SL State becomes prime reference for ‘debt trap diplomacy’ of China in US rhetorics

[TamilNet, Monday, 03 December 2018, 19:03 GMT]
The unitary state of genocidal Sri Lanka has become the de-facto reference case for Chinese debt-trap diplomacy, which is being increasingly referred in the US political, military and financial discussions. USINDOPACOM Commander Admiral Philip S. Davidson made a reference to ‘Sri Lanka’ when he faced a question on what he found as the most problematic with the Belt and Road initiative on 30 November. In the meantime, Roland de Marcellus, the acting deputy assistant secretary for international finance and development within the Bureau of Economic and Business Affairs, testifying at a US Senate subcommittee hearing on “multilateral economic institutions in foreign policy,” on 27 November said ‘Sri Lanka’ had become “a campaign issue in many elections around the world where opposition groups are criticizing the volume of Chinese lending and the terms and all of the other drawbacks”.

“So Malaysia, we saw president Prime Minister Mahathir cancelling billions of dollars of Chinese projects. The Maldives, a new government ran against basic Chinese lending in one. And they are now opening up the Chinese books,” De Macellus observed.

“In Africa, Sierra Leone, the new government criticized Chinese landing and then cancelled an airport project of $300 million dollars on the rational basis that the existing airport wasn't fully utilized. And Burma scaled back a port from 7.3 billion to 1.3 billion,” he added.

“The Debt Trap, when the IMF and the West over-lent in many cases and built up debt burdens in the developing world, we dealt with it,” he said adding: “We owned up to it. We did debt forgiveness.”

“So by the same token, if China makes the same types of mistakes we might have made 45 years ago, we would look to them to some sort of forgiveness for these countries, so they aren't saddled with debt forever, crippling them,” he said.



Commenting at the subcommittee hearing, Edward John Markey, the senator (Democratic Party) from Massachusetts said: “[a]s you point out in Sri Lanka, for 99 years they have a massive port owned. I know I've heard from the national security side, our concern is that might also become a military base outpost for China”.

He asked: “And so I'm wondering as we push to kind of draw attention to this strategy, are there other things that we should consider doing? For example, should we push for a policy in the IMF and World Bank that no loan, no grant project will go to any country that doesn't have complete transparency for its international borrowing?”

US Treasury Undersecretary for International Affairs David Malpass who waw also testifying agreed with the comments of the Senator.

“Senator, those are very good points. So we are within the debt - the transparency initiative that I mentioned in my remarks. We're working in the IMF and the World Bank to encourage them to include terms in loans, so when they do make a loan to a country, say that the country is expected to make transparent, all of the lending that it gets,” Malpass said.

De Marcellus in his testimony also noted that the US Bureau of Economic and Business Affairs was working through the G20 and within the IMF and World Bank on “debt sustainability frameworks for low-income countries.”

“I think Congress has helped us a great degree with the BUILD Act and the new government finance corporation. Thank you for all your action on that. It's going to be able to give us new tools to try to fill the gap. It can't replace and should not replace the private sector,” he testified further.

Malpass came with a remark stating that the developed countries had a technique for when a country really failed, to forgive that debt and let the country start to rebuild. “China has rejected that as a process,” he said.

Clay Lowery, a visiting fellow at the Center for Global Development (CGD), who served as assistant secretary for international affairs at the Treasury Department from 2005 to 2009, was one of the five experts invited for the second session of the hearing.

He said: “[W]hile China may have spent a trillion dollars in its Belt and Road initiative over the last five years I think it is far more important that just in the Indo-Pacific region alone the U.S. has over one $1.4 trillion dollars in trade annually and invested over $900 billion in the region as of 2017. These are U.S. strengths and we should use official tools, whether bilateral or multilateral to highlight and leverage such strengths.”

Ms Jennifer Hillman, a professor from practice, Georgetown Law Center, said China was not following a market oriented economy, but a more state-owned economy, which should be addressed through a broader multilateral response.

* * *


The Commander of the US Indo-Pacific Command (USINDOPACOM) Admiral Philip S. Davidson, at the Third Annual ChinaPower Conference November 30, was posed a question on what he found as the most problematic with the Belt and Road initiative of China.

His response to the question:

“Well, it’s a very pernicious approach that China has taken to the region, using the economic tool of death trap diplomacy. It is not using is funds in a way that respects the international order’s rules for lending and viability of these things. And one of the first things that occurred after I took command was I went to Shangri-La. And all the buzz was about Hambantota Port in Sri Lanka the first week of June. It was also the week that The New York Times printed an op-ed about Vanuatu, which, you know, I think when an outlet like The New York Times publishes an op-ed about Vanuatu that says a lot. And the region has woken up to this. And the region, that it—this is more than just to everyone’s mutual benefit. As the vice president indicated two weeks at APEC, it’s a one-way road back to China.”

* * *


Both the financial and military officials of the USA were promoting the idea of private sector investment to counter Chinese influence in the Indoa-Pacific.

Admiral Philip S. Davidson noted:

“For example, the United States’ Overseas Private Investment Corporation, or OPIC, has a portfolio of $3.9 billion invested in the Indo-Pacific alongside American firms in energy, healthcare, and banking. For every dollar that OPIC has invested, the private sector has more than doubled it.

“And just this past September, the United States passed and placed into law the Better Utilization of Investments Leading to Development Act, or BUILD Act, that will make it even easier for America’s private sector to invest in developing countries to create economic partnerships and stimulate economic growth.”

It is problematic when countries promise loans and improve infrastructure and economic development, but have a much more opaque intention underneath, he said.

“When nations accept loans for more than they can possibly afford – often secured through corruption – borrowers quickly find themselves deep in debt and on the path to default, with the lender gaining leverage against the borrower’s sovereignty.”

* * *


Eezham Tamils, mainly the Tamil diaspora must now conceive a BDS campaign against genocidal Sri Lanka, Professor Francis Boyle, an eminent American expert in international law at the University of Illinois College of Law, told TamilNet after SL President Maithiriapala Sirisena installed Mahinda Rajapaksa as the SL Prime Minister in the island.



External Links:
CSIS: Keynote Address by Admiral Philip S. Davidson at the Third Annual ChinaPower Conference


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