The Real (Not Secret) History Of Hambantota

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By Chris Devonshire-Ellis

Biased Washington media comes up against on the ground facts as Sri Lanka’s Hambantota Port begins to turn a profit

The tales of woe that are typically spread about Sri Lanka’s controversial Hambantota Port gained another member last week with the publication of an article written by Jonathan Hillman, a ‘senior fellow’ with the Washington based US Center For Strategic & International Studies (CSIS). The purpose of the CSIS is to define the future of US national security.

His piece about Hambantota appeared in Reconnecting Asia, a Brzezinski Institute initiative that began life in 2017 as an offshoot of the same CSIS. The Brzezenski Institute is also affiliated with the John Hopkins University’s Foreign Policy Institute.

These exist primarily as think-tanks, where Zbigniew Brzezinski, in his address when starting his initiative stated that he was looking to create a home “where people go to think.” The concentration of this mindset however is fully geo-strategic and connected with, as mentioned, a US perspective on its national security.

Brzezinski himself was a Polish-American diplomat who served as an adviser to US Presidents Lyndon Johnson and Jimmy Carter as security advisor, dealing with issues primarily concerning the threat posed by the USSR during the Cold War. He died in 2017, with the Brzenzinski Institute, and the CSIS both committed to preserving his legacy, a fine tribute to an undoubtedly fine man.

Hillman’s piece for Reconnecting Asia can be read here and claims to be valid based on ‘recently declassified documents’ that ‘reveal the complicated history behind Hambantota Port’s debt woes. Hillman bases his 2021 article on personal research from these documents and a visit he made to ‘Colombo’s bustling port’ and Hambantota in 2017 – four years ago.

I am repetitively aware of the myriad of articles that get it wrong about China’s Belt and Road Initiative, and very much aware of the Hambantota issues. This is because I have vested commercial and personal interests – I have been based in Sri Lanka for ten years, own two residential properties, an hotel and am in the process of developing an up-market restaurant with a Michelin starred Chef. Three of those investments are within a 90-minute drive to Hambantota. In fact, I drove past the Hambantota Port just yesterday.

What surprises me about Hillman’s article most is the fact that it is at best, four years out of date, and that he appears to have approached it with several prejudices already attached – as many BRI related articles are. This means that regrettably, Hillman’s piece, far from being a ground-breaking piece of investigative journalism (which is how it is introduced) rapidly descends into biased hyperbole. It is tainted with an already formed opinion that whatever Hambantota Port is, everything about it is wrong.

Hillman starts with the observation that “If Chinese loans were cigarettes, Sri Lanka’s Hambantota Port would be the cancerous lung on the warning label.” In his second sentence, he mentions the phrase ‘debt trap diplomacy’ – even though the John Hopkins University itself – as we have seen, allied to the Brezezinski Institute and to Hillman’s employers – stated quite categorically in February this year that “The Chinese Debt Trap Is A Myth.”

Hillman then goes into a lengthy piece about ‘declassified documentation’ that show that the original project to develop Hambantota dated back to “Imperial Britain” in 1910 (incorrect), that research into development was undertaken by a Canadian firm in 1999 (true), and that the Sri Lanka government ‘wisely passed on the project in 2003’ (partially true).

This potpourri of information comes from disparate sources. Hillman quotes the British novelist Leonard Woolf, who lived in then Ceylon from 1904-1911 and served as a civil service administrator of Hambantota for three years. He proposed the idea of a Port in 1910. Hillman follows that nugget up with the phrase “In other words, China now operates a port once coveted by Imperial Britain.” As Woolf might have himself said “Balderdash!” Woolf was a relatively junior civil servant, without the authority to build anything. Hillman lazily credits Woolf’s Wikipedia page as a source, whereas far better is Christopher Ondaatje’s biography “Woolf In Ceylon”.

In fact, “Imperial Britain” at the time already had the eastern coast of Sri Lanka adequately covered with fortified naval ports existing all along the south and east coast from Galle, Matara and Trincomalee without the need to develop Hambantota. Britain certainly didn’t ‘covet’ Hambantota – it is in Sri Lanka’s dry zone, and although now home to the famous Yala National Park, has never been especially productive in terms of agriculture or commerce. Why would Britain want to develop a Port in a relatively barren place of little merit? Although as we shall see, times change.

Of more relevance amongst Hillman’s misleading statements are the documents from SNC Lavalin, a Canadian firm who looked at the potential for developing Hambantota Port in 1999 and quoted a 1952 World Bank study into the same. The latter never happened – just a little over three years after dependence and seven after World War Two, there were more pressing concerns than developing an out of the way port, when as I stated, the east coast was already relatively well serviced. But at that time, a small yet significant political development was occurring – the rise of the local, Hambantota based Rajapaksa family in Ceylonese politics. That political dynasty – in power today – began with the election of Don Mathew Rajapaksa to the Ceylon State Council in 1936 and has passed down through the family ever since. The current Prime Minister of Sri Lanka is Don Mathew’s nephew (not son as Hillman implies) as is the current Sri Lankan President, Gotabaya Rajapaksa. Both grew up within communist-influenced, anti-British Imperial political circles – meaning the contemporary Rajapaksa political family ideology is more attuned to China than to the West, a point not mentioned by Hillman.

SNC Lavalin opted out of the decision to develop Hambantota, due to difficulties in extending the port into a deep-water facility – a gigantic, mid-harbor rocky outcrop appearing too difficult to remove. But with the Rajapaksa’s mindful of the local prosperity such a port would bring to their area, with the underpinning of the political support that would encourage, they did not forget, or write off the development of Hambantota port.

Hillman is then critical of China Harbour Engineering (CHEC) – who did eventually take on the Hambantota Port project – and have succeeded in its construction. Hillman states that CHEC did not pursue any ‘community engagements’ when evaluating Hambantota. It’s for a simple reason: they didn’t need too (although as I explain later, Hillman’s statement is again inaccurate). The Rajapaksa’s are locally viewed as regional benefactors, and with poor agriculture and a hot, arid climate, the locals are more than happy to have someone build them a Port. Not for nothing is the related, new airport named after Mahindra Rajapaksa.

Hillman then goes on to note ‘the absence of roads, railways and supporting infrastructure’ in Hambantota. Again, he gets this completely wrong, although he does concede that China built a 77km highway to Hambantota “strengthening a critical link to the port and winning more business for its state-owned enterprises in the process.”

Well, that is true, but then again someone had to build a road. Hillman falls into the old trap of concentrating on the merits – or not – of the highway build and the fact that a Chinese SOE made money from building it. That assumption that a Chinese SOE made profit from the Highway is incidentally only partially correct. The Matara-Hambantota section was financed via a low-interest (believed to be 2%) loan from China’s Exim Bank. Other sections of what in total is Sri Lanka’s Southern Expressway (E01) that connect from Colombo and Galle to Hambantota were financed by the Japan Bank for International Cooperation and the Asian Development Bank. Curiously, no-one accuses them of ‘debt trap financing’.

As a ‘Senior Fellow with the CSIS Economics Program’ one would have thought Hillman would analyze the impact of the highway, and its benefits. But predictably, he doesn’t bother, content to let readers see a purely Chinese goal and greed as the basis for Hambantota’s development.

There are profound attributes to the Hambantota Highway in terms of providing Sri Lanka with additional revenues. Hambantota isn’t just a port, it is home to one of Sri Lanka’s primary tourist attractions, the Yala National Park. Between 2014 (when the Colombo-Matara highway was completed) and 2020, when the final section to Hambantota was finished, tourist visitors to Yala (still then accessible by a smaller, dual carriageway) rose from 660,000 to 880,000.

The Hambantota region is also a major tourism hub for several other attractions: it is close to Sri Lanka’s famed east coast beaches (the west coast, where Colombo is situated tends to rocky outcrops and difficult sea currents along the Palk Strait) and a balmy, warm Indian Ocean. Major tourism projects are dotted all along this coast, with Shangri-La, Kouni, Aman and many upmarket developments all within easy reach of Hambantota.

Hambantota is also a key hub for travelling to the tourist spots in the Sri Lankan highlands. Ella, with its railway journey often cited as one of the world’s most spectacular, and the Nuwara Eliya hill station, nearly 2km above sea level.

Hillman dismisses the Hambantota Airport as ‘failed’ and again points the finger at China, describing it as a ‘White Elephant’. This again is overly simplistic. It is true it is underutilized. But there are reasons for this: not least because after the Rajapaksa’s had arranged to have it built (and rather egoistically named it after themselves), shortly upon opening the facility, they were voted out of office for five years. The Rajapaksa opposing, incumbent Government were not going to continue with an airport so obviously tied to their opponents, and it was quietly left to operate just one charter flight from India each day, just enough to keep the airport ticking over but not enough to allow the Rajapaksa’s any credit for an operational success.

In fact, there is a very sound case for Hambantota’s airport. It is on the southeast coast, close to all the tourism spots I mentioned, whereas flying into Colombo and then driving to the same region takes an additional five-six hours. Then there is its strategic positioning – Hambantota faces southeast, towards Southeast Asia. Colombo airport faces west, towards India and the Middle East. But Sri Lanka’s tourism base is increasingly from China, Australia, and ASEAN nations such as Singapore. Flying into Hambantota rather than Colombo, when coming in from Asia shaves an hour off the flight time. Plus, from Hambantota I can be surfing an hour or so after landing. I can’t do that when arriving at Colombo.

Hambantota, as is generally the case with Sri Lanka overall, has not been the victim of a debt trap, or ill-thought-out infrastructure development. Is has, instead, been rather unfortunate in terms of timing, which is why it is under-utilized. Sri Lanka’s tourism industry took a major hit in early 2019 when terrorist bombs hit several hotels. That was followed in 2020 by Covid. While most economies have suffered the past two years, Sri Lanka has suffered for three.

Every single airport around the world has been affected by the pandemic. Suggesting that Hambantota is a White Elephant is disingenuous. It is not – I have visited it to see for myself. The airport is clean, neat, and organized and will be the asset it was intended to be, and as I have described, will do so once the pandemic wears itself out and tourism returns.

Hillman meanwhile omits any mention of Hambantota’s rail connectivity, instead preferring readers to think it is isolated. It isn’t. Rail connectivity has been delayed (Covid) but work extending the existing Colombo-Galle-Matara line to Hambantota should be completed by 2023 – just in time for the hoped-for resumption of some post-Covid normality. It is double track and will provide much needed passenger and freight capacity. Hillman completely ignores this.

That freight capacity will also service the Hambantota Industrial Park, which Hillman again completely omits to mention. That will eventually cover 15,000 acres and is in an ideal position – as previously mentioned the Hambantota area is dry and flat. It is however climatically suitable for certain manufacturing processes in a way that other areas are not (Western Sri Lanka is monsoonal). Chinese companies have naturally taken advantage of the park, which offers tax holidays, reduced profits tax rates and bonded areas, where goods may be imported, duty free to be worked on. Sri Lanka is being repositioned as a light manufacturing hub to move away from its over-reliance on tourism and agriculture and has local resources and commodities to allow it to do this. But Hambantota Industrial Park isn’t purely a Chinese play – other foreign investors are welcome.

The island is redeveloping its rubber industry and has large natural reserves of high-quality graphene – an important component with many hi-tech applications including in EV batteries. Consequently, Sri Lanka will be developing as a hub for auto component manufacturing with an eye on servicing Southeast Asia and Australia. But it’s not just auto and light manufacturing – Hambantota is also to become a pharmaceutical manufacturing hub and is part of the “Health Silk Road”.

Hillman meanwhile compares Hambantota with Sri Lanka’s Colombo Port City, which is also Chinese invested, but not exclusively (although Hillman again omits to mention this) – Japanese, Indian and Singaporean investors are also involved. Colombo Port City aims to create a business services hub in the Sri Lankan capital on its central west coast, connected to Colombo airport by road and rail. Hillman compares Hambantota unfavorably with Colombo and supports this with graphs showing the annual port calls by both. Citing statistics provided by the Israeli Maritime tracking analysis company Windward, Hillman shows Hambantota Port effectively flatlining at a consistent 500 port calls per annum from 2013. Colombo Port has averaged over 12,000 calls per annum since 2017. Yet this, while true, is again misleading. Hambantota Port is still not fully connected, with the important railway not due for completion for another 18 months. That (and Covid) undermines its potential. Hillman sees this as failure, whereas it is an asset still under development – just as Shanghai Pudong once was.

Shanghai’s Pudong Port at Waigaoqiao and the Pudong airport both opened without rail connectivity in 1999. That followed later, among some moaning and groaning about logistics and relocation costs from Hongqiao, the smaller, inefficient yet then Shanghai’s only airport. I was based in Shanghai at the time with Dezan Shira & Associates advising clients building the airport and its infrastructure. At the time, the phrase “White Elephant” was also used. Today these two ports are amongst the busiest in the world.

Meanwhile, and either again ignored or unresearched by Hillman, China Merchants Port Holdings (CMPH) has just declared a dividend of Rs.1.05 billion (US$5.24 million) to the Sri Lanka Port Authority (SLPA) and announced that their first half 2021 net profit increased by 204.7% to HK$4.71 billion (Rs 120.61 billion), from HK$1.54 billion in 2020.

Offloaded vehicles at Hambantota Port. Its Chinese operator has just announced its first profit dividends for the Sri Lanka Government.

CMPH operates among other Sri Lanka assets, four multi-purpose berths, two oil berths and four container berths in Hambantota’s International Port Group (HIPG).

For the first half of 2021, CMPH, who are listed in Hong Kong, said that Hambantota International Port Group handled 790,000 tonnes of bulk cargo, largely because of rising cement volumes. Bulk cargo volume vaulted by 338.9% from the year before. China Merchants Port Holdings said the roll-on/roll-off terminal at Hambantota handled 281,000 vehicles in the first half, up by 56.2% year-on-year. The Hambantota Industrial Park meanwhile has signed up 27 enterprises, the company said. It is also gearing up to become a fully functional multi-purpose port next year.

There’s more. In July, China’s state news agency Xinhua, quoted HIPG General Manager, Commercial and Marketing, Lance Zuo as saying: “As Hambantota Port is working towards being a fully-functional multi-purpose port by next year, we are gearing up at all levels, which includes continuous training and testing our systems for optimum efficiency.”

Cargo volume at Hambantota had risen to more than 1.20 million metric tonnes in the first six months, from 420,421 MT at end June, 2020, Xinhua said, citing HIPG.

Roll-on/roll-off volume increased to 413,005 MT from 239,827 MT the year before. As it reported interim earnings, CMPH said also that CICT launched a ‘Hope Village’ with a Rs 17 million community center for Pannila, near Horana.

It donated US$21,600 to the Government of Sri Lanka to build coronavirus isolation centers and gave eight 20-foot containers to a hospital in Gampaha District, to be fitted out for use as nucleic acid testing labs. It gave US$4,500 worth of anti-pandemic supplies (5,000 N95 respirator masks) to a hospital in Hambantota; US$10,000 to Hambantota Zonal Education Office and a hospital, and an additional US$75,000 worth of PCR testing machinery.

In April, CICT and HIPG jointly launched the second ‘Hope Village’ project in a village in Hambantota. So much for Hillman’s assertation that the Chinese do not engage with the local community.

Hambantota is in fact becoming a component part of China’s investment success story in Sri Lanka – the exact opposite to Hillman’s claims. Again, as a senior fellow aligned with CSIS Economics Program, Hillman seems to have no grasp of the basic economic concept that to accumulate wealth, one must first invest.

Such is the negativity of Hillman’s Hambantota research and article as opposed to the actuality of what is happening on the ground that one must question the real purpose behind the piece. It is completely flawed, to the point of being preposterously biased – as a lot of BRI related articles unfortunately are. Hillman appears intelligent and appears to argue his case against Hambantota very well. Yet appearances can be deceiving.

Clues as to why such people and organizations such as CSIS are prepared to go to such lengths to provide such misinformation can be found in recent Chinese complaints that the United States appears to want another Cold War. It has an ultra-competitive mindset, it needs confrontation, and it needs to win. The USSR, and now Russia and China fit the bill. Given that the likes of Hillman, educationally indoctrinated in such politics, and that the CSIS exist as a think-tank for US national security would appear to be a justification for such a misleading article to be produced. Facts and research just don’t enter the equation. China is bad, is a threat to the United States and so is Hambantota. Yet that isn’t exactly the truth. So why write it? Because certain think tanks still feel that the way to proceeed is for the United States to create conflicts. To compete, and to win.

Disinformation is key to this. Yet as both Beijing and Moscow have pointed out, this is a cold war mentality. The world has arguably even more serious problems to contend with than it did 40-50 years ago. This is especially true when considering the rise of pandemics and global climate change, when cooperation, not confrontation is required. Hillman falls into the Cold War camp, as do to some extent, the CSIS. The danger here is of becoming unfit for purpose in today’s world, with today’s challenges. The Cold War, uber-competitive environment is being and must be replaced by a new paradigm.

Hillman does his readers no service in filling their heads with inaccuracies of the type portrayed. He produces political rhetoric designed to fulfill a political agenda – and does so at the expense of the truth. CSIS meanwhile has accused Beijing of ”unfortunately choosing to close the door to genuine scholarly exchange.”

Yet Hillman’s article is neither genuine nor scholarly. China must face up to its own shortcomings when it comes to its relations with the United States, and these are many and varied. Yet Washington too has an agenda, and articles like this point to many of the same accusations – economical with the truth, biased, not grounded with contemporary on-the-ground research, any understanding of infrastructure development economics, or even hard facts. At best, Hillman’s article is outdated, lazy, armchair journalism passing itself off as an academic study. At worst, it is a deliberate attempt to mislead. Readers of CSIS material deserve better.

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Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at silkroad@dezshira.com or visit www.dezshira.com

 

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