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Sri Lanka will not re-negotiate commercial terms of Hambantota deal, only security: President

ECONOMYNEXT – Sri Lanka is not looking to change commercial terms in an agreement with China over a port in Hambantota, but is only concerned about security and border control, President Gotabaya Rajapaksa said.

“I am looking at what the security aspects of it is,” President Rajapaksa told foreign correspondents in Colombo.

“We want to see whether border control is with the sovereign government, like the Colombo Port.”

“We want to see whether that is with us.”

President Rajapaksa said a committee has been appointed to go into the agreement. A Chinese special envoy had already met him and they were agreeable to ensure security aspects, he said.

“It is not a re-negotiation. If there are things to add, we will add. Those are not commercial,” President Rajapaksa said.

“The commercial part is no problem. They have already already negotiated with the government, and they have come to an agreement. That commercial aspect I can’t change,”

“We do not want to give the impression when one government signed a commercial agreement with an investor and another government comes and changes it.”

He said Sri Lanka wanted to have control on which vessel entered the port, in the same way as any ship entered Colombo or Galle or Kankasanthurai port.

“This is a vital economic centre, an asset,” President Rajapaksa said. Airports and harbors have to be under the rule of sovereign nations. So we are looking at those things.”

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He said Sri Lanka wanted to decide what ships came in to the port and not get involved in political rivalries with world powers.

According to information disclosed in parliament Sri Lanka will re-gain a majority stake in the terminal company at Hambantota port from China after 80-years for one dollar and the port will pay standard royalties on containers and bulk cargo after 25-years.

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Hambantota port control to revert to Sri Lanka after 80-years for one dollar

Under the existing agreement with China’s CM Ports, a company called Hambantota International Port Group (HIPG), will build and operate container terminals and an existing bulk terminal at the port.

CM Ports will have an 85 percent stake in the firm and Sri Lanka Ports Authority 15 percent. For the 85 percent stake in HIPG, CM Ports had paid Sri Lanka 973.68 million US dollars.

Common user facilities at the port such as piloting to guide ships and anchorage will be provided by another firm called Hambantota International Port Services (HIPS), in which Sri Lanka Ports Authority has a 42 percent stake and HIPG a 58 percent stake.

Because of the 15 percent stake in HIPG, Sri Lanka Ports Authority effectively owns another 8.7 percent of the HIPS port services company or an effective total of 50.7 percent.

After 10-years Sri Lanka will have an option to buy back a 20 percent stake in HIPG.

After 70 years Sri Lanka could completely buyout China’s stake in HIPG effectively gaining full ownership of both companies. The details of how the price would be arrived at were not given in parliament.

If the options are not exercised at 80 years, a 40 percent stake in HIPG will come to Sri Lanka at a nominal cost of one US dollar. The duration of the balance concession period was not given.

HIPG will pay nominal royalties of 100,000 US dollars in the first 5 years, 200,000 dollars for the next 5 years, and 300,000 dollars from year 11 to year 14.

From year 15 to 20, 400,000 dollars will be paid and from year 21 to 25, 500,000 US dollars a year would be paid.

After 25 years, royalties of 2.25 US dollars per container will be paid to Sri Lanka. For break-build cargo 10 rupees a tonne will be paid, which will escalate at the rate of 3 percent a year. (SB-Colombo/Dec19/2019)

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