ONCE again the US has expressed its apprehensions about Chinese investment in Pakistan, Sri Lanka as elsewhere. For the US, the investments are a predatory debt trap that could lead to ‘asset seizures’ like Hambantota port of Sri Lanka.
The factual position is that Chinese infrastructure loans have not led to the forfeiture of a single valuable asset abroad.
The US view is based on Rhodium Group study, which mentions only Hambantota port as the lone instance of seizure. The claim of forced lease or seizure is questionable. The Hambantota port lease, held jointly by the Hong Kong-based China Merchants Port and the Sri Lanka Ports Authority, was negotiated over 2016-2017.
Payments of the principal and interest for the port loans included only about 1.5 per cent of Sri Lanka’s external debt repayment obligations. The Sri Lanka Ports Authority promptly paid dues using revenues from Colombo port, which includes a container terminal run by China Merchants Port.
China holds an estimated nine to 15pc of Sri Lanka’s low-interest external debt. It owes high-interest loans to Western commercial banks. International sovereign bonds account for about half of the external debt, with Americans holding two-thirds of their value and Asians only about eight per cent.
Sri Lanka is liable to pay interest averaging 6.3 per cent on international sovereign bonds and the principal must be fully repaid in about seven years. In contrast, more than two-thirds of the value of Chinese state funds lent to Sri Lanka from 2001-2017 (including two-thirds of the Hambantota port loans) were at two per cent interest, and mostly repayable over 20 years.
Media reports about Sri Lanka’s government being forced to sign the port away on a 99-year lease after failing to repay Chinese loans at 6.3pc are untenable.
The Sri Lankan government still owns the Hambantota port and funds received for the lease were used to pay off expensive Western loans. There is no Chinese military base at Hambantota port.
The port’s security remains in the hands of Sri Lanka’s southern naval command. Sri Lanka used the Chinese-controlled Hambantota port to host a joint naval exercise with the US.
Earlier, Sri Lanka allowed Airports Authority of India to operate the China-built Mattala Rajapaksa International Airport in Hambantota.
It is eerie that the US has 800 overseas bases, while China has a single base in Djibouti. Negative reports about CPEC were accompanied by sustained calls for India’s role in Afghanistan. Is there a ploy to tarnish Pakistan and China’s image?
WHILE the Chinese loan contribution to this country for improving the infrastructure and other significant areas under the China-Pakistan Economic Corridor cannot be disregarded, the increasing debt which the already strained economy has to bear should not be overlooked.
Viewing the comments by US diplomat Alice Wells through the prism of US-China trade war is not justifiable.
Sure, there may be some ulterior motive to damage OBOR by tarnishing its flagship project, but the fact that the repayment of CPEC and IMF loans — with the US itself being its significant contributor — is going to take a huge toll on this country’s economy cannot be overruled.
Maseeh uz Zaman
Published in Dawn, December 3rd, 2019