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Should Sri Lanka de-dollarise? 

23 Mar 2022

  • Beyond bananas, beaches, bases, and dependent development 
BY Darini Rajasingham-Senanayake Necessity is the mother of invention: Protests are mounting by people from all walks of life in all parts of Sri Lanka against the soaring cost of living, food and fuel shortages, blackouts, lockdowns, forced Covid-19 injections, and the sale of national assets by the ruling Rajapaksa-led regime in Colombo. As the Sri Lankan rupee (LKR) crashes against the US dollar (USD), seemingly a precondition for an International Monetary Fund (IMF) bailout, the buzz in some quarters of the Colombo intelligentsia is the need to de-dollarise and use a basket of currencies for trade, rather than de-value the LKR against the USD to make the people beggars, compound the national debt, and enable Euro-American hedge funds to asset-strip this strategic island, following the “advice” of the IMF’s “economic hitmen”.  Lands and power plants have been sold off in this strategically located island perched on some of the busiest sea lanes of communication in the Indian Ocean to hedge funds like BlackRock and Indian front companies like Adani and Ambani. The latter’s push to take over the agriculture sector of India during Covid-19 lockdowns was only prevented by two years of protests by farmers.  This is especially true as the post-World War Two Pax Americana and its financial and security order based on the USD as the global reserve currency is collapsing fast as Asia giants, China and India, along with Russia, move to design a “new world order”. China may buy Saudi oil in Renminbi, circumventing the petrodollar, and sanctions-hit Russia is working out a deal to sell oil and gas at discounted prices to India. Even tiny El Salvador in South America has made Bitcoin legal via a tender, and may soon pay down IMF debt with Bitcoin.   As people die in petrol queues and a humanitarian crisis mounts with mass impoverishment at this time in Sri Lanka, the island nation may well consider following India’s example: Looking after its own interests and buying oil, gas, jet fuel, etc., from Russia, at discounted rates in rubles or in exchange for tea, rather than succumb to the latest US-EU sanctions on Russia, Generalised Scheme of Preferences (GSP) removal threats, and the IMF’s debt trap “bailouts” and debt restructuring projects, while inviting India and China to help it roll over some of the debt. After all, the US has printed $ 9 trillion in the past two years alone in the form of “Covid-19 bailouts” and is the most indebted country on the planet, with a debt of $ 20 trillion and counting, yet its hedge funds are asset-stripping in Asian and African countries whose economies were hard hit by the World Health Organisation’s (WHO) Covid-19 lockdown policy recommendations, even as Euro-America channels more funds into the environmentally destructive North Atlantic Treaty Organisation (NATO) war machine, with Ukraine as the latest victim of the global military business industrial complex. Look East for development Increasingly, calls are being made for Sri Lanka to look East, to countries in the Association of Southeast Asian Nations and China, and stop following the “experts” and debt trap development “advice” of the Washington D.C., US consensus (IMF, World Bank) and the Organisation for Economic Co-operation and Development (OECD) Paris, France club of aid donors that have dictated colonial development policies in the island. No country can develop without a degree of industrialisation. This is what world systems theorists of dependency and under-development (Samir Amin, Andre Gunder Frank, Immanuel Wallerstein, etc.) wrote about.  In a nutshell, dependency theorists argue that natural resources and raw materials flow from the periphery of the world system, i.e. from poor and underdeveloped states in the post-colonies of Asia, Africa, and Latin America to a core of wealthy nations in the so-called first world, or Euro-America. In other words, poor countries in the third world or the global South pay for the enrichment of wealthy states that continue colonial modes of production and exchange fronting the “development discourse”.  After putative “independence” from the British in 1948 in Sri Lanka, a pliant transnational political and business elite and diaspora, dependent on foreign “donors” and experts by successive Governments, along with a backward and colonised business community, have effectively stymied strategic development thinking and the transfer of technology to enable the country to industrialise and use its massive ocean and mineral resources, and leverage its geostrategic location in the Indian Ocean region for national development.  The current mode of neo-liberal development since the introduction of the “open economy” in 1977 may be viewed as a form of “colonialism by other means” that services and benefits the imperial metropole core countries and impoverishes the Third World, which remains dependent on capital and markets in the West and service Western needs. A mindset of colonial dependency with spiralling political corruption has ensured the lack of a strategic national vision for post-independence economic development by succeeding Governments.  Sri Lanka was also “islanded” by 30 years of externally manipulated “internal conflict”, again due to a lack of strategic and intelligent political leadership during the Cold War period which saw the weaponisation of ethno religious identity politics followed by the US-led global war on terror in the Indian Ocean Rim (IOR) that saw mysterious Islamic States of Iraq and Syria (ISIS)-claimed attacks on Easter Sunday of 2019, which dealt a crippling blow to the island’s tourism-dependent economy. Banana republic: Service economies and aid dependency as a Dutch disease Service economies remain colonial-dependent economies, designed to service the imperial Euro - American metropole powers, unless visionary leaders are able to lead countries’ economic development in the global South.  Almost since the “open economic reforms” of 1977, Paris club donors and advisors along with a pliant and colonised political elite and Lankan business community solely lacking in innovation and enterprise have turned the island’s economy into a banana republic service economy, dependent on US-EU aid, experts, and markets. This is why, despite and perhaps because of its strategic location in the IOR, Sri Lanka effectively remains a “banana republic” as described in feminist academic Cynthia Enloe’s book Bananas, Beaches, and Bases; manufacturing underwear for Europeans, begging for GSP Plus trade concession handouts (that sustain economic dependence on EU markets), and running behind white tourists and “digital nomads”. Actually, GSP and GSP Plus, fake aid, and so called “trade concessions” have kept Sri Lanka’s business community, policy makers, and politicians colonised for decades, and following the dictats of the Paris club and Washington consensus debt trap development, rather than enabling Sri Lanka to craft independent development policies. GSP, like the human rights discourse that is strategically deployed to advance Western interests in Sri Lanka, is an example of how the colonial development policy works through trade instruments that trap dependent developing countries. At this time, Sri Lanka should not cave into the Euro-American sanctions regimes on Russian oil and gas and succumb to EU GSP removal threats. United Nations Sustainable Development Goals experts and Washington consensus “advisors” have also helped maintain a model of neocolonial economic development, dependent on Euro-America and its corporates, albeit with the help of increasingly transnational, political, and business elites of the island. Sri Lanka has missed the opportunity to leverage, transfer technology, industrialise, and value-add to its valuable minerals, including rare earth elements and ocean resources, which are being looted by so called “aid donors” like Germany and Switzerland (graphite, titanium, zircon), France, the EU, and Japan (fisheries). The lack of state-led investment in research and development based on post-colonial national vision and policy to upscale and enable the country to leverage its strategic resources, along with institutional decay and corruption at key higher education and national research institutions like the Geological Survey and Mines Bureau, the National Aquatic Resources Research and Development Agency, the Marine Environment Protection Authority, etc., have also hampered the country from reaping the benefits of its abundant ocean and mineral resources through industrialisation, the transfer of technology, and value addition.  Rather, these research and development institutions were rendered dependent on Western “donors” and hence service foreign interests and external research interests rather than the economic and development interests of Sri Lanka. Dependence on Western donors and markets has resulted in what may be termed as a form of “aid-induced Dutch disease”, another symptom of under-development in a post-colony. It is increasingly clear that Sri Lanka should now be:
  1. a) Using its graphite and rare earth minerals to industrialise and manufacture solar panels, batteries, and graphene oxide (also used in messenger ribonucleic acid gene therapies), and integrating into regional value chains rather than exporting “mineral sands” (titanium, zircon, ilmenite, etc.) cheaply, that are not even listed as contributing to the country’s foreign income
  2. b) Rather than having an “artisanal” fishery sector, the island richly endowed with seas, could have developed an export-oriented fishing industry and by-products such as high end fish oil-based pharmaceutical manufacturing
  3. c) Leveraging its strategic Indian Ocean location for economic development and taxing submarine undersea data cable companies that use Sri Lanka’s seabed-exclusive economic zone
Sri Lanka is intrinsically a rich nation, given abundant water, rich seas, and mother nature’s environmental largesse, but has been rendered a “beggar” nation due to fake independence-dependent development model rooted in Euro-American corporate colonialism, foreign aid, experts, and the dependency complex of its business elites and of course local political corruption in the post-colony. Finally, as the IMF tightens its noose on its long-suffering people with the help of Foreign Minister Basil Rajapaksa (who is also a citizen of the US) and President Gotabaya Rajapaksa, we may well ask why the IMF has not yet declared the US, with its $ 20 trillion debt, a “heavily indebted poor country” (HIPC) and offered it HIPC status? Increasingly, people are challenging the double standards of the Washington consensus and Paris club who use the flailing global reserve currency to print trillions of euros and dollars as “Covid-19 bailouts” and asset strip in the global South and increase inequality among nations and peoples. Desperate times warrant out-of-the-box solutions. At a massive Opposition protest in Colombo organised by an Opposition party last week on 15 March, there were calls to send the ex-US citizen President Rajapaksa and his brother, the Finance Minister, “back home to Los Angeles, USA”.  (The writer is a socio cultural and medical anthropologist based in Colombo) ……………………………………………….. The views and opinions expressed in this column are those of the author, and do not necessarily reflect those of this publication.

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