The newly appointed Minister of Ports and Shipping Mahinda Samarasinghe said that any eventual agreement on the Hambantota Port should result in a win-win situation that the Government can market to the country as a good deal rather than a bad deal. In an interview with the Sunday Observer, Minister Samarasinghe said, it is not only a question of money, the Government has to ensure that our national interest is safeguarded.
He expressed optimism that the Government can negotiate these agreements leading to a mutually satisfactory outcome.
The Sri Lanka Ports Authority (SLPA) also has some concerns that need to be discussed further with the Chinese and the Minister hoped flexibility would be shown by both sides. The Minister categorically stated that the Government will not sell the Hambantota Port and it is only getting out of a very bad situation that was created by the previous Government.
Q. This is a new subject for you. Have you decided on your priorities for this sector?
A. I have been having discussions with various institutions which come under the Ministry. I also met the trade unions. In fact, all trade unions responded to my invitation and attended the meeting.
I gave them the opportunity to speak freely and they put forward valuable suggestions and proposals which I will consider.
As I give leadership to this Ministry, my priority is to ensure that the services we provide are of excellent quality. Of course, there are challenges when we talk about providing services at a level that I want to provide.
Bearing this in mind, I have now announced publicly that the new Chairman that I appoint to the SLPA will be a professional. It won’t be a political appointment. I am now in the process of considering various people and would select a suitable professional without political ties. I believe, a strong leadership will contribute significantly towards improving efficiency as well as the services we provide.
We are proud to say, today, the Colombo Port is ranked 23rd in the world. During my tenure, I want to bring it into the first ten if possible or even further up to be among the first five.
I think we can do it and I have accepted the challenge.
Q. The Hambantota Port deal with China has become a very controversial topic. How do you plan to handle this situation?
A. The Hambantota Port was not a creation of the present Government. It was done during the previous Government’s tenure and a loan was sourced from China to build the Port.
When we formed the Government, we were immediately saddled with this huge problem of how to pay this loan. Hambantota has still not become a viable port. Vehicles are unloaded, that is all.
So, we had to justify this investment and the Port Authority had to take on the responsibility of servicing the loan. In the first four months of this year, we have paid Rs.4 billion from the Ports Authority to service the loan. It is a huge burden on the SLPA.
Bearing this in mind, Prime Minister Ranil Wickremesinghe, when he visited China met the Chinese President Xi Jinping and discussed our inability under the present economic circumstances and asked for a solution.
The Chinese President instructed his officials to find a solution and they came back with the counter offer of bringing in a suitable investor to run the Port on a lease basis and it was not an outright sale.
The lease period will be determined in the course of discussions and they were willing to come in with this huge investment which meant we could use that money to pay off the loan.
A lot of people are accusing us of selling the Port or going in for a bad deal. But what they forget is, this was in a way, a victory for us because we were able to convince the Chinese side, given our longstanding historical relationship and their special affinity towards Sri Lanka throughout history, to help us.
This whole problem was a creation of the previous Government. Today, our public debt is 76 percent of the GDP.
This public debt ratio is going to increase in 2018, 2019 and 2020 because some of the loans will come into play and we will have to start servicing most of the loans in 2018, 2019 and 2020.
So, we were put into a huge predicament by such commercial loans which were taken to show the country that roads are being done, electricity provided and mega structures are coming up. Initially, in loans of this nature, we have a gestation period and are given time to build it and complete the project and then put it into use or earn a starting revenue, so that the loan can be serviced.
Now the loan service period is coming into play during our tenure. They got the money and did the project and showed the country that they have done various things. But now we have to service the loan.
The Prime Minister understood this challenge, went to China and used his skills to negotiate the possibility of a Chinese Foreign Direct Investment (FDI) coming in. It is a transparent process that was followed.
Now we have a party interested in coming in on the basis of an 80-20 deal which means 80 percent will be held by the Chinese and 20 percent by the SLPA.
The value of the 80 percent is US$ 1.12 billion. When that money comes in, we can use it to pay off the loan and the balance will then be put into our international reserves.
The international reserves will increase to that extent, which means economic stability will be restored and Rupee depreciation can be managed so that we don’t put an undue burden on the people.
I wish to reiterate that we are not selling the Hambantota Port. We are only getting out of a very bad situation created by the previous Government.
This was a very responsible decision. I have made a public announcement that I am going to take over negotiations. The SLPA has some concerns that we want to discuss further with the Chinese party.
I have no doubt flexibility would be shown by both sides.
Whatever agreements we eventually sign should be a win-win situation which should be something that we can market to the country as a good deal rather than a bad deal. It is not only a question of money, we have to ensure that our national interest is safeguarded.
I have no doubt that we can negotiate a win-win situation and I want to do that soon. I don’t think we should delay this agreement. We need to fine-tune the agreement.
There are some points that need to be factored in, which I will do fast and then we can sign the agreement and get on with the other challenges.
Q.The strategic location of the Hambantota Port being close to international sea routes should mean that, by now it is a busy Port with ships calling over regularly. Why is it still lagging behind?
A. That is something that needs to be worked on. Just because we built a port, it doesn’t mean ships are going to call at that port. We have to market the port, manage it properly and have an efficient operation.
That is why this company coming into Hambantota is already working with us here in the Colombo Port and they have a terminal they are operating.
They are knowledgeable and it is a good company. I am sure, during the lease period they will do whatever development that is needed to bring it up to the level that can attract ships to Sri Lanka. The location of the Hambantota Port is excellent and there are no two words about it.
But we have to make sure that while operation goes on, the Colombo Port’s interests are also safeguarded. That is why SLPA has come up with certain suggestions, and they are not hard for the Chinese side to accept.
We are not asking for a pound of flesh. We are just asking for certain safeguards to be put in so that our national interest is not jeopardised.
Our national interest is paramount and being a friendly country I am sure the Chinese side will understand and appreciate that our interest also has to be safeguarded.
As I said earlier, it has to be a win-win situation. No one is going to come and pump in US$ 1.12 billion to Sri Lanka because they like us. There has to be some economic return for them as well.
We don’t wish to interfere with this. But there are certain things in the agreement that needs to be fine-tuned and clarified. There are legal issues that need to be factored in. The laws of the country must be respected. We can’t violate the law. All those should be explained to the Chinese. Then they will fall within the legal regime of the country.
Q. Is there any proposal or agreement with India to develop the Kankesanthurai harbour?
A. This is part of the discussions taking place and there is no agreement yet. But the Indian side is interested in a number of projects in Sri Lanka which means FDIs will come to Sri Lanka.
Assets like the Trincomalee oil tank facility are being wasted without being utilized. We are building in safeguards to ensure all of these investments to ensure our national interest. Did we ever use those oil tanks in Trincomalee? This was constructed by the British and just lying there, and no one actually using it properly.
No one was even talking about using it for years, and when the Indian side approached us and said that they would like to do a participatory development program targeting the oil tanks, considering our national interest we agreed to a joint venture - their side plus the Ceylon Petroleum Corporation (CPC).
It will be a joint venture developing and utilizing the oil tanks, and not utilising it as a storage facility within Sri Lanka but also we have to consider the export potential.
It has a huge capacity that can be used. It is on that basis that we are now discussing. No agreement has been signed, discussions are ongoing. We need FDIs, as that is the only way we can ensure a rapid economic growth and sustainable development.
Our international reserves need to be boosted. The Government is succeeding because we have reached out to countries that have not been reached out earlier.
Just because they voted for successive resolutions they were considered to be meddling in Sri Lanka’s internal affairs, and we said “you are against us and you are not our friends”. The foreign policy of the previous Government was to favour countries which voted with us.
The majority voted against us. So, we unnecessarily antagonized a lot of powerful countries. Sri Lanka being a small island nation can’t afford to antagonise big powers.
We need to get along well with everyone. So this Government has adopted a successful foreign policy. It is reaching out to those which the previous Government didn’t reach out to. This is why in a very short period, we got the GSP Plus back. That is going to benefit Sri Lanka hugely.
I think within the first year of the GSP recommencing, some estimates are that we will get as much as US$ 1.5 billion benefit from the GSP Plus.
These are the things that the previous Government couldn’t do. We lost out internationally. Now there is a different approach and we are benefiting from it and FDIs will start pouring in. I think our future is good.
Q. Is there any truth in the Joint Opposition allegation that part of Colombo Port, East Block is to be sold or leased out to India?
A. There is no such decision yet. We are considering various options because the development of the East Terminal is very important.
Lot of transshipment takes place between Sri Lanka and specially India and South Asia in general.
If there are Indian companies interested in coming in on a determined equity partnership that would ensure sustainability of this transshipment to India primarily and other destinations in South Asia. No final decision has been taken.
We are discussing and looking at various options.
The SLPA is also interested in developing the East terminal. So I will look at all these options and we will take the right decision to ensure the long term sustainability of the Colombo Port.
Q. You were deeply involved in defending the country at the UNHRC. How do you assess the present situation, especially the controversial foreign judges question?
A. The President has very clearly put forward what our bottom line and what our position is. There is no necessity to bring foreign judges to Sri Lanka. We have now an independent judiciary and seniority is being respected and political appointments are not being made. The credibility of the Sri Lankan judiciary is at a high point. The international community really didn’t want to bring foreign judges per se. They had questioned the credibility of the judicial process that will eventually look into all those allegations.
So now we can proudly say that we have an independent judiciary and the situation has changed. In any case, we have the requisite expertise within this country.
We have had bad experiences in the past like the IIGEP during former President Mahinda Rajapaksa’s tenure which started meddling with the internal affairs of the country under the guise of giving us advice on international standards. So there is no necessity to bring in foreign judges.
If there are allegations, we will certainly look into it and take necessary steps to ensure that such incidents will not recur in the future.