Sri Lanka’s Financial Trouble and⁤ Hopes for Construction Projects Funded by China

Sri ‌Lanka is facing severe financial difficulties and is pinning its hopes on construction projects funded by China to bring in much-needed vitality to its economy.

The country’s economic collapse is partly attributed to the government’s heavy borrowing from China to finance ⁢massive infrastructure⁢ construction projects. Despite ​this,​ presidential candidates in the upcoming election are still betting ⁣on at least one construction project to reverse this trend.

Sri Lanka has‌ a history of launching construction projects that⁤ have⁢ been criticized as “white elephants” and have been accused of falling into‌ the “One Belt, ⁣One Road” debt trap set by China.

In 2022, the country suffered its worst economic recession ‍in history, ‌with President Gotabaya Rajapaksa facing intense criticism for his⁢ handling of the⁤ economy.

US Central Intelligence Agency (CIA) Director Bill Burns has ‌also weighed in on the issue, blaming the government for making a⁢ “stupid bet” on⁢ a Chinese-funded construction project.

This⁤ includes the construction of an international airport‍ without planes, a port without ships, an empty convention center, and a 350-meter-tall communication tower that the radio station has avoided.

Unable to repay its debt, Sri ⁤Lanka leased Hambantota Port to China for ‍99 years at a price of US$1.12 billion in 2017.

The⁢ International Monetary⁤ Fund (IMF) has provided a bailout package of US$2.9 billion to the Colombo authorities, but the country still faces a huge‍ amount of loans and interest accumulated due to⁤ the lack of ‌foreign debt.

The three most popular candidates in the current polls – incumbent President Ranil Wickremesinghe,⁣ opposition ⁣leader Sajith Premadasa, and Marxist leader Anura⁣ Kumara Dissanayaka‌ – are all counting on ⁢the Chinese-funded “Port⁢ City” real estate development project to attract foreign investors.

This development project was announced in 2014, with the China Harbor Engineering Company (CHEC) investing US$1.4 billion in a⁤ 269-hectare piece of land next to the Colombo harbor.

Billed as the “Gateway to South Asia”, it is a special economic zone with ‍a‍ 40-year tax holiday.

However, critics point out that the companies⁢ currently relocating ⁣to the‌ special zone are either ​existing Sri Lankan companies or foreign companies already operating in‌ the country.

Imran Furkan of Tresync,​ a⁣ geopolitical risk analysis company, said: “What is the reason for these companies to enter Hong‍ Kong? The answer is simple and there is only one, because they have received⁣ very generous tax holidays from 25 ‌to 40 ​years.”

Furkan ‍pointed‌ out that India has always considered neighboring Sri Lanka within its sphere​ of influence, but the “Port⁢ City” development project has concerns about intensifying the strategic competition between China and ⁤India.

Furkan said Indian companies that have benefited ‌from domestic duty-free⁢ zones may not be willing to deal with landlords with Chinese state-owned enterprise backgrounds.

“This makes no economic or​ strategic sense,” he warned.