Sri Lanka softens its stance on China port city deal

Sri Lanka's new government said on Thursday it might renegotiate a $1.5 billion "port city" deal with China Communications Construction Co Ltd, softening its pre-election threat to scrap the project.
New Prime Minister Ranil Wickremesinghe, before last month's presidential vote, said he would cancel the port deal if his party came to power. Maithripala Sirisena, backed by Wickremesinghe's party, unseated ex-president Mahinda Rajapaksa at the polls.
"We can renegotiate with China after reassessing the deal," Cabinet Spokesman Rajitha Senarathne told reporters.
"We need to see the feasibility study. We need to see the environmental impact assessment (EIA) and reassess the tax concessions given to it and land ownership issues."
He said the current government had not seen any EIA or feasibility study of the project and it needed to be re-assessed because of impacts on coastal erosion.
Work has already begun on construction of the port city, launched by Chinese President Xi Jinping when he visited in September last year.
The site is on 233 hectares of reclaimed land in the capital, Colombo. Under the proposed deal, 108 hectares would be given to the Chinese firm, including 20 hectares on an outright basis and the rest on a 99-year lease.
Sri Lanka's giant neighbour India, which has uneasy relations with China, is worried about the port city project.
Indian diplomats have told Reuters the 20-hectare plot is a security concern because of the large number of India-bound cargoes that pass through Colombo port.
China Communications Construction Co Ltd said in a statement issued on Wednesday an initial technical feasibility study and EIA had been carried out and approved by the previous Rajapaksa government.
It said an environmental management plan had been provided by the company "after monitoring the environmental impact, especially the erosion of the beach, according to the requirement of EIA".
"We are open to cooperate with the government authorities and provide all the information required according to the relevant regulations, believing on a strong cooperation together to the best success of this magnificent project," it said.
Wickremesinghe's pro-business United National Party says some development deals struck by the previous government, which was heavily dependent on China for infrastructure, did not follow appropriate tender procedures and were not transparent.
The port development would include shopping malls, a water sports area, golf course, hotels, apartments and marinas.
India pushing back
against China
Frank Jack Daniel writes from New Delhi : When Sri Lanka unexpectedly turfed out President Mahinda Rajapaksa in an election this month, it was the biggest setback in decades for China's expansion into South Asia - and a remarkable diplomatic victory for India.
Despite New Delhi's protestations, diplomats and politicians in the region say India played a role in organising the opposition against pro-China Rajapaksa.
His successor, President Maithripala Sirisena, has said India is the "first, main concern" of his foreign policy and that he will review all projects awarded to Chinese firms, including a sea reclamation development in Colombo that would give Beijing a strategic toehold on India's doorstep.
India has pushed back against China elsewhere in the region since Prime Minister Narendra Modi took office in May, improving ties with Japan and Vietnam, both locked in territorial disputes with Beijing, and contesting a port project in Bangladesh that could otherwise have been a cakewalk for China.
The new robust diplomacy, which Modi calls "Act East", has delighted Washington, which has been nudging India for years to dovetail with the U.S. strategic pivot toward the region.
When President Barack Obama makes a landmark visit to India starting Sunday, he will be the chief guest at New Delhi's showpiece Republic Day military parade, and rarely for a presidential trip, is not scheduled to visit any other country before returning to Washington.
"What is appealing to me and my colleagues is the fact that Prime Minister Modi has undertaken to build from what has been a 'Look East' policy to an 'Act East' policy," U.S. Assistant Secretary of State for East Asia and the Pacific Daniel Russel said in Washington last month.
"He has shown in word and deed his interest in involving India in the thinking and the affairs of the broader region. That's very much to be welcomed."
Washington made no bones about its distaste for Rajapaksa, who critics accuse of war crimes, corruption and nepotism. But until last year India was indecisive, perhaps afraid of pushing the hero of the war against Tamil separatists even closer to China.
That changed in September, when Rajapaksa allowed a Chinese submarine to dock in Colombo, without informing India, as it was bound to under an existing agreement.
"That was the last straw," a senior Indian diplomat told Reuters.
"He told Modi: "the next time I will keep you informed,"" the diplomat said, a promise that was broken when the submarine visited again in November.
In the build up to the Jan 8 election, India played a role in uniting Sri Lanka's usually fractious opposition, for which the station chief of India's spy agency was expelled, diplomatic and political sources say.
"At least that was the perception of Mahinda Rajapaksa," said M.A. Sumanthiran, a prominent member of the Tamil National Alliance, a coalition of parties close to India. "He managed to get one of their top diplomats recalled."
The Indian government denies any of its officers was expelled. But Sumanthiran said Modi had in a meeting encouraged the Tamil alliance to join forces with others in politics.
"The Indians realised that you can't do business with this man and they were hoping for a change," he said.
On Friday, Sri Lanka said it would review a $1.5 billion deal with China Communication Construction Co Ltd to build a 233 hectare patch of real estate on redeveloped land overlooking Colombo's South Port.
In return, China was to get land on a freehold basis in the development. This is of particular concern for India, the destination for the majority of the trans shipment cargo through Colombo.
"The message is clear, that you do not ignore Indian security concerns," said the Indian diplomatic source.
Modi is looking for similar good news elsewhere in South Asia. He has already visited Nepal twice, becoming the first Indian prime minister to travel to the Himalayan buffer state with China in 17 years, and signing long delayed power projects.
India has muscled into an $8 billion deep water port project that Bangladesh wants to develop in Sonadia in the Bay of Bengal, with the Adani Group, a company close to Modi, submitting a proposal in October. China Harbour Engineering Company, an early bidder, was previously the front-runner.