Indian Foreign Secretary Harsh Vardhan Shringla visited Sri Lanka from October 2 to 5. According to India’s Ministry of External Affairs (MEA), Shringla’s visit was an opportunity to review the status of bilateral ties, including an assessment of the bilateral projects between the two countries. The was undertaken at the invitation of his Sri Lankan counterpart, Admiral Prof. Jayanath Colombage. It was possibly meant as an effort to iron out some of the recent wrinkles in the bilateral relationship, a reflection of which is the rescheduling and/or cancellation of some of India-led projects in the island nation.
The MEA’s press release about the visit insisted that “Sri Lanka occupies a central place in India’s ‘Neighbourhood First’ policy” and that the visit was a reflection of the significance that the two countries attach to buttressing their “close and cordial relations in all spheres of mutual interest.” But clearly, New Delhi has been feeling the pressure of China’s efforts to befriend India’s neighbors. During the visit, Shringla met with both the president and prime minister, following which he traveled to Kandy, Jaffna, and Trincomalee to inspect some Indian-funded projects.
China’s growing footprint in Sri Lanka, with massive infrastructure projects across the island nation over the last few years, has been of concern to India. China’s strategic interests in the Indian Ocean has pushed Beijing to pursue multiple infrastructure projects including land and rail connectivity initiatives in Sri Lanka and Myanmar. These are seen as crucial for China as it begins to enter the Indian Ocean to protect its sea lanes of communication, which are vital for its oil imports and as a trade corridor to Europe and elsewhere. India’s concerns became particularly sharp after the passage of the controversial Colombo Port Bill in May, which critics argue will give China considerable control over nearly 62-acres of land that has been reclaimed and is being developed as a special economic zone.
Nevertheless, India has some good news, despite China’s growing influence in Sri Lanka. On September 30, an Indian company, the Adani Group, signed a $700 million deal with the Sri Lanka Ports Authority and the Sri Lankan conglomerate John Keells Holdings, making it “the largest foreign investor” in Sri Lanka’s port development projects. The agreement is meant to develop the Western Container Terminal (WCT) of the Colombo Port, with the Adani Group having a 51 percent stake and John Keells and the Sri Lanka Port Authority at 34 percent and 15 percent, respectively. Back in March, the Sri Lankan Cabinet approved the development of the terminal using a public-private partnership model. As per the agreement, the three parties have decided on a build-operate-transfer arrangement, spread over 35 years. According to reports, the opening up of the terminal will likely bring an additional 3 million annual TEU capacity to the Colombo Port. The Sri Lanka Port Authority said that “With the signing of the agreement, and the massive development thereafter, the Port of Colombo will further enhance its global reputation as an international hub port.”
This comes in the backdrop of a couple of cancellations and approvals earlier in the year. In February, Sri Lanka scrapped a 2019 trilateral agreement with India and Japan to develop the Eastern Container Terminal of the Port of Colombo. Reportedly, more than 200 trade unions and civil society groups had called for the cancellation of the agreement, but China is seen as the critical player behind Colombo’s decision. Almost immediately after the cancellation, it was reported that the WCT would be given to India and Japan although the Indian government did not respond immediately. A Sri Lanka Port Authority official talking to an Indian newspaper at the time said the offer was a better one because “it would give 85 per cent stake to the developers.” He added that the “WCT project is almost the same if they (India) consider the security aspect and the necessity to have a terminal for India in Sri Lanka… And WCT is not smaller in size or depth compared to the East Terminal. It is just that the development of ECT has been partially completed by us while the WCT work has to begin from scratch.”
In March 2021, the Sri Lankan Cabinet approved a proposal for the development of the WCT, using the same public-private-partnership model. A cabinet note said that an approval has been granted “to develop the West Container Terminal of Colombo South Port as a private public limited company in collaboration with the Sri Lanka Ports Authority and parties nominated by Indian and Japanese government.”
Clearly, Sri Lanka has to perform a balancing act between India and China, and it is doing so well. As China-India ties see no signs of progress, the competition between the two will be evident in the entire neighborhood. China’s strategic interest in the Indian Ocean is an added pressure on Indian Ocean countries like Sri Lanka and Maldives, but it is also an opportunity to play two great powers against each other. Given the adversarial nature of relations between India and China, with no dissipation of tension between the two across the border, one can expect this competition to continue and small neighbors in the Indian Ocean will continue to use it to benefit themselves as much as they can, as well they should.