COLOMBO • Sri Lanka yesterday sealed a billion-dollar deal to let a Chinese state firm take over a loss-making port in a move that worries many, including its giant neighbour India.
The long-delayed US$1.1 billion (S$1.5 billion) sale of a 70 per cent stake in Hambantota port, which straddles the world's busiest East-West shipping route, was confirmed by Sri Lanka's Ports Minister Mahinda Samarasinghe.
The government used tough laws against industrial action to stop workers going on strike last week to oppose the sale to China Merchants Port Holdings.
India is nervous about China's infrastructure moves into its traditional sphere of influence.
"We have addressed geo-political concerns," Mr Samarasinghe said at a signing ceremony in Colombo. "China has accepted that everything in this agreement will operate under Sri Lankan law."
The deal was held up for months amid opposition from trade unions and political parties.
The minister last week said several countries had raised fears about the sale. India and the United States are known to be concerned that China getting a foothold at the deep-sea port could give it a military naval advantage in the Indian Ocean.
But Mr Samarasinghe said Hambantota, 240km south of the capital Colombo, will not be a military base for any country.
China Merchants built and runs Sri Lanka's only major deep-sea terminal in Colombo, which can accommodate the world's largest container carriers.
Mr Samarasinghe said Hambantota will be purely a commercial port, but any routine port calls by foreign navies will be regulated by Sri Lanka as in the case with the Colombo port.
Two Chinese submarines called at Colombo in 2014 during the final year of former president Mahinda Rajapakse's tenure, angering New Delhi.
Apart from the US$1.12 billion sale price, the Chinese firm will invest a further US$600 million to develop Hambantota, Mr Samarasinghe said.
The port has racked up losses of US$300 million in the last six years, according to official figures.
In addition, the government pays more than US$60 million annually to service the port's debt.