East Container Terminal (ECT) Project: All you need to know

Amid the pressure from trade unions who opposed the joint venture, Sri Lankan Cabinet helmed by PM Mahinda Rajapaksa unanimously agreed to run the ECT as a fully-owned operation of the state-run SLPA.
East Container Terminal (ECT) Project
East Container Terminal (ECT) Project

India has asked Sri Lanka and Japan to abide by the existing understandings and commitment of a trilateral agreement to develop the strategic Colombo Port's East Container Terminal (ECT). 

As per a spokesperson at the Indian High Commission in Colombo, "I would like to reiterate the expectation of Government of India for expeditious implementation of the trilateral Memorandum of Cooperation (MOC) signed in May 2019 among the Governments of India, Japan and Sri Lanka for the development of ECT with participation from these three countries."

He further added, "The commitment of the Government of Sri Lanka in this regard has been conveyed several times in the recent past, including at the leadership level. Sri Lanka's Cabinet also took a decision three months ago to implement the project with foreign investors. All sides should continue to abide by the existing understandings and commitment."

On Monday, Sri Lankan Cabinet helmed by Prime Minister Mahinda Rajapaksa unanimously agreed to run the East Container Terminal (ECT) as a fully-owned operation of the state-run Sri Lanka Ports Authority (SLPA), succumbing to pressure from the trade unions who opposed the joint venture to develop the strategic terminal. Around 23 trade unions demanded that the ECT must remain 100% owned by the SLPA. 

As quoted by The Hindu, a senior Indian source stated, "We would hope that Sri Lanka does not unilaterally decide on this matter, as there is a tripartite agreement on it."

Earlier, amid the China concerns, Sri Lankan President Gotabaya Rajapaksa announced the revival of tripartite Japan-India-Sri Lanka deal to develop a deep-sea terminal in Colombo harbour. The project is located next to a controversial $500 million Chinese-run container jetty. The approval came after reviewing regional geopolitical concerns-- India's suspicion of China's role at the same port.

The announcement came after Indian External Affairs Minister S. Jaishankar visited Colombo on a three-day official visit on 5 January 2021. During his visit, he reportedly urged Sri Lanka to expedite finalising the deal. 

Earlier, amid the trade union resistance, the Sri Lankan Government held the deal. In May 2019, the state-run Sri Lanka Ports Authority (SLPA) inked a memorandum of Cooperation (MoC) with Sri Lanka, India and Japan to develop the East Container Terminal (ECT) under former Sri Lankan PresidentMaithripala Sirisena's administration. Sri Lankan President Gotabaya Rajapaksa came to power in November 2019.

The three countries agreed that SLPA would retain 100% ownership, while a jointly-owned Terminal Operations company would run the terminal-- 51% stake with Sri Lanka and 49% with India and Japan. 

What is the Necklace of Diamonds Strategy?

Highlights:

1- It will be developed with 51% ownership by the Sri Lankan Government and the remaining 49% as an investment by India's Adani Group and other stakeholders including Japan. 

2- It is estimated to cost between $500-$700 million, as quoted by The Hindu.

3- The ECT is situated around 3 km away from the China-backed International financial city-- Port City-- built on reclaimed land on the seafront of Colombo. 

4- Japan is likely to provide a 40-year soft loan with 0.1% interest rate. As per SLPA, it is one of the best loan terms that Sri Lanka has obtained. 

5- Around 70% of the transhipment business at ECT is linked to India. 

6- The project is located next to the Colombo International Container Terminal. The said terminal is 85% owned by China and was commissioned in the year 2013. The state-run SLPA owns the remaining 15%. 

In the year 2014, India lodged protests after Chinese submarines made unannounced visits to the Chinese managed terminal. However, since then, Sri Lanka has refused permission for further submarine calls. 

It is well established that Sri Lanka has been prey to Chinese Debt-trap strategy. Sri Lanka handed Hambantota and Colombo Port City to China, raising concerns at home and abroad. The deal was made after Sri Lanka was unable to repay massive Chinese debt incurred under Chinese loans. 

In 2017, the $1.12bn deal allowed Chinese state-owned company, China Merchant Port Holdings Limited to take over the Hambantota port on a 99-year lease. The port straddles the world's busiest east-west shipping route. 

This has raised concerns for India and the US as the port can provide China with a military naval advantage in the Indian Ocean. However, Sri Lanka has insisted that its ports will not be used for any military purposes. 

Why is China expanding its military footprints in the Indian Ocean?

FAQ

How much India and Japan were investing in the East Container Terminal (ECT) project?

As per MoU signed between India, Japan and Sri Lanka, the East Container Terminal (ECT) was expected to be developed with 51% ownership by the Sri Lankan Government and the remaining 49% as an investment by India's Adani Group and Japan was to provide a 40-year soft loan with 0.1% interest rate.

How much of the transhipment business at East Container Terminal (ECT) is linked to India?

Around 70% of the transhipment business at East Container Terminal (ECT) is linked to India.

What is the estimated cost of the East Container Terminal (ECT) project?

The estimated cost of the East Container Terminal (ECT) project is $500-$700 million, as quoted by The Hindu.

What is East Container Terminal (ECT) project?

East Container Terminal (ECT) project is a trilateral agreement between India, Japan and Sri Lanka to develop a strategic terminal at Colombo Port. However, Sri Lankan Cabinet unanimously agreed to run the East Container Terminal (ECT) as a fully-owned operation of the state-run Sri Lanka Ports Authority (SLPA), rejecting India, Japan role.
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