ECONOMYNEXT – The loss of the USD 480 million grant opportunity provided to Sri Lanka by the Millennium Challenge Corporation (MCC) was on the cards for some time. The two projects it was meant to implement became too controversial, though on their face they were about promoting economic development. The Transport Project aimed to increase the relative efficiency and capacity of the road network and bus system in the Colombo Metropolitan Region and to reduce the cost of transporting passengers and goods between the central region of the country and ports and markets in the rest of the country. The Land Project was to help the government identify under-utilized state land that might be put to more productive use and maximize rents from lands that the government leases. Both of these projects were interpreted in a negative light to make them a threat to Sri Lanka.

The US government’s decision to withdraw its offer cited its Sri Lankan counterpart’s lack of interest in taking up the offer and therefore the need to shift the funds to other countries. The main problem that was highlighted by opponents of the MCC grant, and by leading government politicians on many occasions, both prior the elections that they won and after them, was that the MCC grant had linkages to two military cooperation agreements that Sri Lanka has with the United States. These are the Status of Forces Agreement (SOFA) and, Acquisition and Cross Servicing Agreement (ACSA) which permit the United States to use Sri Lankan facilities for its logistical purposes, including refuelling and entry into and exit from Sri Lanka for American military personnel without having to obtain visas. The MCC grant was seen as feeding into the geo-strategic engagements of the United States that would be detrimental to Sri Lankan sovereignty.

The MCC grant provided nationalist politicians and those associated with them the opportunity to fan fear in the minds of the electorate. They predicted the bifurcation of the country by an economic corridor that would stretch from Colombo in the west to Trincomalee in the east. Also that it would make it necessary for Buddhist pilgrims from the south to get visas from the US embassy to go worship in the ancient capital of Anuradhapura in the north. This was one of the key factors that induced thousands of Buddhist monks to advice their followers about the need to ensure the defeat of the then government to prevent the division of the country. In a similar manner, many government leaders spent the past two weeks captivated by the herbalist who claims to be the son of a Hindu goddess and produced an indigenous herbal tonic to do battle with the Coronavirus. Unless government leaders analyse problems more rationally they will not be able to cope with the enormous problems of getting Sri Lanka out of our morass. But once nationalism takes a grip on the imagination of a people it becomes very difficult to move them in the opposite direction even if it is in the national interest.

Further Deterrents

As a result of the US government’s withdrawal of its offer, Sri Lanka will lose two very large economic projects that could have brought in an infusion of foreign exchange and helped the country to modernize two critical sectors of its economy which have lagged in comparison to other developing countries. Unlike Thailand and Malaysia, and a host of other comparable countries, Sri Lanka still does not have a bus system where buses run to regular schedules and where the buses have electronic panels which indicate the location of the bus. Likewise, where land is concerned the tenancy or ownership of much of it has not been registered which makes it difficult to use the land in an economically efficient manner. The MCC grant would have upgraded urban transport, land registration and also built several key rural road links to the main roads.

The LKR89bn that the MCC grant would have made available to Sri Lanka could have been utilized for the welfare of the people by renegotiating the activities set out in the grant. The fact that Sri Lanka had received such a large grant from the US might have also induced foreign investors to put their faith in Sri Lanka as they would have been reassured by the US government’s investment in the country as an indication of its economic viability. President Gotabaya Rajapaksa has been asserting the need for foreign investment in the country instead of loans. This is an indication of his determination to ensure that there is sustainable growth in Sri Lanka. Unfortunately, the message that will go out now will be a negative message that the US government has given up on Sri Lanka at a time when it faces a massive debt repayment crisis. This negative image will be worsened by the negative credit ratings that Sri Lanka has been receiving from the most reputed credit rating agencies whose analyses are watched carefully by international investors.

Adding to the problems likely to be faced by the government is the likelihood that the United States together with EU countries will be contemplating a fresh resolution in the UN Human Rights Council to replace the last one on Sri Lanka, Resolution No 40/1 whose period of implementation ends in March 2021. In February of this year, the government decided to withdraw from the implementation of that resolution and the commitments made by its predecessor government when it co-sponsored Resolution No 30/1 in 2015. There is every reason to believe that the government will strenuously resist any new resolution on it. The government is confident that its allies among other developing countries and in particular its strong relationships with China and Russia will enable it to prevail in such a contest. However, the negative publicity resulting from a battle on Sri Lanka in the UN Human Rights Council will serve to act a further deterrent on foreign investors being willing to invest in Sri Lanka.

More Challenges

The forthcoming session of the UN Human Rights Commission in Geneva in March 2021 will see Sri Lanka having to face down two sets of challenges. The first is the argument that is being made that Sri Lanka should not be permitted to set a precedent for international institutions by its unilateral withdrawal from its co-sponsorship of UN Human Rights Council Resolution 30/1 of 2015. Those countries that support the UNHRC as an important global institution for the protection of human rights would not wish to set precedents that enable other countries to back out of commitments they have made. Although at the time of its withdrawal in 2020 from the commitments made in 2015, the Sri Lanka government promised to come up with a nationally driven reconciliation mechanism as an alternative, this has not yet materialized.

The government’s hope will be to muster the support of developing countries as well as its superpower allies, China and Russia, to numerically defeat those countries that wish to put it into the dock again on human rights. However, this hope will be endangered by the alienation of Muslim countries. Turkish news agency TRT reported that the 57-member Organisation of Islamic Cooperation expressed concern over the issue of Covid cremation and called for Sri Lankan Muslims to be allowed to bury family members in line with their religious beliefs. “Against this practice, forbidden under Islam, the OIC calls for respect to funeral rites in the Islamic faith,” it said in a statement. The international media, especially in Muslim countries, have reported the story of the 20 day old baby who was cremated without permitting his parents access to the body. TRT further commented that “The image of a sleeping baby Shaykh has become a symbol for what Sri Lanka’s Muslim community as well as moderates consider cruel and inhuman treatment of the Muslim coronavirus victims.”

If Sri Lanka is to prosper, it needs to build its relationships with the world beginning with those within the country. President Rajapaksa has said that he will be the president of all Sri Lankans and not only those who voted for him. Accordingly, the government he leads would need to think about problem-solving that is not aligned to any one group or community but with rationality with the interests of all in mind. This needs to be done on the issue of Covid burial which is accepted worldwide, on the issue of constitutional reforms which requires the reality of Sri Lanka as a multi-ethnic, multi-religious and plural society be taken into account, on the issue of the MCC grant which provides Sri Lanka with an opportunity to upgrade its road transport and land registration practices and on the issue of prisoners who are at risk in overcrowded prisons, especially those held as LTTE suspects without charge for many years even exceeding twenty. If the government does so, the healing and rebuilding of Sri Lanka as a multi-ethnic, multi-religious and plural society would have begun, and the country will emerge stronger to engage with the world and get the best from it. (Colombo, December 24, 2020)