By Halik Azeez
Involved in constructing and part financing the projects to the tune of Rs 60 billion, China is literally calling the shots in Hambantota. The multi billion rupee projects include a port, airport, cricket stadium and convention centre. Costs for the four big projects total almost up to more than USD 500 million or Rs 60 billion. Construction is largely carried out by Chinese corporations which employ a Chinese workforce.
Most of the funding for the projects is being generated from China; mainly from the China Export-Import Bank. The loans are offered at concessionary rates with short grace periods. But these, together with borrowings made for other development projects, still add up to huge amounts of potential debt for the Sri Lankan government which will have to be paid back. How the current government of Sri Lanka is going to do this is anyone’s guess.
The Sri Lankan people get little or no benefit from the large amount of monies spent on the projects. The money lent from China is going back into the pockets of Chinese construction firms and workers, completely bypassing Sri Lankans and minimizing any trickle down and/or multiple effects which could have stimulated the local economy.
The Sri Lanka Ports Authority signed a contract with a Chinese firm, China Harbour Engineering Company, to start the second phase of a new port in Hambantota on the South Coast.
Phase two would start in November this year with the completion of the first phase of the port project.
This agreement was signed by SLPA Chairman B. Wickrama and the Chairman of the China Harbour Engineering Company Sun Ziyu.
China will continue to provide finances for the second phase of the port project. Phase two of the project will include further excavation of the site for the harbour basin and dredging of the approach channel as well as building berths for ships.
Whether the use of the port in Hambantota will be monopolized by China or if it will completely belong to Sri Lanka is as yet unclear. Officials have stated that the port will be turned over to the Ports Authority who will then repay the debt to the government.
It is also unclear yet whether the other projects, once completed, will remain in state control or not. Public-private partnerships are a mechanism to ensure that state institutions run with efficiency but given the recent track record of the government, which looks to be on a reverse privatization spree, such partnerships don’t look likely. Meanwhile, the inefficiency in the Ports Authority and Mihin Air does not bode well for the new institutions at Hambantota. The Sunday Leader was unable to reach Minister Basil Rajapaksa for comment on this issue.
A Political Partnership
Speaking to The Sunday Leader, Senior Lecturer in Economics, University of Colombo, Dr. Srimal Abeyratne said, “Partnering with China is seen as more of a political move rather than an economic one. It is in step with the current government’s tendency to partner with non-traditional countries”.
The Professor went on to state that any potential benefit from the projects will heavily depend on the state of the overall economy and business environment.
“Infrastructure such as ports and airports are heavily dependent on robust economies. Successful implementation of the government’s five hubs concept and steps to create the connectivity, compliance and business friendly environment of an open economy will be necessary to ensure profits from these initiatives.” Not a lot of information has been released to the public on costs and completion dates.
At the inception of looking for potential construction partners, Sri Lanka apparently looked to other nations like the US, but China seems to have offered the best terms and hence seem to have been accepted. “We have no favorites,” said Jaliya Wickramasuriya speaking to the New York Times on the subject. China has recently emerged to become a global construction powerhouse capable of offering major cost advantages as compared to competition.
String of Pearls
International controversy surrounds the Chinese entrance, worrying India; Sri Lanka’s powerful neighbour. China has been engaged in similar activities throughout the region; setting up powerful naval bases in areas of Pakistan, Bangladesh and Myanmar. It has also begun constructing railroads in Nepal, a country which previously had no railway system at all. This strategy, the Indian government somewhat sarcastically calls the ‘string of pearls’; to indicate an emerging Chinese stranglehold. Though China insists that this is merely to strengthen regional markets for its products and secure its supply chain, India fears that China is beginning to pose not only an economic but also a security threat.
The two nations do not exactly have a rosy past. The countries fought a war in 1962 over the Himalayan border and to India’s annoyance, Pakistan, with whom India has fought four wars, maintains close military ties with China. Sri Lanka could become the latest battleground between these two giants with both of them eager to be exacting the most influence. India has invested heavily in Sri Lankan projects and has just committed a 200 million credit line for a power project in Trinco, as well as agreeing to construct a railway line between Talaimanar and Madhu in the North.