The state-owned Chinese firm has won a contract to build an eastern container terminal at the Port of Colombo, the Sri Lankan government announced Wednesday, months after it canceled a three-way deal with India and Japan to build a deep-sea container port.
China is one of the largest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing fears that China has lured Sri Lanka into a debt trap.
In 2017, the island nation leased the strategically important port of Hambantota to a state-owned Chinese firm for 99 years in exchange for $ 1.2 billion in debt.
According to the Cabinet of Ministers, China Harbor Engineering Company has signed a contract for the phased construction of the Colombo Port East Container Terminal (ECT).
The Cabinet of Ministers approved the proposal of the Minister of Ports and Shipping to select a Chinese firm through competitive bidding, without mentioning how much the deal costs.
The ECT development project has become a controversial political issue in Lanka, as the administration of President Gotabay Rajapaksa abandoned the previously concluded trilateral agreement with India and Japan on the development of the ECT.
The port unions, led by the ruling branches of the SLPP, have pushed for abandoning the India-Japan deal, arguing that the proposed deal with India’s Adani Group was a sell-off of the lucrative ECT. They demanded that the ECT be run by the Sri Lankan Port State Authority (SLPA).
The SLPA signed a memorandum of cooperation in May 2019 with India and Japan to develop the ECT during the previous Sirisena government.
The unions of the port of Colombo opposed the proposal of investors from India and Japan to buy 49% of the ECT shares. They demanded that the ECT remain 100% owned by the SLPA, not 51%.
President Rajapaksa said he wants the deal between India and Japan under the ECT to take place. However, after weeks of protests by trade unions, the government canceled the ECT deal between India and Japan in February this year.
Both India and Japan have officially expressed disappointment over Colombo’s rejection of the ECT.
Subsequently, the Adani Group in September entered into a deal with SLPA to develop and operate the strategic Western Container Terminal (WCT) of the Port of Colombo. As the first ever Indian port operator in Sri Lanka, the Adani Group will own 51% of WCT.