The first phase of the Magumpura Mahinda Rajapakse Port at Hambantota was inaugurated recently.
How much did China influence?
The government finalised an agreement to sell an 80% stake in the port’s operations for $ 1.1 billion to China Merchant Ports Holding Company Ltd, which also has the contract for the Colombo Port.
Sri Lanka took this step to service the debt on the loan it took from Exim Bank China to build the port.
While India has not commented on the new agreement, the domestic protests continue.
Port workers and Ceylon Petroleum workers have struck work to protest the sale of Hambantota to the Chinese, as well as the Trincomalee agreement with India.
Is it a successful venture?
The Hambantota Port adds to the nation’s huge foreign debt.
A large portion of it owed to China as repayment of loans for infrastructure projects.
For the $ 1.5 billion Hambantota Port, 85% of the finances came as loan from China’s Exim Bank, at an interest of 6.5%.
The rest came from the Sri Lankan government, which was borrowing heavily from other sources.
By 2016-end the commercial operations’ cumulative losses were estimated at over SL Rs 450 billion ($ 3 billion).
Rajapakse international airport is a second giant lossmaking project.
It was built by the Chinese, with the Exim Bank of China lending $ 190 million.
How India’s interest is treated?
When the new government took office in Sri Lanka, it was expected that it would correct the China tilt in Sri Lanka’s foreign policy, and put relations with India on a firmer footing.
There is some disappointment in the Indian establishment that Sri Lanka did not altogether cancel all the Chinese infrastructure projects, including the controversial offshore Colombo Port city deal.
Sri Lanka believes it stands to benefit from One Belt One Road and China’s investments.
To normalise its relations with India, Sri Lanka signed a MoU on the development of Trincomalee harbour.
