President Gotabaya Rajapaksa says that he wants to renegotiate the Hambantota Port deal that gave away this strategic harbour on a ninety nine year lease.After having inked the deal, the UNPers had the gall to say that the Wickremesinghe government never sold any state owned property to foreign interests!
The President also emphasizes that his foreign policy would be strictly non aligned. The decision to renegotiate the Hambantota Port deal brings into sharp focus the difference in approaches between the Rajapaksa led government of today, and the Yahapalana government that preceded it.
Obviously, the former government had no idea about internationally important ramifications of the 99 year port deal.The only reasonable rejoinder under these circumstances to Wickremesinghe’s action would be ‘what was he thinking?’He — Wickremesinghe— has gone on record saying that the Port deal was not forced on his government, and that it was not a debt for equity swap.
The reasons for the deal being mysterious as they are, renegotiating it is the only way to go forward if a host of negative consequences are to be avoided.
A fine balance
The President has a larger foreign policy challenge ahead of him, and that’s the maintenance of the fine balance between relations with India, China and the United States, in a way that none of these friendly countries’ interests are hurt.
Renegotiating the Hambantota Port deal is the correct place to start in this regard, as this deal certainly gave serious concern to Sri Lanka’s other allies such as the US and India. It’s a delicate matter nonetheless.
China will not use the port to advance its strategic interests, and that was part of the arrangement for the deal signed granting the 99 year lease.
But the Hambantota Port is smack in the middle of a major sea lane. Apart from the bad optics of China having effective control over such a facility, there was the apprehension among the major powers — dread US, India — that China would exert undue influence over the region as a result of the control over the port.
Sri Lanka was caught in the crosshairs of this covert battle for regional clout, and control of vital commercial shipping, leaving aside strategic implications of course.
The new President now wants to press the reset button on the deal that has effectively brought unwelcome attention upon the country and as a result potentially upset the balance of power in the region and thereby invited a geopolitical crisis with latent possibility of erupting say twenty years or more from now, into a major standoff between the big powers, over who has effective control over important maritime resources close to our shores.
A foreign policy reset was only the first essential component of a Gotabaya R presidency.
He begins as a uniquely placed individual who can lend his technocratic mindset to problem solving. He is not the quintessential politician and that’s obvious, though now he too had taken the plunge into the turbulent world of politicking, and would have to take political considerations into account.
First up, he faces the task of placing the economy on an even keel.
This domestic priority however is intimately tied to some of the foreign policy issues mentioned in the opening paragraphs of this comment.
The country can run up a budget deficit, but would definitely need an infusion of money. Of course, the idea of the newly announced tax reductions this week is to stimulate activity in the economy.
But the deficit has to be bridged. The ex Prime Minister Wickremesinghe was a balanced budget type of guy. He took pride in balancing the budget, but obviously that economic strategy, to say the least, seems to have led him and his coterie to much disappointment. Certainly the large mass of the voting public didn’t think that strategy worked. We don’t even know if the public understands.
There are some ‘accountants’ these days who think that balancing the budget is to tally the left column evenly with the right column, and who say that this is basic economics! Beg your pardon but that’s just a private joke. However, questions regarding balancing a nation’s budget or leaving it deficit heavy, and deficit-spending if the budget is not balanced, are all serious matters.
On an even keel
The President and his Finance Minister, the Prime Minister Mahinda Rajapaksa and their team would have to bridge the deficit, and apart from minting the money and issuing Treasury bonds, an infusion of money could always be expected from ‘friendly sources.’ China has been a great friend and benefactor, but most Chinese loans were for infrastructure and other projects and not for consumption and short term facilities to be able to keep the Exchequer on an even keel.
But all infusions of money help. China has been a source for all eventualities, even when lending at commercial rates. So of course the President will keep China on the side, but it is earnestly hoped that he could renegotiate the China port deal as he said in the interview with Nitin Gokale of SNS India.
The President’s foreign policy seeks to accommodate rather than confront. This is the preferred route, and is also perhaps the wise way to go, given that he has to maintain the delicate balance of power in this neck of the woods, and not favour one big power over another.
But, this foreign policy would also face its own challenges, especially, when it comes to the thornier issues. Revisiting the UN Human Rights Council Resolution is something that would almost be imperative, but the new administration is bound to meet with resistance in this regard. But, it seems that the President’s willingness to shatter preconceived ideas about China with his willingness to renegotiate the Hambantota Port deal, would win him friends in unexpected places.
So, it could be said, there is an even larger foreign policy reset here. In that context, policy makers and negotiators will have greater goodwill from among policy interlocutors from the USA, Europe and the West in general, even when it comes to potential issues such as taking a fresh look at the UN Human Rights Council Resolution, supported and passed during the watch of the Wickremesinghe administration.
State institutions as cash cows
On a separate note, not much cash was forthcoming from Western governments during the tenure of the Wickremesinghe administration, and Palitha Kohona, the former UN diplomat said pithily, ‘they expected these countries to come with bags of gold but no bags of gold materialised.’
Regarding the budget, it could be said there are several ways to skin a cat. Short term infusions of money apart, the plan is to bring in more revenue, and this is not from taxes.
All state institutions are to be made productive, and this is where the Gotabaya style of ruthlessly efficient administration would come into play. If more revenue is raised as planned, State coffers could rely on a steady infusion of cash, provided there is prudent fiscal policy and Management to go with that tack.
The mechanisms are gradually being put in place. The plan is to have state institutions led by achievers who could show results, cut down waste in the process, and bring in revenue through streamlined management.
Naysayers would scoff at the idea, saying it’s impossible to earn revenue as a means of deficit reduction, but the stamp of the Gotabaya style of administration is to find the ways and means of making state institutions work. It’s not a matter of mindset alone. Naysayers would say that implementation is difficult in the State sector, even if good policy is in place.
But President Gotabaya Rajapaksa seeks efficiency through proper leadership at organizational level, and innovative ideas. He has a track record of delegating tasks to competent state sector leadership, and doing things this way. So if he seeks State revenue to fill the gaps in the budget, he might get there, in which case the naysayers would have to find something else to criticize him with.
