Aiming to curtail
China’s influence in South Asia, US will provide $553 million in financing for
a port terminal in Sri Lanka’s capital being developed by billionaire Gautam
Adani.
The financing from
International Development Finance Corporation underscores renewed US and Indian
efforts to loosen Beijing’s sway over Sri Lanka after Colombo borrowed heavily
to spend on Chinese port and highway projects before its economic meltdown last
year.
For Adani, US
money may offer a stamp of legitimacy after allegations of fraud by short
seller Hindenburg Research erased billions from the conglomerate’s market value
earlier this year.
The deepwater West
Container Terminal in Colombo is the US Government agency’s largest
infrastructure investment in Asia, and among its biggest worldwide. It will strengthen
Sri Lanka’s economic growth and “its regional economic integration, including
with India, a key partner to both countries,” DFC said in a statement.
The funding is
part of a global acceleration of DFC investments that totaled $9.3 billion in
2023. A US official described the Sri Lanka port financing as emblematic of the
US commitment to be more engaged in development projects across the
Indo-Pacific.
China had invested
about $2.2 billion in the island nation as of the end of last year, its biggest
foreign direct investor. US officials have publicly slammed Sri Lanka’s
little-used southern Hambantota port as unsustainable and part of what it calls
China’s “debt-trap diplomacy.”
DFC said it will
be working with sponsors John Keells Holdings Plc and Adani Ports & Special
Economic Zone Ltd, relying on their “local experience and high-quality
standards.”
Colombo’s port is
one of the busiest in the Indian Ocean, given its proximity to the
international shipping routes. Nearly half of all container ships pass through
its waters. The DFC said it’s been operating at more than 90 per cent
utilization for two years and needs new capacity.
The US funding may
serve as an endorsement for Adani Group, as well as the controversial port
project in which it holds a majority stake. The conglomerate has been fighting
a raft of corporate fraud allegations leveled by Hindenburg Research and
various media investigations, which it has repeatedly denied.
DFC, a development
finance agency launched under the Trump administration, was established to aid
developing nations while advancing US foreign policy goals. It struggled at
first to stake out projects around the world due to the Covid pandemic.
But funding has
accelerated in recent years and the agency has helped Washington close the
development spending gap with China’s much more higher-profile Belt and Road
Initiative, according to a new report from the AidData institute at William
& Mary in Virginia.
The DFC’s funding
will create “greater prosperity for Sri Lanka – without adding to sovereign
debt – while at the same time strengthening the position of our allies across
the region,” said Scott Nathan, the DFC’s chief executive officer.
Agency
