China's $1 billion port in Lanka where ships don't want to stop

[atan651]

The goal has always been to ultimately turn this port into a Chinese naval base. The T&C can always be modified.

 

[Clutch]

• Major shipping lines route cargo through Colombo and don't divert operations south to Hambantota
• Sri Lanka borrowed heavily to build the port, couldn’t repay the loans, and gave it to China on lease
• Experts say the port just serves China’s strategic interests to secure crucial trade routes and foreign supply chains

Just 1 ship a day: Lanka port shows what's wrong with China's 'Belt-Road'


NEW DELHI: Each year roughly 60,000 ships vital to the global economy sail through the Indian Ocean past a Chinese-operated port on the southern tip of Sri Lanka. Almost none of them stop to unload cargo.


The eight-year-old Hambantota port -- with almost no container traffic and trampled fences that elephants traverse with ease -- has become a prime example of what can go wrong for countries involved in President Xi Jinping’s “Belt and Road” trade and infrastructure initiative. Sri Lanka borrowed heavily to build the port, couldn’t repay the loans, and then gave China a 99-year lease for debt relief.

The experience has fueled fears that Xi’s plans to finance more than $500 billion in projects could see China take control of strategic infrastructure that also has military uses. But the massive state-owned Chinese conglomerate that took over the port in December wants to prove the skeptics wrong.

China Merchants Group -- whose 2017 revenues of $93 billion dwarf Sri Lanka’s gross domestic product -- is aiming to use its experience stretching from China to Europe to make the port profitable. During a rare look inside the grounds late last month, executive Tissa Wickramasinghe told Bloomberg News it had already nearly doubled the number of ships visiting the port.

"We are hell bent on making it work," said Wickramasinghe, chief operating officer of Hambantota International Port Group, a joint venture led by China Merchants. "Whether the port should have been built, why it was built -- those are, to me, irrelevant now."

Still, the port has a long way to go before it worries competitors in Singapore, Malaysia and the Middle East. Even with more traffic, Hambantota is only handling about one ship a day -- not enough to even register on China Merchants’ own data showing cargo handling volumes for February. It didn’t make a United Nations’ list of the world’s top 40 container terminals.

Major shipping lines now route cargo through Colombo, Sri Lanka’s capital, and see little reason to divert operations south. Maersk Line, the world’s largest container carrier, is waiting for Hambantota’s operator to offer a “firm value proposition” for clients, according to Steve Felder, the company’s managing director in South Asia.

“It’s too early to tell whether Hambantota will be of interest to us,” Felder said. “Much will be dependent on connectivity within the mainline network, extent of domestic cargo, cost and productivity.”

The port’s weak performance has fueled impressions that it simply serves China’s broader strategic interests to secure crucial trade routes and international supply chains. It would take billions of dollars of investment to generate meaningful traffic, according to Rahul Kapoor, a Singapore-based shipping analyst with Bloomberg Intelligence.
“Hambantota is a great example of the Chinese quest for global maritime dominance,” Kapoor said. “For the foreseeable future, it remains a strategic push over commercial viability.”

From its earliest days, the port has spurred debate. Former Sri Lankan President Mahinda Rajapaksa spearheaded the project, taking Chinese loans to shower goodies on his home district of Hambantota -- including a new international airport that still has just one daily scheduled flight.

The current administration led by Prime Minister Ranil Wickremesinghe told Bloomberg News the $1.1 billion debt-to-equity swap with China Merchants helped ease "the Chinese part of the debt burden." Still the decision remains unpopular with many Sri Lankans. Ironically that’s boosted the political fortunes of Rajapaksa, who lost a 2015 election in part due to concerns he was too cozy with China.

On a recent afternoon at the port, vehicle traffic was nearly non-existent. A large monitor lizard meandered across the main road. A port executive shot a video with his iPhone of a Singaporean ship unloading cement into a smaller vessel, complaining that the process was taking too long.

Yet for Hambantota, it was busy: Two other ships were also docked -- a cruise ship whose passengers were on a jungle safari and a vessel full of vehicles.

"Today’s a good day," said Wickramasinghe, the COO.

To boost revenue, he plans to lure vehicle trans-shipments, refueling and oil storage services away from Singapore, the U.A.E. Port of Fujairah and Malaysia’s Port Klang. The company could spend around $500 million on cranes to handle containers, and is speaking with "most of the oil majors" for oil bunkering and storage, he said.

Plans are also afoot to build a logistics and industrial zone next to the port. The 11.5 square-kilometer (4.4 square-mile) area -- more than three times the size of New York’s Central Park -- is now mostly jungle. Farmers nearby worry they could lose their ancestral land to proposed industrial zones.

"All the profits are going back to China," said Dharmasena Hettiarchchi, a 52-year-old farmer.

The abundance of space allows Japanese and Europeans automakers to store vehicles for trans-shipments to South Africa and the Middle East, Wickramasinghe said. China Merchants plans to more than double the number of vehicle trans-shipments to 250,000 this year, he said, with 10 percent annual growth expected the next few years. Singapore now handles 1 million vehicle trans-shipments annually.

“China Merchants doesn’t go and dump money if it’s not commercially viable,” Wickramasinghe said. “It’s definitely not political or military.”

China this week dismissed speculation that the Belt and Road Initiative had a military dimension, with foreign ministry spokeswoman Hua Chunying saying it was “open and transparent.” Hambantota was mutually beneficial and would aid Sri Lanka’s economy, she said.

“For others who speculate, I believe they have no reason to do so,” Hua said.

Still, Sri Lanka relocated its southern naval command to Hambantota in part to ease Indian and Japanese worries, state minister of defence Ruwan Wijewardene said in an interview.

“We’ve been speaking with them, and also with the Chinese,” he said. “We’ve made it very clear that it can’t be a military port.”

Wickramasinghe said it was normal for China Merchants to have a 99-year lease, citing a similar deal with the Port of Newcastle in Australia. Not everyone is convinced.

"The current Sri Lankan government has said that it will not permit military use of the facility, but that could change," said Amit Bhandari, an analyst at Mumbai-based Gateway House. "Ninety-nine years is a long time after all."

There is nothing about Gwadar in the news article?... Fake Indian News!

 

[war&peace]

Hopefully we will lease the Sri Lankan port at dirt cheap rate in neae future.

That near neae future will be at least after 99 years ..

 

[Pakistani Aircraft]

Maybe India can also buy a port in Sri Lanka for $1 billion for a 99-year lease?

 

[war&peace]

Hopefully many things will be up for lease in pakistan too by that time.

Yeah some cars and vehicles will be up for leasing.

 

[Sam Vaish]

It is SL and China matters. why it is bothering India ?

I can ask same question to you. Why it bothers you when we talk about other countries. We not talking about your country. So what makes you think this is your concern.

 

[Kiss_of_the_Dragon]

it takes a big heart to use such a words... Rajapakse took enough money from China to build a port there.. now he sleeps on golden bed

Yeah Rajapakse took enough money from China to build a port there which gave India sleepless night over these years, tell us who was the one crying about China-Sri Lanka cooperation?. You Indians are not the one to have last laugh, we still have 98 years to go with this port to create opportunity for China and Sri Lanka, and the most important thing is this port will bind that China-Sri Lanka relation for another 98 years, this is our intention. Or should I say India will have to endure China's present at their door step for another 98 years.

 

[comfortably_numb]

Part of me wants India to go ahead with the Trincomalee port project to develop the infrastructure nearby especially the oil tanks to counter Chinese presence, the prudent thing to do though would be to engage in capacity building in our own shores like the Vizhinjam port project(state sponsored) which will be more beneficial in the long run.

 

[$@rJen]

Yeah Rajapakse took enough money from China to build a port there which gave India sleepless night over these years, tell us who was the one crying about China-Sri Lanka cooperation?. You Indians are not the one to have last laugh, we still have 98 years to go with this port to create opportunity for China and Sri Lanka, and the most important thing is this port will bind that China-Sri Lanka relation for another 98 years, this is our intention. Or should I say India will have to endure China's present at their door step for another 98 years.

untill unless you don't use it for a military purposes we're finn with it... and heyyy please don't tell me about sleepless night to us.. we did saw how your Media whinned over small issues... such a pathetic state controlled media ya... try porting a Sub

 

[Chaosmaster]

I didn't know they already captured New Delhi..but I remember they said they can reach New Delhi in 48 hrs.

They also said CPEC will be beneficial to pak like they said hamabantota will be beneficial to SL.
And don't you worry about delhi, its not Islamabad. It will not get colonised.

 

[SQ8]

I can ask same question to you. Why it bothers you when we talk about other countries. We not talking about your country. So what makes you think this is your concern.

Because your q’tiya call center fellow countrymen dragged Pakistan into the thread.

 

[Jackdaws]

If pushed to the wall, a nationalist Sri Lankan Govt can always nationalize the port.

 

[ghameed]

If pushed to the wall, a nationalist Sri Lankan Govt can always nationalize the port.

that is exactly what will happen in the medium term future ....

 

[war&peace]

Yeah Rajapakse took enough money from China to build a port there which gave India sleepless night over these years, tell us who was the one crying about China-Sri Lanka cooperation?. You Indians are not the one to have last laugh, we still have 98 years to go with this port to create opportunity for China and Sri Lanka, and the most important thing is this port will bind that China-Sri Lanka relation for another 98 years, this is our intention. Or should I say India will have to endure China's present at their door step for another 98 years.

98 years is a long time. We may be talking to many different independent states in near future.

 

[Kiss_of_the_Dragon]

If pushed to the wall, a nationalist Sri Lankan Govt can always nationalize the port.

Who will pushed nationalist Sri Lankan to the wall, certain not China, indeed if Sri Lanka neighbor try to push it to the wall, China will not only have the civilian port but shall be granted to use as Naval base as well. The journey of thousand miles begins with a single step, we have toke the first step to built port, Indians can use their imagination for the rest of 98 years journey.

untill unless you don't use it for a military purposes we're finn with it... and heyyy please don't tell me about sleepless night to us.. we did saw how your Media whinned over small issues... such a pathetic state controlled media ya... try porting a Sub

You never know the future, if India know how to behave itself Sri Lanka certain will not let China to use as military base, but if India is threatening Sri Lanka's interest such as fishing and other contentious issues, they will have this port as geo-political bargain for 98 years to come.