China became the Port's key holder because India failed

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By 2017-07-17


Pro-Indian analysts' interpretation of the Magampura Port to be leased to the Chinese for the next 99 years is interesting. According to them, the 'Sri Lanka case' offers a classic example of how China does business. Apparently, China offers aid and when that country cannot repay, China moves into assert its controlling rights over the strategic asset. We, in Sri Lanka, know that is not what actually transpired.

It is not because we failed to repay loans the Port is about to fall into Chinese hands. Payment has nothing to do with China becoming the Port's key holder. It is because India failed - not once, but thrice.

1. Failing to Partner in Developing the Magampura Port

The construction of the Magampura Port was first offered to India. Six months later, they were still scratching their heads without confirming their commitment. Indian foreign policy in relation to Sri Lanka is extremely racist. Most of their aid to Sri Lanka is only for the benefit of one very specific ethnic group in Sri Lanka. Their continuous insistence of the 13th Amendment, which they forced into our Constitution, is again to meet this group's 'aspirations'.

India wants to be perceived as 'brother' by the developed West and 'uncle' by their immediate economically challenged neighbours. To be the regional hegemony, India engages in unsavoury, underhand acts to destabilize its struggling neighbours.

The patronage Sri Lankan terrorists received by the Indian government are a case in point.

Thus, unlike US, who enjoys good neighbourly relations with Canada, Bhutan is India's only friend from the neighbourhood. Again, it is not a friendship among equals as Bhutan was made to agree to let India 'guide' its foreign policy. To Indians, Bangladeshis are illegal immigrants, Nepalis are watchmen, Pakistanis are terrorists and Sri Lankans are racists. In their prejudice, they feel their interests being threatened when their neighbours try to develop their respective economy or strengthen national security.

Hence, partnering to build a strategic asset that will propel Sri Lanka's fortunes to be on par with Singapore or Dubai was not in India's cards. Without addressing this inferiority complex, analysts prefer to bludgeon China.

2. Ridiculing Magampura Port as Grist for the 'Regime Change' Mill

To discredit the Rajapaksa's administration, the constant harp was that the Magampura Port is an economically unviable, ego-centric project of the Rajapaksa's.

The Magampura Port was structured differently to that of the Colombo Harbour to be run with less than 500 people. The low operational costs enabled an operational profit. Out of the four terminals for general, cars, bunkering and containers, the agreement for the container terminal was a 40-year lease on a Supply, Operate and Transfer basis. The Sri Lanka Ports Authority's (SLPA) commitment was to provide only the basic infrastructure. SLPA was to get 35 pc plus a royalty of USD 2.56 per container, that was to increase by one pc each year, as well as USD 30 per container as wharfage.

2,000 hectares of land within the harbour was to be a free trade zone, allowing value addition, packing and assembling to be done, free of duty and tax payments.

The only payment was for the port charges for the exports within the port. The local market can also be tapped from here, but that will be subject to Sri Lanka's prevailing duties and taxes. SLPA signed this agreement with 11 different companies.

Transshipments increased rapidly. The number of vehicles increased to around 12,000 in the first year, to 67,000 and 200,000 in the second and third years. Out of that 200,000 vehicles, 70 percent was transhipment.

This reality was distorted with blatant falsehood, simply to oust the then administration. Whilst doing so, India never paused to care for this strategic asset's fate.

3. Refusing to take Responsibility

The incumbent government sincerely believed that their strong backers would bring in investments. Trusting India and the West, they showed China the door. On regime changers' advice, rupee was allowed to be devalued.

The then Ports and Shipping Minister Arjuna Ranatunga charged that the SLPA incurred a loss of Rs 18 billion. However, it is not because of rupee devaluation. The loan value was USD one billion. Rupee devalued by more than Rs 20, resulted in a loss of Rs 20 billion. In turn, it has resulted in a foreign exchange loss of USD 18 billion in SLPA accounts.

Other than for a pat in the back, the much anticipated investments never came through, leaving the new government cash strapped. The new administration to fulfil election pledges had reduced their income whilst increasing their expenses. Hence, they were forced to crawl back to China and put the country on sale.

Getting rid of the Rajapaksa administration was one thing. The more despicable act was installing a careless government. This is evident by the casual, almost offhand manner the Port is attempted to be leased.

The two Chinese companies that already had a 40-year lease contract for the container terminal tendered proposals. One proposed one-time payment of USD 1,080 for a 99-year lease.

The second proposed an initial payment of approximately USD 730 million, but for a 50-year period. Throughout that period, a payment structure, similar to..a royalty, had been proposed for the wharfage – i.e. accommodations provided at a wharf for the loading,unloading, or storage of goods and all the other port charges that comes to the Port. Thus the value of the second proposal is in fact approximately USD 1,500 million.

Thus the two proposals were USD 1,080 million and USD 1,500 million respectively. The SLPA was interested in the second proposal as revenue is earned throughout the period – thus benefitting both the SLPA and the country.

However, the first proposal was accepted. The objective of leasing the port was fuelled by the need for immediate funds.

Therefore, though the accepted proposal offers actually less than the rejected proposal, it is an upfront lump sum payment. It shows the government's disinterest in the long-term return.

In accepting the proposal, the existing systems of obtaining approval from the Technical Evaluation Committee (TEC), Cabinet Appointed Negotiation Committee, Attorney General Approval and the Cabinet had been bypassed. Instead, a committee chaired by the PM invited the investors for a discussion and a decision reached thereupon.

India must stand up to China's sinister plans

Furthermore, a proper valuation for the facilities, infrastructure and land that even includes a man-made 110-acre island had not been conducted. Thus, the deal is finalized at just the construction cost, discounting the fact that even a basic house appreciates in value after construction.

The one billion dollars would not be used to repay the loan. It will be deposited in the Central Bank of Sri Lanka (CBSL) to be used for other projects. It is still not clear who will be servicing the loan.

While all concerned - residents of the area, SLPA including Arjuna Ranatunga - threw their weight to stop this agreement, India remained ominously silent. It is widely speculated that India did not protest, so when Magampura Port falls into China's hands, it will pave the path for India to take over the Trincomalee oil tanks. We might never know the truth behind the silence. More to the point, China was NOT behind the regime change, nor did they manipulate the Port's control from us.

The real issue is that Modi's government is run by a handful of musclemen than intellectuals. Retired Major-General Kakar's comment, that in the Doklam Plateau standoff with China, India cannot afford to lose is in Modi's thinking line. Kakar advocates that India must stand up to China's sinister plans, if the South Asian geostrategic environment is to remain India-centric.

Modi must be feeling especially gratified with the U.S. finally siding with India and calling on Pakistan to ensure that "its territory is not used to launch terrorist attacks on other countries". They further called on Pakistan "to expeditiously bring to justice the perpetrators of the 26/11 Mumbai, Pathankot and other cross-border terrorist attacks perpetrated by Pakistan-based groups."
Modi et el should not forget who actually created the terrorists that Pakistan is now accused of harbouring. Were these not the same groups who were created to fight the Russians during the Cold War? Once they lost their purpose to their creators, it is fascinating how quickly they became designated as terrorists. Pakistani lost their U.S. ally with the communist threat diminishing.

Today, U.S. is standing with Pakistan's arch enemy simply because it serves the American purpose.

India's actual problem is not China, but its inability to look beyond the rhetoric. Modi, coming from a rustic background, is not comfortable with the educated elite. Thus, the like of Sushma Swaraj who was a Supreme Court judge intimidates Modi. He is used to women like his wife. She despite 50 years of estrangement accepts him as husband and the life he has forced on her. The ridiculousness of her situation is, she lives a meagre but independent life from Modi as a retired teacher. While she uses public transport, the bodyguards assigned to her follows her in an air-conditioned vehicle, who bullies her and her family into cooking for them and making their beds.

Thus, though Swaraj is officially the minister for external affairs, she is only a pretty face in the administration. It is theundercover agent Ajit Doval who is actually strategizing the Indian foreign policy. Doval concocted a solution to oust the Rajapaksa administration. He however does not have the faculties to envision the step after.

Likewise, there is none in Modi's circle to point out the West's fickleness. For all the red carpets and private dinners, Modi will never be anything more than the token brown boy in the white man's club. The day the West achieves their purpose, the wooing will stop.

If India wants to be the true power in South Asia, India must stop looking to the West who for centuries ravaged Asia. Instead, India must try to be a genuinely good neighbour. If India is our true strength, then China will not be entertained. If India and China become partners, then the West will dare not be fickle.

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