Sri Lanka expects immediate benefit by integrating with the Indian economy

President of Sri Lanka Ranil Wickremesinghe made an official visit to India on 20-21 July 2023 at the invitation of Prime Minister (PM) Narendra Modi. During his visit, President Wickremesinghe met his Indian counterpart Droupadi Murmu and held discussions with PM Modi, Minister of External Affairs Dr Subramanyam Jaishankar, National Security Advisor Ajit Doval, and other dignitaries on a range of issues of mutual interest on 21 July 2023. The main purpose of the visit was to bolster the longstanding friendship between the two countries and explore avenues for mutually beneficial cooperation across sectors. “Productive and outcome-oriented” discussions were held in this regard during the visit.

Several new areas of cooperation to enhance connectivity were identified during the delegation-level talks headed by President Wickremesinghe and PM Modi and commitment was made by both sides for initiation of the process for early execution of the same. Both sides have also underscored the need to promote awareness and effective implementation of already signed mutually beneficial projects. An economic partnership vision document titled ‘Promoting Connectivity, Catalysing Prosperity: India-Sri Lanka Economic Partnership Vision’ Was adopted during the visit to provide a “long-term direction and significant momentum” to bilateral cooperation for growth and prosperity in both countries and in the Indian Ocean region.

The economic partnership vision document is in line with India’s vision for ‘Security and Growth for All (SAGAR)’ and ‘Neighbourhood First Policy’, and Ranil Wickremesinghe’s ‘Roadmap for National Transformation’. Hence, it can be argued that this is an opportune moment for both India and Sri Lanka to take the decisions made during President Ranil Wickremesinghe’s maiden visit to India to their logical conclusion.

National Transformation Roadmap of Wickremesinghe Presidency

President Wickremesinghe presented a ‘National Transformation Roadmap’ to stabilise, revive and develop the economy. The roadmap focuses on four primary pillars including fiscal and financial reforms, investment drive, social protection and governance, and state-owned enterprises transformation. President Ranil Wickremesinghe’s main aim is to create “an entrepreneurial state instead of a welfare state”.

In this regard, the government is trying to attract foreign investors and technology holders to establish joint ventures with Sri Lankan partners for industrial investments with advanced technologies to ensure better and sustainable utilisation of Sri Lankan resources and increase value addition without disturbing the interests of the national economy. To end the monopolistic position and facilitate private investment, the government has taken measures to restructure state-owned enterprises, particularly the loss-making enterprises. Emphasis is given to collaboration between the public and private sectors. The government is also aiming at transforming Sri Lanka into an export-oriented economy that is globally recognised. In this context, the focus is given to prioritising modern and sustainable efforts such as renewable energy, green hydrogen, and digitisation.

The Current Sri Lankan government believes that the island country can benefit immensely by integrating with the Indian economy. The point was manifested in the ‘Economic Partnership vision document’ adopted during President Wickremesinghe’s visit to India.

Economic Partnership Vision

The vision document underscored the unparalleled advantages the two countries can avail by harnessing the existing synergies and complementarities to achieve shared and sustainable economic prosperity. To this end, the leaders re-emphasised the importance of promoting and strengthening connectivity in the areas of maritime, air, energy, power, trade, finance, economy, and people-to-people level.

In order to strengthen connectivity five new Memorandum of Understandings (MoU) were signed during the visit including a Memorandum of Cooperation for the economic development projects in the Trincomalee District, an MoU on renewable energy, an energy permit for a solar power project, a network-to-network agreement between IPL and Lanka Pay for UPI application acceptance, and an MoU on animal husbandry.

Both sides have also agreed to explore more areas of cooperation to strengthen the connectivity between the two countries. Some of the identified potential areas include high-capacity power grid interconnection to enable bidirectional electricity trade between India and Sri Lanka; construction of a multi-product petroleum pipeline from Southern part of India to Sri Lanka; joint exploration and production of hydrocarbons in Sri Lanka’s offshore basins; facilitating Indian investment in the divestment of Sri Lankan state-owned enterprises and in economic zones; reinitiating discussions on Economic and Technology Cooperation Agreement to enhance bilateral trade and investments in new and priority areas; land connectivity for developing land access to the ports of Trincomalee and Colombo; and establishment of new higher education and skilling campuses in Sri Lanka in accordance with Sri Lanka’s requirements and priorities.

The arrangement made by the Reserve Bank of India in 2022 to settle trade transactions in Indian Rupee (INR) ensured a smooth supply of essential items to the crisis-ridden country without posing an additional burden to Sri Lanka’s (almost empty) foreign reserves. In this context the decision to designate INR as currency for trade settlements between the two countries gained special attention.

The vision document has also mentioned about quick and effective implementation of already signed projects. In this context, both sides have agreed on the development of ports and logistics infrastructure at Colombo, Trincomalee, and Kankesanthurai; resumption of ferry services and flight connectivity between mutually agreed places in India and Sri Lanka; augmentation of airport infrastructure at Palaly; expediting the implementation Sampur Solar power project and LNG infrastructure; expediting the joint development of Trincomalee tank farm; leveraging India’s digital public infrastructure in accordance to  Sri Lanka’s requirements and priorities; enhancing tourism by popularising India’s Buddhist circuit, and Ramayana trail as well as ancient places of Buddhist, Hindu and other religious worship in Sri Lanka; and expanding cooperation between research and academic institutes. India has also announced INR75 crore for the development of Indian-origin Tamils.

Opportune Moment

It is noteworthy to mention here that most of the projects mentioned above are being discussed for quite some time, but implementation of those projects had become an arduous task due to domestic opposition and lack of political will in the past. Keeping their political future in mind, Sri Lankan presidents in the past acceded to the demands of the anti-India lobby.

Such kind of domestic opposition against Indian investment still exists in Sri Lanka. However, amidst the economic crisis, the anti-India lobby apparently has become less influential (or perhaps chooses to be less vocal). India’s generous assistance to Sri Lanka during the worst-ever economic crisis cannot be overlooked even by the harshest India-bashers in the island.

In order to avail of the International Monetary Fund (IMF) facility, President Ranil Wickremesinghe brought a New economic reform policy in line with the IMF conditions. Even though some sections of people in Sri Lanka are not happy with the President’s economic reform policy, in the absence of any proposed viable alternatives, they are not initiating any large-scale protests against the current administration.

Since Ranil Wickremesinghe’s United National Party (UNP) does not have any presence in the parliament, he is politically not under pressure to succumb to the populist demands.

Challenges

Even if he is in a better position to execute his policy as President compared to his earlier position as Prime Minister in 2001-2004 and 2015-19, President Wickremesinghe is not free from challenges. His survival as President and execution of his policy completely depends on the support of the Sri Lanka Padajana Peramuna (SLPP) party on the floor of the parliament.

As far as cooperation with India is concerned, as mentioned above, the anti-India constituency in Sri Lanka at this point may not be very active, but the possibility of reviewing Sri Lanka’s India policy under a new administration in the coming years and when the economic situation improves, cannot be ruled out.

Way Forward     

Hence, following the fruitful discussions with Indian leadership during the visit, President Wickremesinghe needs to focus on consensus building at the domestic level to promote sustainable and effective cooperation between the two countries.

It is encouraging to see that hours after returning back to Sri Lanka from India, the Wickremesinghe government announced all political party consultation on devolving police powers to provinces, which was denied earlier. Full implementation of the 13thamendment to address the aspirations of the Tamil community for equality, justice, and self-respect within the framework of united and prosperous Sri Lanka has been the consistent position of India as far as the political reconciliation of the Tamils in the island is concerned. PM Modi reiterated India’s consistent position when President Wickremesinghe shared his plan to implement the 13thamendment minus police power as part of his comprehensive reconciliation plan.

Long perennial fishermen issue was also discussed during the visit. Both sides agreed to proceed with a humane approach to deal with the fishermen’s issue. This policy approach has been followed by both sides for quite some time now. It is about time that both sides went beyond rhetoric and think out of the box mutually beneficial practical solutions. In this regard, the government of India can positively consider Sri Lanka’s request for innocent passage for its fishermen to Arabian sea via India’s Exclusive Economic Zone and propose for an agreement allowing Indian fishermen to fish in Sri Lankan waters in regulated manner as quid-pro-quo.

As far as India is concerned, it is important to understand the fact that the economic crisis and President Ranil Wickremesinghe’s policy vision provide an opportune moment for both countries to execute and implement the long pending projects and enter into new areas of cooperation in the economic, trade, energy and financial sectors. Therefore, it will be prudent for India to expedite the process it needs to undertake at its end to implement the projects discussed during the visit, in addition to the continuation of its financial, developmental, and humanitarian assistance. Issues arising in bilateral relations due to red tape need special attention.

Financial express

By Dr Gulbin Sultana

The author is an Associate Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA).

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