China gains near full control of Hambantota port in South Sri Lanka

Date: 12 Dec 2016

Source: The New Indian Express

A Chinese-dominated Sino-Sri Lankan Joint Venture (JV) will be granted comprehensive control of Hambantota port — including its internal security — under a Framework Agreement signed this week between the Sri Lankan Government and China Merchants Port Holdings Company (CMPort), the Colombo-based Sunday Times reports. 

The agreement, which was seen by the Sunday Times was entered into between CMPort and the Secretaries of the Ministries of Finance, Port and Shipping, and Development Strategies and International Trade.

The final deal is to be signed in January. 

The Framework Agreement provides for the setting up of a JV company between CMPort and the Sri Lanka Ports Authority in which the Chinese company will hold 80% of shares and the Sri Lanka Ports Authority (SLPA) 20%. This will entitle the SLPA to a single seat on its board. The term of the lease and concession period is 99 years.

CMPort has not consented to immediate royalty payments to the SLPA. 

“It was explained that the Chinese side is in agreement to consider the request of the SLPA on royalty payment, on a revenue sharing basis, once the port utilization reaches a mutually-agreed level of performance,” a joint Cabinet memorandum says. 

The Framework Agreement sees the Chinese-led venture gaining authority over pilotage (directing ship movement) service, navigation service, tug service, berthing service, port security service, lighterage (use of lighters in loading, unloading and transporting ships) service, shipping and trans-shipping, warehousing, mooring service, wharfage, supply of water, fuel and electricity, bunkering and inner anchorage service.

The Chinese also gain control of diving and ship repair including underwater ship repair service, handling petroleum, petroleum products and lubricating oils to and from vessels and between bunkers and depots, and any other service incidental to all services stated above.

The JV will acquire or lease (as the case may be) all operational assets and common user facilities, including container terminals, multi-purpose terminals and oil terminals with fuel storage and supply facilities, the manmade island, sea channel, breakwater, access road, turning basin, navigation, cofferdam and common user terminals.

Security

The SLPA had wanted the security of the port to be handled by it.  However, the Chinese had insisted on the JV doing this on its own. 

Accordingly, the Framework Agreement states that the national security of Hambantota port shall be controlled by an Oversight Committee of the JV consisting of representatives of the Sri Lanka Navy, Sri Lanka Police and SLPA.

“However, all internal security within the Hambantota Port premises, the safety of the cargo, vessels, and the personnel, including but not limited to manning of the entry/exit gates shall be the responsibility of the JV, who will be guided and monitored by, and work in close coordination with the said Oversight Committee, so appointed,” it holds.

Liabilities

The JV is to collect all the revenue from provision of services. Meanwhile, any and all debts, loans, claims and liabilities in relation to the Hambantota port, including any accumulated debts in relation to design, development and construction of the Hambantota Port, existing prior to or relating to the period prior to the transfer of assets of the project to the JV, shall be the responsibility of the Government of Sri Lanka.

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