China Merchants lands Lanka contract

Logistics conglomerate China Merchants has won the approval to operate phase two of Sri Lanka’s largest container terminal in a deal signed during President Xi Jinping’s trip to the South Asian nation.

The Hong Kong-listed firm has been granted a 35-year lease to manage the Hambantota Port Development Project in a joint venture with the Sri Lanka Ports Authority and China Harbour Engineering Company. The two Chinese partners will invest a combined HK$3 billion into the project in return for a 64.98 per cent stake, according to a stock exchange filing.

Hambantota is on Sri Lanka’s southern coast and is billed as a future transit hub for goods moving around Southeast Asia. Xi will also inaugurate a US$1.5 billion project, the largest single direct foreign investment, to build a port city on reclaimed land in the Sri Lankan capital, Colombo.

China and Sri Lanka completed a feasibility study in March on a free trade agreement, which is expected to boost the island’s top exports of tea and garments.

Since the end of a nearly three-decade war in May 2009, Sri Lanka has been spending heavily on infrastructure, including ports, to attract foreign investments to its US$67 billion economy.