Japan regrets Sri Lanka's scrapping of port terminal deal

The Japanese Embassy said Wednesday it regrets a decision by Sri Lanka's government to scrap a deal to develop a port terminal with Japan and India after weeks of protests by trade unions and opposition parties.

An embassy official said on condition of anonymity that it is unfortunate that the government unilaterally announced that development and operation of Colombo Port's East Container Terminal will be carried out solely by Sri Lanka.

Sri Lanka had agreed to develop the strategic terminal under a deal in which India and Japan were to own 49% of the terminal’s shares while Sri Lanka’s Ports Authority would hold 51%.Opponents of the agreement said it was a selloff of a profitable venture that should be held by the state.

On Tuesday, the government declared the East Container Terminal, which is already in operation, would be wholly owned by the Sri Lanka Ports Authority. It said it would instead develop the port’s West Container Terminal with investment from India and Japan.

The Indian Embassy on Tuesday said it still expects Sri Lanka to implement the agreement the three countries reached in 2019 and was reaffirmed by a Cabinet decision three months ago.

Japan and especially India with close physical proximity to Sri Lanka have been concerned about growing Chinese influence in the island nation.China considers Sri Lanka to be a critical link in its massive “Belt and Road” global infrastructure building initiative and has provided billions of dollars in loans for Sri Lankan projects over the past decade. The projects include a seaport, airport, port city, highways and power stations.

China already operates the Colombo International Container Terminal as a joint venture with the Ports Authority.Critics say the Chinese-funded projects are not financially viable and that Sri Lanka will face difficulty in repaying the loans.

In 2017, Sri Lanka leased a Chinese-built port located near busy shipping routes to a Chinese company for 99 years to end the heavy burden of repaying the Chinese loan the island nation received to build it.The facility is part of Beijing’s plan for a line of ports stretching from Chinese waters to the Persian Gulf. China has also agreed to provide a $989 million loan to Sri Lanka to build an expressway that will connect its tea-growing central region to the Chinese-run seaport.Japan and India are members of Quad, a group of Indo-Pacific nations that also includes the U.S. and Australia that is seeking to counter Chinese influence in the region.