Sri Lanka Reopens Stalled Chinese-Funded $1.4B Colombo Port City Project

colombo-port-city-projectBE2C2 Report — Sri Lanka has reversed a year-old decision, and given the green light on the Chinese-funded $1.4 billion Colombo Port City project, reports ENR.

The contractor, China Harbor Engineering Corp., has resumed work that had been stalled by a government decision following disputes over land rights and environmental issues.

The turnaround came during Sri Lankan Prime Minister Ranil Wickremeshighe’s recent visit of  to Beijing. The development opened the door for a range of Chinese investments in Sri Lanka’s infrastructure sector, which Chinese companies are eager to carry out.

Officials from China and Sri Lanka put together a series of different agreements for construction of new railway, road, port and airport projects that would be constructed by Chinese companies. Wickremeshighe appended his signature to the new set of deals.

The Colombo Port City project, which would be built on 230 hectares of land reclaimed by city, is planned as a high-end entertainment and commercial complex with a Formula One track, five-star hotels, shopping arcade, water sports area, mini golf course, recreation centers and apartment buildings. A proposed gambling center was scrapped after a public uproar.

Unresolved controversy

But Wickremeshighe’s Beijing visit has not solved an important piece of the puzzle. One of the important reasons why the project was stalled was a dispute concerning the ownership of the land on which it is being built.

Critics say the Sri Lankan government has signed away its sovereignty to a foreign country in a sensitive area inside the country’s capital. Neighboring India, which is also a major source of trade and investments for Sri Lanka, has been concerned about the security risks involved in Chinese presence very close to its own shores.

Both Sri Lankan and Chinese officials have remained tight-lipped on whether the agreements signed in Beijing covered this crucial aspect. Chaminda Hettiarachchi, lecturer and researcher at the Colombo University, said he expected the government to renegotiate this aspect of the deal, and ensure that the ownership of the project land remains with Sri Lanka.

Hettiarachchi said the government was pushed into making the deal because it is in severe financial crunch and expects China to bail it out with some assistance. “The Sri Lankan government almost bankrupt,” he said. “It needs Chinese money at least in the short term. This is why it has agreed to sign the port city deal. But Chinese projects are not useful to the Sri Lankan people.”

Two international ratings firms, Fitch and Standard & Poor’s, reduced the island nation’s credit rating in February and March. This has made it extremely difficult for Colombo to raise funds from the market at reasonable rates.

Colombo is trying to persuade Beijing to reschedule past loans amounting to about $5 billion, and extend fresh loans. This includes $1.6 billion in Chinese financing for a seaport and an airport in Hambantota. But there have been no specific assurances from Beijing so far, the report says.


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