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15 Aug 2018

China and the Hambantota Port

The Chinese Authorities do know how they could very effectively maintain and expand
friendship/loyalty of countries which have approved the 'Belt and Road 'Projects not only by
establishing projects but also by giving grants sans any interest charges e.g. the funds granted for the
kidney diseases hospital in Polonnaruva. The Chinese Authorities have implemented these steps in
six African countries and a few South American countries.

What is fascinating to observe is the interplay of countries: USA-UK-INDIA-CHINA-JAPAN.


Russia is as yet not active on this interplay. President Trump shouts out daily from the rooftops- " I will
make America great again!".- He also proclaims-"America No:1! ".He proceeds to implement his tariff
e.g. tariffs against China and tough immigration policies on "tough guy" image. Hon. Xi Jinping the
Chinese President also loudly stresses "The Belt and Road" Policy. It can be considered to be a
revival of China's very flourishing trading and maritime relationships in 'ancient 'days, covering many
countries upto Europe.

Today China's "Belt and Road" Program has been agreed to/approved by Singapore, Malaysia,
Thailand, Australia, Sri Lanka, Pakistan, several Middle Eastern and European countries as well as by
Egypt. China's policy is to fund/establish Projects in the cities involved in the 'Belt and Road" routing.

USA and India have •••not •••involved themselves in the "Belt and Road" Project. India's Strategic
Pacts and "String of Pearls" Policy in the Indian Ocean around China is not too well known. This
includes strategic Pacts in Seychelles, expensive bases in the Andaman and Nicobar Islands, Oman's
Diamond Port, in Iran on Chabahar Port, Access to Madagascar (Malagasey),and Djibouti (with USA
and France).

Indian investment and possible military base in Sabah Port in Indonesia, is located near the Strategic
and vital Shipping Channel - the Strait of Malacca on the vitally important Shipping Lane from West to
East and vice- versa. This Channel can be controlled by the Indian presence at Sabah Port. Apart
from this strategic presence in Indonesia, India has Pacts with Malaysia and Vietnam and Singapore.

China has its own "String of Pearls " - Strategic Pacts with India's neighbors , "encircling India " as
described by some maritime scholars-with Myanmar, Maldives, Pakistan (Gwadar Port) and military
base / installation planned in Jivani in Pakistan, with Nepal the Chinese military base in Bangladesh
and with Sri Lanka. Thus China has full access to the Bay of Bengal. China has access to Djibouti too-
together with US, France and India.

Although many of Lanka's politicians state often that ships'(especially China-owned ships) using the
Southern Port in Lanka is justified by as many as 10 ships traveling daily to/from Asia and Far East in
very close proximity to the Port, one may probe deeper. If due to any break-out of hostilities, the
usually very busy Straits of Malacca were to be blocked, then this will have a crippling effect on
China's very many oil consuming industries/projects, thereby very adversely affecting exports and
employment.From Lanka's Hambantota Port Chinese and other tankers carrying crude/unrefined oil
could sail directly via the Bay Of Bengal, to the already operating deep-water Port of Kyauk Phyu in
Myanmar. This port located along the Bay of Bengal ,in Madae Island, Rakhine State is equipped with
large oil storage and oil pumping facilities. The facilities are capable of pumping up to 400,000 barrels
per day (equivalent to 5% of China's daily demand for oil ) over a large distance through Mandalay,
Lashio and Muse to China at Ruili border by an already operational US$1.5 billion, 479 mile long
pipeline, to the already operational large refinery in Kunming in landlocked Yunnan province in South-
West China.

Additionally there is an operational US$ 1.04 natural gas pipeline from the Kyauk Phyu port in
Myanmar to Kunming in Yunnan Province in China and beyond to Guizhou and Guangxi in China
running a total of 1700 miles ,and having a capacity of 12 million tons of crude oil per year. Both crude
oil and natural gas pipelines run in a parallel manner.

Thus the Straits of Malacca will be uniquely bypassed by Chinese owned/leased vessels, away from
"a blocked" off Straits of Malacca, if such a situation should ever arise. Thus, this would be an
alternative Route for Middle Eastern oil other than via the crowded Malacca Straits and Singapore.
This new "oil gateway", as described by PetroChina, is a NEW OIL TRADING ROUTE that fits in well
with One Belt One Road Ambitions of China, linking it with Central Asia and Europe.The pipeline
Project is part of a strategic project by Beijing to reduce its reliance on oil and gas imports through the
Straits of Malacca, "thereby avoiding the possibility that an adversary like the United States could
close the Straits to threaten China's energy supply.",as described by a maritime specialist. However
the validity and reality of the "blocking" of the Straits of Malacca has been queried by a few maritime
scholars-this would effect total harm to some countries which are very close to some very powerful
Western and European countries and would therefore protest very strongly, such as Japan, Singapore,
Malaysia, Indonesia, Thailand, Vietnam and the Philippines.
PetroChina's Partner in this operation is the Government owned Myanmar Oil and Gas
Enterprise.(MOGE). The required Protocol for this 'operation 'was signed by China with Myanmar
during the Period of the last Boss of Myanmar who was previously the Army Chief. In December 2017,
State Councillor Aung San Suu Kyi and President Xi Jinping agreed in Beijing to establish a new
China-Myanmar Economic Corridor connecting Kyauk Phyu and Kunming. Myanmar decided to begin
and expand three large industrial projects where the Japanese , and the Thai-Japanese Projects are
prominent economic zones around the Myanmar Kyayukpu deep-sea Port on the Bay of Bengal. To
maximize returns from the Hambantota Port, Lanka could establish with sizeable foreign
funding/investment and technical expertise, several industrial units including a refinery and bunkering
and ship (including engine repair unit) in and around the Port.

Also, export/ import industries should be rapidly established in Sri Lanka with shipping to/from
Myanmar with ultimate destinations/import centers beyond Myanmar including China, Thailand,
Indonesia, Cambodia and Vietnam etc. This must be successfully blended into the Regional
Comprehensive Economic Partnership (RCEP), which is essentially an Indian Ocean community of 16
Asian countries (the ASEAN countries and six others).

Sri Lanka should look outward onto joint- ventures in Asia on Port operations and shipping. For
example, the PSA (Port Of Singapore Authority) with the bank of Baroda and the Punjab National
Bank as lenders, has invested in the Indian Central Government owned Port Trusts Chennai,
Chidambaranar, Kolkata, Jawaharlal Nehru and the privately owned Kakinada .The PSA via these
joint- ventures in these Indian Port Terminals is enjoying a market share of 15% of the Indian container
market, with India "as a Consuming Powerhouse."-- with PSA presence in the Indian key hubs and in
the Indian hinterland.

Also the importance of the Kra Canal Development has to be definitely reckoned with in relation to
operations in and out of Hambantota Port.'India is spending US$40/- millions to upgrade
Kankesanthurai Port in Northern Lanka,as. Commercial Port. The full implications of future operations
from/to the Hambantota Port based on the KRA Canal Developments, have to be carefully studied and
acted upon.

We "have to come out from the islander mentality, with an exports oriented National mindset. "Service
oriented industries, tourism and offshore services should be given priority. Local industries which
manufacture products for local consumption must ,whilst improving, promoting and developing for
local and export markets, such as the Pharmaceuticals industries, getting tax/duty waivers and
concessions for raw materials imports and utilizing trade agreements between countries ,facilitating
advantages in exports. Thus isolation must be avoided by getting into trade agreements which many
Asian Countries are busy negotiating. An example is the 10 acre 3 Stage Trace City in Maradana,
which involves IT and knowledge- based industries catering to highly competitive employment
opportunities . Import of raw materials is bound up with providing job opportunities and supporting sub
industries and services. Low interest funding is important.

Thus the unique importance of the Hambantota Port to the Chinese Government and indeed to the
Asian region, could be understood in its true but not broadly publicized context. China's seriously
abiding Interest for using, developing and maintaining Lanka 's Hambantota Port will now be more
clearly understood. In fact, historical records indicate that China has over a long period, been engaged
in improving its long surviving political, cultural, military, maritime, spiritual, economic and trading
relationships with Sri Lanka.

Though distance is considerable, sailing vessels have been operating from Sri Lanka to/from China
with full knowledge of Kings and Emperors, carrying gift items such as Buddha statues made of stone,
jewelry with blue and yellow sapphires to China; and jade figures and onyx
collectibles and printed (on strong paper) Buddhist Manuscripts containing Mahayana Sector's
Mahasanghika and Vijnanavada Scriptures from China. Sri Lanka consistently had an Ambassador in
Beijing. To this day his office including his desk and chair can be seen in a building in Beijing now
called the Summer Palace.

I am very confident that our top politicians and officials in charge of the Maritime, Defense and Foreign
Policy sectors are fully aware of this situation. Rapid action, not talk, is what is needed.

Best Regards,
Harsha Wickramasinghe.

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