Government,CMPort continue discussions on $585 m payment

The government this week continued discussions with the Chinese company involved in the Hambantota Port project, which has put on hold the last tranche of US$ 585 million to Sri Lanka, examining some concessions in terms of tax benefits.

Both sides are keen to resolve the matter without any delay, an informed source close to the discussions confirmed, adding that previous sticky issues are unlikely to block the deal and final payment.

The fact that the money has not been transferred to the Sri Lanka Ports Authority (SLPA) account at the Bank of Ceylon and in turn to the Central Bank was this week confirmed in the money markets. “No, the money has not been transferred as yet,” an experienced dealer at a private bank said. The money is in the Chinese company’s account at Standard Chartered Bank.

Informed sources said that while China Merchants Port Holdings Company (CMPort) Ltd had earlier insisted that in accordance with the existing Concession Agreement, an artificial entertainment zone on reclaimed land is among the issues it wants resolved, it was

now more concerned about the tax issues.

In the dispute over taxes, the government position is that the

tax and other concessions provided in the agreement are not permissible under new tax laws. The Chinese side argues that the

agreement was signed before the new tax laws came into force and thus has to be honoured.

The sources said that the Chinese side is now unlikely to push for the proposed entertainment island but concentrate on the tax issues. On the government side, officials are looking at whether some reasonable tax concessions – not to the extent offered earlier – would be offered under current, new laws to end the impasse.

Last week Sri Lanka Ports Authority ( SLPA) Chairman Parakrama Dissanayake said the port area had been gazetted (under the SLPA Act) and would only be used for marine and port related activities. No land would be used for entertainment or tourism purposes, he said.