{"id":72200,"date":"2021-03-13T03:20:39","date_gmt":"2021-03-13T08:20:39","guid":{"rendered":"http:\/\/dbsjeyaraj.com\/dbsj\/?p=72200"},"modified":"2021-03-13T03:21:07","modified_gmt":"2021-03-13T08:21:07","slug":"81-of-the-total-cargo-arriving-at-the-colombo-port-is-transhipment-cargo-with-over-70-of-the-transhipment-business-is-linked-to-the-indian-market","status":"publish","type":"post","link":"https:\/\/dbsjeyaraj.com\/dbsj\/?p=72200","title":{"rendered":"81% of the total cargo arriving at the Colombo Port is transhipment cargo with Over 70% of the transhipment business is linked to the Indian market."},"content":{"rendered":"

By<\/p>\n

Meera Srinivasan<\/strong><\/p>\n

In a Cabinet decision on February 1 this year, Sri Lanka booted India and Japan out of a 2019 deal to jointly develop the East Container Terminal (ECT) at the Colombo Port, as trade unions and sections of the Buddhist clergy vehemently opposed foreign involvement in the strategic national asset. Further, some raised questions about the possible conflict of interest, given that the Adani Group operates about a dozen ports in India.<\/p>\n

Both India and Japan expressed displeasure at the Sri Lankan government\u2019s \u201cunilateral\u201d decision, reneging on a tripartite agreement signed by the former Maithripala Sirisena-Ranil Wickremesinghe government.<\/p>\n

As an alternative, the Rajapaksa administration offered the West Container Terminal (WCT) at the Port to India and Japan for joint development on new terms, with higher stakes of 85 % for the foreign partners.<\/p>\n

On March 1, the government approved a joint venture with the Adani consortium to develop the WCT, on a Build-Operate-Transfer basis for 35 years. But Sri Lanka\u2019s change in course has been far from smooth.<\/p>\n

Why?<\/strong><\/p>\n

Both India and Japan have distanced themselves from the decision New Delhi has termed Colombo\u2019s statement, that the Indian High Commission had approved the Adani Group\u2019s proposal to develop the WCT as \u201cfactually incorrect\u201d. Japan is yet to name an investor, according to Sri Lanka\u2019s Cabinet spokespersons.<\/p>\n

<\/p>\n

What is Colombo\u2019s response?<\/strong><\/p>\n

Asked about New Delhi\u2019s reaction to Colombo\u2019s March 1 Cabinet decision, spokesman Udaya Gammanpila said at the weekly media conference on Tuesday (March 9), that the Indian government had \u201cnominated\u201d the Adani Group to invest in the ECT. Therefore, the Sri Lankan government \u201cassumed\u201d that the Group was the nominee for the WCT project too, as it was \u201cthe very same investment\u201d, and only a \u201cchange in investment location\u201d. <\/p>\n

Noting that the Indian government has said it will not \u201cofficially involve\u201d itself in discussions about the joint venture, Sri Lanka will continue its dialogue with the Adani Group, he said, adding: \u201cIt has already commenced.\u201d
\nAre the ECT and WCT deals similar?<\/p>\n

The Colombo Port has five terminals at present \u2014 South Asia Gateway Terminal (SAGT), Jaya International Terminal (JCT), Colombo International Container Terminal (CICT), Unity Container Terminal, and the ECT. The proposed WCT is to come up at the Port\u2019s western end.<\/p>\n

Although both the ECT and the WCT are located in the same Port, there are crucial differences in their proposed development.<\/p>\n

The ECT is partially functional with a 600-metre quay wall, backyard, and gate complex. It awaits further development to augment operations and cargo transfers, at an estimated cost of $ 700 -$800 million. The WCT, on the other hand, exists only as an idea with no physical infrastructure, such that its development would require greater investment and take more time to be profitable.<\/p>\n

In the ECT deal, the Sri Lanka Ports Authority (SLPA) was to hold majority stakes of 51%, while Indian and Japanese investors were to hold 49% together. The more recent WCT deal that Sri Lanka\u2019s Foreign Secretary called a \u201ccompromise\u201d, envisages 85% for the Indian and Japanese investors, for 35 years, while the SLPA would hold the remaining, minority stakes. The arrangement is similar to the CICT, where China Merchants Port Holdings Company holds 85%.
\n
\nWhat is Colombo\u2019s rationale?<\/strong><\/p>\n

According to Cabinet spokesman Mr. Gammanpila, the \u201cnationalist forces\u201d as well trade unions \u201cstrongly\u201d view the ECT as \u201ca strategically important terminal\u201d and maintain it should not be developed by a company with a conflict of interest. \u201cBut WCT is not considered as important as the ECT, therefore, their [Adani Group\u2019s] experience in the port sector would be considered as a positive factor, not a negative factor,\u201d he said on Tuesday.<\/p>\n

Further, the government argues that it is the ECT that has a distinct advantage, in being located right next to the SAGT \u2014 a shallow terminal \u2014 allowing swift and economical cargo transfers. The WCT does not have the advantage, as the only terminal adjoining it would be the China-backed CICT.<\/p>\n

How is the government\u2019s decision viewed?<\/strong><\/p>\n

In terms of foreign relations, the government\u2019s abrupt exit from an existing international agreement surprised, and even shocked, many. Domestically, too, the government faces several questions.<\/p>\n

While the government claims that a \u201cmajority\u201d of trade unions are on board with the new proposal, a section of unions see the WCT offer to India, as being as problematic as the former ECT deal, as their opposition was principally to foreign involvement in national assets.<\/p>\n

The government\u2019s political rivals including the main Opposition party Samagi Jana Balawegaya (SJB, or United People\u2019s Front) and the leftist-nationalist Janatha Vimukthi Peramuna (JVP), are also opposing the decision, accusing the government of back-tracking.<\/p>\n

Government spokesmen have sought to justify the move, by claiming that President Gotabaya Rajapaksa\u2019s poll manifesto-turned-policy framework \u2018Vistas of prosperity and splendour\u2019 ruled out foreign investment only in the ECT.<\/p>\n

However, the vision document states: \u201cThe Port of Colombo is a national asset, and it must be upgraded to handle transhipment business volumes, thereby doubling the TEU capacity. Priority will be given to the East Terminal development project by our government. We will conduct a feasibility study to construct a new cross berth terminal between East Container Terminal and SAGT. The West Container Terminal too would be developed with private sector participation,\u201d making no mention of foreign investment.
\n
\nWhat are the implications?<\/strong><\/p>\n

Industry representatives, who favoured private partnerships to develop the Colombo Port as an international hub are unconvinced of Colombo\u2019s policy switch. Rohan Masakorala, maritime shipping expert and CEO of the Shippers\u2019 Academy Colombo, said it was \u201ca big mistake\u201d.<\/p>\n

\u201cMaking the ECT a 100 % public terminal without a partnership with international consortiums or port operators is purely a political decision, not an economic one,\u201d he said, adding that the move could cost the Colombo Port in its efficiency in the medium to long term. \u201cIt also gives potential investors here mixed signals, because the government\u2019s position was volatile and not direction driven,\u201d he told The Hindu.<\/p>\n

The latest WCT proposal also begs the question that if there is no governmental agreement from India or Japan this time, why didn\u2019t Colombo choose the investor through a competitive international bidding process? <\/p>\n

Observing that \u201cideally\u201d Colombo should have gone for such a bid, Mr. Masakorala said: \u201cBut we walked into a situation that required damage control.\u201d<\/p>\n

Industry experts have for long maintained that if the Colombo Port is to become an international hub \u2014 given its strategic location along one of the world\u2019s busiest shipping routes \u2014 it would need to collaborate with foreign shipping companies, port operators and logistics companies. Especially because 81% of the total cargo arriving at the Colombo Port is transhipment cargo, while only 19 % accounts for domestic cargo. Over 70% of the transhipment business is linked to the Indian market — a reason that successive governments cited for Indian involvement in the terminal development projects.<\/p>\n

Courtesy:The Hindu<\/em><\/p>\n

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By Meera Srinivasan In a Cabinet decision on February 1 this year, Sri Lanka booted India and Japan out of a 2019 deal to jointly develop the East Container Terminal (ECT) at the Colombo Port, as trade unions and sections of the Buddhist clergy vehemently opposed foreign involvement in the strategic national asset. Further, some …<\/p>\n

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