China aims to build houses, roads in Sri Lanka north to extend sway

By Shihar Aneez

COLOMBO (Reuters) - China wants to build houses and roads in Sri Lanka's north, much of which is in a state of disrepair nearly a decade after the end of civil war, Chinese and Sri Lankan officials said, in a bid to expand it influence beyond the island's south.

China's latest push in the Indian Ocean island nation comes despite criticism that a big Chinese port project and related infrastructure in the south are dragging the country of 21 million people deep into debt.

Luo Chong, chief of the political section at China's embassy in Colombo, said China wanted to help with reconstruction in Sri Lanka's north and east, the centre of a 26-year war between the government and ethnic minority Tamil separatists that ended in 2009.

"Since the situation is different now, we are willing to have more projects in remote areas in the north and east with the support of the Sri Lankan government and from the Tamil communities," he told Reuters.

In April, state-run China Railway Beijing Engineering Group Co Ltd won a more than $300 million project to build 40,000 houses in the northern district of Jaffna. China's Exim bank was to provide the financing.

But the project has been halted after residents demanded brick houses instead of the concrete structures planned by the Chinese firm, saying they preferred their traditional dwellings.

That has given an opportunity for China's old rival India to step in. M.A. Sumanthiran, a legislator from the regional Tamil National Alliance, said authorities had opened negotiations with India for the housing project.

India has already built 44,000 houses in the north in the first phase of reconstruction through a grant to Sri Lanka and has planned to rebuild Palaly airport and Kankesanthurai harbour, both of which were heavily damaged in the war which ended with the defeat of the guerrillas.

Two senior ministers in the Sri Lankan cabinet told Reuters that China had offered to build houses, roads, and water storage facilities at a cost lower than offered by its competitors.

"They are willing to take up even rural infrastructure projects like road networks and water projects and expressed their willingness to complete them faster," said one of the ministers who declined to be identified because of the sensitivity of engagement with China.

India has longstanding ties with Sri Lanka, located just off the tip of southern India, bound by cultural and ethnic links with Sri Lanka's Tamils, many of whom live in the island's north and east.

But in recent years China has swept in, building ports, power plants and highways in the island that sits near busy international shipping lanes and is seen as part of China's String of Pearls strategy of building a network of friendly ports across Asia.

(Reporting by Shihar Aneez; Editing by Sanjeev Miglani, Robert Birsel)