China boosts Sri Lankan trade options with India
By Amantha Perera
COLOMBO - As he stood on the westernmost edge of Colombo’s new harbor expansion, it was hard for Priyath Bandu Wickrema - the man tasked with reinventing the port as a regional giant - to cap his enthusiasm.
"The potential is enormous," Wickrema said, standing on top of the new pilot house. "You know we are standing on land that is not even on the map."
The land is part of a harbor expansion scheme that will add three terminals to Colombo port, each with three berths. The first opened this week. In all, US$400 million were invested for the land development and another $500 million for the infrastructure on the
berths. Of the investment on berths, 85% came from China Merchant Holdings and the rest from the Sri Lanka Ports Authority (SLPA).
Wickrema, the SLPA chairman, is upbeat on prospects. "Our aim is to get $1 billion in revenue by 2020."
The target is large ships that carry above 10,000 containers. There are at present 183 such ships moving between East Asia and Europe, according to SLPA chief manager Upul Jayatissa. Only three ports in the Indian Ocean can handle these massive vessels - Salalah in Oman, Singapore and Dubai.
The SLPA envisions the new harbor as a transshipment hub, with India the biggest supplier of business. "Our catchment area is the east coast of India," Jayatissa said.
Wickrema does not discount the west coast either. He said large volumes of cargo from the Indian west coast are moved through Dubai or Oman, and promises that Colombo will be far more attractive in terms of distance and efficiency. "Our aim is to attract about 20% of the Indian container load," Wickrema said. Currently Colombo handles around 16%.
The little irony in Sri Lanka’s plan is that most of the funding has come from China, which is vying with India for dominance of the Indian Ocean. Since a debilitating civil conflict ended in this country in 2009, China has been the biggest lender to Sri Lanka, funding highways, a new airport, a new port and hotels, along with the harbor expansion. Sri Lanka turned to the China Construction and Communications Co for $1.4 billion of funding for a land reclamation project just south of the new port.
All this money that China is pouring into Sri Lankan coffers has led to criticism, especially by opposition parties, that the Mahinda Rajapaksa government has borrowed itself into a corner, and undermined Sri Lanka’s strategic relations with India. Officials from the World Bank and the International Monetary Fund point out privately that China is giving Sri Lanka loans as opposed to concessionary grants, and that Sri Lanka has found it hard to attract significant private investment from elsewhere.
Economists in Colombo say that with bilateral or donor grants not forthcoming, China offered better rates than international banks.
"The interest on commercial borrowing from China is generally lower than commercial borrowings from European capital markets which Sri Lanka has been tapping in recent times," Muttukrishna Sarvananthan, who heads the economic think-tank the Point Pedro Institute of Development, told IPS.
China may have financed economically unviable projects like the new airport in the southern province and the new port at Hambantota nearby, but large chunks have gone to more prudent projects, he said. "China has funded projects in Sri Lanka such as the Norachcholai Coal Power Plant and the Colombo-Katunayake Expressway."
The government has also faced charges that China could use some of the investments in the ports, especially in the southern port, for military purposes. Critics of these Chinese funded projects on India’s southern doorstep say that China could use the southern harbor to increase its naval presence in the Indian Ocean.
Chinese military presence in the Indian Ocean is not a major worry for India yet, according to Ramani Hariharan, a former Indian intelligence officer and defense specialist. But, he said, there are growing concerns.
"The Chinese want to establish a strong presence in the marine business in Sri Lanka because that would enable them to build up their influence in future maritime developments, including security of Chinese ships, mainly tankers, and anchorages and repair facilities," he told IPS.
In addition, the investments would allow the Chinese to maintain a presence in the region more easily. "It would also provide legitimate excuse to collect data required for future naval operations - survey of ocean and approaches as well as stealthy electronics eavesdropping," Hariharan said
Wickrema dismisses all such fears. "I guarantee there will not be a [Chinese] naval base in [southern] Hambantota," he said. Chinese investments such as those that he has overseen are only commercial deals with profits as the final target, not military muscle, he said. "I don’t think anyone will get opportunities to use these ports as strategically important military service hubs," he said.
If the aim is to get more Indians to ship through Colombo, Wickrema would have to make sure he and the government kept that promise.