Sri Lankan Prime Minster Ranil Wickremesinghe and Chinese Ambassador to Sri Lanka YI Xianliang attended the launch of an industrial zone in the Hambantota district on January 7. It is reported that hopefully China will invest billions into the zone within the next three to five years. What businesses does the Sri Lankan government plan to develop in the industrial zone? How will the zone help in the development of Sri Lanka?
At the outset, I would like to thank the China Daily for the opportunity given to me to provide our views with regard to the Hambantota Port and the proposed Industrial Zone in the same district in Sri lanka. My responses to your questions are as follows:
Sri Lanka built a large seaport in Hambantota with the support of an Exim Bank credit facility commencing around 2009. The Ports Authority of Sri Lanka managed the port upon its completion but it unfortunately did not prove to be a viable entity business-wise, even though some ships carrying vehicles were diverted to Hambantota from the Colombo Port. Since the new port had been built using a loan, the loan had to be paid back in time along with the interest. Unfortunately the revenue the port generated was insufficient.
Therefore, the Government of Sri Lanka, with the concurrence of the Government of China, decided to invite Chinese shipping companies to lease out and run it on a Private partnership basis.
Accordingly, the Sri Lankan government called for proposals and two Chinese companies submitted proposals. The proposal submitted by China Merchants, which offered USS 1.12 billion for an 80% stake for 99 years was recommended by the relevant technical committee. Here I must mention that China Merchants is already involved in seaport business in Sri Lanka, as they manage the Colombo International Container Terminal very successfully. That is the only port capable of handling 18,000 TEU capacity vessels in South Asia.
When the Industrial Zone adjoining the Hambantota Port was ceremonially opened, the Chinese Ambassador in Sri Lanka informed the gathering that Chinese investors would invest US$ 5 billion in the zone during the next three to five years.
Sri Lanka needs to accelerate its export base, as its current export earnings are equivalent to only 50% of its import bill, leaving Sri Lanka with a very unfavourable balance of payment. It is up to investors to identify suitable industries. Sri Lanka would like to provide employment opportunities to the country’s human resources, so labour-intensive industries would be welcome. Further, investors who use local raw materials, such as mineral sands, graphite and agricultural commodities would generate income opportunities for Sri Lanka. As the Hambantota Port includes a bunkering facility and a Tank Farm Project, investments relevant to both ship repairs and building would be useful.
Protests broke out on the day the industrial zone was launched. Protestors are reported to have said they are worried about a “Chinese colony” and that their lands may be taken to develop the zone. What is the Sri Lankan government’s attitude towards that zone? Will it stop the development of the zone because of the protests and if so why?
In Sri Lanka, protesting against the government’s work has become a hobby for some people; fortunately, these people constitute a small minority. From the time any new project was introduced since 1948, some of our people have opposed it. Even when the well-known Rubber-Rice Agreement was signed in 1952, under which China sold rice to Sri Lanka at a price below the world market and bought Sri Lankan rubber at a price above the world market, one member of Parliament voted against it in Parliament. It was only one out of 101 members of Parliament at that time. When land settlements were introduced in the 1940s, some people protested. During the introduction of large Multipurpose Development Projects such as Galoya in 1948 and Mahaweli in the 1980s and Economic Reforms which included special Economic Zones for foreign investors in the late 1970s, some people protested. But those projects were implemented and Sri Lanka is now enjoying the benefits of those projects.
Even now only a few hundred politically-motivated participants have been protesting. Calling it a “Chinese Colony” is baseless. No human settlements have been planned, for Chinese people or even for Sri Lankans under this project. Only a few senior Chinese managers would arrive to manage the investments, China Merchant has managed the Colombo International Container Terminal since 2011, managing a 2.4 million TEU capacity terminal, while employing only 22 Chinese nationals within their 1,200 capacity workforce. Of these 22 Chinese nationals, only a few live in Colombo with their families.
The Sri Lankan Government will utilize only government land in Hambantota and the adjoining districts for this investment project. Most of the land used to build the Seaport, the Hambantota Airport and the 23 km highway connecting the Airport and Seaport were government lands. The Government has already given assurance that human settlements and farmland already in use would not be taken away.
The Government’s attitude towards the proposed Industrial zones is extremely positive. The Government will not stop these initiatives. The people and the Government of Sri lanka have invested more than US$ 2.0 billion, if I include the value of the land used for the Seaport, Airport and the highway connecting these two projects. Of this USS 2.0 billion, US$ 1.5 billion was financed by the Chinese Exim Bank loan, which we must pay back with interest in due time. Therefore, no sensible government would stop the proposed industrial parks. The business viability of both the Seaport and the Airport would totally depend on the success of investments in Hambantota and its adjoining districts. We have already used almost 15,000 acres far the Sea Port, Airport and highway. If we would do not build the industrial parks, the land already used would be wasted, which would be a national crime.
It is reported that Sri Lanka is planning to grant 80 percent of the Hambantota port’s stake to China Merchants Port Holdings on a 99-year lease. Could you confirm this? Has a deal on such granting been signed? If not, when will it be signed?
The agreement has not yet been signed. It is true that the investor has asked for 80% of the Hambantota Port’s stake on a 99 lease. The final decision will be taken soon, as we need an investor who has the capacity and a proven track record. China Merchants has been in Sri Lanka since 2011 and their expertise and leadership in managing seaports is well known.
Could you share with us the reasons why the Sri Lankan government decided to grant 80 percent of the stake of the Hambantota port, which was constructed by a Chinese Company to China Merchants Port Holdings on a 99-year lease?
It is true that the seaport in question was built by another Chinese company; that company has built a magnificent seaport. Their capacity in engineering and construction is excellent, which is why they were able to build such a mega project in time. However, China Merchants has a greater reputation with regard to port handling. That may be the reason for the selection of China Merchants.
Chinese investments have also joined the construction and development of the Colombo International Financial City (formerly known as the port city). What is the role of Chinese companies in the development of Sri Lanka’s ports and other infrastructure? How have Chinese investments helped Sri Lanka’s economic growth?
It is true that the Colombo International Financial City, which was earlier known as Port City, is going ahead. The construction of the Financial City is supported by the relevant government agencies. The construction company has already planned to do promotional work while constructions are ongoing.
What is your government’s attitude towards Chinese investments in your country?
As I mentioned earlier, the Sri Lankan Government’s attitude towards Chinese investment is positive. This is not a new thing; after Sri Lanka introduced economic reforms in the late 1970s, all successive governments have actively encouraged foreign investment. In fact, Chinese investment became the largest source during the past ten years. We are aware of China’s policy of “Going Global”. Therefore, China’s policy and our policy regarding foreign investment have become complementary.
D.H.R Amarasinghe Monday, 6 March 2017 12:51
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