ADB to confirm new deal for Colombo South Harbour

The Asian Development Bank (ADB) has agreed to an alternative plan that would allow for the construction of the breakwater for the new Colombo South Harbour, with US$300 million funding from the bank. An earlier arrangement involved an open and transparent awarding of the contract for building the new harbour’s first terminal.

The ADB office in Colombo, however, said details and a final confirmation of the new deal would not be available until early next week. Several attempts to contact the Sri Lanka Ports Authority chairman Saliya Wickramasuriya in this regard have failed.

When bids opened in September last year, South Korea’s Hyundai Engineering & Construction Company Ltd offered the lowest cost bid at Rs. 36 billion. The other two bidders, Hanjing Heavy Industries and Construction, also of South Korea, and China Harbour Engineering Company Ltd quoted a colossal Rs.76 billion and Rs.61 billion respectively.

Although the bulk of the funding for the dredging work and the construction of the breakwater was approved by the ADB as far back as February last year, there was a delay because of an ADB stipulation that ADB funding would depend on Sri Lanka’s following an open competitive bidding procedure in awarding the contract to build the new harbour’s first terminal.

In early February, the government awarded the contract to build the first terminal to Hutchison Whampoa Limited of Hong Kong, although Hutchison was the second highest bidder. Shortly afterwards, President Mahinda Rajapaksa cancelled the award and announced a decision to call for fresh bids on the basis of a Cabinet decision to ensure protection of the national interest in the future awarding of tenders. This has further delayed the awarding of the contract to build the breakwater. So far there have been no calls for fresh tenders for the building of the first terminal.

The ADB has warned that any further delays in starting construction work on the breakwater would entail huge cost overruns that would have to be borne by the government.

The creation of the South Harbour is expected to consolidate Colombo’s position as a transshipment hub in the Indian subcontinent region. The South Harbour will eventually have three terminals, each with a container capacity of 2.4 million TEUs (twenty-foot equivalent units).

The ADB is advancing the government a sum US$300 million to be paid back over 25 years, with a grace period of five years.