US Sanctions on Selected Chinese Companies Will Worsen Sri Lankan Economic Downturn
Posted on September 2nd, 2020

Dilrook Kannangara

USA has announced economic sanctions on a number of Chinese companies and other companies that deal with them. Among them are Chinese companies involved in the Port City, Hambantota Port and Mattala Airport. This is obviously a US attack on China’s one belt one road” initiative. The impact on Sri Lanka will be catastrophic given the massive amount of money already spent on these unviable projects. Repayments must have to be made, otherwise China can takeover the land.

Port City was touted as the development project that can make or break Sri Lanka. If foreign investors (not local investors) flocked to buy its land as expected and they build the next financial hub of Asia and global players patronize their businesses, Sri Lanka’s economy would grow at astronomical rates. However, if any one of the do not happen, it will be the opposite. Sri Lanka will have to repay loans worth billions of dollars without any profitable returns from these projects.

Port City was opened for investment for one year now. However, no foreign investor (not even from China) has come forward to buy or lease any land there or put up their investment properties. Now it is even unlikely they will come. There is no worth in local investors or the government buying into this area – they do not bring anything into the country but the loans and their interest must be paid to external parties.

Port City must be regularly maintained to repair erosion, sustain sandbanks and keep the sea from reclaiming it; a very costly affair. Sri Lanka has three white elephants to maintain without any profitable gain. The damage already done to the environment building these is enormous. As a result, erratic weather, earthquakes, droughts, landslide, etc. become frequent. These are not costed.

Sri Lanka must immediately stop the disastrous western model of borrowing to do development work. It does not work. The best example is USA which is saddled with a government debt close to $20 trillion, almost the size of the US economy. The only profitable approach is to source local finance, local labour, local constructors and foreign expertise. If local commercial banks do not support it, that is a clear indication it is an unviable project.

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