WHY DOES SRI LANKA REQUIRE A FOREIGN POLICY REVISION?
Thareendra Kalpage ?
Co-Founder @ Digital Zyndicate | Startup Investor, Entrepreneur
SRI LANKA'S ECONOMY NEEDS A FOREIGN POLICY MAKEOVER, BUT HOW?
Facilitating a strategic foreign policy makeover to revive Sri Lanka's dying economy
One of the world’s great diplomats, Henry Kissinger, once said, “Behind the slogans lay an intellectual vacuum.”, I have always found it fascinating to read about Henry Kissinger, the diplomat, and spending 20 years of my adult life in Sri Lanka proves to me how accurate that statement is. He was correct. Whether external or internal policies, Sri Lankan political leadership has always consisted mainly of empty slogans.
The article is not about Henry Kissinger or his brand of foreign policy but the commonly held belief that foreign policy is the ultimate weapon for any country’s survival. However, our island nation needs to construct a policy that can lead her from a default situation to a prosperous one. Factors such as a smaller population, a weak economy, and lower internal productivity will make it difficult for Colombo to bargain with the outside world. However, as the old saying goes, “If there is a will, there is always a way.” By making a genuine effort and reworking Sri Lanka’s foreign policy, improving trade facilitation, enabling regulations, boosting innovations, and addressing labor-related issues, Sri Lanka can help attract the outside world to bargain.
?Sri Lanka’s policymakers must first focus on sound decision-making and a comprehensive sound foreign policy makeover to accomplish economic growth . Failure to address the issue through foreign policy will have severe consequences for Sri Lanka. Small countries have traditionally had less to offer the business community in the past, and Sri Lanka is no exception. Nonetheless, the government must focus on economic liberalism or intense economic diplomacy to provide the world with something more appealing.
?The economic lesson learned during World War 2 was that nationalism was costly. The Bretton Woods Agreement set a fixed exchange rate using gold as the standard and the 44-nation agreement created the IMF and World Bank as part of the alternative for costly nationalism-driven path . The system proved workable for many countries. By the 1970s, the political economy came into existence as a field of International Relations. The North-South gap, economic regulations, and barriers to third-world economies started to be discussed. Gradually it was felt that there was a dire need to make a financial web, so all the states became involved economically to avoid poverty, war, and conflicts. It was a kind of thought where intellectuals have tried to make collective economic dependency. The concept is called economic Interdependence, and it was given by liberals such as Joseph Nye and Robert Owen Keohane. Countries like Singapore, South Korea, and many Southeast Asian nations opted liberal economic model and have progressed a lot. Today, Singapore is more capitalist than the US and an ideal to many Asian and African countries.
?Coming to the point, Sri Lanka should indulge in economic liberalism by making its markets more open. For that, she would reconsider her protectionist and regulatory policies. But more important, financial stability and true democracy are the first criteria for opening to economic liberalism. If there were political instability and a non-Democratic setup, no state or financial institution would take risks investing in the country.?
Background of Sri Lanka’s foreign policy
The basic Principle of Sri Lanka’s foreign policy is “friendship towards all, enmity towards none”, which can be traced from the inception of its foreign policy. Sri Lanka was the founding member of the Non-Aligned Movement (NAM) because Colombo wanted to maintain a foreign policy of neutrality. In contrast, Sri Lanka’s first constitution was Westminster, which influenced the beginning era of its foreign policy. The first Prime Minister of independent Sri Lanka, D.S. Senanayake maintained the British legacies, but gradually these attitudes changed with time.?
?Later on, diversity and multilateralism sought foreign policy in 1956 under the leadership of the then Prime Minister S.W.R.D. Bandaranaike, the country, established diplomatic relations with China and the USSR. Later on, the Rubber-Rice Pact agreement with China and the Island’s position on the Suez issue were giant steps toward multilateralism. There was a tough time in its foreign policy between 1976 and 2009.
?However, the opening up of the Sri Lankan economy in 1977 changed the entire economy. Therefore, on the other hand, the separatist conflict is highly responsible for slow economic progress in the country. Since 2009, Sri Lanka has been performing well on its foreign policy front, but still, some challenges have to be resolved.?
?Currently, the country has faced many challenges regarding its foreign policy. For example, Colombo faces a growth challenge, as there is no economic diversity on the Island. In other words, the only sector the country has is the non-tradable sector of the economy. Furthermore, Climate Change and Covid-19 are affecting the agriculture sector. Similarly, the challenge of maintaining a non-aligned spirit in her foreign policy amidst great powers’ competition in the Indo-Pacific and the Indian ocean. The civil war has significantly affected Foreign Direct Investment (FDI) because of the country’s lack of stability and weak infrastructure.?
There are three main objectives of Sri Lanka’s foreign policy, promoting economic ties with the world, ensuring her national security, and seeking the world’s help for inside security.?
Sri Lanka is in Desperate Need of a fresh Foreign Policy
The country’s ailing economy is the most significant task that needs to be resolved as the first step, which requires external financial support and foreign direct investment. But how to achieve that is the primary job of policymakers in the government.?
?Secondly, the location of a country is of formidable importance in foreign policy. Sri Lanka’s location as a gateway to South Asia offers a more attractive economic opportunity. But unfortunately, the national debt, the rising geopolitical tensions, and climate change in the region pose severe challenges to the Sri Lankan policy establishment. The country must work on that and take more advantage of its location.
?Thirdly, the country has no institutionalized foreign policy; instead, personalized ambitions have always driven the external policy. In other words, there are always leaders driven by foreign policy rather than institutions based.
?Fourthly, in the past few years, Sri Lanka’s foreign policy did evolved around China. There is a need for diversity in her foreign relations. Even when China put demanding conditions on the country, she is still in that orbit. There will be no harm if the country departs from this orbit.?
?Last but not least, the nation is always at loggerheads when it comes to foreign policy decisions, particularly regarding aid and loans. Some support China, and others are with India and the USA, threatening the consistency and legitimacy of foreign policy makeover.?
How should Sri Lanka go about its Foreign Policy?
Sri Lanka has faced the worst governance globally, marked by corruption, nepotism, and unsustainability in economic policies, ultimately leading to political instability. Political instability creates doubt in the mind of investors and the fear of losing their investment in politically unstable countries. Sri Lanka should bring meritocracy into the country rather than nepotism and instability to overcome the business community’s trust. Inclusive economic institutions lead to Inclusive political institutions. Once Sri Lanka gets Inclusive political institutions, there would be no reason not to invest in the country. Hence, the country will be able to get higher FDI. The government should work on enabling regulations and promoting investments.
?Nonetheless, the country’s geographical location is of immense importance. It can provide security to India and be a trade route between East Asia and West Asia. Also, it connects the Middle East with ASEAN countries and is a turning point between QUAD, AUKUS (a trilateral security pact between Australia, the United Kingdom, and the United States) and BRI (Belt and Road Initiative). Therefore, the country should fully utilize its geographic location to get maximum foreign policy handovers. The location can be the most viable tool for her foreign policy bargaining.
?In addition, there are several options for Sri Lanka that can be used by the government while pursuing its economic diplomacy. On the international front, the country can use Bretton Wood institutions, particularly the International Monetary Fund (IMF); Sri Lanka can seek European markets and ask for loans from giant powers. At the regional level, by using economic diplomacy, Colombo can take loans from friendly states or could initiate bilateral trade in the region to overcome its hoovering imports.
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?Similarly, the national debt and the rising political tensions pose severe challenges for the Sri Lankan policy establishment to bring FDI. The country must work on easing business so the Island can attract more FDI – according to experts, an increase in the ease of doing business rank of a nation can bring up to $44 million to its economy. Sri Lanka’s foreign policy aims to attract outside support for the country’s post-conflict domestic stability. But due to a lack of sufficient national consensus on the type of post-conflict society and weak infrastructure, she cannot achieve the desired goals. What the country needs the most to build national consensus and work for the national interests of the land.?
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Moreover, when it comes to diplomats, they should forge links between those leaders and institutions in foreign countries which are relevant to Sri Lanka to facilitate discussion in Sri Lanka and build the necessary greater consensus. With a national agreement, external engagement to support domestic stability is more likely constructive and beneficial for Sri Lanka.
?However, one must look at the fact that in the future, there will be a strategic challenge for many states to manage China’s rise, particularly in the Indian ocean. Hence, Colombo cannot set herself aside in the contest. Therefore, the Sri Lankan establishment will hurry to maintain the realpolitik paradigm of a balance of power between the US and China in her foreign policy in the Indian ocean.
?More importantly, Sri Lanka needs to work with the USA, Europe, SAARC, OECD, and Southeast Asian countries to secure its national interests, especially among economically powerful nations. What the nation has seen in more than 70 years is the downgrading of its growth and a high increase in foreign borrowings. Although the government adopted an unconventional policy in 2020 to support its economy, the ban was imposed on imports of unnecessary goods, which has improved the economy by 8 percent in the first half of 2021. But still, the economy is in hot water, and the government should reconsider its foreign contracts, especially with China. This would be the prime task of policymakers. Furthermore, the island nation needs to overcome its debt burden through viable foreign policy. The country has to improve and build a strong economy and should construct trade ties with SAARC and BIMSTEC countries.?
?Besides, Sri Lanka’s elites are pursuing their self-interests over national interests. The elites should bring change in their policies while dealing with foreign countries. For example, in their agreement with China, the elites went for the High Interests agreement with their Chinese counterparts rather than the Build, Operate and Transfer model. The move exposes their vicious ambitions. Sun Tzu, in his book ‘The Art of War,’ says when an individual commits something wrong, that is called a mistake. Still, when it comes to leadership, then this is not merely a mistake but a blunder because leadership decisions sustain the nation or destroy the nation. To overcome its challenges, Sri Lanka requires visionary leadership and a firm grasp of foreign policy. By this, the author was emphasizing the significance of a state-driven policy level in which a visionary policy would prevail regardless of who is in power, such as the United States Senate Committee on Foreign Relations.
?The tourism industry is considered to be the backbone of the country. But unfortunately, it was severely affected by Covid-19. The total share of Tourism in GDP was 5.6 percent in 2018. In other words, it was contributing $4.4 billion in 2018, suddenly shrunk to 0.8 percent in 2020. As Covid-19 is becoming a mere memory, the government should take all the basic steps to attract tourism. Currently, there are prolonged vaccination rates in Sri Lanka, and the total vaccinated population ranges 26.14 percent in the country. This means the government is not serious about dealing with COVID-related issues to attract tourists. Hence, to backtrack the largest industry in the country, the government should take all the essential steps regarding corona-related issues and must work on vaccination to declare the country fully vaccinated. Also, the Sri Lankan government could introduce a “Free Tourist Visa Policy” to attract international tourists to the country.
?Last but not least, there is hope for the Island nation to play a more provocative role in regionalism and multilateralism. Sri Lanka’s history as the leading player in multilateral and regional organizations such as the Indian Ocean Rim Association and BIMSTEC has grown recently. By using active foreign policy, the country can lead a leading role in the future, and that would be more beneficial to reinstall the mindset of being the trustworthy nation in the world.
Conclusion
There is always a war between continuity and change in world politics. Sri Lanka is experiencing the same situation. For example, whether maintain the old legacies/policies or go with new ones by taking some risks. There are always challenges for every nation when it comes to foreign policy. Foreign policy means to achieve your national interests in a challenging environment, what realists in international relations call anarchy. There are three models for foreign policy decision-making, the Rational Actor Model, the Organisational Actor model, and the Bureaucratic Actor model.
?The Rational Actor Model suits Sri Lanka. Sri Lanka's foreign policy faces challenges from domestic issues such as political instability, weak institutions, dead growth, and less technological innovation to foreign policy flows like always getting in to?losing negotiations with great powers, balancing US-China rivalry, increasing bilateral trade with regional countries, re-establishing world economic institutions' confidence, or making business grounds for FDI.
?On the other hand, the Rational Actor Model with ‘Cost and Benefit Analysis’ takes the central role in decision-making. While the country has many opportunities, and by using them with great enthusiasm, Sri Lanka can achieve all the desired ambitions of the Sri Lankan people.??
?Finally , It’s the Cinderella story of Asia. Sri Lanka, like all Cinderellas, is the most beautiful girl with the most beautiful nature while being located at a crossroads for all trade routes, despite working in a rat-infested kitchen.
References
?(The writer is the Chief Executive Officer of Epic Lanka Technologies and the perspectives and opinions expressed in this article are solely those of the author's personal viewpoints.)?
Sri Lankan diplomat, Alumna of the University of Colombo and NESA Center for Strategic Studies
2 年Congrats. Glad to read your thoughts on Foreign Policy.