by Thileelar; originally published January 22, 2004
While there have been many articles written about the military importance of Srilanka to India, many have overlooked the role of Srilanka in India’s long term economic vision.
It is obvious that India has been aspiring to be an economic powerhouse and seeks to organize the south Asian countries around its own agenda. There has been so much talk lately about a common currency and other open trade agreements in the South Asian region.
For India to be an economic giant, it has to reduce its spending on what it deems unnecessary in the long term. While neutralizing the military threats of its neighbors, it also has to stymie the economic prospects of its neighbors.
The thawing of the relationship between India and Pakistan is an effort by India to offset the drain the Indo-Pakistan conflict has on its resources. A smooth relationship with Pakistan will also help stabilize the progress of the Indian economy.
On the other hand, India is pursuing a different strategy in Srilanka. A look at all the countries in the region would make it clear that Srilanka is the only country with the potential to offer an economic challenge to India. Despite the brutal war and the plundering of billions of dollars in the war effort, Srilanka maintained a relatively good economic growth in the past until the attack on its international airport. Economic growth has since increased due the current peace process. Srilanka has also managed to maintain relatively high social index scores as well.
While India looked at previous UNP governments’ open economy as a threat to its socialist domestic economic policy, it sees the current UNP’s global economy policy as a competition that needs to be eliminated or, at minimum, retarded. The fact that the current UNP has firmly aligned itself behind the global economy is very evident in its approach to the peace process and in its behavior in international forums.
The events unfolding in the northeast also add to India’s worry. The LTTE’s remarkable ability to maintain a coherent and efficient administrative structure has worried many people in this region for many different reasons. The LTTE has shown that it is not just a fine military organization, but it can also transform itself into a world class administration that can work with international organizations and other countries. The LTTE has also proven that it can put together impressive development projects with limited resources and good planning. It has shown great flexibility in learning and it has demonstrated its willingness to accept guidance and help from people outside of the northeast.
A combination of the UNP, the LTTE, and stable peace is the fastest way to recover Srilanka’s economy.
Several international players saw the opportunity that Srilanka presented. America and Japan are such players. In current times, economic interests are as vital, or even more vital, than military interests. America and Japan protect and seek to expand their economic interests with zeal.
While the economic policies of India presented opportunities to other countries to make use of India’s cheap labor, it also gave everyone an opportunity to sell into the fast expanding domestic Indian market. Once all the economic barriers are removed, the international big corporations will use their economies of scale and their experience to control and drive the domestic Indian economy. In a global economy this is unavoidable.
Thus countries like America and Japan are on a mission to curry favors with countries that can help them diversify their economic interests while they develop inroads into India.
Srilanka can help them achieve both.
A fast developing Srilanka will turn the India/Srilanka relationship into one that it mimics the current Taiwan and China relationship in which Taiwan controls a big portion of China’s economy.
Even though China’s cheap work force is tempting to many, it is Taiwanese companies are some of China’s biggest investors. Taiwan companies’ investments are mainly in the manufacturing sector to exploit China’s cheap labor. Research and development are still maintained in Taiwan. Even though Taiwan is smaller in size, it controls a large stake in China’s economy.
While it takes a long time and big financial commitments to build up the infrastructure for hardware based technologies, it is relatively easy for anyone to compete in the software related activities. India has positioned itself as an emerging leader in the software based IT industry.
There are three necessary key factors for building a strong software based IT industry.
1) Highly skilled workforce
2) Ability to work in a globilized economy
3) An efficient and a scalable infrastructure.
Srilanka meets these requirements. Srilanka’s ability to meet reasons one and two are mentioned earlier in the article. With international players willing to contribute to Srilanka’s development, a good IT infrastructure is not a big concern.
Given all these factors, Srilanka has all the potential to become an IT powerhouse that can surpass India in a very short time. This could also be easily translated into the banking sector through which Srilanka could become the financial hub of South Asia.
So a quick emergence of a Singapore-like economic structure in proximity to India will overshadow India’s economy, introduce unwanted competition and is not in India’s best interests. A stronger economy in the region will seek to exploit India’s cheap labor while maintaining the economic initiatives at its home base.
It is easy to get exclusivity in another country’s military affairs though defense accords, but it is a rather delicate task to gain control over other countries’ economic policies.
So it is a strange coincidence that there has been so much love between the JVP and India lately. TheJVP’s archaic economic ideas and their open opposition to the global economy will slow down Srilanka’s economy to a trickle.
While the process in the south is a lot easier to manipulate, the situation in the northeast has become very tricky. With the Tamil political entities united under the LTTE banner, it has become difficult to play power games in the northeast. Even India’s new found fondness for the SLMC cannot prevent the LTTE from exercising control over the northeast and showing their ability to govern. So the JVP is brought in to help here, too. The JVP will now work to revive the defunct paramilitary groups of the northeast and will try to bring them into the peace process. Blinded by shortsighted thinking, India is left with very limited options in the northeast affairs of Srilanka.
It is up to the international agencies to rise above the power plays and to work with the people of the northeast directly to define a new development model that will be a showpiece for the global economy.