Chinese Checkers


On Friday, this newspaper, based on a Committee on Public Enterprises (COPE) meeting held on Wednesday, carried a story under the heading ‘H’tota Port Foreign Loan Records Missing.’

In respect of Hambantota Port (HP) Central Bank of Sri Lanka’s (CBSL’s) 2017 Annual Report said, “On 29 July 2017, SLPA (Sri Lanka Ports Authority) and the Government entered into a concession agreement with China Merchants Port Holdings Company (CMPort) to improve operational efficiency and future development activities of HP.

Accordingly, CMPort agreed to invest up to USD 1,120 million in port and marine related activities at HP. As per the agreement, port operations at HP will be carried out by two companies jointly owned by the CMPort and the SLPA, Hambantota International Port Group (Pvt) Ltd. (HIPG) and Hambantota International Port Services Company (Pvt) Ltd. (HIPS).

SLPA owns 15 per cent and 50.7 per cent of the HIPG and HIPS. The agreement is for a 99-year period and SLPA is entitled for royalty payments for container and break-bulk handling activities at HP.”

In effect, CMPort, a company owned by the Chinese Government, on a 99-year lease for USD 1,120 million is operating HP. Further, CBSL in a statement issued on 26 December 2017 under the heading ‘Proceeds from CMPort Received on Account of Handing Over of Operations of HP,’ said, “Subsequent to the agreement signed between SLPA and CMPort, USD 292.1 million was credited to the US dollar account of Government of Sri Lanka (GoSL) maintained at CBSL.”

Therefore, as at 26 December 2017, the Chinese had paid USD 292.1 million to the GoSL and not to the SLPA, as part payment of the USD 1,120 million HP lease agreement, leaving a balance of USD 827.90 million yet due to GoSL.

CBSL’s 2018 Annual Report in respect of the balance USD 827.90 million dues said, “FDI inflows in 2018 were mainly received by HIPG (USD 828 million) of which USD 682 million was received by the Government as proceeds of the long lease of HP during the year.” Therefore, the balance USD 827.90 million due from the Chinese HP was also received by GoSL and not SLPA. SLPA established by an Act is fully owned by GoSL.

Meanwhile, Finance Ministry’s 2018 Annual Report said, “The whole port of Magam Ruhunupura Mahinda Rajapaksa (HP) was leased during 2017 to CM Port.” HP encompasses 15,000 acres.

According to the website ‘’ (HTPMN), “In October 2006, SLPA signed a Memorandum of Understanding  ‘concerning Hambantota Port Development Project (Phase I) detailed design works’ with a Chinese consortium comprising China Harbour Engineering Company (CHEC) and Sinohydro Corporation Limited.”

From February to March 2007, (then) President Mahinda Rajapaksa visited China, where the Hambantota project was discussed. A few days after the visit, CHEC signed the Phase I construction contract project with SLPA at the Presidential Secretariat, Colombo. Construction commenced in October 2007. The contract was worth USD 361 million, but Phase I’s actual cost increased to USD 508 million by the time it was completed. According to SLPA, two loans were obtained from China Exim Bank (CE) for Phase I, a USD 307 million commercial loan at a fixed 6.3 per cent rate and a 960 million RMB (USD 141 million) concessional loan at 2 per cent interest rate.

Phase I was completed in 2012. By December 2010, CHEC already signed an ‘engineering, procurement, and construction’ contract for Phase II. Phase II’s total cost was initially estimated at USD 808 million, later raised to USD 885 million. It was funded by a mix of three commercial and preferential loans from CE. These included a USD 600 million loan with a 2 per cent interest rate, a USD 65 million loan with a 6.5 per cent commercial interest rate, and a 1 billion RMB (USD 143 million) concessional loan at a 2 per cent interest rate. Together with the two loans for Phase I, between 2007 and 2014, five loans were obtained from CE to finance various parts of the project.

HTPMN is funded by the Hong Kong University of Science and Technology, The Australian National University, Lund University, and the Raoul Wallenberg Institute of Human Rights and Humanitarian Law, Sweden.