US International Development Finance Corporation (DFC) will provide a loan of $553 million to Colombo West International Terminal (CWIT), a joint venture in which India’s Adani Group is a partner. The investment is the largest foreign direct investment (FDI) into Sri Lanka through a single project and the first time the US government has invested in a project being developed by Adani Group.
Further, the loan will also help the US, Sri Lanka and India to foster a legacy of cooperation in the development of sustainable infrastructure such as smart and green ports.
CWIT, which is owned and operated by a consortium – Adani Ports and SEZ (APSEZ), Sri Lanka’s John Keells Holdings and Sri Lanka Ports Authority – would use the fund to develop a shipping container terminal at the Port of Colombo.
The deepwater Colombo West International Terminal in Colombo is the US government agency’s largest infrastructure investment in Asia, and among its biggest globally. It will bolster Sri Lanka’s economic growth and “its regional economic integration, including with India, a key partner to both countries,” DFC said in a statement.
The funding is part of a global acceleration of DFC investments that totaled $9.3 billion in 2023. A US official described the Sri Lanka port financing as emblematic of the US commitment to be more engaged in development projects across the Indo-Pacific.
China had invested about $2.2 billion in the island nation as of the end of last year, its biggest foreign direct investor. US officials have publicly criticized Sri Lanka’s little-used southern Hambantota port as unsustainable and part of what it calls China’s “debt-trap diplomacy.”
DFC said it will be working with sponsors John Keells Holdings Plc and Adani Ports & Special Economic Zone Ltd., relying on their “local experience and high-quality standards.” Colombo’s port is one of the busiest in the Indian Ocean, given its proximity to the international shipping routes. Nearly half of all container ships pass through its waters. The DFC said it’s been operating at more than 90% utilization for two years and needs new capacity.
Karan Adani, Whole Time Director and CEO of APSEZ said: “When completed, this project will transform the socio-economic landscape, not just in Colombo but across the island, through thousands of direct and indirect new employment opportunities and by massively boosting Sri Lanka’s trade and commerce ecosystem. The project will transform us too, as it comfortably aligns with APSEZ’s journey to become the largest container terminal operator in the Indian subcontinent region”.
“Today, we are the largest integrated transport utility in this part of the world, one of the world’s largest port developers and operators, and India’s largest container terminal operator with a market share of over 40%,” Adani said, adding, every third container moving from India’s container ports is handled by APSEZ.
Adani Group investments
The US funding may serve as an endorsement for the short seller-stung Adani Group, as well as the controversial port project in which it holds a majority stake. The conglomerate has been fighting a raft of corporate fraud allegations leveled by Hindenburg Research and various media investigations, which it has repeatedly denied.
Its energy and port investments in Sri Lanka were criticized last year by some local lawmakers as opaque and closely tied to New Delhi’s interests. The Indian billionaire — a long-time supporter of Indian Prime Minister Narendra Modi, who has challenged China in past public speeches — denied these claims, saying the investments addressed Sri Lanka’s needs. The US official declined to comment specifically on the allegations, saying only that DFC deployed strict due diligence in selecting projects.
DFC, a development finance agency launched under the Trump administration, was established to aid developing nations while advancing US foreign policy goals. It struggled at first to stake out projects around the world due to the Covid-19 pandemic.
But funding has accelerated in recent years and the agency has helped Washington close the development spending gap with China’s much more higher-profile Belt and Road Initiative, according to a new report from the AidData institute at William & Mary in Virginia. The DFC’s funding will create “greater prosperity for Sri Lanka – without adding to sovereign debt – while at the same time strengthening the position of our allies across the region,” said Scott Nathan, the DFC’s chief executive officer.
The consortium is developing CWIT on a build, operate and transfer (BOT) basis for a period of 35 years. The development of this terminal will reinforce Colombo Port’s position as the primary hub in the region and is expected to elevate its ranking to 20th among the world’s top container terminals. When commissioned, CWIT will be the largest and deepest container terminal in Sri Lanka. With a quay length of 1,400 metres and an alongside depth of 20 metres, CWIT will be equipped to handle ultra-large container vessels with capacities of 24,000 TEUs.
(With additional inputs from Bloomberg. The reporter is in Colombo at the invitation of the Adani Group.)