Vantage | Why US is funding an India-backed port in Sri Lanka

In a significant development in Sri Lanka, the United States has stepped into a turf war between India and China over the Colombo Port. While India and China have been the main contenders in this strategic location, the United States has now thrown its hat into the ring aiming to contribute to the expansion of the Colombo Port. This move involves a substantial financial commitment emphasizing a commitment to high-quality, transparent and debt-free infrastructure development. Colombo Port expansion project The focal point of this development is the Colombo Port, one of Sri Lanka’s most crucial maritime assets. Currently undergoing expansion, the plan is to construct an additional terminal and United States is poised to provide significant financial backing for this endeavour. The United States has committed to lending a substantial sum of $553 million to support this expansion project. It’s crucial to note that this financial assistance is not directed to the Sri Lankan government but rather to a consortium responsible for building the new terminal. This approach aligns with the US government’s commitment to ensuring that projects respect local laws and conditions and do not burden countries with sovereign debt. Instead, the focus is on financing the private sector, which is considered a source of sustainable capital for global development. Consortium behind the project The consortium involved in this project consists of three key entities: India’s Adani Group, Sri Lanka’s John Keells Holdings and the Sri Lanka Ports Authority. Notably, the Indian firm holds the majority stake, with 51 per cent. Two main factors underscore the importance of this development. Firstly, the Colombo Port is strategically located and serves as a critical link between West Asia and major Asian economies making it a hub for the transportation of goods from oil producers to consumers. Secondly, the funding model and approach in this project could serve as a template for similar endeavours in the future. A counter to China’s influence The United States and India have been collaborating on similar infrastructure projects, such as the I2U2 in West Asia, where the US provides funding while India contributes logistics and local expertise. This approach is seen as a potential counter to China’s investment strategy, which has raised concerns of debt traps and hidden agendas. The collaboration between India and the US represents a win-win deal without such concerns. It’s important to note that the Colombo Port has already attracted significant Chinese investments with a recent announcement of a logistics complex costing around $400 million. Furthermore, China already operates a terminal at the Colombo Port. Therefore, US and India find themselves playing catch-up in this strategic location where China has already established a strong presence. The US involvement in the Colombo Port expansion project represents a significant policy shift. In the late 2000s, US was critical of Sri Lanka’s human rights record during the civil war resulting in the suspension of military aid. However, the focus on the Indo-Pacific region and Sri Lanka’s strategic location in global oil traffic have now prompted a change in approach with US showing support for the country’s economic recovery. Challenges ahead While the financial commitment is substantial, success in this project will depend on the ability to deliver on investments and replicate this model elsewhere. China’s experiences with some of its large investments in Sri Lanka, often criticised as white elephants, serve as a cautionary tale. As China has port projects worldwide, this project in Colombo is viewed as a starting point. Developing countries will closely watch the outcome as it could influence their decisions on future projects. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.