Context: After strong opposition from trade unions across the country, Sri Lanka has unilaterally pulled out of a 2019 agreement with India and Japan for developing the strategic East Container Terminal (ECT) at the Colombo Port.

Background:

• In 2019, India and Sri Lanka signed a memorandum of understanding for co-operation on economic projects.
• The MoU did not mention the Eastern Container Terminal, but India and Sri Lanka had already been in discussion for its development and operation.
• Unlike Chinese projects, big projects by India have always faced opposition in Sri Lanka.
• Sinhala-Buddhist politicians either ride such opposition opportunistically when it suits them, sometimes using this as a pretext over the real reason, or are reluctant to go counter to the public sentiment for fear of being attacked for surrendering to “big brother India”.
• For this reason, India had roped Japan into at least two of the projects listed in the MoU – the ECT, and an LNG Terminal/Floating Storage Regasification Unit (FSRU) in Kerawalapitiya/Colombo with a piped gas distribution system along with retail outlets for CNG etc — believing this would ensure the project comes through.
• Japan was the biggest donor to Sri Lanka through the years of conflict. The Geoffrey Bawa-built Sri Lankan parliament, which came up at the height of the conflict, was funded by Japan.

Sri Lanka’s consolation offer:

• ECT would be developed and operated as a wholly owned container terminal of the Sri Lanka Ports Authority (SLPA), a cabinet meeting approved a proposal to develop the West Terminal at the Colombo Port as a Public Private Partnership with India and Japan, seen as a bid to compensate for taking away the ECT.
• The Sri Lankan side believes it can persuade India and Japan that the West terminal is strategically no different from the East, and commercially even better.

Importance for India:

• For India, the ECT deal was important as between 60 and 70 percent of transhipment that takes place through it is India-linked.
• The ECT is also considered more strategic than any other in Colombo Port.
• It is located next to the Colombo International Container Terminal (CICT) project, a joint venture between China Merchants Port Holdings Company Ltd. and SLPA.
• India had been offered the Western Container Terminal earlier, but had refused. The ECT is already operational, while the WCT has to be built from scratch.
• The implementation of the ECT agreement was high on Jaishankar’s agenda when he visited Colombo in January.

https://indianexpress.com/article/explained/colombo-port-india-sri-lanka-7173610/

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