Prioritising Trincomalee Port Development

By Austin Fernando -

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Austin Fernando

Background

Environmentally the Trincomalee (TCO) Harbor is the second best natural harbor in the world. Its available water and land area is about ten times larger than the Colombo Port. TCO has its history with European powers vying for mastery of TCO harbor and the Portuguese, Dutch, French, and the English, each holding it in turn. The harbor, the fifth largest natural harbor in the world, is overlooked by terraced highlands and its entrance is guarded by two headlands. TCO being a sheltered port, the effects of seasonal weather changes and tidal waves are minimal, thus making it an all-season port.

The TCO Bay has a large harbor area of 2,030 hectares (as against 195 hectares in Colombo) and Entrance Channel of 500 meters and huge land area of 5,261 hectares. Berthing facilities, piers and storage are limited. TCO was tentatively identified to cater for bulk and break bulk cargo and port related industrial activities, tourism etc. The conflict prevented these commencing positively, though there were minor investments, e.g. Japanese assistance in 2002 to develop commercial activities in TCO. On an average, about 320 ships call annually at TCO; majority of these being bulk vessels carrying wheat to the Prima flour mill and vessels which used to carry military cargo. The latter has reduced in volume now.

The Sri Lanka Ports Authority (SLPA) has completed zoning to utilize the existing unutilized land under it, with other institutions [i.e. Urban Development Authority (UDA), Board of Investment (BOI), and Sri Lanka Tourist Development Authority (SLTDA)]

Let us look at the issues and challenges in this development process.

Domestic Politics and TCO Port development

State Policies

During the last five decades TCO was less fortunate for port development. Even under the United National Party (UNP), Minister of Shipping late Lalith Athulathmudali pursued vast development in Colombo Port and showed diluted interest on TCO Port.One of his infamous quotes to a European ship-owner, when asked why TCO was unutilized and developed when there are many offers, was to bluntly state, “It is on the wrong side of the map!” It was the way the conflict influenced development decision making. However, with conflict over, it is important that President Mahinda Rajapaksa changes this policy and attitude and utilize its immense potential.

Conflict

This weak attitudinal response was unsurprising because the Liberation Tigers of Tamil Eelam (LTTE) considered TCO as the capital in the merged North-East Province. Even a non-LTTE Chief Minister Vartharajah Perumal established his official infrastructure there. With the potential of being a strong ‘LTTE Port’, no government wished to develop it to full capacity. But, they treated it as a subsidiary port to support the “war efforts” and cement and flour factories. Now that the Government has total security control of the region, the interest to develop TCO Port emerging is unsurprising. However, the fears of LTTE regrouping and the location of vulnerable security establishments inside the harbor will rightly motivate security administrators to be involved in any port development project.

Further, the UDA and coastal area management subjects are now placed under the Ministry of Defense (MOD), giving official / legal access to the MOD to intervene in the decision-making processes in implementing TCO Port development. Isolation of a Port Project only for commercial shipping or industrial or tourism development, irrespective of security cannot therefore be expected now. It should be so too.

Political Benefits

Any state development function is tied to political benefits. The manner southern politicians viewed HambantotaPortand MattalaAirportas priorities to please the South are good examples for this. Incidentally, it is the UNP government that spent for HambantotaPortfeasibility studies in 2002. The Rajapaksa government inherited it after 2005. Similarly, Minister AHM Ashroff focused on OluvilPortto earn political benefits. If the incumbent government wishes to earn political benefits it could revive the collapsed political negotiations with the Tamil National Alliance (TNA) making TCO Port Project as one “tool” among several, if one does not wish to use the terminology “bait’!

However, Ports are a Reserved Subject under the 13h Amendment and therefore, even if the Provincial Council (PC) administration goes to the TNA some day, the PC will not be able to intervene in port management. Therefore, in that sense too the government is on a sound and secured footing by investing in the TCO Port Development Project.

In this critical background when other international pressures demand from the GOSL vast development in the North and East TCO Port Project is one that could be considered eye-catching, more or less listed expecting only the kick-off.

International Politics and TCO Port development

The international aspects of politics in TCO Port development are vivid. Country-wise there are two concerned on the TCO Port Project. One is India who plans to construct a Coal Power Project in Sampur, awaiting GOSL ratification and to develop an industrial zone south of TCO Port. The other is China that has invested in development projects elsewhere in Sri Lanka, inclusive of port development.

Security of India

The location of TCO Port and security vulnerability of India is a prime concern. This orchestrates crucial due to the signing of Rajeev Gandhi- JR Jayewardene Agreement on July 29^th 1987, where the parties agreed:

(a)      Not to allow respective territories to be used for activities prejudicial to India’s unity, territorial integrity and security. (This could obviously collapse, if the Chinese get involved in TCO Port development.)

(b)      Disallow engagement of foreign military or intelligence personnel which could be prejudicial to Indian interests. (This too can be jeopardized if the Chinese get involved in this project.)

(c)       Not to make available TCO or any other port in Sri Lanka for military use by any country in a manner prejudicial to Indian interests. (With China and Pakistan being extraordinarily close to GOSL, Indians will be perturbed if these countries involve in TCO Port development.)

(d)      To restore and operate the TCO oil tanks by undertaking a joint venture between the two countries. (This could affect Indian security if a long term Build Operate and Transfer (BOT) project execution is reached between GOSL and China for TCO Port development.)

(See Avatar Singh, India Sri Lanka Relations and Sri Lanka Ethnic Conflict Documents Vol. IV: pp 1950-1951)

These might have come into existence due to India’s suspicions of any Chinese or Pakistani involvement in the Bay of Bengal and Indian Ocean areas. TCO Port is one crucial location and hence based on this Agreement India may demand from GOSL positive obligations. The naked truth is that if this project is left under open tender procurement, it will lead to Chinese beating all others, due to pricing advantages and Chinese government involvements in business, irrespective of quality assurances as demanded in Norichcholai. Therefore, GOSL should be extra cautious, if an India- friendly attitude is to be maintained. A country friendly to India (e.g. Japan, having port development expertise, even though having minor political and economic skirmishes with China) may suit the GOSL, if it is interested in avoiding clashes. However, under the present complicated political developments after UNHRC in March 2012 and US officials headed by James Moore declaring last week that the USA is “sure” of Indian support in Geneva in February-March 2013 for a resolution critical to GOSL, can this Agreement survive abrogation?

Indian Coal Power Project and Industrial Zone Project

Coal power generating project collaboration between Indians and the Ceylon Electricity Board (CEB)- had been on the cards for more than four years. This delay must have certainly irked Delhi. So much so the UNP recently indicated that the previous Minister Patalie  Ranawaka had been “sacrificed” at the Indian altar at the latest Cabinet reshuffle to satisfy the Indians on Sampur! Again with the new UNHRC developments will GOSL still stick to the agreements?  Politics is complicated and some of these suspicions remain not more than suspicions!

Concurrent to the coal power generation project was the proposed Industrial Zone to be executed by Indians. This had problems due to internally displaced persons’ (IDPs) resettlement issues, i.e. IDPs returning to their original homes in Muttur and Sampur. With Tamilnadu and Diaspora interests this has become a local and international political issue. With Tamilnadu politicians’ provocations this issue should be seriously kept in mind by whoever involved in such development.

If an integrated project with coal power generation and an industrial zone is taken over, for example by Japan (in comparison to China) due to Japan’s vast experience in power generation, small industries and capital attraction capacity, it may erase the political embarrassments for GOSL and help maintaining good relationships with the latter. It is further noted that Sampur coal power transmission from Habarana to Veyangoda is a proposed Japanese assisted sub-project. However, whether Japan is comfortable with take over of the multi development projects – muddling in a political mess- is her political decision.

Further, though not spoken openly at all, the military too has been interested in seeing to it that Sampur area does not fall in to the hands of ‘minority IDPs.’ GOSL’s Navy has experienced adverse situations of LTTE cadres operating from Sampur and Muttur areas and LTTE Navy operating in Ilankanthai. The location of the Sri Lanka Eastern Command Navy camp, berthing and Navy’s maintenance units inside the harbor are obvious undisputable reasons for the MOD to be extraordinarily concerned with the TCO Port Development Project. This is a very genuine concern. Therefore, any planning of a project or commitment should sort out this MOD issue beforehand.

If the Industrial Zone is to be dropped by Indians and if a country like Japan takes over the project, the potential threats for Indians could be diluted, but whether Indians would take it up lying so low is a matter to be concerned with. Therefore, it all depends on the political readings of the GOSL with India.

Chinese interests

The Chinese interests are also important aspects to be considered.

China has been involved in port development and other large projects in Sri Lanka and more importantly the GOSL is dependent on China and Russia at the United Nations Security Council, if and when a war crime investigation issue is raised. It appears with the latest statement made by a US Team that there is backyard planning in operation for similar approach, soon in Geneva. Further, China has set her eyes on other foreign port projects, such as the Thai Canal Project and in Burma and Pakistan. Therefore, to have a coordinated action plan with TCO Port will be an appreciable added advantage to Chinese maritime networking.

In fact with the recent statement by Secretary Defense on military training in China, if USA drops GOSL could be laying a foundation for furthering positive military connections with China. It can be queried whether such support, if forthcoming, is without any bargaining chips in return. Such bargain could be for a Naval Base at the worst- not necessarily in TCO! However, for regional political and security reasons this will be the biggest problem for India. And, GOSL may not most likely reach that point, unless arm-twisted to a breaking point. Nevertheless, it must be remembered that during the conflict it was China who assisted the military with lethal weapons. If China involves in TCO port development, it will strengthen the Chinese through access to regional port networking and maritime security-wise empowering, while Indians will be the losers.

It is noteworthy that the political leadership in Sri Lanka too has been favorably responsive to Chinese involvements as seen by a statement made by Minister of Industries and Commerce Rishard Bathurdeen “I wish to invite the Chinese businesses and investors to take part in this important event.” (Quoted by Xinhua from CHINADAILY.com.- July 27^th 2011) This was when China was the island’s largest aid donor with $ 1.2 billion.  He made similar appeal to Iranians too. Of course, later the Minister of External Affairs and some ambassadors (e.g. Mr. Jaliya Wickramasuriya) have wooed others for investments. In comparison, GOSL has been sitting over the Comprehensive Economic Partnership Agreement (CEPA) with India for a long time, though there had been occasional requests for Indian investments in Sri Lanka. However, even with observed comparative lukewarm Sri Lankan behavior, Indians have pledged and invested substantially in Sri Lanka. Due to this blow hot and cold background I may say that as an international intervener Japan or another country has to consider TCO port development.

Tamil Diaspora and Development

The common thread of criticisms against GOSL has been emanating from the Tamil Diaspora and countries that have been well canvassed by them. For political reasons, they see the potential of TCO Port in a “Tamil Eelam”- though a dream presently. Tamil websites and the Diaspora have been critical of the incumbent government and said that even after the war is over, there is not a single industrial project started in the East.  Therefore, TCO Port Project and Industrial Zone could be vast advertisement for the GOSL to counter such criticisms.

Environmental issues

Usually coal power projects are synonymous with environmental degradation. Previous experience in Norichcholai was an example. Fortunately for them the Catholic Church was taking the initiative to protest and negotiate with authorities. In Sampur it is an unsophisticated individual appointed by the community who responds as a spokesperson, though the environmental degradation could be similar. Since the potentially affected are from minorities it is easy to superimpose other reasons for the project location, as much as explanations for the affected to leave their original lands.  Anyhow, whoever takes over the TCO Port Project, the required Environmental Impact Assessments under the existing environmental laws and regulations have to be conducted, along with comprehensive compensation packages.

Incumbent Government and TCO Port Project

The idea of developing the TCO Port as a metropolis growth centre has been toyed around for some time after May 2009, especially after the President’s second term commenced.

The SLPA was planning to develop the TCO port and the lands (nearly 5,000 acres) in the vicinity to carry out businesses, by utilizing land for three different types of businesses. (1) Lands surrounding the port for port related business ventures (2) the inner most lands to establish business premises (3) lands in the beach areas for tourism development.

A Cabinet Decision taken on Trincomalee Port City Development Project emphasized on the appointment of a Cabinet Appointed Negotiation Committee (CANC) and a Project Committee. The Cabinet decided to request for proposals from interested parties to commence Port related business ventures with high potential to contribute to the Sri Lankan economy. Accordingly, Cabinet approval was also granted to appoint a CANC and a Project Committee to evaluate proposals. The CANC was to evaluate investment proposals based on potential for income generation, employment opportunity creation and the income port receives.

The SLPA Chairman at one stage planned to invite investors to make proposals for investments in theTCOPortwhere large tracts of land were available.  It was to involve in servicing the existing industries, new industries that will be established in the vicinity, development of the port to suit further novel expansion in the shipping industry, enhance the Sri Lankan Navy establishment functioning, relate to areas such as tourism, trade, international shipping and logistic support (e.g. storage, transportation, handling, introduction of state of the art developed systems and machinery etc)  taking the ongoing international and regional developments.

However, Tamil web sites have earlier reported quoting Chairman SLPA as saying “We don’t want to convert TCO into a major port. We must first find revenue to match cost at TCO. Once we recover costs we will then look for profits. For now, we will be focusing on Hambantota andColombofor development.” The frustration in the Diaspora would have been ignited by such previous statements too. In a way, the SLPA insisting on rationality in development fund allocation purely on economic merit need not be contested due to pure economics and the past security status.

The Project Area and Important Information on Components

To consider the execution of an overarching integrated project there are ingredients in the TCO District.

Places of attraction

Setting aside some negatives one must admit that there are sizable plus points in the area for such an integrated project. Map I explains locations, roadway connections and inter-district connections relevant to TCO Port development.

Firstly, the Bay of TCO’s harbor is renowned for size and security is accessible to all types of craft in all weathers. The depth of the sea in TCO harbor is advantageous, especially in the light of larger 18,000 twenty-foot equivalent units (teus) operating in the near future and new transshipment arrangements.

Capture Trinco Port

                                          Map – Trincomalee Port and vicinity

Secondly, the beaches (Nilaveli in TCO district and Pasikudah and Kalkudah in Batticaloa district) are tourist attractions. Hence, additionally the fishing and tourism industries could gain, (i.e. yachting and cruise operations). The foreign tourists could visit Anuradhapura and Polonnaruwa and new hotel facilities in Trincomalee, Kuchchaveli and Nilaveli in Trincomalee beaches and Passikudah and Kalkudah beaches in Batticaloa.

Thirdly, the historical places in the District are important (e.g. FortFredrick, the largest Dutch Fort in Sri Lanka).

Fourthly, the Koṇēshvaram temple, a Hindu place of worship (3rd century), attracting pilgrims locally and from all parts of India.

Fifthly, there are several Buddhist historical sites, (e.g. Seruwila Mangala Raja Maha Vihara said to contain the forehead relic of Lord Buddha, dating back to 2nd century BC, the Sri Gajaba Len Vihara, Tiriyaya temple and the Welgam Vehera temple.)

Sixthly, there are the seven hot springsof Kanniya.

Seventhly, unlike in Kilinochchi or Mullaitivu or Jaffna remnants of LTTE actions are not so vastly observed in TCO District, though there are minor places of interest for tourists.

The above status calls for focus on tourist related port development. It may be for sea sport facilitation. Already SLTDA has invited tourist business to invest in TCO area and announced several heavy investments  to build hotels and resorts.

Military Establishments

TCO houses the Sri Lankan Navy Base and a Sri Lankan Air Force base at China Bay. These run in history to the colonial times.  Today SLNS Tissa and SLN Dockyard are used by the Sri Lankan Navy, while the Sri Lanka Air Force is based at SLAF China Bay. The Sri Lanka Army has its Security Forces Headquarters – East in TCO. TCO War Cemetery is one of the six Commonwealth War Cemeteries in Sri Lanka. The Navy Base is home to a naval museum called The Hoods Tower Museum.

Apart from the historical value of the harbor there is security concerns expressed by the MOD. The LTTE had some of their attacking units in Muttur and Sampur areas and had a minor berthing point at Ilankanthai. These were always considered threats to the Navy and Air Force Bases, and hence the removal of civilians has been firmly demanded by the MOD. Therefore, whether it is port construction or industrial development in the area south of the port for which earmarked land is extensively available, the MOD prior approvals will be essentially required. The planners therefore should be mindful of MOD concerns always, which cannot be considered unusual with past experiences.

Why TCO Port should be developed?

There are proposals to develop harbors in Sri Lanka, which have been partially achieved (e.g. Hambantota where a test ship was berthed recently) and one not even that (e.g. Oluvil). Recently Chinese have won the contract to construct three terminals under the Colombo Port Expansion Project, which could accommodate 2.5 million teus annually. In addition, there are port related developments which motivate development of theTCO Harbor.

These developments happen in the region (especially in India) and internationally. Among multiple changes there are a few aspects, which are more relevant to Sri Lanka, which is aiming to become the ‘port hub’ of the Region. They can be considered under three major headings.

• Indian port development programmes which may affect transshipment business with India which accounts to about 80% of Colombo’s volume.
• Sethusamudram Shipping Canal Project (SSCP) and Thai Canal Project which will affect the transshipment volumes.
• Trend of ships getting bigger demanding ports with deeper approaching channels.

Indian port development programme

This includes an Indian national programme to develop harbors, mostly in South India, to be efficient transshipment points, mega container-terminal points, deepening the draft in selected ports, expansion to take charge of larger vessels, specialized port facilities etc, which will definitely be commercial/ business threats to Colombo for transshipment activities. Since the draft of Colombo has constraints, finding an alternative all weather port with deeper draft and expansion potential will be a requirement and TCO Port fits in to these requirements.

Regional port development

The Thai Canal, formally known as Kra Isthmus plans to construct a canal across southern Thail and, like that of Suezand Panama, enabling ships to avoid the Malacca Straits. Length of proposed canal could be anywhere between 50-100 km and the depth would be 25 meters.  According to US Government, this project has been now undertaken by the Chinese to be completed in ten years with an estimated cost of $ 20-25 billion. Once it is completed and operative, it will make remarkable changes to East/West trunk sea route by reducing voyage time and could tend to usher positive effects on Sri Lanka by enabling more competitiveness as a transshipment hub- especially those ports in the Eastern coast (TCO and Oluvil) and to some extent in South coast, placing them directly in line with the Thai Canal. This will give untapped economic opportunities to TCO.

With the SSCP implementation the location advantage of Colombo will be reduced with further drop of cargo volumes to Tuticorin since direct access will be possible to Tuticorin. Colombo may not have much cargo attraction as for super container vessels, maximum draft of 19 m planned for Colombo South Port would not be appealing. Therefore, it is natural that shipping lines operating those ships looking for an alternative to cater for Indian cargo volume. Should Sri Lanka allow them to choose Gangavaram with 21 draft or Vizhinjam with 23-27 m draft or any other planned new ports?  Why not presentTCOPortas the alternative?

Vessel size revision

It is now becoming increasingly clear to planners that there are no insurmountable technical barriers to increase the size of container vessels which can accommodate 18,000 teus. In 2008, the South Korean shipbuilder STX Corporation announced plans to construct a container ship capable of carrying 22,000 teus. Certainly, enhancement will take place with passage of time and requirement demands. Enhancing vessel size will have multiple effects on port development and if it is economically favorable Sri Lanka should grab this opportunity.

The aspects that deserve attention are the following:

• Requirement of deep draft for the large vessels will limit the number of ‘calling ports’. For instance, the planned 18,000 teus vessels can call only at ports having 21 to 25 meter draft. Thus the economic viability of colossal amount of money spent in constructing new smaller ports becomes a moot point- especially when externally borrowed. Even the recent bonds were to be used for infrastructure development, but disseminated information did not list TCO Port development. Due to complexity and costs foreign funding needs to takeover this project, whether Chinese or Indian or Japanese, or any other.
• The principal objective of shipping companies in going for bigger vessels is to gain the economies of scale and thereby getting a marketing edge.TCOPortby its physical nature is a ready vantage venue to draft and berth such larger vessels and hence if developed will assist the country and the industry positively.
• With larger vessels preferred for shipping current transshipment hub status of some of the ports will be challenged and some of today’s key transshipment hub ports could become feeder ports. This will demand for a port that could operate larger vessels and TCO Port could remain a hub for shipping as well for transshipment in the future scenario.

·         Depth of the natural basin could accommodate even the proposed 18,000 teus ships that have a deeper draft need (25 meters) thus servicing cargo needing fast carriage on super container vessels which can be berthed only at TCO.

·         This factor would make it a transshipment port for cargo generated from Indian ports such as Chennai, Ennore, Paradip,Calcutta and Chitta gong inBangladesh, and Tuticorin, assuming the SSCP would have been completed by that time.

·         TCO could develop an effective railway network with the Western Province where most of the industries are serviced in the Port of Colombo. Even the improvement of the railway system could be a part of an integrated port development exercise. In fact, when industries develop in the Northern Province,TCO Port may be the servicing unit when raw materials are received and products are shipped from Sri Lanka. The successful resumption of rail connection to Southern India through Danushkody commences it may offer an opportunity for Indian cargo to be loaded from TCO, which will be international integration.

·         Domestically rail transport of containers should solve problems related to the distance, congestion and cost of transporting finished goods to the port. Will this sideline a smaller port like Hambantota causing political embarrassment to the incumbent government?

·         There is enough land reserved for SLPA around TCO favoring solving the possible problem of space for container storage and other supporting services, which will be a great advantage when industries are planned and established in the Special Economic Zone. Close cooperation with the MOD may be essential as the UDA and coast conservation now falls under the MOD.

·         Planned industrial development through an Industrial Zone ( Special Economic Zone) for international investments facilitated by Sampur Coal Power Project, cement bagging plants, Prima Project etc could be considered while planning the TCO Port. This should assist the decentralization of industry from the Western Province. If GOSL could attract eight investors to sign agreements with the SLPA to begin new business ventures at the Magampura Mahinda Rajapaksa Port, to the value of $ 1 billion plus as divulged by Ports and Aviation Project Minister, the opportunities for TCO will be fascinatingly more.

·         Being an attractive place for promoting tourism, planned improved highway and rail connections should be considered in an integrated development plan.

·         Rapid development of Eastern and North Central Provinces could enhance economic value of the project and substantial development benefits.

·         Considering the growing importance of fresh water in two decades, TCO could be a port that would accommodate Very Large Water Carriers and Ultra Large Water Carriers which potential has to be kept registered.

In this situation one can fearlessly say that the TCO Port project is not only a port development exercise but an integrated development project, which could even extend to other development areas. Hence, the approaches should be positive, cautious, competitive and comprehensive, especially due to the project’s political and economic complexity..

Conclusion

One caution is that in Sri Lanka development decisions of this nature, especially in port development is not that swift. Colombo South Port expansion proposed in 1997 took 13 years to see any constructive steps taken towards construction. Since port development operations also take longer time, such delay is unacceptable. Yet, hoping that the GOSL is sufficiently far-sighted in identifying the repercussions and the opportunities of the changes occurring (1) in the international trade; (2) in cargo volume, their direction and type of commodities, (3) changes in shipping environment, (4) expected political reconciliation, and, (5) long term impact on the total economy of the country, it is nothing but fair that it has to consider developing TCO as a container port at a faster speed. I wish that a capable financier with required technical and technological abilities would go ahead with a BOT or Public Private Partnership project forTCOPort.If this is to make Hambantota and Oluvil share the hub status with TCO it should be accepted irrespective of political egos attached to them.

Epilogue

One of my much respected bosses Mr. MDD Peiris once recollected how President R Premadasa, at a Mahaveli Sports Meet held in Bakamuna decided to provide free school uniforms, leaving the bureaucrats led by Mr. Peiris to find resources. Similarly, he had to find resources on the direction of Minister Richard Pathirana to implement the Teacher Salary Revision.

Will it be an apt coincidence and repetition of the past if President Mahinda Rajapaksa decides positively on TCO Port Development Project, when he visits TCO for the Independence Day Celebrations next week?