China, Sri Lanka port deal will boost investor confidence

By APD Writer Jamila Husain

COLOMBO, Aug 1 (APD) - China's deal with Sri Lanka to acquire a 70 percent stake to develop the Hambantota Port in southern Sri Lanka for 1.12 billion US dollars will boost Sri Lanka's foreign-exchange reserves and help bolster investor confidence, an international rating agency said Tuesday.

Moody's, in its latest report said earnings from the Hambantota Port stake sale will feed into the Sri Lanka Central Banks foreign-exchange reserves, which will help bolster investor confidence and encourage future portfolio inflows.

"Importantly, the sale will allow the government to set aside earnings to repay its upcoming debt maturities and reduce its external debt, a key constraint on Sri Lankas credit quality. External debt maturities in 2019-22 total $13.8 billion," Moody's said.

The rating agency further said the development of the broader Hambantota Port area will help bring in foreign direct investment into Sri Lanka, especially from China.

The buildup of associated infrastructure surrounding the port also can help attract greater private-sector investments. This, together with other ongoing development projects such as the Western Region Megapolis Plan and Colombo Financial City Project, will provide a stable source of financing for Sri Lankas external position and support economic growth, Moody's said.

China Merchants Port Holdings and the Sri Lanka Ports Authority signed an agreement here Saturday to develop the Hambantota Port in southern Sri Lanka.

Under the deal, the Chinese side will hold a 70 percent stake in two joint ventures to be launched to take charge of the commercial and administrative management operations of the port respectively.

After 10 years, the Sri Lankan side will gradually purchase an additional 20 percent stake, resulting in the two sides owning an equal share of 50 percent each, according to the agreement, which is valid for 99 years.

(ASIA PACIFIC DAILY)