In this episode, the researchers from the Italy team interviewed Prof. Cardillo on the importance of economic security relations between China and Italy from the perspective of state owned firms, foreign direct investments, and new developments through instruments such as the Belt and Road Initiative and, in general, soft and hard power tools.
Prof. Ivan Cardillo, is an expert jurist and Assistant Professor in Law at Zhongnan University of Economics and Law, where he teaches courses, on Comparative Law, Chinese-Western Comparative Legal Cultures, History of Foreign Law, Law and Cinema. He is the founder and director of the Institute for Chinese Law.
“Everybody says Hambantota was ‘invaded’ by the Chinese. Well, just look around… There are probably no more than twenty Chinese people in the whole town. We definitely were not invaded by anyone. If anything, we Sri Lankans are hostages – hostages of our political class”, says Dilshan while sipping his tea. He is an ordinary man that lives in Hambantota, a sleepy town at the Southern tip of Sri Lanka - a remote place where taxis are nowhere to be found, public buses remain rudimentary, and the local residents buzz around the streets on rusty TukTuks, making a living mostly out of fishing and agriculture. Those that visit Hambantota are soon warned by a yellow signal: beware of wild elephants - they might come out of the bush and cross your way. It seems ironic that this forgotten tropical town with only 11,000 residents has recently drawn intense scrutiny from international media, becoming the epicenter of a fierce debate in academic and political circles. At the heart of this debate is a metaphorical “white elephant” – not the one that might come out of the bush - but the giant port that sits on the town’s coastline: the Hambantota Port.
Source: (A common street in Sri Lanka. Credit: Flickr)
The Hambantota Port was part of Beijing’s signature Belt and Road Initiative, and its construction was mostly funded by Chinese loans. When in 2017, the debt-ridden Sri Lankan government decided to lease a 70% stake in the port to the China Merchants Group for 99 years, Hambantota became a symbol fiercely cited by devoted proponents of the so-called ‘debt trap theory’. This narrative depicts China as a predatory investor that invites the Global South nations to join the BRI’s family and then deliberately pushes them into debt through murky loans and contracts. At this point, when the naïve, cash-strapped government is buried in debts it can’t repay, Beijing carries out its calculated master plan and forces its victim to cease its national assets. “Look what happened in Hambantota!”, is a claim that still reverberates in many political discussions, often with a prophetic tone.
Walking in Hambantota today, however, reveals a more complex reality. The discontent of the local people and the semi-abandoned buildings give away a different truth: there is another side of the debt-trap theory - one that is often overlooked. The countries that join the Belt and Road Initiative are not always led by cash-strapped, naïve, unaware politicians that happen to find themselves buried in debt, with no other choice than ceasing national assets to Beijing. Often, these might actually be corrupt politicians, blinded by megalomaniac tendencies left unchecked, that utilize Chinese loans for their own political and material gains.
Source: (The Fishing Market of Hambantota. Credit: Flickr)
For almost two decades, Sri Lanka’s political landscape has been dominated by the Rajapaksa family, a political clan that essentially ruled Sri Lanka like an autocratic family business. When Mahinda Rajapaksa was elected President in 2005, part of his political manifesto promised to deliver economic revitalization by constructing megaprojects and new infrastructure. Unfortunately, Rajapaksa failed to become the architect of Sri Lanka’s economic miracle: instead, he created a ticking bomb. First, he built the foundations of this economic revitalization on unsustainable debt, recklessly borrowing from bilateral lenders, mainly China, India, and Japan, as well as from a wide range of private investors. On this shaky ground, the government erected a wide array of megaprojects without conducting proper feasibility studies – essentially, building pieces of infrastructure that would never be commercially viable. Meanwhile, the Rajapaksa family has been accused of corruption, nepotism, bribes, and money laundering, with its members secretly transferring billions to accounts abroad. The infamous port of Hambantota, therefore, might not be the story of a Chinese masterplan. It is more of a tale of Sri Lanka’s broken politics.
In the early 2000s, many experts frowned upon the decision to build a new port in Hambantota, only 200 km away from Colombo, which hosts the 25th busiest port in the world. For a small island nation like Sri Lanka, this did not seem like a calculated, rational decision. In fact, it was a political one. Mahinda Rajapaksa is from the Hambantota district, a place where he hoped to solidify his grip on power and build a political stronghold. He thus erected a wide array of megaprojects - some of them carrying his name – in an attempt to elevate himself as the strongman that was capable of delivering economic revitalization to his native area. Today, in Hambantota, the signs of Rajapaksa’s megalomania and heavy spending are everywhere – not only in the port itself. Take the cricket stadium, built with a capacity of 35,000 people for a remote town with only 11,000 residents: largely unsuccessful, it is often used as a wedding venue to recover some profit. Alternatively, the airport sits semi-abandoned with no departures or arrivals. Moreover, the huge convention centre that barely hosts any event – at the moment, it has mostly become a playground for Sri Lankan kids, who often play cricket next to the main entrance. These white elephants are the grim legacy of a political dynasty out of touch with reality, unable to comprehend the needs of the people they governed, whom they eventually dragged into bankruptcy in 2022. “They built a port, an airport, a conference centre, and a cricket stadium, but they forgot that we in Hambantota are mostly farmers. What we really need is agricultural reform – not another empty project,” says Anaya, who used to be a teacher.
Source: (A train in Sri Lanka. Credit: Flickr)
For the much-debated port of Hambantota, China Exim Bank provided 85% of the funding at an unusually high-interest rate of 6.3%. The proponents of the debt-trap theory interpret this as yet another sign of Beijing’s plan to push Colombo into debt. Yet this might be simplistic thinking that once again fails to consider the broader context of the Sri Lankan reality. When construction of the Hambantota port began in 2007, Sri Lanka was still ravaged by one of the bloodiest phases of a decades-long civil war, struggling to generate public revenue. The government presented the port project to many investors, yet China emerged as the only country that was willing to take the risk of financing the megaproject. More than a predatory investor, China was a lender of last resort. Moreover, it demanded a high-interest rate because it essentially offered a high-risk loan to a conflict-torn country.
Once the Chinese loan was granted, the Sri Lankan government failed to plan its spending in a way that could offer quick returns. The Danish firm Ramboll recommended that, during the first phase of construction, the port should only manage the transport of non-containerized cargo, like oil tanks and cars. Once the Hambantota port generated the necessary revenue, Ramboll suggested, new parts could be constructed. Yet the Sri Lankan government took the hasty decision to request new funding and proceed with the second phase of the construction, immediately transforming Hambantota into a container port. “Experts suggested they constructed different parts of the port at different times, allowing each phase to be profitable and operational. Instead, the government preferred to build everything at the same time, although this implied more borrowing without solid revenues”, says Dilshan. Corruption and self-interest were also widespread. For instance, Ramboll forecasted that building a bunkering facility at Hambantota would cost roughly $33 million, yet the ports Minister submitted a document that demanded a $100 million loan. The extra cash was allegedly poured into the pockets of the Rajapaksa clan.
Source: (A Sri Lankan lady. Credit: Flickr)
By 2014, the Hambantota port was a fiasco and a burden to the Sri Lankan government. The Sri Lankan Port Authority found itself diverting money from the profitable Colombo port because Hambantota’s revenues were too low for the port to sustain itself. In 2016 many Western creditors were also demanding their annual repayments, and Sri Lanka found itself in need of foreign exchange. The ticking bomb created by Mahinda Rajapaksa was about to explode. And this is when Sri Lanka decided to lease out Hambantota to China Merchants Port for a 99-year concession. It was not about a predatory investor attempting to seize its debtor’s national assets: it was more about Sri Lanka getting rid of an inefficient and underperforming port to restore its foreign reserves, which had dried up after years of heavy borrowings and irrational spending.
The debt trap theory fails to consider that recipients of Chinese funding are often autocratic and corrupted leaders seeking to advance their political agenda. Visiting Hambantota and its semi-abandoned buildings suggests that, for the population of a developing country like Sri Lanka, living under these regimes might in fact be the real trap.
*For privacy and security reasons, pseudonyms are being used to de-identify those that shared information and personal opinions with the author
For its third event of "The View from" Series, Ilas Touazi from University of Sétif 2 and Michele Tallarini, ITSS Verona, Africa Team, discuss US-China competition in Africa, touching upon regional dynamics, trade, BRI, questions of debt, and Chinese military presence in the continent.
Since 2019, Sri Lanka has been experiencing its worst economic crisis. Unprecedented levels of inflation, the near depletion of foreign exchange reserves, the rising prices of basic commodities, daily blackouts lasting ten to thirteen hours, and shortages of medical supplies plague the already poor nation. Sri Lanka’s population of almost 22 million people now waits in nearly endless lines for basic amenities. Schools have been suspended because of the lack of equipment and businesses shut down because of the lack of petrol needed for commuters and the transportation of goods.
Declared the "worst economic crisis for Sri Lanka in 73 years" by the Sri Lankan Government, the country now finds itself embroiled in protests and steadily increasing violence. Protesters place blame on president Gotabaya Rajapaksa's government, whom they accuse of mismanaging the economy. The Rajapaksa are Sri Lanka's most influential family, a political dynasty, prominent in several senior roles in the Sri Lankan State. Protesters demand that Rajapaksa and his family step down, hoping to pave the way for new democratic leaders.
Understanding Sri Lanka's turmoil and the regional fallout are vital to understanding the current state of South Asian security and diplomacy. There are several reasons for Sri Lanka's current unrest, ranging from president Rajapaksa's tax cuts, Sri Lanka's significant foreign debt, the ongoing agricultural crisis, and the tourism fallout over the 2019 Easter bombings and COVID-19. Finally, Sri Lanka's second-largest market for tea exports, Russia, has been ostracized by the international community in the wake of their invasion of Ukraine. Sri Lanka depends heavily on tea exports, with 17% of its economy relying on it completely.
Sri Lanka has already given up a port to the Chinese ambition. Under pressure from China regarding debts, Sri Lanka coughed up the Hambantota Port and 15,000 acres of land surrounding it. China now controls a piece of territory just off the shores of its main regional rival, India. China's ambition in Sri Lanka does not stop there. China's Belt and Road Initiative (BRI) has invested $1.4 billion in the Colombo Port City project, the largest ever foreign investment in Sri Lanka's history.
China has utilized the BRI as a form of neo-colonialism, using it to debt-trap poorer countries while exploiting those same countries for their raw resources and control over the infrastructure. With the presence of China in Sri Lanka already, and the current economic crisis, the Chinese are poised to take advantage of the situation by further exploiting the poorer island nation.
Sri Lankan Islamist Extremism
Easter Sunday, three years ago, three churches and three luxury hotels in Colombo were targeted in a series of coordinated Islamist terrorist attacks carried out by the National Tawahujja Jama'ath (NTJ). The attack killed 269 people, injuring at least 500 others. NTJ is believed to have connections to the Islamic State (ISIL). Terrorism in Sri Lanka has existed for some time. Organisations such as the Tamil Tigers and various Marxist-Leninist parties have carried out attacks in the past. Islamist terrorism began to rise in the 2010s, with a steep rise in attacks against the country's small Roman Catholic minority. These attacks eventually culminated in the 2019 Sri Lanka Easter bombings.
Sri Lanka's Islamic population, called Moors, is not large, accounting for roughly 9.7% of the population, and they have historically faced significant persecution by the Buddhist majority. Following the defeat of the Tamil Tigers in 2009, there has been a steep rise in anti-Islamic sentiment in Sri Lanka. Bhavani Fonseka, a human rights lawyer, spoke to the BBC about the issues, saying "in the post-war period, Muslims have become the new enemy." Muslim Sri Lankans, who already face discrimination from the government and who have a sudden rise in extremism within their community, are now staring down the barrel of the ongoing economic crisis.
Studies have shown that there is a connection between poverty, economic minority discrimination, and domestic terrorism. The ongoing economic crisis will exacerbate the divide between the Muslim and Christian minorities and the Buddhist majority. With the crisis worsening, Sri Lanka can expect a dramatic rise in Islamic terrorist attacks from well-trained, ISIL-affiliated organisations like the NTJ.
This rise in terrorism is not just a domestic issue either. Malaysia, Indonesia and the Philippines have seen their shared maritime border exploited by Islamist terrorists seeking to supplement conflict zones in Southeast Asia with foreign fighters. The Philippines' large Islamist problem has crossed the maritime borders and is beginning to affect its neighbours. Sri Lanka shares a maritime border with Maldives and India, two countries that could face the fallout of rising Islamic terrorism within Sri Lanka. As the economic crisis continues, and Sri Lanka finds itself unable to support its military and police structures, terrorists and criminals will leak through the porous borders.
Conclusions
In an increasingly globalized and interconnected world, the economic downward spiral of a small country can still have a great effect on the world at large. For South Asia, Sri Lanka's crisis can be a catalyst for significant shifts in the area's power structure, a rise in terrorism, and the opportunity for powerful countries to gain a further foothold in the region. This article has highlighted some of the ways Sri Lanka's ongoing crisis could do significant damage to South Asia, but there are undoubtedly other issues, such as international criminal organisations, which were not addressed. If you'd like to learn more about security concerns in South Asia and elsewhere, click here to view more of ITSS Verona's articles.
China’s influence in Africa is becoming increasingly deep. 2021 saw a bilateral trade between Beijing and the African continent of 254 billion dollars, with a 35% growth compared to the previous year. Given these findings, China is Africa’s largest trading partner for the twelfth consecutive year.
Over the last decade, Beijing has replaced “classical” colonial powers thanks to a new paradigm which privileges trading, infrastructural investments and non-interference in the home affairs of the countries with whom it cooperates. This success can be attributed not only to the fact that China has not been a colonial power, but also to a precise strategy pursued by its government, which is based on specific principles. One of the most important of these is financial support: from 2007 to 2020 Chinese development banks provided more funding than all other foreign financial institutions put together. The second point is the aforementioned neutrality in Africa’s countries home affairs, with no political interference, in contrast to the classical Western multilateral approach. This does not mean that Beijing does not show its soft power, but it prefers a strictly economic type of support, with no assistance, for instance, in the development of new democratic institutions or interventions in African political crises. Another important point is the “raw material for infrastructures” policy, which allows China to pay for African goods (mainly natural resources) by building new strategic onsite facilities (bridges, roads, railways etc.).
Given this strategic approach, African governments see China as a reliable partner and the main interlocutor for their economic development. The recent opposition of several African countries on the condemnation of Russian invasion of Ukraine at the UN General Assembly (17 abstained, following China and India, 8 were absent and 1 vote against), underlines the strong political connection which links the Beijing government and Africa, pushing African leaders to pursue Chinese interests in the international arena. This connection is bilateral but not equal: China, as a global superpower, extends its political influence by leveraging African countries’ debts. In particular, failure on their part to return money granted to them by China for the construction of strategic infrastructure may lead to repossession of that infrastructure by Beijing. Main examples are the Djiboutian port of Doraleh or the Mombasa port, used as collateral for the building of the Mombasa-Nairobi railway.
Chinese military presence in Africa: is this the beginning of a new framework?
As well as stronger financial and political intervention, in the last few years Beijing has intensified its military presence and cooperation. This engagement runs through the UN peacekeeping missions, which see a high presence of Chinese soldiers. This engagement aims to give China the chance to improve the expertise of its soldiers in operational contexts and to establish its presence in the continent.
At the moment, Beijing has a military base in Djibouti operated by the Chinese People's Army Navy (PLAN). The African country is an important hub for the control of worldwide trade: located in the Horn of Africa at the intersection of important shipping routes such as Bab-el-Mandeb and the Aden Gulf, which is the entry point for the Suez Canal, where 30% of global maritime trade takes place. Because of its strategic importance, the country hosts several military bases, notably the US, France, Italy, Spain and Saudi Arabia. The Chinese base hosts 2000 soldiers.
Endorsed by Chinese President Xi Jinping in 2013, the Djibouti base was inaugurated in 2017 and tasked with peacekeeping operations (PKO) and convoy duty. Regardless of the official purpose of the base, its size and the onsite facilities set out its possible role as a starting point for future military expansion in the African continent, with the creation of new bases in other countries. U.S. Gen. Stepen Townsend referred to it, in an interview with The Associated Press: “They have arms and munitions for sure. They have armoured combat vehicles. We think they will soon be basing helicopters there to potentially include attack helicopters.” Moreover, the above-mentioned multipurpose port of Doraleh, built by China and located near the base has been strategically important for it. Again, Chinese military expansion would appear to go hand in hand with the spread of its commerce and investments, following the routes of the “Maritime Silk Road” and taking advantage of facilities built and controlled for cooperation purposes.
It is plausible that Beijing will reproduce the “Djibouti base model” in other African countries, following the same steps and dynamics. In this regard, the recent agreement between Chinese and Tanzanian governments for the extension of the Bagamoyo port (75 km north of Dar es Salaam, Tanzania) could be the first stage of further military expansion. The seaport could give Beijing the chance to reinforce its presence in the region and act as a centre for ship repair. Moreover, a new base in the Indian Ocean could help resolve Chinese dependence on the Malacca Strait.
Between money and weapons: the end of Chinese soft power?
As we’ve seen, recent Chinese expansion in Africa seems to lead to an increasingly strong military presence in the continent. This new framework set up by Beijing, which combines investments, the building of new infrastructure, huge lending and limited political interference in African countries’ home affairs could be the forerunner for further military expansion. In the near future it is possible that China will decide to increase its presence in areas interested by The Belt and Road Initiative, in order to protect its own business through a greater control of the territory.
At the same time, the setting up of new military bases in key locations, especially on Indian Ocean coasts, will allow China to improve the strategic capabilities of its naval forces. It is hard to say if it is the beginning of a stronger approach: as seen, one of the main principles which drives Chinese interventions in Africa is the non-interference in the home affairs of local governments. Moreover, from the African countries point of view, Chinese interest, and new investments onsite, could represent a chance to develop their own economies, modernise their infrastructures and build new strategic facilities. Maybe this framework will not be overturned, but it is clear that Beijing aspires to a deeper and more active presence, underlining the importance of Africa in its global strategy.
Giulia Pompili discusses South Asian security perspectives. Giulia Pompili is a journalist and author. She currently sits on the South Asia desk at Il Foglio and writes the South Asian newsletter, Katane. She is also the author of Sotto lo stesso cielo, a book on the relationships between Beijing, Seoul, Taipei, and Tokyo.
In this session, Giulia Pompili discusses Australia & New Zealand's place in the US-China tensions over Taiwan, Japan's perspective on the BRI, Secretary Blinkin's visit to Indonesia, and the US diplomatic boycott of the Beijing Winter Olympics.
Prof. Valbona Zeneli (George C. Marshall Center) discusses the current state of the Belt and Road Initiative, analysing European perceived security and economic threats, opportunities, and scenarios vis-à-vis China.
