The trade union collective of the SLPA issued a warning not only against the government but also against India and Japan. Prasanna Kalutharage had informed: “Do not let them privatize the Eastern Container Terminal. If the Sri Lanka Ports Authority loses this and the income this generates then the JCT will be affected. The JCT earns 75% of the income of the Sri Lanka Ports Authority. We ask the officials of the Indian Embassy and the Japanese Embassy to give up the idea of acquiring the Eastern Container Terminal. If not we, as the trade unions will surround your respective embassies in protest.”

It seems there is no clarity and transparency over the issue for two reasons. First, reports indicate that the previous yahapalana government in May 1919 signed Memorandum of Cooperation (MoC) with Japan and India facilitating the completion of the ECT and to set up an operational company to operationalize the terminal under build, operate and transfer BOT. The joint initiative is estimated to cost between $500 million and $700 million and the Japan will come up with a loan at 1 per cent interest. Second, an unavoidable question: Will the new government of Gotabhaya Rajapaksa continue with the MoC signed by the previous government? Is the MoC binding so that the present government should also adhere to it? Cabinet co-spokesperson Dr Bandula Gunawardana has informed that the matter is still under discussion although the last administration had signed an agreement. To add suspicion, some cabinet ministers including the Prime Minister is reported have said that the agreements with foreign countries may not be arbitrarily annulled in spite of the change of the government. So, Dr Gunawardana said that “problems will be resolved through talks at a diplomatic lebvel.” Port workers have raised the issue primarily because the new government appears to be vacillating on agreements with foreign countries. It has already informed that the Hambantota Harbor agreement cannot be reversed as it is a commercial transaction. Similarly, what the government will do for MCC compact is not clear in spite of the MCC committee headed by Prof. Lalithasiri Gunaruvan has specifically recommended that the signing MCC would be injurious to country in many ways. This pro-US lobby in the cabinet and the Sri Lanka Podujana Peramuna (SLPP) appears to think that $ 480 million grant would be a solution for the problems of the Sri Lankan economy.

 Twin Economic Argument

Two closely related arguments have been raised in support of getting foreign participation and encouraging private capital. First points to the scarcity of capital. Present Chairman of the SLPA, Major General Daya Rathnayaka has noted that the ECT after completion would be a gold mine. If his estimate is taken valid, the raising funds worth US$ 700 would not be a problem. There may be Sri Lankan investors. Above all, the state may create money and transform that money capital into production capital. Investment by the state would lead to inflationary outcome if and only if money capital is not transformed into productive capital. The second argument refers to the usual story that public sector is in efficient and not cost effective so that it would be always wise to hand over this kind of ventures for private sector, foreign or local. This argument may not be held in the face theoretical reasoning and empirical evidence. There has been ample empirical evidence all over the world in support of the efficient running of state enterprises. Singapore Airlines that has never made a financial loss in its history is a state-owned enterprise. South Korean steel maker, Pohang Iron and Steel Company (POSCO) began as a state-owned enterprise and became one of the best three streel makers in the world.

The Lauderdale Paradox

James Maitland, the eighth of earl of Lauderdale, authored an interesting argument that is popularly known as the Lauderdale Paradox. He argued that there was an inverse correlation between public wealth and private riches in the sense that an increase in the latter invariably served to decrease the former. Here he defined public wealth as something emerging from usefulness of things. Following this theorization, one may argue that leaving the Colombo Port as well as similar public wealth in the hands of public or state would increase country’s pubic wealth.

 Going Beyond Economics

The issue around foreign involvement in the East Container Terminal of Colombo Port has to be studied not only referring to economic logic but also with regard to broader development in the global constellation of forces. It is not a contended issue that Sri Lanka situates in a key position in the Indian Ocean Region. When Sagala Ratnayake, a former Minister of Port, Shipping and Southern Development announced that Sri Lankan government entered into MoC with Japan and India, it had led to so many questions. Why India and Japan together? Of course, both countries have strong economic and other relations with Sri Lanka from the time immemorial. So India or Japan coming forward to assist Sri Lanka in its development process should not be unnecessarily questioned or subject to suspicion.

Nonetheless, as I argue in my previous column, the USA is building up a common front consisting the US, Japan, Australia, India and to a lesser extent Taiwan against China to make it actively operational in the South Pacific and the Indian Ocean regions, the so-called Indo-Pacific region. Hence, it is totally justifiable to assume that the India’s and Japan’s interests are not purely economic.

Hence, I submit that India’s and Japan’s interest in the ECT should be treated together with the US interest for Sri Lanka to sign SOFA, ACSA and MCC. All these come in a single package although their synergy is not clear and transparent

Sumanasiri Liyanage