Chinese Debt Trap Diplomacy in Hambantota: Implications.

 By anagha-lakshmi
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With the end of the Cold War in 1991, the United States of America became to the sole successor of the world’s leadership turning a bipolar world into a unipolar world. However, with the onslaught of globalisation and commercialism, the world has begun to evolve into one that focuses more on the strength of the military, the robustness of the economy, and the stability of the political structure. This is in glaring contrast to the erstwhile period were in the focus was mainly on religion, tradition and the domestic struggle for power has begun to take shape. A dynamic movement away from a majorly Eurocentric world, to one that is looking towards Asia, has highlighted the building strengths of the economies and militaries of countries such as India, Pakistan, China, and Sri Lanka. With the ongoing economic trade war between China and the US and the continuing struggle for world hegemony, there has been a remarkable shift in paradigm in the global political and military scenarios.

 In this given context, also known as the Magampura Mahinda Rajapaksa Port, Hambantota is a maritime port in Sri Lanka. It is situated along the key shipping route between the Malacca Straits and the Suez Canal and links Asia and Europe. An estimated 36,000 ships, including 4,500 oil tankers, use the route annually. The port’s construction began on 15 January 2008 and was constructed by the Chinese companies China Harbour Engineering Company and Sinohydro Corporation. The first phase of the port project was to provide bunkering, ship repair, shipbuilding, and crew change facilities following which, the capacity of the port was to be raised to 20 million TEUs per year. When completed, it is claimed it will be the biggest port constructed on land to date in the 21st century.

The total estimated construction cost of Phase 1 of the project is US$361 million, out of which 85% was funded by the EXIM Bank of the People’s Republic of China. the Hambantota Port in 2016 made revenue of US$11.81 million and incurred expenses of US$10 million as direct and administrative costs to report an operating profit of just US$1.81 million (Srilankan ports authority, Oct 2007). As the port incurred heavy losses, making debt repayment difficult, in 2016 it was proposed to lease 80% of the port in a debt-for-equity swap to the China Merchants Ports holding company (CMPort), which will invest US$1.12 billion to revive the port under a public-private partnership. Later, it was decided that under the agreement, CMPorts will divest 20% of its shares to a Sri Lankan company within ten years. CMPort will have to spend at least US$700–800 million or more to bring the port to the operational level. In July 2017, the agreement was signed, but leasing only 70% of the Port to CMPort instead of the initially proposed 80%.

On July 29, 2017, Sri Lanka Ports Authority (SLPA) and China Merchant Port Holdings signed an agreement on the Hambantota Port to lease the port to China Merchant Port Holdings for 99 years. The government of Sri Lanka kept ownership of the port and lease it for 99 years. The deal gave the Sri Lankan government $1.4 billion, that they will be using to pay off the debt to China. This will stop the Sri Lanka Ports Authority from paying off the debt of Magampura Port from the profit of the Colombo port. The deal had been delayed by several months over concerns that the port could be used for military purposes and also the government had to face huge opposition to this deal from trade unions and opposition political parties who called it a sell-out of the country’s national assets to China. The large Chinese loans, the inability of the Sri Lankan government to service the loans, and subsequent 99-year Chinese lease on the port have led to accusations that China was practicing Debt trap diplomacy. Although China has stated that the port will solely be used for commercial activity, questions over its sovereignty and Sri Lanka’s national security persist.

The central implications of this debt-trap diplomacy can be felt by three key players of the game of power in the Indian Ocean region– India, China, and Sri Lanka itself.

India on it’s part is posed by the Chinese expansionist assertions on more than one side. China has already established its presence in Pakistan, with its port at Gwadar playing a vital link in the China-Pakistan Economic Corridor (CPEC). The strengthening of the CPEC is also a flagship project under Xi Jinping’s Belt and Road Initiative. On the Horn of Africa, too, Beijing has made its presence felt, with the opening of its first overseas military base at Djibouti. This strengthening of the maritime security in the region and the shadowing commercial outputs threaten India’s military and economic security. The call for counter strengthening its relations with its diplomatic partners have resulted in policies such as the Look East Policy and the neighbourhood first policy. The latest development in the growing strategic competition across the Indian Ocean region is India’s purchase of the Mattala Rajapaksa International Airport (MRIA). The strategic and diplomatic implications of this venture make it a masterstroke that will counter the Chinese advances in the region. Airports Authority of India (AAI) is to enter into a joint venture with Sri Lanka’s civil aviation department to operate the $201 billion airports. By strengthening its presence in Srilanka, India must seek to counter maritime Chinese advances and proactively safeguard its national trade interest. The decision to buy the airport 118 kms from the Hambantota seaport also plays a balancing role in the country’s military strategy. India’s interest in the region is emboldened by its expanding fleets, technologically upgrading bases, and secured access to foreign ports. aggressive naval posturing via joint exercises, extended sorties, and live-fire drills are attempted to establish strong opposition to their Chinese counterparts. The geostrategic importance of this seaport at Hambantota challenges the Indian dominance in the Indian Ocean region and thereby poses competition to India’s assertion to a global footprint.

Sri Lanka is in a spot of doubt and challenges the administrative sovereignty of the country over its land. While this gives China leverage over Srilanka, Chinese strategic advances cannot be countered by the Sri Lankans without diplomatic alliances in the IOR. The location of the Hambantota port at the intermediary position in the sea route, and could therefore be converted to an advanced trade port. In July 2018, Sri Lanka announced the relocation of its naval base at Galle to Hambantota thereby strengthening their standpoint in the locale.

In conjugation to the Indian position and that of Sri Lanka, the tremors of Chinese advance impact the United States and emerging powers in the region like Nepal, Maldives and South Africa. US Vice President, Mike Pence was one of the first people to accuse china of the debt trap diplomacy blaming China for the construction of a ‘forward military base’ in Hambantota. Even when Sri Lanka continuously downplays these accusations and terms them ‘imaginary’, the growing Chinese aggression remains a point of caution (TimesNow Digital, Oct 2018). While Pakistan remains an active member of the CPEC, China’s policy of multilateral pragmatism has led to a diabolical international instability.  Balance of power in the region is at stake with China practicing assertive policies powering its economic superiority and massive naval strength to its expediency. Building up of a regional framework for cooperation remains the need of the hour in the IOR.

References:

Sirimane, shirajiv, “hambantota port, gateway to the world” the Sunday observer, (Feb 21, 2020)

Reuters, “Sri Lanka to Shift Naval Base to China-Controlled Port City”. Voice of America. (July 2, 2018)

Times Now Digital, “US’ claims that China is building naval base at Hambantota port ‘imaginary’: Sri Lankan PM”, (Oct 11, 2018) https://www.timesnownews.com/international/article/united-states-claims-that-china-building-a-forward-naval-base-in-hambantota-port-imaginary-sri-lankan-prime-minister-ranil-wickremesinghe-mike-pence/297970