August 1, 2010 / 4:13 PM / 9 years ago

Sri Lanka opens $1.5 bln port to outside investors

 * Aims to attract at least 2,500 ships/year initially
 * Sri Lanka mulls $800 mln Chinese loan for phase 2
 * Oil bunkering operation not open for investment
 By Shihar Aneez
 HAMBANTOTA, Sri Lanka, Aug 1 (Reuters) - Sri Lanka on Sunday
said it would invite outside investors into its $1.5 billion
Hambantota port project, the keystone of a $6 billion post-war
infrastructure revitalisation drive.
 The invitation for external investment will coincide with
the November opening of the port on Sri Lanka's southern coast,
along an ancient "Silk Road" trading route and one of the
world's biggest East-West shipping lanes.
 The port and its accompanying services represent the single
largest investment option for foreign investors in Sri Lanka,
which is aiming to transform its economy after finally ending a
quarter-century separatist war in May 2009.
 One option that is not on the table for outside investors is
the oil bunkering facility. Many have speculated China wants the
right to use the site as part of its "string of pearls" strategy
to expand its influence and maintain energy security.
 "We will handle oil bunkering. We don't want to give it
outside. But bulk cargo handling, storage facility, warehouses,
transshipment, and all others are open for investments," Sri
Lanka Ports Authority Chairman Priyath Wickrama told Reuters.
 About 30 investors -- primarily from India, China,
Singapore, Russia, the Middle East, Australia and major shipping
lines -- have expressed interest, Wickrama said. He did not
elaborate further.
 China, Sri Lanka's largest infrastructure lender, has loaned
$425 million toward the port, which will be Sri Lanka's largest.
 "We are negotiating with China for an $800 million loan for
the second phase," Wickrama said.
 Wickrama declined to say if China will have a role in
operating the bunkering facility, about which neighboring India
has expressed concern to the Sri Lankan government.
 Political analysts say Sri Lanka has successfully managed
Indian pressure over the Chinese port investment, which could
also help transshipment trade on the subcontinent.
 Hambantota is one of four ports being built or upgraded
under President Mahinda Rajapaksa's plans to renew the Indian
Ocean island nation's $42 billion economy by returning it to its
old and lucrative role as a trading hub.
 Sri Lanka initially aims to get 2,500 of the 70,000 cargo
vessels that pass Hambantota annually to use its bunkering and
cargo handling facilities, and expand that to 8,000 a year once
the second phase is done in 2014.
 Sri Lanka now handles around 6,000 ships annually in its
only port in Colombo on the western coast, which requires ships
plying the East-West shipping lanes to divert.
 Initially, Hambantota will have 100,0000 metric tonnes of
bunkering capacity, which could be expanded to 4 million metric
tonnes if demand picks up.
 (Writing by Bryson Hull; Editing by Michael Shields)

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