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INTERNATIONAL > East Asia & Pacific

Sri Lanka awards port project to China after dropping Japan, India

  • November 25, 2021
  • , Nikkei Asia , 11:13 a.m.
  • English Press

RYOSUKE HANADA, Nikkei staff writer

 

NEW DELHI — Sri Lanka will tap a Chinese company for a port project in Colombo, its largest city, that had been awarded to Japan and India before the partnership was scrapped early this year.

 

The decision highlights Colombo’s balancing act and comes a month after Indian conglomerate Adani Group was awarded another deal worth over $700 million to develop the West Container Terminal at the Colombo port. President Gotabaya Rajapaksa has said he wants to be “neutral” in Sri Lanka’s relations with India and China as the nation struggles with a shortage of foreign currency.

 

His cabinet on Tuesday agreed to have state-run China Harbour Engineering develop the Eastern Container Terminal while stipulating that local authorities would handle all operations. It cited recommendations by a cabinet-appointed committee as the basis for the decision.

 

The apparent pro-China tilt of Rajapaksa’s government is seen as a factor in the change of plans. Beijing has invested heavily in projects on the strategically positioned island under its Belt and Road infrastructure initiative.

 

Sri Lanka had signed a memorandum of understanding with Japan and India in May 2019, under previous President Maithripala Sirisena, to jointly develop the Colombo terminal. The operating company would be 51% owned by the Sri Lankan government, with the rest held by Japan and India.

 

Rajapaksa, who took office in November of that year, indicated at first that the project would stay on course.

 

That changed this past February, when the cabinet decided that the operating company would be wholly owned by Sri Lanka, pushing Japan and India out of the project. The Japanese government called the unilateral move “regrettable.”

 

China has continued to provide financing for Sri Lankan infrastructure, taking control of projects such as roads and port facilities in the process. Concerns have been raised that this support is pushing the country into a debt trap, as was seen in a 2017 lease deal of the Hambantota port in the southern coast of the island. The previous government leased it out to a Chinese state-run company for 99 years, in return for $1.1 billion as a part of Colombo’s efforts to repay debt to China.

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