Wednesday, 17th September 2014
A view from Sri Lanka’s capital of land curving into a sea once famed for its pearls now shows giant yellow digger trucks piling boulders. It’s another show of China’s increasing global influence.
Once fought over by European powers, Sri Lanka is now benefiting from the attention of Asia’s biggest economies, drawn to its Indian Ocean location along some of the world’s busiest sea-lanes. The Chinese-financed $1.4 billion “Colombo Port City” project is its largest foreign-funded investment on record.
President Xi Jinping, who has sought to restore China’s prestige and historical links along the “maritime Silk Road” through Southeast and South Asia, arrived in Colombo yesterday, shortly after a visit by Japanese Prime Minister Shinzo Abe.
Deepening ties with East Asia would aid its recovery from 26 years of civil war.
Dushni Weerakoon, head of macro-economic policy at the Institute of Policy Studies in Colombo said, “Sri Lanka stands to benefit from its growing economic links with each of these countries, but it will also require a careful balancing act on the political front.”
The Port City will be built by a unit of state-controlled China Communications Construction Co. (1800) on 233 hectares (576 acres) of reclaimed land, an area slightly larger than Monaco. The offices, hotels, apartments and shopping centres will draw as much as $20 billion in investment over about 15 years, according to ports authority chairman Priyath Wickrama.
“The government wants to convert Sri Lanka into a maritime center,” Wickrama said in an interview at his office overlooking the project area and adjoining port, which is also part-funded by China. “We can give some competition to Singapore and Dubai, which are running out of capacity.”
The unsolicited investment will boost job creation as China will bring only “expert category labour,” Wickrama said. Sri Lanka will own rights to 125 hectares of the reclaimed land and 20 hectares will be held by China Communications, with the remaining 88 hectares leased to the company for 99 years.
Colombo’s port is the only one in South Asia that can accommodate 18-metre deep draft vessels, putting it in position to serve the Indian subcontinent, the Middle East and some African states, said Parakrama Dissanayake, former chairman of the Chartered Institute of Logistics and Transport in Sri Lanka.
China last year overtook the U.S. as Sri Lanka’s largest trading partner after India, and has described itself as an “all-weather” friend.
Chinese government lending to the island nation has increased 50-fold over the past decade to $490 million in 2012, compared with $211 million combined from Western countries and lending agencies.
India has focused on development and reconstruction in the north, which was affected by the civil war that ended in 2009. As many as 40,000 civilians died in the conflict, according to a 2011 report from a panel appointed by UN Secretary General Ban Ki-Moon, most of whom shared ethnic links with the southern Indian state of Tamil Nadu.
“Both countries have mutually important strategic interests” in Sri Lanka, Deshal de Mel, senior economist at Hayleys Plc in Colombo, said of India and China. “Whilst it is probable that China’s interests in Sri Lanka are largely strategic and commercial in nature, particularly in terms of logistics and access to resources, it is inevitable that India will feel a degree of insecurity.”
Unlike previous infrastructure projects undertaken by Chinese companies in Sri Lanka, the port city is financed by equity from China Communications or funds raised through it, with no commitment or guarantee from the Sri Lankan government.
Besides Sri Lanka, Xi also visited the Maldives on this trip, which he called “an important stop of the ancient maritime silk road” in an article published in local media. Xi will travel to India tomorrow.
Asia’s biggest economy, which will import more than $10 trillion of commodities and invest more than $5 billion overseas in the coming five years, is committed to peaceful development, Yang Jiechi, a State Councillor and the country’s former foreign minister, said in Beijing in June.
Xi last year unveiled plans to build a maritime Silk Road, referring to an ancient series of land routes that connected China to the Mediterranean Sea, linking traders, priests, artists and explorers. Details on the project are short and may be fleshed out at the Asia-Pacific Economic Cooperation meeting in Beijing in November.
The project will attract “big Western” companies to Sri Lanka besides Chinese investment, Treasury Secretary P.B. Jayasundera, told reporters in July. “It may be a Chinese built city, but it will be a catalyst for growth overall.”
Source: Bloomberg Internet Publication