India, Japan cool to Colombo offer of new port project

Days after the Sri Lankan cabinet decided to allocate Colombo’s West Container Terminal (WCT) to an Adani Group consortium to compensate for cancelling the East Container Terminal (ECT) agreement, previously signed by India and Japan, both New Delhi and Tokyo have signaled their distancing from the decision.

“Our High Commission in Colombo has already conveyed to the Government of Sri Lanka (GoSL) that their media release, in so far as their reference to the approval of the (Indian) High Commission, is factually incorrect,” Ministry of External Affairs (MEA) spokesperson Anurag Srivastava said on Friday, speaking about the cabinet notification issued on March 1 ( that had said the proposal presented by the Adani group and Special Economic Zone Ltd, a consortium called APSEZ, had been “approved” by the Indian High Commission.

“We understand that GoSL has engaged directly with investors on this project,” added Mr. Srivastava, indicating that New Delhi had not been apprised of the negotiations directly.

The Japanese government has not yet responded officially to the Sri Lankan offer for the WCT, but it had reacted sharply to being ousted from the previous Memorandum of Cooperation (MoC) with India and Sri Lanka for the neighbouring ECT project, and had called the decision “regrettable”.

“We (Japan) have been in touch with (governments of) India and Sri Lanka, but Japan has not made any decision regarding the West Coast Terminal (WCT),” a senior diplomatic official told on Friday.

However, another diplomatic source said both India and Japan were keen to remain engaged in Sri Lanka.

When it was signed in May 2019, the trilateral MoC between India, Japan and Sri Lanka for the East Container Terminal was a government-to-government agreement, expected to send a strong strategic signal in the region, as India and Japan planned to collaborate to fund and develop infrastructure projects in South Asia, where thus far China had a bigger role. Japan is understood to have offered very generous terms at the time, for a 40-year soft loan with a 0.1% interest rate to help fund the ECT.

Japan’s reluctance to accept the WCT offer instead of the ECT could be a blow to the new agreement, which is now a public-private partnership driven by the Adani group.

“In the Sri Lanka port project, Adani group is committed to make investment to the tune of $400 million (approximately ₹3,000 cr) to develop the terminal and other infrastructure,” a senior Adani Group representative said in response to a query. He added that the investment would be met from the company’s own resources, and not linked to funding from Japan.

“(Adani Group) has assured the authorities in Sri Lanka that the group, which operates around a dozen ports in India, will develop into a world class port terminal and infrastructure in the island nation,” the representative added.

Adani Ports is involved in two other international projects, one for the Abbot Point coal terminal in Queensland, Australia, which has run into damages of about $80 million over a lawsuit, and one for a container terminal on Myanmar’s Yangon river, which could face headwinds after U.S. sanctions on Myanmar following the toppling of the elected government by the junta last month.

The Rajapaksa government has not responded to the comments from New Delhi about the WCT project.

In an interview last week, Sri Lankan Foreign Secretary Jayanath Colombage had said the WCT offer should be seen as a sign that his government “was willing to make a compromise”, despite what he called President Gothabaya Rajapaksa’s “pledge to safeguard national assets”. Colombo has also offered India and Japan a much larger stake in the WCT (85%), on par with what China has been given for another terminal, than it was willing to give in the ECT (49%), he pointed out.

On the other hand, experts have said the ECT had distinct advantages for investors — it is already partially functional and adjoins a shallow port which ensures economy of time and costs in cargo transfers. The additional development was estimated to cost $700 million; the WCT, on the other hand, has to be built from scratch.

Source: The Hindu