Private sector investment and involvement in developing ports emerged as a significant requirement in the 1980s. By this time, many ports had become bottlenecks to the efficient distribution chains of which they are an essential component. Government investments into port development was categorized as “White Elephant Syndrome” due to the following three main problems, illustrated by port congestion and consequent chronic service failures, contributed to the gradual deterioration of service quality during this period.

  • The first reason for a lack of port service quality was the inability or unwillingness of many governments to invest in expensive port infrastructure or the “misinvestment” in infrastructure (providing facilities that were badly matched with the needs of foreign trade and shipping). During this period, a number of beautifully constructed port complexes became “white elephants”
  • The second reason why many ports failed to respond adequately to the increased demands imposed on them was centralized government control in the port sector. Particularly between 1960 and 1980, central planning (in the port sector as well as in other sectors) prevailed not only as a norm in socialist economies, but also in many western and developing countries where national port authorities were often promoted by international development banks.
  • The third problem was restrictive labor practices. Institutional reform and the technological advances that frequently precede rapid modernization of port handling equipment. At the start of this process, labor unions often refused to accept reductions in the labor force and ignored the need to upgrade skills.

The World Bank has categorized Port Terminal Ownership and Administration models in to 4 categories. Categorization is based on the role played by the public/private parties in the investment and operational activity of the Port.


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The Landlord Port and Private Service Port models were preferred options since the mid 80’s. Since the development of the Jaya Container Terminal by Sri Lanka Port Authority as a Public Service Port, SAGT and CICT were developed as Private Service Ports.

The opportunity for gaining share in the Indian subcontinent transshipment market with post-covid recovery

Transshipment emerged in the 1970s as trade with Asia increased but volumes were not sufficient to justify direct connections to many ports. Ports such as Singapore, Busan, Tokyo, and Kaohsiung emerged as the first transshipment hubs. As container ships grew larger based on improved designs the ‘hub & spoke’ operating model to maximise efficiency and reduce unit costs became the norm in container liner shipping and this eventually led to the setting of pure transshipment hubs at key locations along major shipping routes, such as Colombo, Salalah, Gioia Tauro, Algeciras, and Kingston.

Sri Lanka’s domestic economy is not adequate to sustain the expansion of the Colombo Port. The Colombo Port expansion project was funded by the ADB. In ADB’s 2007 loan recommendation report, the rational for the expansion is stated as “Colombo Port is the natural transshipment hub port for the South Asian region. However, in recent years Colombo Port lost market share of the regional transshipment market because the fundamentals of the market changed and Colombo Port did not adapt. Colombo Port cannot offer the additional operating capacity required to compete for the Indian subcontinent transshipment market or the depth required to berth the latest generation container ships. Colombo Port will have to develop additional container berths with the required depth to address these capacity and depth infrastructure constraints if it is to remain a transshipment hub port.”   Note should be taken on the focus on capturing Indian transshipment market. Transshipment and India’s Contribution Towards Port of Colombo’s Hub Status is a fact that cannot be ignored by any stakeholder of the Colombo Port


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Singapore has lost its top spot to Shanghai in the last 14 years.  Zhoushan, Shenzen and Guanzhou have been developed as very close competitors to Singapore. Growth in these new port developments which were comparatively smaller to Singapore in 2005 were driven by the Chinese economic growth. This is a lesson that Sri Lanka could learn from, as we cannot ignore our neighboring superpower and the growth in the Indian economy. IMF projected India to grow by 11.5% in 2021 as per their estimates released in January 2021. The only country in the region to have double digit growth for 2021. Sri Lanka is well positioned to benefit from this growth.

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India has 12 major ports and around 200 non-major ports. In FY20, major ports in India handled 704.82 million metric tonnes (MMT) of cargo traffic, implying a CAGR of 2.74% during FY16–FY20. Cargo traffic at non-major ports reached 447.21 MMT in FY20 (till December 2019). Since ports handle almost 95% of the trade volumes in India, the rising trade has contributed significantly to country’s cargo traffic. The major ports had a capacity of 1,514.09 MMT per annum (MMTPA) by FY19P. Given the positive outlook, proposed investment in major ports is expected to total US$ 18.6 billion by 2020, while those in non-major ports will be around US$ 28.5 billion.


Indian transhipment is the main business of the Port of Colombo. With the Eastern and Western Container Terminals being developed the total capacity of Colombo can go to an estimated 14-15 Mn TEU’s annually. As of now 85% of this will be transhipment containers, over 70% of which will be to/from India. The Port of Colombo cannot discount the relevance of India, if it is to be a hub port going forward. As explained in the first paragraph under this heading, transhipment hubs were created as domestic economies weren’t large enough to sustain longer shipping routes. Sri Lanka needs to understand this concept clearly and realise that expansion the Colombo Port is not sustainable if we don’t service Indian transhipment containers.


Fundamentals of the Port Business – Importance of the Link between Port Operators and Shipping Lines


Hutchison Ports, PSA, APM Terminals, P&O Ports, DP World, APSEZ are some of the main port operators in the world. They have contracts with main shipping lines such as Maersk, Evergreen, Mediterranean Shipping, CMA-CGM, Hapag Lloyd and COSCO to plan their routes through the ports that they operate. The Port Operator makes sure that the port they develop is strategic to the shipping lines. The shipping lines schedule their routes according to the services and pricing offered by these Port Operators. This is another reason why Governments don’t get involved in Port Developments. They very often do not possess the commercial ability and flexibility to attract the main shipping lines, which is another point of learning that Sri Lanka seems not to have fully considered in its decision to develop the East Container Terminal in the Port of Colombo.


The table below the top 10 terminal operators with their respective market shares in 2019.

Ranking   T’Put Share
2019 2018 Operator (mteu) (%)
1 1 China Cosco Shipping 109.8 13.7%  
2 3 PSA International 84.8 10.6%  
3 4 APM Terminals 84.2 10.5%  
4 2 Hutchison Ports 82.6 10.3%  
5 5 DP World 69.4 8.7%  
6 6 Terminal Investment Limited (TIL) 50.8 6.3%  
7 7 China Merchants Ports 35.6 4.4%  
8 8 CMA CGM 26.1 3.3%  
9 10 SSA Marine 13.0 1.6%  
10 13 ICTSI 11.8 1.5%  

Source: Drewry Maritime Researc


 The Port of Colombo has reached its capacity and losing market share 

Calendar Year 2019 (Jan – Dec) volume of terminals in the Port of Colombo (“POC”) compared against their respective capacities:

PoC Terminals Total Throughput Capacity available Utilisation
SAGT 2,052,141 2,200,000 93%
JCT 2,282,609 2,600,000 88%
CICT 2,893,544 3,200,000 90%
Total POC 7,228,294 8,000,000 90%


It’s very clear that we have reached the maximum capacity levels as of 2018-2019 and that we are failing to gain an annual increase of at least 5-6% of transhipment volume which is undoubtedly lost to regional peers. Shippers’ Academy Colombo CEO Rohan Masakorala in his article published in the Daily FT under the heading “Shipping and Ports in crisis”, clearly articulates an opportunity cost of 10% growth in transhipment volume lost due to delays in developing the ECT.


Capacities of other regional hubs and their utilization levels during 2019


Regional Hub Ports Capacity CY 2019 Throughput Utilisation %
Singapore 38,000,000 37,195,636 98%
Hong Kong 23,000,000 18,300,000 80%
Dubai 22,600,000 14,111,000 62%
Salalah 6,100,000 4,109,000 67%



ECT was to be developed and operational by 2017 which would have added approx. 3 million Twenty Foot Equivalent Units (TEU) annually to the POC capacity. Sri Lanka has lost a golden opportunity to capture market share and much needed revenue for development due to inconsistent and implementation delays in Government Policy. The Sri Lanka Ports Authority (SLPA) completed development of the first phase of ECT by early 2015. This consisted of 600m length quay wall, part container yard and a 440m deep-water berth. In 2016 a request for proposal was floated by SLPA to develop ECT on a BOT basis. This process was terminated in 2017 when the GOSL had discussions with the heads of India and Japan to develop ECT. Based on these discussions a MOC was signed between Sri Lanka, India and Japan in May 2019 to jointly develop ECT. This decision was overturned in February 2021 with GOSL deciding to develop ECT as a public service port.


Contribution of FDI towards the timely expansion of the Colombo Port


Sri Lanka’s foreign currency reserves which were at USD 5.7Bn as of December 2020, have now marginally fallen below the foreign debt obligations for the first time in the recent past as foreign currency reserve cover falls below 1.0x. Official reserve assets of the country stood at USD 5,665Mn as of 31 December 2020 while the foreign currency repayment schedule for 1-year stands at USD 5,797Mn. The three main international rating agencies downgraded Sri Lanka’s economic status in the last few months. The GOSL has imposed import restrictions since mid-2020 to maintain a highly pressurized LKR from further depreciating against the USD. These restrictions are continually being extended every 6 months.


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On apf 6 positive note the GOSL’s initiative to hold discussions with India and Japan to develop the Western Container Terminal (WCT) as a private service port on a 35 year concession is a welcome change.  Similar to ECT the WCT is positioned in the Colombo South Port with similar dimensions to CICT and ECT and 20m berthing depth.

We hope that the discussions will be carried out swiftly and decisions taken quickly to develop WCT in line with  CICT and SAGT as a private service port. The timely development of both ECT and WCT is essential to maintain Colombo Ports Transhipment Hub status in the years to come and will act as a conduit for Sri Lanka’s next phase of development.




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