Sri Lanka president turned Japanese loan into Indian investment in ECT deal: Jayasundera

ECONOMYNEXT – Sri Lanka leader Gotabaya Rajapaksa turned a planed Japanese yen loan to set up the East Container Terminal (ECT) into around 700 million US dollar investment into West Container Terminal as the county could not afford any borrowing for huge projects, Presidential Secretary P B Jayasundera said.

Governments of India and Japan signed a 500 million US dollar worth agreement with the previous Sri Lankan government to operate ECT, which was 80 percent completed when the deal was signed, state officials say.

Sri Lanka initially called bids for a build operate transfer terminal which drew responses from the worlds top container shippping firms, but under the then Sirisena-Wickremesinghe administration but was junked, which some suspect may have been due to policy fright or internal divisions.

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However, the deal was unilaterally scrapped by Prime Minister Mahinda Rajapaksa in February this year in the face of mounting opposition by port trade unions, severing diplomatic relations with India. However, Sri Lanka government instead gave West Container Terminal (WCT) to the Indian private firm Adani Ports-led consortium.

The issue became a geopolitical issue as India accounts for around 70 percent of the transshipment in Colombo port where China is handling a port terminal next to a 1.4 billion reclaimed Port City land owned by China.

Since the arrival of two Chinese submarines to Colombo port in late 2014, India has been concerned over the Indian Ocean region’s security and had been looking to increase its physical presence in Colombo port, diplomats have told EconomyNext.

Presidential Secretary Jayasundera said the terminal deal had ended in an investment instead of a long term loan.

“According to the original ECT agreement, Sri Lanka was to borrow a yen loan from Japan which will get the contract to develop the terminal,” Jayasundera told a media briefing organized by the Presidential Media Centre on Tuesday (02).

“That terminal was to be developed via a yen loan. After completing, the treasury was to repay the loans. This was the agreement with India and Japan.”

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However, he said President Rajapaksa persuaded both India and Japan to develop the terminal as an investment instead of a loan.

“We do not have the ability to borrow loans for large investment projects in the country because our debt is too high. Within the two months the president came into power, he issued a directive saying that no foreign projects should be allowed with loans and they should be turned to investment,” Jayasundera said.

“After becoming the president, he first visited India. When he went to India, the request from the Indian government was to implement the ECT agreement.”

“The president said he had no objection with India and Japan jointly doing this project because both are our friendly nations.”

“But he asked both countries to join with Sri Lanka Ports and develop the terminal as an investment. That is why we go to Japan and India. Otherwise we ourselves can do this and we do not have to sign agreements with India and Japan.”

“They (Japan and India) accepted this. But because of the opposition, the West Container Terminal was given.”

Adani Ports partnered with Sri Lanka’s John Keells Holdings and Sri Lankan Port Authority (SLPA) to develop the WCT in Sri Lanka on a Build, Operate and Transfer basis for a period of 35 years.

Adani Ports will be the first ever Indian port operator in Sri Lanka and will hold 51 percent in the terminal partnership and WCT is expected to be developed to reach a capacity of 3.5 million TEUs.

The quay length of 1400 meters and an alongside depth of 20 meters is expected to make WCT a prime destination for transshipment cargo and to handle Ultra Large Container Carriers, Adani Ports has said.

“With the consensus of all, an Indian investor came to invest. It’s a reputed listed company,” Jayasundera said. (Colombo/Nov04/2021)

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