Eight Members of the Joint Opposition have written to President Maithripala Sirisena appealing to him to scuttle the Public Private Partnership (PPP) Framework Agreement signed between the government and the China Merchant Ports Holding Company on the management of the Hambantota port.
“As far as we know, no proper valuation of the Hambantota Port’s facilities, infrastructure and land (including the 110 acre island) was done. Only construction costs had been taken into consideration. So, the agreement is based on an undervaluation of the assets,” they said.
The full letter of Joint Opposition
2016 January 02
H.E. Maithreepala Sirisena
President of Sri Lanka
National Concern over the Hambantota Port Agreement
We, the undersigned Members of Parliament belonging to the Joint Opposition, have severe misgivings regarding the current proposal to restructure the Hambantota Port on a PPP basis with the China Merchant Ports Holding Company, for the following reasons in accordance with the information available:-
(1) The Sri Lanka Ports Authority (SLPA), in September 2014, entered into an agreement with the China Merchant Holdings (International) Company Ltd and China Harbour Engineering Company Ltd, to lease the Hambantota Port (Phase II) on a supply, operate and transfer (SOT) basis for 35 years. However, this agreement was nullified. Subsequently, China Harbour Engineering Company Ltd and China Merchant Ports Holding Company Ltd, tendered separate proposals, without the criteria for their selection having been defined.
(2) China Harbour Engineering Company Ltd proposed an initial payment of approximately US$ 730 million for a 50-year lease period, during which a payment structure similar to a royalty was proposed, which made the value of this proposal in fact US$ 1.5 billion. This was reported the option preferred by the SLPA, which would have benefitted the country and the SLPA. However the option selected was the proposal of China Merchant Ports Holding Company, for a one-time payment of US$ 1.08 billion, for a 99 year lease, extendable for a further 99 years. The question arises as to why China Merchant Ports Holding Company was selected, and who selected it.
(3) The project has been valued at US$ 1.4 billion by the SLPA. The question arises as to what basis was used to arrive at this figure. As far as we know, no proper valuation has been done of the Hambantota Port facilities, infrastructure and land (including the 110 acre island), but only construction costs have been taken into consideration, so the agreement is based on an undervaluation of the assets.
(4) The Attorney General has given his opinion that articles 4, 5, 8 and 16 of the agreement are beyond the scope and/or the statutory powers vested with the SLPA.
(5) The China Merchant Ports Holding Company Ltd has agreed to invest US$ 1.12 billion in the joint venture project, paying US$ 5 million as a security deposit, 10% of the investment value, including the security deposit, within one month; 30% of the investment value within 3 months and 60% of the investment value within 6 months. According to the agreement, these funds are to be invested in the project itself. The Government of Sri Lanka (GoSL) has agreed to be responsible for the debts of the SLPA, so the joint venture will not be responsible – in the event of the project going bankrupt, GoSL will still have to pay the debts.
(6) The SLPA suggested a share split in the original proposed joint venture company, , but this was subsequently changed by the Government to 80% to China Merchant Ports Holding Company Ltd and 20% to the SLPA. The question arises as to how, why and on what basis all these critical calculations and changes were made by the Government.
(7) No proper due diligence has been carried out on the project.
(8) The Cabinet Appointed Negotiating Committee (CANC) was not given sufficient time and not followed laid down procedures to study the proposals and make adequate recommendations.
(9) Granting of 15000 acres in adjacent of the Hambantota Port depriving farmers of their land has no justification.
(10) The SLPA Board cannot give its approval to the project and above mentioned according to the SLPA Act.
It is proposed to grant a lease of the Hambantota Port to the China Merchant Ports Holding Company for 99 years + 99 years, totalling up to 198 years. Such a vital asset should not be entered into lightly, and should be given due consideration. This does appear to have been the case. The world’s eyes are upon the very high profile agreement on the future of the Hambantota Port. Any impropriety could not only cause a bad reputation for Sri Lanka, but gravely cause national and financial consequences for Sri Lanka.
Ultimately, in terms of the SLPA Act, Parliament is responsible for oversight into this agreement. If there have been malfeasance or procedural blunders, the public officials responsible could be called to account by Parliament and law of the land.
In the light of the above, we request your excellency to delay the signing of any agreement in connection with the Hambantota Port and to inquire into the manner in which this matter has been handled.
Dinesh Gunawardena, MP
Leader of the Joint Opposition
Vasudeva Nanayakkara, MP
Bandula Gunawardane, MP
Udaya Gammanpila, MP
Keheliya Rambukwella, MP
Sisira Jayakoddy, MP
Prasanna Ranaweera, MP
Geetha Kumarasinghe, MP