• Young Diplomats Society

The Politics of International Development: China, Sri Lanka, and the West


Source: Unsplash

Jack O'Donovan


Key Points

  • In recent decades, China has sought to position itself as an alternative aid partner for developing countries disillusioned with the West's approach.

  • From a realist perspective, international development is a domain where major powers may simultaneously compete for 'future returns' (e.g. money, land, influence) and burnish their international reputation by being seen to extend their knowledge and resources.

  • However, China's global investment program, the Belt and Road Initiative (BRI), has been critiqued as cover for an expansionist agenda based on infrastructure development and "debt trap diplomacy".

  • Sri Lanka's Hambantota port has been highlighted by Western critics as a prime example of this, where China allegedly has control of the port in exchange for debt-forgiveness.

  • Yet this narrative appears to ignore several key factors, suggesting an argument based on China's known characteristics rather than objective analysis.


In recent decades, the world has experienced a paradigmatic shift characterised by events that have upset Western hegemony across the domains of security, finance, and politics. Such events include the September 11 attacks of 2001, the Global Financial Crisis of 2008, the political upsets of the 2016 Brexit Referendum and the election of Donald J. Trump to the US presidency in 2017. In the last decade, there has also been a correlative effect within the domain of international development. Here, the previous dominance of Western democratic institutions of aid finance has been challenged by the economic might of a rising China.


Seeking to establish itself as an effective alternative to the West, China has been actively engaged in offering developing countries a different approach to growth and prosperity – one not tied to the democratic values of the West, but instead to a ‘win-win’ spirit of mutual gain. Consequently, China has drawn the ire of the Western governments, many of whom have critiqued the East Asian state’s development program, the Belt and Road Initiative (BRI), as cover for ulterior motives contrary to the best interests of developing countries. This article seeks to address such claims by providing a nuanced analysis of China’s recent development efforts in Sri Lanka.


The Domain of International Development – A Realist Point of View


Broadly speaking, international development is a space where major powers may pursue two primary objectives. The first is to secure inroads for ‘future returns’ in countries where prosperity is lacking but the potential for reform is great. The second is to be seen as willing to extend their resources and expertise to assist developing countries in order to improve their international reputation. Importantly, it is a space where major powers compete in pursuing these objectives, each offering the self-proclaimed ‘best’ approach to achieving economic prosperity. Each of these approaches is unique to its own geopolitical context and thus will likely yield different results depending on the state offering development assistance. As such, developing countries are faced with a crucial choice in selecting the aid partner most suited to helping them realise their goals.


It is important to note, however, that the concept of ‘future returns’ is applicable not only to finance. Money is a significant factor, especially for costly infrastructure projects. However, as major powers compete in a variety of ways, what may be constituted as a ‘return’ is therefore similarly varied, with examples including the rights to mineral exploration, being awarded a contract for infrastructure construction, and bilateral trade agreements. Each return possesses a certain level of utility that comes with associated benefits and risks. This might be political influence with a national government following a successful trade deal, or even access to an important piece of infrastructure in a strategic location upon completion of a construction contract.


Crucially, how these ‘returns’ are subsequently managed and has a direct impact on the second objective of states, as discussed above – maintaining their reputation. If a state is seen to be utilising its influence inappropriately, then its efforts become futile, attracting criticism from observers while providing competing powers an opportunity to offer a different approach to developing countries in a bid to delegitimise their opponent.


China’s Approach – The Belt and Road Initiative


The model presented above is a distinctly realist way of looking at the politics of international development. However, it is a concise description of the narrative being told by many in the West, particularly in the US, to criticise the validity of China's development projects under its global investment program, the Belt and Road Initiative (BRI). Unveiled in 2013 as the ‘One Belt, One Road’ project, the basic idea behind the BRI is to promote economic exchange between countries to improve global growth and development. It is a modern-day re-imagining of the ancient Silk Road trade routes which once ran through Eurasia and parts of Africa centuries ago. Under the BRI, China hopes to redevelop this ancient network of connectivity by investing heavily in infrastructure development – particularly ports, railways, and roads – in both developed and developing countries alike.





However, the delivery and diversity of the BRI’s composite projects seem fragmentary in their scope, making the initiative appear open-ended and based on particular interests rather than unified under a single, specific agenda. Due to this incoherence, along with the opaqueness surrounding China’s motivations and investment methods, the BRI has been criticised by Western states as a cover for an expansionist agenda centred on infrastructure development. Ports in particular have been singled out as potential outposts for military deployment to provide ongoing security for Beijing’s trade and energy interests abroad. This parallel yet countervailing force against US hegemony and military mobility has been characterised as a ‘string of pearls’. To this end, Beijing has been accused of adopting a practice of ‘debt-trap diplomacy’, or “strategically ensnaring recipient countries with loans they can’t repay...[to subsequently] increase Chinese leverage.”





China and Sri Lanka – the Hambantota Port


To critics in the West, Hambantota Port, located on Sri Lanka’s southern coast, is a prime example of this practice. Conceptualised in 2002 as part of the national government’s long-term development report, Hambantota was positioned as a key infrastructure project aimed at strengthening the country’s regional maritime operations in the long term, whilst stimulating new economic activity in the poverty-stricken Southern Province in the short term. Between 2007 and 2014, five loans totalling approximately USD 1.263 billion were secured from Chinese banks to finance the project – two commercial loans with high interest rates and three negotiated on concessionary terms.


By 2016, it became clear that repayments could not be sufficiently met through the port’s generated income. After yielding a low operating profit of USD 1.81 million that year and with loan repayments in the next financial year amounting to USD 79 million, the government decided to renegotiate the lease in 2017 in what was branded a “debt-equity swap”. As reported by the New York Times, this amounted to China securing a controlling stake in the port’s management and operation (and profits), as well as control over thousands of acres of the surrounding hinterland through the state-owned company China Merchant Port Holdings Company Limited on a 99 year lease. In exchange, the debt Sri Lanka had incurred was ‘forgiven’. To Western critics, China’s alleged ‘future return’ from Hambantota pertained not only to monetary profit but a land grab. In this narrative, China was granted control of a key strategic location in the Indian Ocean from which it could base its naval vessels in the future so as to aggressively challenge Western hegemony and secure its own interests against its rivals.


Assessing the Narrative – A Re-adjustment


This narrative spun against China’s financing of Hambantota appears to be based, in part, on the known characteristics of the East Asian state’s foreign policy rather than on objective analysis. To be fair, this isn’t entirely unfounded; the opacity surrounding much of Beijing’s investment methods is a barrier to piercing analysis. Consequently, state-behaviour and agendas in other regions, such as Beijing’s aggressive protection of its security and energy interests in the South China Sea, can inform and influence analysis of China’s behaviour in other domains such as international development. China’s failure to address issues of environmental degradation, corrupt practices within its state-owned companies, and the impact of further debt on already debt-laden developing nations, has done it no favours in mitigating such conflations or offering assurances on the ‘win-win’ spirit of the BRI.


However, this does not necessarily mean that China’s agenda is one of malintent. Looking closer at the Hambantota deal helps alleviate this misconception. For one, the alleged practice of ‘debt-trap diplomacy’ is incorrect. As the Diplomat outlines:

The often quoted “port deal” was actually a lease agreement clearly separate from the loans obtained for the purpose of constructing the port and the money obtained from the lease was used to strengthen the foreign reserves of the country, not to repay China. There was no cancellation of debt, although the port was leased to China for 99 years. There has been no change in ownership. However, as per the lease agreement, a significant portion of the operations in the port will be handled by China Merchant Port company, thus a large portion of the profit, if any, will be earned by CM Port.


Put simply, no debt has been forgiven and no sovereign territory ceded. Granted, Beijing does hold a 70% investment stake, an asymmetry that affords it some influence with the Sri Lankan government. However, the argument that this is a prelude to the future deployment of Chinese naval vessels ignores a few key elements. Firstly the 2017 lease renegotiation included a security amendment that explicitly stated that all port security would be handled by Sri Lanka. This is reinforced by the fact the port will “house Sri Lanka’s own southern naval command.” Secondly, under the UN Convention on the Law of the Sea (UNCLOS), Sri Lanka, as a sovereign state, holds sole jurisdiction over the entry and barring of vessels into its ports. Thirdly, even if Chinese forces were deployed to Hambantota and forced Sri Lanka’s acquiescence, such a move would not benefit Beijing as it would likely do significant damage to its reputation as a development aid partner.


Moreover, the suggestion that Beijing is recklessly pursuing an expansionist agenda with significant implications for power relations both regionally and globally is overly simplistic. As the Interpreter has outlined, Beijing established the BRI in an effort “to externalize [its] massive debt and industrial overcapacity problems by stimulating external demand for Chinese goods, services and capital. Approved projects therefore follow the logic of economics, not geopolitics.” Put another way, the type of ‘future returns’ Beijing is likely to seek from its BRI investments abroad fall more into the category of profitability rather than military supremacy. The Economist argues much the same point, iterating China’s growing ‘empire of ports’ as about facilitating trade rather than expanding an aggressive military agenda.


Conclusion


The theory, then, that Beijing’s investment in ports across the Indo-Pacific constitutes the ground-work of a plan to encircle emerging rivals fails to account for the economic imperatives Beijing faces in its trade relations as an export-driven economy, one that is rapidly reaching new heights. In the context of Hambantota port, the deployment of Chinese naval vessels is less suggestive of a malicious attempt to persecute the interests of other states and more illustrative of an effort to protect its trade interests, now and into the future.


Fault, however, can be placed at China’s feet for the military implications. Beijing’s lack of transparency and communication over what it perceives its role to be in the world economy – evidenced by its non-commitment to global economic institutions and dubious claims of “anti-piracy” measures in the deployment of its naval vessels in the Gulf of Aden, among others – does it no favours. For a major power to compete effectively in the domain of international development, careful consideration on how the pursuit of ‘future returns’ is communicated to others is imperative for the maintenance of international reputation. To paraphrase China scholar Odd Arne Westad, a core issue affecting China's foreign policy, as it has throughout its history, is its parochialism which stems from the distinct belief of China's centrality in the world. If China wishes to lead with approval rather than dissent, it needs to recognise its blind-spots and adjust accordingly.


Jack O'Donovan is an Honours student in Politics and Policy Studies at Deakin University. He is currently writing a thesis examining the impact the era of securitisation and, in particular, Australia's border control policy of deterrence has had on the health of representative democracy. He has interests in foreign affairs, international development, and Australian political history.