Hambantota Port deal and East Container Terminal

Hambantota Port

Colombo Port

By A Port Retiree

In planning of modern ports, ‘Hybrid’ port management systems created by past events in less developed nations, are directed towards one basic system in port management for achieving economic benefits to maritime nations, to match with recent developments in sea borne trade. 

The three basic port management systems operating worldwide, are described in literature as follows (ref. Port Designer’s Handbook by Carl A. Thoresen):

• Resource (tool) port: The port owns the land, infrastructure and fixed equipment, provides common-user berths and rent-out equipment and space on a short-term basis to cargo-handling companies and commercial operators.
• Operating (service) port: The port provides berths, infrastructure and equipment together with services to ships and their cargo. 
• Landlord port: For larger ports this is the most common system where the port owns the land and basic infrastructure and allows the private sector to lease out berths and terminal areas.

Prior to gaining Independence, Ports of Ceylon, Malaya (Singapore) and in all other British Colonies were operated as ‘Tool Ports’ nicknamed as ‘French Model’ as ports in France are operating in the same system even today as I understand. Tool port system was efficient with unit load as one hundred pounds for manual operations in transfer of cargo to goods and vice versa, when unskilled labour was available in abundance in less developed British Colonies.

With the invention of ‘Forklift’ in early 1950s, the unit load handled in the ports increased to over one ton, where palletised cargo bundling system was the norm in port operations.

Labour intensive character of general cargo port operations, diminished with mechanised handling. Ports with future vision operating under ‘Tool Port’ system, changed to either ‘Service’ or ‘Landlord’ systems of port management to suit the demands in labour and in trade. 

‘Service ports’ nicknamed ‘Chinese Model’ in currently practiced in China, but was not attractive in the Ports of the Western world. Singapore Ports Authority (PSA) is an organisation, where a smooth transition from ‘Tool Port’ system to ‘Service Port’ system has been possible, that has achieved excellent results to be a world leader in ports industry.

Rotterdam-Gateway to Europe, Antwerp and many other major ports providing port services to domestic trade and international trade as well; are adopting ‘Landlord’ port management system. 

The British handed over the national ports of Ceylon to the Ceylonese at independence, under ‘Tool Port’ system of port management with private port operators. Port of Colombo as a port service provider to the international trade in East-West shipping route, has served as a major transshipment port, if one glanced through the past port statistics of Colombo in early 1950s.

With nationalisation of Colombo Port operational activities in the year 1958, general cargo port operations were handled by a sole public port operator, named Port Cargo Corporation (PCC), and major port operational activities in international trade, got shifted to other regional ports outside Sri Lanka. Major exports like rubber and tea in domestic trade got shifted to Galle and Trincomalee respectively, where port operations were handled by private port operators until late 1960s. Loss of transshipment in Port of Colombo, were mainly due to ship operational delays due to political action experienced in ports of Sri Lanka after nationalisation. ‘Tool Port’ system of port management continued to function in Sri Lankan commercial ports, until 1979.

World seaborne trade had a major shift, in containerisation of cargo, due to the economies of scale, in handling large unit volumes of over 10 Ton unit loads became the norm in mechanised lifting and haulage. Singapore as a successful regional port opened up Pasir Panjang Container Terminal in 1971, and had shown excellent operational management in a ‘Service Port’ concept in container handling and all other cargo handling works and port services, setting a world class example in this port management system.

With the expansion of Containerisation, giants in international seaborne trade, wanted to re-introduce transshipment activities in Colombo, mainly to handle large volumes of containerised cargo to and from Indian Subcontinent, as Colombo was the main recognised deep water facility close to East-West shipping route in competition to Singapore, Aden and Dubai. 

With open economy introduced in 1977, Colombo commenced development activities to handle Containers with technical assistance from Japan.  Presumably to safeguard the returns on Japanese investments as well, taking Singapore as a classic example, ‘Service Port’ system was introduced in Sri Lanka, with the creation of Sri Lanka Ports Authority (SLPA) in 1979. 

This institution handled all port terminal operations as the sole public port operator together with other State Sector Institutions performing statutory duties of Port Regulator, Landlord and Harbour Control; all functions coming under one umbrella – ‘Service Port Concept’ of port management.

The potential of Sri Lanka emerging as the future Maritime Hub of Indian Ocean, was no secret to the International Giants in port operations, together with ADB, World Bank and other multilateral and bilateral lending agencies, who were looking for a safe haven for their investments in promoting port development, engaged in international trade within major shipping routes.

These investors being stakeholders of international trade, automatically become stakeholders of the ports of maritime nations providing port services to international trade.

(Technocrats of national maritime sector, engaged in port planning activities; should not forget that, most of such port services, are related to cargo; to and from the Indian Sub-continent, and India and other nations in Indian Ocean periphery, have to be treated as special stakeholders of national ports of Sri Lanka engaged in port services to international trade, among the other international giants.)

South Asia Gateway Terminal (SAGT) came into operation for handing containerised cargo in late 1990s, making Container related port operations under ‘Landlord’ system of port management. All other general cargo, break-bulk, etc. port operations and port services remained under the ‘Service Port’ system, making a ‘Hybrid’ system port management in Toto; practiced in all national commercial ports of Sri Lanka.

This Hybrid port management system practiced in Sri Lankan commercial ports; is not practiced in other major ports in the world; aspiring to achieve maritime hub status, as it is against the national interests of a nation. This fact is more relevant, for an island nation, depending on an export/import oriented economy. Together with SAGT formation, to retain the regulatory aspects embodied in SLPA Act of 1979, a public company by the name of M/s Jaya Container Terminal Ltd. (JCT) was registered with 100% share holdings by SLPA, to show legality of container operations by Public Private Partnership (PPP) companies under ‘Landlord Port’ system, within SLPA Act embodying the ‘Service Port’ concept.

For all purposes, JCT remained hidden within SLPA, and dissection of this ‘Black Box’ is needed to understand the real nature of operating characteristics of this Company as the sole public container terminal operator in Sri Lanka.

Under the same principles of SAGT formation, Colombo International Container Terminal (CICT) came into operation in 2014; at Port of Colombo, for container cargo operations, taking Port of Colombo, to one of the few ports in the world for handling  >18000 TEU container vessels.

In a recent scenario, there are two PPP companies created at Port of Hambantota, namely; Hambantota International Port Services Co. Ltd. (HIPS) and Hambantota International Port Group Ltd. (HIPG).

If I am not mistaken, HIPS will be providing port services in Hambantota Port, which remains an activity to be done by SLPA under “Service Port” concept of port management. For legalising of this activity to be handled by a PPP company, coming under ‘Landlord’ System, there may have been a necessity to create a public company with 100% shareholding by SLPA for providing such services at other national ports of Sri Lanka, on the same principle adopted in creation of SAGT.

Same is true for HIPG; if at Hambantota port, this PPP company is the port operator for general cargo, break-bulk, liquid bulk, petroleum, etc. other than for container operations, a public company with 100 % shareholding by SLPA for providing port operator activities in common user terminals become a necessity, to make the PPP contracts of ‘Hambantota Port Deal’ legally recognised in ‘Service Port’ concept embodied in SLPA Act of 1979.

Under Right to Information (RTI) Act, the Sri Lankans with national interest, should seek for release of documents for public scrutiny by the legal fraternity of Sri Lanka, with regard to the PPP contracts relevant to HIPG and HIPS company formations, as creation of any public companies with 100% shareholding by SLPA for port services and port operations at common user terminals in other national ports of Sri Lanka are not in public domain to date.

The Minister of Ports and Shipping publicly announced in local media, during the last week of October 2018, that consent of port trade unionists were obtained to activate PPP model contracts for HIPG and HIPS companies, by promising to retain East Container Terminal (ECT) as a public terminal, without making it a PPP terminal with Indian partnership. The stakeholders of ports providing port services to both domestic and international trade are many, especially when such ports belong to island nations. Trade Unionists alone are not qualified to drum beat ‘National Interests’.

The stakeholders are categorised as follows:

• Sri Lankan nationals – Port is the heart of the nation, as viable port services for domestic trade, have to be provided/guaranteed by SLPA. This is where the national interest gets priority for the SLPA decision makers.
• Port Trade Unionists – Trade Unions are there to guarantee SLPA port employee interests; over any national interests of Sri Lankans in general or global interests of international players.
• Giants in International Trade and Global Investors: Looking for enhancement of world economy in promoting seaborne trade with a lesser cost to nations, providing safe havens for their capital investments; that bring Foreign Direct Investments (FDIs) to developing nations, and their promoters.
• Nations in Indian sub-continent, as they are in a position to squeeze/deactivate transshipments through ports in Sri Lanka, by having administrative controls for cargo carriers of their imports and exports.

The whole country is moving towards anarchy, after the secret discussions of Sri Lanka Cabinet of Ministers headed by the President, became gossip in public and social media worldwide, when cabinet discussions were centred on a cabinet paper for “Purchase of 5 Nos. Cranes to run East Container Terminal (ECT) of Port of Colombo as a Public Terminal”, where a MOU signed in March 2017 for operation of same as a  PPP with Indians was recommended to be changed by inciting national interests of the Sri Lankan nation, having being promoted by the port trade unionists. 

The port planners who briefed the Minister of Ports and Shipping in both projects namely ‘Hambantota Port Deal in creating HIPG and HIPC’ and ‘Purchase of 5 Nos. cranes for operating ECT as a Public Terminal’ should make a public announcement as to; in which direction, they are leading the maritime industry in Sri Lanka.

What is the basic port management model, aspired to be achieved for the future generations of Sri Lankans. ‘Landlord Port’ system; ‘Service  Port’ system or the present ‘Hybrid’ system to continue further, to grab the spoils outside Sri Lanka, by interested parties, and making a present volatile situation of Sri Lankan economy to remain forever, driving the whole nation to anarchy. A brief scrutiny of gazette ‘Port Tariff’ operating for over 35 years period, and as renewed in 2015, is all that is needed, to understand the ‘National Interests’ of past and present politicians engaged in port decision making, port management from inception of SLPA to date and the port trade unionists now and then.