Courtesy Port Strategy

According to Reuters, under the new agreement cleared on July 25, the Sri Lankan government has limited China’s role in the port to the running of commercial operations, while Sri Lanka maintains oversight of broader security.

The port has been the subject of controversy following Chinese state-run China Merchants Port Holdings’ signature of an agreement granting them an 80% stake in the facility.

Chinese control of Hambantota, part of its modern-day “Silk Route”, as well as a plan to acquire 15,000 acres to develop an industrial zone next door, had sparked concerns, primarily in India but also in the US and Japan, that Chinese naval vessels could use the port.

The first deal’s terms also sparked street protests by Sri Lankans, who were concerned they would lose their land, while politicians said that such large-scale transfer of land to China encroached on Sri Lanka’s sovereignty.

According to Reuters, the document says that two companies are being established to split operations at the port and alleviate concerns about the port being used for military purposes.

China Merchants Port Holdings will hold an 85% stake in Hambantota International Port Group – which will run the port and its terminals – with the remaining shares being taken by the Sri Lanka Ports Authority.

A second firm, Hambantota International Port Group Services Co., will be created to oversee security operations, with Sri Lanka holding a 50.7% stake and China holding 49.3%.

China has been creating what military officials call a “String of Pearls”, or a network of friendly ports where the country’s warships can refuel, through its building of ports in Pakistan, Sri Lanka, Bangladesh and smaller island nations.

According to Reuters, Ports Minister Mahinda Samarasinghe said that a number of foreign missions had sought clarification about whether the Chinese navy would be using Hambantota port.

“We told China that we can’t allow the port for military use and that 100 percent responsibility of security matters should be with the Sri Lankan government,” he reportedly said.

Reuters also said that China Merchants Port Holdings had also agreed, in the document, to reduce its share in the Sri Lankan joint venture running the port’s commercial operations to 65% after 10 years.

According to the news agency, one source commented on the new agreement: “They [Sri Lanka] emphasized that they wanted to maintain balanced relations with other countries.

“But the deal is still beneficial for China in terms of revenue.”

http://www.portstrategy.com/news101/world/asia/sri-lanka-agrees-on-port-deal-with-china