Tuesday , June 18 2019
Breaking News
Home / International Customs / Sri Lanka / Former Sri Lanka Official Clarifies Hambantota Port was Never in A “Debt Trap”
Former Sri Lanka Official Clarifies Hambantota Port was Never in A “Debt Trap”

Former Sri Lanka Official Clarifies Hambantota Port was Never in A “Debt Trap”

Colombo : Hambantota Port has started to build before the proposal of the Belt and Road Initiative. In respond to the New York Times article of “How China Got Sri Lanka to Cough Up a Port” published in June 2018, Saliya Wickramasuriya told Business Times that Sri Lanka was absolutely voluntary during the process, and there was no trap in middle.

Saliya Wickramasuriya is the Senior Adviser to the Chief Executive Officer of Hambantota International Port Group in Sri Lanka, also the former Chairman of the Sri Lanka Port Authority and National Investment Authority.

According to Saliya, since 2001, the expansion of dry bulk and liquid bulk cargo operations grow rapidly, and Sri Lanka has started to feel the urgent need to have another port apart from Colombo Port. As a result, a suggestion to develop Hambantota Port has been put to the national agenda, he shared during the International Forum on New Inclusive Asia in Kuala Lumpur on December 6.

“At first, we filed a loan application with the multilateral development banks, but was rejected, and India thought that Hambantota Port has no development potential. Lastly, we tried to talk with China.” Saliya said.

After extensive negotiations and consultations, the Export-Import Bank of China finally agreed to offer 85% loan for the first phase construction costs of Hambantota Port. The $306 million commercial loan term is 15 years with 6.3% interest rate and four years grace period.

The Export-Import Bank of China provided $900 million loans for the second phase port construction then. The interest rate was set at 2% and 77% of China’s loans to Sri Lanka enjoyed this preferential interest rate.

The first phase construction of Hambantota Port commenced in January 2008 and was completed by the China Harbour Engineering Co., Ltd. and China Water Conservancy & Hydropower Construction Group. The port began operation on November 18, 2010.

However, due to poor management, Hambantota Port was unable to attract transit vessels to port. As of the end of 2016, the port’s losses piled up to $304 million.

In order to meet the IMF’s rescue conditions and loan repayment obligations, Sri Lanka signed a PPP mode agreement with China in July 2017, to transfer most of the operational management of Hambantota Port to a Hong Kong Stock Exchange listed company- Merchants Port Holdings Limited.

According to the report submitted to the Hong Kong Stock Exchange by Merchants Port, the Hambantota Port Lease Agreement includes the following terms: Merchants Port will invest $1.12 billion in Sri Lanka, of which $974 million will be used to acquire a 85% Hambantota International Port Group (HIPG) stakes. HIPG market value is $1.4 billion. The Sri Lanka government will grant HIPG the sole and exclusive right to develop, operate, and manage Hambantota Port, which is for a period of 99 years.

“I would like to clarify that Sri Lanka is absolutely voluntary in the process. There is no trap in the middle, and the construction of Hambantota port has started to build long before the Belt and Road Initiative was proposed,” Saliya said.

He also shared with Business Times about the current situation and future development planning of the port. “Hambantota port does not have huge capacity. It has certain physical restrictions that limit its use for anything other than special services.”

“What we are focusing on right now is vehicle import transshipment business, which is a niche market: transshipping vehicles from India to the rest of the world and from Japan to East Africa. And we are also looking at energy transshipment.” He added.

Saliya explained that the port need to position itself in areas with no fierce competition in order to tap into more business opportunities. “Colombo Port is a competitor in terms of container; Singapore is the world’s top port in terms of both container handling and bunkering sales. Sri Lanka being in South East Asia and close to Indian market, therefore, we need to align with the Indian subcontinent related transshipment, costal shipping, and making sure that we can present regional opportunities in energy sector.” He said.

Saliya expressed that there are numbers of fruitful collaboration between China and Sri Lanka besides Hambantota Port project. “For example, the Chinese Merchants Charitable Foundation has set up a local project in protecting elephants; both countries universities are collaborating on training and technology transfer basis. Likewise, China is involved in ocean research in Sri Lanka as well.”