March, 22, 2019
Bloomberg - A proposed oil refinery in Sri Lanka could boost a barely used Chinese-operated port that has piled on debt for the country and fueled criticism of President Xi Jinping’s signature Belt and Road infrastructure-building initiative.
The $3.9 billion refinery project will be located near the southern Sri Lankan port of Hambantota, which was built with funding from Beijing and eventually handed over on a 99-year lease to a state-owned Chinese company in a debt-to-equity swap.
The port in a remote part of the country has become a prime example of what can go wrong in the Belt and Road initiative. Sri Lanka is paying down billions in debt on the project that has raised geopolitical concerns for giving China control of an asset located along key shipping lanes just off southern India’s coastline.
“It will help make the Hambantota port an active port,” said Nalin Bandara, deputy minister of development strategies and international trade at a news conference in Colombo on Tuesday. “The oil tankers will find it easy to reach the refinery through the Hambantota port.”
U.S. officials and Western analysts have criticized many Belt and Road projects as predatory debt traps designed to further Beijing’s long-term geopolitical goals. The projects alarmed policy-makers in New Delhi, who have watched China build up various infrastructure projects in surrounding nations, including next door in rival Pakistan. Malaysia and others have since cancelled or begun to renegotiate Chinese projects.
The export-oriented refinery, which is supposed to begin construction next week, will be built on 585 acres of land and amounts to Sri Lanka’s largest foreign direct investment project, according to Mangala Yapa, a technical adviser with the Ministry of Development Strategies and International Trade. The refinery is a joint-venture between Singapore-based Silverpark International and the Sultanate of Oman, he said.
“What we trying to do through this is generate port harbor volumes,” Yapa said.
Sri Lanka has been trying to boost global investor interest in a proposed industrial zone surrounding the port, as well as in a nearby airport with no scheduled flights. But in the past, Sri Lankan officials have occasionally spoken publicly about foreign investment projects that are not entirely finalized.
Photo - Hambantota Port in Sri Lanka. Photographer: Atul Loke/Bloomberg