Colombo ECT: Embers glowing; bureaucratic incompetence? | Daily FT

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With the tremendous increase the world is experiencing in the demand for trading across seas, ports have become the pivotal role players serving not only the vital economic functions but also becoming hot trouble spots in world politics in addition to bringing a variety of benefits to the economy of the countries

Crucial infrastructure projects remain in the focus of many Sovereign Wealth Funds (SWFs) and financial conglomerates.

Dubai Ports World has $ 3 billion looking for investment across the Indian Ocean logistics sector. UAE investment companies have signed up with China Development Bank for a $ 10 billion joint venture. A ‘tech town’ is in the offing near the UAE port of Jebel-Ali with an investment of $ 600 million from Alibaba to develop mobile apps and robotics.

Oman’s new port Duqm has turned into an industrial park involved in shipbuilding and auto assembly. Hambantota Port in Sri Lanka is being baptised as the maritime hub of China’s Belt and Road initiative. This is just a little of the global scenario relevant to the issue at hand.

The active presence of China in this region and particularly in SL has exposed us to a high alert of the powers that be. Although Sri Lanka first approached India with the request to develop the Hambantota Port its dillydallying paved the way for the alternatives.

Now India is exploring ways and means to monitor and find ways to wiretap China, offering to upgrade the Hambantota Airport and soliciting indirect participation in getting involved in the development of Colombo’s newest container terminal and its operations. The current dilemma we are facing is associated with this setup.

With the tremendous increase the world is experiencing in the demand for trading across seas, ports have become the pivotal role players serving not only the vital economic functions but also becoming hot trouble spots in world politics in addition to bringing a variety of benefits to the economy of the countries.

History lessons

The world has seen this role-play from pre-historic periods. Between the 14th and 16th centuries economic activities of South East Asia was centred on spice trade. European nations were trying to establish their dominance in the Indian Ocean. They searched for a passage round Africa and Atlantic to gain quick access to spice rich lands in the eastern part of Asia. The Portuguese mariner Bertolameu Dias discovered the Cape of Good Hope route in 1488 and Vasco da Gama reached India through the same route in 1498.

History also shows us how the various rulers in the spice producing countries have entered into corrupt deals with the European buyers from time to time offering them monopolies in the trade on agreements reached in their own personal interests virtually surrendering the rights of the inhabitants and delivering them as forced labour to the European invaders.

The swelling of the European presence in the region under various entities such as Dutch East India Company and English East India Company bear ample evidence to this fact. These intrusions soon culminated into physical invasions massacring almost the entire populations in the spice growing island nations leaving only a few alive and that too for the benefit of the trespassers just to get them information on how to grow and produce mace, nutmeg and cloves.

History is full of examples where unscrupulous rulers have surrendered the sovereignty of the countries they ruled wholesale for their personal gains. Seeing through these horrible events in the history people always desire to safe guard the national interests when it comes to any sort of intervention by foreign elements in the economic affairs of a country. This is where the leadership qualities have to be displayed truly for the liking of the masses.

Singapore

The Prime Minister of Singapore delivers a National Day Address to the nation on 9 August every year, their National Day. The National Day Address of the PM is awaited by the whole world because he spells out policies and plans that become important to several sectors in a global sense.

Several years ago in one of these speeches the Singapore PM pronounced that the business income from the Changi Airport was expected to decline due to the world aircraft industry contemplating the manufacture of long haul aircrafts that can travel direct from Melbourne to New York non-stop. He said that Singapore’s GDP would be affected as a result and to compensate it they were going to develop the Singapore Harbour by increasing its cargo handling and the efficiency to supplement the loss revenue from the airport.

This statement teaches us two lessons. The first is how the national leaders are knowledgeable and acting with foresight to meet the future contingencies. The second is how important the port operations of a country are when it becomes necessary to augment the national income. As for us we are very fortunate as a nation that we have the best chosen in the cabinet who can mastermind the augmentation of national income from vulnerable and strategic sources with experience and knowledge based rhetoric.

Sri Lanka

Be that as it may, our port issue is hanging fire from the last regime days. This provides a good escape route for the various parties to play political ‘ping pong’ while the masses watch with interest. Somewhere around may 2019 we heard that the Sirisena-RW Government decided to enter into a MOU with Japan and India (on a tripartite basis) to develop the ECT with a loan facility of $ 500 million and the construction to be undertaken by India. We were also informed that the loan was on very attractive low interest rates with long grace periods.

But the proposal met with lot of public criticism alleging that the SLPA was in a position to undertake the development work and opposed the envisaged transfer of terminal operation rights to a newly established company jointly owned by Sri Lanka, Japan and India. However as usual the problem was the lack of transparency of the proposal for public perusal and evaluation. It appears that this is an area that remains well guarded and protected under all successive governments! The sovereignty of the people enshrined in the constitution stands subjugated to that extent.

The current situation has arisen due to the Government that came into power offering 49% of the ownership of the shares to an Indian company. According to Govt. spokesmen it is neither a lease nor a transfer of ownership. But it is an indefinitely on going share ownership in a vital operation of the country associated with one of its prime locations crucially important as an asset in the strategic sector.

The Government has to pay heed to this public claim in the context of their election promises and declared policy stands. What is significant is the country has a right to know what exactly the proposal is, instead of bits and pieces uttered here and there. Nobody should fear to divulge the truth. After all if the current proposal is more beneficial (to the country!) in the long run, there should not be any qualms about the matter.

State banks example

On the other hand the voice of the people in particular the workforce should receive the fullest recognition and regard as they are more concerned about the lasting effects. Our own experience in a proposal of a previous government to privatise the State-owned banks is a case in point for us to ponder over.

In the early 1990s State banks came under heavy attacks by the then Government to the extent the Minister of Finance himself declaring the banks are bankrupt. We remember as if it were yesterday how the matter culminated into a no-confidence motion against the FM in the Parliament. We respectfully, graciously and with great pride recall the role we played as employees and trade unions in that struggle to safeguard the State banks for the future generations by fighting an unforgettable battle against the move.

Today, all successive governments of the day regard the State banks as their ultimate source of solace (last resort) when it comes to borrowing for the Government. During some eras they have been treated as bottomless wells. We remember the phraseology they used to baffle us to win over the public, calling it commercialisation, peopleisation and so on which we defeated successfully. They even proposed what was called ESOP (Employee Share Ownership Plans) to influence the employees to agree to the sale of shares of the bank.

A few questions

Coming back to the current issue there are a few questions that the country should raise.

The first is, are we so desperate in raising $ 500 million and that too when needed not at once but in tranches running over a period? Are we not having captive funds (virtually sovereign funds) which can very easily afford if not singly, as consortiums under a lead arrangement to meet this obligation. After all if it is a profitable venture for a foreign lender to get involved why shouldn’t we muster our resources and benefit by the profits to be generated while saving the earnings of the venture to ourselves at the same time?

The second question is, are we under some obligation or pressure from international powers to yield to a request against our wish? Well, the answer is in the hands of the Government. When there was intense pressure brought on us by powerful blocks during the last stages of the internecine war we were told that our president then stood firm and said leave it to us. If the powers that be do not want to abide by such a reaction best is to leave it to the people to decide. A referendum will indicate whether the people want to succumb or not. When UK decided to withdraw from EU (brexit) it is the people who endorsed the decision. We will politely let them know that it is what we want.

The third is, are we dealing with the right party in this matter? To the best of our knowledge the port industry for India is an extremely competitive affair. It has 12 major ports and 205 minor and intermediate ports. A mega project named Sagaramala is operating with a national perspective plan to develop their port business adding six new mega ports some in close proximity to ours. India has a coastal belt of 7,500 kms and it is the 16th largest maritime country in the world.

It has allowed Foreign Direct Investment (FDI) to an extent of 100% for harbour construction and maintenance projects with long tax holidays to investors. They have set national targets for achieving specific number of cargo traffic under a plan. Indian Govt. has taken steps to improve their operational efficiencies through mechanisations, investments and development. We should not feel shy to ask our big brother to leave our bread and butter to ourselves. We are friends, neighbours and they are the crusaders of our valued religious culture. We will never be anywhere close to them in the competitive field but wish to be acknowledged as complimentary players.

The last question is, who is the party that we are planning to go with in this program?

For all intents and purposes, it is not the Govt. of India but a company in India called Adani Ports and Special Economic Zone Ltd. (APSEZ). Let us examine their profile and the current engagements of this company in port related activities in India.

APSEZ completed the acquisition of Khrishnapathnam Port Company Ltd. for $ 1.63 billion in October 2020. In July 2020, they launched an offshore bond offering to raise $ 750 million.

Between 2018 and 2019 APSEZ became the first Indian port operator to handle cargo movement of 200 million MT.

This company is saddled with its own commitments under the strategic plan of the Indian Government to develop and achieve the national targets of the Indian Government in the Port business.

These are some of the relevant factors that deserves special consideration entrusting affairs in the context of putting into full operation a terminal which has some unique values and potential among the harbours of the world.

The strategic location, size and depth, and the climatic conditions are all some exceptionally valuable treasures we have associated with our ECT. Any partner who is also a competitor in the same business may develop conflicts of interests in the course of ongoing operations.

Hence a cautious approach is warranted. Considerations go beyond the ordinary thinking capacities and experiences of those in the game front currently.

I conclude with all best wishes!