In an Exclusive interaction, Sri Lankan High Commissioner Milinda Moragoda speaks with BW Businessworld’s Manish Kumar Jha on a diverse set of issues ranging from trade, investment, energy to defence and security. He recently proposed developing the thrust areas to scale up the strategic relations in his unique effort which is enshrined in the ‘Integrated Country Strategy’. He talks about the restructuring and tightening debt- measures for economic recovery. His previous role as the Minister of Economic Reform in the Sri Lankan government places him crucially on the right spot to bring back the economy on its maritime strength and its relations with India. He dwells on strategic pacts like Colombo Dialogue, SAGAR and maritime security in the IOR.

High Commissioner of Sri Lanka Milinda Moragoda recently proposed developing the thrust areas of petroleum, electricity, ports, tourism, ICT, exports, manufacturing and agriculture to elevate the Sri Lanka- India relationship to a strategic level which is enshrined in the Integrated Country Strategy. 

This Integrated Country Strategy (ICS) for Sri Lanka Diplomatic Missions in India 2021/2023, was drafted under the guidance of Milinda Moragoda, and convened by Niluka Kadurugamuwa, Deputy High Commissioner. In its unique proposition, it is an outstanding effort in addressing the finer aspects of our bilateral relations, and the potential which lays down a road map for the next two years.

In this context, he stressed the need to integrate the Trincomalee Oil Tank Farms and the Port of Trincomalee to the overall energy strategy of India with a view to making Trincomalee an energy hub, a move which he observed that would unfold greater trade and energy security cooperation.

Economic Bond

Milinda talks about the steps to enhance Sri Lanka’s energy security. He looks at the greater potential and the further agreement for joint redevelopment of the British era oil-tank farms in the eastern coastal town of Trincomalee. Sri Lanka inked a deal with a subsidiary of Indian Oil Corporation (IOC) for the long-gestating project to refurbish and develop the British-era Trincomalee oil farm, an 850-acre storage facility with a capacity of almost one million tonnes.

While on the port side, having cancelled the East container Terminal deal with India and Japan, State-owned Sri Lanka Ports Authority and India’s Adani Group finalised a deal last year to develop the west container terminal at Colombo port. Dredging work at the terminal is expected to start later this month.

Crisis 

Is the sovereign debt crisis still lingering on Sri Lankan economy? Then what are the steps that the government is taking to mitigate the impact?  

 Inflation also surged to 12.1 per cent in December. Sri Lanka has borrowed heavily and faces repayments on USD 12.5 billion in international sovereign bonds. Officials have said the government is gradually building back reserves to ensure it can honour its debts. The government settled USD 500 million due on sovereign bonds in January and the gross official reserves stood at $2.36 billion at the end of January, according to the country's Central Bank. Including the latest payment, Sri Lanka has foreign debt obligations exceeding USD 7 billion in 2022, including the repayment of another bond worth USD 1 billion in July.

Ocean, livelihood and marine sustainability

The issue of unsavoury incidents that involve Indian fishermen is certainly the complex one. It is worth noting that India-Sri Lanka has fairly well resolved the sea lines--boundaries under the UN Convention on the Law of the Sea (UNCLOS-I). What is left is the history which is about cultural commonality, trade practices and people to people moving from the shores of Tamil Nadu to Sri Lanka. Mostly, the problem persists in the Palk Strait

This time around, Colombo has excluded livelihood from governmental consideration beyond. This has already flagged consternation in Tamil Nadu and has the potential to strain Centre-state relations on the one hand.  It was in 1964-66 that the two nations delineated the International Maritime Boundary Line (IMBL) under the UN Convention on the Law of the Sea (UNCLOS-I). In a unique way, the IMBL accord deviated from the UNCLOS-proposed median-line principle, which left the tiny Katchchativu islet, within Sri Lankan territory. The uninhabited islet was earlier under the Sivaganga principality in British-India, but then the IMBL deviation supposedly ensured that no third nation could venture out into the shared Palk Bay/Gulf of Mannar waters.

Defence cooperation 

High Commissioner Milinda outlines the crucial aspect of defence and security cooperation which is an NSA-level dialogue. The NSA’s dialogue is a platform where India, Sri Lanka and the Maldives come together and it is called Colombo Dialogue. The Colombo Dialogue now needs to be expanded to bring in other countries.

Sri Lanka is in talks with India to discuss a proposal to acquire two military aircraft for the Sri Lankan airforce, following a meeting between foreign minister G L Peiris and the Indian minister for external affairs, S Jaishankar.

The proposal is centred on acquiring two Dornier aircraft. The Dornier is a twin-engine multi-purpose aircraft used for maritime surveillance by the Indian Navy and Coast guard. Aircraft is to be used by Sri Lankan coast guard and navy.

Moragoda also emphasized: “Sri Lanka is the largest recipient of Indian defence scholarships, and at any time 600 to 700 of our personnel are training in India. We want to increase this and expand it to the police.”

Excerpts: 

Manish Kumar Jha: You laid out a grand strategy in the ICS for the next generation of India Sri Lankan bilateral relations? What do you propose and how will it work?

High Commissioner Milinda Moragoda: India-Sri Lanka relations have a history of thousands of years. But if we talk of the modern era i.e., post-independence, the evolution of our relations has been in three phases. These three phases are: Transactional phase, Strategic Phase and Special Relationship.

Talking about the economic aspect of India-Sri Lanka relations, there are a few thrust areas that can further propel our economic relationship to explore the unexplored areas. We can look at the Trincomalee Port. 

The Trincomalee port can be used as an energy hub for India. The port of Trincomalee is one of the largest natural harbours in the world which can harbour almost all the ships ranging from commercial tankers to aircraft carriers. Thus, it can support the operation of both defence and commercial activities.

India's demand for energy and fuel is growing with each passing year. By 2030, it is expected to grow even more. And therefore, India needs strategic reserves. Therefore, if India includes Trincomalee in its strategy, it can add a strategic reserve for its needs and also can use the port for oil refining. If this happens, then Trincomalee automatically becomes an energy hub. This will benefit Sri Lanka’s eastern sector as well by creating employment and thus contributing to the economic growth of the country.

January 2009 Gujarat The then Tourism Minister of Mahinda Rajapaksa administration Milinda Moragoda with the Chief Minister of Gujarat Narendra Modi. Moragoda was there to address the annual Vibrant Gujarat( photo credit-Island)The second area where we are looking to cooperate is in the domain of electricity generation, especially from renewable sources. In some areas in Sri Lanka, the capacity to produce electricity by extracting wind energy is approximately 5000 megawatts. The total energy requirement of Sri Lanka as of now is 4000 Megawatt. The companies like NTPC in India have the capacity to successfully generate 6500 Megawatt. As of now NTPC and the Sri Lankan government are collaborating to generate 100 MW of power. So, if India and Sri Lanka can collaborate in tapping wind energy, we can generate electricity much more than our energy needs and thus will also have the possibility of export.

The third area where India and Sri Lanka can cooperate is in the area of Ports. Out of the total shipments, only 20 per cent of the total shipment goes into Sri Lanka. Almost 80 per cent of the business at the Colombo port is trans-shipment. Of this 80 per cent, 70 per cent goes to India. So, in other words, India is the main market for Sri Lankan ports. Interestingly, of the whole 70 per cent, 35 per cent goes to Adani controlled ports. That is the reason Adani is part of West Terminal Port.

As of now Sri Lanka's total port capacity is 70.5 million TEU's. Our cooperation in this domain will increase Sri Lanka's capacity and thus will also result in an increased volume of trans-shipments to India. 

The Chinese CICT is also 3 million. So, the collaboration that is taking place with India in the western part as far as ports are concerned should continue. 

The fourth area of collaboration is tourism and people to people connections. Before the onset of COVID-19, approximately 20 to 25 per cent of tourists visiting Sri Lanka were from India.

So, we are optimistic that this trend is to continue in the near future as well. We can employ aviation, ferry services, cruise services to encourage tourism and facilitate the movement of tourists in a smooth fashion. We should attempt to increase people to people contact as well.  

We should have such terminals where Indian customs officials can station at Colombo and anyone going to any Indian state can just check-in at Colombo itself and fly off to India without much difficulty. Such an arrangement on both sides will facilitate people to people contact.

The fifth area is digital and ICT. We want to use the Aadhar Card as a template in Sri Lanka. We are going to collaborate with India on the technical aspects. So, the idea has been approved by our government and very soon the collaboration will begin. We are also looking at companies like HCL and Tata for investments. These companies will be creating quality jobs. So, we want more and more private companies to get involved. Sri Lanka will provide an optimal environment for such private sector investments to take place.

The sixth area is trade and import-export. India and Sri Lanka have a Free Trade Agreement. So, rather than signing any more agreements, we will like to innovate and use the FTA in better ways. For example, if we can import Indian fabrics and clothes from India and further refine and stitch these clothes to further export them to India, without quotas. Sri Lanka has developed a niche in apparel. Sri Lanka is not only specialising in stitching but also in designing clothes and swimsuit wears.

In the area of manufacturing, we are looking at the pharmaceuticals sectors. Indian pharma companies have been interested in investing in Sri Lanka. There is a pharma zone being developed at Hambantota. The Sri Lankan government will definitely give tax concessions.

The other sector we are looking at is agriculture and livestock. We can create a triangular partnership comprising India, Israel and Sri Lanka in the domain of agriculture. We have already imported organic fertilisers from India and are using them in Sri Lanka.

So, these are the basic thrust sectors. If these things can be done, then in my view everything else becomes less important and as the economies of both, the countries get integrated to a greater degree.

Manish Kumar Jha: What are the prospects of defence cooperation between Maldives, Sri Lanka, India and Bangladesh where we could jointly manufacture boats?

High Commissioner Milinda Moragoda: We can look into this area but Sri Lanka has no shipyards rather we have boat-yards. We can work in this area. The other aspect of defence and security cooperation in which we are engaged as of now is NSA dialogues. The NSA’s dialogue is a platform where India, Sri Lanka and the Maldives come together and it is called Colombo Dialogue. India has helped to develop a secretariat in Colombo.

The Colombo Dialogue now needs to be expanded to bring in other countries. Few countries are observers as of now. So, over the years if we can include other countries like Bangladesh, then this platform will be an interesting forum to discuss defence related issues. The objective of this dialogue is concentrated on and around maritime security issues.

So overall, I will say that India can and has the potential to be a locomotive in propelling this region to prosperity. All the other nations in the region could benefit from that.

Manish Kumar Jha: Inflation stood at 12.5 % last year and 12.5 billion international sovereign bonds. What about Sri Lanka's economic situation and how is India assisting Sri Lanka?

High Commissioner Milinda Moragoda: This has to be sequential. India is helping us on the stabilisation side bilaterally. There are basically four pillars on which this is operating.

• First is to support the Balance of Payment.
• Second is in the area of energy security. A revolving credit of 500 million dollars for oil and petroleum has been given.
• Third is for essential items and a loan of 1 billion dollars, which will be signed later this week.
• And the fourth one is the investment component. India has played a very crucial role in stabilisation of the ongoing Sri Lankan economic crisis.

Manish Kumar Jha: What about the fishing dispute which keeps occurring at times? And this time around, Colombo has excluded livelihood from governmental consideration while it is also acknowledged that International Maritime Boundary Line (IMBL) is well defined under UNCLOS and accepted by both countries. 

High Commissioner Milinda Moragoda: It is a difficult and complex issue as most of the time fisherman from India cross the agreed notions of demarcations and enter the Sri Lankan side, which becomes illegal.

Secondly, the bottom trawlers used by the fishermen from southern India are internationally banned. The big trawlers completely dig the base resulting in the destruction of breeding ground for the small fish.

One of the areas where we have come to an agreement is that we will encourage these fishermen to go for fishing in deep seas rather than being on the periphery. We are working on it. The Indian government has set aside funds for boats and training. 

So, right now we are focussed on processes. We have a Joint Working Group between India and Sri Lanka which is due to meet in the first half of march. Then we will have a meeting between the fishermen's association on the two sides.

India’s External Affairs Minister, S. Jaishankar is planning to visit Colombo between 18th and 20th March. He will be accompanied by the minister of fisheries. We will have representatives from our side as well. 

So, it will be a 2+2 discussion. Some representatives from Tamil Nadu will also be joining. This issue can only be dealt with dialogue and comprehensive discussion. There is not going to be a quick solution. We have to work on this but I am optimistic as we have an ongoing process at place to deal with the issue. 

We are not against fishing as a livelihood. We are only concerned about the concept of sustainability. The way it is being done right now, is destroying the breeding ground and the fishing beds. Therefore, we have to come to some kind of arrangement. 

The situation was different when there was an ongoing war in Sri Lanka. Post-war, we were managing it, but now we need to come to some understanding. We have to respect the boundary because that is the key.

We can also look at cases as to how other countries have dealt with this. This is not the not the first and the only unique case of a fishing dispute. Other countries have had this issue. So, we can learn from their experience about ways to solve an issue such as this.

Manish Kumar Jha: How do you look at the Indo-Pacific? How does Sri Lanka view it?

High Commissioner Milinda Moragoda: I will give you a philosophical answer to this. For us, as an Island country, our connection with the sea is eternal. Civilisations like ours and that of India go back to thousands for years. The sea has been the source of opportunity and also has been the pathway for colonisation. Both threat and opportunity come from the sea. So, we need to have a very balanced approach in dealing with every situation. Being a small country, we cannot call the shots but we have to balance the dynamic geopolitical. Our relationship with India is different. We share a common heritage and are all from the same DNA. We have a privileged relationship and we have had our ups and downs. So, we have to be conscious of the prevailing situation.

I think the only way to handle this is through discussion of each other’s grievances. Reciprocity in understanding each other's grievances will enable us to deal with all challenges. 

India has always respected our identity, our history and culture and has had a big heart in its dealing with Sri Lanka. We realise that the relationship between India and Sri Lanka is asymmetrical. But we should have candid dialogues on the issues of concern.

In the case of strategic issues, we have to take things into perspective. We both have suffered from colonisation and have a commonality of shared historical experiences. 

If we both can be candid, open and have no surprises for each other in the relationship, our relationship will sail smoothly on the waves of the Indian ocean