Background:

• In a Cabinet decision on February 1 this year, Sri Lanka booted India and Japan out of a 2019 deal to jointly develop the East Container Terminal (ECT) at the Colombo Port, as trade unions and sections of the Buddhist clergy vehemently opposed foreign involvement in the strategic national asset.
• Both India and Japan expressed displeasure at the Sri Lankan government’s “unilateral” decision.
• As an alternative, the Rajapaksa administration offered the West Container Terminal (WCT) at the Port to India and Japan for joint development on new terms, with higher stakes of 85 % for the foreign partners.
• On March 1, the government approved a joint venture with the Adani consortium to develop the WCT, on a build-operate-transfer basis for 35 years. But Sri Lanka’s change in course has been far from smooth.
• Both India and Japan have distanced themselves from the decision.
• New Delhi has termed Colombo’s statement that the Indian High Commission had approved the Adani Group’s proposal to develop the WCT “factually incorrect”. Japan is yet to name an investor, according to Sri Lanka’s Cabinet spokespersons.

Colombo’s response: The Indian government had nominated the Adani Group to invest in the ECT. Therefore, the Sri Lankan government assumed that the Group was the nominee for the WCT project too, as it was the very same investment, and only a “change in investment location.

Two projects:

• The Colombo Port has five terminals at present — South Asia Gateway Terminal (SAGT), Jaya International Terminal (JCT), Colombo International Container Terminal (CICT), Unity Container Terminal, and the ECT. The proposed WCT is to come up at the Port’s western end.
• Although both ECT and WCT are located in the same port, there are crucial differences in their proposed development.
• The ECT is partially functional with a 600-metre quay wall, backyard, and gate complex. It awaits further development to augment operations and cargo transfers, at an estimated cost of $700-800 million.
• The WCT, on the other hand, exists only as an idea with no physical infrastructure, such that its development would require greater investment and take more time to be profitable.
• In the ECT deal, the Sri Lanka Ports Authority (SLPA) was to hold a majority stake of 51%, while Indian and Japanese investors were to hold 49% together.
• The more recent WCT deal that Sri Lanka’s Foreign Secretary called a “compromise” envisages 85% for the Indian and Japanese investors, for 35 years, while the SLPA would hold the rest.
• The arrangement is similar to the CICT, where China Merchants Port Holdings Company holds an 85% stake.

Questions about the deal:

• In terms of foreign relations, the government’s abrupt exit from an existing international agreement surprised, and even shocked, many. Domestically, too, the government faces several questions.
• While the government claims that a “majority” of trade unions are on board with the new proposal, a section of unions see the WCT offer to India, as being as problematic as the former ECT deal. Their opposition was principally to foreign involvement in national assets.

https://www.thehindu.com/todays-paper/tp-international/the-tale-of-two-terminals-in-colombo/article34032237.ece

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