In July 2017, China struck the Hambantota Port deal with the erstwhile Sri Lankan President Maithripala Sirisena, under which the port was leased to a Chinese company for 99 years.
However, after widespread criticism of the neocolonialist undertones to the deal, the current President, Gotabaya Rajapaksa, indicated the Sri Lankan government’s intention to revoke the lease. However, the current Prime Minister, Mahinda Rajapaksa, clarified that the government intends to continue its friendly relations with China and follow through with the terms agreed upon by the previously elected government.
The uncertainty around this deal is driven by its misrepresentation and concealment of facts. Upon closer inspection, the deal is revealed to be mutually beneficial and protective of Sri Lanka's sovereignty.
It is widely believed that China's 'Belt and Road Initiative–its global development strategy of infrastructural development and investment across the globe–is a veiled attempt at modern colonialism, whereby poor economies are exploited into ceding their sovereignty and entangled in a ‘predatory debt-trap’. Thus, China is accused of using its soft power to disturb Sri Lanka’s political independence.
Gaining access to this port is doubtlessly significant for China as part of its 'Belt and Road Initiative', as two-thirds of China’s oil exports and all of its exports to Africa and Europe go through this corridor.
However, with a debt of over US $50 billion, Sri Lanka, too, stands to gain from this deal. China aims to develop the port into a major hub in the Indian Ocean, and infrastructural development will lower the costs of industrialization and trade.
Additionally, Rajapaksa has clarified that Sri Lanka sought funds to develop this port from India and the USA, only to be rebuffed. China filled this vacuum and struck a symbiotic relationship with the Sri Lankan government, wherein the latter received aid and funds without major restrictions, including lower interest rates and extended time periods for repayment of the loans.
In fact, the two countries have a history of friendly relations and have aligned their economic goals on multiple occasions. Chinese firms have previously developed airports, railways, roads and power stations in Sri Lanka. Moreover, the Colombo port has a successful container terminal controlled by the same Chinese company that intends on developing the Hambantota port.
Furthermore, the ‘debt-trap’ criticism ignores the corruption and mismanagement of public funds by the Sri Lankan government that has led them to this situation. The majority of Sri Lanka's debt is owed to the USA and other Western entities; China accounts for merely 10% of Sri Lanka’s debt. On average, the interest rates on debts from other countries stand at 6.3 % to be paid over 7 years; China has loaned two-thirds of the Hambantota port loans at a 2% interest rate payable over 20 years. Hence, it is unfair to say that there has been a ‘debt-trap’ created by China when the terms of its loans are much more favourable than those of other countries.
While the text of the treaty has not been released by Sri Lanka or China, a combined reading of the released excerpts and the statements made by official representatives provides a clear picture of the nature of the deal. Contrary to popular belief, the lease does not aim to write-off the debt owed by Sri Lanka to China. Rather, it aims to assist Sri Lanka in repaying the loans taken from various countries by developing the Hambantota Port, which would bolster economic growth. A working paper by the World Bank predicts that Sri Lanka's GDP will grow by at least 1.23% after covering the cost of building the infrastructure.
Moreover, the lease is purely for commercial use and gives the Chinese highly limited powers. The mandate gives the Chinese company an "exclusive right to develop, operate and manage" the Hambantota Port for the first 15 years, giving it the power to collect all revenues in port and marine-related activities. However, Sri Lanka retains the ability to collect taxes in the area. Further, the deal does not allow for Chinese military or naval presence. In fact, the Sri Lankan government has shifted its Naval Base to the Hambantota port to ensure this. This is in stark contrast to other such deals, such as in Guantanamo Bay, wherein the lessee has effective control over all the affairs of the leased property and has a military and administrative presence.
The Hambantota Port deal is a comparatively conservative lease as it merely gives the Chinese company powers over port and marine activities and has a fixed time period. Moreover, neither the Chinese government nor the company will have no control over sovereign functions like taxation, administration, law-making and governance. This limitation on the powers of the Chinese was reiterated by the Sri Lankan government when they denied the Chinese company’s request to utilise a part of the leased land for entertainment purposes.
China is known for its deceptive policies, which forms the basis of the universal scepticism surrounding its ‘Belt and Road Initiative’ policy. The lack of transparency surrounding the deal supports this fear of the international community. While clarity on the minutiae of the treaty is currently lacking, considering Sri Lanka's debt and the fact that the treaty guards against Chinese incursions on Sri Lankan sovereignty, the deal appears to be a win-win situation for both parties.
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