Sri Lanka hopes to finalise China FTA amid protests

Concern growing over scale of Chinese investments in country

BEIJING • Sri Lanka aims to finalise a free trade agreement (FTA) with China this year and the country's Prime Minister will visit Beijing in May, the Sri Lankan ambassador said yesterday, amid rising concern in the South Asian nation about Chinese investments.

Hundreds of Sri Lankans clashed with police at the opening last month of a Chinese-invested industrial zone in the south, saying that they would not be moved from their land.

It was the first time opposition to Chinese investments in Sri Lanka had turned violent.

China signed a deal with Sri Lanka late last year to further develop the strategic port of Hambantota and build a huge industrial zone nearby - a key part of Beijing's ambitions to create a modern-day Silk Road across Asia.

China's One Belt, One Road aims to build land corridors across South-east Asia, Pakistan and Central Asia, as well as maritime routes opening up trade with the Middle East and Europe.

Critics, including former president Mahinda Rajapaksa - an influential opposition politician who allowed China's first investment into Sri Lanka when he was leader from 2005 to 2015 - say that Sri Lanka's port deal grants overly generous terms to China.

The administration of Mr Rajapaksa's successor, President Maithripala Sirisena - who came to office threatening to cancel high-value Chinese contracts on the grounds that they were unfair - last month approved a deal to lease 80 per cent of the port to China Merchants Port Holdings for US$1.12 billion (S$1.58 billion). The lease was for 99 years.

Officials said Mr Sirisena's hand was forced by the country's high debt burden and the fact that inflows from other countries, including India and the United States, were less than expected, despite a US$1.5 billion, three-year IMF loan programme agreed to last year.

The government also announced the lease of a much bigger 6,000ha of land around the port for an industrial zone controlled by China Merchants Port Holdings, which has become a lightning rod for protests.

Speaking to reporters on the sidelines of a national day reception at the Sri Lankan Embassy in Beijing, ambassador Karunasena Kodituwakku was upbeat on bilateral relations and downplayed the protests.

Sri Lanka wants to finalise a free trade deal with China and another with India this year, Mr Kodituwakku said.

"In the case of China, this is our 65th anniversary of trade relations," he said. "So this will be the best way to commemorate, by signing a free trade agreement."

China has spent almost US$2 billion on Hambantota and a new airport, and wants to spend much more as part of its One Belt, One Road initiative.

Mr Kodituwakku said Sri Lankan Prime Minister Ranil Wickremesinghe would attend a major summit on the initiative in Beijing in May.

China has said that about 20 foreign leaders are going, but has yet to provide details on who is attending, apart from Philippine President Rodrigo Duterte.

The ambassador admitted that Chinese officials had expressed concern to him about the controversy over Hambantota, though he said the numbers protesting were small.

"Despite the opposition from a small group, the government will go ahead," he said.


A version of this article appeared in the print edition of The Sunday Times on February 05, 2017, with the headline 'Sri Lanka hopes to finalise China FTA amid protests'. Print Edition | Subscribe