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Chinese Interest in Hambantota, Chittagong Ports- An Update

China, which is already meeting in the form of a soft loan from its Ex-Im Bank 85 per cent of the cost of construction ( US $ 360 million) of the first phase of the Hambantota port in Southern Sri Lanka, has agreed to give another soft loan of US $ 200 million towards the cost of construction of the second phase due to start early next year. An agreement in this regard was signed by the concerned officials during the visit of Chinese Vice Premier Zhang Dejiang to Colombo from June 10 to 12,2010. With this, the total Chinese funding for the project will come to about US $ 500 million, out of its total estimated cost of US $ one billion. The project being undertaken in three phases is expected to be completed by 2023. It is too early to say whether China will substantially fund the third and last phase too.

2.The first stage due to be ready by end 2010 will allow three ships to berth. The final stage, for which there is no offer of funding yet from China, is planned to accommodate more than 30 ships, which is the present capacity at Colombo. President Mahinda Rajapaksa is trying to develop Hambantota in his home district into another Colombo with its own port as big and as modern as Colombo, its own international airport at Weerawila, its own oil storage facilities and refinery, its own tourist hub, its own international conference hall and its own complex of sports stadia to enable it to bid for the Asian Games one day. He is hoping that the Chinese will ultimately fund the major part of the cost of his Hambantota dream. He has also sought South Korean funding for the proposed international conference hall.

3. While China has readily expanded its financial commitment for the Hambantota project, it is still to make up its mind on the request from Sheikh Hasina, Prime Minister of Bangladesh, made during her visit to China in March last for Chinese financial and construction assistance for the expansion and modernization of the Chittagong port. While the Chinese have agreed to consider her request sympathetically, they have not yet come out with a concrete project. Expectations that they would make a firm announcement during the just-concluded visit (June 13 and 14,2010) to Dhaka by Chinese Vice President Xi Jinping have been belied.

4. Local news agencies did report that during his talks with Sheikh Hasina, Mr.Xi “proposed to give assistance to Bangladesh for building a deep seaport in Chittagong and installing the country’s first space satellite” and that “Beijing also agreed to quickly disburse its assistance for the Pagla Water Treatment Plant and the Shahjalal Fertiliser Factory”, but there was no official announcement. Briefing reporters on the outcome of the talks, Foreign Minister Dipu Moni said the Chinese side assured more investment in Bangladesh, and promised to reduce the bilateral trade imbalance by allowing more Bangladeshi products to have duty-free access to the Chinese market. She added that the Chinese agreed to help Bangladesh in ensuring food security and in combating militancy and terrorism. She also said that China also agreed to extend cooperation for the development of telecommunication and infrastructure in Bangladesh. While there was thus a mention of Chinese assistance for the development of infrastructure, there was no specific reference to the proposal for Chinese assistance for the expansion and modernization of the Chittagong port. The issue was formally raised by Sheikh Hasina with the Chinese leaders only in March and it is perhaps too early for the Chinese to come out with a formal proposal.

5. After Gwadar on the Mekran coast of Pakistan, the first phase of which has already been completed and the port commissioned, their focus has been on the early completion of the first phase of the construction of the Hambantota port and its commissioning by the end of this year and the start of the second phase. They are attaching equal priority to the timely completion of the Kyakpyu port off the Arakan coast in Myanmar, the construction of which started last year. While they are interested in taking up the project for the expansion and modernization of the Chittagong port, it does not as yet seem to enjoy the same priority as Gwadar, Hambantota and Kyakpyu,, which, in their view, are important for ensuring their energy flows from West Asia and Africa. They do not seem to attach the same urgency to the Chittagong project from the point of view of their energy flows.

6.There are so far no indications of a Chinese interest in a naval base at Hambantota or Kyaukpyu or Chittagong. Their interest in a naval base at Gwadar remains strong. Retired Chinese naval officials have been underlining the importance of rest, refueling and re-stocking facilities for Chinese ships deployed in the Indian Ocean and the Gulf of Aden. Gwadar is attractive in this regard, but if the internal security situation in Balochistan where Gwadar is located remains unsatisfactory, Hambantota could become their fall-back choice.

( The writer, Mr B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai, and Associate of the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com )

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