A deal on ECT at the Colombo harbour
Posted on December 29th, 2020

By Shamindra Ferdinando Courtesy The Island

Sri Lanka Muslim Congress (SLMC) leader Rauff Hakeem, MP, recently told The Island that Sri Lanka had no option but to involve India in the development of the deep water facility, the East Container Terminal at the Colombo Port, which has been built to accommodate the largest container ships that ply around the world carrying as many as 16,000 containers (TEUs), like its competing Chinese-run Colombo International Container Terminal also in the more recently built and what is known as the Colombo South harbour.

The Samagi Jana Balavegaya (SJB) Kandy District lawmaker said so in response to the writer seeking an explanation as regards his stand on the issue at hand in the wake of his quite controversial statement on Derana ‘Wadapitiya’, anchored by Chathura Alwis.

In response to The Island assertion that the SLMC leader took a bold but factual stand on the matter and  responded: Why beat around the bush? That is the truth.”

He hit the nail on the head, when Attorney-at-Law Hakeem declared that due to the Colombo harbour’s very heavy dependence on Indian transhipment cargo, there was no choice.

Having first entered Parliament in 1994 on the People’s Alliance (PA) National List, Hakeem took over the leadership of the SLMC soon after its founder leader M.H.M. Ashraff was killed in a helicopter crash in September 2000.

Amidst a simmering dispute over alleged Indian investment in the ECT that had engulfed the SLPP administration, Hakeem is the only lawmaker to publicly come out with the somewhat unpalatable truth that the bulk of Colombo port’s business come from Indian transhipment cargo. Hakeem, who has been in the PA, UPFA (United People’s Freedom Alliance) and the UNF (United National Front) governments as a Cabinet Minister didn’t mince his words and quite surprised the other participants, Wasantha Samarasinghe (former JVP MP and its current Anuradhapura District leader) and State Ministers, D.V. Chanaka (Hambantota District) and D.B. Herath (Kurunegala District).

Hakeem joined the programme after its commencement but lucidly explained his stand on a number of matters, including the simmering dispute over cremation of Muslim Covid-19 victims and the high profile ECT transaction. The SLMC group, within the 54-member SJB, consists of five lawmakers, including Hakeem. Hakeem recently suffered a severe setback when his four other MPs in Parliament voted for the SLPP’s 20th Amendment last October, while he alone from his party voted against it.

Besides the yahapalana regime, in which Hakeem’s SLMC was a full partner, had already muddied the Lankan waters by giving away the Hambantota Port to China on a 99-year lease. So it is only natural for New Delhi to have a foothold in Colombo with the ECT. Even our comrades, the JVP, though now making lots of noise over ECT going to the Adani Group of India, hardly murmured a word in protest when it was cavorting with the yahapalana regime at the time of the virtual sale of Hambantota to the Chinese.

The Kandy District MP, who had previously held the Ports and Shipping portfolios, said that the SLPA (Sri Lanka Ports Authority) owned JCT (Jaya Container Terminal) in addition to Unity Container Terminal. The SLMC leader emphasized the need to further develop JCT whereas CMPH (China Merchant Port Holdings) managed Colombo International Container Terminal (CICT) and Keells-led conglomerate owned South Asia Gateway Terminal (SAGT) conducted their operations successfully.

Amidst the simmering ECT issue, the former Minister declared that though some opposed foreign investment in such strategic projects, the country facing a daunting financial crisis had no option but to accept the Indian investment.

Ironically when the SLPA advertised the Colombo South Harbour for investment after it built its breakwater with a USD 300 million loan from the Asian Development Bank after the end of the war, India was not interested and for that matter no one else made any worthwhile offer other than the Chinese. However as in the case of Hambantota, New Delhi awakened to its value when the China Merchant Port Holdings singlehandedly bid and obtained the CICT berth on a 35-year Build, Operate and Transfer agreement after 2010, with the SLPA holding a mere 15 per cent stake in the venture.

Lawmaker Hakeem asserted that the situation here could be stabilized by Indian involvement in the expansion of the overall Colombo Port operations. The SJB constituent took up the position that the country was in such a desperate situation, the incumbent government couldn’t afford to antagonize India.

How Indian investments can stabilize Lanka

Hakeem took a very clear stand on ECT as well as overall foreign investment in the ports and shipping sectors. The former Ports Minister articulated that against the backdrop of foreign investment in SAGT, the first public private partnership container terminal in Sri Lanka and also CICT, there couldn’t be any issue with regard to the agreed Indian investment.

SAGT launched operations in 1999. According to the SAGT: The Company is a Board of Investment flagship entity with approximately 60% of Sri Lankan shareholding, and is backed by John Keells Holdings, APM Terminals, SLPA and Peony investments (subsidiary of Evergreen Marine Corporation).”

State Minister Herath interrupted MP Hakeem to raise a question though the former ignored the SLPP politician.

Hakeem declared that under no circumstances he would say not to accept Indian investment though the final decision lies with the incumbent government. The former Shipping Minister made reference to current Ports and Shipping Minister Rohitha Abeygunawardena declaration that 49 per cent of the ECT ownership would be foreign and the remaining 51 owned by the government. SLPA holds just 15 per cent each of SAGT and CICT. The SAGT deal is for a 30-year period on BOT (Build Operate and Transfer basis) whereas the agreement on CICT covers 35 years.

Hakeem’s stand drew opposition from all other participants, including Chathura Alwis. However, Hakeem stood firm on his stand regardless of consequences. The SLMC leader asserted that Sri Lanka couldn’t turn a blind eye to the need to appease India. Declaring that Sri Lanka had appeased India before, Hakeem, turning towards Wasantha Samarasinghe emphasized the country should come to terms with the reality.

State Minister Chanaka asked Hakeem whether the previous yahapalana government entered into a MoC (Memorandum of Cooperation) with India in respect of the ECT. Hakeem however conveniently side-stepped the query, while JVPer Samarasinghe said that was finalized in May 2019.

After having been an active team player in the much muddied yahapalana rule, MP Hakeem however had the nerve to ridicule the incumbent government’s much touted ‘neutral’ foreign policy. I haven’t the slightest idea what this government meant by neutral or balanced foreign policy. If we took a non-aligned stand, the public can clearly understand what the government intended. How one can balance the foreign policy,” MP Hakeem said.

Hakeem silent on inter-terminal transport crisis

Trade union leader Samarasinghe alleged that one-time Ports and Shipping Minister Hakeem conveniently failed to mention the crisis caused by what the JVPer called inter-terminal transport.

Samarasinghe alleged that the inter-terminal transport was in a mess. For want of sufficient space within the harbour area, vessels couldn’t be unloaded. Samarasinghe claimed that successive governments caused unprecedented deterioration due to giving the relevant contract to immensely politically influential people outside proper tender procedures.

MP Hakeem without hesitation acknowledged the crisis within the harbour, in addition to the simmering issue over the ECT.

State Minister Herath sought MP Hakeem’s opinion on the leasing of the Hambantota Port for a period of 99 years to CMPH in late July 2017. Having been a partner to that  pact, MP Hakeem naturally defended the agreement on Hambantota Port to the hilt. Hakeem had been a member of the Cabinet of the yahapalana government that finalized the controversial deal on the Hambantota Port. The then Ports and Shipping Minister Arjuna Ranatunga strongly opposed the deal. UNPer Ranatunga’s stance finally led to him being replaced by SLFPer Mahinda Samarasinghe. Ranatunga was replaced on May 22, 2017. The former national cricket Captain received the Petroleum Resources Development Ministry as a consolation prize.

Both the Minister and his brother, Dhammika objected to the deal whereas Vasudeva Nanayakkara on behalf of the Joint Opposition, moved the Supreme Court against the port transaction.

President Sirisena and Premier Wickremesinghe ensured the finalization of the controversial transaction following the delay caused by the opposition.

Panelist Samarasinghe asked Hakeem whether the yahapalana government used USD 1.2 bn received from CMPH to settle what we owed China. Warning Sri Lanka would run out of foreign reserves next year once debts were settled, MP Hakeem predicted an unprecedented financial crisis.

The SLMC leader asserted that except China all other countries were in deepening financial turmoil. The MP categorized Sri Lanka with Angola, Liberia and Lebanon. While acknowledging the economic deterioration started during the yahapalana administration, MP Hakeem faulted the incumbent government for not being able to tackle the situation.

Hakeem warned that unless the government and the Opposition worked together, the country would have to go down on its knees to international lenders as Sri Lanka had done before on many occasions. In spite of big boasts by some, those in power and others should be realistic and be aware of the challenges faced by the country. Hakeem predicted a massive tragedy. He expressed the view that against the backdrop of the incumbent government asking for foreign investments, it should be ready to consider investments in sectors preferred by those having the wherewithal. We have to be realistic.”

Emphasizing the responsibility on the part of Sri Lanka to exploit the country’s strategic position in the East-West route on the Indian Ocean, the SLMC leader explained how the two strategic harbours in Colombo and Hambantota could be utilized.

Now that Sri Lanka had given controlling shares to one terminal at the Colombo harbour to China why not another to India, the SJB lawmaker asserted, demanding that Sri Lanka adopt a realistic approach as the country is desperately in need of foreign investment.

Subsequently, Hakeem suggested that the controlling shares of the ECT should be given to India, Japan though JVPer Samarasinghe insisted the SLPA could handle it. With the installation of three gantry cranes, 400 m long ECT is in operation now. A further 800 m has to be built,” Samarasinghe said, asserting USD 400 mn investment was required. With the three cranes, ECT in op even now with the 440m already built, now had to build 800 m more, which required USD 400 mn.

Declaring the SAGT and CICT generated an annual income of USD 160 mn and 250 mn, respectively,

Samarasinghe asked why investors could not build a terminal in the remaining Western side. It can be bigger than all existing facilities. Why do we have to give up lucrative ECT?”

Samarasinghe predicted in spite of claims that SLPA would receive 51 per cent and the investor 49 holding per cent, finally ECT, it too, was expected to be eventually shared in the proportion of 15 per cent to the SLPA and 85 per cent to the investor.

ECT aggravates Prez, PM dispute

The then President Maithripala Sirisena and Premier Ranil Wickremesinghe clashed over the ECT. The dispute caused rapid deterioration of yahapalana relationship in the run-up to the sacking of Wickremesinghe’s government on Oct 26, 2018. Wickremesinghe insisted on Indian investment whereas Sirisena rejected it. But, Wickremesinghe went ahead with the project regardless of the President’s intervention. Amidst deepening turmoil, Wickremesinghe brought in Japan into the picture.

On the instructions of Wickremesinghe, Sri Lanka, Japan and India signed a MoC on the ECT on May 28, 2019. According to an SLPA statement issued following the signing of the MoC, the GoSL through the SLPA retained 100% ownership of the ECT, while the Terminal Operatiing Company,  is jointly owned. Sri Lanka will hold a 51 per cent-stake in the project and the joint venture partners will retain 49%.

The ECT is positioned about 3 km away from the China-funded Colombo Port City on reclaimed land on Colombo’s sea front.

Japan is likely to provide a 40-year soft loan with a 0.1 percent interest rate,” The Hindu quoted Sudarshana Gunawardana, Director of Development Communications at the Prime Minister’s office as having said. The SLPA then termed the envisaged Japanese loan” as one of the best loan terms Sri Lanka has obtained”.

What is not yet clear is whether the incumbent government intends to go ahead with the MoC finalized by Wickremesinghe or change it.

JVP, SJB on ECT deal

The JVP played a significant role in paving the way for the disastrous Maithripala Sirisena presidency. The likes of trade unionist Samarasinghe have conveniently forgotten how the JVP backed UNP’s presidential candidate Sirisena, the longstanding General Secretary of the SLFP. Having installed Sirisena, the UNP-led coalition comprising one-time LTTE mouthpiece Tamil National Alliance (TNA), the JVP, the SLMC pursued an agenda of its own. One shouldn’t be surprised by lawmaker Hakeem standing as a UNP breakaway faction the SJB still followed UNP strategies though Wickremesinghe obviously had no say in its affairs.

Chief Opposition Whip Lakshman Kiriella’s recent declaration that the government should take advantage of the constitution making process undertaken by the previous yahapalana government is a case in point.

Lawmakers Kirieilla and JVP leader Anura Kumara Dissanayake recently flayed the government over the decision to involve India’s biggest ports and logistic company Adani Group in the operation. Adani Ports and Special Economic Zone Limited seems to be confident of overcoming the obstacles. The project that had been delayed due to labour protests launched ahead of the last parliamentary polls in August drew stepped up condemnation of the SJB and the JVP.

It would be pertinent to ask whether the SJB and the JVP opposed only the involvement of Adani Group in the ECT development or disputed the MoC finalized in May 2019 in the run-up to Nov 2019 presidential polls by the previous regime, in which JVP and present day SJB members were partners?

SJB heavyweight Kiriella speculated whether the government intended to win over Indian Premier Narendra Modi by giving control of the ECT to billionaire Gautam Adani. Kiriella asserted that Sri Lanka couldn’t appease India by giving ECT to a close friend of Modi. Nothing can be further from the truth.

Obviously, the SJB hasn’t taken into consideration the roles played by India and Japan as well as Australia in the overall Indo-Pacific US strategy meant to counter the growing Chinese challenge. The US led coalition is still struggling to cope up with the vastly strengthened China relentlessly pursuing an anti- China policy.

A ‘Comprehensive Partnership’ with Japan

JVP leader Dissanayake is on record as having said that a director and a local shareholder of Shangri-La who had been involved with Viyathmaga, too, promoted the deal with Adani Group. The JVPer also alleged that the same person immensely benefited from recent government decisions to change import levies on sugar and coconut oil.

Outgoing US Secretary of State Mike Pompeo’s recent visit to New Delhi and Colombo highlighted their strategy. There is no doubt the Adani Group’s move on the ECT had been approved by the highest level of political leadership and the talk of Sri Lanka trying to appease India by involving Gautam Adani is nothing but bunkum.

The public should not forget the then Premier Wickremesinghe entered into a ‘Comprehensive Partnership’ with Japan in early Oct, 2015. In the following year on Oct 09, the training squadron of the Japanese Maritime Self Defence Force (JMSDF) was in Colombo to underscore the strengthening of the partnership. The writer had an opportunity to visit JS Kashima on the invitation of the Japanese Embassy in Colombo. Asked for a clarification as regards growing Japanese military role in Asia in support of the US as well as joint military cooperation among the US, Japan and India in response to the Chinese Challenge, Commanding Officer of the squadron Rear Admiral Hidetoshi Iwasaki explained the circumstances under which the Japanese forces could be deployed overseas along with the US.

Sri Lanka-Japan ‘Comprehensive Partnership’ should be examined taking into consideration three agreements sought by the US, the ACSA (Acquisition and Cross Servicing Agreement finalized in early August 2017), stalled MCC (Millennium Challenge Corporation) Compact and SOFA (Status of Forces) agreement. The recent US declaration that Sri Lanka wouldn’t be accommodated in the MCC Compact is unlikely to be the end of the US efforts to bring Sri Lanka under its control.

 As part of overall Western strategy, the US seeks a government receptive in Colombo. The US wants to deny China access to Sri Lanka. The US made an abortive bid to install the then General Sarath Fonseka as the President in January 2010. However, the US project succeeded at the January 2015 presidential election. The Sirisena-Wickremesinghe regime initially took a hardline stand on China. Some members of that administration responsible for Treasury bond scams in Feb 2015 and March 2016 alleged corruption couldn’t be tackled here unless Chinese investments were drastically pruned. Having accused China of promoting corruption here, the yahapalana administration ended up handing over the Hambantota Port on a 99-year lease to China.

In the run-up to the July 2017 Hambantota Port deal, former President Mahinda Rajapaksa accompanied by ex-External Affairs Minister and Chairman of the SLPP Prof. G.L. Peiris visited Beijing where the issue was discussed. During the weeklong visit in late 2016, they also visited Southern China. They urged the Chinese to stick to the original Hambantota development project to avert possible protests. They suggested it would be better to utilize 750 acres as originally planned. This suggestion was made against the backdrop of the then Development Strategies and International Trade Minister Malik Samarawickrema’s revelation that the Chinese wanted 15,000 acres of land in the Hambantota district for large scale development projects. In the second week of January 2017, Wickremesinghe launched the Hambantota project in spite of President Sirisrena’s objections. Wickremesinghe ignored Sirisena’s claim that the agreement hadn’t been finalized yet. Having launched the Hambantota project, Wickremesinghe declared that negotiations were underway with India and Japan for the development of the strategic Trincomalee Port.

With US-China hostility on the rise, Sri Lanka shouldn’t expect breathing space from either party. A much weaker economy as a result of the rampaging corona epidemic when compared with the time Gotabaya Rajapaksa won the presidency in Nov 2019, should prompt Sri Lanka to adopt an austerity drive.

 Let that begin at the Parliament, dubbed the most corrupt institution in the country by no less a person than one-time Justice Minister Dr. Wijeyadasa Rajapaksa, PC.

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