By Samira Shackle
From the article:
Hambantota sits on the southern tip of Sri Lanka, its natural harbour close to international shipping routes. In ancient Sri Lanka, the area — which had an operational port as far back as 250 BCE — was crucial to the economy. In those days, Chinese and Arabian merchants used it as part of the maritime silk route. In modern times, however, Hambantota, the main town in a province badly affected by the 2004 tsunami, is underdeveloped.
In 2008, construction started on a new maritime port. It was the brainchild of Mahinda Rajapaksa, then prime minister, who dreamed of turning this area — his ancestral home — into a tourism and business hub. He and his allies insisted that the port would ease the pressure on the highly successful port in the commercial capital, Colombo. There was little evidence to support this claim. The Hambantota Port had failed numerous feasibility studies. India, a regional power and one of Sri Lanka’s key allies, declined to finance it. China, however, stepped up.
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There is some anxiety — particularly in India — that the scale of Sri Lanka’s debt crisis (the country has a debt-to-GDP ratio of 77 percent) could lead to further concessions, such as letting China use Hambantota as a military base. It is a widespread theory that China is deliberately trapping countries in debt in order to gain concessions and military advantage. However, it is debatable whether this is an explicit strategy, with some experts arguing that unsustainable debt is a by-product of inadequate planning. “I can’t believe people were concertedly looking at what turned out to be a very poorly planned port project and saying, ‘This is not going to make any money, so it’ll be a good investment because it’ll default and we’ll get a 99-year lease,’” says Geall. “I think it speaks more to accelerated, fragmented and perhaps rash decision making in overseas investment on the Chinese side, rather than a concerted effort to entrap countries through debt.”
Why, then, does China keep investing in outlandish projects? A recent study by the Center for Global Development found that the risk of debt distress is rising in 23 countries with Belt and Road funding. Eight of these countries — Pakistan, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan — already have unsustainable levels of sovereign debt. This means poor returns on loans for China, as well as potentially disastrous economic outcomes for the countries involved. The affected nations are among the poorest in their respective regions and will soon owe more than half of all their foreign debt to China.
Read the full article here.