As New Delhi and Washington seek to limit China’s influence in South Asia, the US will finance a $553 million port facility being planned by Indian billionaire Gautam Adani in the capital of Sri Lanka.
The largest infrastructure investment made by the US government agency in Asia and one of its largest worldwide is the financing provided by International Development Finance Corp. for the deepwater West Container Terminal in Colombo. According to a statement from DFC, it will support Sri Lanka’s economic expansion and “its regional economic integration, including with India, a key partner to both countries.”
In addition, the US funding suggests that efforts to lessen Beijing’s influence over Sri Lanka are resumed after the country overspent on Chinese port and highway projects prior to last year’s economic collapse, leaving it heavily indebted to Beijing. India aspires to shift the regional power dynamics as well.
The money is a part of the $9.3 billion global acceleration of DFC investments in 2023. According to a US official, the financing of the port in Sri Lanka is representative of the USA’s intention to get increasingly involved in development initiatives throughout the Indo-Pacific region.
As of the end of the previous year, China was the island nation’s largest foreign direct investor, having made investments totaling over $2.2 billion. The little-used southern Hambantota port in Sri Lanka has drawn widespread criticism from US officials who see it as unsustainable and a component of China’s “debt-trap diplomacy.”
According to DFC, it would collaborate with sponsors Adani Ports & Special Economic Zone Ltd. and John Keells Holdings Plc., depending on their “local experience and high-quality standards.”
Because of its close proximity to international shipping lines, the port of Columbo is among the busiest in the Indian Ocean. All container ships travel through its waters in over half of cases. The DFC stated that it needed additional capacity despite running at over 90% utilisation for the past two years.
The US money might be seen as support for the controversial port project in which the Adani Group, which is majority owned, and the short seller-hit company. The corporation, which has consistently denied any wrongdoing, has been battling a litany of corporate fraud accusations brought up by Hindenburg Research and numerous media probes.
Some local MPs attacked its energy and port projects in Sri Lanka last year, claiming they were opaque and closely linked to New Delhi’s objectives. The Indian billionaire refuted these accusations, claiming that the investments met Sri Lanka’s needs. The billionaire is a longtime supporter of Indian Prime Minister Narendra Modi, who has publicly criticised China. The US official stated simply that DFC used rigorous due diligence when choosing projects, declining to comment further on the specifics of the accusations.
In order to support US foreign policy objectives and assist developing countries, the Trump administration formed the Development Finance Corporation (DFC). The Covid-19 pandemic made it difficult initially to stake out initiatives over the globe.
However, according to a recent assessment from the AidData institute at William & Mary in Virginia, funding has increased recently and the organisation has assisted Washington in closing the development spending gap with China’s much more well-known Belt and Road Initiative.
According to DFC CEO Scott Nathan, the organisation’s support 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.”