January 20, 2022

Ada Rata

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SL settles Chinese fertilizer issue on the eve of Foreign Minister’s visit


Chinese Foreign Minister Wang Yi is scheduled to pay an official visit to Sri Lanka today Saturday 08 prompting the government to settle the controversial organic fertilizer procurement issue mending damaged fences between the two countries.     .

Political analysts say this will be a crucial visit to Sri Lanka as the Chinese Foreign Minister will visit Sri Lanka following the signing of an agreement with India on the Trincomalee oil tank complex.

Both India and China are concerned about each country’s involvement with Sri Lanka. 

The Chinese Ambassador to Sri Lanka visited the Northern Province last month and during his visit also launched several projects to provide infrastructure facilities to the people in the province. 

Chinese Foreign Minister Wang Yi will have an opportunity to help out Sri Lanka when he visits the country  as the island nation searches for funds to rebuild foreign exchange reserves and repay debt amid ballooning import bills.

Wang’s visit comes as Beijing seeks to balance U.S. and Indian influence in the Indo-Pacific region during a pivotal political year in China. 

He may offer more grants while in the capital Colombo, according to a Sri Lankan government official who wished to remain anonymous. The ministries of finance and foreign affairs didn’t officially respond to questions on the matter. 

Chinese loans to Sri Lanka have been a contentious political topic over the past decade, with the country becoming an oft-cited example of debt diplomacy in President Xi Jinping’s Belt and Road Initiative — an allegation Beijing has refuted. 

In particular, Sri Lankan politicians came under scrutiny for a port in southern Hambantota that lost money and was eventually sold to a state-owned Chinese firm in a much-criticized debt-to-equity swap on a 99-year lease.

Still, Sri Lanka currently needs cash, and its leaders have sought to balance ties between major powers to get funds. The country’s finances have nosedived since the pandemic grounded airplanes and shuttered its tourism industry, a major source of foreign exchange earnings. 

The situation has been exacerbated by looming debt repayments that Fitch Ratings put at $6.9 billion this year. Citigroup has flagged the risk of a “future potentially disorderly default.”

Sri Lanka is fast mending damaged fences with China with the People’s Bank’s action to pay US$ 6.9 million to the Chinese company that shipped a much-disputed consignment of organic fertilizer to Sri Lanka.

The payment came after the Colombo Commercial High Court dissolved the enjoining order preventing the payment on Letter of Credit to China-based Qingdao Seawin Biotech Group Co., Ltd.

On January 03, the enjoining order in question was dismissed as all parties had agreed for a settlement to ship a new stock of standardized fertilizer.

As per the terms of the contracts between Sri Lanka and the Chinese company, the payment for the controversial organic fertilizer shipment was slated to be made through a Letter of Credit established via the People’s Bank.

However, last year, the Ceylon Fertilizer Company (CFC) had secured two enjoining orders from the Colombo Commercial High Court against Seawin Biotech, its local agent and the state-run People’s Bank, preventing the payment on Letter of Credit. 

The first court order against the Chinese firm in question was secured on October 23, blocking the People’s Bank from making any payment under a Letter of Credit opened in favour of the Chinese company.

The fertilizer consignment in question was under the spotlight over the past few months after the National Plant Quarantine Services (NPQS), which tested the fertilizer samples sent by the Qingdao Seawin Biotech, revealed the detection of the microorganism called ‘Erwinia’ in September 2021.

Several days later, Sri Lanka decided to suspend the importation of organic fertilizer from Seawin Biotech.

The Chinese firm retaliated, saying that the NPQS took only three days to draw a suspicious conclusion although it takes more than 6 days to identify Erwinia as per the ISPM27 rule in IPPC (International Plant Protection Convention).

The Chinese company later sent a letter of demand seeking USD 8 million in damages from the Additional Director of the National Plant Quarantine Services (NPQS) of Sri Lanka.



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