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Underwater myth of Sri Lanka’s Hambantota Port deal

Underwater myth of Sri Lanka’s Hambantota Port deal

Colombo:A $ 1.12-billion agreement, a 99-year lease and “debt diplomacy” are some of the flashy words weaving different stories about the Hambantota Port project between China and Sri Lanka.

But what is really happening under the turbulent waters of the maritime port? And if it is commercially run by a joint venture, then who has the final say?

In short, the Hambantota Port is under Sri Lankan sovereignty. And the much-trumpeted security concerns over the commercially-run port by a Chinese company are invalid, as the Sri Lankan Government recently moved its southern naval command to the facility.

“There is no need to be frightened as the security of the Hambantota Port will be under the control of Sri Lanka Navy,” announced a statement by the Sri Lankan Prime Minister’s Office issued in June. It clarified that Sri Lanka and its people own control over the port, and refute allegations that a “Chinese colony is being built” there.

Chinese and Sri Lankan joint ventures will operate the port and share revenues. When it comes to security, Sri Lanka has full responsibility and control.

All these have been guaranteed by a five-party agreement reached by China Merchants Port Holdings (CMPort), Sri Lanka Ports Authority (SLPA), the Sri Lankan Government, Hambantota International Port Group (HIPG) and Hambantota International Port Services Company (HIPS).

An item often overlooked in some media reports is that the China Merchants Port Holdings (CMPort) needs to invest up to $ 1.12 billion in Hambantota Port and relevant sea logistic business under the agreement.

Under this deal, the Chinese side holds a 70% stake in two joint ventures and the Sri Lankan side holds the rest 30%. After 10 years, the Sri Lankan side will gradually purchase an additional 20% stake, resulting in the two sides owning an equal share of 50% each.

Colombo, the commercial capital and largest city of Sri Lanka, is too busy to deal with seaborne trade routes. Sri Lanka needed a new economic growth engine, and Hambantota Port, with its proximity to the world’s busiest shipping lanes, proved to be a good option.

Commercial activities at the deep-sea port are expected to trigger economic development for Sri Lanka.

Back in 2005, constructing a new port in Hambantota and connecting it to the capital Colombo via a planned industrial belt was prioritised in the ‘Mahinda Vision for the Future,’ which was proposed by former Sri Lankan President Mahinda Rajapaksa. It aims to transform Sri Lanka into “a hub for sea transport, aviation, business, energy and knowledge”.

How feasible and practical is it to build the Hambantota Port?

The Sri Lankan Government has carried surveys and research regarding that matter in previous years.

During the time of former President Chandrika Kumaratunga, Danish engineering consultancy firm Ramboll did the first feasibility study, without finishing it. Another top engineering consultancy firm, SNC Lavalin from Canada, completed another study in June 2003.

In 2004, Ramboll was back in the picture and completed the study in 2007. This was under the second term of Chandrika Kumaratunga.

The conclusion of two feasibility studies under two different governments is clear and convincing: Build the Hambantota Port.