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Sri Lanka Dismisses Concerns About China's Control of Hambantota

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Ro/ros at the Port of Hambantota (file image)

By MarEx 2018-10-11 20:12:00

Ranil Wikremesinghe, the prime minister of Sri Lanka, has pushed back against U.S. Vice President Mike Pence's warnings of a Chinese military presence at the port of Hambantota. State-controlled China Merchants Port Holdings (CM Port) took over the control of the facility on a 99-year lease last year, giving Sri Lanka funds to repay Chinese loans. 

In a speech last week at the Hudson Institute, Vice President Pence accused China of using “debt diplomacy” to expand its influence at the expense of developing  nations. "The terms of [China's] loans are opaque at best, and the benefits flow overwhelmingly to Beijing," he warned. "Just ask Sri Lanka, which took on massive debt to let Chinese state companies build a port with questionable commercial value. Two years ago, that country could no longer afford its payments – so Beijing pressured Sri Lanka to deliver the new port directly into Chinese hands. It may soon become a forward military base for China’s growing blue-water navy."

At a a forum at Oxford University on Monday, Prime Minister Wikremesinghe suggested that the site's potential as a Chinese military installation is "imaginary." As a measure of reassurance for interested nations, the Sri Lankan Navy's Southern Command will be moved to the port of Hambantota to provide port security. "The U.S. Defense Department has been briefed on these developments," Wikremesinghe said. 

"There are no foreign naval bases in Sri Lanka," he added. "The Hambantota Port is a commercial joint venture between our ports authority and China Merchants - a company listed in the Hong Kong Stock Exchange."

According to DBS Group, 62 percent of China Merchants Port Holdings' equity is held by China Merchants Group, a Chinese state-owned enterprise.

Building continues

Despite its indebtedness to China, Colombo continues to accept loans for Chinese-built infrastructure. Work on the new Southern Expressway between Hambantota and Matara is nearly complete, backed by a $1.9 billion concessional loan from the Export-Import Bank of China. The road is being built by China State Construction Engineering Corporation and its partners. 

"When [the expressway is] completed, travel between Colombo and Hambantota will be shortened from four and a half hours to around two," said Jia Ruihua, deputy general manager of CSCEC's Sri Lanka branch, speaking to state-owned China Daily. 

According to Bloomberg, some completed segments of the highway do not see much traffic, but have found an alternative use among locals for the drying of newly-harvested rice. "The road gets really hot, so the rice dries faster," farmer Vijitha Gamage told Bloomberg's Iain Marlow in May.