China­ Backed Port City in Sri Lanka

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    The Sri Lankan Parliament passed a controversial Bill on laws governing the China-backed Colombo Port city.

    About

    • The $1.4 billion-Colombo Port City, was launched in 2014 during the previous term of the Rajapaksa government.
    • The government defended the Colombo Port City Economic Commission Bill, pointing to potential foreign direct investments, upto $15 billion and prospects for job creation.

    Criticism of Government’s Move

    • The provisions of Bill infringed upon the country’s sovereignty, gave the governing commission overarching powers, and immunity from Sri Lankan law, and threatened to create a “Chinese enclave”.
    • The opposition asked the government if its stated policy of striving for ‘One Country, One Law’ meant “Chinese law”.
    • The “China-centric” Sri Lankan government is again challenging the geo-political order in the region and may have to pay a heavy price with such choices.
    • Some critics are accusing the government of giving away part of its land to China.

    Benefits of Chinese Assistance

    • Economic stability: This significant dollar inflow can be used to strengthen the country’s foreign reserves and make some short-term foreign debt repayments. 
    • Employment for locals: The Colombo Port City development is the single largest foreign direct investment in the Indian Ocean island. Foreign investment for major infrastructure projects creates large numbers of jobs for local workers. 
    • Developing Infrastructure: The development of ports is also leading to creation of a massive new airport and a new hospital.

    Disadvantages of Chinese Investment

    • Multiple concerns: The critics accuse authorities of pushing a model that will turn a key section of the capital into a “Chinese colony”, discriminating against Sri Lankans, violating labor laws and the constitution and infringing on Sri Lanka’s territorial integrity and sovereignty. Critics say the Chinese-funded projects are not financially viable and that Sri Lanka will face difficulty in repaying the loans.
    • China’s workforce and machinery: China continued its practice and brought in brigades of Chinese workers, operating Chinese machinery for the state-owned China Harbour Engineering Company to reshape Sri Lanka’s coastal landscape.
    • Protests: The mega infrastructure project is currently being built on land reclaimed alongside Colombo’s iconic sea front, while environmentalists and fisher folk opposed the move. From the start, the plan sparked fierce public protests and has run into legal headwinds.
    • Security of Indian Ocean: The port fits in with the objectives of China’s so-called string of pearls strategy: a series of Chinese-built or operated ports along the Indian Ocean coastline to secure maritime routes for economic and potentially military purposes. 
    • Chinese Influence: China has carried out other major projects in Sri Lanka, notably the controversial Hambantota Port development at the southern tip of the island. It became a prime example of the Chinese debt trap. Beijing loaned billions to a developing country, with the money ultimately going to Chinese state-owned companies for projects they built. Now China’s influence is becoming even more visible in Sri Lanka. Sri Lanka’s budgetary woes make it an outlier in terms of its vulnerability to its debt to China.

    Conclusion

    • China has undertaken countless infrastructure projects across the globe as part of its Belt and Road Initiative. The Colombo Port City development shows China’s effort to gain a strategic foothold in developing countries across the globe.
    • A look at the map shows how well-positioned Sri Lanka is for global navigation. Thus, the increasing Chinese presence in the Indian Ocean is an alarming development for India.
    • China’s geopolitical advances with military motives need to be made questionable at regional and global forums.
    • Japan and India are members of Quad, a group of Indo-Pacific nations that also includes the US and Australia that is seeking to counter Chinese influence in the region.

    Indian involvement at Sri Lankan Port Cities

    • Trincomalee oil farm
      • Sri Lanka in 2003 had leased out 99 World War-era oil tanks to the IOC for 35 years for an annual payment of USD 100,000.
      • Lanka IOC (LIOC), a subsidiary set up then, has been using 15 tanks, while the rest await an upgrade for use.
      • In an overarching MoU in 2017 on development cooperation, India and Sri Lanka, agreed to jointly [with LIOC involvement] refurbish the remaining 84 tanks and build related infrastructure in the strategically located eastern port city. 
      • But the two sides were unable to firm up the terms of the project, amid mounting pressure from oil sector trade unions that sought more control for the state-run Ceylon Petroleum Corporation (CPC).
    • East Container Terminal at Colombo Port
      • Sri Lanka, Japan and India signed an agreement in 2019 to jointly develop the East Container Terminal at the Colombo Port.
      • In Feb 2021, after strong opposition from trade unions across the country, Sri Lanka unilaterally pulled out of agreement with India and Japan.
      • India was particularly interested in the East terminal because it contributes about 66% of the re-exports from that terminal.
      • In March 2021, the Sri Lankan government approved a proposal to build the Colombo Port’s Western Container Terminal (WCT)  under a joint venture with India and Japan for a period of 35 years.

    Image Courtesy: Worldatlas

    Source: TH