New Delhi, November 9, 2023 : In a strategic move to counterbalance China’s influence in South Asia, the United States has committed $553 million in funding to support the development of a port terminal in Sri Lanka’s capital, spearheaded by Indian industrialist Gautam Adani. The financing, provided by the International Development Finance Corp., is intended for the deepwater West Container Terminal in Colombo and marks the agency’s most significant infrastructure investment in Asia and among its largest globally.
The initiative is aimed at fortifying Sri Lanka’s economic growth and fostering regional economic integration, notably with India, a pivotal partner for both nations, as stated by the DFC in a released statement.
This substantial financial injection represents a joint effort by Washington and New Delhi to counteract Beijing’s substantial influence in Sri Lanka. The island nation had heavily invested in Chinese-led port and highway projects before facing an economic downturn, leading to significant indebtedness to Beijing. India, in turn, is keen on shifting the power dynamics within its regional sphere.
The allocation is part of an escalated global drive by the DFC, which totaled $9.3 billion in investments in 2023. A US official described the funding for the Sri Lanka port as emblematic of the United States’ commitment to increased engagement in development initiatives across the Indo-Pacific region.
China’s prior investments in Sri Lanka, totaling around $2.2 billion by the end of the previous year, positioned it as the island’s most significant foreign direct investor. US officials have openly criticized Sri Lanka’s underutilized southern Hambantota port as unsustainable, branding it as an example of what they term China’s “debt-trap diplomacy.”
The DFC emphasized its collaboration with sponsors John Keells Holdings Plc and Adani Ports & Special Economic Zone Ltd., acknowledging their local expertise and adherence to high-quality standards in this endeavor.
Colombo’s port, being strategically positioned along international shipping routes in the Indian Ocean, is among the busiest. With almost half of all container ships passing through these waters, the DFC noted that the port has been operating at over 90% capacity for the past two years, necessitating additional capacity.
The US funding not only signifies support for Gautam Adani’s Adani Group, which has faced allegations from short sellers and various corporate fraud claims, but also backs the controversial port project, in which the Adani Group holds a majority stake. Adani has refuted these allegations and maintained that their investments in Sri Lanka address the country’s requirements, rebuffing claims of opaque dealings tied to New Delhi’s interests.
The DFC’s involvement underscores its commitment to advancing US foreign policy goals through development finance. Despite initial struggles due to the COVID-19 pandemic, the agency has accelerated funding in recent years and is aiding Washington in bridging the development spending gap in comparison to China’s well-known Belt and Road Initiative, according to a report from the AidData institute.
Scott Nathan, the CEO of the DFC, highlighted that this financial support is geared towards enhancing prosperity for Sri Lanka without adding to its sovereign debt, simultaneously bolstering the standing of US allies in the region.
