The ouster of President Mahinda Rajapaksa, who steered Sri Lanka toward China until 2015, was a setback for ties, as his successor reviewed projects to check if they were fair and legal.
Now Maithripala Sirisena’s government, faced with falling foreign reserves, a balance of payments crunch and few, if any, alternative investors, is heading back into Beijing’s embrace, albeit on better terms than before, the Reuters news agency reported.
“The stance on China has completely changed,” cabinet spokesman Rajitha Senaratne told Reuters. “Who else is going to bring us money, given tight conditions in the West?”
Most of the focus has been on the $1.4 billion port city China wants to build in the commercial capital, Colombo, where cranes and diggers have sat idle for months.
But according to International Trade Minister Malik Samarawickrama, Chinese investors have also expressed interest in a special economic zone (SEZ) in Hambantota, southern Sri Lanka, where a $1.7 billion seaport and airport built by the Chinese are operating at a fraction of capacity.
“We will agree to that. They will invest their own money. That’s the way to go forward,” Samarawickrama told Reuters.
The SEZ in Hambantota is the biggest of four proposals made by the Chinese to Sri Lanka’s Board of Investment, the official there said. He did not provide details about others.
The SEZ is one of 45 projects the government plans to help lift growth at a time when public finances have deteriorated and Colombo is seeking an emergency IMF loan to avert a balance-of-payments problem.
Trade Minister Samarawickrama said the government decided to go ahead with the Colombo port city project after proposing to the Chinese to reduce the land area and limit the environmental impact.
Already, the suspension of work has cost $380,000 a day overall, according to state-owned China Communications Construction Co Ltd (CCCC), which is financing the project.
“During negotiations, the new Sri Lankan government understood the reality and also the fact that they were legally bound by the contract,” said an official at CHEC Port City Colombo (Pvt) Ltd, the local company handling the project.
Sri Lanka and the Chinese government also discussed loan terms, which critics said were too onerous on the host country, Finance Minister Ravi Karunanayake told Reuters.
“Everything is going well. If there were 7 percent (interest) loans, we have reduced to lower-regime loans,” he said, without detailing which loans were being renegotiated.
China said it looked forward to working closely with Sri Lanka.
“We believe Sri Lanka … will continue to deepen practical cooperation with China,” said foreign ministry spokeswoman Hua Chunying. (Colombo Gazette)