Critics of H’tota Port deal must first study Agreement - Ports and Shipping Minister Mahinda Samarasinghe | Sunday Observer

Critics of H’tota Port deal must first study Agreement - Ports and Shipping Minister Mahinda Samarasinghe

Ports and Shipping Minister Mahinda Samarasinghe in an interview with the Sunday Observer says intricate clauses in the much debated Hambantota Port agreement are misinterpreted by the Joint Opposition, for petty gain.

Affirming that this was an arrangement which was in the offing from the days of the former regime, the Minister said, “This is a better deal, given that the government settled for US$ 1.12 billion while the former investor was going to pump in just US $ 300 million.”

“The critics of this deal must carefully read the agreement first,” he quipped.

On the continuing efforts to marry the SLFP and the Joint Opposition before the upcoming Local Government polls, he said if the talks fail the SLFP is ready to face the elections alone. “However, if SLFP members are seen supporting ‘Pohottuwa’, they will have to face legal action for violating party constitution resulting in expulsion from the party as well as Parliament,” he said. Excerpts:

Q: Hambantota Port was handed over to China on a 99 year lease. The Opposition calls it an erosion of the country’s sovereignty. Your comments?

Let me correct you. It was not handed over to China. Two companies, registered under the Companies Act of Sri Lanka will be running the Hambantota Port.

Sri Lanka’s government has a 15% stake in the Hambantota International Port Group Pvt. Ltd (HIPG) which has the sole and exclusive right to develop, operate and manage the Hambantota Port.

In the Hambantota International Port Group Services (HIPS) which has the sole and exclusive right to develop, operate and manage the Common User Facilities, the government has a direct 40% stake. Overall, the Chinese company holds 69.9% stake while we have 30.1%.

The Joint Opposition is using a wrong terminology to describe this transaction. During former President Mahinda Rajpaksa’s time, they were trying to hand over the Hambantota Port to the company which is building the Port City.

They even signed the agreements. The China Harbor Engineering Company was going to bring in US $ 300 million. But the current investor, China Merchants Port Holdings Pvt. Ltd is infusing US $ 1.12 billion.

This is nothing new, only it’s a better deal than the previous one. And on the 99 year lease, when we reach 80 years, SL Ports Authority gets majority shares of 60 %. For the last 19 years we will be running the show as the majority equity holder.

I’d like to say, people who shout that we are selling the Port to China, must first study the agreement .

Q: When the Sri Lankan Airlines moved out of Emirates tie up, SriLankan was in a huge crisis. Any safeguards to ensure that this would not be the story of Hambantota?

But it was not a good decision to move out of Emirates tie up. We went downhill after that. We bought back the Sri Lankan airlines and terminated the management contract. During that period, Emirates consolidated their position at the expense of Sri Lankan airlines.

We did not recover from that. On hindsight, today SriLankan Airlines is being offered to an outside investor on a private public partnership (PPP) basis. They have huge debts that need to be repaid.

There is no other option, but to restructure and go for PPP which means we are going back to square one.

We should have continued with the Emirates, then this debt would not have accumulated. Sri Lankan airlines would have had sustainable operations and we could have got better dividends than holding on to equity.

We were going to much more destinations with them. We were riding on the good reputation of Emirates. It was a foolish decision.

Q: How does the SLPA benefit from the Hambantota Port deal?

There will be huge benefits. The accumulated loss of SLPA during the last 6-7 year period, had been Rs.44 billion.

Every year we needed Rs.10 million to pay the debts. SLPA has to service the loan. The Treasury did not pay anything. So it was a huge drain on the revenue generated. From that point of view this has been a huge financial gain. Last year our projected profit was Rs one billion.

Our projected profit this year is Rs.12 billion. From one billion in 2016, we are jumping to Rs.12 billion. Our financial position will be significantly strengthened. The revenue generated can be used to develop other ports like Trincomalee, KKS, Point Pedru, Pottuvil, Oluvil in addition to the Colombo Port.

We can fast track our development so that more revenue can be generated. From December 9, we have washed our hands from servicing the debt, it is the Treasury that will be doing that. It was a huge financial gain. As a result of the strong financial position that we are in, we were able to pay the 11,000 odd port workers an additional bonus of Rs.10,000 this year.

We are now in a position to realize our dream of bringing the global ranking of Colombo Port from its current 23, to a much better ranking during the course of next year.

Q: What will be the fate of the workers at Hambantota Port ?

There is a misconception that they were employed by Sri Lanka Ports Authority. They were actually employed by a company called Magampura Port Company. Magampura Port company is a 100% SLPA owned subsidiary. The workers were given employment letters without job security being offered. Those who actually put them in this situation must take responsibility for this situation.

I do not know what promises were made to them for political gain but according to their contracts they did not have job security. We have offered special compensation. The amount is three times more than what a state employee gets during termination of employment. In addition to compensation whoever is willing, can continue to work at the Hambantota Port. They will be employed through a service provider. But their demand is to work under SLPA. How can we do that?

Only 15 of the 464 workers opted to continue work at Hambantota. The others are agitating to be employed by the Sri Lanka Ports Authority. We cannot do that because they were never employed by SLPA.

Magampura company is a 100 % SLPA owned subsidiary. But it’s a private entity listed under the Company’s Act. This is the stalemate at the moment, they have gone on to arbitration, we will see what happens.

Q: Hambantota Port plays a key role in China’s One Belt One Road initiative. It is keenly watched by trade rivals like India and Japan. Don’t you think this lease out will upset our relations with these good neighbours?

First of all I must say we are a sovereign country. We take decisions in the best interest of our country. On the other hand we are mindful of our neighbours’ interests. We don’t want to send wrong messages.

This was 100% a commercial venture. This had no political or military aspects to it. We have made it clear in the agreement itself that this Port cannot be used for military purposes whatsoever. All security in the Port will be handled by the Sri Lankans. The Navy will be there inside the Port in the area that has been demarcated. They can come and go as they please.

Any foreign war ship calling over at the Hambantota Port will have to do that on a government to government basis. The particular government should request from our government. We don’t have to consult anyone to take a decision on that.

We have put all the checks and balances into the agreement so that our friends and neighbours don’t get the wrong message.

It was purely a business venture, we could not service the Hambantota Port loan, we asked for China’s help, two companies tendered offers, the selected company had the best deal, in terms of the investment as well as the experience. This particular company is running 50 odd terminals internationally.

If anyone is scared of China Merchant Port having links to China military establishment, they can go and buy shares of this company. It’s a public listed company in Hong Kong.

We will ensure that this deal will not be used for anything else other than for commercial purposes.

Q: That was going to be one of my questions, whether the Hambantota Port will be used as a Naval base by China ?

They can’t.

Q: There is another accusation that after the Hambantota lease out the government is going to balance India by offering them the Mattala Airport on a platter. How true is this claim?

It has nothing to do with India. Mattala management will be handed over to a private investor, a company which happens to be Indian. It has shown interest in taking over Mattala and running it as a viable business enterprise. We spent huge amounts of money constructing this airport in the middle of nowhere.

It has been ranked as one of the two loneliest airports in the world. We were losing money. The deal is now being negotiated and it is not about balancing anyone. India is very important to us. We will continue to have that special relationship with India. China has also been a friend in good times as well as in bad times. And, we are reaching out to the West as well, unlike the previous government which picked and chose their bi-lateral partners. They looked at the West as enemies of Sri Lanka which was a mistake in my opinion.

On the contrary, President Maithripala Sirisena and this government took a moderate path. Today, the West is reciprocating and assisting Sri Lanka to complete our journey towards comprehensive reconciliation and accelerated development in the country.

Q: The Opposition says the people are scared that the 15,000 acres that is to be acquired for the Hambantota industrial zone will ultimately become a Chinese colony.

It is not being given to only Chinese companies for investment. The Hambantota Port is 1,150 hectares, these industries will not be within the Port. We are identifying bare land for the industrial zone, not occupied land. And anyone can come and invest in the industrial zone. All will be entitled to the same tax benefits. But there will be a big interest shown by Chinese companies.

In addition to the US $ 1.12 billion, the China Merchants Port Holdings Pvt. Ltd is getting ready to invest another US$600 million on the Hambantota Port. At the moment the Port is not fully operational. They are trying to make it fully operational with that additional investment. This is again more forex flowing in.

Q: Do you think Hambantota will ultimately become obsolete with ambitious Chinese funded Port projects in Pakistan, Bangladesh and other countries?

I don’t think so. Hambantota is strategically located. It is a huge FDI. They are willing to pump in more money than the FDI to fully operationalise the Port. That itself is a mark of confidence that this would be a profitable venture.

Q: There are ongoing efforts to patch up the Joint Opposition and the SLFP faction of the government to form a joint force at the upcoming election. What is your take on this development?

The President has been extremely flexible at the discussions. He had agreed to more or less every demand put forth by the Joint Opposition such as the selection of candidates on a ratio of 50/50 between SLFP and the Joint Opposition.

Obviously as the leader of the SLFP he wants to strengthen the party. He wants to get the people who are in the opposition back into the SLFP fold.

Talks have not resulted in anything substantial yet, except for two MPs in the Joint Opposition joining the President. There could be others who may take a similar decision in the coming days. The doors are open for anyone to come back.

It is quite interesting because the Opposition was betting on that, those with the government would join the Opposition on December 9, at the final vote on Budget. But the opposite has happened and it shows the President’s popularity is at a high peak.

He is a clean politician and people appreciate the decisions he has taken. He has set a very good example by being the first leader to prune executive powers at the very beginning of his term.

The SLFPers are being drawn towards the President, away from the former President. The election results too will mirror this trend very clearly. True SLFPers would not wish to take part in anything that contributes to weaken the party, and gives a winning edge to our opponents.

In some districts we are using the betel leaf and others, the hand symbol.

Q: Any particular reason to use two symbols?

Certain minority parties have said they don’t associate betel leaf with the SLFP, there is a notion that it represents the former leader of the SLFP Mahinda Rajapaksa whereas the hand symbol is something that they can accept.

But there are mixed reactions to this. The Ceylon Workers’ Congress (CWC) has welcomed the use of betel leaf symbol in areas where they are contesting. That is the reason to change the symbol. Hence, most districts will have the betel leaf. The UPFA will use the betel leaf and the hand is the symbol of the SLFP.

Q: Going by the discussions so far, what is the probability of facing the elections jointly?

The majority of SLFPers don’t want to strengthen the UNP at the election, so they will vote with us. The SLFP MPs who wish to support anyone else other than the SLFP candidate must think twice. They will be violating the party constitution. They can’t be seen in election platforms of other parties. They cannot go canvassing for members of other parties.

This rule is not only applicable to MPs, it is also applicable to Provincial Council members. We will monitor the developments carefully. Take photographs to compile a docile of those who violate the party constitution.

Later we can go to courts and ask for the expulsion of those members. SLFP members cannot identify themselves with “Pohottuwa”. If they do so they would lose the SLFP membership and Ministerial positions or Provincial Council seats.

Q:That goes for former President as well?

Precisely.

Q: Do you think there is still a chance to go for elections together?

On Thursday (14) 12 noon, nominations for 93 local bodies closed. For the other LG bodies the nominations will be from December 18 to 21. We have a week to see what will take place. The talks are still continuing.

If there is no agreement we will contest on our own and we are confident of winning.

Q: But there are signals from the UNP side of the government that the SLFP must leave the government before they join alliances with the Joint Opposition for the election. Is that the opinion of the Prime Minister as well?

At the last Parliamentary election, some of us were in the government but we contested together. So how can there be one rule during the last Parliamentary election and another rule during a local election.

Obviously, the President and the Prime Minister will have the last say in that. We need not get agitated over comments by others who make a big noise.

Pic: Chinthaka Kumarasinghe 

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