As New Delhi and Washington seek to limit China's influence in South Asia, the US will offer USD 553 million in funding for a port terminal in Sri Lanka's capital being planned by Indian billionaire Gautam Adani.
The International Development Finance Corporation's financing for the deepwater West Container Terminal in Colombo is the US government agency's largest infrastructure project in Asia and one of its largest internationally. It would boost Sri Lanka's economic growth and "regional economic integration, including with India, a key partner for both countries," according to the DFC.
The US investment also indicates fresh efforts to weaken Beijing's grip on Sri Lanka, after Colombo splurged on Chinese port and highway projects prior to the country's economic catastrophe last year, leaving it heavily indebted to Beijing. India also wishes to shift the balance of power in its immediate neighborhood. The money is part of a global acceleration of DFC investments, which are expected to total $9.3 billion by 2023. According to a US official, the port finance in Sri Lanka exemplifies the US desire to become increasingly involved in development projects throughout the Indo-Pacific.
As of the end of last year, China was the island nation's largest foreign direct investor, having invested over $2.2 billion. Officials from the United States have publicly criticized Sri Lanka's little-used southern Hambantota port as unsustainable and part of China's "debt-trap diplomacy." According to DFC, it would collaborate with sponsors John Keells Holdings Plc and Adani Ports & Special Economic Zone Ltd., depending on their "local experience and high-quality standards."
Given its proximity to major shipping lines, Colombo's port is one of the busiest in the Indian Ocean. Its waterways are used by over half of all container ships. The DFC stated that it has been operating at greater than 90% utilization for the past two years and requires additional capacity.
The US money might be seen as an endorsement for the Adani Group, which has been hammered by short sellers, as well as the contentious port project in which it has a majority stake. Hindenburg Research and numerous media investigations have leveled a slew of corporate fraud claims against the corporation, which it has constantly rejected.
Some local MPs criticized its energy and port developments in Sri Lanka last year as opaque and closely related to New Delhi's interests. The Indian billionaire, a long-time supporter of Indian Prime Minister Narendra Modi who has publicly challenged China in the past, rejected these charges, claiming that the investments were made to meet Sri Lanka's needs. The US official declined to comment explicitly on the allegations, stating only that DFC used thorough due diligence in project selection.
