Politics and International Relations
This paper explores the impact of China belt and Road Initiative (BRI) on foreign direct investment (FDI) in Sri Lanka. In 2013, China introduced belt and road initiative (BRI) and the role played by the infrastructure, had been the most important feature in this initiative for international cooperation and development. China has identified Sri Lanka as one of the significant locations in BRI and they build a strong strategic relationship by providing mega investment projects to Sri Lanka, especially the infrastructure. (In this paper the researcher identified infrastructure as one of the determinants of FDI) After 2010 China became a key provider of loans and grants to Sri Lanka and these finances were allocated to road and transportation, power and energy and ports development. However, through this infrastructure financing, BRI raises the risk of debt distress in Sri Lanka. One example is with Sri Lanka unwilling to service a mega loan that was used to finance the construction of Hambantota port, China agreed to a debt-for-equity swap accompanied by a 99-year lease for managing the port. Therefore, it is vital analyzing the pros and cons of Chinese investments (FDI) in Sri Lanka associated with this initiative and the rationale behind the government of Sri Lanka for debt financing and allowing China to build their maritime and other infrastructure as a form of FDI. Based on these assumptions (i) China as an encouraging and alternative international funder,(ii) China as one of the regional power which increase regional connectivity, the Sri Lankan Governments applied their own reasons and domestic political concerns when considering BRI as well as Chinese investments into Sri Lanka.