- Anbarasan Etirajan
- BBC News, Colombo
“An economic turning point”. This is how officials describe the Port City of Colombo, a glittering metropolis that rises above the water along the waterfront of the Sri Lankan capital.
Adjacent to Colombo’s leafy business district, a vast expanse of reclaimed sand is being transformed into a high-tech city.
It will house an international financial center, residential areas and a marina, causing comparisons with Dubai, Monaco or Hong Kong.
“This land gives Sri Lanka the opportunity to redraw the map and build a city of world-class proportions and functionality, and compete with Dubai or Singapore,” Saliya Wickramasuriya, a member of the Sri Lanka Economic Commission, told the BBC. the Port City of Colombo.
But critics question how much Sri Lanka’s economy will really change.
To begin with, in order to gain the 2.6 square kilometers of new land, the country needed China Harbor Engineering Company (CHEC) to invest US$one.400 million.
In exchange, the company received 43% of the property in a 99-year lease.
After several years of dredging, construction activity gained momentum and the new city is taking shape.
Huge cranes overseen by Chinese engineers are moving concrete slabs, while bulldozers fill trucks with tons of sand.
A river running through the reclaimed land has already been dredged, allowing access for small boats and yachts.
Officials estimate that it will take around 25 years to complete the projectthe first of its kind in South Asia.
Sri Lanka says that the land under its control and the area handed over to the Chinese will be leased to multinational companiesbanks and other companies.
The government may also collect a tax on income.
Some 80,000 people are expected to live in the new city, which will offer tax breaks for those who invest and do business there.
All transactions in this special economic zoneincluding salaries, will be made in US dollars.
Debts and help from China
The Port City project was officially launched during Chinese President Xi Jinping’s visit to Colombo in 2014, a year after he launched his Belt and Road Initiative, nicknamed “the new silk road”,an ambitious plan to build road, rail and maritime infrastructure links in Asia and Europe to boost trade.
Sri Lanka turned to China for financial aid for reconstruction after a long war with Tamil separatists in 2009.
Western nations had expressed concern about the human rights abuses.
At the time of Xi Jinping’s visit, Mahinda Rajapaksa was the president of Sri Lanka.
But he lost the election that same year, with citizens concerned about Chinese loans, particularly for a large southern port in Hambantota.
Eight years later, Rajapaksa is back in power as prime minister, with his younger brother Gotabaya as president.
But the port of Hambantota is no longer in the hands of Sri Lanka.
In 2017 Sri Lanka handed over to Chinese control after struggling to pay off debts to Chinese companies, with some of the money earned reportedly used to meet other commitments.
Concerned about the award
So it is perhaps not surprising that not everyone in Sri Lanka shares the enthusiasm Port City officials have for the project.
Concerns about the program are numerous and include the environmental impact of a project of this size.
Others fear that such development will not benefit the country as much as its supporters suggest.
“A potentially negative aspect around the Port City is the fact that there are very significant tax exemptions that are built into its law. There is the possibility of even 40 years of tax exemptions for some investors,” said Deshal de Mel, an economist at Verite Research.
“Having this great tax concession does not improve Sri Lanka’s overall revenue proposition“, he added.
The tax regime triggered other concerns.
The United States warned that the relaxed trading environment could become a haven for money laundering.
Mohamed Ali Sabry, Sri Lanka’s Justice Minister, disagrees.
“There’s no way for that to happen because normal criminal law applies here. We have our money laundering law and we have our financial intelligence unit. There’s no way anyone can get away with it,” he told the BBC.
The interests of India and the Chinese advance
With China becoming more assertive on the global stage, there are also concerns about its strategic ambitions long-term.
The growing Chinese footprint in Sri Lanka is a concern for India in what it has traditionally seen as its backyard.
the port city aims to attract multinational companies and investors who are already based in Indiawhich could affect investments and job opportunities there.
But some say that Sri Lanka also has much to fear from the Port City of Colombo.
In 2020, Laos avoided bankruptcy by selling part of its power network to China to help finance a railway linking the two countries.
As with Hambantota, could the Port City of Colombo end up becoming a chinese outpost long-term?
“At the moment, the way this government negotiated with the Chinese, China has taken over almost everything in the Port City, everything,” opposition MP Rajitha Senaratne told the BBC.
“Some day, Sri Lanka will not really have a say in this project,” he added.
Chinese scholar Zhou Bo disagrees, saying that the goal is for both countries to benefit.
“The initiative of China’s Belt and Road it is not a charity. We want the benefit to be mutual. That means we also want our investments to have economic benefits,” Zhou, a former People’s Liberation Army colonel who now works at Tsinghua University in Beijing, told the BBC.
“China has no intention of trapping any country in debt,” he said.
Sri Lankan officials take the same stance.
“The entire area is under the sovereign control of Sri Lanka. The right to patrol, police, immigration, and other national security duties rest with the Sri Lankan government,” said Saliya Wickramasuriya of the Port City Economic Commission.
But Sri Lanka, which going through an unprecedented economic crisisyou have limited options.
The covid pandemic devastated its lucrative tourism sector and it dented employment abroad, causing foreign exchange reserves to plummet.
The country’s foreign debt has risen to more than $45 billion and it owes about $8 billion to China alone.
Amid calls for financial aid, Sri Lanka earlier this year asked Chinese Foreign Minister Wang Yi to restructure its debt repayment to Beijing.
But with repeated downgrades by international rating agencies, possibilities for Colombo to turn to international investors in search of others loans seem scarce.
Only China has long-term ambitions and a lot of money.
But there could be conditions: some believe that a city like Hong Kong in Sri Lanka would help China to strengthen its control in this part of Asia in the next years.
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