Why Sri Lanka walked back on Indo-Japanese involvement in Colombo Port

Here, I briefly analyse the circumstances entangling Sri Lanka, particularly with regard to Chinese geoeconomic interests and unfavourable public opinion acting as a barrier for India to participate, with or without Japan, in the island’s strategic developmental ventures.


In a unilateral move, Sri Lankan Prime Minister Mahinda Rajapaksa announced on February 1, 2021, that the Sri Lanka Ports Authority will manage the operations of East Container Terminal(ECT) of Colombo Port on its ownand will not be sold to any foreign country. This statement effectively revokeda 2019-signed Memorandum of Cooperation on the joint operations of ECT with India and Japan.

As a consolation offer, the Rajapaksa government has offered India and Japan an offer to develop the yet-to-be-built West Terminal of the Colombo Port on public-private-partnership (PPP) model. New Delhi and Tokyo have not expressed its interest in it, while reiterating that Sri Lanka should remain committed to the initial ECT project.

The project was intended to enhance the port’s harbouring capacity to host more international cargo ships for transhipment activities, of which 70 per cent businesses come fromIndia. It is this strategic fact that necessitated the Indian government to join hands with Japan, thereby alleviating concerns surrounding India’s sole involvement.

Last month, India’s External Affairs Minister S. Jaishankar met with the Rajapaksa brothers, the President and Prime Minister, and registered Indian concerns about the stalled ECT project. Unfortunately, for India, as it turns out, that meeting has not seen its intended result.

The background for Sri Lanka’s move

It was about twenty months ago, in May 2019, the previous government of Sri Lanka, led by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, inked a tripartite pact (Memorandum of Cooperation) with India and Japan for the joint operations of Colombo Port’s East Container Terminal (ECT)at a cost of $700 million.

While the Sri Lanka Ports Authority was to retain cent per cent ownership in the venture, a jointly-owned Terminal Operations Company was to run the terminal on a daily basis, with 51% Sri Lankan stake and 49% jointly with India and Japan.

But, the deal has been stalled since July 2020 as the government ordered a review of the project due to increasing uproar from the port workers’ unions and nationalist groups against any foreign involvement in Sri Lanka’s ‘national assets’.

The Rajapaksa government’s recent ECT move follows such continuing protests from port workers’ unions, supported by several nationalist and civil society groups, demanding complete Sri Lankan control of the ECT, which is located not far away from Chinese-led project sites in the greater city of Colombo.

China-backed projects lying adjacent to ECT

The East Container Terminal is located just three kilometres away from the Port City Colombo project also known as the Colombo International Financial City project, conceived as an extension of the Central Business District of Sri Lanka’s commercial capital, Colombo. It will take about 25 years to be completed in 269 hectares of reclaimed land from the sea.

The state-run China Harbour Engineering Company (CHEC), the same behind the controversial 2017 Hambantota port project, had invested hundreds of millions of dollars in this futuristic project, aimed at creating the first world-class planned city of South Asia, conducive for businesses, along the warm waters of the Indian Ocean.

The ECT is also near to the Colombo International Container Terminal, in which the China Merchants Port Holdings Company holds an 85% stake. Considering these facts, a Chinese hand in forming unfavourable public opinion towards Indian and Japanese involvement can be suspected, if not proven. It is also noteworthy that public protests against China-led projects are almost absent.

Ties with Japan on back foot

As a key player in the Indo-Pacific, along with India, Japan provides substantial assistance, both as financial aid, technical assistance, and low-interest loans, to Sri Lanka.

Japan was also one of the biggest aid-givers to Sri Lanka during the civil war, which occurred from 1983 to 2009. Japan’s Mitsui Group was the chief contractor of the Sri Lankan Parliament Building, completed in the 1980s, situated in Sri Jayewardenepura Kotte. Japan also cooperates with India on building an LNG Terminal and piped gas distribution system in the island.

The initially warmth in relations between Colombo and Tokyo has been curtailed by an increasing Chinese presence and economic influence on Sri Lankan affairs. Before the recent ECT decision, the Rajapaksa government has also unilaterally walked back from a Japanese rail project in Colombo.

A ‘pearl’ in Chinese shadow

The island of Sri Lanka is strategically located in the northern section of the Indian Ocean, overlooking major sea routes connecting West Asia and Eastern Africa with Southeast Asia and eventually China. This makes the island an ideal location for global transhipment business, literally ‘the pearl of the Indian Ocean’. The ports surrounding the island are of particular significance in this context.

In many ways, the past decade saw Sri Lanka emerging as a hot-spot for great power rivalry between India and China like the 2017-signed controversial deal of Hambantota Port in India’s own backyard where Chinese geopolitical interests are also aligned.

India can’t afford to even think of a future Chinese military base in Hambantota, like the one operating in Djibouti since 2017. Today, Chinese debt-trap diplomacy is affecting even the internal sovereignty of Sri Lanka, which is poised to turn worse in the future, leading to more assets-for-money swap arrangements with China or Chinese state-run corporations.

Sri Lanka is also a key part of China’s trillion-dollar Belt and Road Initiative, connecting three continents, both via land and sea. Due to this entanglement with China, combined with the lack of confidence on the sub-continental giant across the Palk Strait, Colombo is attaching itself closer to Beijing, at the cost of deteriorating ties with New Delhi and Tokyo.

The inescapable trap of Chinese geoeconomic involvement in Sri Lanka, combined with the majority population’s not-so-warm memory of Indian involvement with the island’s frozen ethnic tensions pose a serious strategic challenge in the coming years for neighbouring India in the wider Indo-Pacific region, more than it does for Japan.

Bejoy Sebastian
Bejoy Sebastian
Bejoy Sebastian writes on the contemporary geopolitics and regionalism in eastern Asia and the Indo-Pacific. His articles and commentaries have appeared in Delhi Post (India), The Kochi Post (India), The Diplomat (United States), and The Financial Express (India). Some of his articles were re-published by The Asian Age (Bangladesh), The Cambodia Daily, the BRICS Information Portal, and the Peace Economy Project (United States). He is an alumnus of the Indian Institute of Mass Communication (IIMC), New Delhi, where he acquired a post-graduate diploma in English journalism. He has qualified the Indian University Grants Commission's National Eligibility Test (UGC-NET) for teaching International Relations in Indian higher educational institutions in 2022. He holds a Master's degree in Politics and International Relations with first rank from Mahatma Gandhi University in Kottayam, Kerala, India. He was attached to the headquarters of the Ministry of External Affairs (Government of India) in New Delhi as a research intern in 2021 and has also worked as a Teaching Assistant at FLAME University in Pune, India, for a brief while.