Port City - tough negotiations ahead:

Reclamation to resume after monsoon

by Chandani Jayatilleke

The sea reclamation of the Port City project in Colombo, funded by China will start in September-October, soon after the monsoon is over. It will cover an area of 269 hectares, when filled.

“We are now restarting the project and the Chinese company has already begun repairing the partly constructed breakwater,” Deputy Director General, Urban Development Authority, Nihal Fernando said. “The partly constructed breakwater cannot be kept as it is; it could get damaged again during the forthcoming monsoon. Therefore, it is being repaired now,” Fernando said in an interview.

It got damaged due to the exposure to the monsoon, as the project was suspended largely due to sovereignty issues and environmental concerns early last year.

Sri Lanka and China have now agreed in principle to set up a joint venture company –a more flexible business model - to implement the Port City project.

However, the details of the joint venture are yet to be discussed and decided on between the two countries.

The next step is to reclaim land using sea sand from the deep sea. The Geological Survey and Mines Bureau has given approval for sand burrowing from two areas of the three proposed by the developer.

“The sand burrowing can be done after the monsoon as the seas will be calmer by then.”

The previous Port City agreement (concession agreement) signed by the Sri Lanka Ports Authority and CHEC Port City Colombo (Pvt) Ltd was hugely advantageous to China and they were to get 108 hectares of land and Sri Lanka 93 hectares. The rest would be free areas. These two areas were to be promoted and marketed for investment by the two countries separately under the original deal.

“It looked quite unhealthy and disadvantageous for Sri Lanka as we couldn’t have successfully competed with a country such as China at that point, because obviously they are in a better position to market such a huge project,” Fernando said.

When the present government took office, Prime Minister Ranil Wickremesinghe suggested that the Port City project should be handled by a joint venture company between Sri Lanka and China. He also proposed that the JV should market the land as one and share the income and profits under the JV law.There are no specific details about the JV as yet. At present the project is governed by the concession agreement that was signed by the previous government and is a legal document.

However, after agreeing to set up a JV, some amendments have been made in the original concession agreement. A couple of major changes include the 99-year lease (instead of freehold) and the change of the managing agency to the Urban Development Authority from the SLPA.

The proposed JV agreement will be worked out after deliberations by the representatives of all the stakeholder agencies. The finalisation of the agreement is expected to take about one to one and a half years. The facts to be considered for the JV include the model of the JV, infrastructure development, and decision of management agencies, marketing and promotion network, and conditions for developers.

“During the next one and a half years we will start marketing the projects and the release of lands will be done in several stages. The creation of the land alone will take three years. By then the full JV should be ready as well,” Fernando said.

The Chinese party had already worked out a plan for marketing and according to them they want to release only seven hectares per year. That will give them a good price edge, he said.

The final survey plan after the new government requested changes has been submitted to the UDA and the UDA has accepted it in principle. However, the proposed land has not been reclaimed as yet.

Hence, it does not come under any agency yet until the legal procedure in connection with the sea reclamation is finalised, which is now at the final sage.

The law in Sri Lanka empowers the President to authorise the reclamation of the sea bed, for development purposes. Hence, the President will decide on appointing a government agency or institution to manage the land. “This process is now being followed,” Fernando said.

The UDA can manage areas which would come under the UDA law only. “There is no area to declare now. It can be done only when the land is created. Therefore, we are unable to approve the final project plan; but we have accepted it in principle,” he said.