved the Sinhalese but because of India’s strategic interest in the Sri Lankan economy and her maritime waters. Similarly, China’s support during the war was also coloured by her own national interest to gain market and add one more pearl to her string of military and commercial facilities along the Indian Ocean. These hard facts are now being openly displayed in the various economic and strategic deals that are being signed between Sri Lanka and India on the one hand and Sri Lanka and China on the other. The actual outcome of these deals are more to the advantage of the foreigner than to the local.     

Economically India is slowly but surely proceeding on her long term mission to convert Sri Lanka into a profitable enclave for Indian capitalists. At the same time, geo-strategically India’s desperation to gain a long term leasehold over the Trincomalee harbour like her leasehold over Mattala airport are measures to counter the growing Chinese influence in the island. The 99-year leasehold over the Hambantota harbour granted to the Chinese government was a payback to Chinese weaponry used in the war and financial support to the island’s infrastructural development. China also has been awarded the contract to redevelop the Colombo Port city. Just as India wants to keep the Indian Ocean Indian in every sense of that name so also Beijing wants to safeguard her trade routes along a new silk road over the Indian Ocean which has now become crucially vital in the face of tensions in the Pacific between Washington and Beijing. In this new geopolitical great game Sri Lanka is bound to face situations when she will be forced to make a choice between two or even three – if one includes the U.S – confrontationists. It will be a cruel choice that will tax Sri Lanka’s diplomatic skill to its extreme. Will that also endanger her sovereignty?

The IMF, the third of the impossible trinity, is a different kettle of fish. Its sole mission is to train Sri Lanka as an obedient pupil of the neoliberal economic school. As the supreme institution of the neoliberal economic order IMF has invariably become the handmaiden of Washington and the Wall Street. If getting economic and financial assistance from India and China becomes too onerous the only other source available to Sri Lanka is the IMF, but that supremo has its own conditionality attached to its wallet. The so called structural adjustment program and austerity measures assiduously preached by the IMF ultimately benefits the rich at the expense of the poor. Broadening the tax base by shifting from direct to indirect taxes, privatization of state owned or state managed enterprises, operation of an untrammelled free market, freedom for foreign multinationals are some of IMF’s cure for national economic ailment. The recent IMF $167 million tranche to Sri Lanka carries with it some of these conditionality. The usual IMF mantra of short term pain for long term gain has not worked in any of the counties that sought IMF assistance.  If Sri Lanka refuses to play by the IMF rules, then there the international credit rating agencies that are IMF’s subsidiary managers who will punish the nation by down grading its credit rating so that other international lenders will keep away from assisting the nation. 

Read More