The United States has set sail on a significant venture, announcing a colossal $553 million project to construct a deep-water shipping container terminal at Sri Lanka’s Port of Colombo. This move is strategically positioned in the context of the U.S.-China rivalry in international development financing. As the U.S. vies for a prominent role in the Indo-Pacific region, the West Container Terminal is positioned to play a pivotal role in transforming Colombo into a world-class logistics hub.
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According to the U.S. International Development Finance Corp, the project aims to bolster the critical infrastructure of Sri Lanka, potentially transforming Colombo into a world-class logistics hub intersecting major shipping routes and emerging markets.
DFC Chief Executive Officer Scott Nathan emphasized the significance of the loan in creating greater prosperity for Sri Lanka while simultaneously strengthening alliances across the region. At a time when Sri Lanka is grappling with a severe financial and economic crisis, this project could offer a lifeline.
Since 2021, the Port of Colombo has been running at or near capacity; the new terminal will serve the Bay of Bengal’s expanding economies.
DFC Loan and Consortium Details
The project will receive a direct loan of $553 million from the U.S. International Development Finance Corp. The consortium responsible for the terminal’s development comprises India’s largest port operator, Adani Ports & Special Economic Zones Ltd. (51% ownership), Sri Lanka’s John Keells Holdings (34% share), and the Sri Lanka Ports Authority (15%).
Geopolitical Competition in Sri Lanka Between India-China
India and China are both jostling for influence in Sri Lanka and both have already invested in expanding facilities at the port of Colombo. India is concerned about China’s growing presence on the island, which is on one of the world’s busiest shipping routes and in a region that India considers part of its strategic backyard.
Colombo Port also has a terminal operated by China Merchants Port Holdings. Another Chinese project, a luxury waterfront development spread over 269 hectares of reclaimed land called Port City, is being built by CHEC Port City Colombo Co., a unit of China Communications Construction Company.
The $1.4 billion project to build an integrated resort and casino and conference center zone, a marina, apartments, a business district, and green space has raised concerns in Sri Lanka and India that the development could become a virtual Chinese outpost or colony.
The DFC was established five years ago in response to Beijing’s massive global infrastructure construction drive, known as the Belt and Road Initiative. Through this, Beijing has invested billions of dollars each year in building roads, railways, ports, and airports, usually in developing countries, to increase trade and goodwill towards China.
Geopolitical Competition in Sri Lanka Between USA-China
Scott Nathan, CEO of DFC, highlighted Sri Lanka’s significance as the organization’s “2nd largest exposure” in the Indo-Pacific region after India. The US aims to actively participate in the Indo-Pacific region to counter China’s influence.
India wants the same. Because they are friendly countries. And India will ultimately benefit if the US dominates.
As the U.S. faces fierce competition from China in development funding, the AidData research lab has recently narrowed the gap. China, with its Belt and Road Initiative, has been a dominant force in global infrastructure financing, but the United States has been bringing in increased lending through DFCs.
AidData’s report indicates that while the US is catching up with China in development financing, China is now focusing on greener, safer, and more sustainable projects. China remains the single largest official source of international development financing, but the United States is gaining ground through initiatives such as the DFC.
As the U.S. aims to match China’s expertise in infrastructure projects, AidData’s Bradley Parks raises an important question: Can the U.S. deliver rapid, large-scale infrastructure projects with the same expertise as China? Geopolitical competition remains a significant challenge in the global infrastructure market.
Conclusion
The unveiling of the $553 million Colombo port terminal project marks a significant chapter in the ongoing geopolitical competition between the United States and China. As both nations vie for influence in the Indo-Pacific region, the success of this venture will not only impact Sri Lanka’s economic trajectory but also shape the future landscape of international development financing. The waves of this geopolitical struggle continue to shape the contours of global infrastructure development.
