China to get high dividends from Colombo Port City
China Communications Constructions Company (CCCC), a Chinese government owned company is to get high dividends from the Colombo Port City Project, which covers 233 hectares to be completed in eight years in two stages.
It is located alongside the breakwater of the Colombo Port Expansion Project towards the Galle Face Green.
However there were still unanswered questions on how this project which proposes to give ownership of newly constructed land to a foreign company would affect Sri Lanka’s sovereignty, territorial integrity, freedom and rights of the citizens and as to whether the judicial structure of the country would apply to the newly constructed area.
According to the project plan, access roads, electricity, communication and all other infrastructure facilities together with landscaping constructions including lakes will be constructed by the Chinese company.
170 hectares out of 233 have been identified as an area that can be developedand the rest of the 63 hectares have been allocated for common facilities such as water area, roads and parks.
108 hectares will be handed over to CCCC to cover its investment costs, marketing promotions costs and profits. The Chinese company is to invest US $ 1,337 million as the total construction cost.
Of this reserved land for CCCC, some 20 hectares will be on free hold right basis and the balance 88 hectares on a 99 year lease basis.
The revenue from the leasing of excess land will be shared between the Chinese company and the Ports Authority on 60 to 40 percent basis, the project agreement revealed.
Accordingly, the investor, at the initial stage, owns only the seabed. The procedure in this regard will be leasing the seabed.
With additions of interest to the total project expenditure, the cost will be US$1,918 million. Divided by the land extent owned by the investor company, the investor would spend Rs. 5.8 million for a perch of seabed.
To receive the internal rate of return of the investment as at 16 per cent, one hectare of land extent should be valued at $24 million. The value is Rs. 7.8 million for a perch. Therefore, the minimum value of one perch is Rs. 8 million, a valuation expet told Business Times.
Around $20 billion investment will be made in the second stage of the project within a period of 20 years. The China Harbour Engineering Company will carry out the construction work.
The project plan revealed that the remaining 125 hectares of this reclaimed land will be vested with the Sri Lanka Ports Authority (SLPA).
Of this 62 hectares will be for development and 63 hectares for common facilities such as roads. CCCC will invest $ 1.4 billion on the first phase of this project. A general motor racing track will be built similar to such tracks available in Singapore.
The handing over of the reclaimed land to a Chinese investor rather than at the hands of the State doesn’t constitute a direct benefit to the public, an economic analyst said adding that the government would need to show a significantly higher public purpose for depriving the public of a resource which was freely accessible to them.