Sri Lanka has formally handed over its southern port of Hambantota to China on a 99-year lease, which government critics have denounced as an erosion of the country’s sovereignty.
The US$1.3bn port was opened seven years ago using debt from Chinese state-controlled entities. But it has since struggled under heavy losses, making it impossible for Colombo to repay its debts.
In 2016 Sri Lankan ministers struck a deal to sell an 80 per cent stake in the port to the state-controlled China Merchants Port Holdings.
But that agreement sparked protests from unions and opposition groups, forcing the government to renegotiate it. Under the new plan, signed in July, the Chinese company will hold a 70 per cent stake in a joint venture with the state-run Sri Lanka Ports Authority.
Ranil Wickremesinghe, Sri Lanka’s prime minister, welcomed the deal during the official handing over ceremony at the weekend. He said: “With this agreement we have started to pay back the loans. Hambantota will be converted to a major port in the Indian Ocean.
“There will be an economic zone and industrialisation in the area which will lead to economic development and promote tourism.”
But the renegotiated plan has failed to quell dissent within Sri Lanka. When it was first signed Namal Rajapaksa, Hambantota’s MP and son of former president Mahinda Rajapaksa, tweeted: “Government is playing geopolitics with national assets? #stopsellingSL”.
For Beijing, the Hambantota project is a lynchpin of the “One Belt One Road” project, which aims to build a new Silk Road of trade routes between China and more than 60 countries in Asia, the Middle East, Africa and Europe.
That project is underpinned by a network of harbours across the world that have put China in a position to challenge the US as the world’s most important maritime superpower. Other similar developments in the region include the Gwadar port in Pakistan, which is the centrepiece of the $55bn China-Pakistan Economic Corridor.
But some have accused Beijing of using projects such as this to increase its regional political power, noting the length of the lease agreed by Sri Lanka is the same as that which gave Britain control over Hong Kong in the 19th century.
Constantino Xavier, a fellow at foreign policy think-tank Carnegie, said: “This is part of a larger modus operandi by China in the region.
“Beijing typically finds a local partner, makes that local partner accept investment plans that are detrimental to their country in the long term, and then uses the debts to either acquire the project altogether or to acquire political leverage in that country.”
New Delhi has become so concerned about Beijing’s plans at Hambantota that it has entered into talks with Sri Lanka to operate an airport nearby.
In recent months, however, there have been signs that China’s partners are starting to become wary over the terms being dictated to build projects under the One Road banner.
Pakistan, Nepal and Myanmar have all recently cancelled or sidelined major hydroelectricity projects planned by Chinese companies. The projects would have been worth a total of US$20bn.