India/Sri Lanka politics: Quick View - India provides additional assistance for port upgrade

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Economist Intelligence Unit
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International Relations, Politics, News Analysis, Forecast
Political Geography
India, Sri Lanka


The Export-Import Bank of India has signed an agreement with Sri Lanka's Ministry of Finance to extend a credit line worth US$45.3m to upgrade and rehabilitate the Kankesanthurai (KKS) port, located in the country's Northern province.


The loan supplements previous grants from India amounting to US$19m for initial rehabilitation work-four of the six phases of the port upgrade have already been completed with Indian assistance. Upgrading the KKS port is part of the Sri Lankan government's "Vision 2025" strategy of creating new commercial ports across the country, in a bid to boost economic activity outside the capital, Colombo, as well as strengthen Sri Lanka's position as a maritime hub in the Indian Ocean region. Currently, Sri Lanka has only two large commercial ports: a container port in Colombo and a deep-sea port in the southern coastal city of Hambantota.

India has been steadily increasing its bilateral development assistance to Sri Lanka in an attempt to counterbalance China's growing presence in the country. Chinese state-owned companies are engaged in several infrastructure projects in Sri Lanka, anchored to China's Belt and Road Initiative. Furthermore, the Sri Lankan authorities formally passed control of the Hambantota port to a Chinese-led joint venture under a 99-year lease in December 2017. Meanwhile, India approved loans worth US$318m to improve Sri Lanka's railways last year.

India's bilateral assistance has focused largely on Sri Lanka's Northern province, which was one of the main stages of the 1983-2009 civil war. The majority of the province's population are of Tamil ethnicity and share a common language and culture with south India. The Economist Intelligence Unit believes that the Indian government's fears about Chinese-run ports acting as a strategic gateway for Chinese military influence are overblown, and we do not expect any foreign military presence at these ports in the forecast period (2018-22). Nonetheless, the Indian government will be particularly wary of China's growing influence in the Indian Ocean region and, therefore, we expect India's investments in Sri Lanka to increase over the next five years.

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