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Hambantota Port Phase II: China to get four of the seven berths
The Sri Lanka Ports Authority has agreed to hand over four out of seven berths from the second phase of the Hambantota Port development to a Chinese joint venture that includes a company that is also getting vast tracts of prime property on the Colombo Port City artificial island.
Authoritative sources said negotiations on the terms of the “Supply, Operate and Transfer of Container Terminal Hambantota Port Development Project—Phase II” continued till the last minute on Monday. The agreement was signed the next day in the presence of President Mahinda Rajapaksa and his Chinese counterpart, Xi Jinping. Under the circumstances, it is not possible for the Cabinet to have seen and approved the document before it went through.
It was the first time that such an arrangement for the Hambantota Port was revealed to the public. Sri Lanka Ports Authority (SLPA) Chairman Priyath B Wickrama signed on behalf of Sri Lanka. Chen Fenjian, President of China Communication Construction Company Ltd. (CCCC), and Li Jianhong, Chairman of China Merchants Group (CMG), signed for China. The Sri Lanka Ports Authority has also enlisted CCCC to build Colombo Port City, a 223-hectare artificial island on which it will have effective control of 108 hectares. Both CCCC and CMG are owned by the Chinese Government. They will set up a project company in Sri Lanka to operate the four berths in the Hambantota Port’s new container terminal.
There was confusion this week over what the term “Supply, Operate and Transfer” (SOT) denotes. SOT does not come up on internet searches; the alternative “Build, Operate and Transfer” (BOT) pops up instead.
But an authoritative SLPA source said the arrangement was different from a BOT. Phase II of the Hambantota Port is being completed with US$ 808 million (Rs. 105 billion) loan from China Exim Bank. At the end of construction, the SLPA will transfer four out of seven berths to the Chinese joint venture for a period of 35 years. The Chinese will have control with 53 per cent of shares. The SLPA’s equity will be the remaining 47 per cent.
The Chinese will also get “some container” yards, the source said. These are usually measured in hectares. He could not immediately say how many hectares they will receive. “They will, with their own money, build another yard and supply equipment such as gantry cranes and forklifts at their cost,” he revealed. “They will also construct some administrative buildings.”
The SLPA will put in money, but it is not known how much or by what means it will meet this obligation (another loan, etc.). Under the agreement, the SLPA will earn revenue from leasing out the land and also from royalties on each container.
“It is a complicated agreement,” one official said, refusing to be named. The Chinese Government has also promised to encourage investors to set up industries within the port.
Ministerial sources said the Ministry of Finance and Planning had been concerned about several of the terms. This could not be independently verified from the Ministry as officials refused to comment. The External Affairs Ministry said it had no part to play in the SOT deal and the Attorney General said he would have to check on Monday whether his Department had given its seal of approval to the deal.