January 5, 2017 / 4:52 PM / 9 months ago

Sri Lanka delays southern port JV with Chinese firm

A group of Sri Lankan visitors at the new deep water shipping port watch Chinese dredging ships work in Hambantota, 240km (149 miles) southeast of Colombo, March 24, 2010. REUTERS/Andrew Caballero-Reynolds/File Photo

COLOMBO (Reuters) - Sri Lanka has delayed a joint venture with China Merchants Port Holdings Company Ltd to develop a port in its south, where China has also offered to build an investment zone, a top government official said on Thursday.

The nation’s cabinet has already approved the deal under which Sri Lanka will lease 80 percent of Hambantota port to the Hong Kong-based listed firm for 99 years for $1.12 billion.

The delay was due to unfinished negotiations between the stakeholders, Malik Samarawickreme told reporters in Colombo.

“It will take 10-14 more days to finalise all the agreements. We are hoping to finalise everything by end of January. We don’t want to rush,” he said.

Samarawickreme said a joint venture share holding agreement between the Chinese firm and state-run ports authority, the 99-year lease agreement, and the “most crucial” concessionary agreement still have to be signed.

A government document had said the project was to be launched on Jan. 7 along with the commemoration of President Maithripala Sirisena’s completion of second year in office.

The delay also follows protests by people in Hambantota who say the government is trying to evict thousands of families to provide the 15,000 acres of land for an industrial zone for Chinese investors along with the port deal.

The government has denied the claim and said land will be provided from four southern districts and not only from Hambantota.

The government signed an initial deal last month with the Chinese company which has already made a payment of $5 million as a security deposit.

The company will pay 10 percent of the $1.12 billion within one month of signing all the agreements, and the remaining 90 percent within six months of signing the transaction documents, an official government document showed.

The port was built with the help of Chinese loans and contractors in 2010 under former, China-friendly president Mahinda Rajapaksa, as part of efforts to develop the country’s infrastructure after ending a 26-year war in 2009.

Rajapaksa, who is now an opposition legislator and trying to make a political comeback, last week criticised the plan to grant 15,000 acres for Chinese investment in his constituency, saying it will deprive people of agricultural land.

China’s interest in the port may reflect its ambition to build a “Maritime Silk Route” to the oil-rich Middle East and onwards to Europe.

That makes some countries, including India and the United States, nervous with Sri Lanka’s proximity to shipping lanes through which much of the world’s trade passes en route to China and Japan.

Reporting by Ranga Sirilal and Shihar Aneez, editing by David Evans

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