Sri Lanka's geographical location enables it to provide quick and efficient global and regional connectivity. More than 60,000 ships ply the route served by Sri Lanka annually, carrying two-thirds of the world's oil and half of the global container traffic.

Sri Lanka is located very close to all major ports in the Indian subcontinent, especially those of India, allowing it to provide fast and easy connectivity for the Indian subcontinent through its feeder network.

As such, the country possesses the essential geopolitical advantages to become a key logistics hub in the Indian Ocean. However, Sri Lanka will be able to capitalize on its advantages only if its ports can cater to the requirements of large container ships which shipping lines are adding to their fleet. It also needs to improve the quality of its logistics services, physical infrastructure, technology and new types of services.

Sri Lanka's economy, which contracted by 7.8 percent in 2022 due to a balance of payment crisis, is likely to further decline this year before gradually recovering in 2024.

The country secured a $3 billion four-year bailout from the International Monetary Fund on March 20, which will help it to stabilize its economy and begin restructuring its debt. While Sri Lanka's external bilateral debt accounts for 31 percent of its total debt, its debt to Western multilateral or multilateral development banks account for 27 percent and commercial (majority of them international sovereign bond) debt 42 percent of its total debt.

Amid all this, the US Federal Reserve's aggressive tightening policy has made the US dollar a much stronger currency, exporting inflation to other countries. As a result, the currencies of many countries have been weakening, pushing up the prices of imported goods, including food, fuel and medicine. Many developing countries with big debts have been particularly hard hit by the strengthening US dollar because their external debt stocks and debt service payments are mostly denominated in dollars, making it even harder for them to borrow in the open market to finance their budget deficits.

It is in such circumstances that the Export-Import Bank of China extended the debt payment in 2022 and 2023, and the Chinese side agreed to negotiate a medium- and long-term debt disposal plan with Sri Lanka in a friendly manner, and promised to do its best to promote Sri Lanka's debt sustainability.

Reiterating its position several times, the Chinese side has stressed that China and Sri Lanka are good brothers, good partners and good friends. It has also said it is committed to maintaining friendly relations with Sri Lanka for mutual benefit and emphasized that it will continue to support Sri Lanka's socioeconomic development and provide humanitarian aid to the best of its ability.

Moreover, China has said it will promote pragmatic cooperation between the two countries and jointly implement the Global Development Initiative, and agreed to further strengthen cooperation with local and foreign companies and make more contributions to Sri Lanka's economic recovery by encouraging Chinese enterprises to invest in Sri Lanka and participate in high-quality cooperation under the Belt and Road Initiative's framework to help Sri Lanka.

With China's help Sri Lanka's aspiration of becoming a major logistics hub in the region took a giant leap forward with the launch of a $392 million South Asia Commercial and Logistics Hub in Colombo Port. The 5 million-square-foot logistics hub will be built in the center of Colombo Port and have a storage capacity of 530,000 cubic meters. The construction of the complex is expected to begin later this year, and the complex is expected to be completed by the end of 2025.

The SACLH will offer the full gamut of logistics-related facilities and services such as less-than-container load, multi-country consolidation, container freight station, general warehousing and various other value-added services. Also, the project is expected to provide direct employment for at least 1,800 people and create 10,500 other jobs indirectly.

It will provide better logistics and warehousing facilities and services, enhancing the Colombo Port's competitive advantage and consequently strengthening its status as a logistics hub, by improving the port's services and introducing leading-edge technologies. It's direct foreign investment like this that Sri Lanka needs to boost its economic recovery.

There is no doubt the Chinese enterprises will improve operational and marketing skills, strengthen the market power and commercial relationships, enhance technological expertise and access to cheaper sources of finance, which are of paramount importance for attracting more traffic to Sri Lanka and turning it into an international logistics hub.

The author is Maya Majueran, director of Belt and Road Initiative Sri Lanka, an independent and pioneering Sri Lanka-led think tank.