Colombo, April 2 (newsin.asia): The signing of a Sino-Sri Lankan agreement on the Hambantota port, which was take place between April 7 and 8, has been put off indefinitely apparently because of the continuing controversies in Sri Lanka over the draft agreement, informed sources said.
Nevertheless, an 80-member high level business delegation headed by Yu Zhengsheng, Chairman of the Chinese Peoples’ Consultative Conference, will be in Colombo on April 7 and 8, meeting President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and Chinese businessmen in Sri Lanka.
Yu is the fourth highest ranking leader in China after President Xi Jinping.
The delegation was to visit Hambantota port and sign the agreement on it. But both were cancelled. The delegation was to visit the Maldives too, but that too has been cancelled.
Earlier, the delegation was to be headed by none other than the Chinese Prime Minister, Li Keqiang. It was to have been a four days visit stretching from April 5 to 9.
The Sri Lankan government’s initial proposal, made in consultation with the China Merchants Port Holdings Company (CMPort), was that there will be a joint venture company comprising CMPort and the Sri Lanka Ports Authority (SLPA) to run the port in which CMPort will have 80 % stake and the SLPA 20%. The 80% stake was valued at US$ 1.2 billion, which would be disbursed by year end in phases.
The JV company will have a 99 year lease on the port. China will also get 15,000 acres of land around the port to develop an Economic Zone.
Controversy
But this decision, taken by Prime Minister Wickremesinghe and the Strategic Development and International Trade Minister Malik Samarawickrama, did not have the approval of the Ports Minister, Arjuna Ranatunga. The latter said that the SLPA cannot surrender the right to own the port as it is legally required to own it. Any change would need an amendment to the SLPA act. Ranatunga also said that the valuation of the port at US$ 1.4 billion was too low as the land and the strategic importance of the port had not been taken into account. He also noted that there is no provision for the terms under which the port will be returned after 99 years. He wanted the stake of the Chinese company to be brought down from 80% to 65%.
The Joint Opposition, led by former President Mahinda Rajapaksa, described the proposed deal as a sellout of a national strategic asset. It also pointed out that for the first 15 years, the country will not get any payment other than the down payment of US$ 1.2 billion from the CMPort for the 80% stake it will be taking.
Debt Trap
The government’s argument for going for the deal to sell 80% stake in the port has been that Sri Lanka is deeply in debt and needs the US$ 1.2 billion from the sale desperately.
The Prime Minister told parliament that the total debt at the end of 2015 was LKR 11,000 billion (US$ 72 billion), of which foreign debt was LKR 5000 million (US$ 32.8 billion). Even this does not include debts incurred by several public sector enterprises. About 90% of national income is spent on debt repayment.
With exports decreasing and imports increasing, there could be a balance of payments crisis, for which, the IMF’s help will have to be sought. The government has already told the IMF that it will sell of stakes in several private sector enterprises to meet the need for money.
While the Joint Opposition leader Rajapaksa wanted the government to re-negotiate the deal and follow his proposals when he was in power till January 2015, a set of young Sri Lankan entrepreneurs issued a statement challenging the government’s contention that Sri Lanka is insurmountably in debt. They put out statistics to show that the national debt to GDP ratio in some advanced countries is much higher compared to Sri Lanka’s 76%. The young entrepreneurs also contended that government can raise US$ 1.2 billion by cutting down on fuel, foodgrin and vehicle imports.
But this appeal fell on deaf ears as import of fuel, vehicles and foodgrains is critical for the political survival of any governments.
Sirisena’s Steps
With mounting criticism of the deal on the grounds of national sovereignty and security, President Sirisena, who has his ears to the ground, pressed Wickremesinghe to modify the deal. This was done and the government got the cabinet to approve a 60-40 stake division to be given effect to after 10 years. It was also decided that the security of the port and the kind of military activity to be allowed in it, will be the prerogative of the government of Sri Lanka.
On the SLPA’s claim to the ownership of the port as per the SLPA act, the legal advice given to the government was that this would not be necessary and the cabinet has the authority to decide on the matter even over-riding the line ministry. It is also argued that parliament’s nod is not needed.
Still, on the insistence of President Sirisena, a six member cabinet committee was formed to oversee the implementation of the agreement. But displeased with this, Champika Ranawaka, a confidante of Sirisena’s resigned from the committee saying that a debt crisis should be solved by selling national assets to foreigners.
Asked whether the Chinese company and the Chinese government have agreed to the proposed changes, the junior minister of Strategic Enterprises, Sujeewa Senasinghe, said that the Chinese just want a majority stake.
“Even 51 % would be alright by them,” he added.
However, it is not yet clear if this claim is well founded. There may also be many loose ends to the tied, which is why the high powered Chinese delegation will not be signing the agreement during the forthcoming visit, and will not even visit Hambantota.
(The featured picture at the top is that of Yu Zhengsheng, a top Chinese Communist Party leader. fourth highest leader after President Xi Jinping, who is presently Chairman of the Chinese Peoples’ Consultative Conference)
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