Unseen Compromises of the CPCP
By Dr. Rajkumar Singh
On 27 May 2021, the 225-member Parliament of Sri Lanka passed the Colombo Port City Project (CPCP) Bill by a ratio of 149 in favour and 58 in against as a result of a marathon of one decade, leading to a wide discussion at national, regional and global level and redrafting of the bill in the light of suggestions/ directions of the Supreme Court of Sri Lanka. The first such idea to use the off-shore land was envisioned by the Government in 2004 solely on public funding but stalled later due to high cost and other factors.
Again in 2011, the China Communications Construction Company (CCCC), a publicly traded company with links to the Chinese State and via China Harbor Engineering Company (CHEC), submitted an unsolicited proposal to develop the Colombo Port City and envisaged the reclamation of 233 hectares of through Foreign Direct Investment (FDI).
Negotiations for the deal started in 2012 and after two yeas of preliminary deliberations on 16 September 2014 a Concession Agreement (CA) was signed between Ministry of Ports and Shipping and China Harbour Engineering Company and the very next day, (17 September), construction on Colombo Port City was launched by the then president of Sri Lanka Mahinda Rajapaksa and Chinese President Xi Jinping.
However, owing to the criticisms from various corners and change of guard in January 2015 the work on the project was suspended in early March 2015 citing environmental basis, but the same year further negotiation commenced due to heavy compensations claimed by the construction company in reference to the agreement signed earlier.
After a long gap of five years the scheduled works on the project with a revised plan was inaugurated in October 2019 and a prediction was also made about the entire construction to be completed by 2041. With the passing of the Bill, the comment phase is over and now the country is ready to face its consequences-good as well as bad.
Basics of the Colombo Port City
The Colombo Port City project is a part of China’s Belt and Road Initiative, a centrepiece of Chinese Communist Party and ambitious strategic-cum- development plan of its present President Xi Jinping to get support of countries across the world. When completed it would be a brandnew city developed and built as an extension of the Central Business District of Sri Lanka, spanning in 269 hectares of reclaimed land from the sea, having South Asia’s premier residential, retail and business destination.
Its built area will be of over 5.6 million squares meters-built space and include the facilities of healthcare, education, entertainment, hotels, and restaurants, retail and office with an integrated resort and a marina. The making of the Colombo Port City project testifies the gradual strengthening of China-Sri Lanka relations and understandings on all counts including the regional and global strategy.
Although the relations between the two remained noncontroversial since Island’s independence, it achieved a height higher than imagination with the initiation of presidentship of Mahinda Rajapaksa in the year 2005-2015 and again from November 2019 onwards.
In fact, Rajapaksa is very much obliged on account of Chinese help in various fields including the infrastructural developments of the country in last two decades. In the present plan, according to a spokesperson of the company out of 74 buildable plots of land, 40 have been allocated for commercial development while 34 plots are for residential use. Regarding land of 269 hectares reclaimed, China Harbour will get 113 hectares, 91 will be common areas vested in the Government and the balance of 60 odd hectares are land the Government can sell and earn revenue.
Finance for the project
Economy of the country is already in bad shape due to decades of war against the terrorism, the LTTE, in particular, and after its eradication on account of foreign loans which take a significant portion of GDP every year without fail. Although the World Bank has classified the country in lower middle-income group because of high human development indicators including adult literacy 93%, HDI of 0.782, life expectancy 75 years, and gender equality 0.948, its economy has registered a significant decline in GDP from .3.3 in 2018 followed by 2.3 in 2019 and 3.6 % in 2020. Despite progress in managing coronavirus, external debt remains a challenge amid concerns over money printing under Modern Monetary Theory and currency troubles and especially after 2015 it remained on decline continuously.
Keeping in view the current financial position of the country, the Government took effective steps to expedite the Port City project which would attract $ 15 billion in investments from the foreign countries and public resources of the nation, loans from Chinese banks.
As provided in the Bill now the Government will have extensive power to approve investments without going to the Board of Investment, give tax breaks and regulate businesses in the most far-reaching one-stop-shop designed so far. In addition, according to consultations of the new Government, no land will be granted on free hold basis and all the lands will be on 99-years lease basis. If the Government does not require extra land it has kept, the company may obtain the land for another 99- years.
The passing of the most controversial Colombo Port City Economic Commission Bill from the legislature of Sri Lanka on 27 May 2021 invited a criticism from several countries of the world including India because of its security and strategic consequences. Although, the Government of Sri Lanka has highlighted a five-points objectives which include; a. employment, b. foreign direct investment, c. value addition, d. balance of payment, and e. Government revenue, its completion could become a virtual outpost or colony. But, especially for India the Colombo Port City has brought China at its backyard with Belt and Road Initiative infrastructure projects in Bangladesh, Sri Lanka, the Maldives, and Pakistan-essentially surrounding the country in a ‘string of pearls’. In the situation the apprehension is that these apparently commercial projects could serve other, potentially militaristic, purposes as well. This apart, there is a general feeling that China is going to have naval interests and a security presence there would surely affect India’s geopolitical position. Now, Sri Lanka’s relations with other western countries including the United States, will witness some drastic shifts in coming days and years.
Dr. Rajkumar Singh
Professor and Head
Department of Political Science
Dean, Faculty of Social Sciences
Bhupendra Narayan Mandal University