The US has decided to provide $553 million for the development of the Colombo port’s West Container Terminal (WCT) that is partly owned by the Adani group, in an apparent bid to contain China’s growing footprint in Sri Lanka.
Adani Ports & Special Economic Zone Limited (APSEZ) holds 51 per cent stake in the WCT. Its partners in the venture are the Sri Lankan Ports Authority and John Keells Holdings, a Lankan conglomerate.
The funding announcement was made in Colombo on Wednesday during the visit of the US International Development Finance Corporation (DFC) chief executive officer Scott Nathan.
“It is a 20-year loan at a very competitive pricing,” Karan Adani, CEO of APSEZ, told a news channel. The project will be implemented in two phases and will cost $1.2 billion.
The WCT was offered to India as a compromise after Sri Lanka reneged on an earlier tripartite agreement with New Delhi and Tokyo to develop the East Container Terminal (ECT) of the Colombo port.
The Adani group has long denied accusations that pressure from the Narendra Modi government has helped them secure projects in Sri Lanka.
Set up in 2018 under the Build Act, the DFC is a US federal government agency tasked with furthering the country’s foreign policy goals. It invests across sectors, including energy, healthcare, infrastructure, agriculture and small business and financial services.
The Adanis were quick to seize on the DFC announcement and characterise it as a “ringing endorsement” of the logistics-to-energy conglomerate which has been battling a welter of accusations made by US short seller Hindenburg Research ranging from stock price manipulation to accounting irregularities and poor corporate governance.
Hindenburg accused the Adani group of pulling off the “largest con in corporate history”.
“This is the first time that the US government, through one of its agencies, is funding an Adani project which is a ringing endorsement of the Adani Group. It shows their confidence in the Group’s ability to invest and to create a world class container facility in Colombo Port,” APSEZ said in a regulatory filing with the stock exchanges.
“We see this as a re-affirmation by the international community of our vision, our capabilities and our governance,” Karan Adani said.
The Sri Lankan government is also relieved that the US funding for the terminal means that its sovereign debt burden will not rise.
Scott Nathan, CEO of the US funding agency, said: “Sri Lanka is one of the world’s key transit hubs, with half of all container ships transiting through its waters. DFC’s commitment of $553 million in private-sector loans for the West Container Terminal will expand its shipping capacity, creating greater prosperity for Sri Lanka — without adding to sovereign debt — while at the same time strengthening the position of our allies across the region.”
Nathan’s comment is being seen as a swipe at China for laying a debt trap that engulfed Sri Lanka last year.
The US moved in to finance the project exactly a year after construction work began on the WCT on November 9, 2022, and nearly two years after Sri Lanka awarded the contract to construct the second phase of the ECT to China Harbour Engineering Company (CHEC) in collaboration with a local firm.
China already has a 99-year lease on Sri Lanka’s second-largest port Hambantota which is a key component of Beijing’s Belt and Road Initiative project.
The Adani-led consortium will develop the Colombo West International Terminal (CWIT) on a build, operate and transfer (BOT) basis for a period of 35 years.
