Port City ready for take off

With new Agreements specifying new conditions:

by Ranil Wijayapala

The stalled Port City project will get off the ground when the new Agreement between the Government of Sri Lanka and the Chinese Government comes into operation, quashing scepticism that the former Agreement signed by the Rajapaksa regime would stand. State Minister for International Trade, Sujeewa Senasinghe refuted this claim and said a new Agreement has been drawn up clearing doubts and will be signed shortly after resolving legal, security and environmental issues over the Colombo Port City Development project.

Reclaimed land being filled -www.dematix.com

He told the media that a new Agreement will be signed with China Communications Construction Company Limited (CCCC), the investor of USD 1.5 billion for the project, overwriting some of the contentious issues in the existing Agreement drawn up by the former regime. According to the new Agreement, State Minister Senasinghe said China will not have outright ownership to a portion of the land in the Port City nor will it be able to dock ships or planes without prior permission from the Sri Lankan government. That was a security concern not only for Sri Lanka but also for neigbouring India with regard to the Port City Development project. India raised this issue on several occasions during bilateral discussions between India and Sri Lanka.

Scepticism over Chinese investment in Sri Lanka and Chinese- funded projects was the most debated issue in the country after the regime change in January this year. The Colombo Port City project was the hackneyed topic in the past few months.

New Agreement

According to the new Agreement to be signed shortly, State Minister Senasinghe said China will not have outright ownership to a portion of the land in the port city nor it will be able to dock ships or planes without prior permission from the Sri Lankan government. That was a security concern not only for Sri lanka but also for the neigbouring India with regard to the Port City Development project, and India raised this issue on severla occasions during bilateral discussions between India and Sri Lanka.

The USD 1.5 billion investment undertaken by the CCCC with the blessings of the previous government led by Mahinda Rajapaksa irked environmentalists, civil society organisation and politicians for not adhering to stipulated procedure when making such investment in Sri Lanka.

The main criticism was the project was not subjected to proper environmental clearance and Environment Impact Assesment(EIA) was done in a haphazard manner without addressing the main concerns raised by environmentalists, marine biologists and civil society groups.

The project extends to about 270 hectares on reclaimed land adjacent to the Colombo Port. The Minister said that an EIA report on the project has also been finalized clearing a major hurdle for the commencement of the project. Like the Port City project, many of the Chinese funded development projects which were suspended for review after the regime change have also been put back on track after some negotiations with the contractors and the funding agencies. It was mainly the China funded road development projects that were suspended for review by the Government.

Second stage of the Outer Circular Highway from Kaduwela to Kadawatha www.colombo.net

The Outer Circular Highways, the Southern Expressway Extension project and the Kandy expressway presently known as the Central Expressway are the China funded projects that have been reviewed by the Government. According to the Highways Ministry officials, the main concern of the Government was to reduce the costs of the projects as it was of the opinion that many of the highway projects which were initiated under Chinese funding by the previous government were too costly.

The Government has by the reviewing process made some savings, though not substantial. Some construction projects have been halted as such investment at present was a waste considering the impact of traffic congestion in 20 years.

The Southern Expressway Extension upto Hambantota was started on July 4, after negotiations with the Chinese funding agencies and contractors. The first phase of the project is from Godagama to Beliatta and the next phase is from Beliatta to Wetiya, Wetiya to Hambantota via Andaraweva and then the Hambantota Port access road.

The 96-kilometre Southern Expressway Extension project costs Rs. 242.2 billion and is mainly funded by the EXIM Bank of China. The construction contracts have been awarded to Aviation Industry Corporation of China, China State Construction Engineering Corporation and China Harbour Engineering Company Ltd.. China Railway First Surver & Design Institute Group Co.Ltd will provide project supervision consultation.

Honour

The Government was of the view that the Expressway should only go up to Beliatta and from there it should be a highway with limited accessibility and the next phase of the Expressway could be developped after the Hambantota port is developed. However, the Chinese funding agency has conveyed that the Government has already signed the Agreement and it has to honour the Agreement.

The Government has already signed the financial Agreement for Section I, Section III and Section IV of the projects while for Section II, too financial assistance has been requested from China EXIM Bank but it has not yet confirmed it", the official added.

The Outer Circular Highway (OCH) is the other project that was criticized due to the high cost of the project. The contract for the third phase of the OCH project from Kerawalapitiya to Kadawatha was negotiated with the Chinese contractor and the funding agency, again, the EXIM bank of China. The project has been estimated to cost Rs 64 billion to construct a 9.2 km Expressway from Kadawatha to Kerawalapitiya. Out of the total length, 5.9 km of the road will be on a viaduct.

"The Government proposed Rs.24 billion reduction in project costs by reducing infrastructure in the six lane concept. In some places we proposed to remove the viaduct and have an embankment, thus cutting costs" a senior official of the Highways Ministry said.

The original proposal was to have provision for a six-lane road. The contractor would create the necessary infrastructure to have a six-lane road in the viaduct area but only a four lane road will now be constructed.

"The changes suggested by the Government could save around 9 to 10 per cent of project cost", the official added. "We have removed one inter-change and six- lane facility and not in the entire project but in the viaduct area. Likewise, we have given some of our proposals to the EXIM Bank of China and they were now agreeing to these proposals," he said.

The Government has the right to make alterations upto 15 percent of the project cost under the agreement reached between the two parties.

The Metallurgical Corporation of China Ltd. (MCC) which is the main contractor for the third phase of the Outer Circular Highway has commenced the construction work at present from Kerawalapitiya to Kadawatha after the reviewing process.

The contract for the Northern Highway, now renamed the Central Expressway has also been reviewed.

The initial plan to commence the project from Enderamulla has been changed and will now commence from Kadawatha. The Government has given the contract for the construction of the first five kilometres of the Expressway to the Metallurgical Corporation of China.The money was from the savings of the last phase of the OCH project.

But now the company has agreed to construct the first two kilometres of the project including the inter-change from the savings of the OCH project.

The original plan was to construct the Expressway from Galagedara to Pothuhera, but now the Government has decided to commence the project from Kadawatha because the public could then use it instead of starting it from Galagedara to Pothuhera.

Loans

The Government is now negotiating with the China EXIM bank for funding, while seeking funding from other financial institutions such as the ADB and JICA to complete the other phases of the project. Many of the projects reviewed by the Government were unsolicited proposals and the Government has taken a policy decision not to entertain unsolicited proposals unless it can make an impact to the economy and also to the overall infrastructure of the country. "There was a Cabinet paper that the Government will not entertain unsolicited proposals unless it is important to the economy and infrastructure of the entire system. That is why none of the unsolicited proposals for the construction of roads was accepted," he added.

The Cabinet sub committee reviewing unsolicited proposals have kept aside these proposals but it was not in apprehension over any country or investor. The Government is of the view that if the proposals are on commercial loans, the Government will not accept but if they are concessionary loans they will be considered.

"At the moment non of the commercial proposals came for road sector was accepted by the Government", the official added. According to Finance Minister Ravi Karunanayake the Government aims to encourage the investors from all over the world to come to Sri Lanka. "We like investors from India, Europe, Singapore, Japan, America and the Middle East to invest in Sri Lanka. Similarly we like Chinese investors to invest here. But they have to adhere to the Laws of the country,"Minister Karunanayake said. "During a particular period Sri Lanka was only looking towards one country for investment. This needs to be corrected. We are inviting everybody to invest in Sri Lanka. We want to ensure investor confidence along with local investors", he added.

"Will any country allow another country to do something that is not legal. We are telling investors to ensure legality. We want it to happen. We want to ensure everything is legal and that is our goal," the Minister said.