SNA (Tokyo) — Sri Lanka has announced that it is pulling out of a deal with Japan to develop a section of its main port of Colombo, marking the second time within six months that a major agreement has fallen through. 

In the most recent case, an investment between Sri Lanka, Japan, and the Adani Group of India, called for the construction of the East Container Terminal (ECT), a shipping port in the capital city of Colombo. By the terms of this agreement, India and Japan were to collectively hold a 49% stake in the project.

This deal was signed in 2019 by then-national leaders Maithripala Sirisena and Ranil Wickremesinghe. However, this arrangement was not universally popular within Sri Lanka. In particular, labor unions, opposition parties, and others criticized the deal, arguing that the port should be developed as a strictly national project without foreign interference and ownership.

Incumbent President Gotabaya Rajapaksa has supported this project that was initiated by his predecessor, but last week Prime Minister Mahinda Rajapaksa abruptly announced to port workers that the ECT would become a 100% national operation under the Sri Lanka Port Authority.

The prime minister’s announcement came as a shock to both India and Japan, with New Delhi indicating that there had been no advance warning about the change, and no negotiations.

The cancelation of the international agreement was provoked by widespread unrest from hundreds of unions across the nation, which were backed by many within the middle class, nationalist groups, and even Buddhist monks.

Anuruddha Ranawarana, press secretary for the left-wing National Freedom Front, released a statement representing ten political parties, including his own, that declared, “Our ten parties work from the standpoint that ‘no part of the East Container Terminal should be given to any party. It should belong only to the Port Authority.’”

Not everyone supported the manner in which the deal was abruptly terminated. The daily newspaper Lankadeepa, for example, editorialized, “We respect the right of the trade union movement and the national forces in this country to stand up for the policy of protecting and developing the country’s local resources… But the right of a government to pursue various strategies involving the international community in developing the country must also be recognized.”

There have been allegations within the Indian media that China may have played a role in instigating the union protests.

These Indian claims appear to be related to the fact that the Colombo International Container Terminal (CICT), near the ECT, is 85% owned and operated by China Merchants Port Holdings. This same firm also acquired a 70% stake in Hambantota port, a town in the southern part of the country. Also, Chinese submarines have cruised these waters in the past.

However, the Sri Lankan labor unions have also opposed Chinese ownership of these other facilities, making the Indian claims less credible.

Japan’s Ambassador to Sri Lanka, Akira Sugiyama, called the decision to cancel the deal “unilateral and regrettable” after meeting with Sri Lankan Foreign Minister Dinesh Gunawardena.

Sri Lanka’s cancellation of the ECT agreement is the second time that the country has backed out of a deal with Japan within the last six months.

Last September, Sri Lanka’s cabinet canceled the Light Rail Transit project funded by Japan International Cooperation Agency (JICA). In that case, it was explained that the project—intended to ease traffic congestion in Columbo—was simply too expensive and raised environmental concerns.

Japan has been financially supporting the development of Sri Lanka’s infrastructure since the 1980s.

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