Sri Lanka approved to 70 percent lease of Hambantota Port to China

Colombo, 25 July, (Asiantribune.com):

Sri Lanka’s government Tuesday approved the proposal of 70 percent lease out of the Hambantota Port to the China Merchant Company.

Hambantota Port_2

“The Cabinet today approved this deal”, Ports and Shipping Minister Mahinda Samarasinghe said.

The cabinet gave final approval to lease a 70 percent stake in Hambantota port for $1.12 billion to state-owned China Merchants Port Holdings, minister Mahinda Samarasinghe told reporters.

The revised deal comes nearly a month after President Maithripala Sirisena reshuffled his cabinet, naming Mahinda Samarasinghe to the ports ministry after his predecessor Minister Arjuna Ranatunga had strongly opposed a majority equity stake for the Chinese firm and raised a red flag over possible military use.

The Chinese will manage the port operations and the Sri Lankans the port security, the minister said. That, he added, should allay fears that the port could be misused by the Chinese.

“Security of the port will not be given to anyone else. It will be handled 100 percent by Sri Lankans,” Samarasinghe said.

He said foreign naval vessels could call at Hambantota as they did at the main port in the capital Colombo.
“We will not provide special treatment to any country. We want to maintain good relations with all and we don’t want to antagonize anyone,” Samarasinghe said.

“We don’t envisage giving special treatment to any one country like during the previous regime,” he said referring to a 2014 incident when two Chinese submarines called at Colombo — the only time any foreign submarines had stopped there.

The call angered neighboring India, which considers Sri Lanka to be within its sphere of influence and has been suspicious of China’s increasing interest in investing in the island’s infrastructure, including its sea and air ports.
The previous government took a $8 billion loan from the Chinese to build the port — a commercial failure which does not even generate enough revenue to pay staff salaries — and other infrastructure.

The new government, which came to power in January 2015, has been trying to renegotiate the terms of the loan.
Samarasinghe said Hambantota port needed a fresh capital injection of $600 million to make it viable, but Colombo could not afford the investment and was banking on the Chinese to turn around the business.

According to new negotiations, China Merchants Port Holdings agreed to reduce its stake in the Sri Lankan joint venture running the commercial operations of the port from 70 percent to 65 percent after 10 years, the document says.

“The cabinet approved the deal and now it needs parliament approval. We will send it for approval this week,” cabinet spokesman Dayasiri Jayasekera said.

He didn’t provide details. A Chinese embassy spokesman said it had no comment to make on the deal. A source close to the Chinese Embassy in Colombo said both sides had reached a compromise and that Sri Lanka’s concerns had been addressed.

“They emphasized that they wanted to maintain balanced relations with other countries. But the deal is still beneficial for China in terms of revenue,” the source said.

The latest agreement relates to the port while the pact for the industrial zone will be handled separately, Sri Lankan officials said.

– Asian Tribune –