In my previous posts I said China has three ways to bypass Malacca Strait for the security of its trade lifelines to the east: the Kra Canal, Railway through Laos, Tailand to Malaysia’s west coast and rail and road link between China’s Ruili and Myanmar’s Kyaukpyu port.
Due to Thai political instability, there is great political risk in building Kra Canal. The canal may provide a shortcut to bypass the crowded and pirate-harassed Malacca Strait. It will benefit not only China but also Japan and South Korea, but due to Thai political instability, no one will take the risk to build the canal.
Even the railway through Laos, Thailand and Malaysia has difficulties to go through Thailand. China has been building and will soon complete a rail way through Laos to Thai border. As the construction of the East Coast Railway in Malaysia has resumed only the section through Thailand is missing and Thailand does not seem willing to build a railway to connect the railways in Laos and Malaysia. Therefore, the second choise of a railway through Laws, Thailand to Malaysia’s western coast to bypass the Malacca still has to wait indefinately.
Now, China is fortunate to have made breakthrough in building China-Myanmar Economic Corridor in 2018. China is now building Kyaukpyu Port at full speed and the rail and road links between Ruili and Kyaukpyu have been under construction or planning.
The US certainly wants to hinder China’s efforts to bypass Malacca. It has been making great efforts to attract India to join its Quad to contain China. The two countries believe that China will bypass Malacca through Kra Canal. As a result, according to eurasiantimes.com’s report “India Responds to China’s Plans To Bypass Malacca Straits By Militarizing Indian Ocean Islands” on August 25, 2020, India is expanding its military bases in INS Kohassa, Shibpur in North Andamans and the Campbell strip at Nicobar in order to hinder China’s shipping through Kra Canal.
As now China will bypass the Malacca through rail and road in Myanmar and begin marine shipping from Kyaukpyu, Andamans and Nicobar are too far away from Kyaukpyu. Moreover, Myanmar has leased Coco Islands to China. If India uses its military bases in Andamans and Nicobar to hinder China’s shipping from Kyaukpyu to Hambantota China, can develop a military base on Coco Islands to counter that.
The Myanmar route will enable southern and eastern China to bypass Malacca while Chinese areas to the north can use the Arctic route as shortcut to bypass Malacca.
On the other hand, northwestern China can use China-Pakistan Economic Corridor to bypass Malacca.
As a result, China’s trade lifelines to the west will be free from hindrance in spite of US control of the Malacca Strait and India’s attempt to control the Indian Ocean,
Comment by Chan Kai Yee on Eurasian Times report, full text of which can be viewed at https://eurasiantimes.com/india-responds-to-chinas-plans-to-bypass-malacca-straits-by-militarizing-indian-ocean-islands/.
There is a common misunderstanding that China’s Belt and Road initiative (BRI) aims at enhancing its geopolitical influence so that Bloomberg’s article “China Faces New Competition as Japan, India Eye Sri Lanka Port” regard India and Japan’s investment in Sri Landa Port as a new competition faced by China.
As I have repeatedly pointed out that BRI aims at provide connections for China’s trade, help other nations’ development by building necessary infrastructures and transferring China’s labor-intensive industries there, and thus expand China’s market there.
China’s investment in building Sri Lanka’s Hambantota Port is a part of its efforts to establish its 21st maritime Silk Road linking China with the Middle East, Europe and Africa through the Indian Ocean. Therefore, the most important parts of that Silk Road are the connection through the China-Pakistan Economic Corridor to Pakistan’s Port of Gwadar and the connection through the China-Myanmar Economic Corridor to Myanmar’s Port of Kyaukpyu. For the latter connection the existing port facilities in Sri Lanka are far from enough for China’s huge shipping volume from the Port of Kyaukpyu. That is why China incurs so great costs to build Hambantota Port into a shipping hub for its maritime Silk Road through the Indian Ocean.
India and Japan’s investment in the Port of Colombo will provide additional port facilities for China’s maritime Silk Road. Their project will help China’s establishment of its maritime Silk Road. China will certainly be happy with that.
China knows well that it lacks financial resources to build BRI infrastructures alone so that it has times and again invited other nations to join it. What India and Japan plan to do in Sri Lanka means cooperation with China’s BRI instead of competition.
Comment by Chan Kai Yee on Bloomberg’s report, full text of which can be viewed at https://www.bloomberg.com/news/articles/2019-05-21/japan-india-in-deal-at-belt-and-road-colombo-port-nikkei.
China’s Belt and Road initiative (BRI) aims first of all at establishment of secure connections to its export markets in Asia, Europe and Africa.
The rail connections to Europe through Russia and Central Asia have not only been established but also in regular operation but the railway freight is expensive and slow due to the need to change carriages with different gauges.
A shipping route through the Arctic to Europe along Russian coast will be a secure shortcut but the Arctic has not melted enough. However, US refusal to reduce carbon dioxide emission may help. I wonder why the US is always helping China with or without its measures to contain China.
The rail link through China-Pakistan Economic Corridor to the port of Gwadar for shipping to the Middle East, Europe and Africa will be a faster and cheaper alternative without gauge problem. The railways will be newly built with capacity devoted to such connections while the rail connections through Russia and Central Asia have limited capacity due to the use of existing old railways that have already been busy. The shipping from Gwadar is safe due to protection of Pakistani and Iranian military, for which China and Russia will provide advanced weapons and training if necessary.
The US is certainly unhappy with that as with such connections powerful US navy will be unable to cut China’s western trade lifelines.
Now, due to the trade war launched by the US against China, BRI’s top goal has switched to the transfer of China’s labor-intensive industries to BRI’s Silk Road economic belt to avoid US tariff hikes on the products of Chinese labor-intensive industries as well as reduction their labor costs.
US trade deficit with China will be greatly reduced but its trade deficit with Silk Road economic belt will increase by the same amount. China’s such strategy will deal a heavy blow at the US to thoroughly defeat the US in the trade war.
China’s market in the belt will expand and so will its geopolitical influence there though geopolitical influence is but BRI’s byproduct not its aim. For the US, however, such byproduct upsets it most as it hinders US world hegemony.
With secure trade lifeline, transfer of industries, exploitation of labor and other resources, expansion of China’s market and geopolitical influence, etc. BRI facilitates China’s further rise to surpass the US and reduces US world hegemony. No wonder the US and the Western media under US influence have been so upset by BRI and have been trying so hard to spread lies about BRI being debt trap, etc. to obstruct BRI. However, lies are but lies. With or without Chinese investment, Pakistan, Bangladesh, Myanmar, Sri Lanka, Thailand, etc. are building railways, roads, pipelines and ports to set up trade connections and build infrastructures and industry zones for China’s trade and labor-intensive industries.
The connections and labor and other resources also attract other countries. According to Reuters’ report (at https://www.reuters.com/article/us-saudi-pakistan-economy/saudi-arabia-to-set-up-10-billion-oil-refinery-in-pakistan-idUSKCN1P60OU on March 13), Saudi Arabia plans to build a $10 billion refinery in Gwadar due to its connections to Saudi’s markets in South Asia and China.
Other countries will also exploit the connections built by BRI. India is a firm opponent against BRI but its wealthy business family owned and Singapore-registered Silver Park International is taking part in building a $3.85 billion refinery in Hambantota, the port built under BRI (see Channel News Asia’s report “Sri Lanka opens work on US$3.85 billion refinery near strategic port” on March 24 at https://www.channelnewsasia.com/news/asia/sri-lanka-opens-work-on-us-3-85-billion-refinery-near-strategic-11374242).
Seeing the successes of BRI, Europe certainly is no willing to lag behind in exploiting the connections built and markets expanded under BRI. Moreover, the infrastructures built under BRI will enable Europe to build factories of cars and other products in Silk Road economic belt to avoid US tariff hikes. Italy has signed a memorandum of understanding to participate in BRI, Germany and EU have shown their interest in BRI after Merkel and Juncker’s summit with Macron and visiting Chinese President Xi Jinping.
Like AIIB, the US will again fail in its efforts to have Europe join it in containing China.
Article by Chan Kai Yee.
In my post “Colonialism Failed but Belt and Road Succeeds despite Demonization” yesterday, I said that some Western politicians and media demonize China’s Belt and Road as the setting of debt traps. I would like to ask what China may gain from such traps?
Due to insolvency caused by such traps, China first of all loses the precious financial resources that it urgently needs for realizing its ambitious China dream.
What may China gain from such financial losses?
The natural resources it needs for its economic development? The money it lends exceeds by far the amounts it needs to pay for the purchase of such resources!
For geopolitical influence?
The Soviet Union invaded Afghanistan for its geopolitical influence there but instead of obtaining such influence, it was driven away by the people there.
Then it is America’s turn. The US has invaded Afghanistan and fought a war there for more than a decade. What has it gained? The government it has helped set up there does not obey it blindly while large areas there have remained under the control of Taliban the enemy the US has fought hard to eliminate.
What about economic pressure caused by debt trap? The country fell into the trap will be in great trouble and has to adopt tightening measures to repay the debt. Instead of obtaining geographical influence China will become very unpopular there.
Soviet and American invasion and military pressure have been proved as stupid attempt to gain geopolitical influence. Do you think that Chinese leaders are so stupid? In the Latin American debt crisis in the 1980s, IMF provided loans to the countries in financial difficulties but the tightening measures IMF told them to take caused great hardship to the people there and made IMF very unpopular there.
However, Western politicians and media have an example they are fond to cite. For example Nikkei Asian Review publishes an article that says “In particular, the Philippines defense establishment is concerned about replicating the experience of Sri Lanka, where the state-affiliated China Harbor Engineering Company has secured a 99-year-lease over the Hambantota port under a controversial debt-for-equity settlement.”
The article is written by Richard Heydarian who Nikkei Asian Review says is a Manila-based academic, columnist and author; his latest book is “The Rise of Duterte: A Populist Revolt Against Elite Democracy.” But what he said is entirely a lie.
I said in my post “Lies, Fake News Cannot Stop China’s Belt and Road Win-win Cooperation” to make clear the fact:
The Chinese investor China Merchant Port Holdings (SM Port) (not China Harbor Engineering Company as alleged by Richard Heydarian) is a subsidiary of China Merchant Group listed on Hong Kong stock exchange with obligation to disclose its Hambantota Port transaction.
According to the Group’s public announcement titled “Potential Discloseable Transaction Concession Agreement in Relation to Hambantota Port, Sri Lanka”, the company is to pay SLPA (Sri Lanka Port Authority) USD973.658 for the acquisition of 85% of issued share capital of HIPG (Hambantota International Port Group) and 58% of issued share capital of HIPG (Hambantota International Port Services) at USD146.00 million.
Adaderana.lk says in its report “Hambantota port handed over to HIPG and HIPS” on December 9, 2017, “The National Treasury (of Sri Lanka) received 294 million dollars as the initial 30% of the total amount that will be received.”
Sri Lanka media Adaderana.lk’s report on the transaction titled “Hambantota port handed over to HIPG and HIPS” on December 9, 2017 can be viewed at http://www.adaderana.lk/news/44680/hambantota-port-handed-over-to-hipg-and-hips-
Sri Lanka is heavily in debt so that recently a Chinese bank has to provide US$1 billion to help it prevent insolvancy, but the debts it owed China is only a small percentage of its total debts. According to Central Bank of Sri Lanka’s statistics, the loan from the Chinese side accounts for 9.22 percent of its entire volume of preferential foreign debt, whereas its loans from the Asian Development Bank and Japan account for 13.40 percent and 10.74 percent, respectively.
Chinese lending including Belt and Road one accounts only a small percentage of Sri Lanka’s total debts and is preferential one. Can that be regarded as debt trap?
Article by Chan Kai Yee
China’s investment in Asia often has great risks due to political instability in the countries it invests in. Myanmar’s suspension of the Myitsone dam project and Malaysia’s scrapping of the east Malaysia railway project are typical examples. However, in spite of the political instability, China has been successful in carrying out its Belt and Road initiative in Asia.
The Myitsone dam project started long before the beginning of Chinese President Xi Jinping’s Belt and Road initiative. It was planned to sell 90% of the electricity the project generates to China’s Yunan Province, but now Yunan has more than enough supply of electricity due to China’s rapid development of infrastructures.
However, the project has now become a Belt and Road one as it will provide power for Myanmar’s industrial development and thus facilitate removal of China’s labor-intensive industries to Myanmar where labor cost is very low.
Anyway, it is not a key project for Belt and Road that mainly aims at providing connection to the outside world for China.
For connection to the areas to the west of China, there may be three routes in which the railway link to Malaysia’s west coast to bypass the Malacca Strait is the last choice due to its long land route across three countries.
The best choice is a canal through Kra Isthmus to bypass Malocca Strait but with the greatest risk. The canal will benefit not only China but also other nations that use Malacca Strait as their major trade route to the west. If China funds the construction of the canal, it has to own the canal to obtain return to its investment but Thailand’s political instability make such huge investment very risky. Moreover, the canal may be nationalized like Panama Canal and Suez Canal.
The best choice seems to be a railway through Myanmar to the port at Kyaukpyu at the Bay of Bengal. China has already built oil and gas pipelines from Kyaukpyu to China’s Ruili and according to The Medi Telegraph’s report “China to develop deep sea port in Myanmar”, China has signed an agreement with Myanmar on the construction of a deep sea port at Kyaukphu with two deep berths.
It is obvious that the port will not be fully useful if it is only used for oil and gas freight to the pipelines. There must be a railway between Ruili and Kyaukpyu, which will not be such a huge investment as Kra Canal but will greatly benefit China and Myanmar. Politically, it is simple as it goes through only one country.
The railway and the port will make the port of Hambantota China is building in Sri Lanka an important transport hub for Chinese shipping to the Middle East, Europe and Africa. From that we see Chinese leaders’ vision in developing the port of Hambantota.
The ports in Sri Lanka and Myanmar under construction, the pipelines completed and the railway if built will be China’s successful 21st maritime Silk Road.
Western media simply ignored the pipelines and port at Kyaukpyu and spread the lies that China’s purchase of 80% shares in the company that has the lease of the port of Hambantota was forced asset-loan swap. They believe by such cover-up and lies they can convince readers that China’s Belt and Road is a failure.
Western and Japanese statesmen are not so stupid as to be deceived by the cover-up and lies. They now are interested in joining China’s Belt and Road or have other ways to invest in infrastructures in Asia and Africa that will ultimately benefit China in providing infrastructures and expanding market for China.
Even the United States has initiated a “Prosper Africa” strategy to contend with China in building infrastructures in Africa. But the United States is hard up. The dispute between President Trump and Congress over a small sum of $5 billion for the construction of a border wall should result in government shutdown! Poor America! Where will it obtain funds to build infrastructures in Africa? It even lacks funds to fix and rebuild its 50,000 bridges in poor conditions!
Comment by Chan Kai Yee on The Medi Telegraph’s report, full text of which can be viewed at http://www.themeditelegraph.com/en/shipping/2018/11/12/china-develop-deep-sea-port-myanmar-ebet6fyKi9LXtA6q16KIXO/index.html.
Drazen Jorgic December 17, 2017
GWADAR, Pakistan (Reuters) – China is lavishing vast amounts of aid on a small Pakistani fishing town to win over locals and build a commercial deep-water port that the United States and India suspect may also one day serve the Chinese navy.
Beijing has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly-needed water infrastructure for Gwadar, a dusty town whose harbor juts out into the Arabian Sea, overlooking some of the world’s busiest oil and gas shipping lanes.
The grants include $230 million for a new international airport, one of the largest such disbursements China has made abroad, according to researchers and Pakistani officials.
The handouts for the Gwadar project is a departure from Beijing’s usual approach in other countries. China has traditionally derided Western-style aid in favor of infrastructure projects for which it normally provides loans through Chinese state-owned commercial and development banks.
“The concentration of grants is quite striking,” said Andrew Small, an author of a book on China-Pakistan relations and a Washington-based researcher at the German Marshall Fund think tank.
“China largely doesn’t do aid or grants, and when it has done them, they have tended to be modest.”
Pakistan has welcomed the aid with open hands. However, Beijing’s unusual largesse has also fueled suspicions in the United States and India that Gwadar is part of China’s future geostrategic plans to challenge U.S. naval dominance.
“It all suggests that Gwadar, for a lot of people in China, is not just a commercial proposition over the longer term,” Small said.
The Chinese Foreign Ministry did not respond to a request for comment from Reuters.
Beijing and Islamabad see Gwadar as the future jewel in the crown of the China-Pakistan Economic Corridor (CPEC), a flagship of Beijing’s Belt and Road initiative to build a new “Silk Road” of land and maritime trade routes across more than 60 countries in Asia, Europe and Africa.
The plan is to turn Gwadar into a trans-shipment hub and megaport to be built alongside special economic zones from which export-focused industries will ship goods worldwide. A web of energy pipelines, roads and rail links will connect Gwadar to China’s western regions.
Port trade is expected to grow from 1.2 million tonnes in 2018 to about 13 million tonnes by 2022, Pakistani officials say. At the harbor, three new cranes have been installed and dredging will next year deepen the port depth to 20 meters at five berths.
But the challenges are stark. Gwadar has no access to drinking water, power blackouts are common and separatist insurgents threaten attacks against Chinese projects in Gwadar and the rest of Baluchistan, a mineral-rich province that is still Pakistan’s poorest region.
Security is tight, with Chinese and other foreign visitors driven around in convoys of soldiers and armed police.
Beijing is also trying to overcome the distrust of outsiders evident in Baluchistan, where indigenous Baloch fear an influx of other ethnic groups and foreigners. Many residents say the pace of change is too slow.
“Local people are not completely satisfied,” said Essar Nori, a lawmaker for Gwadar, adding that the separatists were tapping into that dissatisfaction.
Pakistani officials are urging Gwadar residents to be patient, vowing to urgently build desalination plants and power stations.
China’s Gwadar project contrasts with similar efforts in Sri Lanka, where the village of Hambantota was transformed into a port complex – but was saddled with Chinese debt. (That is a lie. Sri Lanka is not saddled with Chinese debt for the port. On the contrary, the Chinese side is to pay Sri Lanka Port Authority USD973.658 millions for shares in the joint ventures that operate the port and the National Treasury of Sri Lanka has received 294 million dollars from the Chinese side as the initial 30% of the total amount that will be received. See my post “Lies, Fake News Cannot Stop China’s Belt and Road Win-win Cooperation” on December 12.)
Last week, Sri Lanka formally handed over operations to China on a 99-year lease in exchange for lighter debt repayments, a move that sparked street protests over what many Sri Lankans view as an erosion of sovereignty.
The Hambantota port, like Gwadar, is part of a network of harbors Beijing is developing in Asia and Africa that have spooked India, which fears being encircled by China’s growing naval power.
But Pakistani officials say comparisons to Hambantota are unfair because the Gwadar project has much less debt.
On top of the airport, Chinese handouts in Gwadar include $100 million to expand a hospital by 250 beds, $130 million towards upgrading water infrastructure, and $10 million for a technical and vocational college, according to Pakistani government documents and officials.
“We welcome this assistance as it’s changing the quality of life of the people of Gwadar for the better,” said Senator Mushahid Hussain Sayed, chairman of the parliamentary committee that oversees CPEC, including Gwadar.
China and Pakistan jointly choose which projects will be developed under the CPEC mechanism, Sayed added.
When China suggested a 7,000 meter runway for the new airport, Pakistan pushed for a 12,000 meter one that could accommodate planes as large as the Airbus 380 and be used for military purposes, according to Sajjad Baloch, a director of the Gwadar Development Authority.
The scale of Chinese grants is extraordinary, according to Brad Parks, executive director of AidData, a research lab at the U.S.-based William and Mary university that collected data on Chinese aid across 140 countries from 2000-2014.
Since 2014, Beijing has pledged over $800 million in grants and concessional loans for Gwadar, which has less than 100,000 people. In the 15 years before that, China gave about $2.4 billion in concessional loans and grants during this period across the whole of Pakistan, a nation of 207 million people.
“Gwadar is exceptional even by the standards of China’s past activities in Pakistan itself,” Parks said.
HEARTS AND MINDS
There are early signs China’s efforts to win hearts and minds are beginning to bear fruit in Gwadar.
“Baluchistan is backward and underdeveloped, but we are seeing development after China’s arrival,” said Salam Dashti, 45, a grocer whose two children attend the new Chinese-built primary school.
But there are major pitfalls ahead.
Tens of thousands of people living by the port will have to be relocated.
For now, they live in cramped single-story concrete houses corroded by sea water on a narrow peninsula, where barefoot fishermen offload their catch on newly-paved roads strewn with rubbish. Many of the fishermen say they fear they’ll lose their livelihoods once the port starts operating.
Indigenous residents’ fear of becoming a minority is inevitable with Gwadar’s population expected to jump more than 15-fold in coming decades. On the edge of town, mansions erected by land speculators are popping up alongside the sand dunes.
Analysts say China is aware that previous efforts to develop Gwadar port failed partly due to the security threat posed by Baloch separatists, so Beijing is trying to counter the insurgents’ narrative that China wants to exploit Baluchistan.
“That weighs heavily on the minds of the Chinese,” Parks added. “It’s almost certainly true that they are trying to safeguard their investments by getting more local buy-in.”
Chinese officials, meanwhile, are promoting the infrastructure development they are funding.
“Every day you can see new changes. It shows the sincerity of Chinese for development of Gwadar,” Fijian Zhao, the deputy chief of mission at the Chinese embassy in Islamabad, tweeted last month.
For its investment in Gwadar, China will receive 91 percent of revenues until the port is returned to Pakistan in four decades’ time. The operator, China Overseas Ports Holding Company, will also be exempt from major taxes for more than 20 years.
Pakistan’s maritime affairs minister, Hasil Bizenjo, said the arrival of the Chinese in the region contrasted with the experience of the past two centuries, when Russia and Britain, and later the United States and the Soviet Union, vied for control of the warm water ports of the Persian Gulf.
“The Chinese have come very smoothly, they have reached the warm waters,” Bizenjo told Reuters. “What they are investing is less than a peanut for access to warm waters.”
When a U.S. Pentagon report in June suggested Gwadar could become a military base for China, a concern that India has also expressed, Beijing dismissed the idea.
“Talk that China is building a military base in Pakistan is pure guesswork,” said a Chinese Defence Ministry spokesman, Wu Sian.
Bizenjo and other Pakistani officials say Beijing has not asked to use Gwadar for naval purposes.
“This port, they will use it mostly for their commercial interests, but it depends on the next 20 years where the world goes,” Bizenjo said.
Additional reporting by Hassan Raza Syed in KARACHI and Asif Shahzad in ISLAMABAD:; Writing by Drazen Jorgic; Editing by Kay Johnson and Philip McClellan.
This blogger’s note: The port add no threat to India as India is already sandwiched by China and Pakistan, a port cannot add much to the existing threat of sandwiching), however the port may be militarized like the islands in the South China Sea if the US or India has conducted freedom of navigation operations near it to threaten Pakistan and China. That was why Bizenjo said, “it depends on the next 20 years where the world goes.
Shihar Aneez, Ranga Sirilal December 9, 2017
COLOMBO (Reuters) – Sri Lanka’s parliament approved on Friday a raft of tax concessions for a Chinese-led joint venture which will handle the southern port of Hambantota under a $1.1 billion deal that has sparked public anger and concerns in India and elsewhere.
The deal, signed in July, leases the port to a Chinese firm for 99 years and the tax concessions include an income tax holiday of up to 32 years. The port is near the main shipping route from Asia to Europe and likely to play a key role in China’s “Belt and Road” initiative.
The joint venture comprises the China Merchants Port Holdings, which holds a 70 percent stake, and the Sri Lanka Ports Authority (SLPA), which has the remaining 30 percent.
“Today the parliament approved two motions… to grant certain tax incentives to those two companies operating the Hambantota port,” Ports Minister Mahinda Samarasinghe told Reuters.
In the 225-member parliament 72 lawmakers backed the tax concessions and seven voted against. Many opposition deputies boycotted the vote.
The government pressed ahead with the vote despite a suggestion from opposition lawmaker Dinesh Gunawardena, who suggested the measures should require a two-thirds majority, or more than 150 votes, given the strategic nature of the issue.
Government and diplomatic sources have told Reuters that the United States, India and Japan had raised concerns that China might use the port as a naval base and could be a threat to security and stability in the Indian Ocean.
An initial plan to give the Chinese firm an 80 percent stake triggered protests by trade unions and opposition groups, forcing the government to make some revisions that limit China’s role to running commercial operations while retaining for Colombo oversight for broader security issues.
The government will hand over the port, built with Chinese loans at a cost of $1.5 billion, to the joint venture on Saturday and will receive $300 million, or around 30 percent of the deal, Samarasinghe said.
He also said the SLPA and the Chinese firm had signed the lease agreement just before parliament’s approval of the tax exemptions.
There has also been widespread public anger over plans for a 99-year lease of 15,000 acres (23 sq miles) to develop an industrial zone next to the port. This land lease is under negotiation.
The parliamentary vote came a day after Sri Lanka’s Supreme Court set a date for Jan. 11 to rule on three petitions against the leasing of land around the port to China.
Sri Lanka has said the Chinese firm will invest an additional $600 million to make Hambantota port operational and $1.12 billion from the deal will be used for debt repayment.
India is in advanced talks with Sri Lanka to operate an airport near Hambantota port.
Reporting by Shihar Aneez and Ranga Sirilal; Editing by Gareth Jones
Source: Reuters “Sri Lanka parliament backs tax exemptions for port deal with Chinese”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
By Shihar Aneez | COLOMBO Wed Feb 15, 2017 | 6:10pm EST
China will delay a planned $1.1 billion investment in a port on its modern-day “Silk Road” until Sri Lanka clears legal and political obstacles to a related project, sources familiar with the talks said, piling more pressure on the island nation.
Heavily indebted Sri Lanka needs the money, but payment for China’s interests in Hambantota port could be delayed by several weeks or months, the sources added.
After signing an agreement last December, state-run China Merchants Port Holdings had been expected to buy an 80 percent stake in the southern port before an initial target date of Jan. 7.
Beijing also has a separate understanding with Colombo to develop a 15,000-acre industrial zone in the same area, a deal that Sri Lanka was hoping to finalize later.
But Colombo’s plans to sell the stake and acquire land for the industrial zone have run into stiff domestic opposition, backed by trade unions and former President Mahinda Rajapaksa.
A legislator close to Rajapaksa is also challenging the government’s plans in court.
Now Beijing has linked the signing of the port deal with an agreement to develop the industrial zone, saying it would hold off on both until Colombo resolved domestic issues, officials on both sides of the talks said.
“China has said that when they start the port, they want the land also,” Sri Lankan Finance Minister Ravi Karunanayake said, although he added that China had not made it a precondition.
Yi Xianliang, Chinese ambassador to Sri Lanka, said the two deals were related.
“If we just have the port and no industrial zone, what is the use of the port? So you must have the port and you must have the industrial zone,” he said.
A source familiar with China’s thinking said it may wait until May, when Sri Lankan Prime Minister Ranil Wickremesinghe visits Beijing, to sign both deals.
The Chinese foreign ministry did not respond to a request for comment.
The previously unreported setback for Sri Lanka suggests Beijing is digging in its heels as it negotiates its global “One Belt, One Road” initiative to open up new land and sea routes for Chinese goods.
SPEED BUMPS, MOUNTING DEBTS
President Maithripala Sirisena is struggling to contain popular opposition to land acquisition for the huge Chinese industrial zone, including from Rajapaksa, who remains an influential opposition legislator.
The deal for the port development and industrial zone has also been challenged in court, which means it is stuck at least until the next hearing on March 3.
Asked whether the agreement would be delayed until the court had ruled, Yi, the Chinese ambassador, said: “Oh yes. We will follow the rule of law. We have the patience to wait.”
Rajapaksa’s role, the court case and violent protests by people afraid they could be evicted from their land underlined how Beijing does not always get its own way even in countries that badly need investment. Sri Lanka wants Chinese money to help alleviate its debt burden; the government had expected to have the proceeds from the stake sale within six months of signing the agreement before Jan. 7.
Sri Lanka has been under pressure from the International Monetary Fund to cut its deficit, shore up foreign exchange reserves and increase tax revenues as part of a $1.5 billion loan agreement struck in 2016. At least part of the money from the port deal would have gone toward paying down some of the more expensive loans on the government’s books, some of which are from China, a senior Sri Lankan government official said.
Hambantota port and a nearby airport were built from 2008 by the Rajapaksa government with the help of $1.7 billion in Chinese loans.
When Sirisena unseated Rajapaksa in an upset victory in 2015, he froze all Chinese investments, alleging unfair dealings by his predecessor.
Sirisena eventually negotiated a new deal with the Chinese government that involved the stake sale and further plans for the Chinese to develop an industrial zone.
The Chinese government expects to invest about $5 billion to develop the area within 3-5 years. Sirisena also agreed to give land to the Chinese on a 99-year lease. The terms did not go down well with port trade unions, which have asked the government to reduce the Chinese stake to 65 percent and lease period to 50 years.
Hundreds of protesters clashed with police in January when a demonstration against the planned industrial zone turned violent.
(Additional reporting by Ranga Sirilal; Editing by Mike Collett-White and Paritosh Bansal)
Source: Reuters “Exclusive: China ‘Silk Road’ project in Sri Lanka delayed as Beijing toughens stance”
Note: This is Reuters report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
China’s qianzhan.com quoted Russian military industry news website as saying that in early October, Chinese shipyard at Changxing Island installed radar, electronic system and weapons on the aircraft carrier it is making. The ship is scheduled to be launched before 2017 according to China’s plan to produce two China-made 48,000 to 64,000-ton conventional carriers.
From 2017 to 2020, China will build two nuclear aircraft carriers of 93,000-ton grade for protection of its trade lifelines on the ocean.
According to the report, the electromagnetic catapult on China’s nuclear aircraft carrier will be more than 100 meters long. It will use straight linear induction motor supported by complicated power supply and command systems. Its vital part is a highly efficient energy storage devise able to store 120MJ energy needed in ejecting an aircraft within 45 seconds. The device on the carrier can store a maximum of 140 MJ. Its power supply needs 3.1 MW for charging the device; therefore, must have the power not exceeding 4 MW. The carrier needs 60 MW of electricity for its engines, four catapults and other systems.
China has to vigorously develop its navy in order to protect its trade lifelines far away from its coast. Development of navy now costs about one third of China’s military budget, but there will be further increase through cutting the funds for its shrinking army.
The Russian media believes that in order to protect China’s trade lifelines, especially the supply of oil from Middle East, China has begun to infiltrate into the Indian Ocean. Not long ago Pakistani defense minister announced Pakistan’s hope that China will set up a naval base at its Gwadar Port that China has been helping it build.
China has taken an active part in Sri Lanka’s commercial projects at Hambantota Port. Another potential base will be at Sittwe Port, Myanmar.
Chinese navy has been intensifying its activities in Indian Ocean. In March 2011, two Chinese warships visited Abu Dhabi.
Source: “Good news about China-made aircraft carriers: Radar, electronic equipment and weapons having been installed” (summary by Chan Kai Yee based on the report in Chinese)