Sri Lanka formally hands over Hambantota Port to China for 99-Year Lease
Sri Lanka has formally handed over its southern strategic port of Hambantota to China on 99-year lease. Two Chinese firms managed by China Merchants Port Holdings Company (CMPort) and Sri Lanka Ports Authority will own port and the investment zone around it.
Hambantota port is strategically located right in middle of vital energy supply lines in Indian Ocean, connecting Middle East and East Asia. It had gained strategic significance after Sri Lankan government had decided to build massive deep-sea port and airport with huge Chinese loans.
The Sri Lankan government had signed a $1.1 billion deal in July 2017 to sell a 70% stake in Hambantota port to China. Under the 99-year lease agreement, Sri Lanka received $300 million as initial payment. The deal was signed after port suffered heavy losses, making it impossible for Sri Lanka to repay its debts to China which was used to open Hambantota port in 2011.
The 99-year lease deal had fanned concerns of countries with competing strategic interests with China, particularly India and US. Local residents of Hambantota are also protesting selling of “national assets to foreign entities” leading to violent clashes.
Significance of Port
For China, Hambantota port is linchpin of its One Belt One Road project, which aims to build new Silk Road of trade routes between China and more than 60 countries in Asia, Africa, Middle East and Europe. That project is underpinned by network of harbours across world that has put China in position to challenge US as the world’s most important maritime superpower. Other similar developments in region include Gwadar port in Pakistan, which is centrepiece of $55 billion China-Pakistan Economic Corridor (CPEC).
India is apprehensive that the port is part of Chinese ‘string of pearls’ with an objective to surround India and dock its military vessels. The String of pearls is a geopolitical theory on potential Chinese intentions in the Indian Ocean region. To ally India’s concern, Sri Lanka earlier had ruled out the possibility of the strategic port being used as a “military base” by any foreign country.