Game of Loans: How China Bought Sri Lanka's Hambantota Port

Center For Strategic And International Studies ^ | Jonathan E. Hillman

[SeekAndFind]

The Issue

• Unable to repay its debt, Sri Lanka gave China a controlling equity stake and a 99-year lease for Hambantota port, which it handed over in December 2017.
• The economic rationale for Hambantota is weak, given existing capacity and expansion plans at Colombo port, fueling concerns that it could become a Chinese naval facility.

Recommendations

• Recipient countries should link infrastructure projects to broader development strategies that assess projects within larger networks and monitor overall debt levels.
• The international community should expand alternatives to Chinese infrastructure financing but cannot and should not support all proposed projects.

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The view from Hambantota’s Martello Tower says it all. Built by the British in the early 1800s as a lookout post, the small circular fort occupies a hill on Sri Lanka’s southern coast. Look west, along that coastline, and shipping cranes rise above a new port. Look south, out to the Indian Ocean, and hulking ships move cargo along one of the world’s busiest shipping lanes. These images could converge in coming years, but on most days, they remain miles apart. Last year, only 175 cargo ships arrived at Hambantota’s port.

This gap explains how Hambantota became a cautionary tale in Asia’s infrastructure contest. The port was intended to transform small fishing towns into a major shipping hub. In pursuit of that dream, Sri Lanka relied on Chinese financing. But Sri Lanka could not repay those loans, and in 2017, it agreed to give China controlling equity stake in the port and a 99-year lease for operating it. On the day of the handover, China’s official news agency tweeted triumphantly, “Another milestone along path of #BeltandRoad.”

[Blurb2350]

The Chinese are doing this all over the world, but especially in the Third World and developing world, where the leaders are greedy for the moolah the Chinese are willong to lend them — if only they’ll offer their best ports or industries or resources as collateral. Predictably the improvident Third Worlders default and the wiley Chinese have themselves another little piece of the puzzle.

[Stevenfo]

The Chinese own several countries through debt trapping, including Ethiopia. In world bodies they can require these countries to support China’s positions. I think the current investigation by the UN Human Rights Commission into US race issues is driven by China to humiliate the USA. China can count on support from countries it has debt trapped.

[Travis McGee]

Future strategic ChiCom PLAN (Navy) port.

[dljordan]

“The Chinese own several countries through debt trapping, including Ethiopia.”

Kind of like the World Bank does.