brand logo

East Container Terminal: Still in stormy waters 

24 Jan 2021

  • No final decision on tripartite MoC: SLPA
  • TUs to continue struggle demanding 100%
By Maheesha Mudugamuwa Trade Unions (TUs) attached to the Sri Lanka Ports Authority (SLPA) continue to express their displeasure at the apparent disregarding of assurances given by President Gotabaya Rajapaksa that the East Container Terminal (ECT) at Colombo Port would not be sold to any foreign nation, while urging the Government to scrap all investment plans for terminal development and assign it fully to the SLPA. Seeking a total block on any sort of investment, the unions urged the Government to retain 100% of the shares with the SLPA, and to utilise government funds allocated for the Authority to develop the terminal. The JVP-affiliated All Ceylon General Ports Employees’ Union (ACGPEU) Deputy General Secretary G. Niroshan stressed that the total income of the ECT during the last two months has exceeded Rs. 600 million, even without proper operations. “At present, the ECT doesn’t have a separate management or separate employees. It runs with minimum facilities without a proper plan. A higher income could have been earned if a proper system is established even at present,” he told The Sunday Morning. Niroshan went on to say that the SLPA could develop the ECT through its own income within the next two years, without support from India. 

No sale/lease

Nevertheless, at the meeting held with the representatives of port trade unions, President Rajapaksa assured that the ECT would not be sold or leased. Instead, he said, he has negotiated with India on the contract, and that it was possible to reach an agreement to retain 51% ownership and keep control of the terminal under the SLPA. Emphasising that he would not allow any harm to come to the nation’s sovereignty or independence when investments are arranged, the President had told union representatives that the ECT’s development was planned after reviewing all relevant factors, including the regional geopolitical concerns, sovereignty of the country, revenue, and employment generation potential. Explaining further, President Rajapaksa had stated that the ECT will be “sustainably developed” under the investment programme. Accordingly, the terminal would be developed as an investment project with 51% of its ownership under the Government of Sri Lanka, and the remaining 49% as an investment by India's Adani Group and other stakeholders. 

New challenges ahead

However, in the Auditor General’s report attached to the progress report of the SLPA in 2016, it is stated that the shipping agents currently show more interest in using large vessels in the transport of cargo. Similarly, upon the amalgamation and centralisation of container vessel companies, about 95% of the container capacity in the Asian European Trade Route is handled by four allied shipping companies. This has resulted in creating stiff competition for obtaining port services. Under such circumstances, the authority should take appropriate measures to protect and improve its market share. The Audit office has stated that no such step had been taken, even by the end of the year under review, which is 2016. As learnt by The Sunday Morning, since 2016, no major development has been made to the ECT. Moreover, several years have already passed since the signing of the MoC to develop the ECT. Yet, successive governments have failed to take a final decision regarding the development of the terminal. As a result of the delay, experts have alleged that the country has already lost billions of rupees in annual income.  Furthermore, the Audit Report revealed that reshipping represents about 70% of the container handling of the Colombo Port, and a great influence had been posed by competitive ports in acquiring the increasing container transporting capacity. After the Vallarpadam Port of Cochin Town was declared as a reshipping hub by India, this competition intensified. There was a preparation to develop the Vizhinjam Port in South India as a reshipment port, and the Indian Government had declared that 12 leading ports existing under the custodian model of ports had been converted as consolidated entity units. It has also been revealed that the Colombo Port may face competition posed not only by the ports situated outside South Asia, but also by the ports in the Indian subcontinent. However, the ECT could be used for operational activities to face these competitive situations. Colombo Port, primarily a container port, is a rapidly growing maritime hub of the South Asian region, and the port connected cargo originating from and destined for Europe, East and South Asia, the Persian Gulf, and East Africa. The original port had a harbour area of 184 hectares. In 2008, the South Harbour area (285 hectares) was developed to accommodate deepwater berths and the latest generation of mainline vessels. The harbour is served by a two-way channel with an initial depth of 20 m and a width of 570 m. In addition to the container terminals in the original port area, SLPA planned to develop three terminals (each having a capacity of 2.4 million TEUs) in the South Harbour, the first of which was built and in operation on a build-operate-transfer (BOT) basis by Colombo International Container Terminals Ltd. (CICT) – a joint venture company of China Merchants Holding (International) Co. Ltd. and the SLPA. The Colombo Port currently consists of three main parts. One of them is the Jaya Container Terminal (JCT), belonging to the SLPA. The South Asia Gateway Terminal (SAGT) is owned by Sri Lanka and international entities, while a majority of the shareholding in CICT is owned by China. This terminal is located adjacent to the Colombo Port City. As a result, a terminal of sufficient capacity for the SLPA to dock large ships does not exist within the Colombo Port at present. Against such a backdrop, the ECT is under development by the SLPA, using funds obtained from a state bank to accommodate large ships. According to the SLPA, the Colombo Port Expansion Project (CPEP) is being implemented in an area encompassing about 600 hectares. There will be three terminals: South Container Terminal (SCT), ECT, and West Container Terminal (WCT), each 1,200 m in length and possessing facilities to accommodate three berths each. The SCT commenced operations in 2013 under Public Private Partnership (PPP) under a BOT basis with CICT and SLPA. CICT’s management is handled by China Merchants Holdings (International) Co. Ltd. The ECT, under the CPEP implemented by the Mahinda Rajapaksa Government, is the second-largest deepwater project of the Port. Of the planned 1,200 m terminal, 400 m was completed in 2015. 

A turning point for the shipping industry

According to the progress of the ECT Phase I – Colombo Port Expansion Project reported to Parliament, as of 2016, a 600 m quay wall was built, with 440 m-long berthing facilities consisting of a 30 m rail span, a 20 m-wide back reach area, a two-lane road, and a free area with revetments and a capping beam. A land side crane rail and beam were also built, while a container yard was constructed on reclaimed land, comprising 12 dry stack lanes and one reefer lane, with 30 m-wide yard peripheral roads. Additionally, a terminal tractor parking area corner revetment was built, and services and utilities were completed. However, Sri Lanka signed a Memorandum of Co-operation (MoC) for the development of the ECT with India and Japan at the Heads of Government discussions during 2017-2019, and on the Cabinet decisions taken on 30 May 2019. The MoC provides for the formation of a Terminal Operations Company (TOC), of which 49% is jointly held by Japanese and Indian shareholders, while 51% is held by the SLPA. Under the terms of the MoC, the TOC was to develop the ECT based on a Japanese loan to the SLPA guaranteed by the Government of Japan. The MoC was reached soon after China was given a controlling equity stake and a 99-year lease of the Hambantota Port, and concerns have been raised as to whether this deal is also a result of escalating geopolitical competition between regional powers. Following the recent visit of the Indian External Affairs Minister, the trade unions attached to the Colombo Port intensified opposition, urging the Government to cancel the MoC. They alleged that steps were being taken by the authorities to convert the MoC signed under the previous Government into a Memorandum of Understanding (MoU), by giving legal recognition to the tripartite agreement between India, Japan, and Sri Lanka. However, when contacted by The Sunday Morning, SLPA Chairman (Retd.) Gen. Daya Ratnayake said a final decision on the controversial MoC is to be taken following the recommendations by the two committees appointed by Cabinet. Accordingly, the project committee is currently evaluating the MoC, and once the recommendations are given, the CANC will look into the entire MoC and give its recommendations to Cabinet. He said that the two committees were currently looking at the MoC signed between the three countries, and that they were not evaluating any proposals submitted by any private companies. When asked whether it is possible for the SLPA to develop ECT alone, the Chairman stressed that the SLPA has the capacity, but since this is a national issue, it should be viewed in a broader perspective. “The President views this in a nationalistic angle. Even though the SLPA has funds, when considered in a nationalistic perspective, there are number of advantages the country would receive,” he stressed. As explained by Ratnayake, the SLPA is looking for an investment value of around $ 500 million. “Including the funds that we have already spent on the ECT, as of now it is valued at around $ 700 million. But we are looking for at least around $ 500 million,” he said. Asked whether still there is a hope that SLPA would alone go for the development, the SLPA Chairman noted there is a MoC signed under the previous Government, which is still in effective.  Meanwhile, the Indian High Commission in Colombo said the participation of India in the ECT will secure precisely such investment as required in the much-needed capacity augmentation of the Colombo Port, which otherwise faces the prospect of losing business in the absence of investment. Welcoming the emphasis by Sri Lanka’s leadership to attract more foreign investment, the Indian High Commission said that the expeditious development of the ECT will strengthen Sri Lanka’s place as a major connectivity hub, while directly and indirectly creating thousands of jobs and generating revenue for Sri Lanka. Furthermore, it stated that India’s participation in the ECT is also natural, given that over 60% of the Colombo Port’s transhipment traffic is with India. Minister of Ports and Shipping Rohitha Abeygunawardena said the ECT will be further developed into an economic hub in the future. He told the media that discussions are currently underway with the Governments of India and Japan to connect with investors. However, the cabinet memorandum on the ECT, undersigned by Abeygunawardena on 20 January 2020, assured strict adherence to guidelines and recommendations in the Memorandum of Co-operation (MoC) between India, Japan, and Sri Lanka. Even though Sri Lanka entered into an MoC with both India and Japan, the unions claimed that Japan's involvement is not clear, as they learnt that India is going to obtain 49% of shares of the ECT. When The Sunday Morning queried the Embassy of Japan regarding its involvement and progress of the discussions held so far, the Embassy stated that Japan, India, and Sri Lanka are currently holding discussions to finalise the details of co-operation to realise the development and operation of the ECT. PHOTO ©️SLPA


More News..