Sri Lanka And China’s Hambantota Debacle May Now Be ‘Too Big To Fail’
Posted on August 5th, 2016

Wade Shepard Courtesy Forbes

If there is a bright spot in Sri Lanka and China’s multi-billion dollar Hambantota debacle it’s that nobody has given up on it yet.

Too big to fail” is a term that’s often been applied to China’s large-scale developments which don’t take off right away or appear to be failures that the government continues pumping with new resources, funding, supporting infrastructure and ideas until they eventually come to fruition.

This development strategy is often regarded as foolish in the freer markets of the West, but in the context of the Chinese system — where the government maintains a large degree of power over investment and the spatial positioning of enterprises — it can be made to work. Shanghai’s Pudong financial center can no longer be considered a statist monument for a dead pharaoh on the level of the pyramids;” Zhengdong New District is now the million person plus financial capital of Henan province rather than being uninhabited for miles and miles and miles;” and even the Great Ghost Mall of China” has come back from the dead. When we look across China we find that many of the booming new metropolises of today were the mocked and ridiculed ghost cities of yesterday.

The port facility at Hambantota in February 2015. (AFP PHOTO / LAKRUWAN WANNIARACHCHI)

Hambantota is a district in the south of Sri Lanka that over the past five years has been the site of one of the most ambitious development plans in the world. Featuring a $1.4 billion deep sea port, a large industrial zone, an LNG plant, an international airport, as well as a tourism zone, conference center, a world-class cricket stadium and some of the best highways in the country, Hambantota was supposed to have grown into Sri Lanka’s second most important city.

This plan was the work of Sri Lanka’s former president Mahinda Rajapaksa, for whom Hambantota was not coincidentally his hometown. To finance the projects here he looked towards China, who happily pumped the country with $8 billion in soft loans. This development worked to China’s interests as well, as Hambantota, Colombo South Port and the impending Colombo Port City were to be major parts of China’s Maritime Silk Road strategy, which aims to link together Chinese-invested and managed sea ports in Asia, Africa and Europe.

The biggest caveat to Sri Lanka’s ambitions in Hambantota is that it is in an extremely rural region that’s better known as the domain of migrating elephants. Literally, Sri Lanka and China aimed to build a new city in the middle of the jungle.

Almost needless to say, the Hambantota developments have so far struggled to break the inertia and come to life. With at most two scheduled flights per day, Hambantota’s Mattala International Airport is probably the world’s emptiest, the deep sea port is running at severe under-capacity, the conference center and cricket stadiums are seldom used, the smoothly paved new highways have very little traffic, and the industrial zone has yet to be built.

However, Sri Lanka hasn’t given up on Hambantota yet.

This morning, it was announced that China and Sri Lanka have formed a joint committee to devise and implement strategies to save the Hambantota project. This agreement came after Yi Xianliang, China’s ambassador to Sri Lanka, personally went out to Hambantota for an on-site inspection and then met with with Prime Minister Ranil Wickremesinghe.

Chief on the agenda of this new committee is to develop the long awaited Sri Lanka-China Industrial Zone, which is vital for the success of the deep sea port, to facilitate discussions concerning land allocation, devise strategies to bring in Chinese companies, and to develop a Colombo-Kandy-Hambantota economic corridor, which will tie together many of Sri Lanka’s big development projects.

As of now, Hambantota is a prime example of an ambitious new city at a mid-point of development, which is perhaps the most tenuous stage. Building new infrastructure is always long-term endeavor — a very expensive long-term endeavor which often does not produce adequate returns for many years, if not decades.

The conundrum is whether the developer has enough patience and cash flow to see their projects through to the end. If yes, that often means continuously dumping funds into projects that are not making any money (and potentially may not ever make any money); if no, that means a huge amount of already invested funds are going to be wasted and the landscape is going to be littered with half-built White Elephants that are of little use to anyone.

Sri Lanka has gone deep into debt trying to develop its infrastructure and economy with endeavors like the Hambantota project, and this has pushed the country to the brink of insolvency. Sri Lanka currently owes $58.3 billion to foreign financiers, which is taking up 95.4% of the government’s total revenue to repay. The situation is not sustainable, and to these ends the IMF has jumped in with a bailout.

However, China has a history of sticking it out in large-scale development projects and rarely cuts its losses and runs, especially when so much leverage, geopolitical positioning and face is at stake. For China, it’s about the big picture — it’s about the broader Maritime Silk Road network — and Sri Lanka’s Hambantota dream is a core part of this.

No matter how bleak the prospects of this new city in the jungle may seem, Hambantota may very well be too big to fail.

Full Article

http://www.forbes.com/sites/wadeshepard/2016/08/04/sri-lanka-and-chinas-hambantota-debacle-is-too-big-to-fail/2/#6dd240461170

4 Responses to “Sri Lanka And China’s Hambantota Debacle May Now Be ‘Too Big To Fail’”

  1. Ratanapala Says:

    It is makes one retch to see the downright small mindedness of Sri Lankan politicians. Thanks to President Rajapakse and China we have improved our meagre infrastructure facilities with a brand new network of roads, a new port in Hambantota, an extension to the Colombo air port, and a new airport at Mattala to talk of only the major improvements.

    Instead of finding ways and means to make use of the facilities and make them work, these myopic politicians are intent on denigrating the very doers who made these happen and available for the country to build on and prosper.

    Infrastructure developments are always longterm and nobody worth their knowledge of how countries such as Singapore and South Korea and many such other places were developed will deride necessity of these projects.

    What remains to be seen is the inability of the Sri Lanka politicians and the idiotic population to see good and the potential in what they have already have. We have become such a jealous, selfish and dog-eat-dog world. What a shame!

  2. Dilrook Says:

    This Forbes article has many ridiculous inaccuracies.

    More humans live in Hambantota than elephants and it was not a jungle.

    Sri Lanka landed in a debt crisis not because of infrastructure projects but more than 90% of borrowed funds since 2009 were wasted in the North and East.

    Infrastructure by themselves don’t earn money. They are enablers of business. Sri Lanka and China planned to open up industrial complexes around Hambantota for exports. That didn’t happen thanks to Indian interference and regime change. For these infrastructure to be useful a bold leader should disregard Indian invasive tactics and allow China to hold land, invest freely and build industrial areas in surrounding areas. With an impotent foreign policy pandering into Indian demands, Sri Lanka goes nowhere.

  3. Ananda-USA Says:

    Well said, Ratnapala!

  4. plumblossom Says:

    I would strongly urge those who are interested to read up on 2600 years of Sri Lanka’s history. We were totally located on the maritime silk road. At first it was Mahatitta Harbour (todays Mannar) which was the main port where maritime trade took place. Mahatitta Harbour was Anuradhapura or Rajarata Kingdom’s main harbour, whereas Gokanna (Trincomalee) was one of Kingdom of Ruhuna’s harbours. However, during these 2600 years, Godawaya (today’s Hambantota), Dikwella and Galle were also major harbours on the maritime silk road. All sorts of traders came to these ports to exchange goods, the Chinese, Persians, Indians, Ethiopians, Somalians, Greeks, Romans, Egyptians, Arabs, Malays, Indonesians, Thais, Malays, Burmese, Cambodians and so on. The Sinhala Kings major source of income was charging taxes from these maritime merchants in return for using these harbours. Sri Lanka also traded with the world gemstones, pearls, elephants, timber, spices etc. It is with this major source of income that the Sinhala kings built large stupas, large scale irrigation works etc.

    Please read history and archaeology and ancient history articles on ancient maritime harbours of Sri Lanka which are on the LankaLibrary website.

    When reading this history, it become extremely obvious how important Colombo and even Hambantota Harbours are and even Triincomalee Harbour is and will be in the future. Same goes for any airports in the vicinity of these harbours.

    The treacherous UNP full of idiots who do not know or care about Sri Lankan history and do not understand these things. In fact today, Colombo Harbour is probably our number one or two foreign exchange earner and in time to come Hambantota Harbour and even Trincomalee Harbours will join it. However the treacherous UNP who are subservient and puppets of the US,EU,UK, Canada, Norway, Sweden, India, the TNA and the separatist terrorists may jeopardise these happenings since they are only interested in creating an eelam or a separate state which was never ever in existence when looking at Sri Lanka’s history and is a totally fake creation.

Leave a Reply

You must be logged in to post a comment.

 

 


Copyright © 2018 LankaWeb.com. All Rights Reserved. Powered by Wordpress