SL, India and Japan sign MoC to develop ECT

Daily FT

29/05/2019

SL, India and Japan sign MoC to develop ECT

  • Terminal Operations Company to conduct ETC operations 
  • SL retains 51% stake, rest to be divvied up by India and Japan 
  • Japan to fund project with 40-year loan at concessionary interest rate 
  • Cabinet gives approval but will appoint committee to negotiate details
  • Govt. says inclusion of India crucial given transshipment volumes

Sri Lanka, India and Japan yesterday signed a Memorandum of Cooperation (MoC) for the development of the long awaited East Container Terminal in the Colombo harbour. 

Under the MoC among the three governments on the development of the East Container Terminal, the Sri Lanka Ports Authority (SLPA) retains 100% ownership of East Container Terminal (ECT). 

The Terminal Operations Company (TOC) conducting all East Container Terminal operations is jointly owned; Sri Lanka retains a 51% stake, and the joint venture partners purchase a 49% stake, a statement by the Ports and Shipping Ministry said. A 40-year loan at an interest rate of 0.1% is expected from Japan to fund the project.   

“The envisaged Japanese loan carries one of the best loan terms Sri Lanka has obtained. The 51% stake is also one of the best in SLPA joint ownership endeavours. SLPA’s majority ownership in the new TOC represents a significant step in prioritising national interests,” the statement said.

The three governments will work out details based on the MoC at joint working group meetings, and advance their cooperation towards early commencement of work and operation of the ECT.

“As a hub of the Indian Ocean, the development of Sri Lanka and openness of its ports are of great importance. Colombo Port is the leading Port in the region. This joint project reflects the longstanding good will and cooperation among the three countries.”  

Japan has provided cooperation for the development of the Jaya Container Terminal since the 1980’s. Around 70% of Colombo Port’s transshipment business is India-related. Sri Lanka, Japan and India will work together for further development of the Colombo Port and contribute to further regional prosperity and stability of global trading networks, the statement said. 

Primary Industries and Social Empowerment Minister Daya Gamage, addressing a press conference at the Government Information Department on Tuesday, denied that the Government had inked the MoC with India to offset growing Chinese influence in Sri Lanka. The Government of Opposition Leader Mahinda Rajapaksa had earlier given two terminals of the Colombo Port to China’s CM Ports, while the current administration handed over the Hambantota port to the same company in a joint venture in 2017. 

“India is scared with China coming in as they are becoming a threat to them. But we have not signed any defence agreements with China,” Gamage told reporters. 

Justifying the venture, Gamage said: “We don’t have money to develop this, as we will have to buy all the equipment and you cannot fight with India either. Out of all our exports, 80% is Indian transshipment, India joining us in this is a huge strength for us, because if they start another port in India we will lose a lot of our business. So this is a good arrangement for Sri Lanka because it will get 51% ownership without investing anything.” 

Minister Gamage said the terminal venture had been discussed extensively at the Cabinet meeting held on Tuesday, and consent was given by the members.

“Everyone in the Cabinet has given consent, but Cabinet will appoint a Committee on certain matters as we need certain clarifications, such as what are the companies coming in, how the profit margin is going to be set up as well as other details. There are certain other procedures to be followed,” he said. 

“The two countries will have to negotiate their ownership portions.” 

Source at: Daily FT