Sri Lanka hopes to sign new trade agreement with China next year

June 17, 2016

The Government hopes to sign a proposed Free Trade Agreement with China next year, Prime Minister Ranil Wickremesinghe said today.

The Prime Minister said Sri Lanka and China will establish stronger diplomatic relations keeping the future in mind.

He also said that a new agreement is to be signed by August with the Chinese company involved in the port city project.

Wickremesinghe said that under the new agreement the Chinese company, China Harbour Engineering Company Ltd (CHEC), will have rights to the port city land under a 99 year lease.

http://colombogazette.com/2016/06/17/fta-with-china-next-year-new-port-city-agreement-byaugust/

June 17, 2016

Financial problems and the need for infrastructure funding were the main reasons behind Wickremasinghe’s decision to restart the Colombo Port City project, according to Weerakoon Dushni, deputy director at the Institute of Public Policy in Colombo. “Managing loan repayments is a major problem. Nearly half of Sri Lanka’s external debt has been raised on non-concessional and commercial terms,” she said adding, “We need to engage with China both in political and economic terms.”

Some experts believe Sri Lanka has approached China for help because India and the United States failed to provide assistance. “The major task for Sri Lanka's current government is economic development. Yet after its attempt to reduce its reliance on Beijing, Colombo has realized that there is no alternative,” Zhao Gancheng, director of South Asia Studies at the Shanghai Institute for International Studies told the Global Times newspaper. “Over the past year, neither India nor the U.S. has provided it with attractive mega-projects that China did. It is therefore natural for Sri Lanka to turn around and embrace China again,” Zhao said.

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He also said Sri Lanka is trying to use its location on the Indian Ocean to attract Chinese investments. “Apart from the already existing cooperation, including the construction of Hambantota Port, Sri Lanka is now expecting to use its own geographical position to ink more new joint programs with China,” said Zhao.

China needs Sri Lanka to get access to the Indian Ocean, which has an heavy presence of Indian and U.S. navies, for both military and commercial reasons. It is pouring $46 billion on a corridor project that would connect the Chinese border in Xinjiang to the Gwadar port on the Arabian Sea in Pakistan, 1200 kilometers away.

“Sri Lanka is in the midst of important sea routes. China is engaging with Sri Lanka partly because of strategic reasons. Besides, it is focused on the 'One Belt, One Road program,' in which Sri Lanka can have an important role,” said the Institute of Public Policy's Dushni.

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Chinese backed projects, including the airport and sea port in Hambantota and the Colombo Port City plan, have been a matter of raging political controversies in Sri Lanka in recent years. During the 2014 elections, opposition leaders accused the associates of then-president Rajapaksha of taking bribes from Chinese companies. Those critics are now in power.

"The Sri Lankan government is in a real dilemma. It is almost bankrupt and needs money to run the economy,” Chaminda Hettiarachchi, lecturer and researcher at the Colombo University, said.

http://m.voanews.com/a/sri-lanka-accets-chinese-demands-to-avoid-debt-trap/3276282.html