Sri Lanka concerned by China loans, rules out submarine visits

Sri Lanka's newly elected President Maithripala Sirisena (C) arrives for his swearing-in ceremony in Colombo January 9, 2015.

BY BEN BLANCHARD-Sat Feb 28, 2015

(Reuters) - Sri Lanka is concerned with the roughly $5 billion in Chinese loans it has and will send its finance minister to Beijing to discuss the issue, the foreign minister said on Saturday, as he also ruled out future Chinese submarine visits to the country.

New Sri Lankan President Maithripala Sirisena has unnerved China with his re-examination of certain projects that China has invested in, including a $1.5 billion "port city" project in the capital Colombo.

India, which lost out to China in infrastructure development on the Indian Ocean island, was in particular concerned about the security threat posed by Chinese ownership of land, aggravated by the docking of Chinese submarines in Colombo last year.

India had grown increasingly wary of former president Mahinda Rajapaksa's pursuit of closer ties with China, which became a key supporter of the island's economy after its 26-year-civil war ended in 2009.

Speaking in Beijing at the end of a two-day visit, Sri Lankan Foreign Minister Mangala Samaraweera said there were concerns about the manner in which the some $5 billion Chinese loans for his country had been raised.

"During the run up to the last presidential campaign the people of Sri Lanka raised many, many questions about the interest rates especially, and also in certain cases about the manner in which these loans were raised," he told a news conference.

"So we will, as a government committed to transparency, want to go into each of these matters."

The country's finance minister will visit Beijing after President Sirisena's state visit to China, slated for March 26-28, Samaraweera said.

China has built a seaport and airport in the south of the country, raising fears it is seeking influence in a country with which India has traditionally had deep ties.

India's concern grew after the Rajapaksa government allowed the Chinese submarines to dock.

Asked whether there would be any Chinese submarine visits in the near future, Samaraweera said: "I don't see any".

"I really don't know which circumstances lead to some submarines coming to the port of Colombo on the very day the Japanese prime minister was visiting Sri Lanka, but we will ensure that such incidents -- from whatever quarters -- do not happen during our tenure."

Samaraweera said the re-examination of certain projects was actually a good thing for foreign, including Chinese, investors.

"We want to create a rule-based investor climate because we feel that some of the investments which were decided upon by the previous government were not totally given on merit," he said.

(Editing by Louise Heavens)