OBOR Initiative

Colombo Port City Project and Chinese involvement


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Chinese encroachment of Lankan Sovereignty

Sri Lanka recently passed the controversial Colombo Port City Economic Commission Bill, which governs the China-backed Colombo Port City project worth $1.4 billion, amid wide opposition to the creation of a “Chinese enclave” in the island nation.

Colombo Port City Project

  • The Colombo Port City has grabbed headlines in Sri Lanka in recent months even as the relentless third wave of the COVID-19 pandemic sweeps through the country.
  • Almost an artificial island, the territory coming up on 2.69 square kilometers of land reclaimed from Colombo’s seafront has stirred controversy since its inception.
  • Those backing it see in that patch of land their dream of an international financial hub — a “Singapore or Dubai” in the Indian Ocean.

When was it launched?

  • The project was launched in September 2014 by Chinese President Xi Jinping during a visit to the island nation under the Mahinda Rajapaksa administration’s second term.
  • After President Mahinda Rajapaksa was ousted in January 2015, the successor “national unity” government of Maithripala Sirisena and Ranil Wickremesinghe went ahead with the project after briefly halting it.
  • On returning to power in November 2019, the Rajapaksas vowed to expedite the project. The Sri Lankan government says the project will bring in around 83,000 jobs and $15 billion initially.

Issues with the project

  • But skeptics claim that it could well become a “Chinese colony”, with the Bill, which is now an Act.
  • The law provides China substantial “immunity” from Sri Lankan laws, besides huge tax exemptions and other incentives for investors.

What is the extent of China’s involvement?

Effectively, China has substantial control over two key infrastructure projects in Sri Lanka for a century.

  • The port city project is financed chiefly through Chinese investment amounting to $1.4 billion.
  • In return, the company will receive 116 hectares (of the total 269 hectares) on a 99-year lease.
  • The city separates from but located adjacent to the Colombo Port, the country’s main harbor — is the third major port-related infrastructure project where China has a significant stake.
  • China Merchants Port Holdings has an 85% stake in the Colombo International Container Terminal under a 35-year ‘Build Operate and Transfer’ agreement with the Sri Lanka Port Authority.
  • In 2017, the Sirisena-Wickremesinghe administration, unable to repay the Chinese loan with which it was saddled by the previous government, handed over the Hambantota Port to China on a 99-year lease.

Concerns from within Sri Lanka

  • Since its launch, the Colombo Port City project has faced opposition from environmentalists and fisherfolk, who feared that the project would affect marine life and livelihoods.
  • However, in the absence of wider political and societal support, their resistance did not dent successive governments’ resolve to pursue the project.
  • The more recent opposition was specific to the Colombo Port City Economic Commission Bill.
  • The resistance came from Opposition parties and civil society groups, including many who do not oppose the project per se, but rather its governance by “an all-powerful commission answerable to no one”.
  • Significantly, a section of Buddhist monks, wielding much influence in Sri Lankan politics and the Sinhala society, also opposed the Bill and said that it eroded Sri Lanka’s sovereignty.

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