Port handover to Chinese firm will boost Sri Lanka's economy

By Rabi Sankar Bosu

Sri Lanka has joined China's Belt and Road Initiative with the launch of operations at Hambantota Port through a joint venture with China. Sri Lanka formally handed over commercial activities in its Chinese-built Hambantota port to the China Merchant Ports Holdings (CMPH) on December 9, 2017 and received US$292 million out of a US$1.12 billion deal. The port is likely to play a major role in China’s flagship “Belt and Road Initiative” in Sir Lanka. Surely, the Port deal reflects China-Sri Lanka trust. It is hoped that Sri Lanka will gain more benefits from the combination with China, the second largest world economy. It’s a better future for Sri Lanka’s economic activities leading to promotion of tourism.

On December 9, Sri Lankan Prime Minister Ranil Wickremesinghe on the occasion of the handing over ceremony held in parliament said that with the development of the Hambantota Port, steps are also being taken to construct an economic zone there. "The Hambantota Port will add to Sri Lanka's concept of transforming into a hub in the Indian Ocean," he said. Regarding managing and developing the Hambantota Port, the CMPH said in a statement, “The aim of the government of Sri Lanka and the China Merchant Port Holdings is to transform Hambantota port from a "transshipment hub" to a "total logistics hub" of the Indian Ocean region." 

A photo taken on July 29, 2017 shows the signing ceremony of the Hambantota Port concession agreement in Sri Lanka. [Photo: vcg.com]

On July 29 this year, Chinese port operator China Merchants Port Holdings (CMPort) and the Sri Lanka Ports Authority (SLPA) signed a 99-year lease agreement in Colombo to develop Hambantota Port in southern Sri Lanka in the presence of Sri Lanka’s Minister of Ports and Shipping Mahinda Samarasinghe and China's Ambassador Yi Xianliang. According to the agreement, CMPort, which also has a similar contract with Colombo Port, has taken charge of all commercial and administrative management operations at Hambantota under the US$1.5 billion deal, giving it a 70 percent stake, with SLPA holding the remaining 30 percent.

The handover of Hambantota Port to China is a breakthrough in China's Belt and Road initiative, as well as a significant step in China's cooperation with South Asian countries. Hu Zhiyong, a research fellow at the Institute of International Relations of the Shanghai Academy of Social Sciences, has rightly remarked,

" The handover of Sri Lanka's largest multi-purpose port to China shows that the Belt and Road initiative was well received and the two countries' strategic trust was further enhanced. It will further China's influence in the South Asian region." 

Proposed by Chinese President Xi Jinping in 2013, the Belt and Road initiative is a historic endeavor under which China has invested US$560 billion overseas. Comprised of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, Xi called it "the project of the century." Over the past four years, it has been serving as China's blueprint for global development and coordination. So far, the initiative has won support from more than 100 countries and international organizations, over 40 of which have signed cooperation agreements with China. While India remains wary of China's signature international project, its principal neighbors namely Sri Lanka, Bangladesh, Pakistan, Nepal and Myanmar are already seeing results from their participation in the plan.

Hambantota Port which is 240 kilometers (150 miles) from Colombo, is a deep-water port located on the southern coast of Sri Lanka, and its strategic location offers huge opportunities for the Sri Lankan economy. It is hoped that in the future the port will play a key role in the Belt and Road Initiative linking ports and roads across Asia, Africa, the Middle East and Europe in trade, economic and cultural cooperation.

It can be said that Hambantota has become an advantage to Sri Lanka because the country has Colombo on the one hand and Hambantota on the other hand as well. Both the ports will have separate market segments, and they are compliment to each other. So as a result of Hambantota Port, the joint venture with sea and port, Sri Lanka will be in an unassailable position as a maritime gateway to South Asia and also beyond.

In 2009, Sri Lanka, with the strong assistance from the international community, ended a 30-year-long civil war against the Liberation Tigers of Tamil Eelam (LTTE). During the post-war reconstruction, the Chinese government and people have continued to lend a helping hand to provide a large number of concessional low interest rate loans and investments for Sri Lanka.

Undoubtedly, the Belt and Road Initiative has opened up a new era for China-Sri Lanka strategic cooperation. Sri Lanka welcomes China's increased participation in its industrialization process, and infrastructure construction in particular. Yi Xianliang, Chinese ambassador to Sri Lanka, said, "In regards to the Belt and Road, one of our key projects has achieved huge progress. This should have a significant demonstration effect among Belt and Road countries as well as countries along the Indian Ocean and in South Asia who might collaborate with us in the future."

Under the deal, there will be an economic zone and industrialization in Hambantota area which will lead to economic development and promote tourism. In the economic sphere, Sino-Sri Lankan two-way trade exceeded $4.4 billion in 2016, ranking China as Sri Lanka's biggest trading partner and largest import market. China has accounted for 35 percent of foreign direct investments (FDI) into Sri Lanka up to September this year, with FDI for 2017 expected to total 1.36 billion U.S. dollars. China will invest $5bn more in the next three to five years to create 100,000 jobs if everything goes well.

Sri Lanka’s southern region is lagging behind in comparison to its central and western regions in development. So China's investment in the Hambantota Port specifically makes Sri Lankans confident in a bright future for the southern region. More importantly, the Hambantota project will encourage other countries to pursue a more active agenda in participating in the BRI which presents the world with an opportunity to overcome the obstacles of the 21st century, offering inclusiveness, mutual cooperation, openness and "win-win" results.

(Rabi Sankar Bosu, Secretary, New Horizon Radio Listeners’Club, based in West Bengal, India)