Stormy ports
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So, the stormy East Container Terminal (ECT) issue at the Colombo Port has been settled. Or has it?President Gotabaya Rajapaksa, at a meeting with several protesting trade unions, earlier this week reiterated the government position that 51 per cent of the terminal will be held by the Sri Lanka Ports Authority (SLPA) and neither will it be sold or leased, while the balance 49 per cent will be offered to India’s Adani group, which has close links to Prime Minister Narendra Modi and his government, and other investors.
This is unlike the situation at the Hambantota Port, the Colombo International Container Terminals Ltd – CICT or the South Asia Gateway Terminal – SAGT, the last two named being part of the Colombo Port, where all three have foreign stakeholders.
Despite the President’s assurance which gave the impression that the matter had been sorted out – though it was unclear from the statement issued by his office as to who would manage this controversial terminal – the unions returning from the meeting told reporters that the issue remained unresolved.
The President’s comments were a repeat of what Prime Minister Mahinda Rajapaksa told Parliament that the ECT will not be sold or leased, once again leaving in suspense the answer as to who would run its operations, local management or a foreign party vis-à-vis Adani.
What is particularly interesting is that in a rare show of solidarity, pro-government unions, patriotic forces and professionals have joined with opposition unions and political parties in leading the protest against any handover of the ECT to foreign management and part ownership. Such consolidated support was missing or muted in the case of the Hambantota port or the CICT.
As I pondered over these issues which have taken the spotlight in recent weeks, the phone rang. It was my jolly-mood economist friend, Sammiya (short for Samson) on the line. I was pleased with the call, since Sammiya has also been closely following the ECT issue.
“Hi… how are you? I was in fact thinking of you since I am writing about the crisis surrounding the ECT. What are your thoughts,” I asked him.
“Well unlike the CICT and SAGT, the SLPA has spent its own funds of US$100 million to build the first stage of the ECT based on a local loan of $80 million and $20 million coming from its own funds. That’s why the unions are vehemently opposed to handing over the terminal, saying that local investors should be sought,” he said.
“But haven’t the SAGT and CICT done well, managed with foreign partners, and the same applies to the Hambantota Port? So what is the issue,” I replied.
“Well the profits generated from these terminals go out of the country, while the SLPA gets only a pittance in terms of its stake,” he said.
Completing the conversation with Sammiya after discussing many other pressing issues in the country, I reflected on some data that came from a trade union source. This official said the Jaya Terminal run by the SLPA earns revenue of $250 million a year. He argues that if both CICT and SAGT also earn the same amount or more, Sri Lanka is losing an average $500 million in annual revenue as these two terminals are managed by foreign parties (in the case of SAGT, it is managed by John Keells Holdings, while its foreign stakeholders must have a hand in the management).
With my mind filled with turbulent and stormy ports, my attention was momentarily diverted to the conversation under the margosa tree. There, Kussi Amma Sera was saying, “Mokakda Colomba waraye thiyena prashnaya (What is the problem at the Colombo Port?)”
“Mama hithanne, videsha company waraye weda karanna salli daana eka thama (I think it’s about some foreign companies investing money to run the port),” said Serapina.
“Aei apita waraya duwanna beri meita issella kara wage (Why can’t we manage the port like we have done for many years?)” asked Mabel Rasthiyadu.
“Mama hithanne ne, ape yaluwo ho pavul dannawa kiyala prashnayak thiyenawa kiyala (Well, I don’t think many of our friends and families are aware about this and whether it is an issue),” said Kussi Amma Sera.
She may be wrong there, since the movement against the handing over of the ECT to foreign management is preparing to take their case across the country if the government doesn’t wilt under pressure and call off the deal.
The Hambantota Port which was like a ghost fixture (similar to the Hambantota airport) in the first few years of its operations with very few ships calling over, has transformed radically under the management of a Chinese company.
There are some interesting statistics which show that though the previous regime struck a deal with China on the Hambantota Port in what is seen as equity-to-settle-loan deal that is not the case.
The government is still to pay off five loans obtained from the Exim Bank of China to construct the Hambantota Port and the agreements pertaining to those loans still remain. Under a 2017 deal, a 70 per cent stake of the port was leased to China Merchants Port Holdings Company Ltd (CM Port) for 99 years for $1.12 billion. This amount was supposedly to repay the $1.2 billion in loans. But this was not used to pay off the debt. Instead it was used to strengthen the country’s foreign reserves and make some short-term foreign debt repayments.
According to the lease agreement, a significant portion of the operations in the port will be handled by CM Port and thus a large portion of the profit will be earned by the Chinese company.
Opponents of the Hambantota deal said that CM Port can recover its $1.2 billion investment in five to six years and thereafter (for 99 years if it is still around) will be recouping huge profits, something that would have remained at home if the port was managed by the Sri Lankan government.
The transfer of public assets to multinationals and in the ECT case, the Adani group, raises an elementary question: Will this company work in the interests of Sri Lanka or its own interests ensuring that its own ports across India dig deep into the business of Sri Lankan ports in diverting regional transshipment cargo? Unions are accusing the Adani group of working in its own interests and not the interests of Sri Lanka.
As I prepared my concluding remarks on the drama surrounding the ECT, Kussi Amma Sera breezed into the room humming a Sinhala baila tune and left a mug of tea on my table. Thanking her, I was left pondering on the coming together of forces with diverse interests and ideologies for a common good. This doesn’t mean foreign investment is a bad thing; it is just that management skills in running, in this case, ports are also available locally.