New Delhi: The US International Development Finance Corporation (DFC) has announced $553 million in funding to Colombo West International Terminal Private Limited — a consortium of companies including India’s Adani Group — to help develop a deep water container terminal in the Port of Colombo.
DFC is the US development finance institution that partners with private institutions to finance solutions to the most critical challenges facing the world today, according to its official website.
This is the first such investment by a US government agency in a project led by India’s Adani group. The US investment of half a billion dollars in support of the deep water container shipping terminal in Sri Lanka will provide “critical infrastructure” for the South Asian region, the US Embassy in Sri Lanka said in a statement Wednesday.
“The new terminal reflects DFC’s commitment to financing high-quality infrastructure… The investment further demonstrates the United States’ enduring commitment to Sri Lanka’s economic growth and its regional economic integration, including with India,” the US Embassy said.
According to Aravind Yelery, an associate professor at the Centre for East Asian Studies at Jawaharlal Nehru University’s (JNU) School of International Studies, said this was a “one-of-its-kind project in the region” that signalled Washington’s interest in investing in port facilities in South Asia and Southeast Asia “as it looks for alternative territories of strategic importance”.
“It tells the world that ‘we are ready’ to support companies in select sectors in their competition against Chinese companies for overseas projects,” Yelery told ThePrint.
The Adani group signed the build-operate-transfer agreement with its Sri Lankan partner John Keells Holdings and the Sri Lanka Ports Authority (SLPA) in September 2021 to develop and run the Port of Colombo’s Western Container Terminal. According to a Reuters report published Wednesday, the Adani group has a 51 percent stake in the project, with dredging for the first phase of the terminal starting in November 2022, with a 2024 completion date.
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Caught between India and China
In April 2022, Sri Lanka, facing its worst economic crisis since its independence, declared its first sovereign default. As reported by ThePrint last year, soaring inflation and shortages of power, medicines, food, fuel, and other essential commodities developed into a political crisis, with large street protests leading to the eventual ouster of President Gotabaya Rajapaksa.
Colombo’s High Commissioner to India Milinda Moragoda told ThePrint earlier this year that Sri Lanka’s total debt stood at roughly $30 billion.
Its geographical location has led both New Delhi and Beijing to vie for influence in the country. China operates the Hambantota Port in Sri Lanka, while China Merchants Port Holdings also announced an investment of $391 million in a new port complex in the Colombo port earlier in the year.
In November 2021, the state-run China Harbour Engineering Company (CHEC) reportedly signed an agreement to develop the Eastern Container Terminal (ECT) at the Port of Colombo. This came 10 months after Sri Lanka reneged on a trilateral agreement with India and Japan to develop the ECT, saying that the firms involved in the deal had refused its new terms.
Colombo is the largest and busiest transshipment deep water port in the Indian Ocean. While a Chinese company was given rights to the ECT, the rights to develop and operate the Western Container Terminal (WCT) were given to the Adani-led consortium.
“Sri Lanka is one of the world’s key transit hubs, with half of all container ships transiting through its waters. DFC’s commitment of $553 million in private-sector loans for the West Container Terminal will expand its shipping capacity, creating greater prosperity for Sri Lanka — without adding to sovereign debt,” Scott Nathan, CEO of the DFC, said Tuesday at the ceremonial launch of the new terminal.
US Ambassador to Sri Lanka Julie Chung said the financing “is symbolic of the United States’ long-standing commitment to the development and well-being of the people of Sri Lanka.””
Yelery, however, said the investment should be looked at cautiously. “Do not expect US investments to sprout up in the region,” he said.
(Edited by Uttara Ramaswamy)
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