{"id":57382,"date":"2016-08-05T15:50:39","date_gmt":"2016-08-05T22:50:39","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=57382"},"modified":"2016-08-05T15:50:39","modified_gmt":"2016-08-05T22:50:39","slug":"sri-lanka-and-chinas-hambantota-debacle-may-now-be-too-big-to-fail","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2016\/08\/05\/sri-lanka-and-chinas-hambantota-debacle-may-now-be-too-big-to-fail\/","title":{"rendered":"Sri Lanka And China’s Hambantota Debacle May Now Be ‘Too Big To Fail’"},"content":{"rendered":"

Wade Shepard\u00a0<\/span>Courtesy Forbes<\/em><\/span><\/h2>\n

If there is a bright spot in Sri Lanka and China\u2019s multi-billion dollar Hambantota debacle<\/a> it\u2019s that nobody has given up on it yet.<\/p>\n

Too big to fail\u201d is a term that\u2019s often been applied to China\u2019s large-scale developments which don\u2019t 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<\/a>.<\/p>\n

This development strategy is often regarded as foolish in the freer markets of the West, but in the context of the Chinese system \u2014 where the government maintains a large degree of power over investment and the spatial positioning of enterprises \u2014 it can be made to work. Shanghai\u2019s Pudong financial center can no longer be considered a statist monument for a dead pharaoh on the level of the pyramids<\/a>;\u201d Zhengdong New District is now the million person plus financial capital of Henan province rather than being uninhabited for miles and miles and miles<\/a>;\u201d and even the Great Ghost Mall of China<\/a>\u201d has come back from the dead<\/a>. 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<\/a>.<\/p>\n

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The port facility at Hambantota in February 2015. (AFP PHOTO \/ LAKRUWAN WANNIARACHCHI)<\/p>\n<\/div>\n

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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<\/a>\u00a0and some of the best highways in the country, Hambantota was supposed to have grown into Sri Lanka\u2019s second most important city.<\/p>\n

This plan was the work of Sri Lanka\u2019s 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\u2019s interests as well, as Hambantota, Colombo South Port and the impending Colombo Port City<\/a> were to be major parts of China\u2019s Maritime Silk Road strategy, which aims to link together Chinese-invested and managed sea ports in Asia, Africa and Europe.<\/p>\n

The biggest caveat to Sri Lanka\u2019s ambitions in Hambantota is that it is in an extremely rural region that\u2019s 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.<\/p>\n

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\u2019s Mattala International Airport is probably the world\u2019s emptiest<\/a>, 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.<\/p>\n

However, Sri Lanka hasn\u2019t given up on Hambantota yet.<\/p>\n

This morning, it was announced that China and Sri Lanka have formed a joint committee<\/a> to devise and implement strategies to save the Hambantota project. This agreement came after Yi Xianliang, China\u2019s ambassador to Sri Lanka, personally went out to Hambantota for an on-site inspection and then met with with Prime Minister Ranil Wickremesinghe.<\/p>\n

Chief on the agenda of this new committee is to develop the long awaited Sri Lanka-China Industrial Zone<\/a>, 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\u2019s big development projects.<\/p>\n

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 \u2014 a very expensive long-term endeavor which often does not produce adequate returns for many years, if not decades.<\/p>\n

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.<\/p>\n

Sri Lanka has gone deep into debt<\/a> trying to develop its infrastructure and economy with endeavors like the Hambantota project, and this has pushed the country to the brink of insolvency<\/a>. Sri Lanka currently owes $58.3 billion to\u00a0foreign financiers, which is taking up 95.4% of the government\u2019s total revenue to repay. The situation is not sustainable, and to these ends the IMF has jumped in with a bailout<\/a>.<\/p>\n

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\u2019s about the big picture \u2014 it\u2019s about the broader Maritime Silk Road network \u2014 and Sri Lanka\u2019s Hambantota dream is a core part of this.<\/p>\n

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

Full Article<\/p>\n

http:\/\/www.forbes.com\/sites\/wadeshepard\/2016\/08\/04\/sri-lanka-and-chinas-hambantota-debacle-is-too-big-to-fail\/2\/#6dd240461170<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Wade Shepard\u00a0Courtesy Forbes If there is a bright spot in Sri Lanka and China\u2019s multi-billion dollar Hambantota debacle it\u2019s that nobody has given up on it yet. Too big to fail\u201d is a term that\u2019s often been applied to China\u2019s large-scale developments which don\u2019t take off right away or appear to be failures that the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"class_list":["post-57382","post","type-post","status-publish","format-standard","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/57382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=57382"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/57382\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=57382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=57382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=57382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}