China's President Xi Jinping pictured with former Sri Lanka President Mahinda Rajapaksa during a visit to Colombo last year. Pic: AP.

China’s President Xi Jinping pictured with former Sri Lanka President Mahinda Rajapaksa during a visit to Colombo last year. Pic: AP.

On Wednesday, February 19, Sri Lanka’s new government announced that the China-backed Colombo Port City project will be investigated by two committees, after a first assessment showed irregularities. According to Reuters, Prime Minister Ranil Wickremesinghe told Parliament that “all the activities of the Port City deal were done without transparency and without following many legal procedures. The agreement was signed without cabinet approval.”

The project had been approved during the term of former President Mahinda Rajapaksa, who had agreed to the construction of luxury real estate to be built on 230 hectares of land reclaimed from the ocean. The project, launched last September when Chinese President Xi Jinping visited the island, is worth roughly $1.4 billion. It will be developed by China Harbour Engineering Co and financed by China Communications Construction Co.

The fortunes of the mega-project began to change during last year’s electoral campaign. At the time, Mr. Wickremesinghe said that if his side won, they would scrap the project altogether because no proper study of its impact on the environment and of its feasibility had been brought before Parliament.

Things, however, did not turn out to be that straightforward: on January 22, the new government backtracked, saying that the City Port would not be canceled – it only needed to be reassessed. On that occasion, Kabir Hashim, Sri Lanka’s Minister of Highways, Higher Education and Investment Promotion, argued that the project presents serious security issues: “the port city project has to be completely looked at,” reports quoted the Minister as saying. “You cannot have land given on freehold basis to another country in a high security zone.”

According to  Reuters, the agreement endorsed by the former administration allows China Construction Company Co to take over 108 hectares of land, 88 hectares on a 99-year lease and 20 on an outright basis.

Despite the lack of a thorough environment assessment, at the beginning of February Cabinet spokesman Rajitha Senaratne said that the project would go ahead in order to avoid a ‘misunderstanding’ with China. Finally, this week the government announced the decision to have the project further investigated.

What is interesting about the project is that the Colombo City Port has come to symbolize the new government’s rather suspicious attitude toward Beijing. The loudest words were uttered during the electoral campaign, when soon-to-be President Maithripala Sirisena warned against excessive foreign investments: “the land that the White Man took over by means of military strength is now being obtained by foreigners by paying ransom to a handful of persons,” reads his electoral manifesto.

Observers were quick to link the People’s Republic with Mr. Sirisena’s words, for China’s influence on the island’s economy has been steadily growing in the past years. According to Bloomberg, Chinese investments have grown 50 times over the past decade, reaching $490 million in 2012 and turning China into the country’s “top investor, biggest government lender and second-biggest trading partner.”

From Beijing’s perspective, Sri Lanka looks like an attractive, if not essential, partner for its New Silk Road Initiative, a network of highways, railways and sea lanes that China intends to finance in order to spread its capitals and influence across Asia and Europe.

Colombo, in any case, has started to look for alternatives. Only a few days ago authorities signed a deal to acquire nuclear expertise from India. According to  Reuters, “under the deal, India will help Sri Lanka build its nuclear energy infrastructure, including training of personnel,” and in the future, Delhi could sell light small-scale nuclear reactors to the country.