INDO-PACIFIC : Operations Begin on New Chinese-Funded Artificial Island OE Watch Commentary: A newly reclaimed island adjacent to Sri Lanka’s capital has begun attracting businesses. Named “Port City Colombo,” the 269 hectares (664 acres) of reclaimed land juts almost two kilometers into the Laccadive Sea. The project is intended to help turn Colombo into a retail and financial hub, the latter dubbed “Colombo International Financial City,” pulling in investment from India and South Asia. The excerpted article notes that China provided the entirety of the $1.4 billion dollars needed to build , setting China’s investments in the country apart from those of the US and Japan, which the article claims, “are also vying for influence” in the country along with India. Gotabaya Rajapaksa, who was elected Sri Lanka’s president in November 2019, is viewed as being pro-China, and the article notes that his prime minister, , served as President during a period of growing relations with China.

The Colombo project is not the only billion-dollar Chinese investment in the country. ColomboHarbour-November2015-04. Source: Rehman Abubakr via Wikimedia, https://zh.m.wikipedia.org/wiki/File:ColomboHarbour- The Hambantota Development Zone, on Sri Lanka’s southern coast and initiated in 2008, November2015-04.JPG, CC BY-SA 4.0 has attracted even more foreign scrutiny than the Colombo project. In 2017, then-Prime Minister Wickremesinghe agreed to terms that gave China Merchants Port Holdings Company a 99-year lease. The company is majority-owned by China Merchants Group [招商局集团], itself owned by China’s State-owned Assets Supervision and Administration Commission which oversees State-owned enterprises (SOEs). Norochcholai Coal Power Plant in Northwestern Sri Lanka has also run to over 1 billion dollars. The Export-Import Bank of China provided loans for the project in 2006, and construction was undertaken by China Machinery Engineering Corporation. China Merchants Group owns a stake in the power plant. Foreign investment along these lines is likely tempting as many developing countries see the infrastructure they build as a way to rapidly grow their economies. As seen in the case of Hambantota, however, they can quickly run into questions of national sovereignty. End OE Watch Commentary (Wood) “China .. provided the $1.4 billion investment to dredge the sea and build the artificial island. It is the largest foreign direct investment project ever undertaken in Sri Lanka.”

Source: Marwaan Macan-Markar, “China grips Sri Lanka with artificial island off Colombo,”Nikkei , 12 December 2019. https://asia.nikkei. com/Spotlight/Belt-and-Road/China-grips-Sri-Lanka-with-artificial-island-off-Colombo

China, no stranger to building islands, has finished one off the coast of Colombo that gives Sri Lanka, a strategically located South Asian nation, the potential of erecting a futuristic business hub. Billed as Port City Colombo, the 269 hectares of land reclaimed off the coast of Sri Lanka’s largest city was officially declared part of the country last weekend. The night sky above Colombo’s coast lit up with fireworks to mark the moment this Chinese-led venture was formally able to begin attracting foreign investors. Seasoned observers reckon the island will further deepen China’s economic ties with debt-strapped Sri Lanka, where India, the U.S., and Japan are also vying for influence. But it was China that provided the $1.4 billion investment to dredge the sea and build the artificial island. It is the largest foreign direct investment project ever undertaken in Sri Lanka. Diplomatic sources in Colombo say Port City Colombo stands apart from other big-ticket ventures in the country, a big beneficiary of China’s belt and road largesse. Billions of dollars in Chinese loans have resulted in a slew of projects -- a port, airport, and highways. Port City Colombo will not join this list; the FDI project comes at no financial cost to Sri Lanka. The project began in September 2014, when Chinese President Xi Jinping first visited Sri Lanka. It involved China Communications Construction Company, the giant developer and most active builder when it comes to Sri Lanka’s BRI projects, through an affiliate, China Harbor Engineering Company (CHEC). Officials at CHEC Port City Colombo, a company floated by CHEC for this venture, are targeting investors from the Middle East, India, Southeast Asia, and China in their endeavor to turn the island into “South Asia’s premier residential, retail and business destination,” as the company states in its promotional material. Financial analysts in Colombo reckon that Port City Colombo’s location will allow it to draw Indian businesses. At the company’s roadshow in Mumbai, India’s financial capital, one message was driven home -- that the new hub is a three-hour flight away. But as CHEC Port City Colombo points toward its goal of attracting a further $13 billion in property development investments, it awaits some action in the Sri Lankan parliament, which needs to pass several pieces of legislation, including one to make the island a special economic zone. Some of the legislation is contentious, especially that calling for a new legal regime and regulations that some observers are likening to the “one country, two systems” formula China uses with Hong Kong. That will require an amendment to Sri Lanka’s constitution.

OE Watch | February 2020 33