History repeating? After Hambantota, China attempts to weaken Colombo Port deal from India

After facing strong opposition from trade unions across the country, Sri Lanka on Feb 4 has unilaterally pulled out of a 2019 memorandum to develop and operate the strategic East Container Terminal (ECT) at the Colombo Port in a trilateral agreement with India and Japan. Sri Lanka's move to backtrack on the much-hyped ECT project has elicited a quick response from New Delhi.  

The Ministry of External Affairs (MEA) in its first response has urged Sri Lanka to adhere to international commitments over the ECT project. In the initial discussions with the Sri Lanka government, India has reportedly tried to persuade its southern neighbour to recalibrate their decision to cancel the three-way agreement between New Delhi, Colombo and Tokyo. 

“As is well known, the Governments of India, Sri Lanka and Japan had signed a Memorandum of Cooperation in May 2019 to develop and operate the East Container Terminal of Colombo Port in a trilateral framework," Indian foreign ministry spokesman Anurag Srivastava said at a press briefing in New Delhi on Feb 4.

The agreement which was signed in 2019, will see India and Japan jointly holding 49% stake in the ECT's development and operations. It is important to note that the Colombo Port is an important trading and transportation port for the shipment of goods coming in and leaving Indian waters.

Despite following due protocols meticulous planning, earlier this month, the Sri Lankan Prime Minister Mahinda Rajapaksa said that the operation of the ECT would be solely managed by the Sri Lankan Ports Authority. This follows a series of protests from port employees nad unions who demanded the cancellation of the pact with India.

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India-Sri Lanka relationship hits roadblock

The caveat here after cancelling the agreement is Colombo's decision on Feb 4 to return USD 400 million from the Central Bank of Sri Lanka in an apparent "currency swap" a facility which it availed in July 2020 to meet its emergency Covid-19 needs during the lockdown. Although the ECT has been mired in controversies since the time of its inception two years ago, India walked the extra mile re-emphasising its Act East Policy to gain better hold and influence in the region. PM Modi hosted the current President Gotabaya Rajapaksa, brother of current Sri Lankan PM and former President Mahinda Rajapaksa in New Delhi. The Sri Lankan Foreign Affairs Minister also travelled to New Delhi to further cement their relationship. And similarly, National Security Advisor (NSA) Ajit Doval and External Affairs Minister (EAM) S Jaishankar visited Colombo to ensure Sri Lanka doesn't fall into China's debt trap, for which it is famously known.

However, the Sri Lankan government is aware that the economy has been severely hit and that it is in no position to fund the project on its own and will therefore be courting China again to help with the project. This is a cause for alarm because, in the last 15 years, Beijing's influence over Ceylon has been heavy. Starting from Hambantota Port in the south to investing in Colombo International Financial City (CIFC), which is being built on land reclaimed from the Indian Ocean, the ruling Rajapaksa brothers seem to share a great rapport with the Chinese President Xi Jinping.

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China and Rajapaksa brothers colluding against India?

Notably, the port employees' union have reportedly opposed Chinese investment in ECT as well. According to a report in a Sinhalese media, port employees went on a strike opposing any and all foreign partnership and some even go to the extent of believing the Chinese might have received a back door entry from Colombo. The port's employee unions have accused the Chinese of 'playing dirty games' and the Sri Lankan government of colluding with them against the better interest of its own people.

In light of growing tensions in the region, the Rajapaksa brothers defended their decision while speaking to a leading English newspaper Daily Mirror, in Sri Lanka, and noted that there won't be any issue and relations with India won't be affected in this regard. 'There are two schools of thought regarding this investment project. Alienation of state assets is not the policy of this government. Quite a number of Buddhist monks oppose it. They have already come out'. 

However, both India and Japan have urged Sri Lanka to honour its commitments and partnership in the ECT project. India and Japan are important donors to Sri Lanka, where it has frequently provided vaccine and other relief measures when needed and the tiny island must try, with their best efforts and salvage the ECT deal while there is still time before China's talons have firmly gripped them again.
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