As Nigeria Celebrates China Loan, Sri Lanka’s Debt Makes It Hand Major Port As Part Payment

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The Oasis Reporters

September 12, 2018

 

The Hambantota port on Sri Lanka’s southern coast. Handed over to the Chinese for 99 years by Prime Minister Ranil Wickremesinghe

 

The Hambantota port on Sri Lanka’s southern coast. 
Credit: Lakruwan Wanniarachchi/Agence France-Presse — Getty Images

Considering what President Buhari had to say, that ‘change is not about economic or social progress, but it is in terms of citizens’ personal behaviour’, collecting economic loans begins to sound paradoxical and worthy of examination.

During the FOCAC meeting in China, Nigeria’s President said the country has benefited over $5b from China-Africa Cooperation.

A news report says Nigeria’s partnership with China through the Forum on China-Africa Cooperation (FOCAC) has resulted in the execution of vital infrastructure projects across the country, valued at over $5 billion in the last three years of the current administration.

Then consider the huge cost of collecting Chinese loans by a fellow commonwealth country, Sri Lanka at a time that the US Congress is working on legislation to block any IMF bailout for debt ridden states as punishment for profligate living and inept management.
Collecting a loan for generations yet unborn to pay back is an idea considered by many weak economies. What further compounds the problem is inability to manage the loans and resources.

Take Sri Lanka for example. It struggles to pay its debt to Chinese firms, therefore in order to appease the Chinese firms, the nation of Sri Lanka formally handed over the strategic port of Hambantota to China on a 99-year lease, in a deal that government critics have said threatens the country’s sovereignty.


Ex president Mahinda Rajapaksa. He went on a borrowing binge to build infrastructure after the debilitating civil war.

Prime Minister Ranil Wickremesinghe, with the unpleasant task of handing over a strategic port to the Chinese for 99 years.

In recent years, China has shored up its presence in the Indian Ocean, investing billions of dollars to build port facilities and plan maritime trade routes as part of its “One Belt, One Road” initiative to help increase its market reach.

Along the way, smaller countries like Sri Lanka have found themselves owing debts they cannot pay. Sri Lanka owes more than $8 billion to state-controlled Chinese firms, officials say.

Sri Lankan politicians said the Hambantota deal, valued at $1.1 billion, was necessary to chip away at the debt, but analysts warned of the consequences of signing away too much control to China.
Therefore how many more 99 year leases would it take to pay the debt off?
800 years perhaps?

“The price being paid for reducing the China debt could prove more costly than the debt burden Sri Lanka seeks to reduce,” said N. Sathiya Moorthy, a senior fellow specializing in Sri Lanka at the New Delhi-based Observer Research Foundation.

Sri Lanka has long been in India’s orbit, but its relationship with China has strengthened in recent years. As Western nations accused Mahinda Rajapaksa, the country’s former president, of grievous human rights abuses during the final stages of Sri Lanka’s nearly 26-year civil war, China extended billions of dollars of loans to Mr. Rajapaksa’s government for new infrastructure projects.

In July, the state-controlled China Merchants Port Holdings Company signed a deal with the Sri Lanka Ports Authority to control a 70 percent stake in the Hambantota port, which lies on the southern coast of the country.

Last Friday, Sri Lanka’s Parliament voted to grant tax concessions to a joint venture led by China to develop the port. Recently,the government completed the handover of the port to two state-controlled entities run through China Merchants Port Holdings, which has already made its first payment of $300 million to the Sri Lankan government.

“With this agreement, we have started to pay back the loans,” Prime Minister Ranil Wickremesinghe said in an address to Parliament. “There will be an economic zone and industrialization in the area which will lead to economic development and promote tourism.”

Critics said the lease could set a precedent for Sri Lanka and other countries that owe money to China to accept deals that involve the signing over of territory. After the original port deal was signed in July, Namal Rajapaksa, a member of Parliament and son of the former president, asked on Twitter whether the government was “playing geopolitics with national assets.”

Perceiving a threat to its regional hegemony, India has also watched with suspicion as cranes operated by Chinese firms began to dot the skyline in Colombo, Sri Lanka’s capital. To reset the imbalance, India has partnered with Japan to develop a port on Sri Lanka’s eastern coastline, and it has entered into talks to invest in an airport near Hambantota.

Mr. Xavier said Sri Lanka’s dependency on China has alarmed some countries. “Countries in the region are beginning to realize the long-term costs of Beijing’s massive investment promises,” he said

President Muhammadu Buhari and other African leaders had a FOCAC Round Table meeting with Chinese President Xi Jinping. China is the prosperous country, while the African leaders were there for largesse and handouts.

Highlighting specific projects under FOCAC, the President said through the Chinese support, Nigeria has impressively addressed significant challenges in the areas of infrastructure, human capacity development, power, transport, agriculture and humanitarian assistance.

According to him, ”For Nigeria, our partnership with China through the FOCAC platform, has resulted in the construction of the first urban rail system in West Africa. This $500 million project in Abuja was commissioned in July this year.”

The President also cited the construction and operation of the first rail system in Africa that uses modern Chinese standards and technology.

“This 180km rail line that connects Abuja and Kaduna was commissioned two years ago at a cost of $500 million. Today the rail line is functioning efficiently with no issues – indeed, a sign that Chinese technology is world class,” he noted.

President Buhari said that, ”Nigeria is leveraging Chinese funding to execute $3.4 billion worth of projects at various stages of completion. These include the upgrading of airport terminals, the Lagos – Kano rail line, the Zungeru hydroelectric power project and fibre cables for our internet infrastructure.

”Furthermore, less than 3 months ago, Nigeria signed an additional $1billion loan from China for additional rolling stock for the newly constructed rail lines as well as road rehabilitation and water supply projects”.

The Nigerian leader said that the aforementioned projects had demonstrated the high level of consistency and commitment China has shown in boosting its relations with African countries under the umbrella of FOCAC.

”I am optimistic that this Summit will offer new opportunities that would build on these past achievements,” he said, adding that, ”Nigeria will continue to support the FOCAC initiative and also seek to key into the Belt and Road Initiative as an additional Chinese mechanism to build further cooperation in our quest for infrastructural and economic development.”

President Buhari dispelled insinuations about the so-called debt trap by Chinese government on developing countries, insisting that Nigeria would be able to repay the loans.

Not stated clearly is how Nigeria would repay the debts considering that Nigeria once owed so much and under former president Olusegun Obasanjo, Ngozi Okonjo Iweala succeeded in negotiating some debt forgiveness for the country.

The little that was left for the country to pay was easy, because crude oil sales were booming. Today the black gold is now in a state of declining glory. Even the Chinese with a voracious appetite for crude oil are producing solar powered tricycles and solar panels for the world.

President Muhammadu Buhari went on saying, ”These vital infrastructure projects synchronize perfectly with our Economic Recovery and Growth Plan. Some of the debts incurred are self-liquidating. Our country is able to repay loans as and when due in keeping with our policy of fiscal prudence and sound housekeeping,” he said.

While applauding China for its overall commitment to the ideals of FOCAC, the President acknowledged that since the launch of the Forum in 2000, China and Africa had striven to implement the declarations and follow-up action plans for the benefit of both parties.

It is sobering to note that during the regime of military ruler, Ibrahim Babangida (1985 – 1993), his government constructed the Third Mainland Bridge in Lagos, then Nigeria’s capital. China had no Fly – over bridges at all. Today, China builds Glass bridges and every other infrastructure that the human mind can conceptualize, using their human capital. But Nigeria’s human capital constantly fly out to the indignity of living in country’s developed by other governments and their people. Nigeria neglects it’s own and rather go abroad for basic things that we can produce here.

NYTimes
Other agencies
In – house reporting.

 

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Greg Abolo

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