China’s $1 Billion White Elephant

China’s $1 Billion White Elephant
Iain Marlow April 18, 2018 https://www.bloomberg.com/news/articles/2018-04-17/china-s-1-billion-whi...

Each year roughly 60,000 ships vital to the global economy sail through the Indian Ocean past a Chinese-operated port on the southern tip of Sri Lanka. Almost none of them stop to unload cargo.

The eight-year-old Hambantota port -- with almost no container traffic and trampled fences that elephants traverse with ease -- has become a prime example of what can go wrong for countries involved in President Xi Jinping’s “Belt and Road” trade and infrastructure initiative. Sri Lanka borrowed heavily to build the port, couldn’t repay the loans, and then gave China a 99-year lease for debt relief.

The experience has fueled fears that Xi’s plans to finance more than $500 billion in projects could see China take control of strategic infrastructure that also has military uses. But the massive state-owned Chinese conglomerate that took over the port in December wants to prove the skeptics wrong.

China Merchants Group -- whose 2017 revenues of $93 billion dwarf Sri Lanka’s gross domestic product -- is aiming to use its experience stretching from China to Europe to make the port profitable. During a rare look inside the grounds late last month, executive Tissa Wickramasinghe told Bloomberg News it had already nearly doubled the number of ships visiting the port.

"We are hell bent on making it work," said Wickramasinghe, chief operating officer of Hambantota International Port Group, a joint venture led by China Merchants. "Whether the port should have been built, why it was built -- those are, to me, irrelevant now."

Still, the port has a long way to go before it worries competitors in Singapore, Malaysia and the Middle East. Even with more traffic, Hambantota is only handling about one ship a day -- not enough to even register on China Merchants’ own data showing cargo handling volumes for February. It didn’t make a United Nations’ list of the world’s top 40 container terminals.