Sri Lanka halts port deal with India and Japan

Clay Curtis
February 3, 2021

Prime Minister and Finance Minister Mahinda Rajapaksa yesterday reassured that there will no sale or lease of East Container Terminal (ECT) as claimed by the Opposition.

"The congratulatory letter is in continuation of regular interactions between India and Sri Lanka at the leadership level which has resulted into significant strides in the field of development cooperation, trade and economic ties, people to people contacts despite the challenges posed by the COVID-19 pandemic", the High Commission said. In fact, Sri Lanka cabinet three months ago took the decision to implement the project with foreign investors.

External Affairs Minister S Jaishankar had tagged the ECT as a priority project for India during his visit to Colombo last month.

But on Tuesday, Sri Lanka's government declared the East Container Terminal a wholly owned container terminal of the Ports Authority. The Japanese embassy official in Delhi responding to WION' question "expressed regret at the unilateral decision taken by Sri Lanka". "All sides should continue to abide by the existing understandings and commitment", their statement noted.

Sri Lanka has scrapped a deal to develop a major port terminal with India and Japan amid weeks-long protests by trade unions and opposition parties while New Delhi called on its neighbour to honour the agreement.

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Meanwhile, in the aftermath of the development, Japanese envoy to Colombo Akira Sugiyama met with Sri Lankan Foreign Minister Dinesh Gunawardena on Wednesday to discuss a "range of matters relevant to the bilateral partnership between Sri Lanka and Japan", a tweet from Sri Lankan MFA said.

A week after his visit, Sri Lankan President Gotabaya Rajapaksa said the east terminal would be developed as an investment project of which Sri Lanka would own 51%.

According to estimates, over 70 per cent of business at Colombo port is from ships in transit to the Indian coast, making it important for Sri Lanka, too.

The Colombo port trade unions had opposed the proposal of investors from India and Japan buying 49% stake in the ECT and had demanded it remain fully owned by SLPA. As I had noted in an earlier article on the issue, the whole saga once again illustrates the complex relationship between domestic and global politics in South Asia, and how local political incentives and push-and-pull shape the latter.

In a possible bid to make amends - the Rajapaksa government has offered the West Container Terminal (WCT) of Colombo Port on a 35-year agreement to India and Japan instead, but officials have thus far been cold to the offer.

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