ECT and investment options 

The East Container Terminal (ECT) generated much discussion last week, as the unions of the Sri Lanka Ports Authority (SLPA) clashed over the possibility that it may be given to India.  The long-delayed ECT is a microcosm of what can happen when clear policies based on transparent decisions are not carried out. Experts agree that the ECT should have been completed years ago to improve the competitiveness of the Colombo port. 

However, what happened instead was: bids were called in 2015 but no tender was awarded; then former President Maithripala Sirisena promised that the Government would develop it; and then in 2019, former Ports Minister Sagala Ratnayake signed a Memorandum of Understanding (MoU) with Japan and India to develop the terminal. 

Different policies were followed under different Ministers, and ultimately the tenure of the previous administration ended with the project uncompleted. Under the present Government, the tug-of-war has resumed. The SLPA unions contend that unless it is allowed to run the ECT, it will not have a terminal capable of berthing large ships and will eventually lose out to the other two terminals, one of which is operated by a Chinese company and the other by John Keells Holdings. 

The upshot of the strike by the unions was that a committee has been appointed to look into the development of both the ECT and State-run Jaya Container Terminal (JCT), which also includes examining procurement and non-implementation of at least one Cabinet decision. 

One route the cash-tight Government could also follow in this instance is a Public-Private Partnership (PPP), which would enable the SLPA to retain ownership of the ECT but also reduce the pressure on the Government balance sheets. 

As many already know, the Government simply does not have the fiscal space to proceed with large-scale development programs and with an already-high debt situation, which has been made worse by COVID-19, it is clear alternatives must be considered.

Obviously there are obstacles to this, especially since the Government has demonised PPPs numerous times in the past as selling of State assets and conflated it with privatisation. However, infrastructure development is necessary for growth, and if utilised properly it can be beneficial to the public and resolve many transparency issues usually connected to many large-scale projects in Sri Lanka. 

It would also enable to the Government to be proactive in deciding what development projects to focus on, based on the most returns to the public, and the worries of unsavoury unsolicited proposals would also be addressed to some extent.   

In theory, PPPs make great sense. Today, PPPs are considered “creative alliances” formed between a Government entity and private developers to achieve a common purpose. But what Government ministers must remember is that this partnership is a process not a product. Successful navigation through the process results in net benefits for all parties and without buy-in from the public a successful PPP is impossible. 

The vision for the program should be the result of a consensus-building process that identifies the opportunities, objectives and ultimate goals for the community. The local Government must consider and establish its long-range public interest goals and resolve any conflicts that it might have for the specific project in question. It is essential that the overall development strategy is described both verbally and graphically to ensure that both the public and private partner understand the program.

It is also important to manage expectations. During this stage of the process, establish a schedule that clarifies the expectations of the public decision-makers. It is a good idea to craft a public awareness program to inform stakeholders of the goals of the development strategy and the specific projects that are identified. Bridging the trust deficit is the biggest challenge of all as many do not distinguish between PPPs and privatisation. 

Tabling agreements in Parliament, getting independent valuations, and dealing with credible companies will be essential steps to ensuring that PPPs are done in the best interests of the country. Unfortunately, without clearly identifying what investment is needed, the projects and what returns it will bring the Government runs the danger of increasing debt and allowing loopholes for corruption.