At a meeting in Davos in 2017, Chinese President Xi Jinping made a speech supporting the agenda on globalisation. Meanwhile, back in the US, President Trump was highlighting the importance of the US confining its national boundaries. “America only does not mean America alone,” said Trump in Davos. The president received a standing ovation for a speech that resonated the importance of collective action to build a better world. However, global reality, with its increasing political fractures, tells a different story.

Sri Lanka too is witness to political bipolarity at a critical moment in the island's political narrative. For a closer examination of the developments underway in Sri Lanka, a study of the 'Silent Revolution' of 2015 against the monumental French Revolution provides illuminating points for analysis. Alexis de Tocqueville ideas on the French Revolution state that the “chief permanent achievement of the French revolution was the suppression of those political institutions, commonly described as feudal, which for many centuries had held unquestioned sway in most European countries. The revolution set out to replace them with a new social and political order, at once simple and more uniform, based on the concept of equality of all men.”

In comparison, what did the Sri Lanka’s Silent Revolution achieve? Did the present government take precautions to make sure of importing nothing from the past into the new regime? What kind of process did the new regime follow? And what restrictions were set to differentiate themselves in every possible way? Was the word revolution used simply to fulfill a political aspiration?
Messages from the leadership are loud but inconsistent. Sufficiently exposed to bipolar political promises, public absorption of rhetoric has reached exhaustion. This is a poor note to send the electorate after casting their franchise at the local elections in Sri Lanka. Looking at this bipolarity from the top, one could design a “political bipolar index (PBI)” to assess local leaders' (lack of) responsibility.

For politicians, political power remains the raison d’être. The struggle toward electoral victory, subsequent power struggles, and influence over public policy is visible across societies. In certain dignified societies, persuasion remains an acceptable choice over coercion. However, in some societies, politicians prefer the baton, tear gas, and machine guns. In an orderly society, coercion and conflict are transferred from the battleground to councils of law.

Some regimes have the muscle to ward off a revolution while others fail. Sri Lanka’s Rajapaksa regime failed to ward off the Silent Revolution in 2015. It was a peaceful revolution by ballot. To apply de Tocqueville’s words, “The regime which is destroyed by a revolution is almost always an improvement on its immediate predecessor, and experience teaches that the most critical moment for bad governments is the one which witnesses their first steps toward reform.” Today, the Sri Lankan government is experiencing what Tocqueville wrote in 1856, in his book on the French Revolution.

The local government election results revealed the mood of the polity. Local elections remain a perfect barometer to identify political cyclones on the horizon. Then one could also name the next revolution 'Silent Revolution 2.0' in 2020. An actual revolutionary scenario will offer new faces and fresh voices. However, such a reality remains doubtful.

Sri Lanka celebrated 70 years of independence on 4 February this year. The country displayed its achievements since independence in the print and electronic media. Alongside its achievements, the country has also faced nearly a thirty-year war with two youth insurrections in 1971 and 1989. The revolt was against the political system of that time which failed to create better economic conditions particularly in the field of employment. The situation has not improved. The economic condition worsens with high borrowings and debt. This was clearly indicated by the latest Moody’s Asia Pacific rating. Sri Lanka did not rank favourably, especially when compared to with 24 Asia Pacific countries. Earlier, the World Economic Forum's Global Competitiveness Index report reflected the same dismal ratings.

Since independence, successive governments have failed to make Sri Lanka a developed nation. A toxic mix of high-level corruption and bad governance remain at the heart of the problem. According to senior journalist, Malinda Senevirathne, “a system of government run by the worst, least qualified or most unscrupulous citizens” and an absence of technocrats with the right skill set to deliver could be the cause of this situation.
President Sirisena’s findings from the Central Bank Bond Commission and the revelation of malpractice to the public should be appreciated. His actions reflected transparency at the highest level. In a country like Sri Lanka where the appearance of civil power is little more than a wispy gauze veiling the reality of political power, disclosures from the Bond Commission are grist for the mill of politics-as-usual and not a force disrupting the status quo. Only if appropriate action is taken following the revelations contained in the report and the funds recovered to the public can progress be measured in terms of restoring civil power over political power.

In this revolutionary political moment that began in 2015, revolutions within revolutions are needed to harness the scattered and disgruntled polity. The ballot in hand has proven that the results will be a clear epiphany.

China’s investment in Bangladesh’s stock exchange gives Beijing a chance to shape the
financial architecture of the most vibrant economy in India’s neighbourhood.

On 19 February 2018, the board of the Dhaka Stock Exchange (DSE) accepted a proposal by a consortium of China’s Shanghai and Shenzhen Stock Exchanges to acquire a 25% share in Bangladesh’s largest stock exchange. There were only two bidders – the Chinese consortium and a rival group, including India’s National Stock Exchange and the U.S. Nasdaq. The winning bid was $119 million in cash – 56% more than the Indian bidder’s offer.

That figure may seem small compared to the $3 billion in projects China launched in Bangladesh during the 10 years that ended in 2017, but it could be a harbinger of more substantial investments to come. A Gateway House analysis (see details in map below) suggests that current plans could see total Chinese investment swell tenfold – to $31 billion. That would be even more than the $20 billion in infrastructure promised by President Xi Jinping during his October 2016 visit to Dhaka. What’s more, the stock exchange investment hints at a strategic purpose behind Chinese investment: by acquiring a substantial stake in the DSE, China will gain greater access to – and possibly control over – Bangladesh’s financial infrastructure and hence the guts of its economy. Gateway House’s research map on Chinese investments in Bangladesh. Researched by Amit Bhandari and Chandni Jindal.

The new Chinese investment could be beneficial to Bangladesh, at least in the short term. China’s financial sector, led by Alibaba, is technically formidable, admired and effective. Transferring some of its knowhow to Bangladesh, which is already a global innovator in the financial systems associated with strong economies, can reduce transaction and distribution costs. But the growing Chinese presence also is a cause for worry: such a significant
investment in a key pillar of the Bangladesh economy could enable China to influence regulatory and compliance norms in the financial markets in ways that could pave the way for an even larger Chinese role in the economy and ultimately make the country economically and politically dependent on Beijing.

Bangladesh is the most vibrant economy in India’s neighbourhood with the least Chinese penetration; during 2016-17, China (including Hong Kong) accounted for just 7.3% of all foreign direct investment (FDI) in Bangladesh. As a result, Bangladesh has been able to refuse China, as it did in the case of the proposed Sonadia Port that China wanted to develop. It also has significant and growing economic ties with India – and is open to Indian investment. During FY17, Indian FDI in Bangladesh was $95 million – less than China’s total, but still substantial. India already sells electricity to Bangladesh, Indian companies are exploring for oil and gas in Bangladesh and the country is considering a proposal to construct a petroleum product pipeline from an Indian oil refinery to Bangladesh. The prospects for such investments could evaporate if financial norms favour proposed Chinese investments in Bangladesh.

Bangladesh has become a target of opportunity for China. Like other low-income countries, it desperately needs infrastructure like roads, bridges and power-projects. But multilateral lenders are leaving the field open to new investors. The World Bank and the Asian Development Bank, perhaps reflecting environmental concerns in more developed countries, no longer finance coal-fired power plants. And even though the country needs bridges to allow more efficient shipments of goods, the World Bank scrapped assistance for a crucial bridge on allegations of corruption. As a lower income country with weak institutions and poor infrastructure, Bangladesh has trouble meeting standards for financial management set in the developed world. China has readily offered to build much needed power plants, bridges and roads with fewer strings attached, and the country has eagerly accepted.

The Gateway House map of Chinese investments in Bangladesh shows the scope and scale of China’s ambitions. Most of these projects exist so far only on paper; the agreements were only inked in late 2016. But if they move ahead, China will become the largest foreign investor in Bangladesh by a large margin. What’s more, China’s role as a major weapons supplier already gives it leverage with the country’s politically powerful military.

As the Sri Lankan experience has shown, without transparency and proper controls, Chinese lending to help poor countries pay for such investments can push them into a debt-trap – a level of financial obligation that can reduce their economic options. These investments also can alter political geography, leaving them unable to resist political pressures from their benefactor; this has already happened in the Maldives.

India has been unable to match China’s big-ticket infrastructure spending on its own. It could work with Japan, which is trying to increase its own infrastructure investments in the
region; it is helping Bangladesh develop a deep-sea port, at the expense of a Chinese project, for instance. India, meanwhile, could take steps to improve infrastructure supporting border trade with Bangladesh, investments that could help reduce the appeal of Chinese infrastructure. Such opportunities could be lost if China gains disproportionate economic power.

So far, Bangladesh has shown itself to be willing and able to seek the best terms for itself and keep a balance between various powers. The question is whether countries like India will act in time to ensure that Bangladesh retains its freedom to choose.

Trade, investment and regional connectivity between India and Iran received a boost on Saturday with the two countries signing a dozen pacts including one on double taxation avoidance and another for the leasing by an Indian company of a container terminal facility in Iran’s strategically located Chabahar port. New Delhi is keen to develop the port to access Afghanistan, bypassing Pakistan.

The pacts were signed after “substantive” talks between Prime Minister Narendra Modi and
visiting Iranian President Hassan Rouhani in New Delhi.

The two countries also exchanged documents bringing an extradition treaty signed between the two countries in 2008 into force.

Rouhani, who arrived in Hyderabad on Thursday, is the first Iranian President to visit India in a decade. The last presidential visit was by then president Mahmoud Ahmadinejad in 2008.

“Both leaders held substantive & productive discussion on cooperation in trade & investment, energy, connectivity, defence & security & regional issues,” said a Twitter post by external affairs spokesperson Raveesh Kumar soon after the two leaders sat down for talks.

The Iranian president’s visit to New Delhi comes after a four nation trip by Modi to West Asia and the Gulf region, which has seen new alignments with Israel and many of its former adversaries—the Gulf Arab states like Saudi Arabia and the United Arab Emirates— seemingly allied against Shia majority Iran. The region is of key significance to India given that it hosts about 7 million expatriate Indians, a source of valuable foreign remittances and energy for Asia’s third largest economy.
Ties between India and Iran have in the past been buffeted by the impact of international sanctions on Tehran mainly for its nuclear programme. But with Iran reaching a pact with the international community on the subject in 2015, India-Iran ties have gathered momentum. In May 2016, Modi visited Iran and the two sides signed a pact for the development of the Chabahar port. India and Iran also signed another trilateral pact with Afghanistan that would allow the transport of goods among the three countries.

Boosting economic and trade links

According to information provided by India’s ministry of external affairs, the pact on “the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on Income,” was signed to “avoid burden of double taxation between the two countries in order to promote flow of investment and services.” The pact, under discussion for a decade, was signed and exchanged on Saturday, Deepak Mittal, joint secretary in charge of Iran in India’s foreign ministry told reporters.

A PTI report quoting a statement from the Central Board of Direct Taxes said the pact would “stimulate flow of investment, technology and personnel from India to Iran and vice versa, and will prevent double taxation.”

“It will improve transparency in tax matters and will help curb tax evasion and tax avoidance,” the report quoting the statement said adding it meets the latest minimum standards set by the G-20 (Group of 20) Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting Project.

Separately, the Engineering Export Promotion Council of India and the Trade Promotion
Organization of Iran signed a pact for increasing collaboration.

Three other Indian industry lobbies—the Federation of Indian Chambers of Commerce and Industry (Ficci), the Associated Chambers of Commerce and Industry of India, and the PHD Chamber of Commerce and Industry—signed separate pacts with the Iran Chamber of Commerce, Industries, Mines & Agriculture to boost trade.

During talks between Rouhani and Modi, it was agreed that the two sides would look at concluding a preferential trade agreement and a bilateral investment treaty to improve trade and commercial links, Mittal said.

Modi and Rouhani also “recognised the need to put in place an effective banking channel for business transactions,” the joint statement said. “It was noted that permission for the Iranian Pasargadbank to open a branch in India was under advance consideration. It was also agreed to set up a Joint Committee of officials to examine feasible options... to establish functional payment channels,” it said.
Connectivity

The pact on connectivity—the lease contract for the Shahid Beheshti Port, Phase 1 of Chabahar—allows an Indian company, India Ports Global Ltd (IPGL), to take over the interim operations of the port at Chabahar, Mittal said.

The pact was signed between Iran’s Port and Maritime Organization and IPGL and permits
the latter to operate the terminal for “a term of one and half solar year (18 months).”

The India-Iran joint statement released after the Modi-Rouhani talks said “India conveyed its readiness to support the development of Chabahar- Zahedan Rail line,” that will aid the transport of goods right up to the Afghan border. Indian and Iranian companies, engaged in discussions of the railway line construction “were tasked to finalise the technical parameters and financing options for the project in a time bound manner,” the joint statement said.

“Both leaders encouraged greater efforts for cooperation in railway sector including supply of steel rails, turnouts and locomotives,” it added.

“The Iranian side expressed its readiness to enhance enabling environment to attract Indian private and or public sector investments, in Chabahar FTZ (free trade zone),” the joint statement said. “In this context, Iran will organise a business promotion event, with participation of countries from the region and beyond, with the objective of showcasing the economic opportunities offered by the Chabahar Port,” it added.

India is trying to develop the port of Chabahar on Iran’s east coast as a way to gain access to the markets of Central Asia as well as Afghanistan by bypassing Pakistan. The port is about
72km from the Pakistani port of Gwadar, which China is developing. Energy cooperation
On energy cooperation, the joint statement said India and Iran had “agreed to move beyond traditional buyer-seller relationship and develop it into a long term strategic partnership.”

Foreign ministry official Mittal added that both sides had spoken of making the energy partnership a more “comprehensive” one. India and Iran are currently engaged in trying to reach an agreement over India developing Iran’s Farzad-B gas field. Ahead of Rouhani’s arrival in New Delhi, a delegation from the National Iranian Oil Company had held crunch talks with Indian authorities to see whether an agreement could be struck. According to New Delhi, Iran has shifted the goalposts several times since the start of negotiations on the deal in 2007.

Iran has been trying to reach a better bargain with India after crippling economic sanctions against it were eased following its 2015 nuclear pact with six world powers—the US, UK, Russia, France, China, and Germany, according to news reports.
In his comments to reporters, Rouhani said Iran was “fully ready” to intensify cooperation in
the areas of energy.

Terrorism, Afghanistan and other issues

According to Mittal, there was unanimity of views between India and Iran on the need to condemn terrorism in all its manifestations and that sanctuaries for terrorism must be destroyed.

“Iran and India have a common stance on confronting terrorism and extremism, and we are determined to confront terrorism and extremism through culture and the exchange of information and experience,” Rouhani said a statement to reporters after talks with Modi.

On Afghanistan, an immediate neighbour of Iran and a country that India sees as part of its extended neighbourhood, Modi and Rouhani were unanimous on the need for any peace process in the country to be Afghan owned and Afghan-led, Mittal said.

Iran and India, along with Russia, were the three main backers of the erstwhile Northern Alliance resistance group seen as ranged against the Taliban in the 1990s. But now Iran and Russia seemingly have differences with India with the former perceiving the Islamic State as the bigger threat in Afghanistan than the Taliban. According to analysts, the change in stance is also due to the US presence in Afghanistan that Russia and Iran are watching warily given that neither have a good relationship with Washington.