Unable to pay back billions in debt, Sri Lanka hands over port in Hambantota to China
Sri Lanka has formally handed control of a strategic port on its south coast to China as part of a 99-year lease agreement.
Under a US$1.1 billion (Dh4bn) deal that the Sri Lankan political opposition and trade unions have called a sell-out move, Chinese companies now hold a 70 per cent stake in Hambantota port.
The $1.3bn port was built with loans from a Chinese state-owned bank and opened in 2010. But the Sri Lankan government has struggled to repay the debt, with the project incurring heavy losses. Along with loans taken out for other infrastructure development projects, Colombo now owes China $8bn.
“With [the Hambantota port] agreement we have started to pay back the loans,” said Ranil Wickremesinghe, the Sri Lankan prime minster, during a handing-over ceremony in parliament on Saturday. “Hambantota will be converted to a major port in the Indian Ocean.”
He said that the move would lead to economic development and promote tourism. Hambantota is on one of the world’s busiest marine routes but most ships bypass it and head for the established harbour in Colombo, the capital.
Chinese companies, under the state-controlled China Merchants Port Holdings company, now hold a majority stake in the port as part of a joint venture with the staterun Sri Lanka Port Authority. The lease agreement, which
was signed in July, includes wide-ranging tax concessions for the port and a 32-year tax break for the Chinese companies. For its part, China has paid Sri Lanka an initial sum of $300 million, with further payments to come, although exactly when is unclear.
International reaction to the port handover has focused on China’s increasing geopolitical ambitions, while locals have voiced fears of a loss of Sri Lankan sovereignty. When the agreement was signed in July, the MP Namal Rajapaksa posted on Twitter: “Government is playing geopolitics with national assets? #stopselling SL”.
Also on Twitter, Brahma Chellaney, an Indian author and political analyst, described the deal as “debt-trap diplomacy”, saying Chinese loans are often given in exchange for strategically important physical assets which can be “collateralised”.
For Beijing, its acquisition of Hambantota is part of its longer-term One Belt, One Road (Obor) project. Other Obor projects include a $10.7bn plan to develop the Omani town of Duqm into an industrial city, which will transform the dusty port into a major transit hub. Closer to Hambantota will be Pakistan’s Gwadar port, which Beijing is developing as a key part of the $55bn China-Pakistan economic corridor.
China has added the Maldives in the Indian Ocean to its growing sphere of influence, completing a free-trade agreement at the end of last month. Hosting the Maldivian president Abdulla Yameen in Beijing China’s leader, Xi Jinping, said: “China deems the Maldives as an important partner to building the 21st-century maritime Silk Road.” Mr Yameen, meanwhile, said that China was “among our closest friends, most trusted and most dependable partners”.
Such plans are part of Chinese geopolitical goals that will allow Beijing to challenge the United States as the world’s pre-eminent maritime power, with some fearing that China may be seeking to use ports such as Hambantota, Duqm and Gwadar as naval bases. In May, Sri Lanka rejected a request from Beijing to dock a submarine at Hambantota.
But China’s rival and neighbour India has ambitious plans of its own. New Delhi is looking to buy a 40-year lease of the mostly unused airport alongside Hambantota port for $300m. David Brewster, an expert in South Asian strategic affairs at the Australian National University’s National Security College, wrote of this plan: “A key element in any overseas naval base, and even a logistics facility, is easy access by air for people and supplies.
“In short, India is spending $300m buying an airport to block a Chinese naval base.”
Beijing has only one overseas military base – near Doraleh port in Djibouti. The base has been operating since August.