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Sri Lanka opens $1.5 bln port to outside investors

[Reuters, Monday, 2 August 2010 08:35 No Comment]

Sri Lanka on Sundaysaid it would invite outside investors into its $1.5 billion Hambantota port project, the keystone of a $6 billion post-warinfrastructure revitalisation drive.

The invitation for external investment will coincide withthe November opening of the port on Sri Lanka’s southern coast,along an ancient "Silk Road" trading route and one of theworld’s biggest East-West shipping lanes.

The port and its accompanying services represent the singlelargest investment option for foreign investors in Sri Lanka,which is aiming to transform its economy after finally ending aquarter-century separatist war in May 2009.

One option that is not on the table for outside investors isthe oil bunkering facility. Many have speculated China wants theright to use the site as part of its "string of pearls" strategyto expand its influence and maintain energy security.

"We will handle oil bunkering. We don’t want to give itoutside. But bulk cargo handling, storage facility, warehouses,transshipment, and all others are open for investments," SriLanka Ports Authority Chairman Priyath Wickrama told Reuters.

About 30 investors — primarily from India, China,Singapore, Russia, the Middle East, Australia and major shippinglines — have expressed interest, Wickrama said. He did notelaborate further.


China, Sri Lanka’s largest infrastructure lender, has loaned$425 million toward the port, which will be Sri Lanka’s largest.

"We are negotiating with China for an $800 million loan forthe second phase," Wickrama said.

Wickrama declined to say if China will have a role inoperating the bunkering facility, about which neighboring Indiahas expressed concern to the Sri Lankan government.

Political analysts say Sri Lanka has successfully managedIndian pressure over the Chinese port investment, which couldalso help transshipment trade on the subcontinent.

Hambantota is one of four ports being built or upgradedunder President Mahinda Rajapaksa’s plans to renew the IndianOcean island nation’s $42 billion economy by returning it to itsold and lucrative role as a trading hub.

Sri Lanka initially aims to get 2,500 of the 70,000 cargovessels that pass Hambantota annually to use its bunkering andcargo handling facilities, and expand that to 8,000 a year oncethe second phase is done in 2014.

Sri Lanka now handles around 6,000 ships annually in itsonly port in Colombo on the western coast, which requires shipsplying the East-West shipping lanes to divert.

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