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A Chinese enclave in Sri Lanka?

Context:

Recently, Sri Lanka passed the controversial Colombo Port City Economic Commission Bill, which governs the China-backed Colombo Port City project worth $1.4 billion, amid wide opposition to the creation of a “Chinese enclave” in the island nation.

Relevance:

GS-II: International Relations (India’s Neighbours, Foreign Policies and Treaties affecting India’s Interests)

Dimensions of the Article:

  1. About the Colombo Port City
  2. Why is the project surrounded by controversies?
  3. What is the extent of China’s involvement?
  4. What are the concerns?

About the Colombo Port City

  • Colombo International Financial City (CIFC) is a special financial zone and International Financial Centre currently under construction in Colombo, Sri Lanka. The project is part of China’s Belt and Road initiative.
  • After the former planned ‘Port City’ was rejected by the new incoming government, a tripartite agreement was signed repackaging the project as the Colombo International Financial City (CIFC).
  • The modern Port City is an unsolicited proposal submitted by China Harbour Engineering Company based on previous proposals.
  • Construction of the Colombo Port City project was launched on 17 September 2014 by Sri Lankan President Mahinda Rajapaksa and Chinese President Xi Jinping. The port city was suspended after the fall of the Rajapaksa government due to issues related to sovereignty of Sri Lanka and adverse environmental impacts. In 2017, it was predicted that the city would be completed by 2041.
  • Named the “Colombo Port City” because of its proximity to Colombo’s main harbour, the sea reclamation — carried out with considerable Chinese labour — completed in 2019 has doubled the size of Colombo’s financial district by adding 269 hectares.
  • In December 2020, Sri Lankan conglomerate LOLC Group signed an agreement with China Harbour Engineering for a mixed development project, with the investment value totalling $1 billion.
  • The project includes residential, commercial and retail assets set to break ground in mid-2021. This is the first major investment in Colombo Port City.

Why is the project surrounded by controversies?

  • Almost an artificial island, the territory coming up on land reclaimed from Colombo’s seafront has stirred controversy since its inception. Those backing it see in that patch of land their dream of an international financial hub — a “Singapore or Dubai” in the Indian Ocean.
  • But sceptics claim that it could well become a “Chinese colony”, with the Bill, which is now an Act, providing the Port City and the powerful Commission that will run it substantial “immunity” from Sri Lankan laws, besides huge tax exemptions and other incentives for investors.

What is the extent of China’s involvement?

  • The project is financed chiefly through Chinese investment amounting to $1.4 billion, via CHEC Port City Colombo, a unit of the State-owned China Communications Construction Company (CCCC). In return, the company will receive 116 hectares (of the total 269 hectares) on a 99-year lease.
  • The Colombo Port City — separate from but located adjacent to the Colombo Port, the country’s main harbour — is the third major port-related infrastructure project where China has a significant stake.
  • China Merchants Port Holdings has an 85% stake in the Colombo International Container Terminals Ltd. (CICT) at the Colombo Port, under a 35-year ‘Build Operate and Transfer’ agreement with the Sri Lanka Port Authority.
  • In 2017, the Sirisena-Wickremesinghe administration, unable to repay the Chinese loan with which it was saddled by the previous government, handed over the Hambantota Port in the Southern Province to China on a 99-year lease.
  • Effectively, China has substantial control over two key infrastructure projects in Sri Lanka for a century.
  • These projects are within the ambit of China’s ambitious Belt and Road Initiative, in which it sees strategically located Sri Lanka as a trusted partner. In March this year, Mr. Xi told Mr. Gotabaya Rajapaksa that the two countries must “steadily push forward” in major projects and promote “high-quality collaboration in jointly building the Belt and Road”, Xinhua reported.

What are the concerns?

  • Since its launch, the Colombo Port City project has faced opposition from environmentalists and fisherfolk, who feared that the project would affect marine life and livelihoods. However, in the absence of wider political and societal support, their resistance did not dent successive governments’ resolve to pursue the project.
  • The more recent opposition was specific to the Colombo Port City Economic Commission Bill. The resistance came from Opposition parties and civil society groups, including many who do not oppose the project per se, but rather its governance by “an all-powerful commission answerable to no one”. Significantly, a section of Buddhist monks, wielding much influence in Sri Lankan politics and the Sinhala society, also opposed the Bill and said that it eroded Sri Lanka’s sovereignty.
  • During a heated parliamentary debate, Opposition MPs said the Bill paved the way for a “Cheelam” or “ChiLanka”, referring to China’s “control” over the Colombo Port City. Trade unions resisted too, contending that labour rights had no protection under the new physical and legal entity. For the first time, there was widespread resistance to a Chinese-backed project from within the Rajapaksas’ support base.
  • The government accepted these promptly to avert the constitutional requirement of a two-thirds majority in Parliament and/or a referendum of people. The amended Bill received a parliamentary majority.

-Source: The Hindu

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