China and the Magampura Port
Posted on December 27th, 2016

By Shivanthi Ranasinghe Courtesy Ceylon Today

In 1638, we got the Dutch to dislodge the Portuguese and ended in a worse situation. Then, with the Treaty of Amiens in 1802, which had nothing to do with Sri Lanka, the English took over from the Dutch. Thereafter, we lost the last vestiges of our sovereignty and came under their complete subjugation. During World War II, certain local elitists believed a Nazi victory would lead to our liberation. Today, there is a thought that leasing 20,000 acres from our southern coast, including our Magampura Port, to the Chinese will balance the Indians.

However, the Chinese presence is not coming with this leasing agreement. They have been present since the port project came to life. Ironically, then their presence was a contentious issue, for it was seen that the Chinese were taking the locals’ jobs.
The Chinese got involved with the Magampura Port construction almost by accident. Initially, the Rajapaksa administration was trying hard to get support from India to take this project off the ground. India too was very keen and tried their best. Despite the highest level authorities’ efforts from both ends, for over six months, they could not make any progress.
It was during this time that President Rajapaksa visited China. There, whilst speaking of the various investment opportunities in Sri Lanka, he casually mentioned the plans to construct the Magampura Port.

Ego Venture

Many had derided this project as an ego venture of President Rajapaksa, for he is also from Hambantota. In reality, this project has been in the pipelines for more than 100 years. Very few understand this port’s strategic value. Sri Lankan ports had marvelled the world for thousands of years. In fact, the Magampura Port was not the first on the southern coast. Just three kilometres away was the original port, using the estuary of the Walawe River that functioned for over 2000 years.

Contrary to popular belief, it was not the spices that attracted the Portuguese to Sri Lanka. It was the ports that serviced the sea routes. These brought ships from all corners of the world to one converging point – Sri Lanka – with valuable and exotic merchandise like spices and gems. The British realized the importance of developing the southern port. Yet, the business community was concentrated in Colombo that already had the 2000-year old Colombo Port.

After Independence, various administrations wanted to revive this port. This was also in the Southern Development plans of the 2001-2004 administration when the United National Party, under the incumbent PM, Ranil Wickremesinghe’s leadership, was in power.

The inhibiting factor was the cost, for the sea there is very deep. With no landmass between the South and Antarctic, the need for a breakwater was imperative. The construction cost for this breakwater alone made the project prohibitive.
Then a dynamic and innovative team during the Rajapaksa administration came up with the solution to bring the harbour inland than build it in the sea. It was not the perfect solution and attracted much criticism. Still, it made a project heretofore infeasible, doable.

However, Sri Lanka had neither the technology nor the experience to handle this complex project. It was to bridge this gap that India’s help was sought. It was out of India’s depth as well. China on the other hand, quickly got its act together and the project commenced shortly afterwards. Though, Chinese expertise and technology was used, the Sri Lankan engineers played a huge role in the design and consultancy, which was a huge saving for the project. This is attested by the SLPA – China Harbour seal on every engineering drawing. Furthermore, there was a significant transfer of knowledge that our engineers benefitted from.

Solid Business Plan

Many pronounced that the loans taken have plunged the country into a debt trap. Perhaps they were ignorant of the solid business plan that was in action.

The Hambantota Harbour has four terminals for general, cars, bunkering and containers. China Merchant Co. and China Harbour Engineering Co. had jointly signed a 40-year lease agreement for the container terminal. It is these two very companies that also bid for the whole port with the incumbent government.

The agreement was on a Supply, Operate and Transfer basis, where the two companies provided all the equipment for the container terminal. The commitment of the Sri Lanka Ports Authority was providing only the basic infrastructure. SLPA was to get 35 per cent plus a royalty of US $ 2.56 per container, that was to increase by one per cent each year, as well as US $ 30 per container as wharferage. There was also to be a yearly rental for 150 hectares outside the harbour.

Overall plan

The overall business plan for the port, besides the four berths, included cement, fertilizer, sugar, LP Gas, Ro-Ro handling facilities, shipbuilding and repair as well as other port related activities. There was opportunity for cement grinding plants, cement storage and bagging plants, fertilizer storage and bagging plants and LP Gas distribution facilities with three tanks of 2000-ton capacity with gas handling facility at the berth. This was to utilize 2000 hectacres of the land within the harbour, which was to be a free trade zone. Thus, within this zone, value addition, packing and assembling can be done free of duty and tax payments. The only payment was for the port charges for the exports within the port. The local market can also be tapped from here, but that will be subject to Sri Lanka’s prevailing duties and taxes. There were such agreements with 11 different companies.

Yet, vested interest groups propagated stories that the port was wilting without business. It was even said that in a desperate attempt to generate revenue, vehicle carriers from the Colombo Port were diverted to Magampura.

In truth, Colombo Port did not have the space to accommodate more than 2,000 vehicles at a time and that too after using every conceivable space available inside the port and along the road. Until these were cleared, the next ship could not be taken. Sometimes, these ships waited out at sea for two or three weeks. That cost was passed on to the consumers. Sometimes vehicle carriers would dump their load in Dubai, Chennai or Singapore. Then, it had to be re-shipped to Colombo.

Once the operations were diverted to Hambantota, volumes that were limited to 1,000-1,500 unit transshipments increased rapidly. In the first year, the number of vehicles were around 12,000, in the second year it was 67,000 and 200,000 in the third year. Out of that 200,000 vehicles, 70 percent was transshipment.

Not a White Elephant

Therefore, Magampura Port is not a white elephant, but a project that was already tapping the tip of its huge potential. There was already a solid business partnership with Chinese and other companies that guaranteed Sri Lanka a good and progressive income. Thus, there was no economic need to lease 80 per cent of the shares of the port for 99 years to a Chinese company, for a one-time, lump-sum payment. This may be the reason for some to think of this as a geopolitical balancing act.

It is a thought not without merit. India had never been able to enjoy the good historic relations Sri Lanka had with China. Both China and India are rising superpowers and are currently in a ‘ceasefire’, as they are consolidating their strengths. In the latter part of last century, India was with Russia, and China was with America. Today, India is with America and China with Russia.
In the ’70s and ’80s, India for domestic political survival, sponsored terrorism against Sri Lanka. To counter, Sri Lanka leaned towards America. Since then, America has had a schizophrenic relationship with Sri Lanka – alternating between supporting and opposing Sri Lanka’s war with terrorism.

Today, Sri Lanka’s relationship with America is in a total flux. The Obama regime unabashedly took credit for bringing this government to power. When the Republican candidate Donald Trump won, FM Mangala Samaraweera is on record expressing his personal disappointment. Thus, currently our foreign policy stand with the Americans is not clear. Neither are we sure where we stand with Britain, as again the incumbent government openly supported the side that lost the Brexit battle.

Meanwhile, China is making a concerted effort to build relations with Russia. Trump’s foreign policy is not stated yet and difficult to guess given his unpredictable temperament. However, he has promised to be only America’s President and no longer the world’s policeman. Also, Russia and America are in the process of burying the hatchet, which offers much hope to an otherwise grim situation. At the same time, Trump has already irked China by calling the Taiwanese President.

The billions of dollar question is can India and America continue their honeymoon with Trump as the groom. Obama’s last days are spent scuttling Trump’s plans to keep American jobs in America. When both Lockheed Martin and Boeing are offering to take their entire production lines of their fighter jets – F-16 Fighting Falcon and F/A-18 Super Hornet to India, it is obvious who the major industrialists support. Though US military is phasing out the F-16, the demand for it, from other countries, remains. The timing is perfect for India, which is seeking to modernize its rapidly aging Russian-built fleet.

Both aviation companies have vowed that it will not affect the net jobs already in US, but will create new jobs in India. Also, if these production lines were set up in India, then the sole producer of the single-engine combat aircraft will be India. This works for India with its ‘Make in India’ programme that is seeking to expand its manufacturing base to 25 per cent of the gross domestic product within six years.

However, Trump has warned American companies that shifting their operations overseas would prove a costly mistake. At the same time, Iran has sealed a US $ 17 billion deal with Boeing. With this deal in place, work is cut out for Trump to balance his political pledges with international relations. With India surpassing the British economy, it will not be easy for Trump to ignore India’s expectations.

In short, the relationship America so far had with Russia and China are changing drastically. The good relationship that was blossoming between America and India is reaching a crossroad. At times, Trump seems edgy with Iran, but he is not free to act at will because of the huge deal with Boeing. He cannot upset Iran and still hope to save the jobs guaranteed by the Iran deal.

Not Isolated

Looking at these geopolitical movements, we are not as isolated as we fear. China, Russia, Pakistan and Iran had always been good with Sri Lanka. Pakistan and India have crossed swords again. Though, India is powerful and perhaps the darling of the West right now, Pakistan is still a force to reckon with. Indeed, India is not good with most of our friends. Thus, strengthening our relationships with them and their stand with the Indian Ocean is important to balance India, who may be tempted to support a secessionist move in Sri Lanka.

This government, explains

Dr. Dayan Jayatilleke, thought China was dispensable. The recent spat Ravi Karunanayake had with the Chinese Ambassador, to which Mangala Samaraweera also chipped in foolishly, simply aggravated matters. With a smarter foreign minister, with better understanding of geopolitics such as Dr. Sarath Amunugama or Susil Premajayanth, we could negotiate better, is Dr. Jayatilleke’s opinion.

China as an Ally

The need to have China as an ally is undisputed. The damage caused by the incumbent government’s maiden moves has put us on a weak footing. However, would genuflecting to the Chinese correct our course, is the question we need to carefully answer.
It is pertinent to remember, despite our solid relationship with China, we cannot welcome the most venerated Dalai Lama without ruffling Chinese feathers. As the holder of the Sacred Tooth, we are the capital of Buddhist countries. Still, while Dalai Lama is ‘banned’, the Catholic Pope is free to visit at will. Imagine then, what our position would be, if we have no say in our strategic investment, with only the crumbs Chinese choose to throw at us for our survival.

Therefore, we must network with all our friends and balance them on our own terms. The last thing we should do is blindly write off our investments for others to enjoy the returns and for us to pay the loans.


10 Responses to “China and the Magampura Port”

  1. S.Gonsal Says:

    The need to have China as an ally is undisputed.

    This statement is similar to ” need to clap with one hand is undisputed “. A conclusion derived from a wealth of wrong assumption.

    Need of the day is to get our internal “proper applicaiton of law and order re-esatblished”. Every other thing will then fall into path. We will be able to selct the best ally rather than letting them to RAPE our motherland and marry her if they are pleased.

  2. Dilrook Says:

    The only reason Magampura Port isn’t a white elephant is its Chinese purchase. Otherwise it would remain a white elephant. China would not patronise it on our terms. Without heavy Chinese custom, the port and the surrounds would never achieve their potential. The same is happening in Pakistan, Thailand and Burma as well – much more influential countries than us.

    Some reasons for Singapore and India to support regime change in 2015 was China’s involvement in shipping in Sri Lanka. Immediately upon the suspension of Port City, India started work on Vizhinjam deep sea port in Kerala. Even if Hambantota operates, these countries will disrupt it commercially and politically. Sri Lanka is absolutely powerless to contain them. Only China can.

    In the event of another 1987 invasion from India, Sri Lanka would be totally cut-off from supplies and international trade if Hambantota remained under our control. Now with Chinese control, India will dare not think of closing it.

    Selling the port to China is the right thing to do. Although the terms of the trade leaves much to be desired, Sri Lanka is not in a bargaining position. Had Sri Lanka’s net external debt not risen by $46 billion since 2009, we would be in a far better bargaining position.

    Comparison of the Dalali Lama incident is irrelevant. Even powerful European countries and USA get criticised for meeting him. Sri Lanka as the centre of Buddhist learning, don’t need Dalali Lama. Pope’s visit, Thirupathy vists and a ban on Dalali Lama don’t make Sri Lanka any less Buddhist than it is. Under Chinese ownership along with other Chinese projects in Asia, Magampura will link to Burma and Thailand – two nations with identical values. It can do Buddhist economics much more than anything ever imagined.

  3. Christie Says:

    Time we realize what India is doing to us and sell our silver to someone to save our back from the Indian Empire and Indian colonial parasites.

  4. S.Gonsal Says:

    YES. Sri Lanka’s net external debt risen by $46 billion since 2009 is the main cause of loosing that bargaining power. We are simply beggers now. What rights do we have ?
    We cannot have both රැව්ල and කැඳ​, we have to chose one. Agree with Dilrook on that.

    But there is one problem.
    After we sell Hambantota to China , there will be competition between Hambantota and Colombo.
    With a PIG as the Port Minister , only way Colombo can win is to make it a KUDU import export centre.

    Therefore, befor the sale, we need to esablish law and order and need human ministers to run the country.

  5. Christie Says:

    Australia has also sold ports to China.

    India and Indian colonial parasites are the ones who ran the island nation from 1956 to date except for few years here and there.

    With the Channel across Thailand Asia will prosper and Rouge nations like Singapore will not prosper.

    With the opening up of African continent and expulsion of Indian colonial parasites from there we may be able to survive the oppression by Indian colonial parasites and the Indian Empire.

  6. Ancient Sinhalaya Says:

    Sri Lanka need powerful, trustworthy friends. Not india, us, uk, norway etc. etc. who have shown to be anti
    Sri Lankan, anti Buddhist, anti Sinhalese during the prolonged separatist war by the catholic tigers of tamil drealam.
    With the Chinese help, MR managed to get rid of the so called ‘invincible’ terrorist outfit. MR made the terror outfit
    invisible in no time. Secret was the Chinese. They provided everything you wished for, money powerful backing along
    with Russia. Chinese and the Russians are true friends of Sri Lanka.

    Us, uk, india want to minimise the Chinese domination in the indian ocean. They are supported by the japanese and
    singaporians. They have more to lose by Hambantota becoming a trade hub. Especially Singapore resent it since they
    going to lose out to Hambantota. Sri Lanka should stay clear from these countries whose interest is only to destroy/
    destabilise the country. Once there is Chinese presence in the country, nasty indians, us, uk, norway etc. etc
    will stay away from Sri Lanka. Chinese are the best antibiotic to keep the nasty rashes india, us, uk, norway, traitor diasporats etc. etc away. Sinhala modayas saw that during MR’s time. We are surprised gullible Sinhalese
    still falling for these catholic-run anti Sinhalese, anti Buddhist, anti Sri Lankan UNPatriotic party’s false propaganda.
    Traitor chief die hard catholic token Buddhist Batalande Wadakaya pol pot r@nil wickramaSinhalakiller is very good
    at hoodwinking Sinhala modayas with the catholic run media in Sri Lanka which will always paint a rosy picture.

  7. aloy Says:

    We cannot hand over Hambantota to China and wait thinking that they will protect us. When we are weak they will demand more and more concessions for that protection. This is what happened during the colonial rule that lasted for four hundred years. The pigs that are doing all these deals will not be there in a few years time and it will be the future generations that will have to deal with the new rulers. They will divide us on various lines so that Sinhalese will not be a threat to them and eventually enslave us.
    Do not give an inch to foreigners and think of various scenarios. If given they will fight among themselves on our shores for supremacy in the Indian ocean. Let our companies handle these ports on whatever their terms and stay nonaligned as we have been so far. We need only law and order in the country not foreign loans for politicos to make fast bucks.

  8. aloy Says:

    China is not such an economic power now. They are deeply in debts as their CEOs and government officials have siphoned off their money in the stock market and stacked in offshore accounts. Their strength is the large work force ready to go anywhere to do hard work and their capacity to produce machinery and construction materials on a massive scale. With these they can outbid any company from other counties in international tenders. However they will not be eventually cheap and will extract the mobilisation money also from the country that receives the loan. This is what was going to happen in Nilwala project.

    With Trump at the helm of affairs in the US, China’s financial clout will further reduce.

  9. Dilrook Says:

    China will not defend Sri Lanka as we have no mutual defence agreement. However, China by policy is bound to defend its military, economic and strategic interests. Port City and Magampura Port are Chinese economic and strategic interests which will be defended by China. This is essential for Sri Lanka’s survival in the event of trouble.

    It is undeniable China is the world’s largest economy by purchasing power parity. It will lead the USA by trillions of dollars in time to come in purchasing power parity as years pass. This is the credible forecast. Sri Lanka should be lucky to tie up as many economic projects to China.

  10. Dilrook Says:

    However, I very much doubt the sincerity of the pro-separatist/Indian current UNP leadership. This may be a false flag to eventually hand it over to India as they did in 2002 with Trincomalee. The Opposition should not turn pro-Indian just to make a political affair of it.

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