Navigating China’s Digital Silk Road: The Impact on Sri Lanka’s Digital Economy
Over the past few decades, the People’s Republic of China has made remarkable strides in advancing its Belt and Road Initiative (BRI) projects. The BRI aims to foster cooperation and connectivity worldwide, particularly with Asian nations. Currently, the BRI encompasses more than 140 countries, and China is actively working towards establishing digital silk roads between these nations. The projected cost of BRI projects is estimated to exceed $1.3 trillion, with forecasts suggesting the completion of over 2,500 projects worth $3.7 trillion by 2027.
The Digital Silk Road, a key component of the Belt and Road initiative, represents an ambitious and challenging endeavor for China. The country seeks to secure a 60% share of global fiber-optic cable connections within the digital realm. Huawei Marine Networks, a Chinese tech company, exemplifies this ambition through its involvement in 98 projects across the Indo-Pacific, South Pacific, and Atlantic regions. These projects involve the installation of 59,488 kilometers of undersea cables.
Another significant milestone in the Digital Silk Road is the installation of a cross-border fiber optic cable in Pakistan, connecting East Africa and Europe. This project, undertaken in collaboration with Huawei Technologies, carries an estimated cost of $240 million. While fiber optic cable connections are vital for digital communication, concerns have arisen regarding potential threats to digital privacy from both public and private entities, particularly regarding the technologies employed by Huawei.
China aims to solidify its position as a global leader in next-generation cellular networks and 5G technology through its digital infrastructure efforts under the BRI. To date, the country has introduced digital infrastructure projects in over 80 countries, amounting to $79 billion in costs. Within Sri Lanka, the Digital Silk Road is expected to play a crucial role in enhancing the country’s ICT infrastructure. Sri Lanka has demonstrated its potential to improve digital connectivity, digital marketing, and digital investment initiatives. However, analysis of the companies operating within Sri Lanka’s ICT infrastructure indicates the need for improvements in strategy, capability, organization, and culture to facilitate substantial digital transformation.
According to a study conducted by the International Monetary Fund (IMF), Sri Lanka’s digital economy is estimated at $3,469 million, accounting for approximately 4.37% of the country’s Gross Domestic Product (GDP). This estimation considers five components of the digital economy: ICT equipment, the semiconductor industry, telecommunication and internet access services, data processing, software, and other information services, online platforms (including e-commerce), and platform-enabled services.
In a similar vein, numerous reports have emerged regarding digital infrastructure projects taking place in Sri Lanka. Among these projects are the integration of the Lotus Tower into the telecommunications network and various fiber optic initiatives, all of which have received multi-million-dollar contracts from the Sri Lankan Government. While limited information is available on China’s ICT investment specifically in Sri Lanka, there have been reports of other ICT infrastructure projects in the country.
These projects primarily involve major telecom providers collaborating with ZTE and Huawei, two prominent companies in the field. In Sri Lanka, telecom operators such as Mobitel, Dialog Axiata, Etisalat, and Airtel predominantly offer mobile broadband devices from either ZTE or Huawei. The majority of ICT infrastructure contracts in Sri Lanka are entered into with these two companies, with some examples involving significant investments in the millions of dollars.
For instance, in May 2011, Mobitel, a major telecom operator, received an exemption on equipment import duties from the Board of Investment of Sri Lanka for its LTE network deployment project, which was carried out in partnership with ZTE. Similarly, in June 2011, ZTE Corporation was awarded a $27 million contract by Sri Lanka Telecom (SLT) for the rollout of a fiber-optic network as part of the ‘i-sri lanka’ project. The dominance of ZTE Corporation is evident, considering that in December 2006, TK-mobile, a Tajik-Chinese mobile operator, was granted a $70.6 million loan for equipment procurement from ZTE. Additionally, in May 2011, ZTE and Huawei collaborated with Mobitel and Dialog, the largest mobile telecom operators in Sri Lanka, to support infrastructure development for 4G/LTE using their technologies. Huawei technology was also utilized to enhance the network operation system of Dialog Axiata through a significant investment.
Furthermore, there are reports of additional investments aimed at improving communication systems in rural areas of Sri Lanka. A contract worth an estimated $40 million was signed with Lanka Bell to provide equipment related to the CDMA wireless local loop telephone network system and fixed wireless terminals. However, as previously mentioned regarding digital privacy, certain countries such as the United States, New Zealand, and Japan have implemented measures to restrict Chinese companies, including Huawei, from providing infrastructure components for their respective 5G networks. These actions were taken due to security concerns and potential risks associated with intelligence gathering within digital infrastructures.
China has provided significant loans and investments to Sri Lanka, ostensibly aimed at improving the country’s economy. However, a realistic assessment reveals a different story. Sri Lanka has faced challenges in repaying the loan funds to China, leading to the transfer of certain territories to Chinese control. One notable example is the sale of the Hambantota port to a Chinese state-owned company. Additionally, reports suggest that several other parts of Sri Lanka’s territories may fall under Chinese influence.
These include the Sri Lanka Air Force Headquarters, Slave Island Police, Slave Island Police Stadium, Slave Island Housing Complex, Colombo Air Force Base, Air Force grounds, Cinnamon Lakeside Colombo, M.O.D. Cyber Operation Center, Army Electrical and Mechanical Engineering Regiment Headquarters, Grand Oriental Building, Ghafoor Building, government-owned buildings at York Street, Ministry of External Affairs, Headquarters of the Postal Department, Police Headquarters, FICD Headquarters Building at Chatham Street (already occupied by CHEC Port City (Pvt) Ltd, a Chinese company), Hilton Hotel and Homes, Hyatt Hotel & Accommodation, Waters Edge Hotel, and its adjoining 200 acres.
Similarly, the investments made by China in Sri Lanka’s digital economy through substantial loans raise concerns about the country’s digital sovereignty. Given the growing security concerns, this paper aims to assess and examine the ongoing digital infrastructure projects in the country, collecting data to shed light on the implications of such projects in relation to digital security concerns raised by other countries. -(Mawratanews)
