Hambantota Port Deal from Many Angles

PTI Item: “Sri Lanka, China sign USD 1.1 bn Hambantota port deal” Jul 29, 2017

Sri Lanka today signed a USD 1.1 billion deal with China to sell a 70-per cent stake in the strategic Hambantota port to a state-run Chinese firm, a move that could raise security concerns in India.  The deal had been delayed by several months over concerns that the deep-sea port could be used by the Chinese Navy.
Cash-rich China has invested millions of dollars in Sri Lanka’s infrastructure since the end of a brutal civil war in 2009.  As part of the deal, the stake in the loss-making port has been sold to China’s state-run conglomerate China Merchant Port Holdings (CMPort).

Sri Lanka’s Minister of Ports and Shipping Mahinda Samarasinghe and China’s envoy to Colombo Yi Xianliang were present when the Concession Agreement was signed.  Under the 99-year lease agreement, CMPort is to invest up to USD 1.1 billion in the port and marine-related activities. “This is a very favourable agreement compared with the plan in 2014,” Samarasinghe said, referring to the original plan laid out during former president Mahinda Rajapaksa’s tenure.

The agreement was open for further amendments, he said.  The deal may raise security concerns in India.  According to the new deal, only Sri Lankan Navy will be responsible for security of the deep-sea port, and the port will not be allowed to become a base for any foreign navy.  The new provision is seen as an attempt to allay India’s concerns over Chinese Navy’s possible presence in Sri Lanka.  The port, overlooking the Indian Ocean, is expected to play a key role in China’s Belt and Road initiative, which will link ports and roads between China and Europe.

The Sri Lankan government had to face huge opposition to the deal from trade unions, who called it a sellout of the country’s national assets to China.  Last week, petroleum workers brought the country to a standstill for two days by stopping fuel distribution. They called the deal a sell out of national assets to China.

But Sri Lankan Prime Minister Ranil Wickremesinghe yesterday said: “We are giving the country a better deal without any debt.”

The accumulated loss from the port was more than USD 300 million and the money realised from deal will set off the debts owed to China, he said.  Sri Lanka’s Cabinet had on July 25 approved the transfer of stake in the port to the Chinese firm, tweaking the deal after the initial agreement sparked protests in the country.  The initial 80:20 share distribution has been revised to 69.55 per cent to CMPort and 30.45 per cent to Sri Lanka Port Authority.



SL sign deal on Hambantota port with China


Sri Lanka signed a US$1.1 billion deal today to lease the southern Hambantota port to China, after several months of delay caused by protests. The amended agreement was signed between the Sri Lanka Ports Authority (SLPA) and the China Merchant Port Holdings at the Ministry of Ports and Shipping under the auspices of Prime Minister Ranil Wickremesinghe. PM Wickremesinghe yesterday announced that the lease out agreement would be signed today. “We will sign the Hambantota agreement tomorrow (Saturday)…We are giving the country a better deal without debt,” PM Wickremesinghe told media on Friday.

The agreement had been signed with the presence of Minister of Ports and Shipping Mahinda Samarasinghe, Development Strategies and International Trade Minister Malik Samarawickrama, Finance and Media Minister Mangala Samaraweera, Special Projects Minister Sarath Amunugama, Ports and Shipping Deputy Minister Nishantha Mutuhettigama. Chinese Ambassador to Sri Lanka Yi  Xianliang, Executive vice president of china merchant group Dr. Hu Jianhua, Counsul General Yang Zuo Yuan of the Chinese government and a group of government officials also presented.

Secretary of the Ministry of Ports and Shipping L.P. Jayampathy, Chairman of the Sri Lanka Ports Authority Dr. Parakrama Dissanayake signed the agreement on behalf of the Sri Lankan government and Executive Vice President of China Merchant group, Dr. Hu Jianhua Signed this agreement representing the government of China.


H’tota agreement: JVP threatens to block implementation

Daily Mirror, 2017-07-29 1

The Janatha Vimukthi Peramuna (JVP) said yesterday it would get the workers attached to Sri Lanka Ports Authority to prevent the government from implementing the agreement which is to be signed today between the Government and China Merchant Holdings.  JVP Leader and Chief Opposition Whip Anura Kumara Dissanayake told a media briefing that signing the agreement itself would not pave the way for the authorities to implement it. “The parties may sign a paper today but the workers at the ports authority could always prevent it being implemented,” he said.

The MP said the government led by President Maithirpala Sirisena and Prime Minister Ranil Wickremesinghe have been stubborn when it came to the signing of the Hambantota Port Project agreement. He asked how the signing could take place today when the President himself had assured the trade Union that the agreement would only be signed after obtaining the views of the Opposition.

Blurb — The government led by President Maithirpala Sirisena and Prime Minister Ranil Wickremesinghe have been stubborn when it came to the signing of the Hambantota Port Project agreement

“President should take appropriate action and have the signing postponed” the MP said and added that the gazette notice pertaining to the fuel distribution an essential service could not be considered as duly approved in Parliament. He claimed that the House was suddenly adjourned when voting was in progress. “Parliament cannot meet when the mace is not in its proper place. Why do we have a special place for the mace if sessions could go on when it is on the shoulders of the sergeant at arms” he asked and demanded that the debate on the gazette notice should be held on another day. (Yohan Perera and Ajith Siriwardana)

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Sunday Times, “Hambantota port deal signed; minority stake for SLPA in both new companies”  …. http://www.sundaytimes.lk/170730/news/hambantota-port-deal-signed-minority-stake-for-slpa-in-both-new-companies-252696.html

The Concession Agreement for the controversial Rs. 193 billion Hambantota Port, the legally binding document for what is being promoted as a public-private partnership, was signed yesterday. The event at the Ports and Shipping Ministry was telecast live over the UNP-controlled state run Independent Television Network (ITN). Ministry Secretary L.P. Jayampathy and Sri Lanka Ports Authority (SLPA) Chairman Parakrama Dissanayake signed on behalf of the Government while Vice Chairman Bai Jingtao signed for China Merchants Port Holdings Company Ltd.

The highlight of the Agreement is the setting up of two separate companies – HIPG (Hambantota International Port Group (Pvt.) Ltd.),  which will oversee commercial operations and HIPS (Hambantota International Port Services (Pvt.) Ltd) to oversee Common User Facilities (CUF), including security operations.

In the port operator company HIPG, CMPort (the Chinese company) will have a majority stake (85%) and the SLPA will have a minority stake (15%). The CUF Company – HIPS, the SLPA will have 42% and the HIPG 58% of the stake. Thus, the SLPA is a minority shareholder in both these companies.

After last Tuesday’s Cabinet meeting where Minister Samarasinghe’s memorandum was approved, a news release was issued on Wednesday. Both the Minister’s memorandum and the news release create the understanding that the SLPA has the majority stakes in HIPS. It states the SLPA will have 50.7 percent of the shares and CMPort 49.3 percent.

Corporate Analysts, however, pointed out, that the SLPA’s 50.7 per cent is made up of 8.7 percent stake in HIPS shares is not direct, but is represented through HIPG in a convoluted share-structure. The Agreement, which is a legally binding document, states that “initial equity share capital to be comprised of 42% to be held by the SLPA and 58% to be held by the HIPG operator.” The document signed yesterday does not mention SLPA’s 8.7 percent stake to be held separately in HIPS. Instead, it says the HIPG would hold 58% stake in HIPS.

Analysts point out to the widely regarded commercial practice, in a corporate set up, that a majority shareholder decides the policies as well as controls the day-to-day decision making. The CMPort has a controlling stake in the HIPG, so all decisions of HIPG would be the decisions of the CMPort. The minority shareholding becomes irrelevant since they can be voted out.

Among the ministers who attended yesterday’s ceremony were Malik Samarawickrema, Sarath Amunugama, Mangala Samaraweera and Mahinda Samarasinghe. China’s envoy Yi Xianliang was also present.

Minister Samarasinghe claimed that further changes in the Agreement could be made even after yesterday’s signing. He said the document would now go before the Cabinet for endorsement and would be tabled in Parliament thereafter. Earlier, President Maithripala Sirisena had said that the Concession Agreement would be signed only after Parliament debated the deal.

According to the news release issued by the Ministry of Ports and Shipping, the Hambantota Port which began commercial operations in November 2011 has an accumulated loss of Rs. 46.7 billion and that in from January this year it has handled only 10 ships if the car carriers which were forced to unload at the port instead of the Colombo Port are taken off.

The land area that will be gazetted to be leased out to companies wanting to invest around the Hambantota Port will be 1,115 hectares (and not 1,574 hectares), adds the release. The release also states, “The sole responsibility and authority in relation to National Security is with the Government of Sri Lanka).

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“Hambantota: Enter the Dragon”

Chinese officials are seen preparing for the signing of the Hambantota port deal at the Ministry of Ports and Shipping in Colombo yesterday. Pic by Indika Handuwala


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