By Maheesha Mudugamuwa [caption id="attachment_118289" align="alignleft" width="300"] Sri Lanka Ports Authority Chairman (Retd.) Gen. Daya Ratnayake[/caption] It is unlikely that Sri Lanka will revoke the already-signed tripartite agreement between India, Japan, and itself on jointly developing the East Container Terminal (ECT) of Colombo Port in 2019, as the Sri Lankan Government is attempting to renegotiate it for the development of the West Container Terminal (WCT) instead, The Sunday Morning learnt. Secretary to the Ministry of Ports and Shipping U.D.C. Jayalal said the Government would soon appoint a new negotiating committee to renegotiate the existing agreement with Japan and India in a way that its terms could be applied to the Colombo Port’s WCT instead. “There is no need to revoke the Memorandum of Co-operation (MoC). We will appoint a new committee, and it will negotiate the agreement with Japan and India,” he told The Sunday Morning. The Secretary made these comments in the backdrop of uncertainty looming over the possibility of the two countries agreeing to last week’s proposal by the Sri Lankan Government that the Colombo Port WCT be developed instead of the strategic ECT, going against what was agreed upon in 2019 through a MoC between the three countries. Pressured by trade unions, the Government last week was forced to change its tune on the controversial ECT deal. This in turn has resulted in a diplomatic stand-off with India and Japan. Tensions erupted last Sunday (31) when Prime Minister Mahinda Rajapaksa told the media that the ECT would not be handed over to India, in direct contradiction of what his brother President Gotabaya Rajapaksa had stated several weeks ago. At a meeting held with representatives of port trade unions, President Rajapaksa said he had 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 Sri Lanka Ports Authority (SLPA). According to the President, the terminal was earlier said to 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. Nevertheless, proving the PM’s statement correct, the Cabinet last week approved the proposal made to instead develop the WCT at the Colombo Port as a private-public partnership (PPP) with India and Japan, which was seen as an attempt to compensate India. Yet, it is still unclear whether India and Japan will agree to Sri Lanka’s new proposal, which seems to be the final decision taken by the ruling party to avoid political turmoil within the country.   In the meantime, it was reported in Hindustan Times that India has emphasised the importance of Sri Lanka adhering to international commitments under a trilateral agreement for developing the ECT. It is also reported as having quoted Indian External Affairs Ministry Spokesperson Anurag Srivastava as saying that the MoC signed by the three countries in May 2019 envisaged the development and operation of the ECT in a trilateral framework, and the Indian High Commissioner in Colombo is in discussion with the Government of Sri Lanka regarding several matters, including the importance of adhering to international commitments. [caption id="attachment_118285" align="alignleft" width="229"] Secretary to the Ministry of Ports and Shipping U.D.C Jayalal[/caption]

No official communication

However, as learnt by The Sunday Morning, Sri Lanka has not yet officially informed India regarding the relevant Cabinet decision taken last week. Nevertheless, the envoys of India and Japan have held several meetings with the Sri Lankan leadership to discuss this matter.   The MoC for the development of the ECT was signed between Sri Lanka, India, and Japan at the Heads of Government discussions during 2017-2019, and through Cabinet decisions taken on 30 May 2019. It 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 were raised as to whether this deal was also a result of escalating geopolitical competition between regional powers. Now, the question arises over the legality of the amendment approved by the Sri Lankan Government without prior consent from the other two parties, India and Japan. When contacted by The Sunday Morning, SLPA Chairman (Retd.) Gen. Daya Ratnayake noted that the relevant Cabinet decision was based on two reports submitted by the corresponding Cabinet-appointed committees. He also noted that the decision of whether to revoke the MoC would be decided at national level. “As of now, we are having back-to-back meetings, and discussions are underway to decide on how the ECT should be developed,” Ratnayake noted. When asked whether the SLPA has enough funds to develop the ECT, the Chairman stressed that it would have to obtain a loan from a bank to develop the terminal. “We haven’t finalised anything as yet. The discussions are still going on. The loan amount and other details have not yet been finalised,” he added.   “Anyway, we were initially to develop the ECT; and now we were given the opportunity to do so. As of now, the operations are going on as usual,” Ratnayake added. As learnt by The Sunday Morning, neither India nor Japan have yet officially accepted or rejected the Government's proposal, as neither were officially informed about Sri Lanka’s decision. A well-informed source said the political pressure on the Government from the Opposition and trade unions, as well as within its constituent parties, was immense, which has led to the cancellation of the existing MoU and offering of the WCT instead.

The ECT’s strategic importance

Meanwhile, addressing the Cabinet media briefing last week, Joint Cabinet Spokesperson Minister Udaya Gammanpila said the ECT is strategically important to Sri Lanka, and therefore the Cabinet of Ministers decided that Sri Lanka should have complete control of it. He explained to the media that only the ECT has the facility for back-to-back operations between terminals, and that is why there was concern over it. On the other hand, the WCT has no strategic importance, and therefore will be developed with foreign investment. Gammanpila said the development of the WCT with foreign investment is mentioned in the President’s national policy framework. However, as political analysts predict, the recent decision could affect the bilateral relationship between India and Sri Lanka, as India had high hopes of receiving control of the ECT – the topic was also discussed at the top-level meeting held during India’s External Affairs Minister S. Jaishankar’s visit to Colombo in January.  

Trade union involvement

In the meantime, trade unions are keeping silent on the matter regarding the WCT, as they have given written consent to the Government that they would support the Government’s plans to develop the WCT with private investment. In the letter written to the President on 29 January, the unions had assured that they would withdraw from all union actions if six conditions were met. These included the handing over of the already completed section of the ECT to the SLPA; completing the construction work of the terminal with SLPA funds; completing the construction within three years; and to acquire the control of South Asia Gateway Terminal (SAGT) after the existing agreement’s expiry in 2029. On fulfillment of these terms, the unions agreed to support the Government with the WCT’s development mechanisms, to get Cabinet approval to take complete ownership of the ECT under the SLPA, and to get approval for both the WCT and ECT in the same Cabinet approval process. However, when contacted, the Deputy General Secretary of the All Ceylon General Ports Employees Union (ACGPEU), which is affiliated to the Janatha Vimukthi Peramuna, G. Niroshan, stressed that his union did not sign the collective letter sent to the President last week prior to the Cabinet meeting. “We have not agreed to give the WCT either. We don’t want to give the WCT and keep the ECT. We want all terminals. We are against the decision taken by the Cabinet, and we will protest again if the Government tries to sell the WCT,” he stressed. 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: the South Container Terminal (SCT), ECT, and WCT, each 1,200 m in length and possessing facilities to accommodate three berths each. The SCT commenced operations in 2013 under a PPP on a build-operate-transfer (BOT) basis with Colombo International Container Terminals (CICT) and the SLPA. CICT’s management is handled by China Merchants Holdings (International) Co. Ltd. The ECT, under the Colombo Port Expansion Project (CPEP) implemented by the Mahinda Rajapaksa Government, is the second-largest deep-water project of the Port. Of the planned 1,200 m terminal, 400 m was completed in 2015.  PHOTOS © SRI LANKA PORTS AUTHORITY