Making Hambantota Port an integrated hub for shipping in Indian Ocean

4 March 2013 06:30 pm - 0 - {{hitsCtrl.values.hits}}

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The Port of Hambantota, also known as ‘Magampura’ is situated about 19 nautical miles north of the key shipping route between the Malacca Strait and the Suez Canal, which links Asia and Europe. An estimated 36,000 ships including 4500 oil tankers use this route annually.

The construction of this new port began in early January 2008 and is in three stages. After completion, it will raise the capacity of the port to 20 million TEUs (Twenty Foot Equivalent Units) per year and will be the biggest port constructed on land to date in the 21st, century.

The first stage involved the construction of ship building bunkering, rotation of crew and ship repairing facilities.

Two breakwaters, dredging of a 210m wide entrance channel, a 600m turning circle, excavation of 17m deep basin area, a 600m general purpose berth, a 610m oil quay, a 105m service berth, roads and associated buildings were completed and became operational in 2010.

A joint venture (JV) of the Sinohydo Corporation and China Harbour Engineering Company (CHEC) were contracted for the first phase and the Sri Lanka Ports Authority (SLPA) was the project supervision engineer.

The first phase was completed at a cost of US$ 361 million and funded by China Export–Import Bank (65 percent) and the SLPA (15 percent).
Construction of the US$ 76.5 million tank farm and bunkering facilities commenced in October 2009 and completed in 2011.

Han Quin Engineering Construction Company of China was the contractor for the tank farm which consists of 14 tanks namely eight marine fuel tanks for oil ships, three tanks for LPG storage and three for aviation fuel. A 15-storey port administrative building of 100,000 sq ft was also built.

The dredging for the second phase was slightly delayed due to the presence of a huge rock near the entrance to the harbour, which was blasted at a cost of US$ 40 million.

The second phase consisting of three stages is expected to be operational in 2014 and will cost US$ 810 million, financed by the Export–Import Bank of China.
The first stage will also include a 2140m long quay wall to accommodate four 100,000 ton and two 10,000 ton wharf berths.

The second stage will include development of offshore artificial island with an elevation of eight meters.

The third stage will involve the construction of a container oil terminal of 300m long and 17m depth four 100,000 DWT container berths and one 100,000 DWT oil wharf and two 30,000 DWT feeder berths. About 400,000 sq meters of roads and a flyover bridge are expected to be completed.

A 400,000 sq m of harbor basin, a 60 ha of yard area with associated yard handling will also be developed. China Communications Construction Company (CCCC), the parent company of CHEC was awarded the second phase contract in 2011.

The third phase is expected to be completed by 2023 and will involve a dockyard for shipbuilding repairing in a tax free zone with an estimated investment of US$ 550 million.

The port area will include cement grinding, storage and bagging facilities, a fertilizer manufacturing, storage and packaging plant, an LP gas distribution facility, a warehousing complex, a vehicle assembling facility, a flour mill, a food processing and packaging facility and other associated import and export businesses as well as an oil refinery.

Comparative advantage of Ham’tota to Indian ports
In my article under Opinion on May 10, 2012 of the Daily Mirror Business section titled ‘Sethusamudram and its Impact on Sri Lanka’ (SSSCP), I urged the Government of Sri Lanka (GOSL) to take meaningful steps to initiate action with the Federal Government of India for a joint committee to review the negative environmental impacts of this project on the coastal and near shore regions in northwest Sri Lanka, which has a fragile ecosystem and a host of some extinct species of marine mammals such as dugong.

The impact of constructing this canal on the Palk Bay marine eco system should be stressed. However, the saving grace is that the authorities in India have temporarily halted this project and a new canal trace is being studied.

The intention of the SSSCP is to connect the Ports of Mumbai, Marmagoa, Kochin on the west coast with the ports on the east coast namely Tuticorin, Chennai, Visakapatnam, Paradip and Haldia (Culcatta) for rapid deployment of its naval forces, as well as movement of commercial ships of different DWTs without circumventing the coast of Sri Lanka. I have documented the specific information of these Indian ports the majority of which are not deep water ports with comparative disadvantages such as silting, etc.

The   huge advantage that the Port of Hambantota has is that it is a deep water port unlike most of the Indian ports and is in close proximity to the most intense sea lanes in the world. Moreover, it has an extensive flat and wide staging area, integrated development of the port city of Hambantota.
I could draw a parallel of the port city of Hambantota to the US Naval Base at Subic Bay, a deep water port that was handed over to the Philippines in 1991.
The Subic Bay Free trade Zone (SBFZ) located in Luzon Island is the first successful case of a military base converted to a tax and duty free zone similar to Hong Kong and Singapore, operated and managed by the Subic Bay Metropolitan Authority (SBMA). It is a   competitive investment hub with blue-chip companies like Coastal Petroleum and Fed Ex pumping over US$ 3 billion investment creating 70,000 jobs in the free port’s first four years. The US Navy left US$ 8 billion worth facilities and other assets including property when they withdrew the 7th.Naval Fleet.

Fed Ex Asia –Pacific hub Asia-One was also located at Subic Bay for 10 years.

Proposed Ham’tota Port Metropolitan Authority
I propose that the GOSL should take immediate action to set up an independent authority in line with the Subic Bay Metropolitan Authority (SBMA) showcasing the proposed Hambantota Metropolitan Authority (HPMA) as a destination in South Indian Ocean for attracting international port users as a strategic gateway to Asia’s market and logistic hub, investors as an attractive site of choice investment from foreign and local businesses, tourists with lifestyle experience to watch wildlife including bird watching, eco-tourism to pristine rain forests, sites of cultural heritage spanning over 2000 years and water sports such as diving and surfing.

The proposed HPMA should also provide safety, security and environment protection to foreign and local communities who will live in the proposed free port area.
Another ambitious area the GOSL can look into is setting up a satellite launching and tracking station for scientific research as well as for commercial purposes as this area is the ideal location in Asia or even in the world as there is no landmass up to the South Pole. The ideal site will be between Hambantota and Dondra Head.
It is also proposed to prepare an HPMA Investment Guide in line with the guide for Subic Bay and I can provide a   downloaded copy.

Conclusion
Since the GOSL has made a significant investment on the Hambantota Port, it is important that the costs are recouped within the shortest period of time. In order to achieve this objective, it is proposed that a high level committee chaired by the President and ministers from line ministries identify a team of multi-disciplinary consultants to prepare a detailed feasibility report on the proposed HPMA so as to showcase the location and attract FDI. The Board of Investment (BoI) should play an interactive role and coordinate such a preparation in consultation with the Ministry of Defence.

It is also proposed that the GOSL take immediate action to request the Government of Philippines for a team of experts from Sri Lanka to visit the Subic Bay and gain hands-on experience and request Philipino experts to work with the local counterparts.

Since the SBMA was created in 1992 about 21 years ago, it has grown into an attractive investment hub in South East Asia. Funding from the United Nations Development Programme (UNDP), the World Bank and the Asian Development Bank (ADB) should be requested for the integrated multi-disciplinary study of HPMA.
The GOSL with this approach of setting up an HPMA will dispel the fears India and the western countries have that the location is in the ‘String of Pearls’ for the Chinese policy of expanding its military power in the Indian Ocean as it will attract heavy investment worldwide.

(The writer is a retired Economic Affairs Officer of United Nations ESCAP and can be reached at fasttrack@eol.lk)

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Making Hambantota Port an integrated hub for shipping in Indian Ocean

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