China has the port, India has the hearts

Good morning! A big hello to readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition. This weekend we bring you a first-person account of what’s happening in Sri Lanka. Also in today’s edition: we have picked the best weekend reads for you.

The loud chants of “Aragalayata Jayawewa!” (Sinhala for “Victory to the struggle!”) were still bellowing in my ears when my Sri Lankan Airlines flight touched down in Bengaluru on Tuesday evening. The previous 24 hours were a whirlwind as I cut short my holiday and dashed from Galle to Colombo to beat the curfew.

I grew up in the 1990s watching cricketers such as Arjuna Ranatunga, Sanath Jayasuriya and Aravinda de Silva rewrite the conventions of the Englishman’s game. The fascination extended to my Masters’ thesis in 2009. I’ve visited the country many times. After all, you can reach Colombo sooner than you can reach Delhi.

TLDR? I love the country and its people. Granted, with long power cuts and serpentine queues for fuel, it was not the best of times to visit. Protests, although peaceful, had erupted. Anything could happen. I was taking a much-needed break from work. But it was still worth it.

Sri Lanka’s President Gotabaya Rajapaksa had declared a state of emergency on May 6 but Colombo was on its feet. People were out on the roads, offices were open and government buses plied freely. Restaurants and cafes were full. Supermarkets were bustling with activity. Private buses were lined up at “petrol sheds” to stock up on fuel. Life was normal although living was expensive.

Sri Lanka has been relatively free of violence after 2008-2009, when the then tough-talking President Mahinda Rajapaksa—Gotabaya’s brother—ordered the army into northern Sri Lanka to annihilate the Liberation Tigers of Tamil Eelam (LTTE). The LTTE had fought a three-decade war for a separate Tamil homeland. After the army decimated the Tigers and killed its leader Velupillai Prabhakaran, Rajapaksa turned his attention to the economy, inviting foreign investments and launching ambitious infrastructure projects. Many of those projects such as the Hambantota airport, seaport, the Colombo Port City, and even a revolving restaurant were funded and built by China. Sri Lanka’s economic growth rate jumped from 3.1% in 2009 to 9.1% in 2012, according to the World Bank.

The protests

I was taking in the sights of Colombo the day after President Rajapaksa’s emergency proclamation. It was the second time he’d done so since April 1. Although it didn’t affect tourists, a proclamation like that amid uncertainty makes the air heavy. The city was agog with rumours, spread mostly through WhatsApp, that prime minister Mahinda Rajapaksa had resigned. “The first wicket might be falling,” a photographer at the Dilmah t-Lounge at Colombo’s upmarket mall, One Galle Face, had cryptically told me. He thanked me for visiting Sri Lanka in a crisis.

“Thank you for coming, we need your dollars”, he said, over a cup of milk tea.

Mahinda had lost elections in 2015 but returned as prime minister in 2018 (briefly) and 2020 (until Monday) with his brother Gotabaya as President. The earlier growth, fuelled by massive foreign loans, was short lived. Between 2010 and 2020, Sri Lanka’s government debt-to-GDP grew 71.6% in 2010 to 101% in 2021. The economy began to slow down and the pandemic dealt it the final blow as exports stopped and foreign tourists vanished. Sri Lanka imports everything from essential goods such as oil, food, vehicles, medicines, and even fertilisers.

By late 2021, it was clear that Sri Lanka was headed towards bankruptcy. It had no money to repay foreign loans or buy essentials. Finance minister Ali Sabry told Parliament earlier this month that usable reserves were down to $50 million. The rest of the $1.9 billion in official reserves was a swap facility for the Chinese renminbi.

India vs China

The day for anyone who owns a vehicle in Sri Lanka revolves around securing fuel. WhatsApp messages in the wee hours often alert them to its arrival. It’s a dash to find a spot in the long queue at the petrol sheds. One litre of petrol costs LKR 338 and diesel LKR 289. It’s often a 6-8 hour wait in the hot sun. A lot of the fuel comes from India. And people know it.

“It is your food, medicines, and petrol that is keeping us going,” Jeya, a protester at the main GoGotaGama protest site at Galle Face, told me in Tamil last Friday.

“Thank you for being there for us. It's good that you are here and listening to us,” she told me in Tamil. Apart from assistance in kind, India has also given a $1 billion-plus credit line to the island nation. Just as I’d picked up my kothu (takeaway) at the popular restaurant, Pilawoos, in Bambalapitiya, its owner remarked, “thank you for protecting us”.

Sri Lanka has been lurching from one crisis to another in the past five years, beginning with floods in 2017, anti-Muslim riots in Ampara and parts of Digana in Kandy district in 2018, and the Easter bombings of 2019 that killed 269 people. A few flawed policy changes (an overnight shift to organic farming and a revision of taxes) coupled with the impact of Covid on key sectors brought the economy to its knees.

The protests at Galle Face are an outpouring of accumulated frustration with the country’s tanking economy and dysfunctional political system. They have unified Sri Lankans of all ethnicities. There’s a very good chance you’ll find Buddhist monks, Muslims, Christians, and Tamils sitting in the same tent, chanting the same slogans, something unthinkable just a few months ago. The sentiment against the government spans political ideologies. Far-left student unions, those from Sri Lanka’s rural heartlands, and the centrist, liberal Colombo elites share meals at the aragalaya (protests), animated in their concern for Sri Lanka’s future.

The Rajapaksas’ close ties to China have not helped as many see the deals they have done as the reason for the country’s plight. “Look at the Galle Face,” one protester said, pointing to the Colombo Port City project. “They have taken over our country with the help of the corrupt Rajapaksas,” he said in Sinhala.

A Sri Lankan friend who does not want to be named remarked to me, “Sri Lankans feel betrayed by China. Because when we needed them the most (during this economic crisis), they weren’t there. India, on the other hand, has stepped up.”

Soft touch

This is probably where India’s renewed foreign policy realism and a personal touch helped win people over. Indian foreign minister S Jaishankar's visit to Colombo and finance minister Nirmala Sitharaman batting for the country at the IMF helped.

“China is overtly visible through development projects; the white elephants such as the Hambantota airport in the South and other projects such as the Lotus Tower in Colombo, which barely generates any revenue,” my friend said. “But it isn't visible when it comes to medicines and food.”

After the initial $1 billion line of credit extended to Sri Lanka in March, India added another $500 million last month. In May, that credit line was extended by another $200 million. China’s “humanitarian aid” to Sri Lanka was somewhere around $31 million. India is also supplying 65,000 MT of urea for Sri Lanka’s Yala season under its line of credit.

Sri Lanka requested China to restructure its debt repayments but the latter said it had “done its best” to save the former from default. Last month, Sri Lanka’s central bank governor Nandalal Weerasinghe stated that China will not get preferential treatment in the restructuring of Sri Lanka’s debts.

The first port of call for Ranil Wickremesinghe after taking over as prime minister on Friday morning was the Indian High Commission, literally next door to Temple Trees, the official PM’s residence in Kollupitiya. “It (India-Sri Lanka ties) will become much better,” he remarked as he took over the post for a record sixth time.

The choice of Wickremesinghe is stunning given that his party, the United National Party, was routed in Sri Lanka’s 2020 parliamentary elections and suffered a split. Wickremesinghe himself lost his seat and re-entered the country’s parliament last year from the “national list” (as a nominated MP).

With one seat, Wickremesinghe now heads a not-so-popular government propped up by the Sri Lanka Podujana Peramuna and some independents. If he survives a confidence vote next week and proves his majority, Wickremesinghe will expectedly play a glorified foreign minister (and fundraiser), visiting countries he has good relations with — chiefly the United States, India, and Japan, while newfound (old) ally Rajapaksa presides over domestic matters.

The scamper back to India

I was at the beach in Mirissa when my local host called to check on me. “They've issued a curfew order. Try and make it before sunset. Leave within the hour,” he said. The political dominoes were falling. His message was clear: the situation was going to turn ugly. A quick check with my friend mentioned earlier in the story, and it was time to hit the road.

The gravity of the situation became apparent at Unawatuna where crowds were bursting crackers to celebrate Myna's (protestors' nickname for Mahinda in local slang, also a bird) departure. Scores of people had gathered with sticks, Sri Lankan flags, and helmets, surrounding cars that they suspected belonged to Rajapaksa supporters. They let our car pass only after my guide and driver spelt out that I was a tourist and yelled “Aragalayata jayawewa!” 

Enroute Colombo, mobs toppled at least two buses at a petrol station near Thimbirigasyaya, a major junction in the city. The horns and the chants continued late into the night, revealing how much the government had lost control. All this, even as houses of Rajapaksa sympathisers were torched.

To quote Kalani Kumarasinghe, a Colombo-based journalist, “A lot of us who have been covering these protests since day one are aware of what these politically motivated groups can do. Once the curfew was announced, there were several people who had stepped out. At first, it seemed more organic,” she says while describing the events of May 9.

“Journalists weren’t welcome at the scene. All photographers were threatened. They were asked to destroy their memory chips,” she adds.

Kumarasinghe was among those who later visited the GoGotaGama protest site on Monday night, one of the theatres of violence by Mahinda Rajapaksa’s supporters. “It was raining, but that didn’t deter the protesters. It was spirited. There were tents that were taken down, that were being rebuilt. There were still 1000s of people there.”

Strangely, the Sri Lankan capital resembled a ghost town the next morning. On my way to the airport, there was little traffic and troops everywhere. A quick flash of my passport near the road from Colombo to the airport, and I was on my way.

Close to Katunayake, towards the end of the expressway, two uniformed personnel stopped the car and told my driver to pull down the windows. “Why?” he asked. They said there was a check post ahead. I’d been to Sri Lanka during the war and expected police or army pickets. But this was a sea of people holding national flags and peering into the car to see if I was smuggling away any Rajapaksas or their backers. After making sure, I was not hiding any Rajapaksas, they waved me through, “you no issue. Myna issue. Go go.”

For the moment it appears the people have their will back. But you never know. I’ll find out when I return to complete my interrupted holiday.

ICYMI

The tremors: The Russia-Ukraine war is nothing short of earth-shattering. It has displaced millions, created prolonged food and energy shortages, bankrupted countries, changed politics, triggered arms races and threatens to push the global economy into recession. Here is a good overview of how the ripples are travelling across the globe.

Chinese check: Another kind of war in China is adding to the world’s woes. President Xi Jinping’s determined fight to annihilate the Covid-19 virus is crippling China, but the rest of the world is paying the price too. As it accounts for a third of global manufacturing output, China’s deceleration is leading to shortages, production disruptions and inflation in the rest of the world. Being a huge market, it is impacting foreign firms such as Tesla, Volkswagen and Adidas’ toplines.  

What the CIA sees: Russia and China have sent the world into a tailspin. There is a surfeit of global affairs to take in but it is the most important variable in our lives today, even affecting what our next meal will cost. So it is important to also know how the CIA and the US view the turmoil and how they plan to act. Edward Luce at Financial Times has an insightful take, completing a troika of stories to understand how the globe is turning. 

The U-turn: The Reserve Bank of India has learnt over the years that it’s not a good idea to surprise the markets. Modern central banking is as much about communication as it is about actual policy setting. So it was off character when the RBI abruptly raised interest rates. The language until then gave no indication that an immediate hike was on the cards. What gave? The Economic Times has tried to look for clues.

In the top corner: The impending move of goal machine Erling Haaland from Borussia Dortmund to Manchester City in a deal estimated to be upwards of $200 million is unlike most transfers in the soccer world. Haaland is a designer super player and his professional career is meticulously planned by his agent. This pioneering deal is dead in the middle of the path laid out for him.

A podcast for you: Chameleon: Hollywood Con Queen is the true story of a Hollywood scamster who preyed on make-up artists, trainers, aspiring directors and other crew members desperate for a plum project that’d make their careers. The scamster—nicknamed “The Queen”—would pose as powerful women executives and lure unsuspecting victims to Jakarta for “movie shoots” before draining them of their life savings. Who is this notorious “Queen”? The answer will blow your mind.

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