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Debt-ridden Sri Lanka to scale back port deal with China

A dredger pumps sand to reclaim land just outside the port of Colombo on March 7, 2017, as part of a USD 1.4-billion real estate development by China. Photograph: (AFP)

AFP Colombo, Western Province, Sri Lanka Mar 09, 2017, 01.04 PM (IST)

Cash-strapped Sri Lanka is set  to scale back a profitable but controversial deal to sell a deep-sea port to a Chinese company after widespread protests, the ports minister said Thursday.

Arjuna Ranatunga said the government was re-negotiating the sale of the debt-laden but strategically-located Hambantota port.

It had hoped to transfer an 80 per cent stake to the China Merchants Port Holdings on a long lease, but the proposed deal met with opposition from residents in the southern town of Hambantota and some members of the ruling coalition.

"We have proposed several changes (to the original draft agreement) and we will end up with a situation which is far more favourable to the institution," Ranatunga told reporters in Colombo, referring to the state Sri Lanka Ports Authority (SLPA).

The minister did not give details, but official sources said the SLPA wanted to reduce the Chinese company’s equity holding and the lease period, and ensure overall security of the port remained in its control.

Colombo had hoped to raise about a billion dollars from the deal to repay the money China lent it to build the $1.4-billion harbour.

The port, built during the former president Mahinda Rajapakse, has become a white elephant with revenues insufficient even to pay salaries of staff.

The new government, which came to power in January 2015, has been trying to renegotiate terms of its $8-billion Chinese debt, which includes the construction costs of the Hambantota port.

"I hope we will be able to finalise an agreement within a week to 10 days," Ranatunga said.

There was no immediate comment from the state-run Chinese firm.

(AFP)

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