Government wanted to lease out Hambantota port to Chinese company for nearly 200 years--Ports Minister

The original framework agreement for the Hambantota port privatisation had envisaged Sri Lanka leasing out the facility to a single Chinese company for nearly 200 years, Ports and Shipping Minister Arjuna Ranatunga has revealed.

In a letter to a committee of secretaries negotiating the Hambantota deal with China Merchant Port Holding Company Ltd (CMPort), Mr Ranatunga claims his ministry and the Sri Lanka Ports Authority (SLPA) were largely sidelined in the process. But they had received a copy of the proposed framework agreement from the Finance Ministry’s External Resources Department of the Ministry of Finance and had been alarmed by several of its clauses.

Based on the SLPA’s recommendations, some of the terms of the agreement were subsequently amended. One of these was to reduce the lease from a total of 198 years (two leases of 99 years each) to one lease of 99 years. Pressure was also borne upon to increase the outright payment pledged by CMPort from US$ 1.08 billion to US$ 1.2 billion (the framework agreement places it at US$ 1.4 billion); to ensure that the land lease agreement is reviewed after 15 years and thereafter every five years; and to drop a CMPort condition that no other facility will be developed within a 200km radius of Hambantota port.

The Sunday Times saw a copy of Minister Ranatunga’s letter to the secretaries’ committee sent on December 27, 2016. Among other things, he also questions why CMPort was selected for the privatisation over another contender, China Harbour Engineering Company Ltd (CHEC), which had offered to split the shares in a manner more favourable to SLPA.

While CHEC offered a 35 percent stake to SLPA in the joint venture company to be set up under the agreement, CMPort had only consented to a 20 percent stake. There was also clear difference in the revenue the SLPA had stood to gain.

But at a meeting on September 30, the secretaries’ committee had recommended that the SLPA enters into a joint venture agreement with CMPort--the company which had proposed a 20:80 share ratio (the smaller stake to SLPA) for a one-time payment of US$ 1.08 billion.

The SLPA appointed a separate committee to study the proposal to go with CMPort. This group calculated the Net Present Value of the project and warned of the revenue loss the Authority would suffer by entering into an agreement with the company selected by the secretaries.

Minister Ranatunga questions why a second project committee was appointed on December 26, 2016, for the privatisation (the first was named on November 17).  The Ministry of Ports was not asked to name officials to this group.  He says that, “Given the situation, the entire process regarding the Hambantota port is in currently in crisis.”

(NW)