• ECT development moving at snail’s pace despite need for quick completion
• Colombo Port will lose capacity as development work to conclude in 2025: Masakorala 
• Delays in expanding capacity made SL lose 2.4 m containers by 2020
• Colombo Port would have 3 new berths if ECT development began in 2018

By Maheesha Mudugamuwa Industry experts allege that Sri Lanka is gradually losing its maritime positioning in the Asian region as the Colombo Port infrastructure development projects have faced delays due to the ongoing foreign exchange crisis. They claimed that the port’s infrastructure projects had already been delayed by more than five years and would face further delays due to the current economic crisis. As a result, they predicted that Sri Lanka would lose potential maritime businesses which could generate significantly more foreign exchange and thereby solve the current issues faced by its citizens. Sri Lanka is currently facing a severe economic crisis mainly due to the lack of foreign exchange. Since the beginning of this year, Sri Lankans have been experiencing numerous difficulties especially due to the shortages of basics such as food, fuel, and medicine. The shortages are now at a somewhat manageable level as evidenced by the continuous supply to the market for the past few weeks, but the situation remains unpredictable as there is no fixed foreign exchange generation for the country other than the loans and donations secured during the past few months.    On the other hand, experts worry that it may be too late by the time Sri Lanka finishes building the necessary infrastructure to compete with the other ports in the region, which are growing fast while attracting a number of businesses. East Container Terminal As reported by The Sunday Morning last week, the development of the East Container Terminal (ECT) has now slowed down due to the lack of foreign exchange. The Sri Lanka Ports Authority (SLPA) which is currently conducting the construction activities is struggling to secure necessary foreign exchange to bring down the equipment needed for the terminal, it is learnt. It is further learnt that only around $ 50 million has been paid so far out of the total $ 254 million required to bring down the necessary equipment. Speaking to The Sunday Morning, Shippers’ Academy Colombo (SAC) Founder Rohan Masakorala stressed that the poor policy decisions had severely damaged the industry while causing the country losses of millions of dollars. According to him, the current infrastructure development will be completed by around 2025 as stated by the SLPA and during that time the country will be losing a revenue capacity of 2.4 million TEUs compared to the previous plans of completing the developments by 2020.    “During the last five years we have lost out on Colombo Port’s capacity. The ECT project was to have started in 2017. The then Government called for proposals from consortiums and then those consortiums came and the Cabinet allocated committees to open up the proposals. Then President Sirisena came in 2018 and said we will go ahead with the ECT with our money, due to various political and union influences. In 2019 he shifted again and signed the tripartite agreement with India and Japan to develop it as a Government to Government (G-to-G) project,” Masakorala said, adding that after the Government changed again in 2019, plans were changed further and later it was decided that the ECT would be developed by the SLPA. He stressed that the Colombo Port had lost a capacity of 2.4 million containers by 2020 as a result. “If they had gone ahead with the Adani agreement at the time, we would have had three berths by 2021,” Masakorala said, noting that Adani had already planned to finish the project in nine months. “Colombo lost that volume, so obviously the cargo and big ships have issues in Colombo Port as they don’t have berths as and when required. That cargo doesn’t come to Sri Lanka and the country is paying heavily for that mistake,” Masakorala explained.   The ECT is being developed to be the second deep-draft container terminal in the South Harbour with an annual capacity of 2.4 million TEUs, with a 1,200 m quay wall at an 18-metre depth. The SLPA has already developed 440 m of the quay wall, adjacent yard area, and connected facilities at ECT. As per the SLPA, the prequalification process of the project commenced with the public announcement of Expression of Interest (EOI) on 6 June 2016 and the invitation was closed on 20 September 2016. The received EOI applications were evaluated by the Cabinet Appointed Negotiating Committee (CANC) with the assistance of the Asian Development Bank (ADB). The Cabinet Committee on Economic Management (CCEM) at its meetings held on 23 November 2016 and 7 December 2016 instructed to adopt certain new criteria when selecting an investor for the project. A Note to the Cabinet was submitted by the then Minister of Ports and Shipping and Southern Development by highlighting the possible negative consequences of additional selection criteria in the whole bidding process. The Cabinet of Ministers decided to refer this matter to the CCEM again and the bidding process became inactive on 21 December 2016. The first draft of the Concession Agreement prepared by the ADB was reviewed by the SLPA and comments were forwarded to the ADB with special consideration on the potential requirement of new deep container berths at the Port of Colombo following which the then Minister of Ports and Shipping forwarded a Cabinet Memorandum to obtain the approval of the Cabinet of Ministers to operate the phase I of the ECT. As per the SLPA, the construction of phase II of the ECT commenced in January this year and it is expected to commission the first 600 m quay in July 2023 and the first 900 m quay in January 2024, thereby completing the 1,320 m quay by July 2024. Accordingly, the authority expects to complete the total work by 4 January 2025. A missed opportunity The ECT was earlier to be developed as a Joint Venture by Sri Lanka together with Japan and India. Sri Lanka signed the Memorandum of Cooperation (MoC) for the development of the ECT with India and Japan during the discussions among the heads of governments (2017-2019) based on the Cabinet decisions taken on 30 May 2019. The MoC was to provide for the formation of a Terminal Operations Company (TOC), of which 49% is jointly held by Japanese and Indian shareholders while 51% is held by the SLPA. In terms of the MoC, the TOC was to develop the ECT based on a Japanese loan to the SLPA guaranteed by the Government of Japan. The MoC was reached soon after China was given a controlling equity stake and a 99-year lease of the Hambantota Port and concerns were raised as to whether this deal was also a result of escalating geopolitical competition between regional powers. However, due to vehement opposition from the ports unions as well as the opposition political parties, the Government cancelled the MoC and handed over the West Container Terminal (WCT) to Adani instead of the ECT. The cancelling of the previously signed MoC and breaking the promises made by Sri Lanka was criticised by maritime experts, who claimed that it was a black mark for the country in the eyes of international investors. Elaborating further on the ECT, Masakorala said: “For the project, they paid for four cranes about six months ago and they have to pay a balance of approximately $ 20 million. I think nothing has been paid yet and now the port needs about $ 25 million overall. That equipment is not coming because the Government doesn’t have money. There is a little bit of work that is happening as they have commenced the groundwork with local companies which will be paid in rupees, but that has also slowed down now.” He further noted: “So Sri Lanka is incurring losses due to the delay in the ECT. By the end of 2022, Sri Lanka could have received 2.4 million containers into the country. More ships might have come and increased our revenue. Now we have to wait till 2025 even for Adani’s WCT. By that time, shipping lines are not going to wait for Colombo and will have gone to other ports.” When The Sunday Morning contacted Ministry of Ports, Shipping, and Aviation Secretary K.D.S. Ruwanchandra, he accepted that there was a shortage of foreign exchange for the development of the ECT but denied the allegations claiming that the development activities had slowed down. “Development activities are going on and there is no issue,” he said. Port operations full steam ahead Meanwhile, the Ceylon Association of Shipping Agents (CASA) has a different opinion with regard to the operation of the Port of Colombo, stating that the port was operating in full capacity and continued to earn much-needed foreign exchange. CASA also highlighted the importance of restoring confidence among the international community so as to attract more businesses to Colombo. When contacted by The Sunday Morning, CASA Chairperson Shehara de Silva (McLarens Shipping Ltd.) said that CASA had restored confidence among the international community about the continuity of operations and even with all the fuel issues, the Port of Colombo had worked 24/7 right throughout the period. “All exports have happened. If you get the volumes, they are even higher than that of last year. We have facilitated exports; imports of course are less because of the Government policies to reduce imports,” she said. The Chairperson also highlighted that operations were happening at full capacity without being hampered by the ongoing economic crisis-related issues.  “Another main business of the Port of Colombo is transshipment. Transshipment volumes are also fairly stable, but there are highs and lows as in any industry. Globally also there is a lot of supply chain congestion. Those impacts are also there. But as far as the Colombo Port is concerned, we are working and providing all the services. Since imports are a little lower, there is a freight issue of a shortage of containers because we use import containers for exports and there is an equipment imbalance there. The Colombo International Container Terminals Ltd. (CICT) is working at full capacity and the sooner the ECT is brought into full operation the better,” she said. “We are aggressively promoting the Port of Colombo. This situation really hasn’t impacted the port to a large extent; it is continuing to earn dollars and foreign exchange,” she added. Meanwhile, when contacted by The Sunday Morning, SLPA Director General Upul Jayatissa said the construction work on the ECT was currently underway and the payments were also being made for the equipment. “There is no issue, the SLPA is continuing payments,” Jayatissa said.  Regional maritime developments While the country’s maritime industry is facing numerous challenges due to the lack of foreign exchange for infrastructure development and other policy decisions, Shippers’ Academy Colombo (SAC) Founder Rohan Masakorala stressed that the maritime sectors in other countries in the region were developing rapidly and attracting more businesses that Sri Lanka could have drawn if it had the necessary infrastructure.     “Indian volumes have gone up. Growth in India after Covid was around 21%. Bangladesh has seen 14% growth. But that growth rate has not been reflected in Colombo, with it being around 5%,” he explained. Highlighting the importance of opening up the sector for private partnerships, Masakorala said other countries had already opened up their ports to private investors for development. “If ports must be developed by the government itself, why would India open up for Public-Private Partnerships (PPPs)? Why would Israel give its port to Adani? Why would China open up its ports for private investors from around the world? People don’t understand that foreign investors will not come to a country without the intention of earning profits. We have foreign investors in the apparel industry. The same thing happened in Singapore. If our financial industry is strong, it will even keep money in the country without sending it out. But they leave the infrastructure they build here, that’s how the businesses run,” he said. As per Indian media reports, in FY ’22, major ports in India handled 720.29 million tonnes of cargo traffic, implying a Compound Annual Growth Rate (CAGR) of 2.89% during the period 2016-2022. India’s key ports had a capacity of 1,561 million tonnes per annum (MTPA) in FY ’21. In FY ’22, all key ports in India handled 720.29 million tonnes of cargo traffic. India’s merchandise exports in FY ’22 were at $ 417.8 billion, up 40% from the previous year. Non-major ports accounted for 45% of the total cargo traffic at Indian ports in FY ’22, due to a significant shift of traffic from the major ports to the non-major ports. The Government of India has allowed Foreign Direct Investments (FDIs) of up to 100% under the automatic route for projects related to the construction and maintenance of ports and harbours. Indian ports received cumulative FDI inflows worth of $ 1.63 billion between April 2000 to March 2022.  A 10-year tax holiday is extended to enterprises engaged in the business of developing, maintaining, and operating ports, inland waterways, and inland ports. The Indian Government has also initiated the National Maritime Development Programme (NMDP) – an initiative to develop the maritime sector with a planned outlay of $ 11.8 billion. In the Union Budget of 2020-’21, the total allocation for the Ministry of Shipping was INR 1,702.35 crore ($ 233.48 million), reports stated. WCT development yet to take off? While the East Container Terminal (ECT) is currently being constructed by the Sri Lanka Ports Authority (SLPA), Indian investor Adani has commenced development work on the West Container Terminal (WCT), according to the SLPA.  Meanwhile, port trade unions, especially JVP-affiliated All Ceylon General Ports Employees’ Union (ACGPEU) Deputy General Secretary G. Niroshan told The Sunday Morning: “Adani wanted the land and they secured it. There is no development as of yet.” However, when contacted by The Sunday Morning, SLPA Managing Director Upul Jayatissa said the Indian investor had already commenced working on their investment. The WCT will be developed on a Build, Operate, and Transfer (BOT) basis for a period of 35 years as a Public-Private Partnership (PPP). WCT will have a quay length of 1,400 m at a depth of 20 m, thereby making it a prime transhipment cargo destination to handle Ultra Large Container Carriers. Accordingly, Adani Ports and SEZ Ltd. (APSEZ) will partner with John Keells Holdings PLC – Sri Lanka’s largest diversified conglomerate – and the SLPA as a part of the consortium.