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Message: <blockquote data-quote="kukku baba" data-source="post: 20499524" data-attributes="member: 249844"><a href="http://www.forbes.com/sites/wadeshepard/2016/07/31/china-to-sri-lanka-we-want-our-money-not-your-empty-airport/#571b8b901169" target="_blank">http://www.forbes.com/sites/wadeshepard/2016/07/31/china-to-sri-lanka-we-want-our-money-not-your-empty-airport/#571b8b901169</a>Sri Lanka has a debt problem. After more than a decade of taking out  huge loans to build large-scale infrastructure — most of which hasn’t  yet produced adequate returns — the country is now struggling to make  payments, and is looking for another way out. A potential exit strategy was to offer China <a href="http://www.reuters.com/article/us-china-sri-lanka-idUSKCN0X60CH" target="_blank">debt for equity swaps</a>, which Sri Lanka’s <a href="http://www.forbes.com/companies/prime" target="_blank">Prime</a>  Minister Ranil Wickremesinghe <a href="http://www.slguardian.org/2016/07/diplomacy-china-declines-lankas-request/" target="_blank">recently proposed</a>  to China’s Ambassador Yi Xianliang. China was offered varying degrees  of control over some of Sri Lanka’s biggest infrastructure projects,  including Mattala <a href="http://www.forbes.com/international/" target="_blank">International</a> Airport and portions of the Hambantota deep sea port, and Sri Lanka would receive some debt relief. China’s response to this offer was publicized earlier today in Colombo’s Sunday Times: <a href="http://www.sundaytimes.lk/160731/news/htota-and-mattala-china-declines-lankas-request-203012.html" target="_blank">We’re not interested</a>. The Chinese ambassador replied that “it was not possible according to China’s laws.” However, China was clear that it extends its “fullest cooperation”  and that such deals should be conducted via investors on proper  commercial terms. This point is key: while China’s government will not swap debt for  equity they will help clear the road for Chinese companies to take over  key projects in Sri Lanka. IZP, a Chinese informational technology  company, has been put forward as <a href="http://www.forbes.com/sites/wadeshepard/2016/07/18/for-sale-the-worlds-emptiest-international-airport-mattala-international-hambantota-sri-lanka/#229387893a68" target="_blank">a potential purchaser of Mattala International Airport,</a> while COSCO is looking into <a href="http://www.economynext.com/Sri_Lanka_eyes_Chinese_partners_for_Hambantota_port,_Mattala_airport-3-4527.html" target="_blank">expanding operations at the Hambantota deep sea port</a>.     <img src="http://blogs-images.forbes.com/wadeshepard/files/2016/05/IMG_20160218_111424_DCE.jpg" alt="" class="fr-fic fr-dii fr-draggable " style="" />   Not a passenger in sight. It is still the  morning and no more flights are to arrive or depart. Mattala  International Airport may just be the world’s emptiest. Image: Wade  Shepard.   The problem, both for Sri Lanka and for any would-be investor, is  that many of the large projects in question are losing money fast, and  may ultimately prove to be economically unsustainable — at least without  a massive amount of additional investment, more infrastructure, and a  miracle or two. With just two flights per day, Mattala International is  more than likely the <a href="http://www.forbes.com/sites/wadeshepard/2016/05/28/the-story-behind-the-worlds-emptiest-international-airport-sri-lankas-mattala-rajapaksa/" target="_blank">most underused international airport on the planet</a>  and the Hambantota port is also running at severe under-capacity, while  the brand new and fully modern highways that run through this region  are mostly devoid of vehicles.However, not all hope is lost for these projects — yet. Although  China declined a debt for equity swap, their participation in Sri  Lanka’s infrastructure development is more than likely just getting  started. <a href="http://thediplomat.com/2016/05/chinas-jewel-in-the-heart-of-the-indian-ocean/" target="_blank">Colombo Port City</a> has been green-lighted once again and just last week <a href="http://www.forbes.com/sites/wadeshepard/2016/07/27/china-just-asked-for-15000-acres-of-land-in-sri-lanka-for-a-million-worker-sez/" target="_blank">China requested 15,000 acres of land in Hambantota</a>  for the building of a massive, million worker special economic zone.  The latter seems to run flush with the original Hambantota idea: “If you’re going to have a bulk port you need to have industry around  the bulk port to take advantage of it,” said Deshal de Mel, a senior  economist at Hayleys Plc in Colombo. “That is where the whole idea comes  from; that we’ll have industry coming in to kind of match up to the  port. So the shipping port can still be made to work if they can get the  right industries to invest in it.” <a href="http://www.sundaytimes.lk/160320/business-times/sri-lanka-is-on-the-door-step-of-a-public-debt-driven-economic-crisis-186653.html" target="_blank">Sri Lanka’s debt situation is severe</a>. The country is currently in $58.3 billion deep to foreign financiers, and <a href="http://newsfirst.lk/english/2016/07/failed-large-scale-projects-sink-nation-debt/143319" target="_blank">95.4% of all government revenue</a>  is currently going towards paying back its loans. This means that out  of every hundred dollars the government brings in only $4.60 is going  towards essentials like education and public services. Beyond China, Sri Lanka has <a href="http://www.slguardian.org/2016/07/diplomacy-china-declines-lankas-request/" target="_blank">called for proposals</a>  from investors worldwide who may interested in taking on their  Hambantota projects, just in case you’re looking for a challenge.</blockquote>

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