India, Japan, Sri Lanka agree to develop Colombo Port, counter PRC

India, Japan, Sri Lanka agree to develop Colombo Port, counter PRC

FORUM Staff

India, Japan and Sri Lanka signed an agreement in late May 2019 to jointly develop the south part of the Colombo Port, known as the East Container Terminal (ECT), according to media reports.

The move will increase the volume of containers transported through the port and improve regional marine transportation. The multilateral deal also promotes a free and open Indo-Pacific and counters the People’s Republic of China’s One Belt, One Road (OBOR) expansionism, the Nikkei Asian Reviewjournal reported.

The deep-sea container terminal will be developed next to a controversial U.S. $500 million container jetty in Colombo harbor that is controlled by the People’s Republic of China (PRC) and known as the Colombo International Container Terminal (CICT), according to Agence France-Presse (AFP).

The PRC owns 85% of the CICT, which was undertaken in 2013, and the state-run Sri Lanka Ports Authority (SLPA) owns a mere 15%, AFP reported.

In sharp contrast to the PRC deal, the SLPA in its deal with India and Japan will retain ownership of the East terminal and 51% of the company that will run the ECT. India and Japan will own the remaining 49%, Reuters reported. The terms of the agreement will be ironed out at an upcoming joint working group meeting, The Hindunewspaper reported.

Japan will finance the project, estimated to cost about U.S. $500 million, with a long-term soft loan with a 0.1 percent interest rate and a 10-year grace period, according to Reuters.

“The MOC [memorandum of cooperation] demonstrates Sri Lanka´s ability to maintain and further it’s national interests while cooperating with international partners,” the SLPA said in a statement. “The joint project reflects the longstanding goodwill and cooperation among the three countries.”

More than 70% of transshipment through the Colombo Port, pictured, which is Sri Lanka’s largest and busiest port, is related to Indian imports and exports, according to The Hindu.

The deal shows India’s willingness to cooperate with Japan, the U.S. and other Indo-Pacific powers, Constantino Xavier, a foreign policy fellow at Brookings India, told The Economic Timesnewspaper. “China’s Belt and Road Initiative [OBOR] investments in South Asia and the Indian Ocean region have forced Delhi to be more proactive in offering reliable alternatives to Beijing’s rising economic clout.”

The PRC’s recent deals with Sri Lanka have proven detrimental to the host nation. In December 2017, for example, Sri Lanka turned over Hambantota port to a state-run Chinese company after the country could not make payments on an onerous Chinese loan, according to myriad news accounts. A U.S. $1.12 billion deal, disclosed in July 2016, set Sri Lanka up for almost immediate failure with its predatory enticements. Within a year and a half, Sri Lanka was forced to grant the Chinese firm a 99-year lease to run the port, which is 240 kilometers south of Colombo.

China is employing similar debt-trap strategies to gain control of other projects in the region such as those in the Maldives, analysts said.

Many nations, including India, Japan and the United States, have been concerned not only about the PRC’s attempt to turn these countries into satellite states but also that the PRC might militarize such ports in the future as part of its overall OBOR strategy, which is proving to be more about coercion, control and PRC expansionism than innocuous infrastructure development assistance, analysts said.

In 2014, within a year of the signing its Colombo port development deal, PRC submarines visited the Chinese-run CICT at the port, sparking protests from India. Sri Lanka has not permitted their repeat calls, according to Reuters.

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