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News & Analysis

Sri Lanka Clears Major Hurdle For China’s Silk Route Project

By Kalinga Seneviratne

COLOMBO (IDN) - The signing of a deal between the Sri Lankan government and a Chinese company, basically transferring the ownership on a 99-year lease of the strategically located Chinese-built Hambantota Port and 5,000 acres of land surrounding it for an industrial park in southern Sri Lanka has cleared a major hurdle for China’s ambitious Maritime Silk Route project while at the same time raising concerns about security and sovereignty issues.

The government-owned Sri Lankan Port Authority has signed a 1.1 billion dollar deal agreeing to sell a 70 percent stake in the Hambantota port to China’s state-run conglomerate China Merchants Port Holdings. The Cabinet approved the deal on July 25 and the government signed it at a ceremony opened to the media on July 29.

Through this deal, China gains control of a stretch of land surrounding the port, which is larger than that of Vatican City or Monaco and almost same as Macau, which China leased to Portugal in 1557 as a trading post and later became a colony until 1999.

Some concern has been expressed in Sri Lanka and elsewhere about whether China is using its financial muscle in a way similar to European states during the heydays of their colonial conquests.

However, gaining access to ports around the Indian Ocean and creating economic activities around it to benefit local economies is crucial to China’s ambitious project to create modern versions of the ancient trade routes on land and sea across Asia into Central Asia, the Arab world and Europe which Chinese President Xi Jingping has described as bringing prosperity especially to Asia, while its critics, especially in India, Japan, Australia and the United States, claims is about China consolidating its economic might in the Asian region in particular.

The ancient Silk Routes did not involve occupation of land, enslavement of people and other forms of colonial conquests as European commerce did. These were mainly peaceful trading and cultural exchanges where people were able to trade in each other’s goods and share cultures and philosophical ideas.

The Hambantota port was constructed six years ago along with an adjoining international airport and a four-lane highway linking the city to the capital 240 km away at a cost of some 360 million dollars, most of the money borrowed from the Export-Import Bank of China.

The Hambantota area which is the political stronghold of the former President Mahinda Rajapakse under whose government these infrastructures were built, was also a hotbed of Sinhalese youth rebellions in the 1970s and 1980s, which were ruthlessly suppressed by the governments of the time.

These uprisings by the Marxist Peoples Liberation Front (JVP) were fuelled by complaints that the Colombo-based political elites were neglecting the Sinhalese heartlands, which were poor and lacked economic opportunities and infrastructure.

Rajapakse, then a young human rights lawyer, supported the JVP cadres, taking their case to international human rights fora. The building of the missing infrastructure was a policy priority of the Rajapakse regime to bring economic opportunities to the people of this region.

While the infrastructure was developed at a frenzied speed in the post-war (after crushing the Tamil Tiger terrorists) construction boom, there was a lack of planning on how to create economic opportunities from these assets.

As pointed out in Al Jazeera’s ‘Inside Story’ programme on July 29, since the port was completed five years ago, some 36,000 ships have passed through the world’s busiest waterways – the Indian Ocean – but only 44 ships have berthed here. Thus, the port has been running at a huge loss, which the current government of Prime Minister Ranil Wickremisinghe has blamed for the country’s debt burden.

About 95 percent of government revenue is believed to go into serving these debts incurred during the Rajapakse regime and the billion dollars raised from the leasing of the port facilities and the land will be utilised to reduce this debt burden. The government is believed to be negotiating with India to sell a controlling stake in the Trincomalee port in the east coast of the country for the same purpose.

Appearing on the ‘Inside Story’ programme, Namal Rajapakse, the former president’s son and the member of parliament for Hambantota, defended his father’s policies and pointed out that it was because of the loans he took from China and built this infrastructure such as roads and airports connecting to the port that the government has been able to lease this facility for over a billion dollars.

However, he raised some concerns about the deal that should also become a yardstick on how to judge such deals while China embarks on building its new trade routes, which the Chinese government calls the ‘Belt and Road Initiatives’ (BRI).

“The conditions of this deal signed is not in the best interest of Sri Lanka,” argued Namal. “A strategically positioned port being controlled by a Chinese company is of concern in a national security context and also for the people of Sri Lanka ….. Sri Lanka law says that before you transfer a company ownership you need to get an agreement of the trade unions which represent the people who work there so that their interests will be protected …… [neither] company nor the government has had negotiations with the trade unions about what is going to happen to the workers.”

This comes to the very crux of the argument on whether China’s investments in the BRI are creating economic activities for the people of the countries, especially in areas that surround these activities such as ports and railways, or whether it is benefiting only Chinese companies and local political elites.

Meanwhile, because of entrenched corruption in the Sri Lankan political system, a recent editorial in Sri Lanka's Island newspaper hinted of commissions taken by politicians to sign this deal.

Port unions and community groups in this predominantly agricultural area, have also protested about the benefits it will bring to them. Just before the signing of the agreements, trade unions staged a strike against the deal, temporarily crippling fuel distribution on the island.

They fear the deal will give an advantage to China in the bunkering business, which provides fuel to ships, that will impact on their jobs. The Sri Lankan government has argued that the deal will enhance their job prospects with more business created.

In January, there were violent clashes between local protesters and the police. Villagers marched against what they saw as a plan to take over their private land for the industrial zone in which China will have a major stake.

One of the organisers, local lawmaker D.V. Chanaka, told Al Jazeera that they fear the port area would become a “Chinese colony (and) we are against leasing the lands where people live and do their farming.”

Meanwhile according to Indian media reports, India has major security concerns about the deal.

Sri Lanka’s Ports and Shipping Minister Mahinda Samarasinghe has said that only the Sri Lankan navy will be responsible for security of the deep-sea port, and the port will not be allowed to become a base for any foreign navy. But, C.A. Chandraprema of the Island newspaper has said that the deal was signed while rumours were circulating in Colombo that India was putting pressure on Sri Lanka to postpone the signing.

“The fact that this agreement was signed yesterday is arguably the biggest foreign policy debacle that India has faced since that country gained independence from the British” he argued. “Only 42 percent of the Hambantota International Port Services Company which will handle port security will belong to the Sri Lanka Ports Authority and 49.3 percent will belong to the China Merchant Company. … it is China that has the controlling interest in the company that is in charge of handling port security as well.”

“Whatever the Chinese bring into Hambantota may be a security risk to India but poses no risk to Sri Lanka” said Chandraprema. “Chinese war material in Sri Lanka will pose a threat to Sri Lanka only if there is an all-out war between India and China which, however, is not very likely. From inquiries made, it appears that the Indians have basically thrown in the towel and accepted the inevitable.”

It is interesting to note that the date – July 29 – is exactly 30 years to the day that then Sri Lankan President J.R. Jayawardena signed the Indo-Lanka Treaty under duress that brought the 13th amendment to the constitution to devolve power to Tamil areas which is still a contested issue in the island. It also opened the door for Indian interference in Sri Lankan internal affairs, which is deeply resented by Sinhalese nationalists.

“Three decades later to the day, on July 29, 2017, a government of his (Jayawardena’s) nephew Ranil Wickremesinghe signed the Hambantota Port Agreement with China. Perhaps one could argue that this was to reduce India’s influence on Sri Lanka,” noted Chandraprema. [IDN-InDepthNews – 31 July 2017]

Photo: Hambantota Port. Credit: Wikimedia Commons

This article is part of IDN’s media project jointly with Global Cooperation Council and DEVNET Japan.

IDN is flagship agency of the International Press Syndicate

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