2025: Ancient Silk Route to BRI: Exploring Sri Lanka's Futures with China in International Business

This article was published at INQUISITOR (2024-Issue 2) by the Business Law Society of the NSBM Green University

K. Elisha R. L. Fernando

Visiting Faculty, Department of Law, NSBM Green University, Sri Lanka

fernandoelisha7@gmail.com

Abstract

Sri Lanka is geographically located at the crossroads of international trading routes. Ancient maritime silk route passed across this island nation and presently, Sri Lanka is again at the center stage of the Belt Road Initiative (BRI) by China. In this backdrop, it is imperative to understand the significance of Sri Lanka in the international business discourse and thereby it is necessary to question what business opportunities have we overlooked when other nations have identified? Ancient silk route is about the past, OBOR is about the present and this study strives to explore the futures of Sri Lanka in international business. Therefore, the problem question of this study is to analyse the impacts of BRI on Sri Lanka’s futures economy.

In finding feasible avenues towards the research outcomes, this paper will evaluate the facts using interdisciplinary approach in terms of business, defence and futures by navigating the research question through diverse subjects of economics, defence and security studies and futures studies. To achieve this objective, the research methodology adopted in this paper is Futures Studies research methodology of Futures Triangle in evaluation of the research findings gathered from secondary sources. Ultimately, the aim of this paper is to gauge the spotlight to the plausible futures of Sri Lanka to expand the international business horizons.

Key words: BRI, International Business, Sri Lanka, Futures Triangle, Futures Studies

Introduction

A tear dropped shaped island located in the very close proximity of the Indian continent, but separated from Indian peninsular by the Palk Strait, also known as the pearl, of the Indian Ocean, which was called by several names since ancient era by the kingdoms, empires and voyagers from the different parts of the world i.e. Lanka, Ratnadweepa, Serendip, Taprobane, Sihaladweep, Ceilao, Zeilan and Ceylon. Finally, ‘Lanka’ remained to her, which was the oldest reference to the last ancient King of the island, Ravana.

Despite the latitude and longitude geographical situation as declared by the Greenwich, ancient Indian text on sacred geometry, the Surya Siddhanta, describes Lanka at the centre of the earth. (Jayawardene, 2024, p.4) Some texts even claimed this island as the ‘Garden of Eden’, which God created for Adam and Eve, referred the first chapter Genesis of the Holy Bible, thus yet lacks archaeological proof.

With these narrations, the island has gained its importance in the world economics since the ancient era with the ‘Maritime Silk Route’. This route fell across the Eurasian continent connecting the historical trading ports which connected the world east to world west. As reported, it began by the 2nd century BCE and flourished until the 15th century CE. Geographically, the ancient maritime silk route had two paths, one from China to the Eastern China Sea linking to the Korean peninsula and the second from China to South China Sea, Southeast Asia, South Asia, Arabian Sea, Indian Ocean and the Persian Gulf. (Iftikhar et al, 2016) As Wakkumbura (2018) explains, ‘As the Mahavamsa indicates, the diffusion of Buddhism from India to Sri Lanka was primarily facilitated by ancient maritime trade routes.’ Further, the country’s significance in the global trade of the history is apparent in Ptolemy of Alexandria’s world map. Therefore, it is apparent that the island’s strategic geographic centrality has enabled maritime transactions in terms of both trade and religious, cultural since at least 2nd century BCE.

Interdisciplinary Findings: Economic and Defence Perspectives

In the modern world, the discourse of economics is impossible without politics. Thereby, in terms of political economy, historical political backdrop is significant to understand the current affairs and to develop the foresight strategies of Sri Lanka’s economy.

Post Independence status quo of Sri Lanka was made clear at the San Fransisco Conference 1951, by the then Sri Lanka’s Finance Minister, Hon. J.R. Jayawardene, “we are not concerned about favouring this bloc or that bloc. We are concerned about maintaining peace in the world” (Wakkumbura, 2018) Subsequently, in 1971, Hon. Sirimavo Bandaranaike, the world’s first female Prime Minister, who favoured non-align movement tabled Indian Ocean Zone of Peace (ZOP) proposal at the United Nations, which was adopted as the UN General Assembly Resolution 2832. Later, with the election of Hon. J. R Jayawardene, in 1977, he proclaimed open economy and introduced liberal economic policies to Sri Lanka.

With these, it is also significant to be mindful of the ‘global power shift’ and the power rivalry between USA and China in the Indian Ocean Region (IOR), in addition, the effects of the ‘big-brother syndrome’ in relation to India and their ‘Neighbourhood First’ policy.

With the introduction of the open economic policies to Sri Lanka in 1977, USA was given space to establish ‘Voice of America’ in Iranawila, Sri Lanka and thereby, ‘big- brother’ became arrogant with Sri Lanka for letting USA to have a base in the close proximity of India. It is also said that this sparked India to assist terrorists against the Government of Sri Lanka which continued for a 30-year armed conflict.

According to Alfred Thayer Mahan, “whoever controls Indian Ocean has prospects of ruling the world” best described the IOR becoming a hub of strategic competition. (Fernando, 2022) As a result, in the modern day, the growing interests of USA and China is evident by USA’s ‘Indo-Pacific Strategy’ and China’s BRI in the IOR. Indo- Pacific Strategy by USA has led to increasing security cooperations among US, Japan, Australia, United Kingdom and India by QUAD and AUKUS. In defence perspective, China is growing influence in IOR by their ‘String of Pearls Strategy’ and economically by BRI.

The Impacts of Belt Road Initiative (BRI) in Sri Lanka

Besides the ancient Silk Route ties, in the recent past, the Rubber Rice Pact between Sri Lanka and China signed in December 1952, mark a significant milestone in the bilateral ties between the two nations and moreover, this was one of the first agreements that China has signed with a non-communist country. Furthermore, China funded Sri Lanka to build BMICH to host the 5th Summit of the Non-Aligned Movement in August 1976, which became prominent as this Summit was the biggest international conference ever held in Sri Lanka with the participation of 86 States’ Heads and BMICH became the first purpose-built conference hall in Asia.

‘Belt Road Initiative’ (BRI), in other words ‘One Belt One Road’ (OBOR), is a mega project of reconnecting the ancient silk routes by China. Since the launch of BRI in 2013 by Chinese President Xi JinPing, Sri Lanka joined. As a result, in 2024, after 12 years into BRI, China’s major investments in Sri Lanka are i.e. Colombo Port City also called as the Colombo International Financial City (CIFC), Hambantota Port and adjoining industrial estate, Colombo Port expansion, Mattala Rajapakse International Airport, the Colombo Katunayake Expressway, the Norochcholai Coal Power Plant, the Moragahakanda Multipurpose Development Project, the Matara- Kataragama Railway Line and several other monetary investments. Among them the CIFC and Hambantota Port are the flagship projects of the BRI.

It is significant that BRI presents both opportunities and challenges for Sri Lanka. As explained by Wijayasiri et al (2018), “Sri Lanka gains key infrastructure, capital and skills that could put it well ahead in connectivity and trade facilitation. Combined with these are the added benefits of trade and investment promotion, development of an economic hub, participation in global value chains, employment generation, technology and knowledge transfer that will help with economic growth in the foreseeable future. On the other hand, there is concern around the environmental impact of such infrastructure development and the geopolitical and sovereignty issues that come with partnering with China and taking on significant amounts of debt”. The real question is to what extend have Sri Lanka gained these opportunities and the reality of these challenges in the present context.

In the analysis of the benefits of BRI for Sri Lanka, it holds out the prospect to bridge significant infrastructure gap, link local markets to regional and global value chains and business ties with other participating countries. China is the world’s second largest economy by nominal GDP and “while Sri Lanka is not an important trading partner of China, China has emerged to become Sri Lanka’s second largest trading partner, after India in terms of Sri Lanka’s total trade with the world” (Wijayasiri et al, 2018)

The ‘String of Pearls’ strategy, China’s stance is to gain advantage over the ports and infrastructure across South Asia i.e. Gwadar in Pakistan, Chittagong in Bangladesh, Kyaukpyu in Myanmar tocontain India. Further, India has openly rejected the BRI, saying that China’s projects with neighbouring Pakistan infringe on its sovereignty. In these circumstances, China’s investments in Sri Lanka especially in ports of Colombo and Hambantota see of strategic importance. Most importantly, the visits of Chinese submarines at the port of Colombo in 2015 when Chinese President graced the opening ceremony of Port City and then, hand overing Hambantota Port on a 99-year lease in December 2017 raised red alarms in India.

In terms of the growing debt burden on Sri Lanka, “Existing investments in Sri Lanka as part of the BRI amount to approximately US$8 billion, while China has offered up to an additional US$24 billion in financing” (Wijayasiri et al, 2018) Thus, the main accusation against BRI is the so called ‘Debt Trap’ theory. As reported by Legrand (2018), ‘Sri Lanka’s debt equals 81.6 percent of its gross domestic product, which is the third highest ratio among emerging economies, where China is Sri Lanka’s largest creditor’. Throughout, it was apparent that the Government of Sri Lanka has had difficulty making repayments on debt obligations and has had to restructure the debt agreements with the Chinese government. One of the best examples is that ‘due to the inability to repay the $1.4 billion loan from China, the Sri Lankan Government has granted the Chinese Government an exclusive 99-year lease on the Hambantota port in exchange of US$ 1.1. billion of debt write off’ (New York Times, 2017) This further proves the ‘String of Pearl’ strategy of China through BRI.

As reported by Fernando (2024), “by the end of year 2022, Sri Lanka owed USD7.4 billion to Chinese lenders according to the China Africa Research Initiative and USD 1.74 billion to India respectively”. It must also be noted that currently, there is an intense geopolitical rivalry between China and India to gain foothold in Sri Lanka.

The Futures of Sri Lanka with BRI

The research methodology adopted in finding answers to the research question to analyse the impacts of BRI on Sri Lanka’s futures economy, is the Futures Triangle research methodology. The reason behind utilizing Futures Studies methodology is to test the feasibility of the core research argument of the paper in the futures landscape of Sri Lanka.

Futures Triangle was invented by Sohail Inayatullah (2003), and he explained that among the three foundational approaches to futures, future as contested is imperative, because the future as contested is where ‘future is seen as created by a variety of factors- pushes, pulls as well as weights (patterns of history, paradigms). The future is to be decolonized, challenged, rethought, and then an alternative future created’. This provides the gist of the Futures Triangle. In applying the research findings gathered from the secondary sources to the Futures Triangle, in analysing the impacts of BRI on Sri Lanka’s futures economy.

Firstly, the three elements of the futures triangle were analysed with the positive impacts of BRI on Sri Lanka’s futures economy. The weight of the past is that China’s long-term strong international relations with Sri Lanka i.e. Rubber Rice Pact 1952, BMICH and assisting Sri Lankan Government during the war against terrorism. The push of the present is that already commenced and continuing infrastructure projects and other FDIs and financing. The pull of the future is that China currently being the second largest economy in the world and in the near future with the prospects of becoming the world’s largest economy by passing USA, then China’s potential of becoming Sri Lanka’s No.1 trading partner over India.

Next, the three elements of the futures triangle were analysed with the negative impacts of BRI on Sri Lanka’s futures economy. The weight of the past is that Sri Lanka owes US$ 7.4 billion to China and handing over Hambantota Port on 99-year lease to China. The push of the present is that Sri Lanka is in difficulty making repayments on debt obligations and has had to restructure the debt agreements with the Chinese government as well as with IMF mainly following the economic crisis occurred in 2022. The pull of the future is that India and USA are in a power rivalry with China in IOR and Sri Lanka, if to poise a non-aligned stance will have to geopolitically balance the interests of India as well as USA, thereby, Sri Lanka will be in a difficult position to navigate the foreign policy of the country.

Conclusion

In a nutshell, summing up the research outcomes, it was evident that analysing the impacts of BRI on Sri Lanka’s futures economy, both positive and negative impacts were revealed via the futures triangle research methodology. As a result, in the plausible futures of Sri Lanka’s economics, the positive impact of BRI is that China’s prospects of becoming the world’s largest economy in the near future and then Sri Lanka’s potentiality of becoming the No. 1 trading partner of China and thereby, the prospects on further economic opportunities. On the other hand, the negative impact of BRI in the plausible futures of Sri Lanka’s economics is the literal alignment towards China due to owing debts as well as 99-year lease over Hambantota Port and thereby, Sri Lanka’s impossibility to play neutral in the IOR power rivalry game over India and USA. Ancient silk route is about the past, BRI is about the present and as afore argued, according to the research findings, even the futures of Sri Lanka’s economy will have to be China dependent to expand the international business horizons.

References

Jayawardene, S. (2024) Ravana’s Lanka: The Landscape of a Lost Kingdom. Penguin Random House: India ISBN 9780143460763

Iftikhar, M., Abbasi F. (2016) A Comparative view and the 21st century Maritime Silk Roads. CIMSEC. https://cimsec.org/ancient-land-and-the-maritime-silk-road/

Wakkumbura, M. (2018) Sri Lanka’s Maritime Affairs in the changing Indian Ocean. LKI. https://lki.lk/blog/sri-lankas-maritime-affairs-in-the-changing-indian-ocean/#:~:text=The%20country's%20significance%20in%20the,%2C%20Arabs%2C%20Indians%20and%20Chinese.

Fernando, E. (2022) Sri Lanka Matters for America: America Matters for Sri Lanka. Foresight Envoy. https://www.foresightenvoy.com/post/2022-sri-lanka-matters-for-america-america-matters-for-sri-lanka

Wijayasiri, J., Senaratne, N. (2018) China’s Belt and Roa Initiative (BRI) and Sri Lanka. https://archivos.juridicas.unam.mx/www/bjv/libros/12/5550/19.pdf

Legrand, N. (2018) South Asia: New Creditors and New Forms of Debt Peonage. CADTM. https://www.cadtm.org/South-Asia-New-creditors-and-new-forms-of-debt-peonage

New York Times (2017) Sri Lanka, Struggling with Debt, Hands a Major Port to China. https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-china-port.html

Inayatullah, S. (2003) Alternative Futures of Genetics and Disability. Journal of Futures Studies. 7(4), 67-72. https://jfsdigital.org/articles-and-essays/2003-2/vol-7-no-4-may-2003/essays/alternative-futures-of-genetics-and-disability/

Fernando, N. (2024) 12 years into the Belt and Road – what has Sri Lanka achieved so far? Global Connectivities. https://globalconnectivities.com/2024/03/12-years-bri-sri-lanka/#:~:text=by%20Natasha%20FERNANDO,by%20Chinese%20President%20Xi%20JinPing.

About the Author

Elisha Fernando is an Attorney-at-Law by profession and further a Visiting Faculty to Department of Law at NSBM Green University and to Faculty of Defence and International Relations at KDU. She is also the Founder/ Managing Director of Foresight Envoy, which is Sri Lanka’s first organization on Futures Studies. Elisha is currently a Ph. D Candidate in Law. She holds an MSc. in Defence and Strategic Studies (KDU), LL.M in Criminal Justice Administration (OUSL), LL. B (Hons.) (KDU), E-Diploma in Human Rights (CSHR- Colombo). She is also an Asia Pacific Leadership Program (APLP) Fellow at EWC, USA