Bidding for the South Container Terminal, part of the Colombo Port Expansion Project, has come under some criticism from the industry after huge declines in domestic and transshipment volumes in February 2009. However, the project which is being partially funded by the Asian Development Bank (ADB) is ‘progressing nicely’, according to ADB Country Director Richard Vokes.
He told The Sunday Times FT that the ADB has given US$300 million for the project which was delayed after fresh tenders had to be called at the end of January 2009 for the project after allegations of impropriety and a lack of transparency regarding the tender process. Dr. Vokes also said there was a pre-bidding meeting held on 19 March 2009 where sources told The Sunday Times FT that mostly shipping lines, not port operators, had attended.
An industry expert outlined several problems with the tender, the most important being a lack of interest on the part of investors due to contracting domestic and transshipment volumes. Hutchison Port Holdings and Port of Singapore (PSA), two of the largest players who fought tooth and nail in the cancelled tender, have not shown interest and did not attend the pre-bidding meeting.
He added that another problem is that the tender document is not ‘investor friendly’. It was drawn up before the impact of the global economic crisis was being felt and therefore, does not take into consideration the post crisis scenario. When tender documents are prepared, they have to strike the right balance between the interests of the government and the investors. This particular tender document was prepared looking at the interest of the government, he said, adding that the parties that have shown interest so far and attended the pre-bidding meeting are shipping lines, not port operators. ‘We need to be in a position to attract global port operators,” he said. Hutchison Port Holdings and PSA are both large port operators. Also, another important question that needs to be addressed is if the government will be able to attract the same royalty payment that was offered to them by PSA, the party that won the previous contract.
In February 2009, domestic volumes in the Colombo Port fell by 24.3% while transshipment volumes also fell by 19.2% as against February 2008. Re-stows fell by 32.9% and the overall decline for the Colombo Port was 20.7%. SAGT domestic and transshipment volumes fell by 35% and 13% respectively in February 2009 while re-stows fell by 34%. The overall decline for SAGT was 19%.
The ADB loan was approved in February 2007 and made effective in May of last year. The Sri Lanka Ports Authority (SLPA) which called for the fresh tenders stated in its request for proposals (RFP’s) that the construction of the new container terminal will be effected within the framework of the Colombo Port Expansion Project located to the west of the existing harbour. Bids will be closing on 19 May 2009.
Following the decision to call for fresh tenders, the ADB issued stringent conditions for the go ahead on the US$300 million loan. The government of Sri Lanka had been asked to bring in a representative from the Attorney General’s Department into the Project Committee for the re-bidding on the Project.
The ADB will also seek a legal opinion from the Attorney General's Department to ensure that the selection of the private party has been based on an open competitive bidding procedure and that the clause which requires rejection of any proposal where a prospective bidder offers inducement to influence the government with a view to securing the contract, etc. as stipulated in the original bidding, will be retained in the re-bidding. |
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