Lankan cabinet clears Chinese port deal

The Dollar Business Bureau

Sri Lanka's cabinet has cleared a hitherto controversial Chinese built port deal after substantial changes.

Under the new deal according to Reuters, Hambantota that was built by Chinese now relegates the Chinese to running its operations while the overall security is retained in the hands of the Sri Lankan government.

Initially, the development of Hambantota by the Chinese, which is part of the modern day Silk Route across Asia and beyond, sparked security fears in the region as China could use the port for docking its naval vessels. To add to these fears China planned to acquire 15000 acres to develop an industrial zone.

Though details of the new agreement have not been made public, a Reuters spokesperson revealed that, 'two companies China Merchants Port Holdings and Hambantota International Port Group Services Co., are being set up to split the operations of the port and assuage concerns, in India and in Japan and the United States, that it won't be used for military purposes.'

China Merchant Port Holdings will hold 85% stake in the $794 million Hambantota International Port Group Services Co., that will essentially run the port and its terminals with the remaining 15% vested in the hands of the Sri Lanka Ports Authority, Reuters revealed.

According to the international news agency press statement 'a second firm, Hambantota International Port Group Services Co, with a capital of $606 million, will be set up to oversee security operations, with the Sri Lankans holding a 50.7 percent stake and the Chinese 49.3 percent.'

'China Merchants Port Holdings also agreed to reduce its stake in the joint venture after 10 years, to 65% the document said.'

The document will be sent for a final approval to the Parliament, cabinet spokesman Dayasiri Jayasekara said.

"Sri Lanka will have control over port activities including security, which various parties have raised concerns over earlier," a source told Reuters. "The agreement clearly says no military ships will be allowed in the port."

India was alarmed in 2014 when a Chinese submarine docked in Colombo, where another Chinese firm is building a $1.4 billion port city on reclaimed land.

India has always influenced Sri Lanka and sought to push back the Chinese presence in the region. In May, Colombo had turned down a Chinese request to dock a submarine.