‘US-Sri Lanka ties multi-faceted and resilient’

Outgoing US Ambassador to Sri Lanka Alaina B. Teplitz speaks to the Burn Bag Podcast of her tenure in the island.

Here are excerpts of the interview. 

Q: Welcome to the Burn Bag Podcast. My name is A’ndre Gonawela. This is the latest and the last episode in our miniseries on Sri Lanka, and I am honoured to be joined by US Ambassador to Sri Lanka Alaina B. Teplitz who has been in the State Department since 1991. She served as US Ambassador to Nepal between 2015 and 2018, and she has been serving as US Ambassador to Sri Lanka and the Maldives since 2018 and I believe actually, Ambassador, it’s your last two weeks in Sri Lanka, am I correct?

A: This is true. I’m coming to the end of a three-year tenure here. It’s been an interesting but tumultuous time.

Q: How do you see the state of US-Sri Lanka relations in 2021?

A: The bilateral relationship is a complex and a complicated one. It’s a resilient one. And it’s one that’s not solely defined by our Government-to-Government connections. We’ve got people-to-people as well as business-to-business ties and I think when we talk about the US and Sri Lanka, we automatically assume it’s all Government business, but really, it’s not. There’s a lot happening in those other spaces that we can either facilitate or promote, but not all of which is in US Government control, and I think that that’s a good thing.

Our relationship also is one that’s defined by things that we should have in common. Sri Lanka and the United States are both democracies; we both have concerns I think around maritime security; we have concerns around cybersecurity; and we have concerns about climate adaptation and the environment. There’s a lot to be working on together.

Q: So, what are the ways in which the US and Sri Lanka can actually foster closer ties?  What can be done better from the US side?

A:  I’d like to say we’re working hard at it all the time. This is really important. And I think there’s always an opportunity to be communicating better to the Sri Lankan public. Also, an opportunity to try and communicate better with the Government too, and better understand their perspectives. That’s just sort of mainline diplomacy and how we kind of oil the gears of our relationship.

I also think that we have to look at things as they exist today in consideration of our broad range of interests. This is sometimes a challenge for us not just in Sri Lanka but in all countries. We’re not interested simply in promoting US investment, for example. And we’re not interested in simply looking at development. We’re not interested just in good governance or a security relationship. It’s that broader array of interests and being mindful of how we advance all of those interests is something that I think can help us in our relationship and as we’re searching for those areas of common interest.

Q: Have ties been strained between the United States and Sri Lanka under the Governments ruled by Mahinda Rajapaksa and Gotabaya Rajapaksa? Also, what does the overall arch of the relationship look like? Especially since the end of the civil war in 2009?

A:  Every relationship has its ups and downs. It’s got changes in tone over time. Certainly the US-Sri Lanka relationship has had that. And our challenge really is figuring out the enduring sets of interests and how to pursue those things through the good times and the bad times. We do have things in common. A set of values that’s really important that should give us the ability to understand one another better and be able to collaborate around this much broader set of interests. But it is a challenge, obviously, when we do have some concerns in the relationship about the quality of governance, for example, or around commitments to inclusive economic development. These are things that we’ve got to work through. I don’t want to sugarcoat and say that everything is always fine. There are genuinely some issues that we have to work through.

Q: So, in a previous episode on this miniseries, we spoke with the State Minister for Regional Cooperation Tharaka Balasuriya, and he asserted that the Sri Lankan Government declined the MCC because there was a “lack of transparency with how the previous Government handled it” and that there were certain conditions per se that this Government was not in agreement with. For example, they had to pay back the money allocated by the MCC and other “technical issues”, as you said.

So, are these assertions true about these conditions and these technical issues? What’s your response to these criticisms levelled by State Minister Balasuriya?

A: First let me sort of frame up the context for talking about the Millennium Challenge Corporation proposed grant, which was a development assistance grant that was proposed. MCC is a US Government agency, development assistance agency, and operates in about 30 countries around the world.

To receive one of those grants, countries have to express interest and then they have to meet eligibility criteria which include a scorecard on economic governance and other dimensions. We have limited resources so there’s a little bit of competition involved in this.

So, the Sri Lankan Government had sought one of these grants actually for some time and the original President Rajapaksa administration going back to the early 2000s. And finally, something was coming to fruition several years ago. In fact, the previous Government began to dig into the details what that grant would look like, and finally determined that looking at ways to support land management administration and transportation would be most beneficial. In fact, the Government of Sri Lanka funded a study to determine what the binding constraints were to economic growth, and those were the things that they landed on.

So, it was disappointing obviously that the grant wasn’t able to go forward. It was significant. It was US$ 480 million to address challenges in these two areas.

Ultimately the board of the Millennium Challenge Corporation decided to discontinue the grant because of a lack of host Government engagement.

So, the technical issues you mentioned, I mean the grant language is standard. It was actually published on a Government of Sri Lanka website, so it was available freely to the public for months and months. There was a lot of stakeholder consultation around it as well with not just Government but with industry, with civil society, with academics. So extensive work was done to not only validate the choice of areas but how the grant would work.

And grants are generally set up so that the host Government really owns them. They form a little mini-corporation, and corporate really refers to the structure. It’s not a private entity, I mean it’s a Government entity. To oversee the grant and make sure that it’s progressing. There was never any formal communication from the Government of Sri Lanka that they had objections to the framework of the grant or any of the components. So again, I go back to the lack of engagement.

It’s disappointing in the sense that it was a real loss for a country that is still developing, that is caught in that kind of upper middle-income trap where it’s on the cusp of sort of expanding the economy but actually is still requiring a lot of assistance to make that advancement and best serve people.

It’s something that I think was kind of a blip in a 70-year relationship and we move on from there.

Q:  Definitely. And sort of talking about US economic aid overall, is it true that US economic aid is often more conditions based? Because this is the sort of claim I’ve been hearing across these interviews in this miniseries. For example, with GSP+, human rights issues are highlighted. Whereas for example Chinese aid is less conditions based. Is this sort of an accurate assessment of these two countries and the aid programmes they offer?

A: No. I think that’s the short answer. Our US aid is really not conditions based and I don’t think we ought to confuse either eligibility requirements versus conditionality. For example, going back to the MCC and the scorecard which is an eligibility threshold.

But we look for certain things when we’re offering assistance. I mean the very first thing is if we’re developing programmes with a host Government, with the Sri Lankan Government, there’s got to be an expectation of ownership. They’re identifying the priorities. We’re stepping in as the development partner to help them meet their priorities that they’ve identified probably as part of a far-reaching development plan. Then we work on those programmes together. We don’t just say hey, we have a good idea would you like to run with it?

Also, an alignment of values I think is really important, and our development assistance is often around technical capacity building. Not just in maybe technical subject matters. It’s not talking economics to the Ministry of Finance, but it could be, for example, helping a Parliament set up oversight committees.

So, we’re interested in working together on values we share, and that could include the strengthening of democratic institutions.

And there has to be some mutual understanding about the goals that we’re trying to achieve as well. So, we do want some alignment and at the end of the day certainly I, as Ambassador, and others who manage our assistance Dollars, we’ve got a fiduciary responsibility to the American people. They want our assistance Dollars to be spent and achieve results in ways that they’ve approved. They want to make sure that those results are happening over the course of a grant.

So, I’d say the other piece of this which is not really a condition, but it’s just the way we do business. Not uniquely. The World Bank and other development partners do this. But we do our due diligence before offering a grant, and 90 percent of all of our assistance globally is based on grants. But what we’re going to look at is, is something technically feasible? Is it going to generate the result we think, like an economic return or jobs or some positive outcome? Then we’re going to monitor and evaluate over the life of that grant to make sure it is delivering, or shut it down, or rescope, or do whatever we need to do to make sure the money is well spent.

So, in that sense there’s a lot of structure to what we do on the development side of the house. That’s not necessarily true for every development partner, and yet we think it’s super important. I mean you mentioned the issue of China. I don’t know if China is really giving assistance at the end of the day. It’s not a lot of grants. It’s not really looking at sort of the results-driven end of things. And we want to adhere to high standards. In fact, the United States, Sri Lanka, Japan and other Governments have signed up to various international accords that sort of sets standards for development and I think that’s important. You don’t want to end up with maybe a bad metaphor, but a white elephant at the end of the day that doesn’t deliver and in fact costs you.

Q: Following up on that question, I mean the perception is, at least from my vantage point and some others in Sri Lanka and in sort of US foreign policy, sort of commentators in general, is that the Chinese are making more headway with Sri Lanka in terms of investments and economic partnerships.

And sort of following up with what you were saying, is it just perhaps ‘easier’ for Sri Lanka to deal with China or is it just because say for example the eligibility requirements, the standards, they’re sort of less attractive. Is that sort of an accurate way to depict that?

A: I think you’ve got to ask questions. If there’s a problem with transparency, if there’s a problem with due diligence, if there’s a problem with doing proper feasibility work including environmental impact studies, if there’s a problem in making public the framework for such agreements, who benefits from that? Why would people be opposed to those things? Those things can only be good, especially in democratic societies where we should be accountable to our publics and taxpayers that fund these efforts.

So, I think that’s part of the challenge that is out there and maybe the easier piece of that. It might also be who benefits at the end of the day from some of this. And looking at what you want to do. The US government doesn’t invest in a metaphorical sense in projects that aren’t going to generate real results. And maybe that’s where there ends up being some controversy. Because it isn’t about the result people want, it’s about something else. It’s about domestic politics, or it’s about an image or something like that. We actually want to produce development results, or we wouldn’t be extending that support.

Q:  So, when it comes to the Sri Lankan relationship with China, we’ve definitely seen it grow over the past decade and in recent years. How does the US Government perceive the relationship between Sri Lanka and China?  What is the US Government’s position on the relationship if there is a position to be had?

A: I think that’s the important question. We don’t perceive our foreign policy in the region through the lens of what does it mean vis-à-vis China. We’re looking at the relationship with Sri Lanka and of course there are geostrategic considerations but that’s not fundamentally what it’s about and certainly not over a long history, 70 years since Sri Lanka’s independence, so plenty of time to have evolved a relationship and have gotten to know one another, if you will.

That said, globally in the Indo-Pacific as well and in other regions of the world, we’ve expressed concerns about ways of doing business, and we don’t tell the Sri Lankans what to do. As a friend and partner, we’ve often expressed concerns about the openness and transparency of the deals that they’re making. More out of concerns that they become vulnerable as a result of non-transparent arrangements, or arrangements that might obligate them financially and don’t deliver any economically productive results at the end of the day. And then what leverage could be exerted against them and what that might mean, more so than anything else.

If relationships are mutually beneficial, if they’re open, if they’re transparent, these are good results. Again, particularly in a democratic society. And often we find that the PRC’s arrangements are opaque and not necessarily mutually beneficial. In the end, depending on where one sits, and can take a look at that.

I think another piece of this in terms of, again, how we would approach sort of whether it’s development work or business work, we’re big on public–private partnerships, we’re big on letting opportunities grow organically to a certain degree, and that’s not really part of I think the future of other relationships. That makes it hard then to mesh up our different ways of looking at things.

Q: So, when it comes to these loan agreements that have made quite a lot of news in the US at least, there have been many articles in the US media outlets about them. Is there enough transparency around both the loan agreements and perhaps some of the more foreign direct investment programmes that have occurred between Sri Lanka and China?

A: There’s not a lot of transparency around the loan agreements. Most of these texts aren’t public. Often the PRC is asking countries to sign non-disclosure agreements so they can’t reveal loan agreement details. So, it’s highly problematic.

I mean it would be very difficult for anyone, not just speaking from the US Government perspective, but if I were a Sri Lankan wanting to assess whether the agreements being entered into render some benefit or if they are going to cause problems down the pipe. So that I think is difficult. And it’s difficult to assess the true value of projects. Was it really what it cost? Then what’s the ROI on that?  At the end of the day that’s challenging.

I also think we have to look at kind of investment and ask questions or maybe just better define what that term means. When we, the US, talk about investments, often we do mean it, it’s literal in the sense that we’re putting money on the table maybe in the form of a development grant, but it’s kind of a metaphor. We don’t really expect anything in return other than hopefully the good results from the programme that we are funding. There aren’t quid pro quos on the table in that sense.

And US companies might come in and make investments, genuine investments where they put their money on the table and they’re looking for partnerships where they can build a business and presumably profit from that.

I think investment is kind of misapplied to other arrangements that might actually turn out to be loans, where you might have the Sri Lankan Government in fact that has taken out a loan to invest in its own development. So, it’s not necessarily that country investing in that development, maybe they’re facilitating.

But that’s where good decision-making on the part of the Government is also essential. So again, coming back to these loan agreements and not necessarily knowing what they provide for, are the policy decisions good in advance of signing those agreements? And are they going to yield the results that people are expecting or are people going to be left holding the bag?

Q: I think it’s so important that you distinguish between the loans and the actual investments that are occurring, but when we look at the Belt and Road Initiative linked investments and projects, are those fair per se?  If many of these are linked to Chinese contractors, for example, are they actually fair to the Sri Lankan firms on the ground?

A: That’s a really good question. A lot of the tendering procedures related to these programmes or projects are again, non-transparent. Were potentially not even open to broader competition. There were requirements perhaps that the country providing the money, those firms are selected. There’s not really a true kind of private sector I think in the PRC, so you see loans coming from that source being tied mostly to state-owned companies. So, you’re not seeing private deals taking place. That’s not necessarily really investments.

There is some BRI activity in Sri Lanka that might not be all bad. You’ve got an expressway that’s really important, going to help open areas of the country to tourism, but you don’t know how much that expressway costs. So, there’s really no way to kind of measure whether the return equals the expense.

There’s also kind of efforts to build investment that isn’t around that kind of infrastructure. The Port City which is not a port. It’s intended to be a financial city but it’s reclaimed land. And this was something that CHEC China Harbour Engineering and some of its subsidiaries put money into to develop. Right now, it’s basically a big sand bar.

But for example, the legislation that’s meant to define this special place is really troubling. It could potentially open the door to corrupt practices, to money laundering and other activity that is going to not just impact what happens in that space but perhaps spillover into the Sri Lankan economy and affect Sri Lankan companies.

So I think there are a lot of questions, and some of this just means that countries really need to think through how they’re going to approach all of their partners, and what kind of arrangements they’re comfortable with, and what disclosure has to be on the table and what’s in their best interest at the end of the day, and what are those kind of loopholes or fine print that are going to get them in trouble?

Q: You mentioned this in an earlier answer and you sort of alluded to it right now, to talk about whether some of these agreements and these arrangements are mutually beneficial. So, in your view, Chinese investments, have they generated economic benefits to the average Joe in Sri Lanka? Or has it largely benefited the elites? Who is it really helping out here?

A: Again, it’s hard to determine because there’s not a lot of transparency around amounts of loans or terms and conditions surrounding any given project. But I see a lot of projects sitting around that were developed with funding that the Government of Sri Lanka obtained from the Chinese Government and that aren’t generating revenue.

So, I have to draw the conclusion that the broad-brush answer is yes, there are projects that are not sort of benefiting the average Joe on the street. The Hambantota Port is one that’s often raised as an example, but I think even better is to consider that developed around the same time was also an airport, a hospital, a cricket stadium, a telecommunications tower in Colombo called Lotus Tower. These things are either under-utilized, or in the case of Lotus Tower completely empty, and yet the Government’s on the hook for paying back those loans.

So, they’re not revenue enhancing. They’re not generating the income and the jobs that everybody might have expected from them. Did this come from poor feasibility work or somebody just kind of getting ahead of themselves? I don’t know. But you can clearly see that there are projects that really didn’t deliver results. Maybe they will in the future, but they’re not doing so today.

Q: You mentioned the Hambantota Port. We’ve heard a lot about that in the US media and a lot of foreign policy conversations that have been occurring, and there’s a lot of discussion that centered around the 99-year lease that Chinese entities have over the port. What concerns specifically does the US have over the Hambantota Port?

A: Just thinking about the region, Sri Lanka sits next to the major shipping lanes that crisscross the Indian Ocean. Eighty percent of the world’s container traffic passes either by or through Colombo and past Hambantota as well. So certainly, there was an economic opportunity that the Sri Lankans were seeking to seize in developing Hambantota, which is a little closer to those shipping lanes than the Colombo Port which is on the other side of the island.

The port was developed, and it was obviously developed with support from PRC companies and now there’s this lease arrangement. The issue becomes what else might be happening in those spaces and what leverage the PRC might have in its relationships with Sri Lanka that could kind of accrue benefit that would either lead to something that’s militarized or would become problematic.

There’s been a lot of research done by think tanks going back for years, and the study I can think of is the Harvard study from a couple of years ago that discussed port development across the region. Hambantota could be one of those places.

That said, I think the Sri Lankans do obviously have an economic need to develop that port and make sure it’s going to work. So, they’ve got to find a partner that is going to work for them and have some control over that asset, not only from a national security perspective but just from an economic perspective so that they can make sure that it’s going to deliver for them.

To be continued

US Ambassador Teplitz meeting Prime Minister Mahinda Rajapaksa.

– Daily News Sri Lanka

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