As an island state, Sri Lanka relies on Colombo Port for its
international trade links. The Colombo Port has a geographical advantage
that gives it the potential to be the international hub for South Asia.
The port also has the potential to create synergies leading to the expansion
of economic activities centered on port, shipping and related activities.
Technological and structural changes in shipping, particularly
containerisation, have brought new opportunities and the Port of Colombo
has established itself as a premier transshipment port for the South
Being close to international navigation lanes, it provides
the shortest and least cost deviation for shipping lines en route between
the Far East and Europe as well as the east coast of the United States
of America. South Asia, which is the traditional ‘hinterland’ of Sri
Lanka, is identified as one of the most rapidly developing economic
growth areas in the world.
The Government is in the process of introducing new policy
initiatives that would be necessary in order to introduce the port and
regulatory reforms required to transform Sri Lankan ports into truly
modern, competitive and profitable enterprises that would act as a catalyst
for further economic growth in the country.
Private Sector Participation Options
Traditionally port infrastructure in Sri Lanka has been financed
through a combination of Government concessionary borrowing and through
funds generated by the Sri Lanka Ports
Authority (SLPA). However, with the limitations in concessionary
borrowing available to the Government, coupled with the repayment of
existing loans and budgetary constraints on public sector borrowings,
it has become necessary for the Government to explore alternative sources
of funding for the development of large-scale infrastructure.
As such, the Government since 1995 has actively
sought private sector participation in the development of port infrastructure
through Build Own Operate (BOO) and Build Operate Transfer (BOT) basis.
Under certain circumstances, the Government would also be willing to
undertake projects on a public-private partnership basis.
A major milestone in the port
sector of Sri Lanka was the entry of the private sector as a terminal
operator in 1999. The development of the Queen Elizabeth Quay (QEQ)
by South Asia Gateway Terminals (Pvt.)
Ltd (SAGT) on a Build Operate and Transfer (BOT) basis heralded
the first BOT transaction ever concluded in the transportation sector
of Sri Lanka and also gave an indication of the confidence the private
sector and potential financiers had in the Government’s policy of attracting
private sector investment for large scale infrastructure.
Lanka to emerge as a premier maritime center in the region, it is necessary
to have a successful hub port such as Colombo, complemented with the
full range of ancillary services that may be required by a vessel. It
is the Government’s aim to attract private investment to the various
areas of ancillary services by identifying the areas for such investment
and providing the necessary fiscal incentives. Some of the key ancillary
service areas are as follows:
Ship repair and Ship Building
The current ship repair and ship building facilities available
in the Port of Colombo are constrained by the limitation of space in
the port and it has been determined that additional ship repair and
ship building facilities would need to be constructed in the ports of
Galle, Trincomalee and the proposed port of Hambantota.
Insert Colombo dockyard pic
Bunkering and ship chandelling
With the development of Sri Lanka as a major maritime center
in South Asia, there is considerable potential for the supply of bunker
to vessels plying the East –West shipping lane. However, this sector
has not performed to expectation mainly due to the high cost of bunkers
supplied in Sri Lanka and the limited availability of bunkers.
In order to encourage private
sector participation in this sector, the Government is presently in
the process of liberalizing the bunkering sector currently being handled
by the Government owned Ceylon Petroleum Corporation.
The Government is also to actively
develop and promote private sector investment in ship chandelling and
offshore supplies to ships.
Intermodal transport network
The integration of road, rail, and the seaports in an integrated
intermodal network would greatly assist in the reduction of transport
costs, traffic congestion, and increase trade competitiveness. In this
regard, greater co-operation would be required between the relevant
Ministries and agencies in order to work towards a common purpose.
As an initial measure improving the interface between the railways
and the Colombo, Galle and Trincomalee ports should be looked at as
a matter of priority, particularly in the use of railways in the transportation
of containers and bulk cargo to and from the different ports. Such a
project may be feasible even as a public-private partnership.
Multi country consolidation
and entrepot cargo
Efficient ports are perceived
to be a catalyst for adding value to logistics chains and are positioned
to attract certain types of industries and enterprises. Although these
commercial and industrial developments require access to port facilities,
they also require the development of coordinated actions to set up distribution
hubs, which are not currently in place.
With a view to attracting industries
such as International Procurement Centers that requires an efficient
logistics framework, steps are currently being taken to set up several
logistics hubs in proximity to the Colombo Port and the Bandaranaike
International Airport in order to exploit Sri Lanka’s potential as an
Air-Sea cargo hub for the region.
Map of Sri Lankan Ports
Port of Colombo
Colombo Port is one of the
few deep-sea ports that is close to the Indian subcontinent and also
lies on the main shipping route between East and South East Asia, Europe,
and North and South America. It is an excellent location to serve as
a hub for regional container and transshipment traffic, connecting South
Asia’s 1.5 billion inhabitants through feeder services with the main
shipping routes, and could command a significant market share of this
trade. Between 1987 and 1997 the throughput of containers for Colombo
Port, in terms of Twenty-foot Equivalent Units (TEUs), increased from
429,000 to 1,650,000.
Growth however, stagnated from
1997 to 1999, but then grew to 1,732,855 during 2000. The Jaya Container
Terminal (JCT) in Colombo Port is presently handling 1.4 million TEUs
a year and is expected to reach its maximum capacity in 2003/4.
On completion of the ongoing
construction work at the QEQ in the Port of Colombo by SAGT, the container
handling capacity of the QEQ is expected to be increased to over 1 million
TEUs per annum from the current level of 250,000 TEUs pa.
Projections of growth in international
trade across the Indian Ocean indicate that Colombo Port has the potential
for rapid growth. In order to exploit this potential it requires that
the Colombo Port is perceived within the shipping community as an internationally
competitive and efficient port with adequate capacity.
Insert pic of Colombo Port
New South Port of Colombo
The Government’s recent decision
to proceed with the new South Port of Colombo would act as a positive
signal to the shipping community that Sri Lanka is committed to expanding
its container handling capacity to meet the growing demand in the region.
The new South Port of Colombo
is to be completed in six stages and on completion would have 12 berths
with an overall berth capacity of over 7 Million TEUs per annum. The
first two berths under this development program which is to be undertaken
on a public-private partnership with the berths being developed on a
BOT basis, is to be commissioned by 2005/6. Such measures would greatly
assist Sri Lanka to consolidate and enhance its position as a major
maritime center in South Asia
Insert layout diagram
Port of Galle
The existing port of Galle
in the Southern Province of Sri Lanka is to be developed further to
meet the immediate needs of industrialists in the hinterland, in addition
to the construction of a new regional multipurpose port in Galle catering
to conventional and break bulk cargo and a limited number of containers.
As the Colombo Port is increasingly
being utilized for container handling, it is expected that with the
completion of the Colombo – Matara expressway by 2005, and the improvement
of other inter modal links with Colombo, most of the bulk and general
cargo operations would be shifted to Galle.
Port of Trincomalee
The port of Trincomalee on the North-East coast which is one
of the deepest natural harbours in the world, has been identified for
development as a multipurpose industrial port engaging in cargo handling
as well as other port related activities such as, ship repair, ship
building, ship breaking, bunkering, and salvage and towage.
Significant potential also
exist for the development of tourism related maritime activities such
as marinas. At present, the SLPA is in the process of constructing a
250m-quay wall to accommodate 40,000 DWT vessels. Major developments
in Trincomalee have not taken place mainly due to the ongoing conflict
in the North and East, though the SLPA continues to operate its facilities
Proposed Port of Hambantota
The Government is due to commission an independent
feasibility study to determine the technical and commercial viability
of constructing a new port at Hambantota. Due to the lack of suitable
inter modal links, it is expected that in the short term Hambantota
would be developed to handle bunkering, ship repair and other port related
activities. In the long term, it is expected that the Hambantota Port
would be developed as a container port once the new South Port of Colombo
reaches saturation in terms of available capacity.
Ports of Kankesanthurai
and Point Pedro
These two ports in the Northern Province have been earmarked
for reconstruction and development as coastal / regional ports once
the conflict in the North and East end.
Establishment of a Port Regulator
At present, the SLPA itself has been a ‘regulator’
for the sector alongwith the Ministry of Finance. However, with the
modernisation of the port sector and the entry of private sector operators,
it has become necessary to have a Port Regulator independent of the
SLPA, as the SLPA continues to be a monopoly service provider in certain
areas of port activity such as navigation and pilotage, in addition
to being a terminal operator.
The Port Regulator is essentially
a competition regulator who would ensure the interests of all stakeholders
including the SLPA, private operators and the port users are safeguarded
by preventing anti competitive practices in all aspects of port business,
including the, cross subsidization of monopoly services, price fixing
among competitors. The regulator would have the power to investigate
on its own initiative or in response to a complaint made by any port
It is expected that a separate Act of Parliament
would establish the Port Regulator before 2005
The Project Agreements for
the US $ 240 MN Build Operate and Transfer (BOT) for the development
of the QEQ were signed between SAGT and the SLPA in August 1999.
Operations on the existing
QEQ container berths and construction of the new berths commenced in
September 1999. Since the handover of the QEQ to SAGT, the productivity
and efficiency of the QEQ has been increased inspite of the ongoing
construction work. The first container berth under the project and the
new passenger berth are to be commissioned by July 2001
Insert series of pics
Scope of project
The existing QEQ in the Colombo Port is to be widened 100m
into the harbour basin in order to increase the container handling capacity
of the QEQ to approximately One Million Twenty foot Equivalent Units
(TEUs) per annum at a cost of US$ 240 Million. The QEQ would have 3
container berths, with nine quayside gantry cranes, operating on a total
quay length of approximately 940 metres, with 20 hectares of container
A new passenger berth would also be constructed
by SAGT for the use by the SLPA, and all costs of construction including
capital dredging alongside the berth would be borne by SAGT.
This phase is expected to be completed in 2003 as
the construction period is currently estimated to take approximately
3½ years from the date of handover.
The Concession term for this phase of the project is 30 years
from the date of handover of the QEQ.
The project will be undertaken by South Asia Gateway
Terminals (Pvt.) Ltd. The primary sponsors of SAGT are John Keels Holdings
Ltd and the P&O Group companies. The total project cost of US$ 240
mn is to be financed based
on a Debt/Equity ratio of 60:40.
Keells Holdings Ltd., Sri Lanka.
Lanka Ports Authority
Commonwealth Development Corporation
It should be noted that a total
of 41.25% of the SAGT shareholding would be held by Sri Lankan
shareholders (John Keells Holdings and Sri Lanka Ports Authority), while
only 26.25% of the shares would be held in total by the P&O
Private Sector Infrastructure Development Company Ltd.
Source: Borad of Investments - Sri Lanka