Former President Mahinda Rajapaksa, whose dealings with the Chinese government is the subject of an article by New York Times titled ‘How China Got Sri Lanka To Cough Up A Port’, has retaliated in a statement, saying the author of the article was ‘intentionally vague’ about certain of the allegations made, and calling the article a ‘smear campaign’ against him.

Setting the record straight on the allegations made by the New York Times article, former President Mahinda Rajapaksa said the following in a statement this morning:

1 July 2018

MEDIA RELEASE
Allegations made by the New York Times

The New York Times published an article titled “How China Got Sri Lanka to Cough Up
a Port” on Monday June 25, 2018 and our political opponents have made quite a carnival
of it, marching to the FCID to make complaints, holding press conferences and calling for
presidential commissions of inquiry. However the main allegation in this article - that 7.6
million USD had been given to me as campaign contributions by China Harbor Co during
the 2015 presidential elections, is based on a Reuters report that appeared three years ago
in July 2015. At that time the new yahapalana government had suspended all Chinese
funded projects and all Chinese firms including China Harbour Co which was building
the Colombo Port City, were being investigated. More than a year later, this government
cleared China Harbour Co of any wrongdoing and the Port City project was handed back
to them.
No contribution was made by China Harbour Co to my 2015 presidential election
campaign. While claiming that my ‘affiliates’ and ‘campaign aides’ had got the money
and that ‘volunteers’ had delivered the cheques to Temple Trees, the writer of the New
York Times article has been intentionally vague about who had given this money and
who had received it. This seems to be a way of carrying out a smear campaign without
incurring any liability. The Prime Minister himself has gone on record describing the
Colombo Port City as the premier project on which his government has placed its hopes.
If any election campaign contributions had been made to me by China Harbour Co, the
Port City contract would not have been restored to them and neither would they have
been allowed to bid for the lease of the Hambantotaharbour.The NYT writer has stated
that they had obtained some of the details in that article from a Sri Lankan ‘government
investigation’. Every Sri Lankan knows that the main preoccupation of this government
since it came into power has been to sling mud at the opposition.

The NYT writer alleged that China financed the Hambantota Port project with the ulterior
motive of ensnaring Sri Lanka in a debt trap even though the feasibility studies said the
port wouldn’t work. That is not true. One of the world’s foremost engineering
consultancy firms Ramboll of Denmark was identified by the Chandrika Kumaratunga
government to do the first feasibility study but that government was defeated before the
study could get off the ground. Then the RanilWickremasinghe government
commissioned another top engineering consultancy firm SNC Lavalin of Canada which
completed its feasibility study in June 2003. In 2004, under the second Chandrika
Kumaratunga government, Minister MangalaSamaraweera commissioned Ramboll of
Denmark again to do a feasibility study and this was completed in 2007. Thus, two
feasibility studies under two different governments recommended the building of the
Hambantota port.

The loans taken to build phases I & II and the bunkering facility of the Hambantota
harbor amounted to around 1,322 million USD. The NYT writer alleged that the initial
loan of $307 million had been renegotiated to a 6.3% fixed rate after having been taken
initially at a concessionary rate. The intention was to make the point that China was
lending at exorbitant rates of interest. This initial loan was taken at the LIBOR
benchmark rate plus 0.75%. During that period, the LIBOR (London Interbank Offered
Rate) increased, pushing up the actual interest rate of the initial loan to 6.5%. It was then
that a fixed rate of 6.3% was negotiated. However the remaining USD one billion was
taken from China at the concessionary interest rate of 2%. The writer states that loans
could have been taken from other countries at an even lower rate of interest. However in
taking project loans, the interest rate is not the only criteria to be considered. When such
bilateral agreements are entered into, the lending nation recommends the contractor and
the price quoted by this contractor also has to be taken into account. In that respect China
provided the best deal. The Hambantota port was actually built at a lower cost than the
estimates in the Ramboll and SNC Lavalin feasibility reports.

The Hambantota Port is deemed to have failed because it drew only 32 ships in 2012
compared with 3,667 ships at the Colombo port. However the NYT writer fails to
mention that this increased to 335 in 2014. The port made an operating profit of Rs. 900
million in 2014 and Rs. 1,200 million in 2015. These are investments that last centuries
and a new harbour that opened in 2011 cannot be expected to produce profits by 2012.
The writer further claims that the present government was compelled to lease the port to
China because they were unable to repay the loan taken to build it. The total cost of

financing the Hambantota port (capital plus interest) will be USD 1,761 million by the
time the loan expires in 2036. By the end of 2016, nearly USD 500 million of this total
amount had already been repaid. There was never any problem about meeting the
payments for the Hambantota port because it was paid out of the profits of the Sri Lanka
Ports Authority (SLPA). The Auditor General’s report for 2014 states that the profit of
the SLPA in 2014 after paying all loans and taxes was Rs. 8.8 billion.
Even though the NTY writer appears to be unaware of it, every Sri Lankan knows that
the government did not use the 1,120 million USD received from the port lease to repay
the loan taken to build it. Instead it went to the treasury to meet the day to day
expenditure of the government and the loan still remains on our books. Though the writer
claims that China has got the Hambantota harbor (with its industrial zone of 5000 acres)
and an additional 15,000 acres from Sri Lanka due to the debt trap that China inveigled
Sri Lanka into, there was never any Chinese debt trap as alleged. The SLPA had made
careful plans to raise the money to meet the loan repayments until the Hambantota port
broke even. This included the development of the Colombo East container terminal
which was expected to bring in an additional income of 100 million USD a year to the
SLPA.

When my government was voted out, we had already signed a Supply Operate and
Transfer contract with China Harbour Co and China Merchant Co to operate the
Hambantota container terminal for 40 years. The other terminals and the 5000 acre
industrial zone in the harbor was to be controlled by the SLPA. We never had any plans
to lease the entire free port for 99 years to any foreign company. That took place under
the present government which was installed in power by the very Western nations that are
now complaining about the Chinese presence in Hambantota. When I was President,
China never asked for the port on lease or for any land outside the port. It is the present
government of Sri Lanka that proposed to China that they take the entire free port on
lease.

The NYT writer states that the lease of the Hambantota port gave China control of
territory close to the shores of India, and that India was now apprehensive about the uses
that this port may be put to. Such a situation would never have arisen if my government
had continued in power. Former Indian External Affairs Secretary and National Security
Advisor ShivshankarMennon has said in his 2016 book “Choices: Inside the making of
India’s foreign policy” that my defense secretary, GotabayaRajapaksa had a clear view of

Sri Lanka’s interests which was completely compatible with India’s interests and that
India had been given assurances about the nature of Sri Lanka’s relationship with China.
Mennon further stated that Gotabaya was sensitive to India’s concerns and that the
assurances given to India by my government were respected throughout the duration of
the Congress Party government which was voted out in May 2014. The New York Times
has described me as China’s preferred partner in Sri Lanka. Given what has taken place
after 2015, I have no doubt that I am now the preferred partner of India as well.

MahindaRajapaksa
Former President of Sri Lanka