Restricting development of small ports : Government turns down Chinese proposal | Sunday Observer

Restricting development of small ports : Government turns down Chinese proposal

11 December, 2016

The Government has rejected the Chinese proposal to restrict development of Ports such as Galle and Oluvil within 200 km of the Magampura Mahinda Rajapaksa Port in Hambantota.

Cabinet last week approved the proposal to issue the green light for the development of the second phase of the Hambantota Port on a public-private partnership with the Chinese company, China Merchants Port Holdings Company Limited (CMPHCL).

The partnership would be based on a Framework Agreement approved by the Cabinet Committee on Economic Management.

According to informed sources, whilst the Chinese side “had proposed a new condition to restrict the development of the Ports such as Galle, Oluvil which are within a radius of 200 km,” this was not contained in the Project Proposal nor in the first draft of the Framework Agreement.Thus this new condition was rejected and government decided to, “negotiate and reach agreement with the CMPHCL on a suitable time and performance based arrangement which does not impact their operations while the development of the Galle, Oluvil and other fisheries harbours in non-competing areas is not compromised.”

The Ports of Colombo, Trincomalee and Kankesanthurai are to be excluded from the agreement. The Cabinet paper on the memorandum also stated that the Sri Lanka Ports Authority (SLPA), acting on behalf of the government, would enter into the agreement with the Chinese investor on January 7 alongside activities to mark the second year of assumption of office by President Maithripala Sirisena.

The Hambantota Port which was initiated by former President Mahinda Rajapaksa was financed with Chinese loans worth over USD 1 billion. The first phase was opened in 2010.

According to Government sources, the loan repayments on the project has been bleeding the Treasury dry and as a result the Framework Agreement has also agreed to sell an 80 percent stake at the Port to the Chinese investor.

The SLPA which is the signatory on behalf of the Government, however, has suggested that the Chinese side “consider the request of the SLPA for a royalty payment on a revenue sharing basis after Port utilization reaches a mutually agreed level of performance.”

The Ministry Secretary Chandani Wijayawardhana told the Sunday Observer that the agreement will stand for 99 years although after the conclusion of 15 years, the terms of the agreement will be revised every 5 years.