Mahesh Belavi asked: Is Colombo Port City Project a security threat to India?

Ashok Kumar Behuria replies: The Colombo Port City project, initially set into motion in 2011, gathered momentum only after China expressed its interest in it by 2013. In September 2014, during Chinese President Xi Jinping’s visit, it was decided bilaterally that China would invest $1.4 billion to reclaim about 233 hectares of land from the sea, between the southern edge of the new Colombo South Port and the Fort Lighthouse, to build hotels, apartments, office buildings, a F1 track and a golf course.

As per the original agreement, the Chinese company would have been given freehold possession of about 20 hectares and another 81 hectares on 99-year lease. China Harbour Engineering Company Ltd. (CHEC), a subsidiary of China Communication Construction Company (CCCC), started working on the project soon after the agreement was signed. This was floated as a dream project of former Sri Lankan President Mahinda Rajapaksa. However, there was significant opposition to the project on account of its disregard of environmental impact assessment which was allegedly manipulated by the government, large-scale corruption and security concerns about a Chinese firm being given freehold land in the port city project.

What made matters even worse was the docking of Chinese submarines and a warship in Colombo Port, in August and October 2014, around the time of the start of the project. This had raised eyebrows in India. There was a suspicion that Sri Lankan Government was deliberately ceding part of its territory to a Chinese concern ignoring Indian sensitivities.

At the internal level, within Sri Lanka, there were apprehensions too about the way Sri Lanka was being made to brazenly tilt towards China. As Rajapaksa’s political fortunes dipped, the opposition threatened to scrap the project. In fact, the Maithripala Sirisena Government that came to power riding the anti-incumbency, anti-Rajapaksa wave in January 2015 stalled the project immediately after assuming office, issuing an official order to this effect in March 2015 asking the CHEC to stop the project work. The Chinese Government urged the new government to ‘observe rule of law’ and uphold ‘mutual trust’. Soft threats were also issued pointing out the negative fallout of such a decision on Chinese funding of infrastructure projects and China-Sri Lanka relations.

By December 2015, the Sri Lankan Government seemed to take a 'U' turn over the issue and, in March 2016, allowed the recommencement of work on the project after revising some terms of the agreement. The Sri Lankan prime minister projected it as an international financial outpost or hub in the Indian Ocean, where investors from all countries would be invited to invest. The city is touted to play the role of a game-changer and turn the country’s western province into a megapolis in the Indian Ocean, offering opportunities for foreign investment.

Thus it seems the new government smarting under the pressure of Chinese debt of about $5 billion has found it in its interest to continue with the project. The only significant revision of the terms was that the Chinese firm would not be granted any freehold land and about 101 hectares of land will be given away to the Chinese on 99-year lease. Moreover, there is also talk of expanding the project to include peripheral urban areas.

Unmistakably, Sri Lanka is now engaged in a balancing act trying to assuage Indian concerns about growing Chinese presence in the maritime domain in Indian Ocean, on the one hand, and inviting Chinese funds to come in to develop its infrastructure hoping for its roll-over effect on the country's economy, on the other. As the port city is being marketed today, it does not look threatening to India as far as its security interests are concerned, especially after a clear espousal of Sri Lankan position not to allow Chinese warships to use its harbours.

Nevertheless, in view of Chinese determination to make inroads into Indian Ocean and the inclination of countries in the neighbourhood to engage China economically and benefit from its expertise in infrastructure-building, there is a need to constantly monitor the nature of Chinese engagement in projects like the one in Colombo, and at the same time grab the opportunity to invest in the upcoming port city which will take about 15 years to mature.

Rather than crying hoarse about Chinese involvement in the project, in addition to the concessional line of credit India is offering to Sri Lanka to build critical infrastructure, India must hasten the process of economic and technological agreement to strengthen economic partnership with Sri Lanka and encourage the private sector to invest in the balance 132 hectares of land which Sri Lankans will open up for investment.

Posted on July 06, 2016