China Merchants signs concession for Hambantota Port

China Merchants signs concession for Hambantota Port
The port will be able to handle several cargo types

China Merchants Port Holdings (CM Port) and the Sri Lankan government have agreed a 99 year concession agreement, worth US$1.12bn, for the development, management and operation of Hambantota Port.

From the total investment, the Chinese state-owned port operator will pay the Sri Lanka Ports Authority (SLPA) US$974m for an 70% stake in Hambantota International Port Group (HIPG).

Concerns that the port could be used by the Chinese military had delayed the deal but the government has given assurances that China will run only commercial operations from the port.

In the run-up to the signing, unions held protests against the sale, burning effigies of the country’s president Maithripala Sirisena and prime minister Ranil Wickremasinghe.

Opposition MP  Namal Rajapaksa told the BBC that the arrangement would make India “uncomfortable”, adding: “We are against this because it undermines our sovereignty.”

The deep-water port is located on Sri Lanka’s southern coast, within 10 nautical miles of the main Asia – Europe shipping route. It is also in a position along China ‘Silk Road Economic Belt and the 21st Century Maritime Silk Road’.

CM Port will use the remaining US$146m for port and marine-related activities in Hambantota, as agreed with the Sri Lankan government within one year of the final payment of the capital injection in HIPG.

The agreement gives HIPG the sole and exclusive right to develop, operate and manage Hambantota Port and Hambantota International Port Services (HIPS) the sole and exclusive right to develop, operate and manage the common user facilities for the operation of the port, including security.

It is expected that the facility will be developed in three phases – the first two will have 10 berths and a quay length of up to 3,487 m, able to handle containers, bulk cargo, general cargo, roll-on roll-off (ro-ro) cargo and liquid bulk.

During the first 15 years of the concession, the SLPA and the Sri Lankan government will ensure that there are no tenders for any third party to develop a rival port or terminal within a 100 km perimeter of Hambantota Port.