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Colombo Port ECT: Confusion over Investment

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By Eng. D. Godage

The Colombo Port East Container Terminal, ECT, is hot topic, being an important economic nerve centre essential to the country but getting involved as a pawn in geopolitics. Opinion by I. P. C. Mendis in The Island (27.01.2021) prompted to clarify some of the matters and expose true facts.

ECT will neither be sold nor leased; it will be developed through investment from an Indian party and others by giving out 49 per cent share to them while keeping 51 per cent share with the Ports Authority. This is the government stance. Public awareness exists on Build Operate Transfer (BOT) agreements in the port with two terminals operating under this method. Land and sea area are leased to the relevant party by a lease agreement for a specified period, 35 years in both, and the private party invests to develop the terminal. So investment is an essential part in those agreements. But presently announced terminology creates confusion.

The Colombo South Harbour would not have been a reality if not for the Asian Development Bank (ADB), which offered a major loan for infrastructure development when other major donor agencies declined to come forward. The ADB Country Lending programme had only $ 100 million in 2005 while the cost of the South Harbour project was estimated at $ 330 million. There were unfavorable loan covenants such as Jaya Container Terminal (JCT) privatization, and that became a hindrance.

In 2004, the government sought private sector funding for the breakwater works and SEMA (Strategic Enterprises Management Authority) advocated the same even after showing that there was no precedent as regards private sector investment in such port infrastructure globally. Different methodologies, like bond issues, the setting up of a Company as SPV (Special Purpose Vehicle) for commercial borrowing were talked about until May 2006 without success. Fresh negotiations thereafter with the ADB reached fruition and the critical covenants were either relaxed or diluted. The loan amount was increased to $ 300 million and the agreement thereon signed in April 2007.

Critical loan covenant was the selection of private investors for the first two new terminals chosen through open competitive bidding process followed by signing of concession agreements. Subsequent amendment to the Loan Agreement in June 2012 at the request of the Ports Authority changed ‘the first two terminals’ to mean ‘any two’. At no stage did the agreement include private participation in all three terminals.

Proposals were invited from prequalified private investors for the first terminal viz. the South Terminal from February 2007 even before signing of loan agreement to comply with loan covenant. In fact, invitation was made on two occasions as the first was cancelled in February 2008 when a total of five offers with two favourable ones were available. Compliance with the loan covenant was delayed by over a year and this led to a delay in the release of funds from ADB and commencement of construction.

The Memorandum of Cooperation signed with Japan and India in May 2019 proposed the development of the ECT under an Operations Company with 51 per cent shares retained by the Ports Authority. When the Minister submitted a Cabinet Memorandum naming one Indian investor, Adani, disregarding Japan, the government deviated from the agreement as well as the ADB loan covenant of open competitive bidding process. These deviations may be of different degree but the fact remains that they are digressions.

Another issue is that Hambantota Port and the Port City are totally different scenarios. The former is a white elephant in short even though the Chinese have acquired it. Two feasibility studies, one by SNC Lavalin of Canada and other by Ramboll of Denmark did not show viability of the project unless container operations started immediately. While both the Colombo South Harbour and the Hambantota Port projects commenced around the same time, the Hambantota project received priority. As regards the Port City, benefits may accrue after 10 years or more. On the other hand, since last October, the ECT has been operational with one berth built by the Ports Authority and is making profits.

The proposed formula for the ECT, in the referred Opinion, is a Joint Stock Co. As regards both SAGT and CICT, there are BOT (Build Operate Transfer) Agreements signed after being cleared by the highest legal authority of the country; they are between two parties, Ports Authority and the investor. They include a condition that Ports Authority hold a particular share, viz. 15 per cent. On the other hand, Joint Stock Company formation by the Ports Authority as the major shareholder seems a different process. The formation of such company is not permissible under the SLPA Act as found some time ago.

Further to the registration of an unlisted company and proposed structure, it is essential to divulge, inter alia, the total equity in order to estimate the Ports Authority share, Articles of Company to be acceptable to other private party, method of raising $ 500 million as building cost and liability on Ports Authority as lead partner.

Another subject that needs attention is the announcement by the Minister that West Terminal has to be commenced now. It has to be noted that ECT requires at least two more years to operationalize in complete form while only one berth of ECT is operational now by the Ports Authority. Another matter worth mentioning is that the Colombo Port Development Plan prepared and presented by the Ports Authority with the assistance of ADB in March 2019 states the capacity shortage starts from 2020, ECT operations start in 2019 and West Terminal commences operations in 2025. The ECT operations have been delayed and as such the WCT operation is not urgent with ample time available for planning.

What is urgently needed is a prompt decision on the ECT operations already behind schedule and the acceleration of the procurement process by the Ports Authority for remaining work and this is time-consuming.

Those in the maritime industry and others who wish for the success of Colombo Port highlighted the delay in operationalisation of ECT. Trade Unions are agitating, politicians are talking but no productive action has been taken. In the end, a prompt decision is essential as terminals cannot be built overnight but that task takes about two years. Otherwise, the Colombo Port will face congestion, ship diversions and bypassing and above all losing global reputation and position.



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Opinion

How many people can the Earth sustain?

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=On Nov 15 November 2022, we became a world of 8 billion people. 

It’s a milestone we can celebrate, and an occasion to reflect: How can we create a world in which all 8 billion of us can thrive? The growth of our population is a testament to humanity’s achievements, including reductions in poverty and gender inequality, advancements in health care, and expanded access to education. These have resulted in more women surviving childbirth, more children surviving their early years, and longer, healthier lifespans, decade after decade.

Looking beyond the averages, at the populations of countries and regions, the picture is much more nuanced – and quickly takes us beyond the numbers themselves. Stark disparities in life expectancy point to unequal access to health care, opportunities and resources, and unequal burdens of violence, conflict, poverty and ill health.

Birth rates vary from country to country, with some populations still growing fast, others beginning to shrink. But underlying these trends, whichever way they point, is a widespread lack of choice. Discrimination, poverty and crisis – as well as coercive policies that violate the reproductive rights of women and girls – put sexual and reproductive health care and information, including contraception and sex education, out of reach for far too many people.

We face serious challenges as a global community, including the mounting impacts of climate change, ongoing conflicts and forced displacement. To meet them, we need resilient countries and communities. And that means investing in people and making our societies inclusive, so that everyone is afforded a quality of life that allows them to thrive in our changing world.

To build demographic resilience, we need to invest in better infrastructure, education and health care, and ensure access to sexual and reproductive health and rights. We need to systematically remove the barriers – based on gender, race, disability, sexual orientation or migration status – that prevent people from accessing the services and opportunities they need to thrive.

We need to rethink models of economic growth and development that have led to overconsumption and fuelled violence, exploitation, environmental degradation and climate change, and we need to ensure that the poorest countries – which did not create these problems, yet bear the brunt of their impacts – have the resources to build the resilience and well-being of their growing populations.

We need to understand and anticipate demographic trends, so that governments can make informed policies and resource allocations to equip their populations with the right skills, tools and opportunities.

But while demographic trends can help guide the policy choices we make as societies, there are other choices – including if and when to have children – that policy cannot dictate, because they belong to each individual. This right to bodily autonomy underlies the full range of our human rights, forming a foundation for resilient, inclusive and thriving societies that can meet the challenges of our world. When our bodies and futures are our own, we are #8BillionStrong.

(UNFPA)

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Opinion

Sri Lanka Now Famous For Bribery And Corruption

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Bribery and corruption are two words that Sri Lanka has become “famous” for during the last few decades. This was something rare about half a century ago. We very rarely heard of Cabinet Ministers resorting to bribery, except in two cases.

If I remember right one was indicted in courts and had to serve a period in Her Majesty’s free hostel. The other was one of the members of the multi-Member Kadugannawa constituency, but it was not a very serious one as it involved the granting of appointments like sub-Post Mistress. There was also a businessman nabbed for giving bribes and held in a house in Paget Road. However, then it was rare and only a few cases such as that mentioned were known. In addition, these instances did not in any way effect the economy of the country or the people.

Gradually, the art of bribery and corruption became so well-known that most investors and contractors from abroad and locally were not willing to tender for essential supplies and construction of buildings and roads as they had to oil the palms right down the line. At one time a Cabinet Minister was nicknamed Mr. Ten Percent indicating his ‘cut’ on any tender or contract!

This country became famous for bribery and corruption in a big way after the tsunami in 2004 with the Helping Hambantota project, where funds from abroad to assist the victims went into a wrong pocket.

It was also very recently that a Cabinet Minister was reported to the President regarding a bribe he had solicited from a foreign tenderer. The then President asked him to step down till an inquiry was held. But with the change in the top position, a retired judge was appointed to inquire into this allegation. As in the bond scam the inquiry found him not guilty, and he was reinstated in the Cabinet. It is only in Sri Lanka that this type of thing could happen.

The Sri Lankan diaspora would have helped the country to recover from the economic mess the leaders plunged it into by sending money from abroad. But they did not want to do so as they knew what would happen to such funds. Even people here requested them not to send assistance till the corrupt leaders have been got rid of.This resplendent island may have been the pearl of the Indian Ocean at one time but now it has become notorious for bribery and corruption! When will we get honest leaders to run this country as was done about a century ago?

HM NISSANKA WARAKAULLE

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Opinion

The Rehabilitation Bill

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The high priests of our temple of justice has reaffirmed our faith in our legal system and the rule of law. A country without the rule of law will disintegrate into worse chaos than we are plunged in today.

It was heartening to see the determination by the Supreme Court on the Rehabilitation Bill. The legal preamble is a bit hard for an average lay person to follow. To my understanding, they have thrown some strong road blocks on the passage of this Bill. Well and good. I don’t think it will be that easy for the govt to surmount them. The legal fraternity, civil society and ordinary citizens, must fight hard to see that there is no transgression of the determination of the Supreme Court.

We need not and don’t need to incarcerate anybody. Those addicted to drugs should be handled by the health dept. or better still their families. These are our misguided sons and daughters who have taken a wrong path due to a failure in their families and the society around them. They need to be handled with care and consideration. Institutionalizing them would make the problem a costly failure.

Our lawmakers should hang their heads in shame if they vote for this draconian Bill as they may be viewed as persons who serve the wishes of the rulers and not those of the people.

Padmini Nanayakkara
Colombo-3

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