Sri Lanka shuns China to hand over Beijing-funded airport management to Indian, Russian companies 

In a possible diplomatic victory for India, Sri Lanka has decided to hand over management of its $209 million Chinese-built airport to two companies from India and Russia.

The step taken by the Sri Lankan Cabinet is a positive change at a time when the cash-strapped island nation is heavily dependent on Chinese loans for major projects.

Last week, the Sri Lankan Cabinet handed over the airport to Shaurya Aeronautics (Pvt) Ltd. of India and Airports of Regions Management Company of Russia for 30 years, a move clearly showing India regaining closeness with its immediate neighbour over China.

The airport in question is Mattala Rajapaksa International Airport (MRIA), located in Mattala town, about 18 km from Hambantota. 

The airport was built in the country with funds from China EXIM Bank but since its opening in 2013 controversies have been roiling the facility due to less number of flights, environmentally sensitive location and continuous financial loss.

The USD 209 million facility was once dubbed the “world’s emptiest airport” due to a lack of flights and still has no proper scheduled plane operation.

It was built during the tenure of former president Mahinda Rajapaksa with high-interest Chinese commercial loans and since 2019 the government has been trying to find commercial partners to manage it amid heavy losses.

Mahinda Rajapaksa’s tenure witnessed Sri Lanka borrowing heavily from China, moving away from its old friend India, for the construction of several projects which eventually became   commercial failures.

The location of the airport also stoked controversy since it was present in the middle of a migratory route for birds, with several aircraft forced to ground after striking airborne fowl.

Struggling to operate, Sri Lanka’s military was even forced to deploy troops to move away deer, wild buffalo and elephants from the runway to ensure flight movement.

Over time, Air Arabia, Flydubai and even Sri Lankan Airlines quit operating from the isolated airport.

Sri Lankan Airlines, the national carrier of the country, earlier said it saved $18 million annually by not flying to the isolated airport.

Sri Lanka witnessed a massive financial crisis in 2022 with countrywide protests against the then government for mis-governance and economic disasters.

Experts partly blamed debt to China for the unthinkable crisis which prompted Sri Lanka to default on its $46 billion foreign debt in 2023.

In 2017, unable to repay a huge Chinese loan, Sri Lanka allowed China Merchants Port Holdings to take over a nearby port at Hambantota, reported The Economic Times.

The deal raised fears over Beijing’s “debt traps” and its impact abroad after Sri Lanka was forced to handover the port for a 99-year deal to the Chinese company.

Concerns were raised over China’s growing influence in the South Asian region and its way of using debt to exert control over countries and its strategic assets.

The latest development around Mattala Rajapaksa International Airport shows Sri Lanka slowly moving closer towards its trusted friend India, a relationship which was a victim of Chinese debt influence.

As per the website of the Indian Embassy in Sri Lanka, 11 Lines of credit (LOC) have been extended to Sri Lanka by the Export Import Bank of India in the last 15 years.

India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC. India was Sri Lanka’s largest trading partner with an overall bilateral merchandise trade of US$ 5.45 billion in 2021. 

Merchandise trade between India and Sri Lanka stood at US$ 3.6 billion in 2020. 

The significant increase (about 48 %) in bilateral trade in 2021 as compared to 2020 reflects the deepening of the comprehensive commercial engagement between India and Sri Lanka.

Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force and more than 60% of Sri Lanka’s total exports to India over the past few years have used the ISFTA benefits.

Interestingly, only about 5% of India’s total exports to Sri Lanka in the past few years have used the ISFTA provisions, thereby indicating their overall competitiveness in the Sri Lankan market, the Indian Embassy website said.

In addition to being Sri Lanka’s largest trade partner, India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to the Central bank of Sri Lanka, the total FDI from India so far exceeds US$ 2.2 billion. In 2021, India was the largest source of FDI which amounted to US$ 142 million. The main investments from India continued to be in the areas of petroleum retail, tourism & hotels, manufacturing, real estate, telecommunications, and banking & financial services.


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