Sri Lanka, Japan, India sign deal to develop East Container Terminal at Colombo Port

India’s possible role in developing the terminal had become a major flashpoint within the government. Negotiations seemed to have hit a roadblock until Japan stepped in more recently.

May 28, 2019 05:02 pm | Updated May 29, 2019 08:11 am IST - COLOMBO

A general view of Colombo Port City construction site. File photo

A general view of Colombo Port City construction site. File photo

Sri Lanka, Japan and India on Tuesday signed an agreement to jointly develop the East Container Terminal at the Colombo Port. The joint initiative is estimated to cost between $500 million and $700 million, a senior official of the Ministry of Ports, Shipping and Southern Development told The Hindu

The signing of the Memorandum of Cooperation (MoC) is significant, given that the countries had been negotiating the deal since last year, with little success. As per the agreement signed on Tuesday, the Sri Lanka Ports Authority (SLPA) retains 100% ownership of the East Container Terminal (ECT), while the Terminal Operations Company, conducting its operations, is jointly owned, the SLPA said in a statement. 

Sri Lanka will hold a 51 per cent-stake in the project and the joint venture partners will retain 49%.

The ECT is located some 3 km away from the China-backed international financial city, known popularly as “port city”, being built on reclaimed land on Colombo’s sea front.

“Japan is likely to provide a 40-year soft loan with a 0.1 percent interest rate,” said Sudarshana Gunawardana, Director of Development Communications at the Prime Minister’s office. The SLPA described the “envisaged Japanese loan” as “one of the best loan terms Sri Lanka has obtained”.

Details of India’s contribution to the initiative are awaited, but New Delhi’s interest in partnering the project is well known. Over 70 per cent of the transhipment business at the strategically located ECT is linked to India, according to official sources. 

However, last year, India’s possible role in developing the terminal had become a major flashpoint within the government. President Maithripala Sirisena had opposed any Indian involvement in the project, as roping in foreign actors for developing “national assets” remains a politically sensitive call in the island, especially among nationalist trade unions. Mr. Sirisena and Prime Minister Ranil Wickremesinghe had a heated argument on the matter during a cabinet meeting in October 2018, with the PM apparently more inclined towards allowing Indian participation.

While Japan had been part of negotiations even last year, the project assumed a predominantly ‘Sri Lanka-India’ dimension, especially in the local media. Japan has been a long-standing partner of Sri Lanka, and one of Sri Lanka’s biggest donors in the past decades. Japan also helped develop of the Jaya Container Terminal at the Colombo Port, supporting its operations since the 1980s.

The specific terms of the agreement to jointly develop the ECT will soon be finalised at a joint working group meeting, a diplomatic source said.


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