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Tuesday, November 7, 2023 | 10:16 pm
COLOMBO, Sri Lanka – The United States unveiled a $553 million endeavor on Wednesday to establish a new, deep-water shipping container terminal in the Port of Colombo as it competes with China in international developmental financing.
The project, funded by private debt, is presented as crucial infrastructure for the South Asian country with the potential to “revolutionize Colombo into a first-rate logistics center at the convergence of major shipping routes and emerging markets”, as per US International. Developed by. Finance Corporation
DFC’s commitment of $553 million in private debt for the West Container Terminal “will augment its shipping capacity, foster greater prosperity in Sri Lanka – without escalating national debt – along with fortifying the position of our partners throughout the region,” declared Scott Nathan, Chief Executive Officer of DFC.
The US-supported financing arrives during a period when Sri Lanka is grappling to recuperate from a severe financial and economic crisis.
DFC stated that the Colombo Port has been operating near full capacity since 2021, and the new terminal will cater to the expanding economies in the Bay of Bengal. Local partners will include Sri Lanka’s John Keells Holdings and India’s Adani Ports and Special Economic Zone Ltd, which possesses a 51% stake in the West Container Terminal.
The DFC was established five years ago in response to China’s sweeping worldwide infrastructure-building campaign, known as the Belt and Road Initiative. Through this, China invests billions of dollars each year to construct roads, railways, ports, and airports, particularly in developing nations, with the aim of promoting trade and goodwill towards China.
Several of these projects have sparked controversy, including the Hambantota port on Sri Lanka’s southeastern coast. Sri Lanka borrowed extensively from China to erect additional infrastructure, such as a port and airport, as well as a city on reclaimed land. These ventures have failed to generate enough revenue to repay the loans, and in 2017, Sri Lanka leased the port at Hambantota to China.
Sri Lanka’s colossal debt to Beijing has hindered its efforts to resolve its financial crises and is often presented as evidence by critics of the Belt and Road Initiative, who contend that China is engaging in debt-trap diplomacy.
The Chinese government refutes such accusations. Chinese Foreign Ministry spokesman Wang Wenbin stated during a routine briefing on Tuesday that the debt trap argument was “crafted to hinder and weaken China’s cooperation with developing countries.”
India and China are both competing for influence in neighboring Sri Lanka, and both have already invested in expanding facilities at the Colombo port. India is concerned about the growing Chinese presence on the island, which is located along one of the world’s busiest shipping routes and falls within an area that India considers part of its strategic domain.
Colombo Port also houses a terminal operated by China Merchants Port Holdings. Another Chinese project, namely a luxurious coastal development covering 269 hectares of reclaimed land called Port City, is being erected by CHEC Port City Colombo Company, a subsidiary of China Communications Construction Company. $1.4 billion has been invested in creating an integrated resort and casino and conference center area, a marina, apartments, a business district, and green spaces.
This project has sparked concerns in Sri Lanka and India that the development could become a de facto Chinese outpost or colony.
In terms of developmental financing, the United States faces fierce competition from Beijing, which restructured its Belt and Road Initiative to make it more environmentally friendly, secure, and sustainable, according to AidData, a research laboratory at William & Mary, a public university in Virginia.
In a recent report, AidData revealed that the United States is catching up to China in terms of development finance after surpassing Beijing in terms of total official financial flows to the developing world in 2007.
China’s lead has since expanded, but the gap has recently narrowed as China has reduced its lending while the United States has rapidly increased lending through its recently established DFC.
The United States presently provides approximately $60 billion in development finance to low- and middle-income countries annually. Nevertheless, with $80 billion in annual aid and loan commitments, China remains the largest official source of international development finance, according to AidData.
China has dominated global infrastructure finance over the past two decades with faster and larger projects. It has now relaunched with more rigorous environmental, social, and governance safeguards, stated Bradley Parks, Executive Director of AidData.
“This discovery is significant because China’s competitors in the global infrastructure market provide security but not speed,” he commented.
“On the other hand, Beijing is achieving a balance between security and speed. It is several steps ahead of its competitors in the global infrastructure market. It is focused on providing developing world leaders precisely what they desire: swift completion of major infrastructure projects without unreasonably high levels of risk,” he added. “Will the United States be able to do the same? It remains uncertain.”
Didi Tang reported from Washington, DC