A state-run Chinese firm has clinched the contract to develop the Colombo Port’s eastern container terminal, the Sri Lankan government announced on Wednesday, months after it scrapped a tripartite deal with India and Japan to build the deep-sea container port.
China is one of the biggest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap.
The island nation in 2017 handed over the strategically important Hambantota port to a state-run Chinese firm for a 99-year lease as a debt swap amounting to USD 1.2 billion.
The China Harbour Engineering Company has clinched the contract to develop the Colombo Port’s eastern container terminal (ECT) in stages, according to a Cabinet note.
The Cabinet has approved the proposal made by the ports and shipping minister to pick the Chinese firm in a competitive bidding process, it said, without mentioning how much the deal was worth.
The ECT development project had become a controversial political issue in Lanka with President Gotabaya Rajapaksa’s administration reneging a previously entered trilateral agreement with India and Japan to develop the ECT.
The port trade unions led by the ruling SLPP affiliates pressed for ditching of the India-Japan deal, claiming that the proposed deal with India’s Adani Group was a sell-out of the lucrative ECT. They demanded that the ECT should run under the government-owned Sri Lanka Ports Authority (SLPA).
The SLPA had signed a memorandum of cooperation in May 2019 with India and Japan to develop the ECT during the previous Sirisena government.
The Colombo port trade unions opposed the proposal of investors from India and Japan buying 49 per cent stake in the ECT. They demanded the ECT to remain 100 per cent owned by the SLPA as opposed to the 51 per cent.
President Rajapaksa had declared that he wanted the India-Japan deal on the ECT to go ahead. However, after weeks-long protests by trade unions, the government cancelled the India-Japan ECT deal in February this year.
Both India and Japan had officially expressed disappointment over Colombo’s back tracking on the ECT.
Subsequently, Adani Group in September sealed a deal with SLPA to develop and run the strategic Colombo Port’s Western Container Terminal (WCT). As the first-ever Indian port operator in Sri Lanka, Adani Group will have a 51 per cent stake in WCT.