NEWS Sri Lanka government has decided to overturn its tripartite agreement with India and Japan to develop Colombo’s East Container Terminal (ECT). As per the agreement signed by the former Maithripala Sirisena-Ranil Wickremesinghe administration, India and Japan together were to hold 49% stake in ECT.
SRI LANKA’S REASON FOR SUCH WITHDRAWAL
The ostensible reason for the Rajapaksa government’s decision is growing pressure from port union groups which have opposed any foreign participation, and threatened a “worktorule” agitation if ECT operations were handed to the Adani group, as proposed.
SIGNIFICANCE OF THE PROJECT
- The project, worth an estimated $500-$700 million, was a key marker for infrastructure investment in the island nation where Chinese projects are most prominent.
- More than two thirds of transshipment at this port is tied to India, making it an important trade and connectivity link.
- As a joint venture for India and Japan to invest in, the ECT project was also expected to showcase how the two Indo-Pacific partners, and also Quad members, could provide South Asia with viable, transparent and sustainable alternatives for financing and development.
- Also, over the past year, the Indian government has invested much time and resources to India-Sri Lanka ties, including a new credit line, currency swap agreement, and COVID-19 assistance and vaccines.
- India has also set much store by its partnership with Japan, which could be a template for similar projects, as a counter to China’s Belt and Road Initiative.
- New Delhi along with Tokyo have reflected its deep disappointment and suspicions about the motivations.
- Similar commitments made by former PM Ranil Wickremesinghe during a visit to Delhi when he signed an MoU for developing the Eastern city of Trincomalee through oil and infrastructure projects also appear to have fallen by the wayside.
- New Delhi has said it continues to engage Sri Lanka on the ECT issue, although it remains cold to Colombo’s alternative offer of developing the West Container Terminal.
SUSPICION OVER CHINA’S ROLE
- The possible question of Chinese role in the ECT decision also hangs over the decision, given that other terminal projects at the Colombo Port such as the Colombo International Container Terminal, have not faced similar pushback.
- It is also curious that given its financial difficulties, Sri Lanka felt confident in taking a decision guaranteed to upset such important donors.
There is much at stake for all three countries to derail the partnership. It is in all their interest, but primarily Colombo’s, to find a compromise formula to salvage a deal that has far reaching consequences for the region.