COLOMBO: Sri Lanka is going to re-negotiate the deal entered into with China on the US$ 1.4 billion Hambantota port, the Minister of Strategic Development and International Trade, Malik Samarawickrama told newspersons here on Thursday.
Given the heated public controversy over the grant of 80 percent equity in the port to the state-owned China Merchants Ports Holding Company, and also President Maithripala Sirisena’s recent steps to subject the existing deal to a review, the Sri Lankan cabinet has decided to re-negotiate the deal.
The cabinet has appointed a committee to discuss the matter with the China Merchants Ports Holding Company and come to an agreement by the end of January, Samarawickrama said.
Only a Framework Agreement had been signed thus far, and that eight or nine more agreements are to be negotiated, he said. Samarawickrama denied that he ever said that the entire deal would be wrapped up and signed on January 7, a day before the second anniversary of Sirisena’s Presidency.
The new cabinet committee will comprise United National Party (UNP) members Samarawickrama, Ravi Karunanayake, and Sagala Ratnayake; and Sri Lanka Freedom Party (SLFP) members Nimal Sriplala Silva, Sarath Amunugama, and Arjuna Ranatunga. The two parties represent Prime Minister Ranil Wickremesinghe and President Sirisena respectively.
Asked if there is a likelihood of the 80 percent stake may be scaled down, Samarwickreme was evasive but he did hint of the possibility. However, he added that under no circumstance Sri Lanka’s stake will be less than 20 percent.
But Prime Minister Wickremesinghe had said on Wednesday that there is no problem with giving 80 percent stake to the Chinese company because through it, a huge debt will be converted into equity.
The new committee is a more representative one than the panel which thought of and signed the controversial Framework Agreement which gave the controversial 80 percent stake to the Chinese company and 99-year lease over 15,000 acres of land to build an economic hinterland for the port. The Framework Agreement was not signed by the Posts Minister Arjuna Ranatunga but by two others who had nothing to do with ports.
Ranatunga is not averse to giving 80 percent stake to the Chinese company but he does not want the Sri Lanka Ports Authority to lose control over the security of the port. Prime Minister Wickremesinghe is of the view that the security of the port should be in the hands of the joint venture to be formed with the Sri Lankan navy assisting it, as is the case in all major international ports operated by the private sector.
It remains to be seen if the UNP and SLFP members ( ie the representatives of the Prime Minister and the President respectively) will pull together in the committee and negotiate with the Chinese as a team.
There are strong arguments for and against giving 80 percent stake to the Chinese company. The strongest in favor of it is the conversion of a huge debt into equity when Sri Lanka is hard up for cash and has a balance of payments crisis on its hands. Few countries have come forward to offer it money. As a business editor said that Sri Lanka cannot afford to up its stake in the port from the current 20 percent.
The deal is also in line with the government’s policy of developing the country by getting FDIs and not burdensome loans.
But the argument against the arrangement is that the country will have virtually no control over the port which in course of time might become a national and strategic asset. The Hambantota port will be Chinese and not Sri Lankan. And that could also mean inviting unwanted international strategic interest in the port and converting Sri Lanka into a theater of regional and global rivalries, principally between China and India.