Part 2
Q: Touching on the Hambantota Port and some of these other investments and projects that have been occurring, regarding the aspects of China’s relationship with Sri Lanka, do they raise concerns within U.S. government circles about Sri Lanka’s sovereignty?
A: Yes. Frankly, they do. And the American approach, the U.S. approach, is one where we would like to see countries able to fully exert their sovereignty over their territory, over their exclusive economic zones particularly in the maritime space. This is essential. And projects that maybe don’t obviously infringe on a country’s sovereignty can do so in maybe kind of back doorways.
I come back to the potential for leverage. If a country, it may not even be majorly indebted to another bilateral partner but the agreements that they signed have onerous requirements in them or would lead them to negotiations to hand over assets or offer special rights to do things that wouldn’t really be in their national interests but now they’ve become obligated to. That leverage can be really dangerous to a country’s sovereignty, and this is where transparency in development work or in business investment or whatever is really essential to avoid these arrangements or again the fine print that might not have been obvious.
And the more vulnerable a country, the less well performing the economy, or the higher the debt loads, obviously leverage can be exerted with more force. So that would be very worrisome.
So, it’s not to say that any given project I think is in and of itself a threat to sovereignty, it’s when it begins to accumulate and you kind of look at the whole context to a country and what they’re going to need to get out of these programmes and projects.
We haven’t quite touched on this yet, but the Sri Lankan economy is not in good condition. Their credit rating is kind of the lowest of the low right now. Nobody’s really going to lend money to them, not very credible lenders. So, they’re in a vulnerable place. It just might become difficult to defend sovereignty in not just kind of a literal sense but an economic sense as well.
Q: You did mention that obviously when we look at our relationship with Sri Lanka, we’re looking at the relationship with Sri Lanka, not necessarily in the context of U.S.-China relations. But can you sort of speak to how Sri Lanka perhaps fits into the broader nature of the U.S. Indo-Pacific strategy?
A: Maybe that’s a good way to frame that. When we’re talking about our Indo-Pacific strategy or our vision for the Indo-Pacific, it isn’t about choosing sides. It’s really a discussion about buy-in to key principles and of like-minded countries coming together around those principles and in support of those principles. This could be things such as dispute resolution, free and open trade, or unhindered air and sea navigation. It’s very important international norms that allow in fact countries to protect their sovereignty, but also allow us to kind of get along, and for international commerce to proceed in ways that are going to generate the growth and development we want to see in all countries. The prosperity that we’re looking for.
So, when we think about the Indo-Pacific vision, Sri Lanka’s obviously kind of at the heart of some of that given its geography, its geographic location next to these shipping lines. And maybe that’s the best example I can also offer of why the principles we talk about in the context of the Indo-Pacific vision are so important and should be also to Sri Lanka. Freedom of navigation is essential to facilitate the container traffic, the cargo traffic that is the lifeblood of Colombo Port and something that Sri Lanka wants to cultivate even more of as it’s developing Hambantota and potentially expanding other port capacity. But without that right, that privilege that can be safely asserted, their economy is at risk. It also risks our global supply chain and our ability to ship our goods and services. And the United States is actually the largest single country export destination for Sri Lanka. So, this is an important part of our bilateral relationship is the ability to ship the goods produced here to the United States.
So, when we talk about this principle, it’s not a vision that should exclude anybody, it’s a vision about principles that should be most meaningful to us in the sense of our sovereignty as countries. I think, again, it’s been easy to kind of take something that has a title – Indo-Pacific Vision or Indo-Pacific Strategy – and turn that into something that’s heavily politicised when the content itself is actually something that we can all agree on. And in the case of Sri Lanka, we do work together on maritime security. We have interests not just in facilitating freedom of navigation but in interdicting international illicit traffic, and whether that’s trafficking in people or smuggling of drugs and guns and what have you, we collaborate around that too. Looking at illegal fishing, looking at all of the things that concern us in the maritime space.
So, we’ve got the collaboration happening in real time and sometimes the rhetoric deviates from that a little.
Q: You mentioned supply chains, and just for our audience, I’m sure we all realise the importance of supply chains right now as we sort of face this economic moment. But another question is South Asia is somewhat notorious I guess for being one of the least integrated regions in the world. Are there more opportunities for integration, for regional integration in South Asia?
A: The untapped economic potential in South Asia is huge. I mean it could be a driver of prosperity not just for the countries of this region but globally as well for their trade partners and some mutual investment that could be generated.
I think Sri Lanka already is sort of at the heart, again, of some of that because Colombo Port is a transhipment port for a lot of India. It’s a deep-water port and so container ships come here and disburse their cargo to many smaller ships that head off then back to India or over to Bangladesh.
There’s obviously more potential for that and vice versa, for goods that are manufactured there to be consolidated in shipping here and then sent off to its destination. Port capacity would obviously have to be expanded and everything would have to work out, and the Sri Lankans in fact have facilitated an arrangement with an Indian company to develop their Western container terminal in the Colombo Port, so some of that is already underway. There’s probably also great potential for regional electricity and energy sharing. Sri Lanka doesn’t share a land border but restoring sort of ferry service or even road connectivity with India which is to facilitate commerce. The Sri Lankans are reestablishing an air route into India that had been shut down for a while.
So that kind of thing can grow and if countries can find ways to negotiate to renew some of the tariff and non-tariff barriers to facilitate that trade and connectivity, I think they would really only benefit. This is not something the United States is going to accomplish; it’s really going to take the countries of the region being committed to this. But we can certainly try and facilitate buy-in, encouraging and providing technical assistance where it’s asked for to make that happen.
Q: What opportunities for security cooperation exist between the U.S. and Sri Lanka? Have we seen security cooperation be elevated between Sri Lanka and China?
With Eastern Province Governor Anuradha Yahampath
A: Between the U.S. and Sri Lanka, the first thing I’d say is our security cooperation really does exist in the context for a concern around democratic governance and human rights and we take a holistic view of all our engagement along the whole spectrum of our various interests. And there is security cooperation. I just mentioned maritime cooperation for example where we work with the Sri Lankan Navy. We do some joint exercises also with other navies in the region to support patrolling of the maritime space and make sure that various services are trained in how to maybe board boats or interdict sort of illicit activity.
The United States has provided in the past two excess U.S. Coast Guard cutters to the Sri Lankan Navy. In fact, the last one is right now the biggest ship in the Sri Lankan Navy’s fleet. And it’s done more than just kind of deal with what’s illegal out there. It’s also been key to response to maritime disasters, and that’s a whole other dimension of I think the challenge in looking at a busy commercial world where you have a lot of ships going back and forth, there have been two very near disasters to Sri Lanka that have leaked oil, where there have been fires. The last ship exuded these nurdles which are little plastic pellets that ended up on beaches. And the Navy, the Sri Lankan government’s ability to respond to those disasters is really important not only for Sri Lanka’s well-being but for nearby countries as well. So, our engagement has also been in that sort of humanitarian disaster assistance, disaster response phase also. And I think it’s important to be able to continue that. If we want to have partners we’ve got to work together. We need to figure out if we can exercise together and have some joint capabilities. So that’s an important part of it.
On the other hand, we’re also very thoughtful about who we engage with and why and we want to make sure that we’re always engaging in ways that are consistent with our values.
Q: In 2021, we saw the inauguration of President Joe Biden. We also saw President Trump’s administration take a lot of initiative and action with regard to Sri Lanka. We saw State Secretary Mike Pompeo visit just I think a week before the U.S. elections. But has there truly been a shift in U.S. foreign policy towards Sri Lanka? We often think of two Presidents as being politically different, but some things are fairly consistent. So, has there been a shift?
With Foreign Minister Prof. G.L. Peiris
A: Some things are fairly consistent. I mean every administration has an emphasis, a certain set of priorities. But what we have been working to achieve with regard to Sri Lanka and in some extent the broader region, really has transitioned not just from the last administration to this one but across multiple administrations. So, it’s been transparency, it’s been economic development, it’s been a concern for human rights, it’s been looking at quality development standards. It’s been an evolving Indo-Pacific vision. These are all things that we continue to work on and are looking at ways to expand engagement.
President Biden has announced his particular emphases and of course one of them is the environment. So, looking more at climate adaptation and the environment is something we’re focused on now, and post-pandemic recovery. When we’ve reached the end of this experience, that’s going to be I think a challenge globally, something we’ve obviously focused on in providing pandemic assistance, but it’s become a necessity as we look at the impact on economies across the globe.
Q: The end of Sri Lanka’s civil war was quite controversial, and the United States has promoted some initiatives for accountability. We saw some conversations occur in the United Nations just last month about some of the human rights allegations against Sri Lanka. So, can you sort of outline more specifically what is the United States government doing to promote accountability for controversies that abounded at the end of the Sri Lankan civil war?
A: During the 30-year civil conflict that ended in 2009 but even after the conflict we have asked the Sri Lankan government to invest itself in reconciliation and also to pursue accountability for allegations of gross violations of human rights and any other criminal acts.
Sri Lanka does, at various points in its history have had these episodes and so I would not say that our concerns around human rights centre just around that time period. There are early examples of enforced disappearances and other problems. And those are equally problematic and things that I think for Sri Lanka’s sake and the sake of the Sri Lankan people, addressing these things is going to certainly make for a healthier and more stable future.
Former US State Secretary Mike Pompeo addressing a news conference in Colombo
So, with that said, we have encouraged the government in accordance with its international obligations and its domestic obligations to address these issues. And I feel that fundamentally the democratic government that is accountable to its people should be willing to genuinely and credibly investigate and adjudicate criminal allegations. I mean that is a bottom line in the rule of law and something that the Sri Lankan government I hope comes to the point where they would very fully embrace that. That has been the subject of conversations at the UN Human Rights Council, of observations made by Human Rights High Commissioner Michelle Bachelet and many others. It is very emotional when you talk about issues of accountability. Families of the disappeared, they deserve answers about what happened to their family members. People who were the victims of unlawful acts deserve some justice at the end of the day. And in the end, in democratic societies, this is kind of our baseline.
So, we do talk about that with the Sri Lankan government. We talk about other concerns on human rights as well and look at kind of that broad array of human rights issues. But I think this particular challenge because it goes back to multiple points in Sri Lanka’s history, because it is such a sore in relationships and kind of rightly so. It’s something that has to be healed and it can’t just be covered over. It speaks to a culture of impunity that’s fundamentally corrosive to Sri Lanka’s democracy and that’s something Sri Lankans have to address and have to be willing to kind of confront and look at openly. We can encourage, we can continue to keep a spotlight on this set of issues. We can continue to, in fact, try and facilitate measures of reconciliation, but Sri Lankans are really going to have to embrace this and own this. It’s a challenge that they have to solve for a better future.
Q: Does a lack of movement towards accountability and a discussion on human rights on the Sri Lankan side at least, does it hamper the U.S.-Sri Lankan relationship?
A: It’s certainly an issue around which we do not always agree. And in that sense, we have very hard conversations related to this particular topic. Again, in our foreign policy and our engagements abroad, we’re leading with our values on these issues. Not only are we committed to solving these problems for ourselves in the United States as President Biden laid out in the Interim National Security Guidance, but we want to see our partners also being able to address these challenges. And in a country again that is a democracy, I think it’s essential that all of the people, all of their rights, all of their civil liberties are respected all of the time.
And I’d point out too, that I think the dimensions of the problem are simply not Tamil and Sinhala ones. We haven’t really gone deep into the details of sort of what that 30-year conflict is about. There are multiple communities in Sri Lanka and there are challenges along various dimensions. So, this becomes a much more fundamental question than simply one relating to the conflict era. And it’s not a question we as Americans are really going to shy away from. It’s fundamental to who we are and how we’re going to engage. And our understanding also of how societies can grow and prosper. Back to linking to economic results, if you cannot get the politics and the governance right it is really hard to get the economics right and to see inclusive, equitable economic growth as a result.
Artist’s impression of new US Embassy building in Colombo
We also look at Sri Lanka, again, across that broad spectrum of interests. We don’t compartmentalise but we do understand that our interests are linked and back to our earlier discussion about some of the security relationships. We don’t engage with military units, for example, that might have allegations against them, unadjudicated allegations that have been made against them for wartime conduct. We do ensure that our engagements adhere to strict human rights principles and norms. And I think we would not be true to ourselves as Americans if we didn’t engage that way and make sure that our partners understand our perspectives.
Q: So now looking to the future, we saw a recent deal signed between the United States based-New Fortress Energy Company and Sri Lanka. Is this indicative perhaps of further U.S. engagement with Sri Lanka economically?
A: The New Fortress Energy project as it comes to fruition, this is a great example of genuine investment. It’s a well-regarded, well known U.S. company, independently pursuing a business opportunity and bringing their own money to the table. There are no sovereign guarantees, there’s no kind of government facilitated loan. So, in that sense, it presents the opportunity for the Sri Lankans to show that they can be investment ready and that they can work with an array of partners.
With President Gotabaya Rajapaksa, former Foreign Minister Dinesh Gunawardena and former US State Secretary Mike Pompeo
I think one of the weaknesses of the Sri Lankan investment environment is that they don’t necessarily have a broad array of investment partners and they really need to show that they welcome investment from all corners so it can send those positive signals at the end of the day.
Q: How does a trade deficit between the U.S. and Sri Lanka, how does that affect economic ties?
A: Clearly there’s a trade disparity with Sri Lanka sending many more goods to the United States than the U.S. exports to Sri Lanka. But the relationship continues to grow and evolve, and we do have Sri Lankan investment in the United States and we’re looking for more investment in this direction, New Fortress Energy is just one example.
I will say that U.S. investment in this direction has been stagnant over the last several years. That’s disappointing and a situation I’d like to see change because I know there’s so much potential here. There are a lot of businesses that would be eager to have relationships with U.S. companies which are known for helping with technology transfer, they hire local people, they adhere to high standards of environmental concerns and worker safety and health. So, we have a gold standard in terms of our business relationships.
The investment environment in Sri Lanka is a little bit of a challenge. They kind of rate in the bottom half of all the indexes, whether it’s the Corruption Index or Ease of Doing Business Index. So those are things they’re going to have to address.
We’ve been very clear about what would be helpful to address to attract investment and that certainly would extend to transparency in government decision-making. It would extend to things like predictability in regulations, contract enforcement, the basics. It would certainly make this a more attractive destination.
So, in that sense, the private sector is kind of just deterred on the face of the difficulty of the environment, the risks inherent in the environment. It’s not necessarily a feature of an efficient trading relationship.
A New Fortress Energy facility
Q: What’s the appetite actually look like among U.S. investors, perhaps looking to do business in Sri Lanka? You talked a bit about how they’ve been deterred by the environment that’s been set, but have some of the tense political situations over the past few years, some of those political events, has that significantly deterred new investors from going to Sri Lanka?
A: It is a combination of factors. Companies are going to assess their risks and potential exposure in a given environment. You referred to some political events. There was in late 2018, a constitutional crisis that lasted for about 50 days, and just a couple of months after that, there was a devastating terror attack that occurred in Colombo and Batticaloa targeting hotels and churches.
These are events I’m sure investors take note of and want to see some predictability and stability in the environment that they’re dealing with, but that regulatory aspect, that sort of ease of doing business component, I think it’s probably the preponderant part of that equation. Investors want to see that they can make a return and it doesn’t cost them more than they can afford to make that investment. So, the welcoming business environment, just doing things like having a single window to streamline permits and approvals. And as we’ve suggested to the Sri Lankan government, you have a lot of global competition. U.S. investors have choices. We’d like to see U.S. investors here because we think there’s potential, and potential in the region and we have a history of people-to-people ties and business-to-business ties, but clearly there’s more opportunity that right now could be seized.
Q: Sri Lanka’s economy, as we mentioned earlier and throughout this episode is frankly in dire straits right now. But the Sri Lankan government does not still deem it necessary to go to the IMF. Do you think Sri Lanka’s economy can rough it out through the crisis? Or do they need IMF aid?
A: Dire straits is a good way to maybe describe the economic situation. It’s not good and it’s driven by much more than just the pandemic. There’s been some poor policymaking that has seen import bans instituted, price controls, policies that have cut into government revenue, a lot of things that have contributed to the poor situation, compounded by debt sustainability. So, is the IMF really the only option? It’s certainly the best option on the table and maybe the only viable option.
The IMF was formed initially to not just end poverty but also support financial stability globally, and Sri Lanka’s an IMF member country. They should avail themselves of the technical expertise certainly of the IMF. This is something we have urged the Sri Lankan government to do, to go to the IMF.
Former US Presidents George H.W. Bush and Bill Clinton during their post-tsunami tour of Sri Lanka
The country really does need to find a solution out of its economic situation. And while I think it’s a thing of the past to equate IMF and austerity in people’s heads, there have to be tough political choices and putting together a plan or a programme to engage in economic reform with the IMF. It’s maybe going to take some political will. It’s really going to be necessary. You can’t run an economy on Swap lines alone. You’ve got to have something that’s sustainable, something that will be a seal of approval to investors.
Q: What type of COVID related aid is being provided directly to Sri Lanka? We’ve seen COVID really take a hit on this economy. What’s the U.S. doing?
A: Globally, the United States has put forward about US$ nine billion to support addressing the pandemic across the world. This includes almost 200 million doses of vaccines globally. In Sri Lanka, the U.S. government has provided about 2.4 million doses of Pfizer and Moderna vaccine free of charge through COVAX. Many vaccines including Sinopharm were purchased by the Sri Lankan government. Our donations have all been just that, donations and free of cost.
In addition, we’ve provided about US$18 million worth of other assistance, whether it was in kind like ventilators, rapid assessment test kits, PPE, and then other support to help the government message on public health measures and awareness and in fact even to help them clean up polling places after the last elections, do things like that so they can manage better in the pandemic.
So, we’ve been aggressive in addressing the public health needs in Sri Lanka, and it’s not a sector that we’ve worked in recently. The U.S. used to be a development partner in that space. In fact, we helped Sri Lanka end malaria here which had a good outcome I think for everybody. While we were able to surge back into the space because of partnerships we’ve developed over time and obviously our commitment to trying to combat the pandemic globally.
Q: So, as we begin to wrap up this conversation, how does the U.S. government view the state of democracy in Sri Lanka?
A: That’s a loaded question. Sri Lanka is South Asia’s oldest democracy and there are obviously strong traditions here and I think a genuine desire among people to pursue those traditions and retain those traditions. But like many countries, Sri Lanka has seen its institutions tested, seen some of its values such as freedom of speech threatened, to a certain degree. We see a really solid election process happening and yet we see demonstrators that are being dispersed or potentially even detained.
So, there are some challenges with the state of democracy here and we do have concerns around the strength of democratic institutions and around the civil liberties that all people in Sri Lanka should be enjoying to the fullest.
Michelle Bachelet, the UN High Commissioner, highlighted a number of these challenges in her statement. You noted conversations in September but going back to March and the UNHRC session then which resulted in a resolution regarding Sri Lanka, 46/1. She noted, of course, harassment of human rights defenders, journalists, some harassment of families who have disappeared, some of the challenges in judicial proceedings, concerns about militarisation of civilian functions. And while I don’t want to paint the picture that Sri Lanka is a place on fire, because that I think is not true, there are governance quality issues, rule of law issues that really raise questions for people and raise questions among Sri Lankans. Fundamentally, Sri Lankans have to own their democracy. It has to be something of their making, and we can certainly offer our observations and our support. And I mentioned for example earlier some of the work we have done with parliament in helping establish oversight committees.’
A COVAX vaccine donation to Sri Lanka procured through the US
We continue to want to be a friend in spaces where we’re welcome to support Sri Lanka’s democracy, but this is something that when we look at international conventions, Sri Lanka has joined the Convention on Civic and Political Rights where we feel maybe there is room to improve in terms of the quality of the governance that we are seeing.
We hope that that is something that we can work on together as two democratic countries. Again, we should share some values in common. There are things that we can collaborate around, and we’ve collaborated in the past and maybe we can do so again in the future.
Q: My last question, especially significant since you’ll be wrapping up your time in Sri Lanka very shortly. What do you hope to see with regard to the U.S. government’s engagement with Sri Lanka in the years ahead? What do you hope this relationship produces in the years ahead? And what can we in the U.S. do better?
A: We talked earlier about effective communication and sort of mutual understanding. We have to consider the long arc of the relationship. You noted this yourself. We have 70 years of history. We really can’t think about that to the exclusion of the future or our future interests or the exclusion of generating frankly practical and meaningful results for the Sri Lankan and the American public. That’s fundamentally what our end goal should be about, our diplomacy should be about, is making things better for the American people and hopefully for our partners as well.
If there’s a long arc along with history in the past, we have to assume there’s a long arc going forward. So, coming back around to your question what can that look like, I think we have a lot more space to collaborate on some of these governance issues and looking at rule of law and looking at ways to strengthen institutions here, and to do so in ways that are not necessarily adversarial. That obviously relies on the Sri Lankan government being willing to shift some of its stances, but I think if we think about this in the terms of broad international commitments, think about them in terms even of the sustainable development goals, particularly goal 16. These are the kinds of things that we can collaborate on. It’s just going to take some probably long talking to get to that point.
But really importantly, I think that relationship of the future also has to look at the other kinds of connectivity. Business-to-business, people-to-people. We live in a world that’s very global where we can communicate with one another in an instant and where you and I can talk to one another and be halfway around the planet and yet see one another. Our futures are not completely constrained by what two governments agreed is going to happen. And the future I think is really around what people decide to do and sort of taking into their own hands. And whether that means studying together, doing business together, or family relationships that span the globe, that’s what our future’s going to look like so we should be in a position to be facilitating that engagement, making it positive, making it durable and making it something that leads to prosperity and peace. I think that’s what most people want at the end of the day. I don’t think the American public is really hoping for anything much different.
These are things that we have to think several steps ahead about how to get to that space and how to find that future where we can work together seamlessly on multiple levels.
– Daily News Sri Lanka
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