What does the world think?

Indian Minister of External Affairs Subrahmanyam Jaishankar was clearly referring to Sri Lanka when he spoke about airports and harbours. So, what really happened in Sri Lanka? We compiled the voices from all sides.

India is misrepresenting China's Belt and Road Initiative aid as a 'debt trap': Global Times

On 21 February 2022 Global Times, a Chinese newspaper under the People's Daily, published an article titled India's 'debt trap' slandering against Chinese BRI aid is laughable written by Wang Yi.  

Here is an excerpt from that article.

During the 2022 Munich Security Conference (MSC) which concluded on Sunday, Indian External Affairs Minister Subrahmanyam Jaishankar warned countries of the "debt trap" created by Chinese assistance, saying "We have seen countries, including in our region, being saddled with large debts." 

Jaishankar cautioned countries on accepting China's financial assistance.

However, Bangladesh's foreign minister Abul Kalam Abdul Momen, who attended the discussion, told a different story about China's help. It is the aid from other partners that came with a lot of strings, Momen said.

India's anti-China forces have long played a role in the slandering campaign against the mutually beneficial economic cooperation between China and South Asian countries. Jaishankar's latest hypocritical warning about a "debt trap" is nothing but another geopolitical gimmick. 

Leaders of many Asian countries have repeatedly noted that China's assistance has served to greatly boost their economic growth and improve their people's livelihood. 

China is the top foreign investor in Bangladesh's economic zones, the Financial Express reported, citing data from the Bangladesh Economic Zones Authority (BEZA). Some politicians in India apparently regard South Asian countries such as Bangladesh and Sri Lanka as India's spheres of influence and regard China as India's geopolitical rival. 

For the same geopolitical purpose and hostility against China, India has also refused to join regional economic cooperation and free trade agreements such as the Regional Comprehensive Economic Partnership (RCEP).

Yet, Indian officials' political manipulations like the "debt trap" slandering cannot hijack the economic laws and the trend toward greater economic integration and globalisation. During a speech at the MSC, Chinese State Councillor and Foreign Minister Wang Yi warned of the dangers of division and confrontation in the world.

It is hoped that India can give up regional meddling and actively participate in Asian economic cooperation to boost regional prosperity in the post-Covid era.

How China got control of a Sri Lankan port: The New York Times

In an article published on 22 September 2018 in The New York Times titled How China Got Sri Lanka to Cough Up a Port, Maria Abi-Habib wrote about how China strategically took the reins of the Hambantota Port from Srilanka.

Here is an excerpt from that article.

Every time Sri Lanka's president, Mahinda Rajapaksa, turned to his Chinese allies for loans and assistance with an ambitious port project, the answer was yes.

Yes, though feasibility studies said the port wouldn't work. Yes, though other frequent lenders like India had refused. Yes, though Sri Lanka's debt was ballooning rapidly under Rajapaksa.

Over years of construction and re-negotiation with China Harbour Engineering Company, one of Beijing's largest state-owned enterprises, the Hambantota Port Development Project distinguished itself mostly by failing, as predicted. With tens of thousands of ships passing by along one of the world's busiest shipping lanes, the port drew only 34 ships in 2012.

And then the port became China's.

The transfer gave China control of territory just a few hundred miles off the shores of a rival, India, and a strategic foothold along a critical commercial and military waterway.

Months of interviews with Sri Lankan, Indian, Chinese and Western officials and analysis of documents and agreements stemming from the port project present a stark illustration of how China and the companies under its control ensured their interests in a small country hungry for financing.

• During the 2015 Sri Lankan elections, large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China's efforts to tilt influence away from India in South Asia. The payments were confirmed by documents and cash checks detailed in a government investigation seen by The New York Times.

• Though Chinese officials and analysts have insisted that China's interest in the Hambantota Port is purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port's location were part of the negotiations.

• Initially moderate terms for lending on the port project became more onerous as Sri Lankan officials asked to re-negotiate the timeline and add more financing. And as Sri Lankan officials became desperate to get the debt off their books in recent years, the Chinese demands centred on handing over equity in the port rather than allowing any easing of terms.

• Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever, as other loans have continued and rates remain much higher than from other international lenders.

Estimates by the Sri Lankan Finance Ministry paint a bleak picture: This year, the government is expected to generate $14.8 billion in revenue, but its scheduled debt repayments, to an array of lenders around the world, come to $12.3 billion.

Myths about the Hambantota Port Deal: The Diplomat

On 1 January 2020, Umesh Moramudali wrote an article in the Washington-DC-based The Diplomat on the myths surrounding Hambantota Port titled The Hambantota Port Deal: Myths and Realities.

Here is an excerpt from that article. 

Newly elected Sri Lankan President Gotabhaya Rajapaksa has raised concerns about the Hambantota Port lease agreement with China that was signed in 2017 by the previous government. Rajapaksa clarified that his government is not hoping to amend the commercial terms of the agreement.

The Hambantota Port deal is still widely cited to highlight China's "debt trap" phenomenon. It cannot be interpreted as a debt-equity swap or the Chinese cancelling debt in exchange for control of the port. In this case, there was no cancellation of the debt.

Instead, a 70 percent stake of the port was leased to China Merchants Port Holdings Company Limited (CM Port) for 99 years for $1.12 billion. 

At the time of entering into the lease agreement, Hambantota Port was valued at $1.4 billion and CM Port invested $1.12 billion as per the terms of the agreement.

A common and popular myth is that Sri Lanka was unable to pay off the loan obtained to construct the port, thus it was handed over to China. Some of the loans were obtained at interest rates as high as 6 percent while some were concessionary loans. The total sum of these loans amounted to $1.263 billion. 

The often-quoted "port deal" was actually a lease agreement clearly separate from the loans obtained for the purpose of constructing the port, not to repay China. Instead, it is more of a reflection of the external sector crisis Sri Lanka is facing.

Dr Dushni Weerakoon and Professor Sisira Jayasuriya also highlighted that Sri Lanka's debt problem is not caused by China — successive Sri Lankan governments borrowed from international markets despite the persistent fiscal and current account deficits, resulting in a vicious cycle when debt repayments came due. However, these facts do not justify the Mahinda Rajapaksa government's decision to construct the port using foreign loans obtained at higher interest rates. 

Although port operations started in 2011, following the completion of phase one of the project, Hambantota port was still incurring losses by 2016. The debt repayment now is the responsibility of the General Treasury, the revenue generated by the port is still a vital factor given the fiscal constraints of the government.