Sri Lanka clears port deal with Chinese firm

Port mired in controversy since China Merchants Port Holdings took 80% stake

Sri Lanka’s cabinet cleared a revised agreement for its Chinese-built southern port of Hambantota yesterday, the government said, after terms of the first pact sparked widespread public anger in the island nation.

The port, close to the world’s busiest shipping lanes, has been mired in controversy since staterun China Merchants Port Holdings , which built it for $1.5 billion (Dh5.5 billion), signed a pact taking an 80 per cent stake.

Under the new deal, which Reuters has examined, the Sri Lankan government has sought to limit China’s role to running commercial operations at the port while it has oversight of broader security.

Chinese control of Hambantota, which is part of its modern-day ‘Silk Route’ across Asia and beyond, as well as a plan to acquire 15,000 acres (23 square miles) to develop an industrial zone next door, had raised fears that it could also be used for Chinese naval vessels.

Sri Lankans demonstrated in the streets at the time, fearing loss of their land, while politicians said such large scale transfer of land to the Chinese impinged on the country’s sovereignty.

But according to parts of the document seen by Reuters, two companies are being set up to split the operations of the port and allay concerns, in India, Japan and the US, that it won’t be used for military purposes.

China Merchants Port Holdings will take an 85 per cent stake in Hambantota International Port Group that will run the port and its terminals, with the rest held by Sri Lanka Ports Authority. The company’s capital will be $794 million.