Lanka port: China's plan worries India

Lanka port: China's plan worries India

Sri Lanka's formal handing over of Hambantota Port to China on a 99-year lease has enormous ramifications for the island as well as the region and beyond. Unable to repay the roughly $8 billion debt plus interest it owes Beijing, Colombo has handed over the port and an industrial zone surrounding it to China. Under an agreement signed by Sri Lanka Ports Authority and the Chinese government-controlled China Merchants Port Holdings Company, the latter will now control 70% of the stake in Hambantota Port. Through the grant of equity to China, Sri Lanka believes has solved its debt problem. Chinese management of the port and investment zone, the Sri Lankan government claims, will give the island's economy a shot in the arm by promoting industrial development and tourism. The port and related road and airport infrastructure are indeed top class and Colombo may have bought itself time. But this route to chipping away at debt comes at a heavy cost. It will undermine Sri Lanka's sovereignty. Besides, this is just the start. What other assets will Sri Lanka sell to China when the next debt servicing bill arrives?

China's operation of Hambantota port has serious implications for India's security. Chinese presence so close to India's southern coast is worrying. Importantly, there is a concern in Delhi that the People's Liberation Army-Navy (PLAN) ships and submarines will dock at Hambantota. To reassure India, Colombo has made the Sri Lankan security forces responsible for Hambantota port's security. It has also clarified that it will not allow this port to be used by the Chinese navy. Delhi, however, cannot but remain uneasy.  After all, former Sri Lankan president Mahinda Rajapaksa had allowed Chinese submarines to dock at Colombo, after assuring India that he would never do so.

Countries in South Asia and elsewhere, which are taking huge loans at high rates of interest from China for infrastructure projects, should draw lessons from the Sri Lankan experience. Chinese funds for projects don't come free and, like Sri Lanka, they, too, are likely to be drawn into the quicksand of debt sooner than later. When a debtor country is unable to service its debt obligations, Beijing demands its pound of flesh, which is in the form of ownership of the port as in the case of Sri Lanka, ceding of land as with Tajikistan, or the setting up of a naval base as in Djibouti. Countries that are lining up to join China's ambitious Belt and Road Initiative should look before they leap into debt with China. Beijing offers no free lunches.

 

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