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Context
Seven years after the China-built Hambantota Port was inaugurated with great fanfare by the then president of Sri Lanka, MahindaRajapaksa, as a symbol of his country’s rising geopolitical aspirations in Asia, the Sri Lanka government has taken the project to its logical and inevitable, if not the aspirational, conclusion
Augury: a sign of what will happen in the future
What has happened?
Sri Lanka has handed the Hambantota port over to a state-run Chinese company, China Merchants Port Holdings
- The decision also includes handing over a large tract of land close to the port to Chinese companies for a special economic zone
How the port was financed?
Finances for the port: China’s Exim Bank loaned 85 per cent of the finances for the $ 1.5 billion port, at an interest of 6.5 per cent. The balance was put up by the Sri Lankan government, which borrowed heavily from other sources for it
- The first phase, which Rajapaksa inaugurated in 2010, one year after winning the war against the LTTE, comprised four berths and buildings and cost about $ 650 million. The repayment amounted to $ 60 million annually
Reason behind current decision
The port, which began operations in November 2011, had to start making money by 2013, in order for Sri Lanka to be able to repay the loan. However, by 2016-end, the government estimated its cumulative losses at $ 3 billion
Lesson to be learnt
Author states that, for the region, though, Hambantota should be a lesson on big ticket infrastructure projects with loans from their patron countries at market rates.
