Development of Whom? China’s Development Project of Sri Lanka’s Hambantota Port
In December 2017, the government of Sri Lanka officially handed over the Port of Hambantota to China Merchants Port Holdings Co Ltd., one of China’s state-owned enterprises, following the contract agreed and signed in July that year. This 99-year lease was a result of a massive amount of debt that Sri Lanka was unable to pay back to China’s development project “Belt and Road Initiative” (BRI). While the media tends to focus on the Sri Lankan government’s decision to lease the Port to pay off the debts, little attention has been given to how different sectors in the country, including the locals in Hambantota and the new government, reacted to this decision.
Formerly referred to as the “One Belt One Road”, the Belt and Road Initiative (BRI) was launched in 2013 by President Xi Jinping. The aim was to revive and re-establish a silk road connecting China to other parts of the world via overland and maritime routes through infrastructures, such as roads, bridges, and ports. The BRI’s selling point is the “South-South Model,” providing loans for big infrastructure projects for developing countries. Those projects, however, usually come with a higher interest rate compared to those provided by other donor countries.
Since the establishment of the Initiative, China has been funding many projects, especially in Asia and Africa. While the traditional aid provider in the region, Japan, remains the biggest aid provider, China is catching up and even surpassing Japan with a higher number of active infrastructure projects in Cambodia, Indonesia, Laos, and Malaysia. Sri Lanka is another major recipient country of BRI money.
For Sri Lanka, the idea of developing Hambantota Port has long been part of its official development plans. Many feasibility studies were conducted and showed that the Port would not be as commercially viable as other ports, such as the Port of Colombo. However, the government insisted, and the official project to develop Hambantota Port was initiated by the former Sri Lankan President Mahinda Rajapaksa, whose term was from 2005 to 2015. Coming from Hambantota himself, Rajapaksa was eager to make the project happen, however, frequent lenders like India refused to assist. Therefore, he turned to China, and they were willing to invest.
Over the years of construction and renegotiation, the Hambantota Port Development Project has proved the predictions of feasibility studies were correct. In 2012, for example, the Port only drew 34 ships throughout the whole year. This is a minimal number given its strategic location, with tens of thousands of ships passing by.
After various corruption scandals, including the case of Hambantota Port, Rajapaksa was voted out of office in 2015. However, the new government, led by Maithripala Sirisena, was not able to pay back the massive amount of debts as the Port could not gain sufficient revenue. Therefore, Sri Lanka decided to lease the Port covering 15,000 acres of land to China for 99 years in exchange for US$1.1 billion debt relief. Some expressed their concerns over this move, critiquing China’s predatory approach in giving foreign aid. The case on Hambantota Port, without a doubt, has become an example of debt-trap or debt diplomacy of the 21st century.
While many major powers around the world, like the US or Japan, have expressed their concerns over China’s growing influence in the region, little attention has been given to the local voices who were directly affected by the decision to lease the Port. The land of the 15000-acre industrial zone could have provided people with living space and farming opportunities. Consequently, in January 2017, prior to the official decision to lease the Port, local people, led by a group of Buddhist monks, caused a demonstration protesting against the government’s actions.
In November 2019, Gotabaya Rajapaksa, brother of Mahinda Rajapaksa, was elected as President. During the election campaign, he promised to undo the port deal with China if elected. He later clarified that he was not aiming to revise the commercial agreements, but rather revisit security at the Port.
It seems that the 99-year deal is still in effect despite dissatisfaction among the Gotabaya Rajapaksa’s government and the locals in Hambantota. Sri Lanka’s current debt accounts for 78 percent of its GDP, and it is estimated to continue increasing every year. In 2024, the national debt is predicted to be as high as US$97.48 billion. The future of Sri Lanka’s development, and importantly the locals who are affected, remains ambiguous. While BRI-like aid programs were designed to assist development, they could also put the recipient country in a disadvantaged position. Not only China, but the Sri Lankan government should approach foreign aid and development assistance offered by other donor countries with caution.