To counter China’s Belt and Road Initiative (BRI), India in collaboration with Japan and Sri Lanka will be expanding the port in Colombo. Officials say the objective of this trilateral project is to increase Colombo port’s container volume and increase transportation in and around South Asia.
Western experts describe China’s ambitious BRI as a debt trap and have often given example of Sri Lanka’s Hambantota port. Initially, Sri Lanka had turned to India for financial help to build it but New Delhi had rejected it saying that the project is commercially unviable. Eventually, China’s Export-Import Bank agreed to fund 85 per cent of Hambantota’s first phase construction with a 15-year commercial loan of $306 million at an interest rate of 6.3 per cent. The risk premium accorded to Sri Lanka was quite high at that time because of the ongoing civil war.
However, as per several reports, Hambantota port was not able to generate sufficient revenue to meet its loan obligations, with reasons being inadequate governance, lack of commercial and industrial activities and most of all the inability to attract passing vessels to dock at the port. According to sources, Sri Lanka suffered a loss of $304 million in 2016 because of it. However, in contrast, China ‘never’ tried to take the port in concern.
In the midst of the Hambantota port loss, India is pushing Sri Lanka for an estimated $1 billion contract for a second foreign-operated container terminal in Colombo. In collaboration with Japan, India is looking forward to develop infrastructure and connectivity projects in the Bay of Bengal region including Andaman Islands.
In 2018, Sri Lanka had shown interest in handing over the running of the Chinese-built Hambantota airport to India. The Economic Times had stated that the handing over of the Mattala Rajapaksa International Airport (MRIA) in Hambantota to India would enable Sri Lanka to pay back dues to China’s EXIM Bank.
Currently, officials of India, Japan and Sri Lanka are in talks about the Colombo port. An official said the project will involve developing a facility that will allow large container ships.