DH Deciphers: The controversy over the Colombo Port City project

Sri Lankan parliament has enacted a law to set up a commission to run the Colombo Port City project that will be funded entirely by China. Opposition parties, trade unions and civil society organisations of Sri Lanka argued that the legislation is inconsistent with the island nation's Constitution and undermines its sovereignty. New Delhi is also concerned over the project as it fears that the Colombo Port City would eventually become an overseas colony of China, far too close for India's comfort. Here's what you need to know about this project:

What is the Colombo Port City project?

In 2011, Sri Lanka envisaged building the Colombo Port City on 269 hectares of land reclaimed from the Indian Ocean. It will be a financial hub, replete with skyscrapers housing the offices of multinational companies, luxury hotels and resorts, conference halls, casinos and shopping malls — à la Dubai and Singapore. Then-President Mahinda Rajapaksa and Chinese President Xi Jinping formally launched the project in September 2014. The China Harbour Engineering Company has invested $1.4 billion in it.

Why is it in the news now?

The project gained momentum after Mahinda Rajapaksa returned to power as Prime Minister with his brother Gotabaya Rajapaksa as President in November 2019. The Colombo Port City Economic Commission Act was brought into force on May 27, 2021. The act seeks to set up a commission that will grant registrations, licences, authorisations and other approvals needed to run businesses in the Colombo Port City.

What is controversial about that law?

The Colombo Port City Economic Commission Bill stirred a controversy in Sri Lanka after it was tabled in Parliament in early April. The opposition parties, trade unions and civil society organisations moved the Supreme Court against the proposed legislation. In particular, they opposed the provisions to appoint foreigners to the commission. The bill also sought to grant the Colombo Port City exemption from many laws, including those on tax and labour. The Supreme Court suggested several amendments to the bill. The government accepted all the amendments before it was passed by Parliament, but concerns over its implications on the sovereignty of Sri Lanka persist, with critics saying that the port city would turn into a Chinese enclave.

Also read: China’s infrastructure projects have worsened Sri Lanka’s economic woes

What are India's concerns?

China has been trying to expand its geopolitical influence in the neighbourhood of India. Sri Lanka ignored the security interests of India and allowed China to develop strategic assets, like Hambantota Port, which has been leased to a Chinese company for 99 years for a $1.1 billion loan. In 2019, Sri Lanka scrapped a trilateral treaty it had earlier signed with India and Japan for the development of the East Container Terminal of the Colombo Port. New Delhi is also concerned over the Colombo Port City as it anticipates that it could eventually be turned into an overseas colony of China — less than 300 kilometres from the southern tip of India. In Tamil Nadu, pro-Tamil organisations have expressed outrage over the project.

Why is Sri Lanka so keen on this project?

Sri Lanka argues that the Colombo Port City project would bring in foreign investment of $15 billion, creating over 2,00,000 jobs during construction and 83,000 permanent jobs later. It has sought to allay New Delhi’s concerns, stating that no one would be allowed to use the territory of the country to jeopardise the security of India.