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Hambantota port deal: Two major clauses to appease critics
View(s):By Namini Wijedasa
The draft Hambantota Port privatisation agreement — which is to go before Cabinet on Tuesday — includes a new clause making it compulsory for China Merchant Port Holdings Company (CMPort) to divest a quarter of its 80 percent shareholding to a Sri Lankan entity within ten years of taking over the facility.
The provision was inserted into the final working draft of the agreement around ten days ago to appease critics who felt the Chinese company’s share in the joint company that will run Hambantota Port was too large. The original understanding was for CMPort to control 80 percent while the Sri Lanka Ports Authority would have 20 percent.
Also added is a clause that obliges the Chinese to return the port and land to the Sri Lanka Ports Authority (SLPA) at the end of its 99-year lease. “There will be no extension,” said an authoritative official source, privy to the negotiations. “One of the new clauses now ties the Chinese party to giving up 20 percent of its shares within ten years to a Sri Lankan entity,” the source said. “The Chinese have no problem with that. Their ambassador has publicly said they only want the majority shareholding, even it if were just 51 percent.”
But this provision does not oblige CMPort to sell its 20 percent to the SLPA. It only provides that whatever party it divests the chunk to must be Sri Lankan and that the port must be fully operational — with equipment and all necessary facilities — at the time it gives up that slice.
“To bring the port to operational level, CMPort will have to spend at least US$ 700-800 million more,” the source said. “It has to invest in equipment and various other facilities. Once that is done and the port is running, the company can give up the 20 percent. If the SLPA can afford to take that share, it can do so. If not, another Sri Lankan party can avail itself of the opportunity.”
The parties expect to sign the agreement at the end of the month, he added. Among other important provisions are an express prohibition of military activity in the area and the envisaged creation of an oversight committee to take care of national security.