Sri Lanka on 9 December 2017 formally handed over the strategic southern port of Hambantota to China on a 99-year lease and received USD 292 million out of USD 1.12 billion deal signed between both the countries in July 2017.
Two Chinese firms Hambantota International Port Group (HIPG) and Hambantota International Port Services (HIPS) managed by the China Merchants Port Holdings Company (CMPort) and the Sri Lanka Ports Authority will own the port and the investment zone around it.
Hambantota as a major port in the Indian Ocean
• Hambantota will now be converted to a major port in the Indian Ocean. There will be an economic zone and industrialisation in the area will lead to economic development and will promote tourism.
• The port is expected to play a key role in China’s One Belt and One Road initiative, which will link ports and roads between China and Europe.
• However, Sri Lanka clarified that the port will not be used as a military base by any foreign country. This comes as a relief for India’s security concerns over the Chinese navy’s presence in Sri Lanka.
Hambantota Port: A Medium for Sri Lanka to pay off its debts
• Through this deal dubbed as a sell-out by the opposition and trade unions, Sri Lanka aims to shed off the debts of USD 8 billion it owes to China.
• The USD 1.5 billion port was launched in 2010, but was incurring losses due to lack of commercial activity.
• Sri Lanka, initially, decided to give 80 percent stake to the Chinese firm. However, this triggered protests by trade unions and opposition groups forcing the government to limit China’s role to run commercial operations.
• Later, both the sides agreed to redraw the deal and signed a USD 1.12 billion deal in July 2017 in which Sri Lanka sold 70 per cent stake in the Hambantota port to China.
• By doing so, Sri Lanka converted its USD 6 billion debt its owes to China to equity.
Sri Lanka Opened Hambantota Port
India, Sri Lanka sign MoU to build 1200 houses in Hambantota
Who: Sri Lanka
When: 9 December 2017