Sri Lanka, Japan, India ink memo for East container terminal

ECONOMYNEXT – Sri Lanka, Japan and India has inked a memorandum of co-operation to operate a container terminal in Sri Lanka’s Colombo Port, the embassy of Japan said, with terms to be hammered out later.

Companies from Japan, India and Sri Lanka is expected to set up a terminal operating company to run the so-called 1,200 metre East Container Terminal, of which abou at 400 meter length had already been built by the state port agency.

But money is required to buy cranes.

Sri Lanka Ports Authority is expected to hold a 51 percent stake in the operating company and companies representing the other two countries will hold 49 percent.

Japan is expected to provide 0.1 percent yen loan for cranes. Concerns have been raised on who will repay the loans, and also the loans taken to build the civil works.

The statement said the three governments will work out details of the operating arrangements at joint working group meetings.

Sri Lanka has previously given two terminals in Colombo to China’s CM Ports and Sri Lanka’s John Keells Holdings where settling loans was the responsibility of the operating company during the concession period.

The operating company had to pay royalties to SLPA on top of it. After the end of a 30 or 40 year concession period, the entire terminal reverts to the port agency.

Industry analysts say the deal has to be structured in such a way that fees equal to debt repayments comes to SLPA to settle the loan and any exchange risks are also passed on to the terminal operating company, so that taxpayers do not have to pick up the tab.

Sri Lanka’s current administration abandoned a plan to get a private company with Indian participation through an orthodox concession agreement without explanation after getting bids from top shipping and container firms in the world.

Sri Lanka is keen to get Indian participation in a terminal in Colombo to balance out China. India provides around 75 percent of the transshipment traffic to Colombo.

Sri Lanka’s current administration has got into political trouble by handing over Hambantota port to China’s CM Port on an unorthodox contract. (Colombo/May28/2019)