China
Sri Lanka’s foreign policy in a new Rajapaksa era
Author: Nilanthi Samaranayake, CNA
The return of the Rajapaksa family to the leadership of Sri Lanka raises questions about how the country’s foreign policy approaches to India, China and the United States may change. Media reporting immediately after the 16 November election expressed apprehension about Sri Lanka returning to China’s orbit after a presidential campaign marked by strong anti-US sentiment. Now that the Rajapaksas have reclaimed both the presidency and prime ministership, what direction will Sri Lanka’s foreign policy take?
After being sworn in as president, Gotabaya Rajapaksa switched to English in his inaugural speech to reinforce Sri Lanka’s traditional articulation of its foreign policy approach: ‘We want to remain neutral in our foreign relations and stay out of any conflicts amongst the world powers’. The idea that Sri Lanka can swing toward a pro-India or a pro-China disposition with a change of leadership belies the constraints on smaller South Asian states in a region that is still dominated by India and increasingly contested by China — and where other major powers such as the United States and Japan play critical roles.
These smaller states do not have the luxury of choosing exclusive relations with one country when pursuing national development goals. This is especially the case with Sri Lanka, which is currently facing the perils of the ‘middle-income trap’ (rather than a ‘Chinese debt trap’). As it has graduated in income status, the country has lost access to concessional assistance. Sri Lanka relied on debt financing during earlier Rajapaksa governments as well as under the outgoing administration.
During the first Rajapaksa era (2005–2015), Sri Lanka maintained close operational cooperation with India in wartime. Following the end of the civil war in 2009, the Rajapaksa government established a bilateral defence dialogue with India in 2012 that continued under the successive leadership and signed a contract for an Indian shipyard to build offshore patrol vessels for the Sri Lanka Navy.
Yet ties plummeted after Sri Lanka allowed a Chinese submarine to pay two visits to Colombo Port in 2014. The country welcomes most warships stopping to rest and refuel in the central Indian Ocean, but its decision to permit a Chinese submarine to do so was viewed by India’s new Narendra Modi government — with which bilateral ties had improved — as a challenge to India.
Another major source of tension between India and Sri Lanka, particularly during the Manmohan Singh administration, was the treatment of ethnic minorities. The Rajapaksa government will need to set a tone of domestic inclusiveness as it considers foreign policy toward India. New Delhi will be alert to this issue given India’s sizable Tamil population.
The United States remains Sri Lanka’s top exporting partner, providing vital income for the economically challenged nation with a debt-to-GDP ratio of 83 per cent. To what extent will Washington leverage its economic position to encourage the new government to focus on post-war reconciliation and accountability? This remains an open question under the current US administration, but the previous Obama administration made human rights a priority in its Sri Lanka policy during the Rajapaksa years.
More recently, strategic issues, such as concluding a Status of Forces Agreement to give rights to visiting US military personnel, have gained increased prominence. To India’s dismay, the previous Rajapaksa government concluded an Acquisition and Cross-Servicing Agreement with the United States, illustrating Sri Lanka’s foreign policy tradition of maintaining strategic ties with various major powers.
Sri Lanka’s interactions with China will continue to be the most scrutinised of the country’s bilateral relationships. Despite predictions to the contrary, the outgoing coalition government did not depart significantly from the direction of Rajapaksa-era policies toward China. This includes its decision to negotiate a 99-year lease of Hambantota port operations to a Chinese-majority joint venture as well as the transfer of the offshore patrol vessel SLNS Parakramabahu from China.
The new Rajapaksa government could benefit from US assistance under the Indo-Pacific Strategy’s Infrastructure Transaction and Assistance Network, Transaction Advisory Fund and Commercial Law Development Program to fulfil its campaign pledge to revisit the lease for Hambantota Port. In his first interview as president, Gotabaya Rajapaksa affirmed his desire to renegotiate…
China
China Implements New Policies to Boost Foreign Investment in Science and Technology Companies
China’s Ministry of Commerce announced new policy measures on April 19, 2023, to encourage foreign investment in the technology sector. The measures include facilitating bond issuance, improving the investment environment, and simplifying procedures for foreign institutions to access the Chinese market.
On April 19, 2023, China’s Ministry of Commerce (MOFCOM) along with nine other departments announced a new set of policy measures (hereinafter, “new measures”) aimed at encouraging foreign investment in its technology sector.
Among the new measures, China intends to facilitate the issuance of RMB bonds by eligible overseas institutions and encourage both domestic and foreign-invested tech companies to raise funds through bond issuance.
In this article, we offer an overview of the new measures and their broader significance in fostering international investment and driving innovation-driven growth, underscoring China’s efforts to instill confidence among foreign investors.
The new measures contain a total of sixteen points aimed at facilitating foreign investment in China’s technology sector and improving the overall investment environment.
Divided into four main chapters, the new measures address key aspects including:
Firstly, China aims to expedite the approval process for QFII and RQFII, ensuring efficient access to the Chinese market. Moreover, the government promises to simplify procedures, facilitating operational activities and fund management for foreign institutions.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Q1 2024 Brief on Transfer Pricing in Asia
Indonesia’s Ministry of Finance released Regulation No. 172 of 2023 on transfer pricing, consolidating various guidelines. The Directorate General of Taxes focuses on compliance, expanded arm’s length principle, and substance checks. Singapore’s Budget 2024 addresses economic challenges, operational costs, and sustainability, implementing global tax reforms like the Income Inclusion Rule and Domestic Top-up Tax.
Indonesia’s Ministry of Finance (MoF) has released Regulation No. 172 of 2023 (“PMK-172”), which prevails as a unified transfer pricing guideline. PMK-172 consolidates various transfer pricing matters that were previously covered under separate regulations, including the application of the arm’s length principle, transfer pricing documentation requirements, transfer pricing adjustments, Mutual Agreement Procedure (“MAP”), and Advance Pricing Agreements (“APA”).
The Indonesian Directorate General of Taxes (DGT) has continued to focus on compliance with the ex-ante principle, the expanded scope of transactions subject to the arm’s length principle, and the reinforcement of substance checks as part of the preliminary stage, indicating the DGT’s expectation of meticulous and well-supported transfer pricing analyses conducted by taxpayers.
In conclusion, PMK-172 reflects the Indonesian government’s commitment to addressing some of the most controversial transfer pricing issues and promoting clarity and certainty. While it brings new opportunities, it also presents challenges. Taxpayers are strongly advised to evaluate the implications of these new guidelines on their businesses in Indonesia to navigate this transformative regulatory landscape successfully.
In a significant move to bolster economic resilience and sustainability, Singapore’s Deputy Prime Minister and Minister for Finance, Mr. Lawrence Wong, unveiled the ambitious Singapore Budget 2024 on February 16, 2024. Amidst global economic fluctuations and a pressing climate crisis, the Budget strategically addresses the dual challenges of rising operational costs and the imperative for sustainable development, marking a pivotal step towards fortifying Singapore’s position as a competitive and green economy.
In anticipation of global tax reforms, Singapore’s proactive steps to implement the Income Inclusion Rule (IIR) and Domestic Top-up Tax (DTT) under the BEPS 2.0 framework demonstrate a forward-looking approach to ensure tax compliance and fairness. These measures reaffirm Singapore’s commitment to international tax standards while safeguarding its economic interests.
Transfer pricing highlights from the Singapore Budget 2024 include:
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
China has been the world’s largest manufacturer for 14 years, producing one-third of global manufacturing output. In the Emerging Asia Manufacturing Index 2024, China ranks highest among eight emerging countries in the region. Challenges for these countries include global demand disparities affecting industrial output and export orders.
Known as the “World’s Factory”, China has held the title of the world’s largest manufacturer for 14 consecutive years, starting from 2010. Its factories churn out approximately one-third of the global manufacturing output, a testament to its industrial might and capacity.
China’s dominant role as the world’s sole manufacturing power is reaffirmed in Dezan Shira & Associates’ Emerging Asia Manufacturing Index 2024 report (“EAMI 2024”), in which China secures the top spot among eight emerging countries in the Asia-Pacific region. The other seven economies are India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Bangladesh.
The EAMI 2024 aims to assess the potential of these eight economies, navigate the risks, and pinpoint specific factors affecting the manufacturing landscape.
In this article, we delve into the key findings of the EAMI 2024 report and navigate China’s advantages and disadvantages in the manufacturing sector, placing them within the Asia-Pacific comparative context.
Emerging Asia countries face various challenges, especially in the current phase of increased volatility, uncertainty, complexity, and ambiguity (VUCA). One notable challenge is the impact of global demand disparities on the manufacturing sector, affecting industrial output and export orders.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
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- Q1 2024 Brief on Transfer Pricing in Asia
- New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
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