South Asia | Suspended Chinese-funded Colombo Port City project gets new lease of life

Suspended Chinese-funded Colombo Port City project gets new lease of life

December 30, 2015 12:32 AM (UTC+8)

 

Sri Lanka’s coalition government has finally given the green light to restart work on the US $1.4 billion China-funded Colombo Port City project.

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Colombo’s approval for the project work, which was suspended in March this year, however, comes with several conditions. The new administration has changed the clauses with regard to the ownership of land on which the project will be constructed.

Sri Lankan government’s spokesman minister Rajitha Senaratne said in mid-December that the government has decided to lift the suspension on the Port City project and allow China to go ahead with the project after its efforts to renegotiate the contracts with Beijing proved unsuccessful.

“We have decided to go ahead with the project as it is not feasible to abandon them half-way,” he told a news conference in Colombo.

However, several provisions in the contract have been changed in relation to the owing of the land on which the project will be constructed. The new government has decided to offer the land on a 99-year lease. Under the original agreement between China and former president Mahinda Rajapaksa, the 233 hectares (576 acres) land was offered on a free-hold basis.

The project, which is expected to play a key role in China’s ambitious ‘Maritime Silk Road’, has raised concerns in India as a large number of India-bound vessels pass through Colombo port regularly.

China has been one of Sri Lanka’s largest investors in the recent past, especially during the tenure of Rajapaksa. However, with his ouster in the January 2015 presidential elections, the newly elected President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe have shed the pro-China policy.

Since the suspension of the project, China has been sending warning signs to Sirisena and Wickremesinghe whose party was re-elected to power in the August parliamentary elections.

Sources said that the new land clause, which has been added by the Sirisena-Wickremesinghe administration on the mega infrastructure, is a balancing act to keep both India and China happy.

The Port City project, which stakes claim as the largest foreign-funded investment on record in Sri Lanka with hopes to change the face of Colombo’s infrastructure development, was abruptly suspended in March 2015 by the Sirisena-Wickremesinghe administration citing various ‘concerns’ on the agreement Rajapaksa signed with China.

When the project was suspended, construction work was already underway, after it was inaugurated in September 2014 in the presence of Chinese President Xi Jinping and Rajapaksa.

The new Sri Lankan government claimed that Rajapaksa had signed the deal with China without following the procedure and obtaining approval from cabinet ministers.

However, since the suspension of the project, China has been pressuring the Sri Lankan administration and the matter has been taken at the highest levels.

Soon after the project was suspended, Chinese Ambassador Yi Xianliang called for an emergency meeting with Wickremesinghe and Foreign Minister Mangala Samaraweera where he said the new Sri Lankan government must ‘respect’ bilateral agreements and contracts and protect the interests of its foreign investors.

The Colombo Port City, which is being built by the state-controlled China Communications Construction Co. on 233 hectares (576 acres) of reclaimed land — an area slightly larger than Monaco — is expected to attract local and international investments for shopping malls, hotels, apartments, an exhibition center, educational institutions, healthcare facilities, theme parks, and restaurants, among others.

The project is expected to generate 83,000 local jobs and attract international investments to the tune of US $ 13 billion when the project is fully completed.

Sri Lanka’s Finance Minister Ravi Karunanayake declared that the Colombo Port City Project will go ahead, as the government has cleared certain areas.

“There won’t be land given on freehold, but instead it will be given on a 99-year lease,” he said adding that the Chinese can now go ahead with the project.

“We never wanted to stop this project, but we had to revisit certain areas which we have done,” he told Asia Times.

In November this year, Yi disclosed that China has contributed almost US $ 10 billion to Sri Lanka.

Addressing the inauguration of the first China Product Expo in Colombo, he said the Chinese government, through the Exim Bank and other banks, contributed more than US $ 6 billon to the development of Sri Lanka.

“With this as well as other Chinese financial contributions to Sri Lanka over the last 50 years, it totals to about $10 billion. This means Chinese financial contributions to Sri Lanka is quite important with positive impacts on the development of this country,” he added.

Last year, bilateral trade between China and Sri Lanka increased by 16% to $3.5 billion.

Munza Mushtaq is a senior journalist based in Sri Lanka, and former news editor of The Nation and The Sunday Leader newspapers.

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