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US believed China bribed way to Hambantota contract

A cable from the US embassy in Colombo last year, revealed how officials believed China bribed senior Sri Lankan government figures, possibly including President Mahinda Rajapakse himself, to win building contracts in Hambantota.

The leaked cable went on to cast doubts on the long term viability of the city to attract investment.

See full text from Wikileaks here.

Sent by Deputy Chief of Mission Valerie Fowler, entitled “Hambantota Port Complex: Will Sri Lanka realize the dream?” the cable said,

"It is likely that corruption and political patronage are significant factors playing into the focus on Hambantota.  Often when Chinese companies win contracts, their success is due in part on their widespread distribution of graft to senior Sri Lankan government officials."

"While it is currently unknown to what extent President Mahinda Rajapaksa is involved in Hambantota development, it seems logical that his hand is also out when commercial enterprises, especially the Chinese, jockey for contracts and projects."

Hambantota, President Rajapakse’s hometown, is currently bidding to host the 2018 Commonwealth Games. The bid is being led by the President's son, Namal Rajapakse.

Doubts over long-term prospects

In the message to Washington, the embassy went on to say that,

“When the GSL master plan is completed, Hambantota will have a new seaport, international airport, rail links, roads, and local infrastructure. Despite this, there are no near-term prospects for significant commercial investment. The 'international' airport will only be used for charter flights given that there is little domestic airline presence and no international interest in using the airport for either passenger or cargo traffic.”

They further noted,

“There seems to be a disconnect between the level of development and the, as yet, lack of long-term commercial-investment interest in the area. Hambantota may very well succeed in building a city with an airport and seaport that do not live up to their potential and local infrastructure that benefits average citizens but does not spark a local economic boom.”

Why Hambantota?

The question over why Hambantota was chosen for development was also raised by the US embassy.

“Hambantota is located in the rural south, far from Colombo, there are no significant industrial industries nearby, so at least initially Hambantota will not benefit from local exports and imports.”

“Greater Hambantota, however, is President Rajapaksa's home region and political base, and this may play prominently in the drive to develop the region.”

As noted in our earlier post “Chinese firm to develop Colombo port amid sweeteners for Hambantota”, Sri Lanka has recently offered tariff concessions to shippers to shippers and liners to divert to Hambantota from Colombo, and has also planned to shift vehicle imports there.

Chinese involvement

China has so far lent Sri Lanka combined $1.24 billion, 85% of the total cost, to build the port and a 4 million metric tonne fuel bunkering facility, all of it built by Chinese workers.

As the US embassy noted, Chinese diplomants have said that workers on the port have been working “twelve hour shifts six days per week, and they generally work through local and Chinese holidays.”

China’s involvement has also been noted by Hambantota’s rival to host the Commonwealth Games, the Australian Gold Coast.

Ron Clarke, mayor of the Gold Coast said,

"We're respecting their bid - there's always that question about what does that Chinese investment mean for the bid, but no-one has the answers to those questions".

See our earlier posts:

Who benefits from Chinese loans to Sri Lanka? (Nov 2010)

Trends in China - Sri Lanka ties (Aug 2011)

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