Wednesday , 18 September 2019
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Sri Lankan government planning to develop Colombo’s East Container Terminal with Japan and India

Update (28/05/19): Sri Lanka, Japan and India have signed a Memorandum of Cooperation (MoC) to jointly develop the new deep-water facility East Container Terminal (ECT) at the Port of Colombo.

The plan is for the Sri Lanka Ports Authority (SLPA) to retain 100% ownership of ECT while owning a 51% stake in the new Terminal Operations Company (TOC) while the Japanese and Indian governments hold the remaining 49%.

According to the SLPA, retaining majority ownership in the TOC represents a “significant step in prioritising national interests” while financing from the joint venture partners will help “Colombo Port to develop at a faster pace than would otherwise be feasible using the SLPA’s own funds”.

A statement from the SLPA noted that an envisaged Japanese loan “carries one of the best loan terms Sri Lanka has obtained”. Bloomberg has reported that Japan will provide a 40-year Yen loan with a 10-year grace period although the SLPA has not confirmed that these are the terms.

The statement from the SLPA added: “Within the next three decades, over 45% of global GDP and trade is predicted to originate or be located within the Asian region.

“In this ultra-connected world, deep relationships with multiple trading partners is not only prudent business, it is critical to ensuing Colombo Port remains relevant to global trade.”

It continued: “Global cargo trade is an extremely competitive, fast paced, rapidly evolving industry, that requires ports be timely in their capacity expansion, execution, and service levels. The envisaged MoC is a significant step in ensuring Colombo Port delivers on these goals in an agile manner.”

Sri Lanka’s ports minister Sagala Ratnayaka said two months ago that the SLPA was procuring cranes from Japan, noting it wanted to attract shipping lines “which operate the largest ships in the industry”.

ECT’s first phase was completed in 2015 with a US$80m loan from Bank of Ceylon (BOC). A part of the terminal is equipped with a 440 m quay berth and an 18 ha yard in addition to other equipment.

In geopolitical terms, some observers have noted the agreement with Japan and India may be seen as a significant counter to China’s Belt and Road Initiative.

China already operates the only present deep-water terminal in Colombo, Colombo International Container Terminal (CICT), which is run by China Merchants Port Holdings, while it also holds a 99 year concession for Hambantota Port.

The Port of Colombo currently has three main terminals—Jaya Container Terminal, run by the SLPA, South Asia Gateway Terminal (SAGT), operated by John Keells Holdings and APM Terminals, and CICT. The SLPA has ownership stakes of 15% each in SAGT and CICT.

Work will begin by March 2020 according to Nikkei.