Colombo, November 2:
With the Sri Lankan economy slowly recovering from the dumps it has been in since defaulting on its international loans in April 2022, India and China are jostling to secure investment opportunities in the island nation.
The Ranil Wickremesinghe government is trying to accommodate both the regional powers in a delicate and challenging balancing act.
Earlier this week, the Lankan government said that it would shortly enter into an investment agreement with Chinese oil major, Sinopec, to build a US$ 3.85 billion refinery at the Chinese-built Hambantota port.
The project was given to a Singapore-based Indian-family owned company, Silver Park International in 2019, but it had failed to implement the contract, the Energy Minister Kanchana Wijeskekara said.
“There were only two bidders shortlisted and Vitol pulled out. That leaves only Sinopec and we will finalise an agreement with them in a couple of weeks,” Wijesekera told the media.
The government terminated the contract in August when Silver Park International failed to start construction, and took 485 hectares of land allocated for the refinery. It has now go to Sinopec.
China owns 52% of Sri Lanka’s bilateral debt, and Beijing’s approval is crucial for any efforts by Colombo to restructure its outstanding loans.
Meanwhile, India is continuing to try to retain its foothold in Sri Lanka that it had gained substantially in 2022 when it extended US$ 4.5 billion to rescue Sri Lanka from the dire straits it was in after the default in April 2022.
Indian Finance Minister Nirmala Sitharaman arrived in Colombo on Wednesday for a three-day visit, during which, she will attend a grand ceremony to mark the bi-centinary of the arrival of Indian plantation workers in Sri Lanka and discuss with Sri Lankan leaders, the role Indian can play in the economic recovery of Sri Lanka.
Seetharaman is expected to discuss the resumption of bilateral talks to enhance the existing FTA to an Economic and Technology Cooperation Agreement (ECTA) after a five-year hiatus.
The two sides had held the 12th round of negotiations on the ETCA in Sri Lanka from 30 October and 1 November. They had held 11 rounds of bilateral talks from 2016 to 2018. after which the talks were paused.
A Business Summit on the theme “Enhancing Connectivity: Partnering for Prosperity,” is a highlight of the visit. A high-power Indian business delegation of 30 persons, cutting across several industries, is in Colombo to participate in the discussions. The delegation includes the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI).
Industry captains from India who are visiting Sri Lanka will actively seek investment opportunities in Sri Lanka towards achieving mutual benefits. For Sri Lanka, such investments hold the key to its economic recovery.
India has reiterated on several occasions that it is committed to the economic recovery process in Sri Lanka and highlighted the vital role of investments in this endeavour. India is currently the largest source of investments in Sri Lanka and the largest source of tourists too.
India is currently Sri Lanka’s largest trading partner.
Separately, Finance Minister Sitharaman has informed the Chief Prelate of Asgiriya Chapter, Venerable Warakagoda Sri Gnanarthana Thera that she will witness the exchange of MOU on solar electrification of religious places across Sri Lanka. This is the first project under the USD 15 million grant assistance announced by Prime Minister Narendra Modi for the promotion of Buddhist ties between the two countries.
Sitharaman was instrumental in fast tracking the multi-pronged assistance of USD 4 billion to Sri Lanka in 2022.
She also advocated strongly for Sri Lanka with the IMF for a special package, during the economic and financial difficulties. Subsequently, India was the first bilateral creditor to provide a written assurance which paved way for the IMF package.
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China’s Sinopec is to make an initial investment of US$1.5 billion, the single largest foreign direct investment (FDI), in building a refinery in Hambantota once the agreement is finalized within the next two weeks, a top source said.
It remained a foregone conclusion in political circles that the company would be awarded the project, though the government says it is open to any company participating in the competitive bidding process.
Previously, Colombo Port City, another Chinese investment, remained the largest FDI project in Sri Lanka. The source said Sinopec will make an investment of US$1.5 billion, but more money later in other related developments of the refinery.
Hambantota is a deep-sea port constructed during the time of former President Mahinda Rajapaksa with financial assistance from China. However, the port was leased to Chinese state-owned firm ‘China Merchants ‘in 2017 for 99 years for US$ 1.12 billion.
During the recent visit to China, President Ranil Wickremesinghe held talks with Sinopec Group Chairman Ma Yongsheng and top executives in Beijing last week. Sinopec has already entered Sri Lanka’s retail fuel market.
Sinopec secured the project since the only other contender to the project, Vitol Singapore, withdrew from the race.
Meanwhile, the operations of two other foreign fuel companies –the United States-based RM Parks and United Petroleum Australia—will be delayed. RM-Parks has deposited the performance bond, though.
“We have placed a condition that they cannot remit their profits from fuel trading technically for two years after the arrival of each shipment. Therefore, it becomes a huge initial investment for them. Therefore, they need time,” the source said. (Kelum Bandara)
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SJB opposes Govt. decision to extend IOC’s petroleum licence
Monday, 30 October 2023 00:16 – – 759
SJB Deputy General Secretary Mujibur Rahman
The main opposition party Samagi Jana Balawegaya (SJB) yesterday expressed its strong opposition to the Government’s decision to extend Lanka IOC’s petroleum license for an additional 20 years.
Speaking at a press conference held at the opposition leader’s office in Colombo, SJB Deputy General Secretary Mujibur Rahman raised questions regarding the basis on which the licence renewal was granted by the Government.
Rahman pointed out that the agreement with Lanka IOC was originally established in 2001, granting the entity hefty tax concessions and a 20-year licence to operate in Sri Lanka in exchange for $ 70 million investment. “The agreement was struck without a competitive tender process and lacked transparency,” he remarked.
The SJB politician noted that over the years Lanka IOC has obtained a net profit of $ 3 billion from its operations in Sri Lanka. He noted that the Government has now once again renewed Lanka IOC’s petroleum licence under the same favourable tax concessions and benefits for yet another 20 years.
“Once again, there was no competitive tender process or transparency. Are we obligated to grant this deal to the IOC? Was this agreement secretly negotiated between President Ranil Wickremesinghe and Indian Prime Minister Narendra Modi?” he asked.
He raised concerns about whether the cabinet had thoroughly examined Lanka IOC’s two-decade presence in Sri Lanka before consenting to the renewal. Rahman also criticised the relevant Minister for not presenting a comprehensive review and the particulars of the deal in parliament.
Rahman pointed out that IOC was unable to address the fuel shortages during Sri Lanka’s most severe crisis or provide better prices to the public. “The public deserves to know the rationale behind this renewal. Instead, the government has discreetly extended their licence once again,” he emphasised.
The Government last week renewed the Petroleum Products License granted to Lanka IOC – the local subsidiary of Indian Oil Corporation. Accordingly, the Indian multinational oil and gas company will be allowed to continue its retail operations on the Island nation for another 20 years, with effect from 22 January 2024.
This was communicated by Lanka IOC Managing Director, Dipak Das in a letter addressed to the Chief Regulatory Officer of the Colombo Stock Exchange (CSE). The announcement was made pursuant to Section 8 of the Listing Rules of CSE.
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