‘‘Enthusiasm, comfort level of Chinese investors diminished in recent months’’

- SL envoy to Beijing Dr. Palitha Kohona 

• However, like in any relationship, we need to be constantly sensitive to each other’s concerns and work on improving it. Today China is the second biggest economy in the world and, as a member of the UNSC, P5, is also a critically leading force in the international arena
• Many Chinese institutions at senior level have been talking to us. The focus has been on increasing the range of fisheries products, cinnamon, bananas, mangoes, pineapples, coconut products, etc. A number of online meetings, both with the EDB and with Sri Lanka exporters participating, have been organized to familiarize these entities with the special nature and peculiarities of the Chinese market place

•  Sri Lanka also declared eight days of mourning when its long standing friend, Chairman Mao Zedong, passed away
• China has always demonstrated that it takes it friendships seriously and that its relationships are not based on convenience and unilateral temporary need
• Sri Lanka has welcomed the BRI and will benefit from it
• We are also discussing on how China could assist in helping us to secure essential imports
• English alone will not help to sell. Goods must be marketed in Chinese

Sri Lankan Ambassador to China Dr. Palitha Kohona in an email interview with the Daily Mirror responded to queries about the current status of bilateral ties between Sri Lanka and China; particularly in the wake of the controversial ship visit.

Excerpts:  

QWhat is your reading on the current status of bilateral ties between Sri Lanka and China?  

I believe that the bilateral ties between the two countries are on a solid foundation. China and Sri Lanka, having enjoyed a long-term and intrinsically rich friendship going back millennia, have supported each other at critical times in the recent past. Sri Lanka breached an embargo in 1952 to sell rubber- listed as a strategic commodity- to China and was a vocal champion of the resumption of China’s legitimate seat at the United Nations. We have been consistent in our support of the One China Policy. Sri Lanka also declared eight days of mourning when its long standing friend, Chairman Mao Zedong, passed away. From China’s side it stood by Sri Lanka unconditionally during Sri Lanka’s effort to eliminate LTTE Terrorism and, subsequently, when unsubstantiated allegations were being bandied around to penalise Sri Lanka at the UN Human Rights Council.   

It is also to be remembered that when other suppliers of vaccine could not or would not supply Sri Lanka with its critical vaccine requirements, as the pandemic began to spin out of control last year, it was China that stepped up to supply 26 million doses of vaccine to us; three million being provided as a gift. Today the pandemic is substantially under control in Sri Lanka and our borders are open to tourists.   

Considering all these it could be said that the bilateral relationship rests on a sound foundation. However, like in any relationship, we need to be constantly sensitive to each other’s concerns and work on improving it. Today China is the second biggest economy in the world and, as a member of the UNSC, P5, is also a critically leading force in the international arena. Around 400 million Chinese have entered the middle class and China has eliminated extreme poverty and created a vast consumer market. China has always demonstrated that it takes it friendships seriously and that its relationships are not based on convenience and unilateral temporary need. Sri Lanka, with its history of close bonds with China, based on shared cultural values, mutual respect and understanding, is well placed to benefit from China’s increasing prosperity and from the Belt and Road Initiative under which it is expected that 4 – 8 trillion US$ will be invested by China in the wider region, to create a community of shared prosperity. Sri Lanka has welcomed the BRI and will benefit from it.  

QThere was some controversy after Sri Lanka initially asked China to postpone the port call of its research vessel. What kind of an impact did it have on bilateral ties?

The unfortunate issue, relating to the visit of ‘Yuan Wang 5’-the research vessel- has been resolved to the satisfaction of both sides. China consistently provided assurances that ‘Yuan Wang 5’is a research vessel and that there was no ulterior purpose behind its visit. In the absence of any evidence to the contrary, we respected those assurances made in good faith. Sri Lanka has repeatedly welcomed ship visits from a range of regional and global powers and this has been a constant practice of Sri Lanka. Ships from, inter alia, the US, Russia, Australia, France, Pakistan, and India have made courtesy calls in recent times. Sitting in the middle of the Indian Ocean, we have a policy of maintaining good relations with naval powers. These ship visits have other flow-on benefits. Eg. for tourism and enhancing the global visibility of the country. They also give us the opportunity to assert ourselves as a free, independent and sovereign nation, maintaining good relations with all.  

QAs far as maritime security in the region is concerned India is the anchor. That is what Sri Lanka’s envoy in New Delhi said. Sri Lanka is in a precarious position because of competing interests of India and China in the region. What modifications are needed in Sri Lankan diplomacy to walk a tightrope? 

 
I do not believe that there is a need to develop a special policy to deal with ship visits in the future given that naval vessels of many powers have been visiting Sri Lanka for years without giving rise to any concern. Sri Lanka permits such visits consistent with its sovereignty, independence and territorial integrity and approval is given on a case by case basis. Sri Lanka would not permit any such visitors to pose a threat to itself or to any of its friends and has always respected assurances provided in good faith by visitors about the purpose of their visits. India has legitimate security interests in the region and has the capacity to defend them, while China has not challenged India’s interests in any discernible manner. China’s concern would be to keep open the route along which the major part of its energy is carried to the mainland. Sri Lanka benefits from such visits, as we need to maintain the goodwill of our regional and global friends. I believe that as long as we maintain our time tested position, there would be no call to walk a tight rope. Similarly our friends have always respected our sincerity and integrity in wishing to maintain good relations with everyone.   

With much talk of the advent of the Asian Century Sri Lanka must position itself to benefit from it with as many friends and well wishers. India has replaced the UK as the fifth largest economy in the world. Indonesia is expected to become the 6th biggest in a decade. 

 
QChina is not ready to reschedule debt payments whereas other countries are ready. Instead China proposes refinancing loans. But debt rescheduling is important to secure assistance from the International Monetary Fund (IMF). How can we convince China to agree to reschedule debt payments?  

I think it would not be proper at this stage to pre-empt China’s position with regard to debt repayments and the ongoing discussions. It is also important to remember that China owns only about 10% of Sri Lanka’s external debts. The rest, 90%, is owned by multilateral organizations and international financial institutions. In the circumstance to focus on China alone in the current circumstance is not particularly helpful. However, our financial authorities will continue to discuss with China on how the repayments falling due to China could be managed in the context of our approach to the IMF. While the IMF will play a crucial role in extracting us from the current difficult financial circumstances it is to be remembered that the initial catalyst of the crisis, the Covid 19 pandemic, is gradually receding to the background. Tourism is picking up noticeably; the remittances of our expatriate workers are recovering. Likewise, exports are maintaining their momentum. Due to stringent controls imports have diminished. The Governor of the Central Bank believes that the economy will correct itself due to the remedial measures taken and the harsh and noble sacrifices made by the people. It is the area of exports that requires more effort from our part, if Sri Lanka is to succeed in enhancing its earnings, and also in restoring the confidence level of prospective trading partners and investors. This will go a long way in helping us to manage the current situation. Concerted efforts to increase exports and encourage more FDI will also help to restore the confidence level of prospective lenders.  

QHow has the current foreign exchange affected bilateral trading?  

Undoubtedly our foreign exchange crisis is affecting imports. Many imports including essentials have been curtailed. These restrictions have impacted on imports from China as well. The Chinese authorities have constantly encouraged Sri Lanka to make a concerted effort to increase exports to China. We are also discussing on how China could assist in helping us to secure essential imports.  

QYou took steps to promote Sri Lankan exports. How have they yielded? 

We have taken a range of measures, which have been actively encouraged by the Chinese authorities, to facilitate a higher level of exports to China. China has repeatedly emphasised on the need to increase our exports to specifically make our recovery sustainable. Many Chinese institutions at senior level have been talking to us. The focus has been on increasing the range of fisheries products, cinnamon, bananas, mangoes, pineapples, coconut products, etc. A number of online meetings, both with the EDB and with Sri Lanka exporters participating, have been organized to familiarize these entities with the special nature and peculiarities of the Chinese market place. China is the most lucrative consumer market in the world and valued at over 730 billion US$ per annum. It is also a market that is increasingly dominated by online sales. China’s consumers, especially the young, are more likely to purchase their needs on line rather than off line. JD.COM, an online platform, has a turnover in excess of 173 billion US$. Sri Lanka also launched its own platform with the active encouragement of the Embassy. Online marketing is essential to maintain sales momentum and our exporters must become proactive in this area. English alone will not help to sell. Goods must be marketed in Chinese. The Chinese Government, including provincial authorities, is encouraging us to set up of national pavilions in major cities; both to showcase and to market Sri Lankan products. Usually, the set-up costs are met by the host authorities. We just need to take our products there. I have personally visited many of these national pavilions or proposed national pavilion sites in over 10 provinces. The National pavilions in Shandong (Qingdao) and Zhejiang (Wenzhou) are already in operation. Our exporters must make better use of these facilities. 

 
We also made a concerted effort to encourage Sri Lankan exporters to participate at least online in the China International Import Expo (CIIE) in Shanghai in early November, which, last year, attracted over 5 million visitors in spite of Covid related restrictions. It is a wonderful opportunity to interact with prospective buyers and make contacts. We have offered to make Embassy staff available to man our pavilion in the event that Sri Lankan exporters fail to obtain visas to visit Shanghai. There is substantial interest in China in a range of Sri Lankan products, including our tea, sea food, fruits, clothing, batiks, silver ware, gems and jewellery, coconut products, spices, etc.   

China is not an easy market to access, given that there are many regulatory requirements relating to phyto-sanitary standards, quality, labeling, language, etc., to be satisfied. Accordingly the Embassy has been talking both to the Chinese authorities and to Sri Lanka exporters to familiarise them with these requirements. Countries which have satisfied those standards - it takes dedication and time to do so - are doing extremely well in this market place. ASEAN countries, Australia, New Zealand, South Korea etc., are a few of those countries.   
We have also been pushing for the early conclusion of the China – Sri Lanka bilateral free trade agreement. Already initial exchanges have taken place between the two sides. China has been encouraging the early conclusion of the FTA citing the examples of a number of countries which have concluded FTAs with China and which have increased their exports to China exponentially. For example, despite recent political hiccups, Australia’s exports over almost 120 Billion USD worth goods to China, New Zealand exports approximately 25.5 Billion USD, Chili exported 1 billion USD worth of cherries, 90% of its production, to China. While Sri Lanka managed to export only about USD 270 million in total. There is considerable potential for Sri Lankans also to increase our exports significantly by concluding a FTA with China, with adequate safeguards for Sri Lankan producers. China has an insatiable appetite for high quality tea, vegetables, fruits, sea food, spices and garments and they are willing to pay a premium price. The Embassy has also been exploring the prospects for accessing the Central Asian markets via the booming rail services originating in Chinese hubs.  

QThere were a lot of Chinese investments mooted. But there is no result on the ground. What are the impediments to the promotion of Chinese investments in Sri Lanka?  

Many Chinese Companies have visited the Embassy, both to explore the possibilities, and to actively make investments in Sri Lanka. We have encouraged them to provide concrete proposals. A number of companies have noted the energy crisis in Sri Lanka and have proposed projects in the solar and wind power sectors. Renewable Energy will not be dependent on imported fuel. Many of those proposals were sent to Colombo over 12 months ago. Sri Lanka’s abundant availability of sunlight and wind was an attraction and also the potential for long term cooperation. Sri Lanka, consistent with its obligations under the Paris Accords, has also publicly committed itself to carbon peaking by 2030 and becoming carbon neutral by 2050. China, while still substantially dependent on fossil fuels, is making a determined effort to convert to renewable sources of energy and will not fund fossil fuel based power generation. Eg.solar, wind, hydrogen etc. Investment proposals have been sent by other companies in the mineral sector, LNG and petroleum sector and even in steel making. Sri Lanka’s Colombo Port City, Hambantota Harbour and industrial zone have also attracted significant attention. The enthusiasm and the comfort level of potential investors diminished somewhat in recent months, but we have toiled hard to restore these. Major investment commitments made with regard to the Colombo Port City and the Hambantota Port City remain on the table. Both the Embassy and policy leaders in the country will continue to work on these. The Embassy has been hosting regular events for this purpose at the Embassy, including launching a Sri Lanka Platforms on the massively popular Douyin (Tik Tok) and JD.COM social media platforms. We are in talks with Alibaba to launch a Sri Lanka Platform with them also. Other events are planned. We have been actively talking to companies both in Beijing and in the Provinces. We need to process these investment proposals more transparently and expeditiously.