Sri Lanka’s new government wants to undo Hambantota port lease to Chinese venture
- The previous government changed the terms of the Belt and Road Initiative project, agreeing to a 99-year lease
- But the new administration wants to return to the original deal and pay back the loan as originally agreed
“We would like them to give it back,” Ajith Nivard Cabraal, a former central bank governor and an economic adviser to Prime Minister Mahinda Rajapaksa, said in an interview in Colombo. “The ideal situation would be to go back to status quo. We pay back the loan in due course in the way that we had originally agreed without any disturbance at all.”
In Sri Lanka, where the transaction to lease the port was opposed by Rajapaksa’s party, Mahinda took Chinese loans during his 10-year rule as president to build the project in his home district.
“This is a sovereign agreement” and it’s unlikely that it will be scrapped or altered in a big way, said Smruti Pattanaik, a research fellow at the Institute for Defence Studies and Analyses in New Delhi.
“The Chinese may reconsider some clause, if it is considered crucial for the Rajapaksa regime.”
An attempt to rework the transaction will help the new Sri Lankan government, led by Gotabaya and his brother Mahinda, showcase their drive to change contracts seen as hurting national security, a key campaign platform for Gotabaya, a former defence secretary.
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China’s infrastructure-building in Sri Lanka became part of Beijing’s Belt and Road Initiative, prompting concern in India about its geopolitical rival using a port close to its southern coastline for future military or strategic uses. Gotabaya is in India on Friday for his first state visit overseas.
China has dismissed concerns over any military dimension to its investment in the Hambantota port, which lies on the main shipping routes between Asia and Europe, and said it was mutually beneficial and would aid Sri Lanka’s economy.
“Sri Lanka will have to offer it something equally, if not more, attractive in financial terms for Beijing to agree to the cancellation of the lease agreement,” said Brahma Chellaney, a professor of strategic studies at the Center for Policy Research in New Delhi. “With the Rajapaksa family back in power, China hopes to expand its footprint in Sri Lanka.”
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“Bilateral agreements once you’ve signed those, are serious agreements,” Cabraal said. “At the same time, we’ve got to look after the national interests. And if one government had bartered it away, there is a necessity for the new government to find ways and means by which it can be done amicably.”
For its part, China Merchants, whose US$93 billion of revenue dwarfs Sri Lanka’s gross domestic product, has been able to use its experience stretching from China to Europe to help kick start the Hambantota port, which once hardly attracted any ships.
China Merchants’ Hambantota joint venture also last month said it had entered into an agreement with Japanese shipping conglomerate Nippon Yusen KK, for vehicle transshipment through the port.
New Ports Minister Johnston Fernando was not available for comment.