Last updated: May 20, 2010 11:08 pm

Sri Lanka builds on Chinese support

At Hambantota, a remote fishing town on Sri Lanka’s south coast, Chinese engineers are digging a channel through the region’s pristine beaches, connecting the Indian Ocean with a vast inland pit, whose soaring concrete walls dwarf the earth-moving equipment working below.

Next year, the project managers will fill this man-made crater with water, creating the first phase of a new international harbour that will service the passing ships of the oil trade between east Asia and the Middle East.

“There are a lot of local crowds who come to see this,” says an official guide, who takes tourists to a vantage point where Mahinda Rajapaksa, Sri Lanka’s president, is pictured standing alongside Wen Jiabao, the Chinese premier.

The port is the brainchild of Mr Rajapaksa, whose family constituency is in Hambantota. But while the public sees the harbour as an engineering wonder, analysts view it as a symbol of the growing relationship between Colombo and Beijing, which lent $360m for the first phase of the project.

As Mr Rajapaksa this week celebrates Colombo’s victory a year ago over the Liberation Tigers of Tamil Eelam separatist group, these construction works are a reminder of how much he owes his success to Beijing.

Mr Rajapaksa, known for his trademark maroon shawl and traditional dress, won a second term this year on the back of his victory over the Tamil Tigers, for which China provided munitions, and by wooing voters with promises of big-ticket infrastructure projects, many of which are again to be backed by China.

“In the last one year since the end of the war, China has been trying to jump in and seize more opportunities in Sri Lanka,” said Brahma Chellaney, professor of strategic studies at the Centre for Policy Research, a New Delhi thinktank.

China was Sri Lanka’s biggest source of foreign funding in 2009, providing $1.2bn, or nearly triple the $424m given by the number two overseas lender, the Asian Development Bank.

Aside from Hambantota’s port, projects include a coal-fired power plant, an oil bunkering facility and a performing arts centre in Colombo. In March, China pledged another $290m for a new airport and to upgrade the island’s railways.

Mr Rajapaksa, who once acted in Sinhalese films, has become reliant on China for diplomatic support. Beijing helped thwart western calls last year for a UN probe into allegations of human rights violations during the war.

For Beijing, the partnership with Sri Lanka offers secure access to the Indian Ocean through which most of China’s oil passes. Some suspect the island could one day serve Beijing as a de facto navy base.

“If China is to emerge as the pre-eminent power in Asia, unchallenged by Japan and India, then China has to be the dominant force in the Indian Ocean region,” said Mr Chellaney.

Big infrastructure projects come at a price. Sri Lanka’s fiscal deficit blew out to nearly 10 per cent of gross domestic product in the 2009 fiscal year compared with a target of 7 per cent, amid soaring public debt.

This led the International Monetary Fund to postpone in February the third tranche of a $2.6bn loan programme. The delay has not sparked a crisis – the government has adequate foreign exchange reserves and the central bank expects the economy to grow 6.5 per cent this year.

But opposition politicians say the IMF's tight conditions are giving the government an excuse to move further into the embrace of China and other less demanding benefactors, such as Iran.

“What do you need good governance for when investors are coming in anyway?” said Harsha de Silva, an economist and politician with the opposition United National party.

Whatever his critics might say, the fruits of Mr Rajapaksa’s friendship with Beijing can be seen everywhere in Sri Lanka.

In central Colombo, Chinese engineers are putting the finishing touches to the new 1,288-seat National Performing Arts Centre. “Friendship of Sino-Sri Lanka Will Last Forever” read a sign on the site in English and Chinese.

One of the Chinese team managing the project says a lack of equipment and local skilled labour means the centre is taking about one and a half times longer to build than it would in China. “In China this would be completed in one year,” he said.

In Hambantota, Mr Rajapaksa’s family are reaping the political benefits of the rapport with Beijing. The president’s family, including his son, Namal Rajapaksa, won several seats in the district in parliamentary elections last month.

“We want to see Hambantota become a capital of Sri Lanka,” said a group of fishermen during a raucous celebration in Hambantota of Namal’s victory.

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