US to invest $500 million in Adani’s Colombo port

The United States has announced a $533 million investment to construct an additional terminal at Colombo port, developed by India-based Adani Group, as Washington attempts to counter Chinese influence in the Indian Ocean Region. 

The US Development International Financial Corporation (DFC), in a statement, said this investment further demonstrates America’s enduring commitment to Sri Lanka’s economic growth and its regional economic integration, including with India. 

Experts believe it is part of the US efforts to counter China’s regional influence. 

“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,” DFC CEO Scott Nathan said. 

Without openly referring to Chinese investment in Hambantota port in the island nation, which attracted criticism for Beijing’s debt-trap policy, Nathan added that the DFC move 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”.

Colombo Port, which is the largest and busiest transshipment port in the Indian Ocean, has been operating at more than 90% utilization since 2021, signaling its need for additional capacity. DFC mentioned that the new terminal will cater to growing economies in the Bay of Bengal, taking advantage of Sri Lanka’s prime position on major shipping routes and its proximity to expanding markets.

This is the agency’s most significant infrastructure investment in Asia and among its most prominent globally. The investment in the deepwater West Container Terminal in Colombo will boost Sri Lanka’s economic growth and its regional economic integration, including with India, a key partner to both Sri Lanka and the US, the DFC statement noted.

The US funding indicates its efforts to loosen Beijing’s grip over Sri Lanka after Colombo splurged on Chinese port and highway project before the country faced an economic meltdown last year, which left it highly indebted to Beijing.

International Development Finance Corporation (DFC) is a US government agency which partners with the private sector to “finance solutions to the most critical challenges facing the developing world today”. It invests across sectors, including energy, healthcare, critical infrastructure, and technology. DFC also provides financing for small businesses and women entrepreneurs in order to create jobs in emerging markets. The recent funding announcement is part of DFC’s total investment of $9.3 billion. 

China, the most significant foreign direct investor in Sri Lanka, invested $2.2 billion in the island country last year. Its investment involves southern Hambantota port that US officials have openly criticized, calling it a part of China’s debt-trap diplomacy.

About the recent investment announcement, DFC shared that it is working with world-class sponsors, John Keells Holdings and Adani Ports & Special Economic Zones Limited (APSEZ), and added that these companies’ local experience and high-quality standards will help support local jobs and make this project a long-term, sustained success for the Indo-Pacific.

Mint reported that 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.