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Ministers hold Hambantota by Ranatunga
the memorandum has made some very salient points. Here are some highlights: Under this Concession Agreement, the entire Hambantota Port (developed at present), future development rights together with the Sri Lanka Ports Authority (SLPA) rights to operate it, and substantial amount of surrounding lands are proposed to be assigned to the operating Company for a term of 99 years. However, in the Port of Colombo, the sea bed has been given on concession terms only to build, operate and transfer (BOT) a Container Terminal for a period of 35 years. It is advisable to limit the term of the Concession Agreement only for a period of 30 to 40 years instead of 99 years lease. Further, Minister of Finance in his observations to the Cabinet Memorandum has recommended that the lease agreement could be 30 years or less. The extent of the land area of the Port is approximately 1650 hectares and when it is valued at the current land lease rate of Hambantota (US$ 50,000) per hectare per year) for 99 years, the undiscounted land lease itself amounts to US$ 8.1 billion, without considering 3% increment which the SLPA charges at present from the other public–private partnerships (PPP). Further, the value of the land has not been considered at all for the project cost, and no clear reference has been made in the Concession Agreement whether a separate lease is paid for the lands or which lands are considered for lease, if such lease is proposed. In addition, the Government Valuer estimates annual lease value as Rs 988,000 per hectare (Rs 494 million). However, SLPA’s current market annual lease rental is Rs 7,5 million per hectare (US$ 50,000 X 150= Rs 7,5 million). Hence the loss to the Government of Sri Lanka (SLPA) will be approximately Rs 6,5 million per hectare per annum. Since the SLPA has certain concerns regarding the valuation given by the Valuation Department, SLPA requested the Deputy Secretary to the Treasury to have appropriate actions to rectify the valuation. The Minister of Development Strategies and International Trade
The conclusion of a deal with a Chinese company to develop the Hambantota Port began in May last year after a visit to Beijing by Prime Minister Ranil Wickremesinghe, according to the detailed Cabinet memorandum prepared by the Ministry of Ports and Shipping.
The memorandum is backed by several documents as annexures. They include minutes of meetings, other cabinet documentation, reports and related issues.
The first move came in May last year. Premier Wickremesinghe told a meeting of the Cabinet Committee on Economic Matters (CCEM) that many Chinese investors were interested in the Hambantota Port and industrial parks. In the same month, the Sri Lanka Ports Authority (SLPA) submitted details of debts and obligation. The loan (obtained by the Rajapaksa administration) was being paid by the SLPA and not the Treasury. CCEM, however, decided that the Chinese Government should undertake a study of the port on a public-private partnership basis and submit a proposal.
In July, the Chinese Ambassador Yi Xianliang appeared before a meeting of the CCEM. Responding to a Government request, he declared that under the existing Chinese law it was not possible to convert debt directly into equity and it needs to be executed through discussions with investors on commercial terms.
In August 2016 the CCEM gave instructions to R. Paskaralingam, Advisor to Ministry of National Policies and Economic Affairs (which is under Premier Wickremesinghe) to submit a paper on the strategy on which Chinese debt to equity could be transferred.
In September last year, the CCEM was told that the Chinese Ambassador had recommended two companies – China Merchants Ports Holding Ltd. and China