Will China's Maritime Silk Road get a new lease on life in Sri Lanka?

Vast amounts of Chinese investment flowed in, with the anticipated jewel in the crown being the US$1.5 billion (Bt54 billion) Colombo Port City project. This would have been Sri Lanka’s largest-ever foreign-funded investment, built on nearly 600 acres of reclaimed land.

However, the close relationship between China and then president Mahinda Rajapaksa caused concern, not only to many Sri Lankan citizens, but to other superpowers, notably India and the US, and so the election result was greeted with relief in these countries. 

The new president, Maithripala Sirisena, put many Chinese investment projects on hold, including the port city. While it seemed that it might get a fresh lease on life with a new election last month and an attempted comeback as prime minister by Rajapaksa, he was defeated again and the mandate of the Sirisena government was strengthened.

 

Port project will face changes

So what happens now? Prior to the election, there were conciliatory noises towards China, with then finance minister Ravi Karunanayake saying the port project might be able to go ahead – with some changes. His win-win proposal was to change the ownership structure from freehold for the Chinese to some kind of holding company.

Even without the port city project, many other Chinese infrastructure investments remain intact, such as the container terminal at Colombo Port, which boosted Colombo’s capacity by half, Sri Lanka’s first four-lane expressway, its second international airport and a port in Hambantota city. 

These projects have helped support Sri Lanka’s economy, which was growing at a robust 7 per cent prior to the election, while expediting its aim of becoming a major transport hub. They also helped advance China’s 21st Maritime Silk Road project, a series of linked ports, infrastructure projects and special economic zones extending from the South China Sea to the northern Indian Ocean, then on to the Middle East, Europe and Africa. 

Sri Lanka, which sits in the centre of the Indian Ocean, halfway between China and its major energy sources in the Middle East, is clearly an integral part of the project. 

Although the Sri Lankan elections are a setback for China’s ambitions, its earlier strategic investments will be difficult to claw back. And since the election was so close, the result could easily be reversed in the future. 

China is also cultivating bonds with the Maldives and Bangladesh and investing in their infrastructure, so even if some Sri Lankan projects are put on the back burner for now, the 21st Century Maritime Silk Road seems set to roll on.