Sri Lanka’s new President, Maithripala Sirisena in Colombo, January 9, 2015. Buddhika Weerasinghe/Getty Images
Outgoing Sri Lankan President Mahinda Rajapaska conceded defeat on Friday to Maithripala Sirisena, who won Thursday’s election in a surprise victory that will profoundly affect the country’s interconnected economy and foreign diplomacy.
During nearly a decade in power, Rajapaska successfully concluded a long-running war against minority Tamil separatists in the north, centralized executive power, and brought Sri Lanka closer to China. In the last decade, China became Sri Lanka’s top investor, its largest lender, and its second-largest trading partner. In return, China de facto had Sri Lanka in its strategic orbit as an integral part of its global Silk Road initiative (which is backed by a $40 billion infrastructure fund) and a projection of Beijing’s influence in the Indian Ocean. China was the main seller of advanced weaponry to Sri Lanka during its civil war, and twice in 2014 sent submarines to dock in Colombo, the capital. This rankled India, who supported the Tamils during the civil war and has had a lukewarm relationship with Sri Lanka despite its proximity.
With Sirisena’s sudden ascent to the presidency, things will change. Whereas Rajapaska’s dealmaking was largely opaque, Sirisena has pledged greater transparency and a crackdown on corruption. Sirisena laments Sri Lanka’s increased foreign debt burden under Rajapaska’s watch, and his economic affairs spokesperson said that the new government will reexamine all major infrastructure projects and withdraw funding from “white elephants.” Most of these happen to be Chinese, such as the $1.4 billion Chinese-backed project to build a new port city off of Colombo. While reaffirming friendly relations with China, Sirisena promises to rebalance foreign policy and maintain equal relations with China, India, Pakistan, and Japan.
Despite being a relatively small island nation of about 20 million people, Sri Lanka will be able to net oversized economic pull by playing these larger nations against each other. (It has friendly links with the U.S. too, and is encouraging greater American investment.) If Sirisena plays his cards adeptly, he can coax these countries to offer more attractive terms for proposed projects in order to check the influence of their rivals.
Sirisena still faces major domestic challenges — keeping together a diverse governing coalition, transitioning to a parliamentary system from the current presidential one, and implementing economic reforms. (Rajapaska’s central bank governor resigned on Friday, giving Sirisena the chance to reform the institution to ensure greater transparency.) However, despite some uncertainty, the markets remain optimistic on Sri Lanka’s future. Indeed, with strong economic growth rates, a prospering population that is approaching middle-income level, and a location close to major world shipping routes, Sri Lanka could well become a new Singapore.
