In an initiative aimed at diminishing China’s dominance in South Asia, the United States has allocated $553 million in financing for a port terminal situated in Sri Lanka’s capital. This financial backing will aid in the development of this port terminal, overseen by billionaire entrepreneur Gautam Adani. The move reflects a concerted effort by the US and India to reduce Beijing’s influence over Sri Lanka, especially following the island nation’s extensive borrowing for Chinese-backed port and highway projects, a decision that strained its economic stability last year. Furthermore, for Gautam Adani’s business conglomerate, this infusion of US capital stands as an emblem of credibility, countering allegations of fraudulent conduct that previously led to a significant decline in the conglomerate’s market value, spurred by short seller Hindenburg Research.
US Government’s Notable Investment in Sri Lanka
The deepwater West Container Terminal, positioned in Colombo, represents the most substantial infrastructure investment by the US government agency, signifying a notable commitment to bolster Sri Lanka’s economic growth and enhance its regional economic connectivity, particularly with India, which stands as a crucial partner for both nations, as articulated by the International Development Finance Corp. (DFC).
This financial endeavor is part of a broader surge in DFC investments, amounting to $9.3 billion in 2023, and it underscores the US’s pledge to engage proactively in development projects throughout the Indo-Pacific region.
Contesting China’s Dominance
China’s extensive investments in Sri Lanka, totaling approximately $2.2 billion by the close of the previous year, solidify its status as the nation’s most significant foreign direct investor. US officials have publicly criticized Sri Lanka’s underutilized Hambantota port in the south, labeling it as unsustainable and a component of China’s alleged “debt-trap diplomacy.”
DFC has expressed its intention to collaborate with sponsors John Keells Holdings Plc and Adani Ports & Special Economic Zone Ltd., harnessing their local expertise and adherence to rigorous quality standards.
Colombo’s port, strategically positioned along international shipping routes, ranks among the busiest ports in the Indian Ocean, with nearly half of the world’s container ships traversing its waters. The DFC reports that the port has operated at over 90% capacity for two consecutive years, necessitating the expansion of its capacity.
This US funding may serve as an endorsement for the Adani Group, which has been embroiled in a series of allegations regarding corporate malfeasance from Hindenburg Research and various media investigations. The conglomerate has steadfastly refuted these allegations.
DFC’s Comprehensive Role
DFC, established as a development finance agency during the Trump administration, was conceived to provide support to developing nations while advancing US foreign policy objectives. Although it initially encountered challenges in initiating projects worldwide due to the impact of the Covid-19 pandemic, its funding initiatives have intensified in recent years. According to a recent report from the AidData institute at William & Mary in Virginia, DFC’s contributions have been instrumental in enabling the US to bridge the gap in development spending, thereby counterbalancing China’s significantly more prominent Belt and Road Initiative.
DFC’s Vision for Sri Lanka
Scott Nathan, the Chief Executive Officer of DFC, conveyed the agency’s commitment to enhance prosperity in Sri Lanka without further augmenting the nation’s sovereign debt. In tandem, this effort fortifies the position of the United States and its regional allies, asserting their collective influence across the region.
