China faces new competition as Japan, India, eye Sri Lanka port
India, Japan and Sri Lanka are weighing the development of a terminal at the bustling port of Colombo in a country that’s seen ongoing political controversies related to investments from China’s Belt and Road initiative.
The three countries are set to sign a memorandum of understanding in the coming months to build out the east container terminal at the Port of Colombo, according to an Indian government official who asked not to be identified, citing rules.
India and Japan will seek private sector investment and a terminal operator after the framework agreement is signed, with India likely providing easy credit, the Indian official said. Sri Lanka will control 51% of the project with India and Japan jointly controlling the other 49%, this person said. Unlike the Chinese-owned Hambantota port in southern Sri Lanka -- which has been heavily criticized -- the Colombo port project is a commercially viable venture, though it should not be viewed as a counter to China’s Belt and Road, they said. Japan has supported the Port of Colombo’s development since the 1980s in recognition of the importance of a free and open Indo-pacific, said Natsuko Sakata, a spokeswoman for the Ministry of Foreign Affairs. “Nothing has been decided at this moment on any policy of our new assistance regarding the port of Colombo,” she said in a statement sent by email.
Japan has also pushed its plans to be a bigger player in the region under its “Free and Open Indopacific Strategy.”
A Sri Lanka government official, who asked not to be named citing rules, said the deal with India and Japan would soon be finalized. Japan would provide a 40-year yen loan with a 10-year grace period, with Sri Lanka holding 51% and Japan and India jointly holding 49%.
Two months ago Sri Lanka’s Port Minister Sagala Ratnayaka told parliament the Ports Authority was procuring cranes from Japan for the Colombo port’s east terminal. The country was seeking to “attract more shipping lines, especially shipping lines which operate the largest ships in the industry,” he said, noting at the time India was a possible partner. Sri Lanka previously tried to court Indian investment in Hambantota’s empty airport.
The move reflects India’s new openness to co-operate with Japan, the U.S. and other Indopacific powers in its immediate neighbourhood, said Constantino Xavier, a foreign policy fellow at Brookings India. “China’s Belt and Road Initiative investments in South Asia and the Indian Ocean region have forced Delhi to be more proactive in offering reliable alternatives to Beijing’s rising economic clout.”
Sri Lanka has been one of the countries drawn to China’s Belt and Road Initiative, an ambitious plan announced in 2013 by President Xi Jinping to build an estimated $1 trillion of infrastructure to support increased trade and economic ties and further China’s interests around the globe. However, China’s politically controversial investments in Sri Lanka became an election issue in 2015 and fueled infighting between politicians in the capital.
One project in the country includes Port City Colombo being built by China Communications Construction Co., or CCCC. The plan envisions a financial district -- pitched as a new hub between Singapore and Dubai -- with a marina, a hospital, shopping malls, and 21,000 apartments and homes.