Sri Lanka signs $1.1 billion China port deal

31 July, 2017, 00:26 | Author: Gregory Stephens
  • Sri Lanka signs $1.1 billion China port deal

Sri Lanka agreed to sell 70 percent of the stakes in the port to China Merchants Ports Holdings.

Sri Lanka will finally sign a US$1.1bil deal today to lease the southern Hambantota port to China, after several months of delay caused by local protests and claims by opposing politicians that this would threaten national security.

Sri Lanka's minister of ports and shipping, Mahinda Samarasinghe on Saturday welcomed the signing of the Hambantota deal arguing it would help to alleviate the country's considerable debt burden.

The agreement comes after a almost six-month delay since the signing of the framework deal, which immediately drew public criticism and protests.

Under the new deal, which Reuters has examined, the Sri Lankan government has sought to limit China's role to running commercial operations at the port while it has oversight of broader security.

The Chinese will manage port operations and Sri Lanka will handle port security, the minister said, indicating that it should allay fears that the port could be misused by the Chinese. Cash from the firm's majority stake will be used to repay part of the island nation's huge foreign debt.

The port's annual loan repayment commitment stands at $59 million, and by the end of 2016 the port had suffered a loss of $304 million, according to the government.


Under the proposal, a state-run Chinese company will have a 99-year lease on the port and about 15,000 acres nearby for an industrial zone, BBC reported.

"This is a very favourable agreement compared with the plan in 2014", Samarasinghe said, referring to the original plan laid out during former president Mahinda Rajapaksa's tenure.

The port is part of Beijing's so-called string-of-pearls plan for a line of ports stretching from its waters to the Persian Gulf.

China's influence in Sri Lanka makes neighboring India anxious because it considers the Indian Ocean region to be its strategic backyard.

President Maithripala Sirisena came to power in January 2015 promising to loosen ties with China after a decade of funding by Beijing under his predecessor.

India and the United States are known to be concerned that China getting a foothold at the deep-sea port could give it a military naval advantage in the Indian Ocean.

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