Issue No. 4 | October 2017

Debt and destruction: China-funded projects in Sri Lanka stir controversy, conflict

But the project, like many others bankrolled by China in Sri Lanka, is also causing the massive displacement of small farmers and fishers while pushing the country deeper in debt.
Negombo women demand the Sri Lankan government to end the Colombo Port City project (Photo by NAFSO)

Gateway to South Asia” – this the Sri Lankan government’s vision for the much hyped and at the same time highly controversial Colombo International Financial City, or more commonly known for its old name, the “Colombo Port City.” The project, touted to “shake up Sri Lanka’s economic and geopolitical landscape,” will promote the island nation as the ultimate business and tourist destination in Asia.

But the project, like many others bankrolled by China in Sri Lanka, is also causing the massive displacement of small farmers and fishers while pushing the country deeper in debt.

Colombo Port City is so far the largest single foreign investment, as well as, the largest infrastructure undertaking ever in Sri Lanka. Expected to be completed in 2041, the project spans 269 hectares of land where a race track, yacht marina, mini golf course, exhibition center, luxury hotels, high-end shopping malls, apartments, and restaurants will be constructed. It will also supposedly create 83,000 jobs and earn US$20 billion in investments. According to the Sri Lanka Ports Authority (SLPA), the income from the 99-year lease granted to the project’s Chinese investors will enable Sri Lanka to pay back all the loans it incurred in the development of the country’s other ports.

From “port” to “financial” city

The port concept was first proposed in 2004 but it was only fully developed 10 years later through the joint effort of the Sri Lankan government and China Communications Construction Co., Ltd. (CCCC). The latter is China’s largest port construction, city development, and design company, which is the world’s 103rd biggest company as ranked in the latest “Fortune 500” list. The Colombo Port City project was approved in 2014 by then President Mahinda Rajapaksa – whose two terms in office were marked by ambitious and costly infrastructure projects funded by China – and inaugurated in the presence of Chinese President Xi Jin Ping.

China Harbor Engineering Co., Ltd. (CHEC), one of CCCC’s 34 subsidiaries that has been involved in a number of major infrastructure projects in Sri Lanka, is the project’s main developer.

Since the start of its development, however, the Colombo Port City project has been plagued with a number of issues, among them the lack of proper consultation with the affected communities, the lack of socio-economic and environmental impact assessments as required by law, and alleged corruption.

The project was suspended in 2015 after Rajapaksa lost the bid for a third term as head of state to current president Maithripala Sirisena, who, like incumbent prime minister Ranil Wickremesinghe, made a promise during the campaign period to put an end to Sri Lanka’s reliance on the Chinese, as well as, to look into the corruption and other issues involving the port city project.

But instead of addressing these issues, Sirisena and Wickremesinghe merely repackaged the project in 2016 as the Colombo International Financial City. A revised agreement was signed between the Ministry of Megapolis and Western Development, the Urban Development Authority, and CHEC, on 12 August 2017. The project design remains the same under the new agreement, although CHEC was given an additional two hectares of land  as compensation for the US$ 125 million loss it allegedly incurred during the project’s suspension, on top of the 20 hectares it was given in 2014.

The first stage of the project, estimated to cost US$1.5 billion, includes the reclamation of the sea adjoining the Galle Face Green and the construction of the two breakwaters. The total area to be reclaimed from the sea is reported to be around 181-233 hectares (450-575 acres). For this area size, experts estimate that around 200 million cubic meters of sand and 3.45 million cubic meters of quarry (granite) are needed. The Sri Lankan authorities have identified 11 excavation sites in the districts of Colombo, Gampaha, and Kalutara.

Chinese interests in Sri Lanka

Sri Lanka has been of prime interest to the Chinese since the ancient times. Located in the southern tip of India and along the Indian Ocean, the island nation is the gateway between Southeast Asia and the Middle East, Africa and Europe. Traditionally, it was an important port for cargo ships coming from the east and the west, and currently – for China specifically – it is a lifeline to energy sources in the Middle East and Africa. Sri Lanka, thus, is a significant piece in China’s One Belt, One Road (OBOR) Initiative, and being transformed into a major hub for the 21st Century Maritime Silk Road.

It was during the time of Mahinda Rajapaksa (2005-2015) as president that Colombo first became a close ally of Beijing. During his first term, Sri Lanka had no one to turn to for support over the then already two-decade conflict with the separatist group Liberation Tigers of Tamil Elam (LTTE). China graciously offered him a US$37 million ammunition deal as well as jet fighters, anti-aircraft guns, and a radar as gifts, which proved to be a valuable military aid in the defeat of the LTTE in 2009.

Since then, Sri Lanka and China’s relationship turned into a “strategic cooperative partnership,” with the former showing enthusiastic support towards the latter’s OBOR Initiative.

The Chinese have been putting in billions of dollars into the Sri Lankan economy in the form of investments and loans, mainly for infrastructure development projects such as in the construction of countless highways, ports, a cricket stadium, and a convention center. In 2010, China loaned the Rajapaksa administration US$200 million to build “the world’s emptiest airport,” and in 2013, US$272 million to construct Sri Lanka’s “first railway in a century.” From 2005 to 2017, China’s investments in Sri Lanka amounted to US$14.87 billion, while its loans amounted to US$3.3 billion, or 13% of the country’s external debt, most of which was obtained over the last decade.

The heavy debt burden – some even arising from failed projects – could not be sustained by the bankrupt Sri Lankan government. The controversial Hambantota Port located in Rajapaksa’s hometown in south of Colombo, for instance, was built using loans from the Export-Import Bank of China (EXIM). Signed prior to the approval of the arms deal with China in 2007, the current Sri Lankan administration has been struggling to pay back this debt incurred during Rajapaksa’s term that in July this year, it signed a concessionary agreement with the China Merchants Port Holdings Co., Ltd. (CMPort), a Chinese state-owned port company for the further development of the country’s second largest port, estimated at US$1.1 billion. The agreement gave away 70% of the port to the Chinese company, while 30% remained under the SLPA. Aside from the port, around 6,070 hectares of adjacent land in the districts of Hambantota and Moneragala were also leased to the Chinese company for 99 years, which is to be developed into an industrial zone, including factories and a US$3 billion oil refinery.

Impact on communities and people’s resistance

Chinese-led and funded projects in Sri Lanka were often met with resistance from the people on the ground. This is because, more often than not, projects were done without respect to the law, particularly the requirement that proper consultation with potentially affected communities and environmental and socio-economic impact assessments be done prior to the approval and commencement, especially of large-scale projects. This lack of regard to due process has negatively impacted particularly the poor communities.

In the Colombo Port City project, the people in the affected areas mainly rely on fishing and tourism as sources of livelihood. The Sri Lankan government, however, has declared a 10-kilometer no-fishing zone around the excavation areas, some of which are high-yield fishing areas. In Negombo alone, around 30,000 fisherfolks and 600,000 others engaged in related trade are expected to suffer economically.

Sand dredging and dumping on the Sri Lankan coastline, especially in the affected communities of Angulana, Mount Lavinia, Negombo , Panadura, and Uswetakeiyawa cause the irreversible erosion of soil. In Negombo, some houses along the beach have already been washed away. They also cause the destruction of coral reefs which are important spawning areas and nursery ground for many edible fish species. The decline in the number of fish has already resulted in the loss of income opportunities for countless families in Hendala, Moratuwa , Mount Lavinia , Negombo, Panadura, Uswetakeiyawa, Wellawatte, and Wennappuwa.

Protest action against Colombo Port City project in Negombo (Photo by NAFSO)

The Hambantota Port project, meanwhile, is going to physically displace thousands of people. The 6,000-hectare land set aside for industrial development hosts communities that have long been productively occupying the farmlands, albeit many were without proper land titles.

The development of China-funded projects like the Colombo Port City and the Hambantota Port industrial zone continue despite the socio-economic and environmental impacts on the fishing and farming communities. But these communities are not giving up their resistance as well. Cases have been filed in courts and direct people’s actions continue to be organized to demand that these projects be immediately stopped.

In the case of the Hambantota Port project, the signing of the concessionary agreement was delayed a few months from the original target date because of the protests by port workers, local residents, and opposition groups, who were not only against the displacement of communities, but also fear that the plan will result in the setting up of a “Chinese colony” and a military naval base. In the case of the Colombo Port City project, civil society organisations, including PAN Asia Pacific (PANAP) partner National Fisheries Solidarity Movement (NAFSO), formed the People’s Movement against the Port City to oppose the Chinese investors’ destruction of their fishing grounds. #

#NoLandNoLife Features discuss recent developments, events, and trends on land and resource grabbing and related human rights issues in the region as well as the factors and forces that drive it. Send us your feedback at