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Sri Lanka revises Hambantota Port agreement with China, allays India’s concerns

The port, close to the world's busiest shipping lanes, has been mired in controversy ever since state-run CMHC, which built it for USD 1.5 billion, signed an agreement taking an 80 per cent stake.
Written by: India TV News Desk Colombo July 25, 2017 22:35 IST
India TV News Desk

Following widespread public anger and concerns raised by India, the Sri Lankan Cabinet today cleared a revised agreement for its Chinese-built southern port of Hambantota. As per the new deal, the island nation’s government has sought to limit Beijing’s role to running commercial operations at the port.

Minister of Ports and Shipping, Mahinda Samarasinghe termed the deal as a 'win-win situation' for both Colombo and Beijing, adding that the concession agreement on the Hambantota Port between Sri Lanka Ports Authority (SLPA) and China Merchants Holdings Company (CMHC) Ltd will be tabled in Parliament on Wednesday with the government expecting to formally sign the deal on Saturday.

“The Cabinet approved the deal and now it needs Parliament approval. We will send it for approval this week,” Cabinet spokesman Dayasiri Jayasekera said.

The port, close to the world's busiest shipping lanes, has been mired in controversy ever since state-run CMHC, which built it for USD 1.5 billion, signed an agreement taking an 80 per cent stake. Under the new deal, according to news agency Reuters, the new terms will also help allay concerns of India as also in Japan and the United States, that the port won't be used for military purposes.

In 2014, India was alarmed when a Chinese submarine docked in Colombo, where another Chinese firm is building a USD 1.4 billion port city on reclaimed land. India has long considered Sri Lanka, just off its southern coast, as within its sphere of influence and sought to push back against China's expanding maritime presence. In May, Sri Lanka turned down a Chinese request to dock a submarine.

Chinese control of Hambantota, which is part of its modern-day ‘Silk Route’ across Asia and beyond, as well as a plan to acquire 15,000 acres (23 square miles) to develop an industrial zone next door, had raised fears that it could also be used for Chinese naval vessels.

Sri Lankans demonstrated in the streets at the time, fearing loss of their land, while politicians said such large scale transfer of land to the Chinese impinged on the country's sovereignty.

Meanwhile, a Chinese Embassy spokesman in Colombo said that it had no comment to make on the deal. A source, news agency said, close to the Embassy, however, said both sides had reached a compromise and that Sri Lanka's concerns had been addressed. "They emphasised that they wanted to maintain balanced relations with other countries. But the deal is still beneficial for China in terms of revenue," the source said.

China Merchants Port Holdings will take an 85 per cent stake in Hambantota International Port Group that will run the port and its terminals, with the rest held by Sri Lanka Ports Authority. The company's capital will be USD 794 million.

A second firm, Hambantota International Port Group Services Co, with capital of USD 606 million, will be set up to oversee security operations, with the Sri Lankans holding a 50.7 per cent stake and the Chinese 49.3 per cent. China Merchants Port Holdings also agreed to reduce its stake in the joint venture running the commercial operations of the port to 65 per cent after 10 years.