The U.S. International Development Finance Corporation (DFC) has announced a $553 million investment in the Adani Ports-led container terminal project in Colombo, less than a year after American financial research firm Hindenburg accused the Adani Group of pulling the “largest con in corporate history”.

Addressing a media conference in Colombo on Wednesday, the DFC’s Chief Executive Officer Scott Nathan said the Corporation seeks to drive private-sector investments that “advance development and economic growth while strengthening the strategic positions of our partners.” The DFC has pledged $1 billion to Sri Lanka, the second highest in the region, following India. The investment in the new terminal is aimed at catering to growing economies in the region, by taking advantage of Sri Lanka’s prime location along major shipping routes, according to American officials.

The West Container Terminal is “so impressive”, CEO Nathan remarked, after visiting the facility under construction at the Colombo Port earlier on Wednesday. In September 2021, Adani Ports signed a $700-million deal with the Sri Lanka Ports Authority (SLPA) and Sri Lankan conglomerate John Keells Holdings, to jointly develop the terminal.

The move followed an abrupt decision by former President Gotabaya Rajapaksa — he was ousted from power by a people’s uprising during last year’s economic meltdown — to eject the governments of India and Japan out of the East Container Terminal project at the same port. His government said the West terminal was offered to India as “a compromise”, and that Adani Ports was brought in as New Delhi’s “nominee”.

Also read: ‘Adani project is like a government-to-government deal’

Subsequently, the Colombo West International Terminal Pvt. Ltd was set up as a consortium comprising Adani Ports, John Keells Holdings and SLPA, to execute the project in a Build-Operate-Transfer arrangement spanning 35 years.  Adani Ports holds 51% stakes.

Corruption charges

When asked about the DFC’s decision to invest in a project led by the Adani Group, tainted by serious corruption allegations this year [Hindenburg report in January 2023 and the Organized Crime and Corruption Reporting Project’s findings in August], the top official appeared to underplay the allegations. “I don’t think Adani Ports, the subsidiary, was implicated in any of the allegations you mention,” Mr. Nathan told a group of foreign correspondents on the sidelines of the event.

The United States and the DFC, he said, are “committed to high standards that includes transparency and due diligence of partners.”

Explained | From East to West: Colombo’s ‘compromise’ with New Delhi in Port project

“We are highly focused on anti-corruption and sustainability that are the hallmark of our projects,” he said, adding that he was “very glad” that a consortium, including the Government of Sri Lanka, was executing the Colombo terminal project. While the Hindenburg report published in January 2023 noted that Adani Ports was the only listed entity in the Group “with significant reserves” at INR 86 billion (U.S. $1.05 billion), it pointed to stock prices of the seven key Adani listed companies, including Adani Ports, “mysteriously surge” in the past three years.  In August, Deloitte decided to resign as the auditor of Adani Ports, after flagging concerns over certain transactions highlighted in the Hindenburg report.  

In a post on social media platform ‘X’ following Wednesday’s announcement on the West Container Terminal, Group Chairman Gautam Adani said: “This initiative is set to generate significant employment opportunities, boost economic growth, and enhance regional shipping capacity. The Adani Group is proud to be a part of this journey.” While Mr. Adani has become a key foreign investor in Sri Lanka, he is also looking at projects with India’s other neighbours, including Bangladesh, Nepal and Myanmar. On Wednesday, Mr. Adani shared another post on X (formerly Twitter), about his meeting with the visiting King of Bhutan Jigme Khesar Namgyel Wangchuck. “We are excited to explore opportunities for the Adani Group to contribute to green infrastructure development for one of our happy and warm neighbours,” he said.

Also read: Adani saga worries India’s neighbourhood

Meanwhile, the DFC’s involvement in an Indian conglomerate-led port project in Sri Lanka, assumes significance, coming months after the state-run China Merchants Group announced building a logistics complex at the Colombo Port, with an estimated construction cost of $392 million. Further, the development comes even as India and the United States frequently air their concerns to Sri Lankan authorities over Chinese research vessels calling at the island nation’s ports, including in late October when the vessel Shiyan 6 arrived in Colombo.