Sri Lanka scraps deal to jointly develop East Container Terminal with India and Japan

Sri Lanka scraps deal to jointly develop East Container Terminal with India and Japan
The MSC Emma called at ECT in late 2020

Risking a geopolitical row, the Sri Lankan government has decided to renege on a 2019 agreement to jointly develop a new deep-water terminal in the Port of Colombo with India and Japan, choosing instead to put the Sri Lanka Ports Authority (SLPA) in sole ownership.

Two years ago, the previous government headed by Maithripala Sirisena and Ranil Wickremesinghe signed an agreement with India and Japan to jointly develop East Container Terminal (ECT).

At the time, the plan was for the SLPA to hold a 51% stake while the fellow Asian partners would hold a cumulative 49% share.

However, following complaints from trade unions, the current Sri Lankan administration has declared that ECT will be wholly owned by the SLPA, and instead it wants to develop another facility – West Container Terminal in the Port of Colombo – with investment from India and China.

Prime Minister Mahinda Rajapaksa tweeted: “Met the ECT workers trade union to assure them that the terminal will not be sold or leased to any foreign entity.

“The SLPA will maintain control of the ECT. The Sri Lankan government adheres strictly to its policy of retaining assets belonging to the government.”

The decision has not gone down well with India, as a spokesperson for the Indian High Commission in Colombo noted: “I would like to reiterate the expectation of the government of India for expeditious implementation of the trilateral Memorandum of Cooperation (MoC) signed in May 2019 among the governments of India, Japan and Sri Lanka for the development of ECT with participation from these three countries.

“The commitment of the government of Sri Lanka in this regard has been conveyed several times in the recent past, including at leadership level. The Sri Lankan cabinet also took a decision three months ago to implement the project with foreign investors. All sides should continue to abide by the existing understandings and commitment.”

Port investments in Sri Lanka have become heavily politicised in recent years, with the decision to offer a 99 year concession for Hambantota Port to China Merchants Port Holdings (CM Port) proving particularly controversial.

China already operates a deep-water terminal in Colombo, Colombo International Container Terminal (CICT), which is run by CM Port.

The Port of Colombo currently has four main terminals—Jaya Container Terminal (JCT) and Unity Container Terminal (UCT), both 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.

While ECT is still in development, a completed section opened in late 2020, utilising cranes from JCT. The first phase of the project features a 450 m berth while an additional 600 m will be added in the second phase at a later date.