Sri Lanka, China sign $350 mln oil, highway deals

Sri Lanka, China sign $350 mln oil, highway deals

COLOMBO, Aug 14 (Reuters) - Sri Lanka and China`s Exim Bank signed deals worth more than $350 million to build a highway and an oil bunkering facility near one of the world`s biggest shipping lanes, Sri Lanka`s Foreign Ministry said on Friday.

The bunker terminals will be built at the Hambantota port on Sri Lanka`s southern coast, where the state-run Exim Bank has already pledged $360 million to the initial construction phase being carried out by Chinese firms.

The other agreement will finance the building of highway from the Sri Lankan capital Colombo to the international airport 30 km north in Katunayaka. Currently, the journey can take hours because of the narrow, traffic-clogged roads.

`The signing of the two agreements will pave the way for much needed infrastructure requirements which will have an immense impact on the country`s future socio-economic development,` the ministry said.

China in July won the rights to Sri Lanka`s first exclusive economic zone, located in Mirigama with easy access to the Colombo port and airport.

Hong Kong-based conglomerate Huichen Investment Holdings Ltd. will pay $28 million to build the turnkey business park, where Chinese firms can set up shop.

It follows a model China has used successfully in African nations, to house manufacturing and other businesses alongside their mainstay mineral and resource extraction firms.

China and India are competing to win lucrative and strategic investments in Sri Lanka since the military defeated the Tamil Tiger separatist rebels and ended a 25-year war in May.
Both countries backed President Mahinda Rajapaksa`s government when it came under Western-led criticism for refusing to slow its offensive while the Tigers held more than 100,000 civilians hostage in a tiny war zone.

India is wary of the Chinese beachhead in Hambantota, widely viewed as part of China`s `string of pearls` policy to give it coaling stations around the region. New Delhi views it as part of its giant neighbour`s plans to strategically encircle India.

India in its budget this year has pledged a minimum 5 billion Indian rupees ($104.6 million) to Sri Lanka`s post-war development and has already staked a claim to do much of the construction in the former war zone in the north.

China meanwhile has offered an $891 million, 20-year loan with a 2 percent interest rate to build the second and third phases of the 900 megawatt coal-fired Norochcholai power plant.

Sri Lanka`s $40 billion economy this year is expected to see foreign direct investment surpass 2008`s record $889 million. ($1=47.81 Indian Rupee) (Additional reporting by Shihar Aneez Editing by Michael Urquhart)

[China meanwhile has offered an $891 million, 20-year loan with a 2 percent interest rate to build the second and third phases of the 900 megawatt coal-fired Norochcholai power plant.]

does it really need $891 million? or is it a typo? if it does costs that much, since it is a Tamil aria, what kind of return we are expecting to receive annually from Tamils......? if you do the math, we need over 518 million rupees a year to pay off the loan.. lets tell the tamils to use the 'Lambuwa' and we can use the money in the south.