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(Reproduced from the Daily Mirror of November 26, 2001)
ADB has approved US $ 10 million (over Rs. 900 million) concessionary loan for the project, overall objective of which is to improve the efficiency of the existing facilities at Colombo port and expand capacity to address future growth in a way that is technically, economically, financially, socially and commercially viable. Due to be completed by August 2003, the project will cost a total of US$14.4 million. Aside from the ADB loan, the Government will bear the remaining cost of US$4.4 million. It will also support the Sri Lankan government's efforts to attract private sector investment to the port and reform the ports sector. In addition, it will prepare an investment project to develop Colombo's South Harbor Development Project (SHDP). According to Ministry invitation for EOIs, the project under the main services component consists of the port efficiency component, which will be to improve the efficiency of the existing facilities at the Port and the other is the port expansion component which envisage completion of project preparation for the implementation of the SHDP. Ministry said that in order to carry out this study, EOIs are being sought from consultancy firms with a proven track record in similar works and a prospective firm should have recent experience in at least two similar projects. EOIs must be submitted by December 12 and after assessing their applications qualified parties would be requested to submit detailed technical and financial proposals. A spokesman said that Minister Mahinda Rajapakse is keen to develop Colombo port hence has instructed officials to expedite connected work under the project. ADB sources said that Colombo, one of the few deepwater ports in the Indian subcontinent, is strategically placed along the main shipping route connecting East and Southeast Asia with Europe and North and South America. With increased capacity and more efficiency, the port could become an international shipping hub for South Asia. It said that sector reforms should increase private sector involvement and commercialize operations. The project will also address policy, institutional and regulatory issues and develop the regulatory and planning framework for port-related international trade operations. ADB's loan will be from its concessional Asian Development Fund. It will mature in 32 years, including a grace period of 8 years. The interest rate will be 1 percent per annum during the grace period and 1.5 percent per annum after that. The Technical Assistance (TA) Loan will consist of two components. The first component will address port sector policy, institutional and regulatory issues. This will include measures to improve the efficiency of the existing port, and in particular at the Jaya Container Terminal (JCT). It will also prepare the regulatory and planning framework for port related international trade operations. The second component comprises preparatory work for the implementation of the SHDP. The benefits of the TA Loan will be to establish the environment to: (i) increase private sector participation in the Port sector, leading to increased competitiveness; (ii) increase in the efficiency at existing container terminals, through corporatization and improved management of the JCT facility; and (iii) allow project preparation for an investment loan to expand the container facilities that maximizes the use of private sector funding. The
immediate beneficiaries will be the users of Colombo Port but the SHDP has
the potential to create synergies leading to the expansion of economic
activities centered around shipping and related activities. Efficient
transshipment ports attract large ships that will pass on the benefit of
cheaper shipping costs to domestic traffic. “Though the ADB project does not directly refer to privatisation, it speaks of creating an environment (through the project) to increase private sector participation in the Port sector and increasing competitiveness and efficiency through corporatization etc,” industry analysts pointed out. “The second phase i.e. the South Harbour Development Project (estimated to involve over US $ 1 billion investment) will have to involve private sector whether the Minister Rajapakse likes it or not,” they added. Though recovering in October to record a throughput of 135,792 TEUs (transhipment – 94,161 TEUs) as against suffering two consecutive months of decline (August – 139,058 TEUs and September – 122,497 TEUs) including the lowest monthly volume this year in August, Colombo port continues to face mounting challenges and competition from regional ports. This is in addition to being labelled as “war risky” along with “held cover” status forcing lines to pay additional war risk premia since August when calling Colombo. Govt. moves to re-organise JCT The Ministry of Ports and Shipping has decided to develop the Jaya Container Terminal (JCT), the main transshipment terminal in Colombo port, as a separate "cost centre" within Sri Lanka Ports Authority (SLPA) initially, instead of corporatising the facility as originally planned. This has been disclosed in a news item in the SLPA web site. The aim is to give the JCT the required flexibility and autonomy to improve efficiency and enhance its competitiveness," said S. Amarasekara, Secretary, Ministry of Ports and Shipping, the website report added.
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