By Lakshman I. Keerthisinghe
“Our approach to economic development must be modern, focused and in tune with the global trend”
– Ibrahim Babangida-Nigerian Statesman
Media reported that Sri Lanka, Japan and India had signed an agreement to jointly develop the East Container Terminal (ECT). The joint initiative is estimated to cost between $500 million and $700 million. The signing of the Memorandum of Cooperation (MoC) is significant, given that the countries had been negotiating the deal since last year, with little success. As per the present agreement signed, the Sri Lanka Ports Authority (SLPA) retains 100 per cent ownership of the East Container Terminal (ECT), while the Terminal Operations Company, conducting its operations, is jointly owned, the SLPA said in a statement. Sri Lanka will hold a 51 per cent-stake in the project and the joint venture partners will retain 49 per cent.
The ECT is located some three km away from the China-backed international financial city, known popularly as “port city”, being built on reclaimed land on Colombo’s sea front.“Japan is likely to provide a 40-year soft loan with a 0.1 per cent interest rate,” The SLPA described the “envisaged Japanese loan” as “one of the best loan terms Sri Lanka has obtained”. The 51 per cent stake is also one of the best in SLPA joint ownership endeavours. SLPA’s majority ownership in the new TOC represents a significant step in prioritising national interests,” the statement said.
Details of India’s contribution to the initiative are awaited, but New Delhi’s interest in partnering the project is well known. Over 70 per cent of the transhipment business at the strategically located ECT is linked to India, according to official sources. However, last year, India’s possible role in developing the terminal had become a major flashpoint within the Government. Former President Maithripala Sirisena had opposed any Indian involvement in the project, as roping in foreign actors for developing national assets remains a politically sensitive call in the island, especially among nationalist trade unions.
While Japan had been part of negotiations even last year, the project assumed a predominantly Sri Lanka-India dimension, especially in the local media. Japan has been a long-standing partner of Sri Lanka, and one of Sri Lanka’s biggest donors in the past decades. Japan also helped develop of the Jaya Container Terminal at the Colombo Port, supporting its operations since the 1980s. The three Governments will work out details based on the MoC at joint working group meetings, and advance their cooperation towards early commencement of work and operation of the ECT. As a hub of the Indian Ocean, the development of Sri Lanka and openness of its ports are of great importance. Colombo Port is the leading Port in the region. This joint project reflects the long-standing good will and cooperation among the three countries.
The Government had earlier given two terminals of Colombo Port to China’s CM Ports, and earlier handed over Hambantota Port to the same company in a joint venture in 2017. Some analysts had observed that as Sri Lanka’s finances face difficulties for this development as Sri Lanka will have to buy all the equipment and it is disadvantageous to oppose India either. Out of all Sri Lankan exports, 80 per cent is Indian trans-shipment, India joining Sri Lanka is a huge strength as if India starts another port in India Sri Lanka will lose a lot of business. Thus this is indeed a good arrangement for Sri Lanka to gain 51 per cent ownership without any investment.
Unanimous Cabinet consent has been given but Cabinet will appoint a Committee on certain matters as certain clarifications, such as what are the companies coming in, how the profit margin is going to be set up as well as other details are needed. The port trade unions have opposed India’s role in developing the terminal which has now become a major flashpoint within Government. Gopal Baglay, High Commissioner of India had said that in the present situation, the best way to deepen India-Sri Lanka ties is to implement quickly the deep port project of East Container Terminal,”
In conclusion, the discussion on the ECT is still continuing between the two Governments and China is watching closely. When CICT, another 18ft deep water terminal was handed over to China, there was uproar too however, the CICT is now in lead in cargo business in Colombo. Likewise, ECT also would help Sri Lanka not only to improve trade ties but also will support Sri Lanka to elevate itself from the total country foreign debt which is a staggering US$ 56 billion (in 2019) - a 66 per cent of the country’s GDP. The Sri Lankan Government has to weigh the pros and cons carefully when coming to a final decision with expert advice from reputed economists. This project will boost Sri Lanka/s economic prosperity if properly managed
The writer is an Attorney-at-Law with LLB, LLM, MPhil.(Colombo)[email protected]