Sri Lanka Signs Port Deal With Japan, India in Move to Counter Beijing

By Frank Fang, Epoch Times
May 29, 2019 Updated: May 29, 2019

Sri Lanka recently signed a deal with India and Japan to develop a sea container terminal in the island country, almost two years after the government signed away ownership of a nearby port to China after defaulting on loans.

The three nations signed a memorandum of cooperation (MoC) on the joint development of the East Container Terminal (ECT) at the Colombo Port on May 28, according to Indian daily newspaper The Hindu. 

Under the agreement, the Sri Lanka Ports Authority (SLPA) will retain 100 percent ownership of the terminal. Meanwhile, a company named the Terminal Operation Co. (TOC), a joint venture of the three nations with Sri Lanka holding a 51 percent stake, will run the port operation, according to an SLPA statement. 

The Sri Lankan government’s decision to sign the cooperation deal with Japan and India has much to with China, said Paikiasothy Saravanamuttu, executive director at the nonprofit Centre for Policy Alternatives in Colombo, in an interview with the Financial Times. 

“Sri Lanka doesn’t want to be too dependent on China in terms of finances and alliances,” he said. “India, Japan, and the United States are aligned on one side and China is on the other.”

An unidentified senior official at Sri Lanka’s Ministry of Ports, Shipping, and Southern Development told The Hindu that the terminal’s joint development would cost between $500 million and $700 million. 

Sudarshana Gunawardana, director of Development Communications at the Sri Lankan Prime Minister’s office, said that Japan is “likely to provide a 40-year soft loan with a 0.1 percent interest rate,” according to The Hindu.

“Colombo port is the leading port in the region. This joint project reflects the long-standing goodwill and cooperation among the three countries,” the SLPA said, according to India’s English-language daily newspaper The Economic Times. 

Japan has long held an interest in Sri Lanka. Since the 1980s, Japan has provided cooperation for the development of the Jaya Container Terminal in Colombo, according to Sri Lankan news site Lanka Business Online. Meanwhile, the neighboring India conducts about 70 percent of transshipment businesses at the Colombo Port. 

The ECT terminal is located about 1.8 miles from Colombo International Financial City, also known as the Port City, which is being built on reclaimed land. 

In January, the Port City announced on its official website the completion of dredging and land reclamation efforts, which were done by China’s state-run China Harbor Engineering Corporation (CHEC). Of the 269 hectares of reclaimed land, 116 would be handed over to CHEC’s parent company China Communications Construction Co. (CCCC). The remaining reclaimed land would be owned by the Sri Lanka government. 

ECT is about 100 miles from the Port of Hambantota, which is now under the control of Beijing, after the Sri Lankan government in 2017 handed over the port in a 99-year lease to convert its owed loans of $1.4 billion into equity. Seizing the port has allowed Beijing to gain a key foothold in the Indian Ocean. 

Beijing developed Hambantota as part of the One Belt, One Road (OBOR, also known as Belt and Road) initiative. 

Beijing launched OBOR in 2013, a foreign policy project to increase geopolitical influence through constructing infrastructure projects across Asia, Europe, Africa, and parts of Latin America. 

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