Sri Lanka to Renegotiate Framework Agreement with Chinese Company for Hambantota Port

Friday January 6, 2017

Following fierce public debate, Malik Samarawickrama, Sri Lanka's Minister of Strategic Development and International Trade, says the Government of Sri Lanka and the China Merchants Port Holdings Company (CMPort) are set to renegotiate a $1.4 billion framework agreement that was signed last month for the future management of the Port of Hambantota, Indian media reports.

Sri Lanka and CMPort signed a framework agreement in December outlining the management of the Port of Hambantota under a joint venture, which includes bunkering.

The initial framework agreement would see a joint venture company between CMPort and the Sri Lanka Ports Authority (SPLA), with 80 percent of shares set be held by the Chinese company and 20 percent by SLPA - however, Samarwickreme would not confirm if this would be renegotiated under a new deal.

The initial arrangement, noted to entitle SLPA to one seat on the joint venture's board, defined the term of the port's lease and concession at 99 years.

"It was explained that the Chinese side is in agreement to consider the request of the SLPA on royalty payment, on a revenue sharing basis, once the port utilisation reaches a mutually-agreed level of performance," stated a cabinet memorandum in December.

In addition to bunkering, the framework agreement would give the joint venture authority over lubricating oils, petroleum products, pilotage, navigation, tugs, berthing, port security, lighterage, shipping and transhipping, warehousing, mooring service, wharfage, water and electricity supply, inner anchorage service, diving, ship repair.

As part of the deal, Sri Lanka's government had agreed to the appointment of an independent port regulator, which is intended "to enable operational efficiency and to ensure effective regulation of port operations."

Also under the framework agreement, the two parties had agreed that there is to be no port or terminal development within a 100 km of the Hambantota port perimeter for 15 years or until 50 percent throughput utilisation is realised, whichever comes first.

Samarawickrama says the latest development has led the cabinet to appoint a committee to carry out further discussions with CMPort in order to reach an agreement by the end of January.

In November, Ship & Bunker reported that Sri Lankan Prime Minister Ranil Wickremesinghe had said that, contrary to what had been suggested in the media, the country would lease the Port of Hambantota to investors, rather than selling it to China or any other country.