President Mahinda Rajapakse marked a key milestone in the construction of the 1.5 billion-dollar port in the southern Sri Lankan town of Hambantota with a message of goodwill to all nations.

"This port will symbolise our non-alignment and friendship with all," the president said at a ceremony to mark the completion of the first phase of the deep-sea port.

"The step forward we take today as a nation will be one that will see international economic cooperation built through mutual trust, respect and friendship."

Sri Lanka is part of the 118-member Non-Aligned Movement, a group of states considering themselves not aligned formally with or against any major power bloc.

Its neighbour and biggest trading partner, India, is believed to be concerned that Hambantota is part of a Chinese policy to throw a "string of pearls" geographical circle of influence around India.

China is also developing port facilities in Bangladesh, Myanmar and Pakistan, and has plans for rail projects in Nepal and Sri Lanka.

"Indian threat perceptions have grown as China has become more active in South Asia," said Eurasia Group's Asia analyst, Maria Kuusisto.

"New Delhi sees this Chinese manoeuvring as an incursion into its historic sphere of influence, and is consequently trying to outbid the Chinese for strategically important infrastructure projects," she said.

Sitting along the ancient "Silk Road" trading route and one of the world's busiest shipping lanes, the Hambantota port is intended to boost Sri Lanka's economy which is recovering after decades of ethnic conflict.

Partly funded by a soft Chinese loan of 300 million dollars, the first phase of the deep-sea port is scheduled to open in November. Hambantota is also the home constituency of Rajapakse who became president in November 2005.

Rajapakse said he wanted to see the country's per capita income double to 4,000 dollars in the next five years.

The government hopes that by the time the second phase of the port is completed in 2014, it will help attract foreign investment in shipping and related business opportunities.

The Sri Lanka Ports Authority aims to service around 2,500 of the 70,000 cargo ships that ply the East-West sea lane every year.

Last year, China overtook Japan as Sri Lanka's biggest lender, providing 1.2 billion dollars in loans.

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