Aitken Spence port bid in our national interest

It is extremely alarming to note recent media reports of some officials at the Sri Lanka Ports Authority (SLPA) pushing to offer the Colombo South Port Development Project to Hutchison Port Holdings of Hong Kong, contradictory to the recommendations made by the Cabinet-Appointed Negotiating Committee (CANC) and the Technical Evaluation Committee (TEC) to award the project to the consortium made up of Aitken Spence and Port of Singapore Authority (PSA).

On the basis of the financial bid that was read out by the government in the presence of the bidders, which was certified by the bidders who were present, the financial bid of Aitken Spence and PSA was the highest. Its bid quoted US$195.6 million in net present value of the minimum royalties to be given to SLPA while the bid from Hutchison had only quoted US$173.5 million.
Aitken Spence-PSA was also ranked highest in the technical report with 78 marks, while Hutchison Port Holdings of Hong Kong came in second with only 69 marks.

The tender document specifically states that the request for proposal should be without material deviation and that a material deviation is one whose rectification would affect unfairly the competitive position of the other bidders. Considering the fact that a tender is a transparent process, accepting an unsolicited proposal would seriously affect bidders who have strictly followed the document.

The fact is that the Aitken Spence PSA consortium has not only guaranteed to generate the volumes presented in the request for proposal, but it has also come up with a plan to generate volume over and above the stipulated container throughput.

The alleged attempts by some SLPA officials to promote the Hutchison bid gravely undermine due process and transparency in awarding a project of obvious national importance. Indeed, the questionable delay in implementing the recommendations made by the CANC and TEC has already threatened to adversely affect the country’s relationship key donor entities and hurts Sri Lanka’s efforts to promote itself as an attractive destination for international investment, especially for infrastructure projects.

An attempt to award the project to Hutchison- a foreign company at the expense of the bid by Aitken Spence and PSA, in which the former has a shareholding of 70%, would be in direct conflict with the policies brought forward by President Mahinda Rajapaksa. Under the plans espoused by Mahinda Chinthana, preference has been given for local ownership as against foreign ownership.

In fact, the request for proposals of the Colombo South Port Development Project which were circulated through a public tender, specifically granted preference to local bidders. In the evaluation criteria too marks have been allocated to participation of local partners.

Aitken Spence is a highly respected corporate leader in Sri Lanka. It is the only company in the country to be ranked amongst the 200 best under-a-billion US dollar companies outside the US for three consecutive years. Aitken Spence took Sri Lanka’s maritime services sector to new heights with its successful port efficiency management project at Durban, South Africa- Africa’s busiest port.

In this context, a potential blemished move towards handing over the South Port project to Hutchison may well open a can of worms to the government and its allies who have repeatedly made public its commitment to promoting local ownership and local enterprise.

Hutchison, which operates a dozen port terminals in China, is widely believed to have close ties to the Chinese government. It is a known fact that it has been prevented from bidding for Indian home ports by the government of India, due to strategic security concerns.

Seventy percent of the volumes handled in the port of Colombo are transhipments, of which ninety percent is from India.

Obviously, India as a government would not be happy to see their containers moving through a port which is owned or managed by a Chinese port operator. The booming Indian economy offers tremendous potential for Colombo to attract greater levels of transhipment traffic. Neither the delay in the development of the South Port nor highly questionable attempts to promote the Hong Kong-based bidder would help Colombo.

Whilst Singapore is the predominant hub of Southeast Asia, Colombo continues to be the hub of South Asia. Singapore mainly competes with Malaysia’s Port of Tanjung Pelepas in Johor for transhipment traffic that originates predominantly from South East Asian countries such as Thailand, Philippines and Vietnam. In actual fact, far from being a competitor to Colombo, PSA as a minority partner in a Sri Lankan-led venture would actually bring in unrivalled expertise and state-of-the-art technology to Colombo.

As a matter of fact, Port of Colombo competes with Westport of Malaysia, in which Hutchison is a 30% shareholder. From practically no connectivity five years ago, Westport now boasts 12 feeder calls to India per week and 10 feeder calls to Bangladesh pe week. It prices a transhipment move between US$ 23-40 per twenty-footer, which is very competitive. In addition it has plentiful land to expand their capacity unlike Singapore where land is limited and expensive.

PSA is a global leader in the ports and terminals business with investments in 25 port projects in 14 countries. In 2006, PSA handled 51.29 m TEUs of containers at all its ports around the world. PSA’s flagship Singapore Terminals has a port operating history of over 90 years and operates the world’s largest integrated port and transhipment hub. PSA also owns the leading port operating software in the world.

The country’s shipping industry veterans point out that the delay in the development of the new container terminal in Colombo severely compromises Colombo’s efforts to maintain its position as the predominant transhipment hub in South Asia.

Some analysts fear that unless Colombo steps up a gear it could well lose its hub status to rival ports India who are building new capacity faster while taking concerted efforts to attract major shipping lines.

Authorities should ensure that they sustain integrity and transparency in the process by doing away with attempts to promote a financially and technically less attractive bidder on questionable factors outside of the criteria for evaluation clearly mentioned in the tender and followed by the CANC and TEC.