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Hambantota deal: More major changes, 70-year lease on offer
View(s):The number of years that the Hambantota port is to be leased out to China Merchant Port Holdings Co Ltd (CMPort) could be brought down 70, instead of 99, authoritative sources said.
A draft of the heavily-negotiated concession agreement was shared with the Sri Lanka Ports Authority (SLPA) this week. The shareholding ratio could also be changed from 80:20 to 60:40, with sixty percent of shares allocated to CMPort and forty percent to SLPA, the sources said. And it is likely that a further twenty percent of CMPort’s shareholding will be up for sale to a Sri Lankan company within a specified time period.
But negotiations are still ongoing, an official source said, adding that meetings were taking place every few days. The latest incarnation of the draft agreement was once again presented to Cabinet this week but ministers wanted it to be finalised before any decision could be taken.
It was initially proposed to let the Chinese company have Hambantota port on two 99-year leases. This was heavily objected to by Ports Minister Arjuna Ranatunga and SLPA officials, resulting in the lease being cut to one 99-year term. This could be further reduced.
CMPort was also originally expected to hold 80 percent of shares against SLPA’s 20. This, too, could be amended following several rounds of negotiations. “Shareholding is not much of an issue to CMPort,” the official source earlier said. “They have maintained that if they get more than 51 percent they are satisfied. However, the money that the Government earns from the deal at the outset will be reduced. But we are not keen to go down from the US$1.1 billion that CMPort has pledged.”
The same applies to the reduction in the lease period, he said. “If that happens, CMPort may want other considerations. It is still under discussion whether 80 years could be opted for with opportunity to renew the lease after that,” he added.
Special Projects Minister Sarath Amunugama has now instructed the SLPA to report to him with its comments before Tuesday, May 9, the date on which he is due to present the agreement to Cabinet for approval.
Prime Minister Ranil Wickremesinghe will travel to Beijing on May 13 for China’s “One Belt, One Road” summit. He is likely to bring up the Hambantota port agreement with officials there. However, no date has yet been announced for the signing of the agreement.
CMPort also operates the Colombo International Container Terminal (CICT) at the Colombo Port. Its recently-released 2016 annual report cites Sri Lanka as one of its biggest success stories for the year.
“In 2016, total container throughput handled by the Group’s overseas operations increased by 5.7% year-on-year to 16.96 million TEUs, among which container throughput handled by CICT in Sri Lanka hit a record high to more than 2 million TEUs and rose significantly by 29.1% year-on-year,” it said.
The annual report also points out that CICT is currently the only terminal which can receive and unload from ultra-large vessels at the Port of Colombo with a designed annual throughput capacity of 2.4 million TEUs. “It was ranked first in terms of the growth of container throughput in 2014 among 30 big ports in the world,” it says.
The company also says that, in terms of expansion of the overseas ports network, the Group will leverage on strategic investment opportunities offered by the “Belt and Road” initiative. This includes solidifying the ports layout in Asia, improving ports network in Africa, expanding the footprint in Europe and acquiring new exposure in Americas.
Meanwhile, Hambantota port remains in a state of high alert after protesters earlier this year hindered a vessel from leaving. “The security level at the port is designated at Level 2,” an SLPA source said. “This means the navy is still in charge, unlike at the port of Colombo where security level is at Level 1 or normal.”
According to International Ship and Port Facility Security Code (ISPS Code), Level 2 denotes to “heightened risk” where all routine and cargo operations are carried out with an increase in security measures on ships and in the port.