Explained: Why a Chinatown not far from Kanyakumari is damaging for India

A new bill passed by the Sri Lankan parliament has paved the way for the birth of a Chinese colony near Colombo, the island nation's capital.

The Colombo Port City Economic Commission Bill, touted as a sure-fire way to bring in investment and boost the island nation's economy, had drawn flak. Detractors charged it undermined Sri Lanka's sovereignty and the Constitution.

The Sri Lankan Supreme Court, which heard 18 petitions filed against the Bill, too had decreed that certain provisions of the Bill were inconsistent with the Constitution.

However, placards touting $15 billion in investment or 80,000 new jobs ensured the Bill passed 148-59 in the 225-member parliament.

DEBT-TRAP DIPLOMACY

Now, as work progresses on the $1.4 billion project, it seems the Sri Lankan authorities, probably blinded by the mirages of job creation and industrial growth, have grown oblivious to many upheavals spurred by the port project in international politics.

Many accuse China of deploying a 'debt trap' in the island country.

Debt-trap diplomacy is a tool used by powerful lending countries seeking to saddle a borrowing nation with enormous debt, thereby increasing its leverage.

CHINESE FOOTPRINT

The Colombo Port City is the single largest foreign direct investment in Sri Lanka's history. It is the latest in a string of Chinese acquisitions on the island.

In 2017, the strategic Hambantota Port which straddles the world's busiest east-west shipping route was handed over to China in a classic debt swap, sparking global concerns.

STRATEGIC CONCERNS

India and the United States had then flagged that a foothold at Hambantota could give China a military advantage in the Indian Ocean.

The Jaffna Hybrid Energy Project too mushroomed in Sri Lanka with the help of MS/Sinosoar-Etechwin joint venture and funded by Asia Development Bank.

India had protested the selection of a Chinese company to execute the Jaffna project, again citing security reasons. It even offered a grant of $12 million to execute it to thwart a loan offer from China, but to no avail.

In 2019, Sri Lanka had backtracked from an agreement signed between India and Japan for the East Container Terminal (ECT) over allegations that “vital assets are being sold to foreigners”.

It was a disappointing development for India as it had expected over 70 per cent of the transhipment business, or shipment of good or containers in large vessels, in the terminal to be linked to it.

Media reports then hinted at a covert Chinese role in Sri Lanka's decision to withdraw.

ECT project was as equally ambitious as Colombo Port City. Sri Lanka was to retain 100 per cent ownership of the ECT project. Only the company tasked with the operations was split between the three countries.

To pacify the miffed Indian authorities, Sri Lanka offered the contract to develop Colombo's West Container Terminal to a consortium that included India's Adani Group.

However, India maintained that this deal was between Sri Lankan authorities and Adani Group, absolving itself of any unspoken partnership.

WHY SRI LANKA IS VITAL?

Located at the crossroads of global shipping lanes, Sri Lanka is of vital significance. Both India and China are keen to make a toehold here. Both countries want to assert their influence.

Fifty-three per cent of China's crude oil imports come from the Middle East and pass through the Indian Ocean.

Maintaining friendly ports in the region is among China's top economic and security interest.

Meanwhile, 90 per cent of India's trade by volume and all of its vital oil imports are carried by sea. So safe seaways are a strategic and economic imperative.

The Indian Ocean is also a conduit for global energy flow.

Over 36 million barrels, equivalent to about 40 per cent of the world's oil supply and 64 per cent of oil trade, are channelled through the entryways into and out of the region every day.

However, India's economic slowdown in recent years has deeply impacted its ability to keep up with China's aggressive trade and investment ties in the Indian Ocean region.

China is pursuing its 'string of pearls' strategy – building ports in Pakistan, Sri Lanka and Myanmar.

Recently, China surpassed India to become Sri Lanka's largest source of foreign direct investment. The gap is widening.

China is also the second-largest source of trade imports and arms sales in Sri Lanka after India.

India has long been committed to enhancing its friendship and cooperation with Sri Lanka, its 'Priority One' partner in the sub-continent, and Sri Lanka is desirous of India's support in the United Nations. But as China's ambitious 'Maritime Silk Road' project takes shape on Colombo's coast, the tides are slowly shifting.