Adani Group’s strategic Colombo Port deal to pose a challenge to China

Adani Group would hold 51% of the shares in the Build-Operate-Transfer (BOT) agreement with now called the West International Container Terminal (WICT), which is worth more than USD 700 million. It is considered the largest foreign investment ever in Sri Lanka’s port sector. The JKF will have a share of 34% and SLPA will have 15%.

Deep relationships with multiple trading partners critical to Colombo port to remain relevant to global trade

Maritime experts have estimated that within the next three decades, over 45% of global GDP and trade is predicted to originate or be located within the Asian region. In this ultra-connected world, deep relationships with multiple trading partners are not only prudent business, it is critical to ensure Colombo Port remains relevant to global trade.

The new deal fixes the friction between the incumbent Sri Lankan Government and India when Sri Lanka scraped the East Container Terminal (ECT) agreement that was officially endorsed several months ago to be awarded to India and Japan and SLPA – a tripartite government deal

The ECT was a Government to Government proposal but came under heavy criticism and protest by the Trade Unions of the Sri Lanka Ports Authority (SLPA), Buddhist clergies and nationalists who said selling national assets to foreign investors should be stopped. The deal was scuttled in February after the deal was signed.

However, India walked in to take over the West Container Terminal on September 30. It was offered by the government as a replacement for the ECT.

The WCT is the biggest of the three terminals

The WCT is the biggest of the three terminals, namely the SAGT, CICT, and ECT, in the southern port of Colombo.

It was President Gotabaya Rajapaksa who suggested the WCT be awarded to Adani without involving the governments and to be maintained purely as a private-public partnership.

The WCT Port agreement was signed jointly by top local investor Johan Keells Holdings (JKF) and the Sri Lanka Ports Authority (SLPA) and was officially declared as the International Container Terminal (CWICT) of the Port of Colombo (POC).

The current deal between Adani and JKH has been welcomed by many public and private entities as it shares a 50-50 stake deal.

More healthy competition is expected in the coming years

 The port’s operations are primarily dependent on 70 percent of Indian transshipments, and Adani’s acquisition of the WCT may raise concerns for the Chinese operating the CICT. Currently CICT also handles India’s transshipment sharing with other terminals. As a result, more healthy competition is expected in the coming years, with China and India clamoring for shipments to arrive at their terminals, paving the way for Colombo Port becoming the Asian hub.

According to the agreement, the first phase of the development project with a 600 metre terminal is due to be completed within the next two years. Also, the joint venture will develop the terminal to hold 3.5mn TEU capacity.

The WCT’s quay length of 1400 meters and an alongside depth of 20 meters makes WCT a prime destination for transshipment cargo and can handle Ultra Large Container Carriers, Adani Group said in its official statement.

The WCT’s infrastructure design is already underway, and the main development of the terminal would begin in 2022, against the backdrop of the COVID-19 virus’ spread is on the decline.