China Takes Over Colombo with $1.4bn 233 ha Port City Project

A view from Sri Lanka’s capital of land curving into a sea once famed for its pearls now shows giant yellow digger trucks piling boulders. It’s another show of China’s increasing global influence.

Once fought over by European powers, Sri Lanka is now benefiting from the attention of Asia’s biggest economies, drawn to its Indian Ocean location along some of the world’s busiest sea-lanes. The Chinese-financed $1.4 billion “Colombo Port City” project is its largest foreign-funded investment on record.

President Xi Jinping, who has sought to restore China’s prestige and historical links along the “maritime Silk Road” through Southeast and South Asia, arrived in Colombo on 16 September, shortly after a visit by Japanese Prime Minister Shinzo Abe. Deepening ties with East Asia would reduce the role of neighbor India in Sri Lanka’s trade, and aid its recovery from 26 years of civil war.

“China’s growing influence must surely be a cause of some concern to both Japan and India, evident from renewed Japanese interest in Sri Lanka and a more supportive approach by the new Indian government,” said Dushni Weerakoon, head of macroeconomic policy at the Institute of Policy Studies in Colombo. “Sri Lanka stands to benefit from its growing economic links with each of these countries, but it will also require a careful balancing act on the political front.”

Singapore Competition

The Port City will be built by a unit of state-controlled China Communications Construction Co. (1800) on 233 hectares (576 acres) of reclaimed land, an area slightly larger than Monaco. The offices, hotels, apartments and shopping centers will draw as much as $20 billion in investment over about 15 years, according to ports authority chairman Priyath Wickrama.

The unsolicited investment will boost job creation as China will bring only “expert category labor,” Wickrama said. Sri Lanka will own rights to 125 hectares of the reclaimed land and 20 hectares will be held by China Communications, with the remaining 88 hectares leased to the company for 99 years.

Colombo’s port is the only one in South Asia that can accommodate 18-meter deep draft vessels, putting it in position to serve the Indian subcontinent, the Middle East and some African states.

Unlike previous infrastructure projects undertaken by Chinese companies in Sri Lank, the port city is financed by equity rom China Communications or funds raised through it, with no commitment or guarantee from the Sri Lankan government.

The project is “completely non-transparent”, according to Sri Lankan opposition lawmaker Harsha de Silva. His United National Party has demanded the government submit all relevant documents for parliament scrutiny.