Chinese money in Hambantota: Small change in the juggernaut of Belt and Road

14 August 2017 12:14 am - 0     - {{hitsCtrl.values.hits}}

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The controversial Hambanthota port        

 

The government’s manner of communicating details of the Hambantota port deal to the public has been less than forthright, and lacking in transparency, considering public apprehensions over the fallout of the project.  In an attempt to get around the opposition to a big time give-away of control over a national asset – a strategically located deep water port – there seem to have been attempts to pull the wool over people’s eyes.

The impression conveyed and widely reported as to the ratio of shares held by the Sri Lankan side and the Chinese side, was misleading.  Of the two companies to be newly set up under the unprecedented 99-year agreement, the Hambantota International Port Services (HIPS) company - which was granted with the exclusive right to develop, operate and manage the Common User Facilities of Hambantota port including security – 50.7% of shares were said to be held by the Sri Lanka Ports Authority (SLPA) and the balance 49.3% by HIPG (Hambantota International Port Group) in which the China Merchants Port Holdings Co. Ltd. (CMPort) holds a 85% stake.  

However a disclosure made by CMPort on the Hong Kong Stock Exchange categorically said “SLPA will hold (i) 15% of the shares of HIPG and (ii) 42% of the shares of HIPS on the Concession Agreement Effective Date.”  Sri Lanka is clearly a minority share holder in this deal, which translates into a loss of control of a national asset of strategic value, which in turn has implications for sovereignty. 

 

 

"Hambantota International Port Services (HIPS) company - which was granted with the exclusive right to develop, operate and manage the Common User Facilities of Hambantota port including security – 50.7% of shares were said to be held by the Sri Lanka Ports Authority (SLPA) and the balance 49.3% by HIPG (Hambantota International Port Group) in which the China Merchants Port Holdings Co. Ltd. (CMPort) holds a 85% stake"

 

The agreement was signed in the teeth of opposition and protests which included a strike by Ceylon Petroleum Corporation trade unions which hobbled fuel distribution in the country till the government took drastic measures to end it.  After that there were reports of the TUs having talks with President Sirisena and being assured that ‘there would be amendments.’

This seems to have been an exercise of ‘humouring the lads,’ because it turns out that amendments can only be made by agreement between both parties, which is not saying much.  The impression was also given that the CPC’s protest was narrowly defined over the right to provide bunkering services. But CPC’s statements on the issue from some time ago would show that their actions are carried out in the context of a broader protest against the sale of state assets.

The re-drafting of the original Concession Agreement to reduce the Chinese stake from 80% to 70% etc. was parleyed by the government to sound like a move made with a view to protecting independence and sovereignty.  However, had the government been honest it would have admitted to formidable behind-the-scenes pressure exercised by India to bring about these changes. This would particularly relate to the amendments ensuring that security aspects could be handled by Sri Lanka, including the granting of permission for port visits by military vessels.

The loud hints by a cabinet spokesman at a recent media briefing, that the Joint Opposition’s disruption of the parliamentary debate on Hambantota was the result of Indian interference, is laughable against this backdrop. (Minister Dayasiri Jayasekera told reporters “There was a call from a diplomatic mission in Colombo to the JO during the proceedings..,” and said “you know who it is.”)  Was this a diversionary tactic to project the government in a defiant light, when in fact it had capitulated to pressure?

"The government earlier engaged in similar obfuscation in relation to the re-drafting of the Chinese funded Port City project, when it did away with the clause that allowed freehold sale of a part of the land to the Chinese.  The government sought to project it as a move to protect sovereignty, but later cabinet spokesman Rajitha Senaratne inadvertently let it slip that this was done under Indian pressure"

 

 The government earlier engaged in similar obfuscation in relation to the re-drafting of the Chinese funded Port City project, when it did away with the clause that allowed freehold sale of a part of the land to the Chinese.  The government sought to project it as a move to protect sovereignty, but later cabinet spokesman Rajitha Senaratne inadvertently let it slip that this was done under Indian pressure.

The reality of Indian ‘concerns’ in relation to activities in the Indian Ocean Region which it considers as its backyard is nothing new. We may recall that the Letters exchanged between former president JR Jayewardena and former Indian Premier Rajiv Gandhi with the signing of the Indo-Lanka Accord in 1987 had a clause that said “Trincomalee or any other ports in Sri Lanka will not be made available for military use by any country in a manner prejudicial to India’s interests.”

India’s concern at the time was the cosy relationship between the JR government and the US.  Today while it has become more closely aligned with the US and Japan, India’s bogey is China.  With the unstoppable juggernaut of China’s Belt and Road Initiative (BRI) creating road, rail and trade connectivity across Asia, Africa and Europe in order to secure Chinese energy supply lines and trade routes, India’s worries extend far beyond Sri Lanka and Hambantota. The investment in Hambantota, at $US 1.12 billion, and Colombo Port City at $US 1.4 billion, would seem like small change in comparison to China’s infrastructure investments in other parts of South Asia. 


According to a recent report in India Today China has pledged US$60 billion since 2013 to Pakistan (including $US 46 billion in the China-Pakistan-Economic Corridor, or CPEC, as part of the BRI), $US 8.3 billion to Nepal (at an investment summit held this year), $US 7.3 bn to Myanmar for the development of Kyauk Pyu Port, and a soft loan of $US 25 billion to Bangladesh for a variety of projects.

"With the unstoppable juggernaut of China’s Belt and Road Initiative (BRI) creating road, rail and trade connectivity across Asia, Africa and Europe in order to secure Chinese energy supply lines and trade routes, India’s worries extend far beyond Sri Lanka and Hambantota"

 

Given the current scramble among big powers to secure their energy sources, sea lanes of communication and access to markets, these states will continue to engage in power games with each other in Asia.  It’s up to the political leadership of smaller sates like Sri Lanka to avoid getting caught in the crossfire and act in the interests of their own people.

In Sri Lanka, the US wants to change the Constitution.  India wants to maintain hegemonic status. China wants to extend its footprint.  But the people of Sri Lanka do not want to sell out to any foreign power. The political leaderships of successive regimes seem to have underestimated this expectation.  

In recent times Sri Lanka’s responses to pressures from foreign powers have taken the form of ad-hoc reactions and attempts to ‘play one against the other,’ often ending in capitulation, rather than the adoption of positions based on high quality research, analysis and guidance designed to serve the national interest.  

The independent thinking required for this type of policy input relating to geopolitics, which could very well come out of the country’s existing international relations think tanks, seems to be hamstrung by the government’s expectation that these institutions act as its echo-chamber for policies already arrived at, based on political considerations. This is hardly a comforting situation, given the gravity of possible repercussions of such decision making, in the long term.

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