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Chinese Overseas Ports: Hambantota Port and Implications for India; By Lt. Col. (Dr.) Mohit Nayal

Image Courtesy: TELO

Article No. 040/2018

The government of India, its foreign policy experts and analysts, over the last decade have closely followed China’s increasing overseas investments, especially in South Asia, under the One Belt One-Road (OBOR) initiative. There have been reasonable interpretations on each Chinese initiative within this region, under various perspectives of economic, security and social influence. As a common consensus, India must maintain wariness, as much of the Chinese activities are counterproductive for India’s own rise, as a regional power. Still, this approach needs caution or else it will create Chinese phobia, paralyzing our rational and independent thinking, resulting in reactionary behaviour. This article aims to look into Chinese port investments, especially the Hambantota port, with its present and future challenges for India.

China has commendably achieved in a short span the required criteria, to get its seven ports acknowledged amongst the top ten cargo ports of the world. Today, its Shanghai port is the largest port in the world in terms of its cargo handling capability. Further China, in 2015 was able to upgrade its Qingdao port, as Asia’s only fully automatic cargo handling port. At a international platform, in regard to port ownership, the Chinese overseas port procurement  through state owned enterprises (SOE) in recent times has quite aggressively committed investment of nearly US $ 20 Billion in nine ports in places like Greece, Netherlands, Egypt, which are in line to their optimistic One belt, One road initiative. Today, China has operational rights to 40 ports in 22 countries. These emerging patterns of Chinese activities in various continents like Africa, Europe and Asia, indicate the Chinese political willingness to go the extra mile to secure the Chinese economic and security related interests, for the near future. However, on the face of it, the Chinese indulgence in various countries is on the innocent premise of extending financial and technical assistance to the host country for their betterment. Alarmingly, the experiences of countries like Sri Lanka, Pakistan, Laos, Djibouti, etc, present a very contrast reality.

This quite naturally raises the question, whether achieving the overriding control of development assets, the final objective of the Chinese. Well, a closer analysis of Chinese overseas infrastructure activities presents quite an interesting amalgamation of two extreme aspects. There are some Chinese overseas port investments, undertaken to meet the economic requirements of their own regions, which due to the geographical spread, are inhospitable and lacked means of direct and easy access. The Chinese initiatives under CPEC (China Pakistan Economic Corridor in Pakistan), Port at Chittagong in Bangladesh and Kyaukpyu port in Myanmar, come under the category, on which it has made substantial spending. However, there are also those projects, which the Chinese initiated to ensure that not only their huge monetary stockholdings became revenue generating but also their infrastructure building potential, which is suffering from domestic overcapacity, is in use for maximum economic gain and regional influence.

Ironically, such projects that the Chinese thought were pure economic ventures have also landed to be liability for the host nations, leaving limited scope of recovery, resulting in acquiring control. Even, China not withstanding its monetary and technological might may not be able to turn them into a profitable venture, at least in the near future. The Hambantota port surely falls in this category. China extended credit of US $1.5 Billion to Sri Lanka, beyond its repaying potential, unless there was revenue generation from the asset. This is a classical example of incorrect assessment on behalf of either the partners or perhaps a deliberate act with hidden intent. Finally, in 2016 the government of Sri Lanka to clear its rising monetary liability, which overall due to years of internal conflict stand at US $64 Billion, has handed over the right for running the Hambantota port to China for 99 years. However, the port management will pose a challenge for the Chinese on following grounds. Firstly, there is a local rising resentment against the Chinese people, who accuse them of purchasing vast land for colonizing their territory. In the recent past, a number of protests against the Chinese have been reported reflecting people’s frustration over the entire thing. Projects of high magnitude like the port development have ecological issues, environmental concerns, and large-scale displacement of the local population, which China, as per its prior patterns of overseas engagements, has ignored considering it to be an internal challenge for the host nation. This has severely undermined Chinese credentials in nations, who are sensitive for the welfare of their citizens.

Secondly, as an established practice in place, China has relied on the use of its own-trained work force for undertaking various projects, which suites their national interest. However, recently the cost of living within China has increased and so has the labour cost gone up, and thus the option of only utilising the Chinese nationals in overseas projects is becoming difficult each year. The other complexity is that many of the host countries, do not have the trained work force to execute the projects as desired by the Chinese companies. In addition, China does not have a very good record of accomplishment in terms of labour regulatory, especially for foreign labour. These labour specific issues may adversely affect the future of the Hambantota port.

Thirdly, the next constrain that China faces in Sri Lanka is that the country due to its geographical, cultural affinity and struggling economy has major dependency on India for trade and economic activities. The present government in Sri Lanka under President Maithripala Sirisena intends to maintain good relations with India, unlike the previous government under Mahinda Rajapaksa, which was more inclined towards China. Therefore, under prevailing circumstances Sri Lanka cannot undertake activities in favour of China, which are grossly in violation of Indian interests. For instance, quite recently on India’s behest the government of Sri Lanka amended the clause under which China was to take over the security of the Hambantota port. India has also objected to the Chinese naval activities in Sri Lanka.

Lastly, in terms of commercial viability of the Hambantota port, there is a need to upgrade the existing support infrastructure over and above the present Chinese port investments. This may involve investment in terms of the connectivity of port, industrial development of the region and attractive facilities to large cargo shipments. In case, China intends to invest further in this regard, its economic commitment will involve huge cost which will be without due recovery for a long time. Although, China is a strong economic power to undertake this adventure, but this model of functioning may not be wise. Few India’s strategists have apprehensions that notable Chinese naval activities may predominantly motivate such spending, even against all odds. No matter how attractive the argument may seem, but the policymakers in China are equally liable to apply rationale for all such spending, which are much contrary to latest International sentiments, favouring approach that is more nationalistic. Thus, the port of Hambantota becoming an immediate economic success does not seem to be happening in the near future.

Therefore, in India rather than creating hysteria of Chinese activities, especially in Sri Lanka, there is a need to lay priority in development of port infrastructure, which matches the highest international standards. India is better-poised in terms of its geostrategic location in the Indian Ocean Region to offer better commercial port facilities than which can be created in Sri Lanka by the Chinese counterparts. The government of India thinking on similar lines had initiated the Sagarmala project in 2015, which intends to focus on port led development, connectivity, port led industrialisation and the development of the coastal community. There are 12 major and 184 intermediate and minor ports in India, which already have sizable infrastructure support systems. A systematic enhancement of port facilities will surely be able to counter the Chinese rising influence around India’s neighbourhood. Rather, much to the transhipment facilities, which are today, only available for many littoral nations in Indian Ocean Region at Singapore, will find better alternatives in India, which has deep port facilities for further expansion of international cargo load. Also in terms of present status of Indian economy, it is also important to value and consider the huge import and export requirements of the country itself, which are rising due to its fastest growing gross domestic product (GDP) and needs port led development.

Therefore, it is imperative to state that India must undertake port infrastructure development at utmost priority, as China has the potential to not only engage in large-scale port projects like Hambantota but also deliver the facilities in a time bound manner, which may be contrary to India’s interest, even when it is presently in a position of advantage. In the coming years, the port led development undertaken by both India and China will be interesting to watch, as it will have a direct impact on their rise as an Asian power in the 21st century.

[Lt. Col. (Dr.) Mohit Nayal is serving with the Ministry of Defence. In 2012, the officer was awarded PhD in Political Science from HNB Garhwal University. In 2012, his book ‘The Invisible Wall of China’ was published under the aegis of USI. In 2013, he was the chief editor of the first coffee table book of 57 Mountain Division published by Extreme publication. In 2014, Manas Publications published his book ‘Enigmatic Northeast’. In 2016, his third book ‘Beyond the City Lights’ was published by General Press. His area of interest includes China, South Asia and Southeast Asia. The views expressed in the article are of the author.]

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