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Firm pulls out of China-led Sri Lanka port: report

[MISC, Wednesday, 11 January 2012 14:23 No Comment]

A Sri Lankan container port being built by a Chinese-led consortium could be under threat after a local partner pulled out, a report said Wednesday.

Work on the $500-million Colombo South Harbour, which began last month, is is the island’s biggest single foreign investment deal and is being partly financed by a $350 million loan from the China Development Bank.

The deal had attracted concerns from the island’s closest neighbour India, over China’s growing influence in the island.

China Merchant Holdings International owns 55 percent of the venture, with Sri Lanka’s Aitken Spence holding 30 percent and state-run Sri Lanka Ports Authority 15 percent.

"Aitken Spence has decided to pull out of Sri Lanka’s biggest FDI project," the Colombo-based Financial Times reported. "Among key reasons for the Spence pullout, is the escalation of the project cost."

The report said costs had risen to an estimated $600 million. The project was to be financed by 70 percent debt and 30 percent equity.

Officials from Aitken Spence and Sri Lanka Ports Authority declined comment.

The news report said China Merchants Holdings may increase its stake in the venture, which is slated to start operations in 2013.

Two other Chinese firms, China Harbour and Sino Hydro, are building another $1.5-billion port in the Sri Lankan town of Hambantota, which is President Mahinda Rajapakse’s home constituency.

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