Sri Lanka's $550Mn Tax-Free Port Zone at Hambantota Seeks Tenants

08th March 2010, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka plans to invite overseas and local companies this month to set up operations in a new $550 million tax-free port zone as the end of the island’s civil war boosts trade and investment.

Companies from Australia, India, China, Russia and Dubai have expressed interest in opening shipbuilding, ship-repair and warehousing facilities at the port in Hambantota, southern Sri Lanka, said Sri Lanka Ports Authority Chairman Priyath Wickrama. The zone, partially funded by a $370 million Chinese loan, should be completed by November, he said.

Sri Lanka will also push ahead with a fourth container terminal at the island’s main port in Colombo to take advantage of the island’s proximity to India and to major shipping routes between Asia and Europe. President Mahinda Rajapaksa’s government is set to spend $1 billion on ports, roads and power plants this year after ending the Tamil Tiger rebels’ 26-year quest for a separate homeland in May.

“With the war over the potential for Sri Lanka is booming,” Wickrama said. And, “we have a gift of location.”

Sri Lanka is situated on the route between the Malacca Straits and the Suez Canal, which links Asia and Europe. The canal was used by an average of 47 ships a day last year. The island is also 31 kilometers (19 miles) southeast of India, the world’s second-fastest-growing major economy.

Second Phase

Sri Lanka is already planning a $600 million second phase for the Hambantota port, which will include a container terminal, Wickrama said. The government is seeking another Chinese loan, he said. Other industries that may use the 1,700 hectare (4,200 acre) first phase include cement, fertilizers and food- processing, Wickrama said.

Ports Authority will also hold discussions this month with China Merchants Holdings (International) Co. and Aitken Spence & Co., which in 2009 submitted the sole bid for the new $450 million Colombo terminal, Wickrama said.

Construction of the 2.5 million-containers-a-year facility, which will expand Colombo’s cargo capacity by 50 percent, is slated to begin in June and finish by the first quarter of 2012, Wickrama said.

The three existing terminals in Colombo, including two run by Ports Authority and one managed by John Keells Holdings Plc, the island’s biggest diversified company, can handle 4.5 million 20-foot containers a year.

The port will likely handle 4 million containers this year, up from 3.7 million in 2009, Wickrama said.

The island will call for bids for a fifth terminal once Colombo reaches 5 million containers a year, he said.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

Hambantota Port (Harbour) on Google Maps