Debt-stricken Sri Lanka revives port deal with India, Japan
The proposed deep-sea terminal in Colombo is next to China-owned container terminal
Amidst the worst economic slump in Sri Lanka and mounting international concern over the island-nation’s ability to repay foreign debt, President Gotabaya Rajapaksa on Wednesday announced the revival of East Container Terminal (ECT), a tripartite project along with India and Japan.
The Sri Lanka-India-Japan project to construct a deep-sea terminal in the Colombo harbour for which an MoU was signed in 2019. However, the project was on hold pending review of ‘regional geo-political concerns’ and resistance from trade-unions.
The tripartite project will be developed with 51 percent ownership by Sri Lanka and 49 percent investment by India’s Adani Group and other stakeholders including Japan.
Rajapaksa approval came after reviewing the concerns for the project, referring to New Delhi’s concerns at the same port. The deep-sea jetty that President Rajapaksa approved is located next to the Colombo International Container Terminal that is 85 percent China-owned and was commissioned in 2013. Chinese submarines had made uninvited calls to the terminal in 2014, drawing protests from India. Nearly, 70 percent of transshipment containers handled by Colombo were Indian cargo.
Observers of the island country believe that Rajapaksa’s decision to revive the project is an attempt to resuscitate Sri Lanka’s economy from recession. According to Sri Lankan government figures, the South Asian country’s economy contracted by 5.3 percent in the first nine months of 2020 compared to a modest 1.9 percent growth in the same period last year.
Sri Lanka’s economic recession has prodded the government to appeal to international investors to roll over bonds maturing this year. International rating agencies have already slashed Sri Lanka’s creditworthiness citing the island’s inability to repay its foreign debt. About 10 percent of Sri Lanka’s foreign debt is owned by China.
Moreover, Beijing has been found guilty of debt-trapping Sri Lanka because of the latter’s public investment projects financed by China. The commonly cited example of China’s ‘debt trap diplomacy’ is Hambantota port project deal.
In 2017, Sri Lanka, unable to repay a huge Chinese loan, signed a $1.12 billion deal with China for Beijing to take over the strategically located Hambantota port on a 99-year lease. By giving China a toehold at the port located on the busy east-west shipping route, India and the US feared it would give Chinese Naval forces an undue advantage in the Indian Ocean.