As Sri Lanka Reviews Handing over East Container Terminal to India, China Watches Closely


China’s monopoly of loaning big bucks to small nations and eventually buying their loyalty, is an open secret and Sri Lanka is also in the deep pockets of China beginning from 2013 when the Hambantota Port was offered to China state-controlled company. Sri Lanka ultimately ended up giving it for a 99-year lease to the China Merchants with 80 per cent stake when the GoSL could not repay the initial debt they claimed for developing the port.

Since then, Beijing has spread its wings over Sri Lanka, and so did the geopolitics in the region leading the nation becoming the battleground for geopolitics where countries like India, US, Japan, the UK, the EU and Australia accuse Sri Lanka of tilting towards China and creating an imbalance in trade ties.

The extent of the battle resulted in India still not being awarded the East Container Terminal (ECT), which is one of the deep port at the Port of Colombo (PoC). The ECT is adjacent to the Colombo International Container Terminals (CICT) run by the Chinese and speculated to give a tough competition to the Chinese.

Currently, 80 percent of the transhipment cargo is from India at the PoC and the revenue earned from this is huge.

The Port workers have been applying continuous pressure on the government not to award the ECT to India and to keep away from geopolitics. Some critics also allege that China is backing the port workers in the protests.

The Port workers’ protest over awarding the ECT was not experienced when the Chinese were offered mega projects that were “unsolicited proposals” with no proper Environmental Impact Assessments when it comes to the USD 1.4 billion Port City Project.

Former Central Bank Deputy Governor, Dr WA Wijewardena told a local newspaper that there is a problem with Chinese projects, compared to those funded by Asian Development Bank (ADB) or the World Bank (WB), adding that all of these projects are unsolicited. He added, hence, there has not been any proper evaluation of the costs and benefits of those projects before Sri Lanka consented to them. As a result, most of these projects do not earn enough to repay the loans and due to that, the incomes earned from other sources have to be used for repaying these loans.

When Sri Lanka, Japan and India signed the Memorandum of Cooperation (Moc) to jointly develop the ECT, at an estimated cost of USD 500-700 million, on May 29 2019, the Port workers began to protest. There were several protests over ECT claiming that the State

should run its port however, the maritime experts say in a global village embracing international maritime trade is vital.

Despite the ECT was reserved for Indians, due to severe congestion, the government commissioned its operation, the day US Foreign Secretary Pompeo visited Colombo on October 28, 2020, who in fact, came to discuss China and the concerns on the Indo Pacific tension for the US because of China.

After ECT was commissioned, the operations generated revenue and the Port workers once again detested handing it over to India. They said with the revenue we can develop it further. on the other hand, the maritime experts noted that if there are international players at the PoC it will create confidence in the global market and countries like Japan that is known for building ships and India having a mega economy can attract more business to the ECT and also transform the current transhipment port to a global cargo port.

With the recent Cabinet Memorandum, dated October 22 2020, by the Ministry of Ports and Shipping stated that it has been decided to award the ECT to India’s, Adani Group, and Japan on a joint venture.

The ECT is already half-constructed spending around USD 75 million for the construction of the Quay Wall of 600 metres and another USD 30 million for three small cranes that were brought for Jaya Container Terminal (JCT) but currently used as it is in the ECT. What is left to build is another 600-metre quay wall with cranes for the ECT.

A merchant ship captain from India noted that Adani is only the terminal operator appointed by the Government of India and the Indian government does not run terminals. He said India operate terminals locally but have handed over many terminals to private operators like Adani, like Sri Lankan government owns the SLPA.

Former Chairman of Shipping Corporation Sashi Dhanatunge noted that 51 percent of the stake for Sri Lanka and 49 percent stake for India is welcoming as we have lost too much time and now it is a matter of saving the transhipment business from India for survival.

He further added that at the inception, we would have had a chance of creating competition and make a choice. But that edge and opportunity is lost now due to wasting too much valuable time and the time wasted by the Sri Lankan authorities in making a decision enabled India to stabilise its port development plans and to accomplish some of those successfully.

In the process, Sri Lanka lost the opportunity of attracting feeders from Bangladesh, which records one of the highest economic growths in the region, if not the world. Further, because of the lack of foresight of the authorities, none of them saw the importance of supporting and developing other maritime support services to make those operations efficient, environment friendly and economical in line with other successful hub ports like Singapore and Fujairah.

“To become a Maritime, Bunkering and Logistic Hub like Singapore, there should be other services that Sri Lanka should be offering to ship owners and ship operators, he added.

CEO of Shippers’ Academy Rohan Masakorala added that country should embrace international consortium working with the Sri Lanka Ports Authority and other Sri Lankan companies as the business of ports and shipping is a global business and not a domestic venture. “With that, we can secure business through partnership and ensure competition and transparency without control monopoly,” he added.

India with its “neighbourhood first” policy, has given priority to Sri Lanka with 50,000 houses built free including many other grants and soft loans, unlike the Chinese who have been accused of unsolicited proposals and loan facilities that had dived the country into debts.

Media Minister Keheyliya Rambukwelle also told the local media that the government is reviewing the project and have to give priority first. “We have always been considering India to be the first country to approach for trade ties and we will not put India into a confrontational position in the South Asian region,” he recently told a local newspaper Ceylon Today.

The subtle battle between China and India in Sri Lanka forced the GoSL to balance its trade and bilateral partners without antagonising anyone, however, India feels that the ECT would create more trade benefits for both countries mutually. India has two huge ports closer to Sri Lanka and the ECT would be a vital component of it, India has said.

The discussion on the ECT is still continuing between the two governments and China is watching closely. When the CICT, another 18ft deep water terminal was handed over to China, there was uproar too however, the CICT is now in lead in cargo business in Colombo. Likewise, ECT also would help Sri Lanka not only to improve trade ties but also will support Sri Lanka to elevate itself from the total country foreign debt which is a staggering US$ 56 billion (in 2019) – a 66 per cent of the country’s GDP.

(Disclaimer: The author is a freelance journalist and researcher based in Colombo. Views expressed are personal.)


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