A Chinese White Elephant as Sri Lanka Desperately Seeks India’s Help to Tide Over Economic Crisis


Sri Lanka, the maritime hub in the Indian Ocean, is feeling rudderless at the moment due to a critical economic crisis. The double whammy of inflation and the crushing burden of foreign debt is leading to resentment among the public that is spilling out on the streets with chants of ‘Go Home Gotabaya’.

An opposition-led rally two weeks ago saw a huge turnout. Even youngsters were seen participating with posters voicing their anger against the Rajapaksa family. One poster said “no family should have this much power”.

This unfolded as Sri Lankan Finance Minister Basil Rajapaksa was making his second visit to India in less than four months, seeking a $1 billion line of credit. After granting the economic lifeline, India’s External Affairs Minister S Jaishankar is now travelling to Colombo both for bilateral meetings and to participate in the BIMSTEC ministerial meeting ahead of the BIMSTEC summit on March 30.

The repeated visits of Basil Rajapaksa earlier were meant to seek financial help from India. However, this time the need was even more pressing with Sri Lanka too strapped to even afford essentials like food items. Last week, the price of milk powder for a 400 gm pack was hiked in one go by 250 Sri Lankan rupees.

A young protester holds up a poster opposing the Rajapaksa family. (Maha Siddiqui/News18)

However, Sri Lanka’s larger economic problems have been in the making. And the debt trap is largely blamed on the Rajapaksas and their proximity to China. From Hambantota to now the proposed Port City of Colombo, the Chinese footprint is all over.

The Chinese Harbour Engineering Company (CHEC) has created a piece of land from the Indian Ocean for Sri Lanka just south of the Colombo port. A 269 hectares of land has been reclaimed but what next? Sri Lanka is desperately seeking investors to build the critical infrastructure needed to make it a multi-services hub in Asia much on the lines of Dubai or Singapore. However, the Port City Commission hesitates from drawing that parallel.

Saliya Wickramsuriya, spokesperson, Port City Colombo Economic Commission, Government of Sri Lanka, says that more than tax holidays, they want to use Sri Lanka’s strategic location as a transit between Asia and the West as a unique selling proposition.

It is here that the desire that Sri Lanka is seeking Indian investors becomes very clear. The Commission argues that since 70% of the trans-shipment business on the Colombo port is India’s, investing in the Port City Colombo project will be advantageous to the neighbour.

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However, India had a bitter experience with Sri Lanka not too long ago. In early 2021, Sri Lanka unilaterally dissolved a deal between itself, India and Japan. The speculation was that it was done at China’s behest. Later, after much protest, West Container Terminal now has Indian investment. However, while the East Container Terminal was a government to government deal, the West Terminal has commercial investments from private players. The Indian and Japanese governments were extremely upset at the turn of events only last year.

Despite the turbulence in relations due to the container terminals, the Sri Lankan side is pushing for more Indian investment now for the ambitious Port City Colombo which at the moment is like a white elephant for the Sri Lankans.

The Port City Commission claims there is no Chinese control over the projects. Wickarsuriya also adds, “The Chinese company has taken all the risk. The government of Sri Lanka has nothing to lose with the failure of the project, on the other hand it has a lot to gain from its success and so do the others. That’s what we are hoping we can convince the investors from India about.”

However, out of the 269 hectares of land, 43% or 116 hectares has been leased to CHEC, which is a subsidiary of the Chinese state-owned Chinese Communication and Construction Company (CCCC).

On the ground as well, the Chinese involvement is ubiquitous. Photos of Chinese President Xi Jinping with Sri Lankan Prime Minister and former President Mahinda Rajapaksa find a prominent place as you enter the auditorium that runs a promotional film of the model port city.

Photos of Xi Jinping with Mahinda Rajapaksa find a prominent place at the auditorium. (Maha Siddiqui/News18)

The model presents a futuristic picture of what Sri Lanka wants the port city to be like. Yamuna Jayaratne, Director, Sales and Marketing, Port City Colombo says, “On the long term, to realise the full vision and for it to reach its maturity, it will take about 20 years as per our estimate.”

Right now, a high-end, but only a small portion called the Marina has been sold, but the rest of the plan needs massive investment for building the infrastructure on the reclaimed land.

The opposition in Sri Lanka has been sceptical of the project due to an Act that gives the Commission a free hand to develop the project. Some believe the Port City would turn into a province of China as it has its own jurisdiction too. The general public is increasingly viewing such projects as wasteful when the country is struggling with basics like food and electricity.

The project also ran into rough waters with environmentalists and fishing communities. Twenty cases against the project had reached the Supreme Court. The project was finally given a go-ahead after a 30-member committee gave a green signal but with 72 conditions.

The project also ran into rough waters with environmentalists and fishing communities. (Maha Siddiqui/News18)

The Commission says they have done a thorough impact assessment and cost-benefit analysis. WADD Wijesooriya, Head of Environmental Management, Port City Colombo cites examples from the Netherlands to Dubai to Changi Airport to say land reclamation is not a new concept. He explains that the concerns regarding coastal erosion and the fear that the north and south of Colombo will be washed away due to reclamation work have also been addressed.

The land reclamation has been done in record time of 30 months by China, but now the process has slackened due to lack of investors. Sri Lanka hopes that India, which does a bulk of its shipment through this route, will find value in investing.

They also say that inquiries have been made by the US and German embassies about the Port City Project. They claim the project doesn’t fall under China’s contentious Belt and Road Initiative, but the overt involvement of China in Sri Lanka under the Rajapaksas remains a hurdle that the island nation well realises.

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