As Sri Lanka’s political crisis continues, its ‘unofficial’ government has awarded two key port contracts to Chinese companies — here’s what that means for India

• Sri Lanka’s new government, which is yet to be recognised internationally, has awarded two key port contracts with a cumulative value of nearly $58 million to Chinese firms.
  
• The legality of the new government, led by former PM Mahinda Rajapaksa, and its ability to make such deals has been questioned. Yesterday, Sri Lanka’s Parliament voted to cut his cabinet’s budget, citing its illegitimacy.
  
• Sri Lanka’s port deals with China are particularly worrisome for India, since it is an important trade partner. In addition, they also portend the increasing presence of China’s military forces in the island nation.
  

India’s bid for influence in the South Asian region just got a little bit trickier.

Amid an ongoing political crisis, Sri Lanka’s new government, which is yet to be recognised internationally, has awarded two key port contracts with a cumulative value of nearly $58 million to Chinese firms, according to Reuters.

The deals were reportedly signed by the state-owned Sri Lankan Port Authority on Thursday after being approved by the newly-installed cabinet of pro-China former Prime Minister Mahinda Rajapaksa last week. Rajapaksa ruled the island nation between 2005 and 2015.

The legality of the new government and its ability to make such deals has been questioned. The political crisis was triggered at the end of October when President Maithripala Sirisena removed Prime Minister Ranil Wickremesinghe and appointed his former ally Rajapaksa to the post instead.

In the weeks following the removal, the President has called for fresh elections and tried to dissolve the Parliament, where Wickremesinghe holds a majority. Both proposals were struck down by Sri Lanka’s highest court. As things stand, both Prime Ministers are staking their claim to the official post, despite Rajapaksa having failed two no-confidence motions.

Yesterday, Sri Lanka’s Parliament voted to cut the Rajapaksa cabinet’s budget, citing his government’s illegitimacy. In principle, the move prevents the cabinet from making any big spending decisions which will inevitably lead to a conflict over the validity of the port deals.

A move away from India to China

Sri Lanka’s port deals with China are particularly worrisome for India, since it is an important trade partner and conducts a significant amount of its regional trade through the island nation’s shipping channels. In addition, this also portends the increasing presence of China’s military forces in Sri Lanka.

Another worry for India is the removal of Wickremesinghe, who was reportedly in favour of awarding a $1 billion container terminal contract to an Indo-Japanese consortium.

During his time in power, Rajapaksa sought closer ties with China and took on a number of Chinese loans for infrastructure projects, which has driven the country to a tenuous financial position. In December last year, Sri Lanka was forced to hand over control of its $1.5 billion Hambantota Port to the state-backed China Merchant Port Holdings after being unable to meet its debt obligations on the port.

If Rajapaksa eventually succeeds in becoming the country’s official PM, he is expected to continue his pro-China policies as evidenced by these two recent port deals.

That will further exacerbate Sri Lanka’s finances, bringing it closer into a Chinese debt trap - a fate that regional neighbours Maldives and Malaysia are trying to avoid.


SEE ALSO:

India’s bid for greater influence in the Maldives gets a boost as the island nation reportedly looks to scrap a trade deal with China

Wary of a debt trap, Malaysia’s government has backed out of three China-funded infrastructure projects

Sri Lanka is building a $15 billion metropolis to rival cities like Hong Kong and Dubai