Back in July, on the 19th, we wrote a post entitled, “Investors Queue Up in Sri Lanka”. We covered the strategic importance of the port and the value it has for the Chinese. Last week as reported in the South China Morning Post that, China Merchants Holdings International has signed an agreement to take a majority stake of 55% in the project at the Colombo South Container Terminal in Sri Lanka.
Big Money Flowing In
At an expected investment of more than US$500 million, the deal would be the single largest foreign investment by a private company in Sri Lanka, China Merchants said.
The relationship between China and Sri Lanka is an old one. At present China is their largest bi-lateral trade partner. That relationship was kicked off in 1952, when the two countries signed the Rubber-Rice pact where Sri Lanka (then Ceylon) supplied China with Rubber and China exported rice to the island, and has flourished ever since.
During the War with the Tamil Tiger that ended 3 years ago, it was the Chinese and Russians who held off the UN from issuing a cease-fire. The Chinese supplied the nation with arms and other assistance to help make this victory a reality.
Money in More Than Ports
I was able to pull up a pretty complete list of Chinese investment in Sri Lanka from a CNBC post written just 2 weeks ago that follows.
China was Sri Lanka’s largest lender in 2009 and 2010, giving $1.2 billion and $821 million respectively. In 2009, that figure accounted for 54 percent of total foreign loans, and 25 percent in 2010.
In the first six months of 2011, trade between China and Sri Lanka was worth $1.28 billion, a rise of 39.5 percent on the same period in 2010, according to Chinese customs data.
China’s imports from Sri Lanka in the first six months of 2011 were worth $68 million.
Foreign investment of $1 billion will flow into a 500-room hotel by Honk Kong-based Shangri La Asia and a shopping mall by China National Aero Technology Import and Export Corporation (CATIC) in Colombo, the largest investments so far into a post-war tourism boom.
The latter has run into an issue, with the president questioning whether the land should be sold as first agreed by his brother, Economic Development Minister Basil Rajapaksa, or given on a long-term lease, according to local media.
CONTRACTS & TRANSACTIONS
Sri Lanka has signed a $450 million deal with China Merchants Holdings and local conglomerate Aitken Spence to boost the Colombo port’s cargo-handling capacity.
Sri Lanka, with a tradition of strict foreign exchange controls, has allowed international banking transactions denominated in the Chinese yuan since June 29.
China Development Bank Corporation has agreed to provide $1.5 billion within three years for construction of roads, bridges, power plants and water and irrigation schemes.
China has lent $400 million for the first phase of the new port in Hambantota and its Exim Bank has lent $77 million for an oil bunkering facility, while another $810 million has been given for the second phase with China Communications Construction Company as the contractor.
China’s Exim Bank loaned Sri Lanka $455 million to build the first phase of first coal-powered generation station on the Indian Ocean island nation, and has offered an $891 million loan to build the second phase of 600 MW.
China has pledged around $760 million to the island nation’s road construction across the country, including $302 million for projects in the war-ravaged north.
A $310 million Chinese loan from its Exim Bank has been granted for the Colombo-Katunayaka express road, which will connect Sri Lanka’s only international airport and its commercial capital, Colombo. It is due for completion next year.
China has also lent $190 million for Sri Lanka’s second international airport in Hambantota, which is on Sri Lanka’s southern tip and happens to be the president’s electorate.
China’s Exim Bank has committed $102.5 million for Sri Lanka to buy 13 new diesel engines for its railways. The engines will come from Chinese manufacturers.
A Very Close Relationship
As the Chinese command more and more of the space that takes up the ocean via shipping lanes and requires more and more raw materials for its own expansion, the country is making wise investments overseas. Sri Lanka is an important port location and the Chinese investments in the past and support of the country puts them on top of the list when help is needed for expansion.
More and more goods are being consumed world-wide due to Asia’s growth and development. Waves of money are coming onto the shores of countries like Sri Lanka, India, China, Korea and a host of others. Money from foreign nations is pouring in both from government and the private sectors to invest in this growth. Where are you putting your money? Give Pacific Tycoon a call and find out how you can be part of this growth, through container ownership. It’s a lot easier than you may think.