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Government succumbs to pressure from trade unions on port deal

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By Easwaran Rutnam

As a result the cabinet paper will be submitted to ensure the ECT is fully managed by the Sri Lanka Ports Authority.

Sri Lanka has scrapped a deal to develop a major port terminal with India and Japan amid weeks-long protests by trade unions and opposition parties while New Delhi called on its neighbour to honour the agreement.

The decision marks a u-turn from the statement made by Rajapaksa over two weeks ago, when he said the project would go ahead, citing "regional geo-political concerns".

The decision to let the Sri Lanka Ports Authority (SLPA) develop the ECT was signalled last month by Prime Minister Mahinda Rajapaksa in the Lankan Parliament where he said that the government "has not chose to hand over the management of the East Container Terminal, in whole or in part, to any foreign company".

But India has remained steadfast about the project during high level discussions including last month during a visit by India's Foreign Minister S. Jaishankar.

India's High Commissioner in Colombo Gopal Baglay met President Gotabaya Rajapaksa, Prime Minister Mahinda Rajapaksa and Foreign Minister Dinesh Gunawardena yesterday officials said, after Sri Lanka appeared to pull out of its agreement to grant rights to the East Container Terminal (ECT).

The government said it would instead develop the port's West Container terminal with investment from India and Japan.

While the ECT decision does not stand to affect domestic politics in India at all, its role as a pile-on to the growing list of differences between India and the Rajapaksa government may rock the fragile equilibrium between the two that set in since Gotabaya Rajapaksa assumed the Sri Lankan presidency in 2019.

The spokesperson said that the commitment of the Government of Sri Lanka with regard to the ECT has been conveyed several times in the recent past, including at the leadership level. "All sides should continue to abide by the existing understandings and commitment".

The ECT project was considered important for India, mainly for security reasons as the China Merchants Port Holdings Company holds 85 per cent stake in the Colombo International Container Terminal (CICT), which is near the ECT. The Adani Group from India, along with Japanese companies, was to invest in the project expected to cost upto $700 million, as per official estimates.

India - which considers the Indian ocean region to be its strategic backyard - has for years been anxious by its rival China's economic and political influence over neighboring Sri Lanka.

This is the second instance of Sri Lanka reversing an agreement on a large infrastructure project involving Japan, after the government scrapped the $1.5 billion, Japan-funded Light Rail Transit system previous year. The projects include a seaport, airport, port-city, highways and power stations.

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