Crisis Caused by Opposition to tripartite govts-to-govts deal involving Sri Lanka, India and Japan Regarding East Container Terminal (ECT) in the Colombo Port is likely to result in economic, political and diplomatic fallout for Sri Lanka

By Nisthar Cassim

Dissent over the deal on East Container Terminal (ECT) in the Colombo Port has erupted, triggering likely economic, political and diplomatic fallout for Sri Lanka as the Government and officials were busy devising an amicable way out of the crisis.

Trade unions have refused to give up their demand that the Government must abandon the tripartite governments-to-governments deal involving Sri Lanka, India and Japan. Politically, the members of the Government too are divided whilst the private sector and shipping industry though mere bystanders are watching the under currents over ECT with serious concern.

As per the Memorandum of Cooperation signed by the three countries in mid-2018, the agreement was to develop ECT via Terminal Operations Company consisting of operators/investors from the three countries on the basis of 51% owned by Sri Lanka Ports Authority (SLPA) and the rest by private sector from the three countries.

Following competitive bidding conducted during the Yahapalanaya Government, the consortium of Adani, India’s largest private sector operator of Port terminals, its local partner John Keells Holdings (JKH) and Japanese investors were selected.

Following the election of President Gotabaya Rajapaksa and his Government on the promise among others that no State asset would be sold to foreigners, the SLPA in October last year rushed to operationalise, a partly completed ECT with an investment of around $ 80-100 million.

However with Indo-Lanka ties gathering new momentum in tandem with China’s own sustained vigour, the tripartite deal on ECT resurfaced sparking protest from trade unions.

Analysts alleged the latter as politically motivated whilst when the previous regime proceeded with the tripartite deal as well as revising the Chinese loan cum investment in Hambantota port the labour groups were silent.

However trade unions justify their new action purely on the basis of assurances given of no private/foreign deal on ECT when the new President and Government took office. They also alleged that Adani is boosting capacity in its Indian ports hence there was a degree of conflict of interest.

However, shipping experts said whether Adani gets ECT or not, its expansion or modernisation of Indian ports are inevitable as well as a necessity. With India being the biggest source of transshipment traffic in Colombo (volume wise though domestic containers have a higher value), having an investor cum terminal operator from the giant neighbour was beneficial for Sri Lanka.

SLPA Chairman Dr. Daya Ratnayake on Saturday told journalists that he was optimistic of the issue being resolved satisfactorily.

Not revealing what the way out of the crisis is, Ratnayake said that opinion and recommendations of two different committees have been submitted to the Ports and Shipping Rohitha Abeygunawardena who will submit a fresh proposal to meeting of Cabinet Ministers today.

“SLPA is keen to develop and manage ECT. We have already operationalised ECT and all our engineers and workers are keen that the Government undertakes the full expansion of the new terminal,” Ratnayake said.

He recalled that original deal was governments-to-governments and though it has irked many stakeholders going back on it was complicated hence needs to be resolved amicably.

Ratnayake also said ECT was supposed to be completed and operationalised in 2017 and failure caused severe losses to the Colombo Port. He claimed the period between 2015 and 2017 was the darkest for SLPA as there was no development.

In response to trade unions threat to go on strike today, Ratnayake who was a former Commander of the Army Commander, said: “Work to rule is fine and this is what employees are supposed to do but trade unions shouldn’t jeopardise port operations as such a course will impact the economy.”

Analysts said that as per original bid by India-Japan-Sri Lanka consortium, an investment of $ 650 million was envisaged to properly develop the ECT. The figure includes $ 80-100 million already spent by the SLPA. Once done, it will be able to accommodate bigger ships, both in service and those being built for the future.

At present only the Chinese funded Colombo International Container Terminal (CICT) can service such ships but given the capacity constraints, Colombo Port needs ECT urgently. Analysts said the desired modern ECT can be completed and operationalised within 15 months of handover.

Speculation was rife within Government and private sector circles that the alternative proposal for governments-to-governments agreement could be offering the West Terminal, which is part of Colombo Port’s overall plan.

Analysts said that ECT makes commercial sense in terms of time to revenue generation as well as capacity enhancement at Colombo whereas West Terminal may take longer between 18 to 20 months from handover.

They said that transshipment business/traffic has become more mobile and flexible as experienced when Colombo Port had labour and other issues late last year. Shipping lines skipped services to Colombo and dropped off containers in regional ports to avoid costly misconnections within their global trade routes. “Major shipping lines need certainty and clarity in terms of capacity enhancement in Colombo. If not, they will reconsider services or frequency to Colombo,” shipping analysts warned.

Courtesy:Daily FT