Hambantota port
- Formerly called:
- Magampura Mahinda Rajapaksa Port
What was the original purpose of the Hambantota port?
Why was China involved in the construction of the Hambantota port?
What led to the financial issues surrounding the Hambantota port?
What was the outcome of Sri Lanka’s debt crisis related to the port?
How did the Hambantota port’s development continue after the lease arrangement?
Hambantota port, inland port on Sri Lanka’s southern coast near the town of Hambantota. The port, which was intended to become a major hub in global shipping routes, came to represent the financial mismanagement and corruption of Sri Lankan Pres. Mahinda Rajapaksa and his family, who were removed from power by popular revolt in 2022. Hambantota port was financed by Chinese commercial lenders and later leased to Chinese merchants to pay off debt. Critics of China’s Belt and Road Initiative (BRI) have cited the port as an example of predatory lending by China, although accusations of “debt-trap diplomacy” do not neatly fit the case of Hambantota port.
Conception and construction of the port: Mahinda Rajapaksa courts China
The idea of a port at Hambantota was proposed to alleviate economic pressure on the congested area around Colombo, Sri Lanka’s former capital city and primary port, and extend industrial development into its southern region. Feasibility studies in the mid-2000s suggested that a deep water port in Hambantota, near one of the world’s busiest sea lanes, could be commercially viable. While Sri Lanka was still in the final phases of its decades-long civil war, its government, led by Hambantota native Mahinda Rajapaksa, sought foreign assistance in constructing the port. Rajapaksa was keen to develop his home base of Hambantota, which had been heavily damaged by the 2004 Indian Ocean tsunami.
India and the United States were among the countries reportedly approached to finance the project, but neither offered terms that Sri Lanka’s government deemed favorable. Moreover, foreign aid often had strings attached, either related to the civil war or the manner in which the project would be carried out. By contrast, the Export-Import Bank of China (or China EXIM Bank) offered commercially competitive rates with little oversight over the project’s management or Sri Lanka’s fiscal policies. China’s construction industry, which in recent years had become highly efficient, also was able to build the port at a relatively low price.
From the onset, many observers noted China’s geopolitical interest in building the port. Sri Lanka is along a busy maritime route that is considered essential for China’s commercial and naval security. Sri Lanka also had long been within the sphere of influence of India, China’s fastest-growing rival and located less than 100 km (60 miles) north of Sri Lanka. Investing in such a large project in Sri Lanka would give China more political sway and commercial favor in the country, provide a foothold in the southern Indian Ocean, and help ensure that its vital supply chain would remain open in times of tension with India or the United States.
From viable to unaffordable: Rajapaksa’s hubris
Despite the port’s potential to become viable, the lack of oversight allowed the project to become subverted by political developments. The port was inaugurated on November 18, 2010—Rajapaksa’s 65th birthday—before ships could even dock in its harbor. Carved out of bedrock on a 4,000-acre site, the port still had a large rock blocking ships’ entry. Without first building up the port’s commercial base or developing industry around Hambantota, Rajapaksa’s government then took an additional loan from China to expand the port into the largest in South Asia.
By 2014, with a public debt crisis looming and little return on investment on development, Rajapaksa faced widespread criticism for his haste in financing such a grandiose project through China. Concerns over the Hambantota port’s mismanagement led his government to strike a deal in 2014 with experienced Chinese companies to operate the port jointly for 35 years, with 35 percent of the revenue during this phase to be used to pay back the EXIM bank loan. But in early 2015, Rajapaksa was defeated in the presidential election by a member of his cabinet, Maithripala Sirisena, who scrutinized Rajapaksa’s development scheme. He remained in politics, however, becoming prime minister in 2019.
Sri Lanka’s debt crisis and leasing of the port: China’s “debt trap”
Sri Lanka’s rising debt to China led to a balance-of-payments crisis in 2016. In 2017 Sirisena’s government leased a controlling stake of the port to China Merchants Port Holdings for 99 years. Critics, especially in India and the United States, decried the deal as an example of China engaging in debt-trap diplomacy. These accusations reflected concerns over Sri Lanka’s loss of control over an asset that was strategic to China’s position in the Indian Ocean. But the lease agreement did not result in any equity toward the port project’s lenders, a defining criterion of debt-trap diplomacy. Moreover, the majority of the debt that overwhelmed Sri Lanka’s economy was incurred after the port had been commissioned and was the result of Rajapaksa’s ambitions rather than predatory enticement from China. Sustained nationwide protests in 2022 forced Rajapaksa to resign.
Despite the port’s losses throughout the 2010s—and Sri Lanka’s default on its debt in 2022—its development continued after the lease arrangement and foreign investment accelerated. Commercial traffic increased significantly in the 2020s, and a burgeoning partnership with China Petroleum and Chemical Corp. (Sinopec) created potential for the port to develop into a major hub for fuel and energy supplies. In 2023 Sri Lanka’s government approved a proposal for Sinopec to build a major petroleum refinery in Hambantota.