Signpost Indo-Lanka relations

President Gotabaya Rajapaksa’s first overseas trip to India kicked off on Friday with high expectations for stronger relations between the two countries. However, the challenge will be to convert these good graces into tangible economic and social benefits for Sri Lanka. 

A trip to India is the norm for any newly-sworn-in President. In 2015 and before, a Presidential visit to India was a sage acknowledgement of India’s power within the region and acceptance of the need to have the largest and most economically powerful country’s support in navigating the challenging task of global relations and local governance. 

President Rajapaksa is undertaking this visit at a critical time for Sri Lanka. Sri Lanka has experienced slow growth for several years with economic expansion projected to be 3% or slightly less in 2019. Despite the war ending, Sri Lanka failed to attract significant Foreign Direct Investment (FDI), particularly from credible sources, and its export basket remains limited. In many sectors whether it is IT, tourism, or infrastructure, there are synergies that could be tapped with stronger Indo-Lanka relations.  Sri Lanka desperately needs stronger exports and investment to boost public revenue, reduce the Budget deficit, have stronger macroeconomic fundamentals so that it can go to international capital markets and borrow to repay debt at reasonable interest rates and raise the standards of living of its citizens. But engagement with India beyond State visits has not really materialised tangible results on the ground for Sri Lanka.    

On paper it makes sense to plumb stronger economic links with India. But the previous administrations failed to make much headway. The Economic and Technology Cooperation Agreement (ETCA) ran into strong opposition locally and failed to really capture the imagination of the private sector, professionals and other stakeholders. Similar efforts by the earlier Governments headed by Prime Minister Mahinda Rajapaksa also failed to expand the existing Free Trade Agreement (FTA) into a Comprehensive Economic Partnership Agreement (CEPA) despite thirteen rounds of talks spanning from 2003 to 2008. It was later quietly shelved. India’s economy, though seeing a slowdown in growth, remains significant with 5.6% growth expected in 2020. With most countries suffering due to the trade war between US and China it makes sense for Sri Lanka to consider stronger relations with India. In fact in an interview just before his visit President Rajapaksa said he would seek talks on investment. While India has focused on infrastructure and housing projects in Sri Lanka, their commitment is far below that of countries such as China and Japan or development organisations such as the World Bank and the Asian Development Bank (ADB). Indian companies also have a limited footprint in Sri Lanka and the local private sector has remained steadfastly stubborn against liberalisation. Getting past these bottlenecks remain challenging. 

In addition President Rajapaksa has also outlined plans to renegotiate the joint venture on the Hambantota Port and pull Sri Lanka out of the United National Human Rights (UNHRC) resolution. Both of these will require strong international goodwill, particularly on the latter and it makes sense to have India’s support locked in beforehand. International relations experts opine that Prime Minister Modi is unlikely to be as ruffled as his predecessors on reconciliation issues but Sri Lanka still needs to have genuine peace and harmony between communities for it to experience long term stability and economic prosperity. 

Therefore, this visit, despite being short, needs to signpost Indo-Lanka relations for the next five years so that Sri Lankans can have a sense of where they stand with India and what the genuine prospects on the ground can be.