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Tuesday February 7th, 2023

India, China use own geopolitical strategy to keep crisis-hit Sri Lanka in check

  • India sends RAW chief after lending $500 mln loan
  • RAW chief met President Wickremesinghe, former finmin Basil Rajapaksa
  • China sends fuel, rice after sending its research ship in August amid Indian protest
  • Analysts say Sri Lanka’s bargain power to deal with India, China down after crisis

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe was asked by the chief of Indian intelligence agency, Research and Analysis Wing (RAW) to fulfil all the commitments the island nation has promised since 1987 including a Federal solution for the ethnic minority Tamils, sources close to the president said.

The RAW chief Samant Kumar Goel also has discussed possible threats by the expansion projects of China which now has a strong foothold in Sri Lanka mainly on commercial aspects. But India and the West suspects China has a military agenda which Beijing has vehemently rejected.

Sri Lanka is in the middle of an unfolding geopolitical cold war between China and Indian-led ally which also includes the other QUAD nations – The United States, Japan, and Australia.

The visit of Goel comes amid indirect efforts by Wickremesinghe to meet Indian Prime Minister Narendra Modi since the last month, sources said.

“He (Goel) discussed on the pending issues including some commercial transactions. He also raised concerns over increased activities by China and Pakistan in Sri Lanka’s North and East,” a source close to president told EconomyNext referring to Sri Lankan provinces which are closest to South India and dominated  by ethnic minority Tamils.

Another government source said: “Well, he has raised all the commitments Sri Lanka has undertaken including the implementation of 13th amendment.”

President Wickremesinghe last week expressed his willingness to negotiate a solution for the long lasting issues faced by Tamils.

President’s Media Division did not respond to the queries by EconomyNext on the meeting between Wickremesinghe and the RAW chief.

Cabinet Spokesman denies 

Officials at Sri Lanka’s Foreign Ministry said they did not facilitate RAW chief’s visit to Sri Lanka, while the cabinet spokesman said he was not aware of any such visit.

“I swear that I don’t know such an intelligence chief met the president or any other government official,”Cabinet Spokesman Bandula Gunawardena told weekly cabinet press briefing on Tuesday.

“If there was such a meeting, the president will inform that to the parliament. We believe that he reveal all the information to the nation without hiding anything,”

Political sources said the RAW chief also met finance minister and strategist of the Sri Lanka Podujana Peramuna (SLPP) Basil Rajapaksa.

“I think the message is related to the upcoming election,” a source close to Rajapaksa told EconomyNext.

Officials from Indian High Commission were not immediately available for comment on the RAW chief’s visit.

The Indian intelligence chief’s visit also comes ahead of intensifying demands for local government and parliament polls by both organized political parties and people those who participated the April-July protests which ousted former president Gotabaya Rajapaksa.

Government sources said the reason for the RAW chief’s visit was part of India’s efforts  to see a stable long term government to assist Sri Lanka to overcome the current economic crisis.

Sri Lanka’s unique and strategic location in the Indian Ocean has attracted major World powers. However, Sri Lanka has so far not succeeded fully in managing the world powers in a none-aligned manner according to some analysts.

There was a strategy under former president Gotabaya Rajapaksa, but it failed eventually, they say.

Indian role, concerns over China  

Some political analysts are wary of India’s agenda on Sri Lanka.

“It is in the public domain how India worked against Ranil Wickremesinghe in the July 19 election among the MPs to select the president,” a political analyst who is critical of Rajapaksa told EconomyNext.

“Former president Mahinda Rajapaksa himself in 2015 said it was India and RAW who defeated him. So the RAW chief’s visit could be something more than what we hear. How can India order a sovereign nation on how and whom to deal with?”

Despite Indian’s offering over two billion dollars to Sri Lanka at a crucial juncture as well as other kinds of support many Sri Lankans still do not have confidence in the Asia’s fastest growing nation due to its backing for Liberation Tigers of Tamil Eelam (LTTE) at the beginning of 26-year civil conflict in Sri Lanka in 1983.

According to other analysts Indian concerns can be partially justified because of how China is expanding in Sri Lanka.

Since the end of the war in 2009, China has invested billions of US dollars mainly in Sri Lanka’s long-neglected infrastructure.

Sri Lanka owes nearly 20 percent of its total $35 billion of external debts to China.

The criticism from India and the West is that the Chinese investments have failed to give significant return on investment to repay the island nation’s loan and thus Sri Lanka is caught in a “debt trap” by China.

China has rejected this.

Foreign Minister Ali Sabry in an interview with Indian media rejected allegations about a debt trap and said “we don’t agree with that phrase.”

Bad to worse in economic crisis

China has been expanding its assistance to Sri Lanka in the form of fuel and rice specially targeting fishermen and the poor.

China has also started funding underprivileged universality students in Jaffna and Eastern Universities. This has also drawn Indian concerns, university sources have told EconomyNext.

Jaffna University Students’ Union last week said they are opposed to a move by the government to sign a memorandum of understanding with a Chinese agricultural university.

Sri Lanka has lost its bargaining power to negotiate with both India and China in the current economic crisis and the Asian giants are major external creditors and the island nation’s recovery from the economic crisis depends on the debt restructuring agreement by the both nations, according to analysts.

“Sending a ship that is alleged to be a spying ship showed that China wants to prove its influence in Sri Lanka. And now India has responded it with sending its RAW chief to directly discuss with Sri Lanka’s president,” a pro Wickremesinghe political analyst told EconomyNext asking not to be named.

“But we have no options because we are in a crisis where we need the help of both these nations.” (Colombo/Nov30/2022)

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  1. Kumar Soysa says:

    Many of us knew in the mid-1990s that China wants landing stages in Sri Lanka!!! Any idiot could not have missed this!

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  1. Kumar Soysa says:

    Many of us knew in the mid-1990s that China wants landing stages in Sri Lanka!!! Any idiot could not have missed this!

Sri Lanka Railways to seek PPPs to boost revenue streams

CURFEW RUSH: Commuters scrambling to get home after curfew was declared in Sri Lanka on March 20, 2020.

ECONOMYNEXT – Sri Lanka Railway department hopes to expand Public Private Partnerships and earn more non-passenger revenues to offset recurring operational costs, an official said.

“For the past 10 years, except the last few years, the Railway operational income only covers around 50 percent of the operational expense of the Department,” the General Manager of the Railway, D.S. Gunasinghe told EconomyNext.

“Our plan is to increase the non-passenger revenue of the Railway department.

“And we cannot expect and do not hope for money from the government.”

Sri Lanka Railways already has agreements with Prima, a food firm, and Insee Cement, which is bringing in additional income, Gunasinghe said.

“We had agreements for material transportation such as sand in the past, however it was canceled but we hope to start it again” he said.

The department will rent out its storage facilities and circuit bungalows for the tourism sector to create additional revenue streams.

Sri Lanka Railways recorded an operating loss of 10.3 billion rupees during 2021, compared to a loss of 10.1 billion rupees in 2020, the Central Bank 2021 annual report showed.

The total revenue of the SLR stood at 2.7 billion rupees, a 41.3 percent drop from a year ago.

(Colombo/ Feb 06/2023)

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Sri Lanka’s doctors distribute anti-tax hike leaflets to train commuters

ECONOMYNEXT – Doctors representing Sri Lanka’s Government Medical Officers Association (GMOA) distributed leaflets outside the Colombo Fort railway station against a progressive tax hike, threatening to address the government in a “language it speaks”.

GMOA Secretary Haritha Aluthge told reporters outside the busy Fort railway station Monday February 06 afternoon that all professional associations have collectively agreed to oppose the personal income tax hike.

“The government is taking a lethargic approach. They cannot keep doing this. They have a responsibility towards the citizens, the country and society,” said Aluthge.

The medical officer claimed that the government was acting arbitrarily (අත්තනෝමතික).

“If it cannot understand the language they’ve been speaking, if the government’s plan is to put all professionals out on the street, if it doesn’t present a solution, all professional unions have decided unanimously to address the government in a language it speaks, ,” he said.

Aluthge and other GMOA members were seen distributing leaflets to commuters leaving the railway station. Doctors in Sri Lanka in general are likely to earn higher salaries than the average train commuter, and a vast majority of Sri Lanka’s population, most of whom take public transport, don’t fall into the government’s new tax bracket. Many doctors, though certainly not all, collect substantial sums of money at the end of every month as doctor’s fees in private consultations.

About two miles away from the doctors, the Ceylon Blank Employees’ Union, too, engaged in a similar distribution leaflet campaign on Monday at the Maradana railway station. A spokesman promised “tough trade union” action if there was no solution offered by next week.

Sri Lanka’s cash-strapped government has imposed a Pay As You Earn (PAYE) tax on all Sri Lankans who earn an income above 100,000 rupees monthly, with the tax rate progressively increasing for higher earners, from 6 percent to 36 percent.

A person who paid a tax of 9,000 rupees on a 400,000 rupee monthly income will now have to pay 70,500 rupees as income tax, the latest data showed. This has triggered a growing wave of anti-government protests mostly organised by public sector trade unions and professional associations.

Even employees of Sri Lanka’s Central Bank recently joined a week-long “black protest” campaign organised by state sector unions against the sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

The government, however, defends the tax hike arguing that it is starved for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation say it serves as a disincentive to industry and capital which can otherwise be invested in growth and employment-generating business ventures. Instead, they call for a flat rate of taxation where everyone is taxed at the same rate, irrespective of income.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital, at least for a year or two.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and, they argue, though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair.  (Colombo/Feb06/2023)

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Sri Lanka bond Yields end steady

ECONOMYNEXT – Sri Lanka’s bond yields closed steady on Monday, dealers said while a guidance peg for interbank transactions remained unchanged.

A bond maturing on 01.07.2025 closed at 32.15/30 percent, steady from Friday’s 32.05/10 percent.

A bond maturing on 01.05.2027 closed at 28.90/29.10, steady from Friday’s 28.90/20.05 percent.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by one cent to 361.96 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 370.35 rupees on Monday, data showed. (Colombo/Feb 06/2023)

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