Advocata advocates open tender process for ECT

Advocata Institute, a Colombo-based think tank, which promotes free markets, yesterday welcomed the government’s decision to resume the stalled East Container Terminal (ECT) Project in the Colombo Port but called for improved government oversight of the project through an open tender process. Bloomberg recently reported that Indian billionaire Gautam Adani’s Adani Group was the frontrunner to develop the ECT, which would help him to expand his port empire overseas.

Advocata Institute in a statement called upon the government to strengthen oversight and accountability of the project through an open tender process, as “such a policy direction would be more conducive to reaching the administration’s vision of a more productive and prosperous Sri Lanka.” 

“The significance of the Colombo Port is driven by its large volumes of transshipment to India, which now accounts for about 70 percent of the total quantity of shipments. It is beneficial that both countries continue to strengthen this relationship through trade and economic partnerships,” the statement noted.

The think tank urged the government’s attention on two policy areas—accountability through competitive bidding and tax concessions— which would allow policymakers and the public to evaluate the efficacy of the project.

“The key concern of the government when entering any kind of public-private partnership such as the container terminal development process should be to ensure that it will produce value for money. The commercial partner selected should be the most capable of producing this outcome. An open tender process would allow for a more efficient allocation of resources by using competitive pricing as a tool to reflect real market sentiments and allowing better utilisation of resources,” the statement said.

On tax concessions, the think tank pointed out that ECT provides a unique competitive advantage for the operators.

“The risk in this investment is relatively low, given that the port is already established. The Southport (deepwater port) is well known and has been in existence for 6-7 years. The port is also strategically located with only 4-hour deviation from the major East-West shipping route. Additionally, its competitor, the CICT terminal is running close to capacity.  Finally, there is a very limited employment multiplier effect that this project can create. The private returns are significantly higher than the cost of capital factoring in-country and project risk.  Taken together and based on the publicly available information, the case for tax holidays on this project is weak. Further consideration must also be placed on the precarious fiscal situation that the country is presently in and the need to mobilise more tax revenue,” the statement added.