Sri Lanka’s Port City developer withdraws compensation claims

Aug 02, 2016 (LBO) – Sri Lanka’s port city developer CHEC Port City Colombo, who is handling the project for the Chinese investor, China Communications Construction, has agreed to withdraw all compensation claims for losses incurred due to the suspension of the project.

However, the cabinet has approved allocation of 2 hectares to them, without reducing the land extent of 62 hectares owned by Sri Lanka as a gesture to reciprocate their goodwill in completely waiving off all compensation claims.

The cabinet memorandum says the above proposal was acceptable to the GOSL since the project company has agreed in the new master plan approved by the UDA this year to increase public lands.

“When completed Port City will have 45 hectares of parks and 13 hectares of artificial beaches (compared to 5.7 hectares available to the public at Galle Face Green),” the cabinet said.

“Parks, roads, walkways to be used by the general public will be increased by 28 hectares more than originally planned to make Port City more attractive to the public.”

The cabinet has approved the proposed amendments for the port city agreement signed in September 2014.

Under the new agreement, filled lands will be gazetted by President under the Lands Ordinance and thereafter will be allocated to the UDA.

The UDA will declare them as a development area under the Urban Development Authority Act. This will happen before land is leased on 99 year basis to the Project Company.

The project company will allocate 500 million rupees towards the fishermen’s income support programme to the Megapolis Ministry to implement the programme.

Given below is a summary of changes which are suggested to incorporate in to the original agreement signed in September 2014.

Free hold lands

• According to the agreement signed in September 2014 signed by the previous government, a land of 20 hectares will be granted to the C.H.E.C. Port City (Pvt) Ltd on free hold base and the rest land is granted on 99 year lease basis.
• According to the consultations of the new government, no land will be granted on free hold basis, and all the lands will be on 99 year lease basis. If the government does not require these 20 hectares, the company may obtain the land for another 99 years.

Role of the Sri Lanka Ports Authority and the Urban Development Authority

• According to the original agreement the Ports Authority Act is to be amended to enable the Ports Authority to obtain 62 hectares from the project company for its use and development activities. According to the article 6 of the act, this is limited to the objectives of the Ports Authority. Though the previous government has declared that Sri Lankan lands could be used for development of immovable properties, no such authority is granted under the article no. 6.
• Under the new agreement, the Sri Lanka Ports Authority will not be assigned of immovable properties development and its responsibilities will be limited to activities allowed by the current Sri Lanka Ports Authority Act. Therefore, it has been decided that the most suitable institution to assign reclaimed lands is the Urban Development Authority.

Role of the Ministry of Megapolis and Western Development

• Under the new agreement, responsibility of performing government responsibilities including amendment of the Sri Lanka Ports Authority Act is vested with the Ministry of Ports and Shipping.
• Instead of the agreement signed by the previous government on 16 September 2014, a new trilateral agreement will be signed among the Ministry of Megapolis and Western Development (on behalf of the government), UDA and the project company.

Legal situation of the lands proposed to be filled

The status of lands to be filled is unclear under the original concessionary agreement signed by the previous government. Those lands are not a part of the Colombo District. Hence, it is not considered as a land belonging to the Sri Lankan territory according to the article 5 of the Constitution. Under the new law, the land will be brought into the Administrative District of Colombo, and it will be assigned to the proposed Financial City Corporation out of the Colombo Municipal Council.
• According to the original agreement a key tax plan will be implemented by the Sri Lanka Ports Authority related to leasing of lands to the project company.
• Under the new agreement, filled lands will be gazetted by H.E. the President under the Lands Ordinance and thereafter will be allocated to the UDA. The UDA will declare them as a development area under the Urban Development Authority Act. This will happen before land is leased on 99 year basis to the Project Company.

Fishermen’s Income Support Programme

• Under the original agreement, responsibility for funding the income support programme to fishermen was a responsibility of the SLPA. No such programme was implemented by the previous administration of the SLPA.
• Under the new agreement, the project company will allocate Rs. 500 million towards the fishermen’s income support programme to the Ministry of Megapolis and Western Development to implement the programme in consultation with the Ministry of Fisheries and Aquatic Resources Development.

Utilities and transport infrastructure

• Under the original agreement all investments in roads and utilities within the reclaimed area was the responsibility of the project company while providing all utilities and road infrastructure to the periphery of the site was the responsibility of the Government of Sri Lanka.
• Under the new agreement, the possibility of undertaking public-private partnerships through the project company will be evaluated as a long term solution to ease the GOSL’s responsibility of undertaking provisions of road infrastructure and utilities to the periphery of the site.

Management and maintenance of the reclaimed area

• Under the original agreement, an Estate Management Company (EMC) 100% owned by the GOSL would manage, maintain, and repair the common areas of the Port City by collecting management charges from investors. However, until such time EMC is self-sustainable, GOSL or SLPA would have had to inject funds for the operation of the EMC.
• In order to ease the GOSL’s obligation to fund such a venture, under the new agreement, the project company has agreed to consider establishing and operating the EMC in partnership with GOSL.

Limits imposed on developing GOSL lands

• The original agreement limits developments GOSL could undertake on its land during three years from the completion of reclamation to educational and cultural activities only.
• Under the new agreement the above has expanded in favour of the GOSL to include healthcare and hospitals and exhibition and convention centres and the new Colombo International Financial Centre. Also no restrictions will be placed on developing the North and West ports of the Colombo Harbour. In addition, the project company has agreed to setting up the CIFC building in the land area reclaimed first including making a new investment in the CIFC building no sooner it is technically feasible to build on reclaimed land and upon mutually acceptable terms being agreed with the GOSL after a feasibility study.

Compensation claims

• In view of the goodwill created by the visits of His Excellency the President and the Hon. Prime Minister to China, the project company has agreed to withdraw all compensation claims for losses incurred due to the suspension of the project caused by the failure of the previous administration of the SLPA to obtain the required environmental permits.
• In their original Master Plan there was provision for night racing. They had fully abandoned that plan at present. In view of this, a large extent of marketable land becomes available. Out of this, 2 hectares may be allocated to them, without reducing the land extent of 62 hectares owned by the GOSL. This will be a gesture to reciprocate their goodwill in completely waiving off all compensation claims.
• The above proposal was acceptable to the GOSL since the project company has agreed in the new master plan approved by the UDA this year to increase public lands (parks, roads, walkways, etc. to be used by the general public) by 28 hectares more than originally planned to make Port City more attractive to the public. For example, when completed port city will have 45 hectares of parks and 13 hectares of artificial beaches (compared to 5.7 hectares available to the public at Galle Face Green).

Environmental approvals

• Under the original agreement, the responsibility for undertaking and financing all environmental approvals for the project was a responsibility of the SLPA. There were shortcomings in the environmental approvals obtained by the former administration of the SLPA.
• A comprehensive new supplementary environmental impact assessment was carried out by the Ministry of Megapolis in 2015 to address such shortcomings with the cooperation and funding extended by the project company.

New environmental conditions

• Under the original environmental impact assessment study carried out in 2011, 42 conditions were imposed by the Department of Coast Conservation in its development permit.
• Under the new supplementary environmental impact assessment carried out by the Ministry of Megapolis for 269 hectares of reclaimed land and made available for public comments in December 2015, the new development permit issued by the Department of Coast Conservation includes 70 conditions to mitigate the impact on the environment.

Change of status

• The previous administration had this as a Land Reclamation Project to utilize this initially for real estate, sports, education and cultural development including night racing tracks etc. Therefore, the bulk of the land was not available for real estate development by the government.
• Now it has been agreed with the Chinese Government that this land is being used to build a Financial City to fill the vacuum between Singapore and Dubai. This will enable offshore operations. For this purpose, the government will propose new laws for governing offshore activities like in Dubai. The Financial City will make a major income earner and an employment provider for Sri Lanka.