Mr. Rajapaksa’s advisers had laid out a methodical approach to how the port might expand after opening, ensuring that some revenue would be coming in before taking on much more debt. But in 2009, the president had grown impatient. His 65th birthday was approaching the following year, and to mark the occasion he wanted a grand opening at the Hambantota port — including the beginning of an ambitious expansion 10 years ahead of the Port Authority’s original timeline. Ports Authority officials, unwilling to cross the president, quickly moved ahead anyway. The Hambantota port opened in an elaborate celebration on 18 Nov, 2010, Mr. Rajapaksa’s birthday. Then it sat waiting for business while they had not taken into account a large boulder that partly blocked the entrance, preventing the entry of large ships, like oil tankers, that the port’s business model relied on. China Harbor blasted the boulder a year later, at a cost of $40 million, an exorbitant price that raised concerns among diplomats and government officials. By 2012, the port was struggling to attract ships — which preferred to berth nearby at the Colombo port — and construction costs were rising as the port began expanding ahead of schedule.   [3]

Between 2009 and 2014 the country’s total government debt tripled and external debt doubled, amounting to $64.9 billion — $8 billion of which is owned by China. 95.4% of all government revenue went towards debt repayment, with a third of all earnings going to China. This dire situation resulted in a $1.5 billion IMF bailout in 2017. The rising debt and project costs, even as the port was struggling, handed Sri Lanka’s political opposition a powerful issue, and it campaigned heavily on suspicions about China. Mr. Rajapaksa lost the election in 2015. [2][3]

The incoming government, led by President Maithripala Sirisena, was eager to reorient Sri Lanka toward India, Japan and the West. But officials soon realized that no other country could fill the financial or economic space that China held in Sri Lanka. Government officials began meeting in 2016 with the Chinese counterparts to strike a deal, hoping to get the port off Sri Lanka’s balance sheet and avoid outright default. But the Chinese demanded that a Chinese company (either China Harbor or China Merchants Port) take a dominant equity share in the port in return— writing down the debt was not an option China would accept. China Merchants got the contract, demanding 15,000 acres (6,070 ha) of land around the port to build an industrial zone and arguing that the port itself was not worth the $1.1 billion it would pay for its equity — money that would close out Sri Lanka’s debt on the port.

As it’s reported that Sri Lanka's government has signed a framework agreement for a 99-year lease of the Hambantota port with a company in which China will have 80 percent ownership. Officials also plan to set up a nearby industrial zone where Chinese companies will be invited to set up factories. Farmers in the Hambantota area began protesting because they feared their land would be taken to build the proposed industrial zone next to the port; politicians began objecting to the “sacrifice of sovereignty” that would come from selling a key piece of infrastructure; India began chirping about how China is wrapping them up in a ‘String of Pearls’ by developing ports around their maritime periphery; and the issue very publicly polarized the populous.  [4]

On 7 Jan 2017, hundreds of demonstrators, mainly villagers and monks, protested against leasing the lands where people live and do their farming. The clashes took place as Prime Minister Ranil Wickremesinghe was attending an opening ceremony for the industrial zone in Amabalantota, 22 kilometres from Hambantota.  [5] Government supporters, armed with clubs, first attacked protesters organised by the opposition and led by Buddhist monks. The protesters responded by throwing rocks.[6]  A group that appeared to have been transported to the area by the government joined in attacking the protesters with poles. [7]  Police used tear gas and water cannons to try to break up the clashes. [8][9]  Hospital authorities said at least 21 people were injured in the protests. According to police, 52 demonstrators were arrested. [10]

The government denied the protesters’ claim and said opposition was driven by former president Mahinda Rajapaksa’s political ambitions. Rajapaksa, who was trying to make a political comeback, had publicly criticized the plan, saying it will deprive people of agricultural land. A court had issued a restraining order on the protest, saying it could lead to unrest, but the protesters defied it. [7]

After nearly a year-long showdown that brought China and India into the ring and sparked tensions and even outright violence between the various facets of Sri Lanka’s political spectrum, China Merchants Port Holdings Co., the state-owned Chinese port operator, agreed to pay $1.12 billion for a 70% share of the Hambantota port for 99 years, a portion of which is to be put towards a cut of a new company called the Hambantota International Port Services Company (HIPS), and the remaining $146.342 million put into a bank account to cover operational expenses. China Merchants also agreed to invest an additional $600 million into the development of the struggling port, which had incurred $300 million in losses by 2017. [4]

The Sri Lanka Ports and Shipping Minister Mahinda Samarasinghe, in a recent interview with the Daily FT [11], recapped the success of concluding the mega-lease deal of Hambantota Port, which he identified as critical, and outlined plans for the development of other ports in the country aimed at enhancing Sri Lanka’s hub status and socio-economic development.  “When I assumed office as Minister of Ports and Shipping, negotiations were for an 80:20 equity arrangement. However, I ensured that the Government has a larger equity stake without compromising the $1.12 billion investment. We were successful in securing a stake of 30.1%, with CMPort getting 69.9%. Under the former 80:20 equity arrangement, the investment was to be $1.12 billion, which is 80% of $1.4 billion, the valuation of Hambantota Port. When we increased our equity, the money coming in to the Treasury was reduced to $974 million, but we still insisted on an FDI of $1.12 billion, and negotiated for the additional $146 million as an investment. We also got CMPort to agree on the setting up of two Sri Lankan joint venture companies, for the overall operations of the Hambantota Port…More importantly, the inflow of nearly $1 billion over the Hambantota Port lease has also boosted the reserves. This puts Sri Lanka in a better position to face the challenge of debt repayment, starting from next year.”

Deputy General Manager of CMPort considered Hambantota as “one of the best models similar to Shekou (Shenzhen)[12]   in that year”. Former Ambassador of China to Sri Lanka reaffirmed the tremendous exemplary role of Hambantota Port to the other projects along the “Belt and Road Initiative” countries in CCTV. [13]

This port is located very close proximity to the major international east-west shipping route and well positioned at a strategic location on maritime gateway to India. Large number of ships passes Sri Lanka daily along this shipping route and creates good business opportunities for providing services like supply of fuel, water, crew change in addition to the usual port operations.

On domestic trade perspectives, it is better positioned with direct roadway connection to the southern, central and eastern areas of the island and serves Southern half of the island through linking with the Central and Eastern province by roads.

The harbor area is basically protected by 312m and 988m long two breakwaters. An access channel of 210 m width and 17m depth is provided with a turning circle of 600m diameter and 17m deep to facilitate vessels up to 100,000 DWT. (http://www.slpa.lk/port-colombo/mrmr)

China Merchants Port Holdings Co., the state-owned Chinese port operator, will agree to pay $1.12 billion for a 70% share of the Hambantota port for 99 years, a portion of which is to be put towards a cut of a new company called the Hambantota International Port Services Company (HIPS), and the remaining $146.342 million put into a bank account to cover operational expenses. China Merchants has also agreed to invest an additional $600 million into the development of the struggling port, which has so far incurred $300 million in losses.