Hot on the heels of Prime Minister Ranil Wickremesinghe’s conclusion of China visit everyone’s and international community’s eyes were focused on what would happen to ‘Colombo Port City Project’ a project that was initiated by previous government mulling investments to the tune of US $ 1.5 billion. Once commenced and completed the project was said to be the largest Foreign Direct Investment in Sri Lanka in recent history.
According to reports China and Sri Lanka are both determined to push forward with a stalled Port City project in Colombo, following a meeting between the two country’s premiers. Sri Lanka’s government ordered a review of the US $1.5 billion Colombo Port City project last year, citing irregularities in the award of the contract to state-owned China Communications Construction Company (CCCC) by the previous government. But last month the Sri Lankan government, facing with a difficult economy, ordered the Chinese firm to resume work on the Colombo Port City.
However, both political and economic sources highlights that it is now revealed that original master plan by Chinese to have reclaimed nearly 233 hectares facing the Colombo Fort’s coastline has now been suggested to increase by another 37 hectares as Chinese have suffered over US $ 125 million worth losses since the new government came into power and suspended the port city project to ensure larger support from the other Asian giant India. Accordingly China Communications Construction Company (CCCC) has requested to extend the reclaimed land by another 37 hectares in case if Sri Lankan government cannot pay the penalty amount to the tune of US $ 125 million.
Earlier this week Prime Minister upon arrival from China said that there is ‘No Payment’ involved to be paid to China as ‘Penalty’. However, analysts opine that Prime Minister was tight lipped on any changes in original Port City extent plan. Deputy Minister Eran Wickramaratne also recently revealed at a media briefing that during the visit to China, Prime Minister Wickremesinghe will be negotiating a US$ 125 million penalty that the Chinese state firm is seeking from Sri Lanka for suspending work on the Port City project. He has assured that Sri Lanka will protect the lawful rights and interests of Chinese companies in line with its law and foster a sound environment for Chinese investors.
On the US$ 125 million compensation demanded by the Chinese firm for one year, he said now that project has been made a financial hub, the company may have to pay money to Sri Lanka, but did not elaborate.
Prime Minister Wickremesinghe also had said that India should not have any security concern regarding the Colombo Port City project since it has been re-negotiated with China. “Sri Lanka is prepared to discuss it with India further,” the Prime Minister said adding that his government has addressed India’s security concerns over the ‘newly-modified’ project.
However, earlier reports outlined that CCCC which had estimated that the shutdown would result in losses of more than US $ 380,000 a day, has sought compensation of $125 million, according to the Sri Lankan government, which has said it can’t pay and wants to negotiate.
Initially in 2014 the cost of the China Port City project was quoted to be US$ 1,337 million or Rs. 174 billion at Rs.130 for a US dollar. However, now Port City’s cost has risen by another Rs. 22 billion as a result of the Sri Lankan Rupee depreciation by over 10% within 14 months. The entire investment is to be made by CCCC. As per the suggested new master plan, in case Sri Lanka’s new government fails to pay back the penalty of US $ 125 million the Port City Island will be increased to 270 hectares from 233 hectares in extent.
Once completed, CCCC will have effective control of 110 hectares instead of earlier planned 108 hectares of land—and the remaining 160 hectares which was to be earlier 125 hectares will be owned by Government of Sri Lanka. In earlier plan China’s CCCC was to own 20 hectares on freehold basis; 88 hectares on a 99-year lease out of 108 hectares but now the government of Sri Lanka has said that it will only allow Chinese to have the land on a 99-year lease base. However, what has been negotiated is still not clearly informed by the Government of Sri Lanka.
Now Sri Lankan Government will have 97 hectares of land for common facilities as against 63 hectares earmarked earlier whilst development extent has been increased by 1 hectare to 63 hectares. The project documents outline that once completed the Colombo Port City will house over 245,000 people with 28% of them being permanent residents housed in a land of over 5.5 million square meters.