A Chinese megaproject in Sri Lanka has encountered violent resistance from angry local residents who fear forced eviction from their land. This popular resistance puts at risk almost $5 billion in investment that the Chinese government estimates will be attracted to the planned industrial zone over the next 5 years.
Last July Sri Lanka’s Minister of Development Strategies and International Trade announced that China had requested 15,000 acres of land to establish a special economic zone (SEZ) next to the Chinese-financed and -constructed Hambantota Port. Proponents of the SEZ estimate it to be capable of generating up to one million jobs.
This request was accepted by the Sri Lankan government. In exchange for a 99-year lease on this land as well as an 80 percent stake in Hambantota Port by China’s state-owned China Merchants Port Holdings, Sri Lanka will receive USD 1.1 billion in debt relief from the Chinese government.
For China, Hambantota Port — which was constructed by China Communications Construction Co., with financing worth over USD 1 billion from China Exim Bank — is an important asset on its 21st Century Maritime Silk Road, as it is “strategically located close to the key east-west shipping trade route and complements another major China-invested port under development at Gwadar in Pakistan on the other side of India.”
Hence even though Hambantota Port and the nearby Mattala Rajapaksa International airport, which was also constructed with financing from China Exim Bank, have been criticized as “white elephants” due to their underutilization, China has a long-term strategic interest in ensuring the economic viability of these projects. The Hambantota SEZ may be seen as a means to ensure Hambantota Port (and Mattala Airport) will indeed become a “commercial center of the economy.” Already, even without the SEZ, Hambantota Port has managed to attract business from “car carriers from congested ro-ro facilities in Colombo and Chennai and is considered a transport hub for the southern India’s small car manufacturing industry.” With the SEZ, shipping through the port is expected to significantly increase.
For the government of former Sri Lankan President Mahinda Rajapaksa which originally agreed to the deal, the Chinese construction and financing of Hambantota Port and Mattala Airport represented a much-needed short-cut for the country to obtain advanced infrastructure, especially following the recent end in 2009 of the country’s devastating decades-long civil war.
The current President Maithripala Sirisena had suspended the Chinese projects when he came into office, owing to the need to investigate alleged irregularities in the agreements signed with China, but he eventually allowed these projects to proceed. The Sirisena government is facing a major debt crisis, and the USD 1.1 billion in debt relief from the lease of Hambantota Port will help reduce the country’s debt burden, which currently stands at approximately USD 64 billion, of which USD 8 billion (pre-debt relief) is owed to China.
In December 2016, a delegation to China led by former president Rajapaksa warned that China’s plans for the SEZ threatened to trigger social unrest, as the planned concession of 15,000 acres means that “many villagers would need to be evicted from their homes and many farmers kicked off their land, which could provoke a less than favorable local response which may boil over into full-on protests.” To “avert possible protests by the local community,” the former president recommended that China revert to its original plan of constructing a smaller 750 acre SEZ.
The Sri Lankan government and their Chinese counterparts will have to minimize local resistanceby reassuring the people that the project will have no adverse impact on sovereignty, land rights, and the environment.
On January 8, 2017, former president Rajapaksa’s warning came to pass when violent protests erupted during the official launch of the construction of the SEZ. The protestors were driven by fears of forced evictions as well as suspicions that Hambantota will become a “Chinese colony.” As Wade Shepard recounts:
“When discussing where the land would actually come from to build this industrial zone, the Sri Lankan government was quick to claim that it would not be taken from the local elephant and bird sanctuaries, or from any operating stone quarries, or from the area that was previously reserved for a housing development for government officials, or even from the land earmarked for the port to expand. It soon became clear to the locals that the only land left for a development of this scale would be their villages and farms, which they depend on for their livelihoods.”
The fears among the protesters that Hambantota will become a Chinese colony have also grown over time. As Shepard points out, “many of the development projects in Hambantota, which originally began as Sri Lankan national projects that were merely financed with Chinese money, have gradually turned into de facto Chinese enclaves.”
Critics may point to the 24,710 acre Golden Triangle Special Economic Zone (GTSEZ) in Laos as a warning of what may happen at Hambantota. Signed as a 99-year lease by the Laotian government to the Hong Kong-registered Kings Romans Group in 2007, the GTSEZ has become “a semi-lawless zone where gambling … prostitution, and other illicit trades flourish.”
While the GTSEZ and other Chinese SEZs in Laos were nominally established to improve the economic conditions of the Laotian people, Sebastian Strangio notes that the GTSEZ has effectively become a “small China country” where “most of the workers in there are from China or Myanmar, and clocks are turned to Beijing time, an hour ahead of Laos. Most shops refuse to accept payment in local currency, the Laotian kip.” Indeed, given its “special” status, “the zone is entirely outside the control of provincial authorities.”
Greater transparency may hence be needed on the part of the Chinese and Sri Lankan governments to reassure the local community that the proposed Hambantota SEZ will not become a Sri Lankan version of Laos’ GTSEZ. This is important as continued public opposition may turn the proposed Hambantota SEZ into the Sri Lankan version of the suspended Myitsone Dam project in Myanmar.
The construction of the controversial Myitsone Dam was suspended by the government of Myanmar in 2011 following local resistance that emerged from a range of concerns, “including its location near an active seismic fault line, the impact of flooding on local residents and a general lack of transparency in a project viewed as a resource grab by Beijing.”
This turned out to be very costly for China Power Investment Corporation (CPI), the Chinese state-owned enterprise that was to have constructed the Myitsone Dam, as well as its financial backers including China Three Gorges Corporation and China Development Bank:
“China had invested at least 700 million yuan in the project by the time it was halted … Interest on loans for the project ran as high as 300 million yuan a year and CPI also had to spend tens of millions of yuan on equipment maintenance and other expenses.”
While CPI and the Chinese government had expected the new government led by Aung San Suu Kyi’s National League for Democracy that came into office in March 2016 to lift the suspension and resume construction of the Myitsone Dam, the government is still considering the impact of the proposed dam on local residents, and could heed local demands for the project to be officially cancelled.
To avoid a similar fate for the Hambantota SEZ, the Sri Lankan government and their Chinese counterparts will have to minimize local resistance— not with violence, which will inflame the opposition — but by reassuring the people that the project will have no adverse impact on sovereignty, land rights, and the environment. Conversely, ignoring such concerns will likely fuel popular resistance against the project.