Is Sri Lanka on its way to become the jewel in the crown of world shipping?
 On the face of it, the location of Sri Lanka's major ports of Colombo and Hambantota, 240 kilometres away from the capital, seem ideal - right on the path of busiest and highest dollar volume trade lane in the world, the Asia-Europe route.
What's more, Sri Lanka is also on one of the routes of China's new "Belt and Road", also known as the New Silk Road initiative, which is already making strides with roads and bridges in Indo-China and block trains from Chongqing and Yiwu to London.
China has taken much interest in developing Sri Lanka's role in world trade, realising that it stands to be THE marshalling superhub for containers, from the rapidly growing Indian economy, whose GDP canters along at 8-10 per cent a year, sending boxes to and from Europe as well as being at the very centre of the highest box volume intra-Asia trade.
While it was supposed to be big from the start in 2008, no one imagined how big it would become. It started as an US$1.2 billion expansion project. The project, headed by the Sri Lanka Ports Authority and built by the Hyundai Engineering & Construction Company, was to be completed by May, 2012.
It fast became the biggest infrastructure undertaking in Sri Lanka's history. Called Colombo Port City, it was to be a $1.4 billion financial centre of skyscrapers, luxury hotels, shopping malls, and a marina that was destined to shake up Sri Lanka's economic and geopolitical landscape.
The new mini-city will be built entirely on 269 hectares reclaimed from the sea, stretching out from the coastline to the north of Colombo's famed Galle Face Green, an old colonial playground.
Foreign-directed development continued apace as the primary financial backer and builder for the port city was and is China - perhaps the only country in the world with the economic clout, the reason, and the will to take on such an ambitious, expensive, and potentially game-changing endeavour.
This phase commenced in September of 2014. Both Sri Lanka's former President Mahinda Rajapaksa and Chinese President Xi Jinping were there to cut the ribbon, with the latter抯 presence demonstrating just how important this project was to China, noted Forbes magazine.
Of course, it’s Sri Lanka's location that’s of interest to the China. Sitting in the Indian Ocean right below the tip of India, in-between southeast Asia and the Middle East, Africa, and Europe, it's a core station along China's lifeline to its energy suppliers in the Middle East and Africa.
But the Colombo Port City is intended to make this logistical heartland into something more than just a place to transship containers. It is to be a major financial centre, rivaling Singapore to the east and Dubai to the west, providing direct access to the colossal markets of the Indian subcontinent, while boosting Sri Lanka's intake of foreign capital and increasing local employment opportunities in the process.
Then were was the Hambantota projects, which started out as Sri Lankan developments financed with Chinese loans. The first phase of the port was opened on November 18, 2010. Total estimated construction cost of the Phase 1 of the project is $361 million and out of which, 85 per cent has been funded by the EXIM Bank of China.
Hambantota will serve ships travelling along the east-west shipping route which passes just south of the port. But the port incurred heavy losses making debt repayment an issue. As a result, 80 per cent was leased to Hong Kong-based China Merchants Ports holding company in a debt-for-equity swap last year. Now China Merchants will invest $1.12 billion to revive the port in a Private-Public Partnership.
By contrast, the Colombo Port City is Chinese foreign direct investment - the largest single incident of foreign investment in Sri Lanka's history. The monetary backing and construction was taken on by the China Harbour Engineering Corporation, a subsidy of China Communications Construction, a Chinese state-owned enterprise.
The expansion project will consist of four new terminals that are 1,200 metres in length and can accommodate three berths each with 18 metres alongside. The channel width of the harbour is to be 560 metres and depth of 20 metres, with harbour basin depth of 18 metres and a 600-metre turning basin. Once completed, it will increase the annual container handling capacity from four million to 12 million TEU. It will also be able to accommodate larger 12,000-TEU ships.
The first terminal was awarded to China Merchants together with Colombo's Aitken Spence in 2010. From the start, the project was fraught with politics as everything is in Sri Lanka. Factions erupted with the opposition parties charging government corruption. Others said it was a Chinese takeover of a domestic industry. Tamils and Sinhalese, have recently fought a 26-year-civil war divided with the defeated Tamils listening to their fellow countrymen in India. The Indian government, wary of China, whose closer ties to Pakistan is regarded with suspicion, were not co-operative.
Then there is trouble from locals south of the capital. It is now believed that China’s development project at the Hambantota harbour would be delayed due to some issues relating to the Development Zones ?especially, the acquisition of lands.
According to media reports, the Chinese have stated that they would only sign the deal if the 15,000-acre industrial zone comes with it. China plans to invest $5 billion to develop the area within three to five years.
China Merchant Group president Li Xiaopeng revealed a Public Private Cooperation (PPC) model China hoped to share with local partners for a "win-win" situation: “First a port, then an industrial park, and beyond the park, a modern city,” he said, describing the concept as PPC model.
The Sri Lankan government has agreed with China to run the Hambantota deep sea port and Mattala International Airport as public-private partnerships (PPP) that will be driven by monumental debt-for-equity swaps.
Colombo’s South Container Terminal is a 35-year Build-Operate-Transfer (BOT) arrangement with China Merchants Holdings, the same company that’s taking over the Hambantota port.
Plans are also underway for China to be given a long-term lease on 15,000 acres (6,750 hectares) of land in Hambantota for an industrial zone, a $1.4 billion development project.
The Chinese ambassador to Sri Lanka Yi Xianling, delivering the 13th Sujatha Jayawardena Memorial Oration organised by the Colombo University Alumni Association, expressed his concerns that the protests in Hambantota may turn away the investors who have already agreed to invest in the proposed industrial zone down south.
“I already persuaded 10 CEOs of big companies to invest $3-5 billion in the next two to three years. Most of them belong to the 500 Fortune companies. However, if protests continue how can I persuade them? When they approached me I asked them to get the answers from the Sri Lankan leaders, not from me. However, I encourage them to invest here and I am confident that the cooporation between Sri Lanka and China will be a success in the future,” he said.
“When I addressed more than 2,000 locals in Hambantota during a Chinese cultural performance at the International Convention Centre, I promised them that we will not take their lands without their permission," said Mr Yi.
“The port belongs to Sri Lanka. The Chinese investment of $1.1 billion is to operate 80 per cent of it. Whatever the share we get, we will fully respect the government procedure and consensus of the people. We have no intention to intervene in the internal differences between politicians or political groups or former, current and future leaders,” he said.
Mr Yi also went on to highlight the importance of industrial zones, observing many developed countries such as Singapore, Japan and the US, and achieved fast development through special zones.
The ambassador said, the advice of the Chinese president to him during the delay of Colombo port city project was to be "patient" and work cordially with the Sri Lankan government and its people. “I have time and I have patience, but I am worried about the patience of the business community,” he said.
Despite the local squabbling, it seems inevitable that Sri Lanka will realise that it potentially holds the jewel in the crown of global shipping. Perhaps what Winston Churchill once said of the Americans can be said of Sri Lankans: "They eventually get it right, but not without first trying out every other possibility."
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