Dec 26 (ET) NEW DELHI- Sri Lanka's Hambantota port is located a few nautical miles from sea lanes where tens of thousands of container ships pass annually. It is one of the busiest shipping lanes in the world - one that Beijing is eager to control but that compromises Sri Lanka's sovereignty.
"When the Sri Lankan government decided in 2002 to build a new port in Hambantota, China offered $1.1 billion in loans. It also supplied Chinese contractors. And when the port opened in late 2010 and immediately began losing money - so much that Sri Lanka couldn't even make interest payments on those loans - China offered a solution: foreclosure," according to a report by US National Public Radio or NPR in an article titled, "In Sri Lanka, China's Building Spree Is Raising Questions About Sovereignty".
"Beijing has bankrolled infrastructure projects in dozens of countries as part of its Belt and Road Initiative, one of the biggest construction efforts in human history. The difference in Hambantota is that the Chinese state-owned operator physically took control of the port in late 2017 - on a 99-year lease - after the Sri Lankan government defaulted on its loans," NPR recalled.
That has raised questions about sovereignty. An adviser to Sri Lanka's newly elected president recently said the government wants China to "give it back."
"Polling data is scarce, but experts believe most Sri Lankans across the country trust China and are happy about its many investments in their country - from the Hambantota port in the south to a coal-fired power plant in the northwest and a new concert hall and port city in the capital, Colombo," according to NPR report.
"Many Sri Lankans see all this construction, and they're proud of their district having these facilities. What people don't seem to understand are issues of environmental impact, human rights and labor," the NPR reported quoting Bhavani Fonseka, a lawyer at the Centre for Policy Alternatives, a think tank in Colombo. "If you go to any project site, it's the Chinese who have the jobs. Job creation hasn't come for locals. Will these [Chinese] workers settle here? Is this becoming a colony? Very few people are asking these questions."
"With the World Bank or the Asian Development Bank, there are lots of checks and balances. They insist on open processes for tendering, and comprehensive reviews of a project. But with China, there are few conditions. So it's a lot easier to get approval and do projects with China than with these other international institutions," NPR wrote quoting Ravi Ratnasabapathy, an accountant in Colombo who has reviewed the Hambantota deal. The Chinese "don't really ask you for proper assessments. They give you the loan and it's very easy to pad those contracts out - and make a lot of money."
"The country remains deep in debt - to the tune of about $66 billion. China is Sri Lanka's biggest single lender, holding 12% of the country's debt, according to data from Sri Lanka's Finance Ministry. Japan holds 10%. Foreign banks together hold the most - about 42% - in the form of sovereign bonds."
In 2011, the government sold 6 acres of Colombo beachfront property to a Hong Kong-based holding company, for $125 million. The site, now home to a luxury hotel, once held strategic importance to Sri Lanka, but the government was willing to sell it, according to NPR report.
"The Sri Lankan capital's skyline is now dominated by Chinese-built structures: a $1.4 billion business district encompassing apartment towers, office skyscrapers and hotels, a new concert hall - and the 1,150-foot-high Lotus Tower, billed as the tallest tower in South Asia. Commissioned in 2012 by Sri Lanka's telecommunications agency, the Lotus Tower was built by Chinese state contractors as a hub for telecom companies. A revolving restaurant and observation deck were supposed to attract tourists."