Sri Lanka Turns from China, Toward India for Infrastructure Investment

Sri Lankan Railways received a nice shot in the arm this week as geographic neighbour India, as part of a pledged C$1.7 billion to develop the island nation’s railway network, will begin to commission diesel locomotive units for use in Sri Lanka. This investment marks a continued focus away from an over-reliance on Chinese investments following the election of current Sri Lankan President Maithripala Sirisena.

Sri Lanka Railways, the main state-owned railway operator and user, currently maintains 1,561 km of rail tracks, 74 locomotives, and employs approximately 18,000 workers. The recent investments by India will help restore arterial railways lines in efforts to connect the North and South of the country. This was previously made difficult due to conflicts resulting from the Liberation Tigers of Tamil Eelam in their efforts of creating a state in the northern region of the country exclusively for the country’s Tamil population. India’s investment will also go to help the Southern Railways line impacted by recent tsunamis. The investment made by India this week continues India’s deepening interest in Sri Lankan Railways. In 2017, India signed a line of credit worth C$422 million also dedicated solely to the development of Sri Lanka’s railway network, and in 2018 provided 160 railway passenger coaches. India’s total investments in Sri Lankan Railways now exceeds C$1 billion and furthers Sri Lanka’s relationship with India, a major regional power with the ability to counter China’s influence in Asia.

Sri Lankan President Sirisena, as per his election promises, froze all Chinese investment plans that were proposed under former President Mahinda Rajapaksa – a vocal supporter of China and Chinese investments in Sri Lanka. Sri Lankans and neighbouring countries like India became increasingly worried about rising Chinese influence and the potential for security concerns after Sri Lanka defaulted on Chinese loans used to build its Hambantota Port. As part of the debt restructuring process, Sri Lanka was forced to enter into a 99-year lease with a Chinese state-run shipping company along with creating a Special Economic Zone near the port, much to the dismay of Sri Lankan farmers and fishermen. With India’s ongoing investments into Sri Lanka Railways, President Sirisena continues his efforts to diversify away from Sri Lanka’s reliance on Chinese investments. A week prior to the recent railway improvement announcements, President Sirisena signed loan agreements with the Asian Development Bank, with commitments totaling C$1 billion and covering projects in areas including higher education and transportation infrastructure.