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Hambantota project: Stinging protest by Ports Minister
View(s):Ranatunga alleges draft deal gives unilateral powers to Chinese company
The draft privatisation agreement for Hambantota Port lets a private entity unilaterally decide port fees, disregards the value of the land to be transferred under the deal and grants sole discretion to the company or its nominees to carry out development within a 50km radius of the port.
The details were revealed in a stinging letter of protest sent this week by Ports Minister Arjuna Ranatunga to Special Projects Minister Sarath Amunugama, who heads a ministerial committee overseeing the privatisation. The Ports Minister has objected to several other clauses in the concession agreement. The contract is due to be signed between the Sri Lanka Ports Authority (SLPA) and the China Merchants Port Holdings Company (CMPort).
The proposed agreement will transfer the Hambantota Port to a private company to be set up for the purpose. CMPort will hold 80 percent of its shares while the SLPA will have just 20 percent. This could lead to the company operating as a separate authority, the Ports Minister warns.
The concession agreement does not list any conditions related to the return of Hambantota Port to the Government. This is a clear departure from previous Public-Private Partnerships (PPPs) the SLPA has entered into.
“As far as I understand, the agreement cannot be signed without amending the existing SLPA Act,” Minister Ranatunga continues, while also opposing the proposed division of shares. He argues that, as Hambantota Port could become a profit-making entity within the first twenty years, the SLPA must have a 35 percent stake in the company.
The Minister calls for a reduction in the concession period from 99 years and wants a clause specifying that SLPA’s fixed assets at Hambantota Port must be returned without charge at the expiry of the agreement.
The amount proposed to be paid by the company was decided on the basis of 80 percent of the cost of constructing Hambantota Phase I and II. The figure did not take in the value of the land. However, instead of calculating the land cost as a separate input, the concession agreement has included it in the amount pledged by the company.
The agreement also states that, if the extent of land granted to the company is reduced, the investment amount would be lowered. “But what the company agreed to was to pay (as investment) a portion of the construction cost of Hambanotat Port Phase I and II,” Minister Ranatunga points out. “There is no connection between the amount they are investing and the extent of land.”
Action that must be taken if clauses related to security are violated by the company is not stipulated. “National and regional security must be taken into consideration and the security of the port must fall within the (country’s) existing legal framework,” the Minister states.
The draft agreement contains several clauses that “hint” the total value of Hambantota Port — and not the cost of building it — is US$1.4 billion. The Minister wants those clauses removed.
It grants the company discretion of setting port charges. “But by giving this company such privileges, it will threaten the Colombo port, especially local businesses, and Sri Lanka’s economy,” Mr Ranatunga states. Even the SLPA does not hold the right to decide on its own fees without Finance Ministry approval.
The agreement has no guarantee for employees of the Magampura Port Management Company and this could cause problems in future. The Minister also objects to the mention of Hambantota Phase III in the concession agreement, saying it isstill only a concept. Moreover, the company’s investment is relevant only to Phases I and II; therefore references to Phase III must be removed.
The Ports Minister states that observations and recommendations made by the project committee and the Cabinet Appointed Negotiating Committee have been ignored in the draft concession agreement. Meanwhile, clauses that had not been agreed upon were inserted — such as one which allows the company or any entity nominated by it to develop any area within a 50km radius from Hambantota port.
The concession agreement also places the onus on acquiring and providing lands for the project on the Government.