China’s man-made island takes shape in Colombo
China has completed its land
reclamation project in the disputed South China Sea. But thousands of
miles to the west, another Chinese artificial island is slowly taking
shape, the largest foreign direct investment in Sri Lanka, which will
add more than 500 acres of land to its capital city.
The Ocean seafood restaurant at Colombo’s five-star The Kingsbury was
once famous for its magnificent view of the Indian Ocean. Its open-air
wooden terrace that runs along the hotel’s western façade used to be so
close to the beautiful coastline that waves lapped the rocks, sending
sprays of sea foam into the air.
The once popular ocean view is now a massive construction site of
what is slated to become the most modern metropolis in South Asia – the
“The project itself is a modern sustainable metropolis in the South
Asia continent. It is being planned to be the most modern city in this
part of the world,” said Liang Thow Ming, chief sales and marketing
officer of CHEC Port City Colombo, which locally operates the
construction on behalf of Beijing-based firm China Communications
Located next to the Colombo Port, the US$1.4 billion project will add
about 233 hectares of reclaimed land to the capital and house luxury
office buildings, apartment blocks, a golf course, a water sport area,
medical facilities, education institutions, hotels, a theme park and
|The Port City
project was suspended by the Sri Lankan Government on March 6,
2015, following allegations of corruption and environmental
concerns. - Pichayada Promchertchoo/CNA
The Port of Colombo - Pichayada Promchertchoo/CNA
According to the agreement between CCCC and former President Mahinda
Rajapaksa’s government, 108 hectares of the real estate would be given
to the Beijing firm to cover its investment and marketing promotion
costs as well as profits. This includes 20 hectares on an outright basis
and 88 hectares on a 99-year lease.
For many, this is China’s attempt to expand its power to this part of
the world, a claim denied by officials involved in the project.
“There is a lot of suspicion whether this will become some form of a
military installation or some submarine park or something of that
nature,” said its Ming. “This is a commercial consent. We came into this
because we felt that there is money to be made.”
Still, the Port City faces serious hurdles still, centred on an
ongoing investigation by the current government under President
Since March 6, CHEC Port City Colombo has put construction on hold,
following Prime Minister Ranil Wickremesinghe’s announcement that a
preliminary investigation had shown irregularities and that the real
estate deal was carried out without transparency. According to the World
Bank, its parent company CCCC also faces a sanction under the
institution’s fraud and corruption policy, stirring up further
controversy over the land reclamation project.
“Because of the public outcry after the last presidential election,
the project has been put into review,” said Eran Wickremaratne.
However, he insisted the government’s biggest concern is the
environmental impact of the project, as the real-estate deal lacks a
“proper” Environmental Impact Assessment (EIA).
“A complete EIA is being done. If the EIA is satisfactory, the
project will continue. For some reason, if the EIA shows there are some
problems, if it is not environmentally desirable, then we will have to
see if these things can be cured,” Wickremaratne said.
Since President Sirisena took office in January, a number of
megaprojects approved by his predecessor have been subjected to
scrutiny, driven by allegations of corruption and lack of financial
feasibility. Although most of them have resumed, foreign investors’
confidence remains affected.
“Any investors, internationally, what we want to look for is
pro-business, pro-growth policies. What we want is consistency. And that
is important because we cannot have a change of policies every other
five years,” said Ming. “Any stop-work order that is given on ‘a
unilateral side’ so to speak would definitely affect confidence to a
His view was echoed by the likes of Dr. Nishan de Mel, economist and
Executive Director of Verité Research, who warned a lack of political
stability in Sri Lanka could hurt its economy.
“The policy regime kept changing quite rapidly. Every quarter, every
six months, policies would be reversed, reintroduced and reversed
again,” he said.
“I think it is very important, going forward, to look for putting
together a stable set of policies that also creates a level playing
field for entrepreneurs and business investors so that they can enter
the economy with confidence and not feel that their progress is going to
be somehow held to ransom by bottlenecked decision-making system.”
Still, an effective system of checks and balances is crucial for
developing countries such as Sri Lanka, which has just emerged from
decades of brutal war against terrorist group the Liberation Tigers of
Tamil Eelam (LTTE), known widely as the Tamil Tigers.
According to de Mel, Sri Lanka’s population has become somewhat
familiar with undemocratic power used by the state against terrorism,
which in turn jeopardized the country’s democratic values and practices.
Since the end of the war in 2009, Sri Lanka has become one of the
fastest growing economies in South Asia. Its Gross Domestic Product
(GDP) per capita took a leap from US$859 in 2002 to US$3,256 in 2013.
Its central bank’s annual report also showed the economy expanded by 7.4
per cent in 2014, up from 7.2 per cent in 2013.
Growth was mainly influenced by two factors, however, including
consumption of imported goods and a construction expenditure largely
fuelled by the Chinese. “China has become an alternative source of
capital to the traditional source that exists. But the way that it was
dispersed also creates an opportunity for corruption and corrupt
practices to significantly increase in Sri Lanka,” de Mel said.
“The conditionality attached to how the project is managed, how
contracting is done, tender procedures etc; are absent in the Chinese
lending process. And that absence creates some benefits for policy
makers and the government. One of them is speed of unrolling the
projects. The other is also, perhaps, the political benefit.”
During the previous administration, President Rajapaksa awarded
Beijing many infrastructure developments, from the country’s first coal
power plant Norochcholai to the Hambantota Port, Mahinda Rajapaksa
International Airport, and a cricket stadium.
More than US$6 billion was borrowed from Chinese lenders during
Rajapaksa’s administration, which raised concerns of members of the
“There are no international flights at that airport. The port has
hardly any vessels coming in. Therefore, they built infrastructure but
there was no demand,” said Wickramaratne.
“They were funded by loans. So, the country is facing, as a result, a
crunch on the international loans it has taken.”
Unlike his pro-Beijing predecessor, President Sirisena has been
slower on taking loans since he took office. His government is seeking
alternative funding sources that offer cheaper interest rates and longer
“We don’t want to push the country into a debt crisis,” said
Besides the economic front, the new government is also reshaping its
foreign policy to balance its international relations.
During Rajapaksa’s presidency, a number of Western countries were
concerned by Sri Lanka’s human rights issues during and after the war
against separatists, resulting in limited aid and isolation, while China
became financially supportive.
“The country has been somewhat isolated internationally in the last
That was very unfortunate,” said Wickramaratne, claiming that the
current government has successfully normalized its international ties
“at an amazing speed.”
“Our foreign policy is non-aligned but friendly and inviting anyone
to come and invest in this country,” he said.
Earlier this year, Sri Lanka welcomed Indian Prime Minister Narendra
Modi and US Secretary of State John Kerry.
Discussions with Europe are also on the table.
Meanwhile, the government continues to maintain its friendly
relations with China, as it treads carefully on China-funded projects.
“Like any relationship, there are tense periods when Chinese
contractors and the Sri Lankan authorities have had some issues to
resolve. I think the relationship between the two countries is bigger
than just those commercial relationships and, therefore, this
relationship between the two countries will very much be on track,” he
For Chinese investors, however, they want fairness on all fronts.
“It will be very helpful if the government is going to be a little
bit blind towards nationality.
There has to be balance of interest from various international
players and I think, as a Chinese company operating here, we don’t
expect preferential treatment. We just wanted to be treated fairly,”
- Channel News Asia