Sri Lanka, China sign long-delayed $1.5 billion port deal

The agreement to lease out the Magampura Port in Hambantota to China Merchant Port Holdings was signed today.

Hambantota port started operating in 2011 and since then, the operational cost has experienced huge losses.

Ports Minister Mahinda Samarasinghe earlier said that Sri Lanka's navy will be responsible for security of the port which will not be allowed as a base for any foreign navy.

The port, close to the world's busiest shipping lanes, has been mired in controversy ever since state-run China Merchants Port Holdings, which built it for $1.5 billion, signed an agreement taking an 80 per cent stake. This is part of a plan to convert loans worth $6 billion (5.5 billion euros) Sri Lanka owes China into equity.

The pact signed last year sparked widespread public anger as Chinese control of the port, which included a plan for a 99-year lease of 15,000 acres to develop an industrial zone next door, raised fears the port could be used for Chinese naval vessels.

Hambantota port, overlooking the Indian Ocean, is expected to play a key role in China's "One Belt, One Road" initiative, otherwise known as the new Silk Road, which will link ports and roads between China and Europe.

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Cash-rich China has invested millions of dollars in Sri Lanka's infrastructure since the end of a brutal civil war in 2009.

The deal was delayed by several months over concerns that the port could be used by the Chinese military and objections raised by countries like India, Japan and the US.

Meanwhile former Ports Minister Arjuna Ranatunga who has been opposed to the deal, wanting a 60pc stake for the SLPA and not 80pc or 70pc, did not attend the ceremony. The new provision is seen as an attempt to allay India's concerns over Chinese navy's possible presence in Sri Lanka.

After 10 years, the Sri Lankan side will gradually purchase an additional 20 percent stake, resulting in the two sides owning an equal share of 50 percent each, according to the agreement, which is valid for 99 years.

China's influence in Sri Lanka makes neighboring India anxious because it considers the Indian Ocean region to be its strategic backyard.

(Copyright © 2015. All Rights Reserved.)
 
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