Sri Lanka finalises $1.52 billion port deal with China

Sri Lanka's deep sea harbour port facilities at Hambantota.
Sri Lanka's deep sea harbour port facilities at Hambantota. PHOTO: AFP

COLOMBO (AFP) - Sri Lanka's government approved on Tuesday (July 25) the sale to China of a majority stake in a loss-making but strategically sited deep sea port for more than a billion dollars.

The Cabinet gave final approval to sell a 70 per cent stake in Hambantota port for US$1.12 billion (S$1.52 billion) to state-owned China Merchants Port Holdings, Ports Minister Mahinda Samarasinghe told reporters.

The Chinese will manage the port operations and the Sri Lankans the port security, the minister said. That, he added, should allay fears that the port could be misused by the Chinese.

Hambantota port straddles the world's busiest east-west international shipping lane across the Indian Ocean and some nations have raised concerns that it could become a military hub for the Chinese.

"Security of the port will not be given to anyone else. It will be handled 100 per cent by Sri Lankans," Mr Samarasinghe said.

He added that foreign naval vessels could call at Hambantota as they did at the main port in the capital Colombo.

"We will not provide special treatment to any country. We want to maintain good relations with all and we don't want to antagonise anyone...

"We don't envisage giving special treatment to any one country like during the previous regime," Mr Samarasinghe said, referring to a 2014 incident when two Chinese submarines called at Colombo - the only time any foreign submarines had stopped there.

The incident angered neighbouring India, which considers Sri Lanka to be within its sphere of influence and has been suspicious of China's increasing interest in investing in the island's infrastructure, including its sea and air ports.

The previous government took a US$8 billion loan from the Chinese to build the port - a commercial failure which does not even generate enough revenue to pay staff salaries - and other infrastructure.

The new government, which came to power in January 2015, has been trying to renegotiate the terms of the loan.

Mr Samarasinghe said Hambantota port needed a fresh capital injection of US$600 million to make it viable, but Colombo could not afford the investment and was banking on the Chinese to turn around the business.