• Monday, June 27, 2022

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Sri Lanka gets $300mn Chinese factory near key port

COLOMBO, SRI LANKA – NOVEMBER 20: Built on land reclaimed from the Indian Ocean and funded with $1.4billion in Chinese investment, the Colombo Port City project is seen jutting out into the ocean that will eventually be 65 million cubic meters of sand on November 8, 2018 in Colombo, Sri Lanka. In just a few years Port City will be the site of tall glass skyscrapers, a busy financial district, hospitals, hotels and even a theme park. As the political crisis escalates in Sri Lanka, former President Mahinda Rajapaksa”u2019s return to power in late October has been watched with increasing concern by countries including the U.S., China and India. The re-entry of Rajapaksa could and raise the influence from Beijing and alter the power dynamics around the Indian Ocean. During Rajapaksa”u2019s 2005-2015 presidency, Sri Lanka saw an influx of Chinese investment and economic support since he relied heavily on China for economic support, military equipment and political cover. While ousted Prime Minister Ranil Wickremesinghe sought to balance relations with New Delhi and Beijing, Rajapaksa made clear his willingness to accept Chinese money even in the face of unreasonable terms while reports from the Central Bank estimated the debt owed to China could be as much as $5 billion and growing every year. Chinese investments paid for a new port, a new airport and new railway on Sri Lanka”u2019s southern coast, among other projects in Colombo, which forced the government to sell strategic assets to Beijing, such as the Hambantota port, when it wasn’t able to meet liabilities. For China, the relation with Sri Lanka ties back thousands of years when it was a stop along the old Silk Road trade routes, as it is now known to be a critical link for its Belt and Road Initiative, which aims to expand trade across 65 countries from the South Pacific through Asia to Africa and Europe. (Photo by Paula Bronstein/Getty Images)

By: Sarwar Alam

Sri Lanka announced on Tuesday (8) the first large-scale Chinese investment in manufacturing in the country, a $300-million tyre factory near a strategic deep-sea port.

Western nations, as well as regional power India, have long been concerned about Chinese influence in Sri Lanka through projects under its gargantuan Belt and Road infrastructure initiative.

The factory will be adjacent to the Hambantota port, which was leased to a Chinese company in 2017 after Sri Lanka failed to service the $1.4-billion debt from Beijing used to build it.

Sri Lanka’s cabinet approved the setting up of the tyre plant under legislation that allows generous tax concessions, Media Minister Keheliya Rambukwella told reporters in Colombo.

He said Shandong Haohua Tire Co Limited will export at least 80 percent of production, with the option of selling the rest on the local market.

The announcement came just weeks after Prime Minister Mahinda Rajapaksa unveiled the country’s 2021 budget, banking on a huge Chinese real-estate development in Colombo to attract more investment and revive the island’s economy.

The Colombo Port City — a $1.4 billion land reclamation project which started in 2014 — has doubled the size of Sri Lanka’s current financial district.

When Rajapaksa was president between 2005-15, Colombo borrowed billions from China, accumulating a mountain of debt for a string of infrastructure projects — including an international airport dubbed “the world’s emptiest” by media for its lack of flights.

He and his brother Gotabaya Rajapaksa — the current president — have rejected accusations that many such projects are white elephants, and have denied falling victim to a Chinese debt trap.

With credit agencies cutting Sri Lanka’s debt ratings, the country is expecting more Chinese loans in the new year.

Its economy is struggling with both the coronavirus pandemic and the devastating effect the Easter Sunday bombings last year had on the tourism industry.

Eastern Eye

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