COLOMBO: In the run up to the visit of Chinese President Xi Jinping to Sri Lanka, which begins on Tuesday, opinion makers in the island nation are debating as to whether Colombo’s burgeoning dependence on loans from Beijing will be good for the country.
China and Lanka will be signing 20 economic agreements worth billions of dollars during Xi’s visit.
Ranga Jayasuriya ,a doctoral candidate working on China’s relations with South Asia, says that there is nothing wrong in accepting China’s offers of loans for vital infrastructure projects because China has the money and has been massively investing overseas, including the advanced nations of the world. When Xi goes to India, he will be dangling a carrot of US$100 billion. Sri Lanka has so far got only US$6 bn. For 2013-14 the Chinese are committed to projects worth US$ 2.6 bn, which is peanuts compared to what some other countries get. But Lankans are worried about over dependence on China and also the use to which the loans are put. Opposition economist Dr.Harsha de Silva says that the 2.2 per cent interest plus 0.25 per cent service charge for a loan to be repaid in 20 years is “very high”. In contrast, the Japanese have charged only 0.1 per cent for a loan to be repaid in 40 years with a grace period of 10 years. Lanka can get an ADB loan at 1 per cent, he points out.
Costs are massively inflated, de Silva further says. The cost per kilometre of roads or railways constructed by the Chinese is much higher than that for roads or railways built by the Japanese or Indians, he says.
Many of the Chinese projects approved by the Lankan cabinet are “unsolicited” and are designated as “strategic” to circumvent normal tendering and approval procedures. Some of the projects are not of immediate value such as the Humbantota port and the Mattala airport.