As part of its effort to compete with China in international development funding, the United States said Wednesday, November 8, that it would invest $553 million to construct a deep-water shipping container facility in Sri Lanka's Port of Colombo.
Colombo, located at the crossroads of key maritime lines and rising markets, stands to benefit greatly from this project, which the US International Development Finance Corporation (DFC) describes as "critical infrastructure" for the South Asian country.
US Involvement in the Indo-Pacific Region
DFC Chief Executive Officer Scott Nathan stated that the $553 million loan for the West Container Terminal will increase its shipping capacity, bringing more wealth to Sri Lanka without increasing national debt and enhancing the standing of its allies throughout the region, as reported by AP News.
The news comes as Sri Lanka fights to emerge from a severe economic and financial crisis.
According to the DFC, the new terminal will serve the expanding economies of the Bay of Bengal, the northeastern part of the Indian Ocean, which has pushed the Port of Colombo close to its capacity since 2021.
The group of companies building the terminal would get a direct loan from the DFC, of which India's biggest port operator, Adani Ports & Special Economic Zones Ltd., owns 51%. Sri Lankan companies John Keells Holdings (34% ownership) and Sri Lanka Ports Authority (15%) round up the partnership.
US involvement in the Indo-Pacific region is a top goal, said Nathan.
See Also: Chinese Premier Li Qiang Vows To Boost Imports, Expand Market Access Amid Foreign Criticism
Allegation of Debt-Trap Tactics
Beijing's major worldwide infrastructure development push, the Belt and Road Initiative prompted the creation of the DFC five years ago. To promote commerce and goodwill toward China, Beijing has spent tens of billions of dollars annually to construct roads, trains, ports, and airports, generally in poorer countries.
The Hambantota Port on Sri Lanka's southeast coast is one such controversial project. Sri Lanka relied significantly on Chinese loans to finance the construction of the port, airport, and the new metropolis emerging on reclaimed land. Since the developments have not generated sufficient income to service the debts, Sri Lanka leased the Hambantota port to China in 2017.
Critics of China's Belt and Road Initiative frequently point to Sri Lanka's multibillion-dollar loans to Beijing as proof that Beijing participates in debt-trap diplomacy, which has hampered the country's attempts to address its financial issues.
The government of China strongly denies the allegations. According to AP News, China's Foreign Ministry representative Wang Wenbin said the debt trap argument was fabricated to disrupt and undermine its cooperation with developing countries.
Sri Lanka is strategically located between India and China, and both countries have recently invested in developing the port of Colombo. Notably, India is concerned about a rising Chinese presence on the island because of its strategic location on one of the world's busiest maritime lanes.
