Sri Lanka, Japan, India signs MoC to develop East Container Terminal

Sri Lanka, India and Japan have signed an Memorandum of Cooperation (MoC) to jointly develop the East Container Terminal (ECT) at the Colombo Port in Sri Lanka.

Key Highlights

  • Background: The countries had been negotiating the deal to build ECT since 2018 but little success was met as India’s possible role in developing the terminal became a major flashpoint within the Sri Lankan government. Although even last year Japan was part of negotiations but project assumed a ‘Sri Lanka-India’ dimension, especially in the local media due to which negotiations seemed to have hit a roadblock. But the negotiations picked up pace once Japan stepped in more recently.
  • Location: The East Container Terminal is located some 3 km away from China-backed international financial city, popularly known as “Port City” which is being built on reclaimed land on Colombo’s sea front.
  • Ownership: The Sri Lanka Ports Authority (SLPA) will retain 100% ownership of East Container Terminal (ECT). However the company conducting its operations called ‘The Terminal Operations Company’ is jointly owned. Sri Lanka holds 51% stake in the project and other joint venture partners Japan and India will retain 49%.
  • Project Cost: The joint initiative is estimated to cost between $500 million and $700 million. Japan is likely to provide a soft loan with a 0.1 % interest rate for a period of 40-year which is one of the best loan terms Sri Lanka has obtained. The details about India’s contribution is still awaited.
  • Significance: More than 70% of the transhipment business at the strategically located ECT is linked to India thus the joint project holds a lot of commercial significance for India.
  • The specific terms of agreement for joint development of ECT will soon be finalised at a joint working group meeting.

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