Govt. urged to ‘think before leaping’ into Hambantota Port deal
Several Sri Lankan eminent economists warned this week that the Hambantota port deal with China Merchant Ports Holding Company Ltd would be the beginning of selling the family silver to pay massive debts and could drive the country towards abject poverty while becoming a playground of super powers.
They noted that if this deal is allowed to go through, the country with abundance of unexplored resources will have to face the similar plight of mineral and oil rich West Asia and African countries in the future.
Power blocks like the US, India and China and also Russia are eying Sri Lanka which is located in a strategic geographical position of the Indian Ocean in close proximity to Bay of Bengal and on the silk route.
Economist Dr. Lalithasiri Gunaruwan, former public official Chris Dharmakirthi and senior journalist Mohan Samaranayake urged the government to think twice before signing the Public Private Partnership (PPP) Framework agreement with the Chinese company to re-pay the country’s debts, as this deal could bring disastrous repercussions in the future.
The trio made presentations at a seminar on “Selling Hambantota Port, the fore runner of selling strategic resources” at the Colombo University this week.
It was organised by the Sri Lanka Association for Political Economy together with the Economics Students’ Association of the University of Colombo
Dr. Gunaruwan, senior lecturer at the Colombo University and former Secretary, Transport Ministry, emphasized the need of formulating a strategic plan by a team of experts on how to handle the Hambantota Port project and find out the best option for the country following in-depth negotiations towards a workable solution rather than handing over the port wholesale to a Chinese company.
No proper valuation, no proper procedure no bid documents, no expression of interest, no international were the criterion followed by the government in selecting the Chinese company to hand over an 80 per cent stake of the port on a 99 year lease, he said adding that this deal definitely warrants a future FCID case.
He disclosed that only two Chinese companies were given an opportunity to submit their proposals for the PPP, a fact disclosed in a Business Times story last month.
The first company which has agreed to take up an 80 per cent stake with an upfront (full) payment of US$ 1.12 billion was given the deal while the second company offering a 35 to 65 per cent stake with an initial payment of $740 million and the balance making up a total payment of $ 1.5 billion had been rejected, Dr Gunaruwan disclosed adding that he has necessary documents to prove his claim.
Under the proposal of the selected company, Sri Lanka Ports Authority has no revenue stream for first 15 years of the port operation. But the rejected company offer also allowed the SLPA revenue stream continuously– thus benefitting both the SLPA and the country.
The objective of leasing the port was fuelled by the need for immediate funds. Therefore, though the accepted proposal offers actually less than the rejected proposal, it is an upfront lump sum payment. This indicates the government’s disinterest in the long-term benefits, he pointed out.
The prevailing systems had been bypassed in selecting the prospective investor. According to normal procedure, proposals are subjected to the approval of Technical Evaluation Committee (TEC) and Cabinet Appointed Negotiation Committee, which then would be sent to the Attorney General’s approval and to the Cabinet for its approval.
But on this matter, this Chinese company’s proposal had been accepted by a super committee appointed by the Prime Minister by passing TEC and negotiation reports, he revealed.
Although the Prime Minister has publicly stated that this deal was a debt-to-equity swap and industrialisation and the cabinet approval was given for this purpose, Dr. Gunaruwan said that now it appears that the government is using this money to repay debts, according to the Finance Minister and the Central Bank Governor.
The cost/debt for building the harbour was around $1.5 billion and this swap does not obviously cover the full amount. Under this set up no one can understand the logic behind the government’s decision to hand over the port back to the lender China for 99 years, he added.
Chris Dharmakirti, former chairman of the National Ocean Affairs Committee (NOAC), told the gathering that Sri Lankans have not identified the island nation’s valuable asset base and outsiders were trying to rob our valuable resources with or without the knowledge of the authorities.
The government is acting like the blind in the face of asset-robbing like the Hambantota port deal and valuable maritime resources, he disclosed.
“If we allow this to happen then the country will become a battlefield,” he said adding that Sri Lanka is planning to support a claim under international law for a large area of the Bay of Bengal seabed, abundance with mineral and hydrocarbon resources.
The claims will be assessed by the Commission on the Limits of the Continental Shelf, the United Nations scientific body.
“In the queue of claims by states in the northern Bay of Bengal area, Myanmar is first followed by Sri Lanka,” Mr. Dharmakirti said.
This would be followed by claims by India, Maldives and Bangladesh. Under the UN Law of the Sea Convention (UNCLOS) a country can have continental shelf rights up to 350 nautical miles or 100 nautical miles from the 2,500 metres depth, whichever is higher.
However he disclosed that a Sri Lankan top official — whom he didn’t name – is plotting to surrender Sri Lanka’s claim for the northern part of the Bay of Bengal, which has deep sediment deposits reaching down to 20 km, to India.
The International Seabed Authority, in charge of the seabed outside national jurisdictions, is evaluating applications from countries like China, Japan and India to mine for minerals in the southwest Indian Ocean.
These countries are looking to extract minerals like gold, zinc and copper on the seabed which are needed for modern hi-tech industries like electronics, automobiles and clean energy.
Sri Lanka made its claim on May 8, 2009 and a discussion is to be held on January 17 this year and the local authorities are going to hand over Sri Lanka’s portion in the sea bed to India on a platter, he disclosed.
This is how the international treasure hunting takes place with or without the support of authorities, he added.
Mohan Samaranayake, senior journalist and former Presidential Spokesman said that Sri Lanka is now experiencing the repercussions of neo liberal economic policies introduced in 1970s.
But there is nothing new on these policies which are aimed at robbing assets and resources of under privileged countries, he added.
Leasing a port for a foreign company is not unusual in the ongoing trends in the world trade today. But what is significant in the Hambantota port deal was the silence of powerful countries like US and India which were highly vociferous against the Colombo Port City deal with China during the previous regime.
Sri Lanka needs to strengthen its own entrepreneur and management capacities. There is no other way to enter into international deals. A strong national economy is important before undertaking international deals, he pointed out.