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Sri Lanka’s Sweet Deal with China Underpins the Belt and Road Initiative

July 18, 2021  
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Colombo will serve as a potential foothold for expanding Chinese diplomatic and military presence in the Indo-Pacific region.

The Colombo Port City Economic Commission Bill came into force in Sri Lanka on May 27, 2021. The bill lays out the country’s legal framework regarding a flagship project scheduled to transform the seafront of its bustling capital city into a new port. Many have speculated that this plan will pave the way for the island nation—strategically located at the crossroads of major shipping routes to South Asia, the Far East, Europe and America—to blossom into the next Singapore or Dubai.

The bill will establish a Colombo Port City Special Economic Zone under a $1.4 billion deal. That will mean handing over those 660 acres from Sri Lankan to Chinese state entities. Thus, it was no surprise that the bill faced a great deal of opposition before it passed. The Sri Lankan Supreme Court even urged the Rajapaksa administration to amend it, after it heard eighteen petitions filed against the bill by opposition parties and civil society groups who had even proposed an unprecedented national referendum on the topic.

The website of the China Harbour Engineering Company (CHEC), which is responsible for much of the development, already boasts of how the area will be “South Asia’s premier residential, retail and business destination, offering unmatched plan city living along the warm waters of Indian Ocean, with a “Financial District, Central Park Living, The Marina, and the International Island,” not to mention the plans for a water sports arena and housing for up to eighty thousand residents.

Nevertheless, as with other similarly ambitious Chinese projects in the region, its success will depend on those who end up using it, the majority of whom will be from outside of Sri Lanka.

Take the case of the $209 million Mattala Rajapaksa International Airport Project, $190 million of which was funded by high-interest Chinese-state loans. The airport has recently seen an uptick in traffic due to a wave of repatriation, charter and seafarer flights associated with the coronavirus pandemic. But it’s notable that in 2016 the Sri Lankan government called for Expressions of Interest to run commercial activities on the airport as it was not even generating enough income to pay back the loans, and Forbes dubbed it “the world’s emptiest international airport.”

Likewise, Chinese state loans largely funded Sri Lanka’s Hambantota Port, which remains largely bypassed by shipping traffic despite years of investment. When Sri Lanka failed to meet Beijing’s stringent loan repayment conditions, it entered into a ninety-nine-year lease with China Merchants Port Holdings Company Limited to operate the port. Colombo likely faces the same fate if it fails to live up to CHEC’s grand predictions.

What these series of projects make clear is that, for China, multilateral cooperation and free trade are not at the heart of its international expansion as much as the potential for domination via debt-trap diplomacy. While this remains a complex and highly contested concept—and certainly one of which western-controlled institutions have been guilty too—it is at least a feature of Beijing’s global strategy.

In the case of Colombo, the new bill establishes a Special Economic Zone that a commission will be authorized to take a wide range of decisions, including granting “registrations, licenses, authorizations and other approvals to execute businesses and other activities in and from such Zone,” as if it were a whole other sovereign territory.

As Counsel Wijeyadasa Rajapakse advised the Sri Lankan Supreme Court, this port will create the problematic and potentially unconstitutional minefield of a de facto state within a state; even if the project succeeds, its impact on Sri Lanka’s economy may be dire. As with many such projects, any profits will simply flow back to the Chinese state and its cronies. Sri Lankans would even be obliged to pay duties on goods bought within the territory. This is just one sign that any symbiotic partnership is out of the question here.

While the Colombo Port City project is scheduled to take two decades to complete, Sri Lanka’s economy and its already tense political ecology will likely begin to face the consequences long before that happens.

If the Hambantota Port fiasco is anything to go by, then this project is intended to secure Sri Lanka as another semi-vassal state along the “Belt and Road.” Also, it will serve as a potential foothold for expanding Chinese diplomatic and military presence in the Indo-Pacific region.

Georgia Leatherdale-Gilholy is an associate writer for Foundation for Uyghur Freedom and a Young Voices contributor.


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