US pours $553mn into Sri Lankan port to counter China
What's the story
The US International Development Finance Corporation (DFC) has committed $553 million (about Rs. 4,603.4 crore) to finance a port terminal in Colombo, Sri Lanka, which is being developed by Gautam Adani.
This investment aims to counter China's growing influence in South Asia and represents the largest infrastructure investment in Asia by the US agency.
The West Container Terminal project, a deepwater facility, is expected to boost Sri Lanka's economy and foster regional economic integration, particularly with India.
Details
Countering China's influence in the region
The US funding demonstrates a renewed effort to reduce Beijing's grip on Sri Lanka.
This follows Colombo's spending spree on Chinese port and highway projects prior to its economic collapse last year, which left the country heavily indebted to China.
India is also keen on shifting the balance of power in the region. A US official described the Sri Lankan port financing as a symbol of the US's commitment to increased involvement in development projects throughout the Indo-Pacific.
What Next?
Adani Group's involvement and allegations
Adani Group owns a 51% stake in the West Container Terminal of the port.
The company has been battling corporate fraud accusations made by Hindenburg Research and various media investigations, all of which it has consistently denied.
The US official refrained from commenting on these allegations, stating only that the DFC exercises strict due diligence when selecting projects.
Insights
Project details and stakeholders
Sri Lankan conglomerate John Keells Holdings holds a 34% stake in the West Container Terminal (WCT), while the remaining shares are owned by the state-run Sri Lanka Ports Authority (SLPA).
Dredging for the terminal commenced in November, with the first phase slated for completion in Q3 2024 and the entire project by the end of 2025.
The port is among the busiest in the Indian Ocean, with nearly half of all container ships traversing its waters.
Facts
Impact on Sri Lanka's economy and regional relations
DFC CEO Scott Nathan said the funding will create "greater prosperity for Sri Lanka - without adding to sovereign debt - while at the same time strengthening the position of our allies across the region."
In 2021, India provided approximately $4 billion in swaps and credit lines to Sri Lanka, offering crucial support for importing fuel, medicine, and fertilizer during the height of the crisis.
Insights
FDI race: China vs India
The competition for influence in the strategically positioned island nation continues between India and China.
China had invested about $2.2 billion in the island nation as of the end of last year, its biggest foreign direct investor.
US officials have publicly criticized Sri Lanka's little-used southern Hambantota port as unsustainable and part of what it calls China's "debt-trap diplomacy."
As per the Central Bank of Sri Lanka, India's total FDI in 2022 in the country has also surpassed $2.2 billion.