Some days ago, the Chinese government has announced its offer to assist in several development projects. This includes the relocation of the Peradeniya town and building of an International Education Research Centre equipped with modern technical facilities in Kandy. This is in addition to the development of the multi-specialty international port at Hambantota harbour in the Uva province of Sri Lanka with Chinese support on the same pattern as the Gwadar deep sea project in Pakistan. China has also promised to develop the biggest coal power plant in Sri Lanka at Puttalam. Besides, Railway Department of Sri Lanka is going to receive 50 railway carriages and 15 locomotive engines from China later next year to tide over the shortage of railway carriages in the country.

The year 2007 is being celebrated as the “Sino-Lankan Year of Friendship” to mark the 50 years of the establishment of diplomatic relations between the two countries. Both the countries agreed on further strengthening of mutual economic relationship. President Mahinda Rajapaksa on his state visit to China this year signed as many as eight agreements with China. These were under the 10-years Mahinda Chintana infrastructural development programme. Chinese investments in Sri Lanka exceed $1 million. People-to-people contacts are on the rise and more then 16,000 Chinese tourists arrived in Sri Lanka in the year 2006 alone. The number of scholarships provided by the Chinese government to the students from Sri Lanka has seen a significant increase. Emphasizing on their common Buddhist cultural heritage, the two countries has also arranged an exchange visits of Buddhist delegations.

India’s Failure in Sri Lanka

Quite obviously, Sri Lanka is seriously searching for options outside its immediate neighbourhood. These are early signs of Sri Lanka trying to emerge from the shadow of Inda. Being the largest neighbour, India always tried to control and influences the course of events taking place in Sri Lanka. Indo-Sri Lanka Accord of 1989 is a case in point. Lanka often accused India of providing support, moral and material to LTTE in order to satisfy Tamil aspirations at home.

On the economic front, India has not been successful in creating any durable assets in the island nation. The Indian assistance is hardly visible notwithstanding its $450 million investment which is over 50% of all SAARC countries. Historically also, the inflows from India have been low. Though there has been a dramatic increase in their trade relations after the signing of the Free Trade Area in 2002 and 2003, the trend reversed in 2004 when India slipped from 1st to 4th position as a foreign direct investor in Sri Lanka. The prolonged negotiations over the signing of the Comprehensive Economic Partnership Agreement (CEPA) between India and Sri Lanka are delaying the mutually beneficial project. Moreover, the products supplied under $100 million soft commodity loan scheme by India to the Sri Lankan importers have often been found to be defective.

Indian assistance in infrastructure development project has been minimal when compared with China. India’s much-awaited and much-debated Sethu Samudram Project linking Mannar to Rameshwaram is in jeopardy with opposition from both sides of the border. Other investments remain in their infancy. Oil and Natural Gas Corporation has also decided to back off from the nomination process to operate an oil block in the Mannar basin in view of bleak prospects when Sri Lanka government had offered Blocks in the key area to both India and China. The only substantial Indian investment in recent times has been Indian Oil Corporations investment to the tune of US $75 million but whose credibility is still to be seen.

Indo-Lanka defence cooperation is lagging far behind the Sino-Lankan cooperation in the area of defence. Sri Lanka purchase slew of military hardware from China which includes radars, mortar and artillery shells, cartridges, rockets, machine guns and high-explosive bombs. In Contrast, Sri Lanka purchased only two radars from India last year. This is despite assertion in May 2007 by India’s National Security Advisor, M.K. Narayanan, that, “We are the big power in this region. Let us make it very clear. We strongly believe that whatever requirements the Sri Lankan government has, they should come to us. And we will give them what we think is necessary. We do not favour their going to China or Pakistan or any other country…”. At the same time, Narayanan had admitted that India would "not provide the Sri Lankan government with offensive capability. That is the standard position.” Left with few options, Sri Lanka has begun to look towards other nations.

In its dealing with Sri Lanka, India has always given weightage to its own domestic political compulsions in Tamil Nadu and Chennai. It is at the insistence of the South Indian politicians that India had earlier adopted a soft approach towards LTTE and it is on their insistence alone that they disbanded the organisation. In Sri Lanka’s hour of need, the Indian reaction has invariably been linked to their possible repercussions on Tamil Nadu politics.

Sri Lanka, the China’s ‘pearl’

China, on its part view Sri Lanka as one of the pearl in its “String of Pearls” strategy. Being the fastest growing economy in the world has made China increasingly dependent upon imported energy resources. In 2006, the Chinese National Development and Reform Commission issued a plan to increase China’s refining capacity by one-third by 2010 in order to cover the rapidly growing energy requirements. Ninety percent of China oil comes from the Middle Eastern countries and needs secure supply lines.

China's string of pearls strategy includes increased access to airfields and ports which may be accomplished by constructing new facilities or providing heavy subsidies for the construction of the new ports or airfields as in the case of providing 85% assistance for the modernization of $ 1 billion Hambantota port. The assistance comes with the understanding that these facilities will be made available to China as and when needed.

Secondly, the strategy involves developing better diplomatic relations with the ‘node’ or the ‘pearl’. In the wake of Tsunami in Sri Lanka two years ago, it was China which provided the largest ever assistance by any country. Friendship Villages have been built to house those rendered homeless. During the state visit by Mahinda Rajapaksa to China in 2007, several agreements have been signed for major infrastructure ventures coupled with multi-billion dollars Chinese technology and favorable credit facilities. The pacts signed described their relationship as “All-round Cooperation Partnership of Sincere Mutual Support and Ever-lasting Friendship”.

Thirdly, the modernization of the military capabilities of the nation is another facet of the agreement.

India’s Options

As China extends its sphere of influence, India gives the impression of merely following a ‘wait and watch’ policy. After the IPKF debacle and Rajiv Gandhi’s assassination, India seems to have continued a hands-off approach towards Sri Lanka. This period of cooling off lasted till the two countries signed the Free Trade Agreement though Indian businessmen still remain wary of investing heavily in Sri Lanka. India’s non-interventionist policy in Sri Lanka failed to bear any fruits in the context of solving the ethnic problem. When India was following its ‘hands off’ approach, LTTE groups were busy arming and regrouping themselves not far from the shores of India. In fact, Sri Lankan and Indian Navy is separate incidents have found out that LTTE even maintain their bases in the towns and districts of Tamil Nadu with the blessings of their sympathizers.

It is only in recent times only that India realised the dangers of possible attacks byLTTE on its economic and strategic installations down south. While, on the one hand, India has LTTE on its shores to deal with, on the other, the growing presence of China quite near to its borders should be a development that needs careful watch and assessment. Chinese presence would gradually extend its control over the entire shipping traffic passing through the sea lanes of the Indian Ocean.
 
India’s prolonged absence from the regional scene means the active presence of foreign powers in the Indian Ocean region which India considers to be under its own sphere of influence. Earlier this year, Sri Lanka signed Acquisition and Cross-Servicing Agreement (ACSA) with America when India is already watching with concern the growing presence of Pakistan and China in Sri Lanka. in view of the evolving situation perhaps, India refrained from criticising the signing of ACSA.

Repeated attempts by moderate Tamil parties and international observers to involve India in its peace process have not found favor with New Delhi. Judicious activism by India would be useful in Indian interests, be acceptable to Sri Lankans and appreciated by the West. People in Sri Lanka always refer to Indo-Sri Lanka Peace Accord as the ultimate accord for solving the country’s ethnic problem. Even the LTTE now realizes the futility of alienating India as it attempts to once again win the support of India in their fight for Tamil Eelam.

Anjali Sharma is Associate Fellow in Observer Research Foundation.