Make port employees shareholders in Terminal Operations

On 1st February, the Sri Lankan Cabinet unanimously approved that the East Terminal of the Colombo Port will be developed solely by the Sri Lanka Ports Authority (SLPA). President Gotabaya Rajapaksa has accepted a proposal by 22 Port Trade Unions, aimed at resolving a crisis over the proposed handing over of the East Container Terminal (ECT) at the Colombo harbour to India’s Adani Group. Sri Lanka port workers, objecting to a plan to get Indian led investment to develop a container terminal in the Colombo Port, have offered to find US$ 500 MN to build it.

Now Japan has expressed regret for scrapping the 2019 deal with New Delhi and Tokyo for the development of the Colombo Port’s East Container Terminal. According to a Japanese Embassy official, the Sri Lanka Cabinet cannot unilaterally decide how Sri Lanka should develop its own container terminals. The government seems to be under great pressure from New Delhi to go ahead with the MOC, signed during the Yahapalana government. Sri Lanka has to be mindful of the concerns of Japan or Indian.

A container terminal operation requires sizable capital investments. Private investments, which take the risk for the capital they invest, is the best way to create the right incentive structure and create the drive for efficiency, and a very competitive business model. When SLPA alone is involved in terminal operation, it will be managed by the people who have not invested any capital.

India’s and Japan’s and trade unions’ concerns show there is a very good attraction for equity capital for this container terminal operation.

The Government should engage all those interested, including the Sri Lanka Ports Authority employees, in investing in the development of the Sri Lanka Port container terminal on a partnership basis. Already there are two terminals successfully run on partnership basis. The South Asia Gateway Terminals (SAGT) partners consisted of John Keells, Evergreen, A.P.Moller Group and SLPA. The SLPA and China Merchants Port Holdings (CM Port) operate the Colombo International Container Terminals (CICT).

In terms of the original ADB approved plan, too, three terminals at the Colombo Port were to be public-private partnerships. The ADB plan covered three terminals. The China-managed Colombo International Container Terminals (CICT) is one such terminal, and the other two are partly operational ECTs, run by the SLPA and the WCT, a facility which is only on paper.

The SLPA developed the ECT after the previous Rajapaksa administration secured ADB’s consent to develop two of three terminals with external investments.

Accordingly, I suggest:

1.

Promote separate Terminal Operational Companies under the Sri Lanka Companies Act to develop all the Container Terminals, coming under the Sri Lanka Ports Authority.

2.

60% of the authorized share capital of these companies should be issued to SLPA and its employees. Out of this, 60% shares to the value of at least one month’s salary, should be sold to all employees of the particular Terminal Operation Company.

3.

The balance 40 % should be sold to local and foreign private investors through the Colombo Stock Exchange.

4.

Further fundings required should be raised by these companies by issuing debentures.

India’s Adani and Japan’s companies may also buy shares and debentures through the Colombo Stock Exchange.

Management control should be shared pro-rata to share holdings.

JUSTIN KEPPETIYAGAMA

Jdkgamama02@gmail.com